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DEFENCE MINISTRY'S PREFERENTIAL MARKET ACCESS (PMA) POLICY IS PROTECTIONISM

YB WEB DESK. Dated: 1/21/2022 3:33:07 PM

New Delhi,Jan 20 In November 2018, the Niti Aayog released the ‘Strategy for New India @ 75’. It was described as an attempt to “bring innovation, technology, enterprise and efficient management together at the core of policy formulation and implementation.” It identified 41 different areas that require either a “sharper focus on implementing the flagship schemes already in place or a new design and initiative to achieve India’s true potential.” Self-reliance as a strategy hardly made its appearance in the document. It prescribed that import tariffs that seek to promote indigenous industry should come with measures to raise productivity which will provide the ability to compete globally. In response to PM Modi’s calls for building an Atmanirbhar Bharat and being ‘vocal for local’, the Ministry of Defence (MoD) in August 2020 identified 101 items that were put under an import embargo to ‘boost local defence industries’. This was followed by another list of 108 items, in May 2021. Artillery guns, assault rifles, corvettes, sonar systems, transport aircraft, light combat helicopters (LCHs) and radars were among the items mentioned in the lists. Defence Minister Rajnath Singh in mid-December 2021, hinted that though only 209 items have been embargoed so far, it could go up to a thousand. However, a provision to waive the restrictions to cater for exigencies and operational requirements was soon instituted. The August 2020 list was also accompanied by a bifurcation of the Capital Procurement Budget 2020-2021 for domestic and foreign procurements. Some experts described this as a problematic move that could cause delays if funds have to be reallocated and judgement is distorted on outcomes measured in terms of accretion in military effectiveness. Forced localisation, under the ambit of Preferential Market Access (PMA) policies, is a form of protectionism. It is not uncommon for countries to adopt such policies. In the case of the MoD embargo, it has tinkered with the demand side of the issue. But unless most of those items find an export market, it will be difficult to sustain the initial demand once India’s requirements are met. To be competitive internationally, these products require economies of scale apart from a quality advantage. Considering the existing structure of the arms market, success is possible in components of the global supply chain, but it would be more than a gamble for several platforms listed. The success of the gamble lies in getting foreign Original Equipment Manufacturers (OEM) to establish manufacturing facilities in India. So far, India’s attempts to get OEMs to manufacture in India has not been that successful. The prevailing ‘off set’ provisions that were expected to provide for some indigenisation have mostly been a failure. This might be changing. The defence minister.