In order to encourage domestic defence manufacturing, Finance and defence minister Arun Jaitley has hinted that incentives are being worked out so as to cut imports of combat planes, ships and submarines. He also said that the government is working on a defence manufacturing policy that will incentivise foreign firms to set up defence manufacturing bases in India.
The minister has said that the government has liberalised rules as far as investment is concerned and Indian companies, both in the public sector and the private sector, have already started entering into arrangements with international firms to establish manufacturing facilities in India, even outside FDI limits. He also pointed out that in the context of defence, government is the only buyer and therefore, people will establish units only if there is a likelihood of them getting business and therefore, policies have to be tuned to this reality.
Under defence offset, Jaitley noted that a foreign supplier of equipment has to manufacture a given percent of his product (in terms of value) in the buying country and added that this may also be through technology transfer. Asked if the policy under consideration would lead to any change in the offset policy, he said that there will be no change.