India's Defence Collaboration and Procurement Policy Reform

Collaboration with Safran for Jet Engine Development

• India will collaborate with French defence firm Safran to manufacture advanced jet engines locally for its indigenous 5th-gen stealth advanced medium combat aircraft (Amca).
• Partnership involves complete technology transfer, intellectual property rights, and no export restrictions under a Government-to-Government (G2G) framework.

Defence Acquisition Procedure (DAP) 2020 Review

• DAP 2020, guiding military equipment procurement, is under review due to criticisms of delays and inefficiencies.
• The review aims to reshape India's military-industrial landscape for the next five years or more.

Evolution of Defence Procurement Policies

• Until 2002, the defence sector was dominated by Defence Public Sector Undertakings (DPSUs), with no private sector involvement.
• In 2002, procedures allowed private firms and foreign Original Equipment Manufacturers (OEMs) to engage in the sector.
• By 2016, the focus shifted to self-reliance with indigenous design, development, and manufacturing.

Challenges and Opportunities in Defence Sector

• Foreign defence offsets have largely failed to deliver advanced technologies; indigenous content is now prioritized.
• A committee led by MoD’s DG (acquisition) is reviewing DAP 2020 to align with stakeholder needs.
• Conflicting priorities exist between foreign OEMs, Indian companies, and DPSUs regarding FDI limits and indigenous content.

Foreign Direct Investment (FDI) and Technology Transfer

• FDI limits in defence were raised to 74% in 2020 to attract investment and technology transfer.
• Despite increased limits, FDI inflow remains low, and significant foreign joint ventures for advanced weapon systems have not been established.
• Foreign OEMs are hesitant to transfer cutting-edge technology without full ownership.

Future Prospects and Policy Considerations

• Allowing 100% FDI under automatic approval for foreign OEMs could stimulate local production and technology transfer.
• A forward-looking DAP 2020 review could unlock foreign investment opportunities and strengthen bilateral ties.