Home Ministry will now issue defence industrial licences

The Ministry of Home Affairs has wrested away the power to issue industrial licences for defence manufacturing, which includes electronic aerospace and defence equipment, from the Department of Industrial Policy & Promotion (DIPP).

The industry will now have to apply to the Home Ministry for licences to manufacture defence products instead of the DIPP triggering worries that it could lead to a possible slowing down of the process because the former is not focused on promoting industries.

The fate of the over 342-odd industrial licences for defence manufacturing issued by the DIPP over the last decade-and-a-half also hangs in balance as there is yet no clarity on what happens to these since they were not issued by the Home Ministry, an official from the DIPP told BusinessLine .

Reliance Aerospace Technology, Bharat Forge, Mahindra Defence & Naval Systems, Tata Aerostructure and Wipro are some of the companies that have bagged licences for defence manufacturing from the DIPP in the past.

“The Home Ministry had been demanding that it should have the authority to issue industrial licences for defence equipment as under the Arms Act 2016 all items configured for military use fall under its purview. The DIPP has finally given up its claim and the Home Ministry will now be the issuing authority,” the official said.

Manufacturing in defence sector has so far been governed through industrial licencing under the Industries (Development and Regulation) Act, 1951 (IDR). In 2001, the government allowed Indian private sector participation in defence manufacturing sector subject to licensing from the DIPP under the IDR Act.

However, with the notification of Arms Rule 2016, items configured for military use have come under purview of Arms Rules 2016 handled by the Home Ministry and are not a responsibility of the DIPP any more.

“A decision at the highest level now needs to be taken on whether companies already issued licences by the DIPP for manufacturing in the defence sector have to apply anew,” the official added.

The DIPP, at the moment, is more worried about the delay in the consideration of fresh licencing applications by the private sector. There have been no meetings of the industrial licencing committee since August last year since the turf battle started with the Home Ministry.

“The DIPP has urged the Home Ministry and even approached the PMO to ensure that a meeting for considering industrial applications is held at the earliest,” the official said.

Some in the industry are apprehensive that the move would go against the government’s intention of improving ease of doing business.

“The DIPP’s main intention is to promote the cause of Indian industry by playing a facilitating role. However, the Home Ministry has other focus areas and is not expected to give much attention to the needs of the industry,” a representative from a leading industry body said.

The DIPP, while defending its role as the issuer of industrial licences for defence products, had argued that it had always taken the approval of the Home and Defence Ministries and the State concerned before issuing an industrial licence in the defence sector and there was no need for a change of guard.

The Home Ministry, on its part, had argued that items that could be used for military purposes were highly sensitive in nature and all matters related to its production required expert handling.

Defence equipment that require compulsory production licences include tanks and other armoured fighting vehicles, defence aircraft, space craft and parts, warships of all kinds and arms and ammunition and allied items of defence equipment; parts and accessories thereof.

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