Defence Exports : Potential and Promotion

PART I: Regulatory Paradigm of Defence Exports

India has embarked on an export driven strategy for boosting defence production. One reason for the strategy is that shrinking resources for Defence will not be able to sustain a defence industrial base which only produces for the domestic demand. Defence exports have surged in the last three years from Rs 4682 crores in 2017-18 to Rs 8320.09 crores in 2018-19 and Rs 8595.47 crores in 2019-20. The target for 2020-21 is Rs. 15,000 crores.

Impact of Arms Trade Treaty on defence exports

How do the aspirations for an assertive defence export strategy play out in the backdrop of the international arms trade regime? India abstained from signing the Arms Trade Treaty (ATT) as it was of the view that the ATT did not ensure a balance of obligations between exporting and importing states. According to a Strategic Security Analysis by the Geneva Centre for Security Policy on ‘The Arms Trade Treaty and Asia’s major power defiance’, the ATT has failed to attract membership from countries in Asia. The analysis has attributed this reluctance to the fear of restrictions on the import of weapons seen as necessary in a context of protracted conflicts and rising tensions among key states in Asia. Another reason is the efforts of some Asian countries to develop their own arms industry and exports to reduce dependency on external buyers. 

In this backdrop it is evident that India too needs to push an export driven defence industry which is a factor that constrains it to sign the ATT. But at the same time India has consistently made efforts to align with international norms by becoming a member of three export control regimes aimed at checking the proliferation of weapons of mass destruction: the Wassenaar Arrangement on Export Controls for Conventional Arms and Dual-Use Goods and Technologies, Missile Technology Control Regime and Australia Group. The harmonization of the SCOMET (Special Chemicals, Organisms, Materials, Equipment, and Technologies) items is a step in the direction of India’s commitment to the international regulatory environment in the area of non proliferation. Therefore it presents a complex approach in an   environment accentuated by a tense security scenario in the immediate neighbourhood.

Indian Regulatory Environment

The Analysis by Geneva Centre for Security Policy also highlights that India’s defence sector export footprint is expanding in markets of Asia and Africa and defence partnerships have become India’s frontal global engagement model with partners such as France, Israel and Japan as new defence strategic partners.  Though this approach has been driven by India’s own need to reduce import dependence and to get technology for indigenous production of weapon systems and platforms, it will also allow it to get integrated with the global arms supply chain through various policy measures.

Some of the steps which have been taken to streamline the regulatory environment in the country include making two thirds items license free especially on the component side, no requirement of No Objection Certificate (NOC) for dual use items and so on.   A recent step has been the issuance of two open general export licenses (OGELs) for export of certain defence parts and components and intra-company transfer of technology to select countries so as to give a boost to India’s defence exports. The countries allowed under the OGELs are Belgium, France, Germany, Japan, South Africa, Spain, Sweden, UK, USA, Canada, Italy, Poland and Mexico. Export of items to a Special Economic Zone is not permitted. The items permitted under OGEL include components of ammunition and fuse setting device without energetic and explosive material, firing control and related alerting and warning equipment and related system. Approval will be given on a case-to-case basis by Department of Defence Production.  The OGEL is a one-time export license to be granted to a company for a specific period of two years initially.

India has therefore tried to accommodate between the international regulatory regimes and the compulsions of promoting its domestic industry.
To be Continued …..

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