India ring-fences funding for private-sector procurements

The Indian Ministry of Defence (MoD) has approved a move to ensure that at least 15% of procurement funding is assigned for acquisitions from the country’s private sector.

The approval was confirmed in recent social media posts by Ajay Kumar, Indian MoD defence secretary. The move, he said, is intended to provide a boost for small businesses and start-ups in the Indian defence sector.

“In a landmark decision, the Ministry of Defence [has] decided to earmark part of its budget for direct procurements from [the] private defence industry,” Kumar said in a tweet on 17 April.

The Indian MoD has approved a move to assure funding for procurements from the country’s private sector. The move is expected to strengthen the position of small businesses as suppliers on programmes such as the Tejas light fighter. (HAL)

He added, “During 2021–22, 15% of [the] capital procurement budget [will be] targeted for procurements from the private defence industry.”

Kumar also said that the allocated procurement funding will be in addition to the subcontractor deals that private-sector firms win from state-owned defence corporations including defence public sector undertakings and the Ordnance Factory Board (OFB) network.

The allocation for private-sector procurements is aligned with the MoD’s continuing efforts to spur capability development in small businesses and to establish in the country a strengthened “defence industry ecosystem”, which is largely self-sufficient.

It is also consistent with a plan to position the state-owned enterprises as system integrators who rely more heavily for manufacturing and technologies on their private-sector suppliers.

In February, Kumar confirmed that India’s defence budget for 2021–22 provided a large increase for procurements from local industry but made no specific reference to the private sector.