New FDi policy for small arms

[amk]

So been reading in the news that GOI is allowing 100% FDI in small arms manufacturing ventures, don't know if it's through FIPB or the automatic route. Has anyone heard more details whether this will apply to the civilian arms sector too?

Mod if this topic belongs in a different section please excuse and move it; I couldn't figure out where exactly to post this.

Thanks
AMK

[mundaire]

49% FDI is allowed via automatic route, but they can allow upto 100% FDI if "modern" tech is being manufactured here.

The thing to consider though is, as per the current draft of the Arms Rules, there will be approvals required from both Ministry of Defence and Ministry of Home Affairs before even a licensed manufacturer would be allowed to start production!

It's a start no doubt, but there is a long road ahead. No short term gains can/ should be expected by civilians.

Cheers!
Abhijeet

[mundaire]

What comes to mind is the following article from a few years ago

http://www.gfilesindia.com/frmArticleDe ... e%20sector

Trigger Jam
Naresh Minocha
Policy paralysis has hit the small arms manufacturers in the private sector the worst, raising a question mark on their very survival

India Inc and the media have off late been extremely vocal about the slowdown in economic decision-making process. They have dubbed this as a "policy paralysis". In their criticism, they cite the delays in big-ticket reforms, particularly on allowing foreign direct investment (FDI) in airlines sector or in multi-brand retailing. However, they gloss over the fact that some economic policy decisions have virtually remained unimplemented for more than a decade. A case in point is the manufacture of state-of-the-art small arms and ammunition (SAA) by the private sector.

The "policy paralysis" has made SAA production a non-starter, apart from diminishing the survival prospects of 90-plus small-scale units that produce archaic, single and double barrel guns. These units were in this business much before the Arms Act 1959 was enacted. Their hopeless situation is best illustrated by the case of a small-scale entrepreneur failing to secure permission to make sports arms despite a favourable verdict from a high court! More of this later in this story.

SAA are not only required by the defence and para-military forces but also by law-abiding civilians for self-defence and by sportspersons who take part in shooting competitions. As SAA, including carbines and light machine guns, are non-strategic weapons, the potential also exists for Indian manufacturers to carve out a niche for their products in the global market.

The Home Ministry has shared with the Defence Ministry its discomfort over the proliferation of small arms & ammunition once their manufacture takes off in the private sector; a fear, many feel, is unjustified

When the Union Cabinet approved the policy for private sector participation in the manufacture of defence equipment in May 2001, it did not foresee that the policy would run into serious bottlenecks, such as turf wars and paranoia over private sector manufacture of SAA and explosives.

Under the guidelines for policy implementation notified by the Department of Industrial Policy and Promotion (DIPP) in January 2002, the DIPP is required to take a decision on licence applications in consultation with the Defence Ministry.

Accordingly, the latter constituted the Standing Committee on Private Sector Participation in Defence Production (SC-PSPDP). This Committee screens applications and forwards its comments to the inter-ministerial Industrial Licensing Committee (ILC). To check the security credentials of applicants, the DIPP also consults the Ministry of Home Affairs, which often takes a long time in giving its recommendations.

Underthis approval mechanism, only three companies have been lucky so far to get letters of intent (LOIs) for manufacture of small arms, such as carbines. There is, however, no information available in the public domain as to whether these LOIs were converted into licences, which is a pre-requisite for any manufacturing unit.

In 2004-05, it dawned on the Ministry of Home Affairs that the regulation of manufacture of SAA came under its domain. The Ministry subsequently got into a turf war with the Defence Ministry. In February 2007, the former submitted to the Defence Ministry an opinion from the Additional Solicitor General stating that it was the licensing authority for SAA manufacture under the Arms Act 1959.

Immediately after that the SC-PSPDP stopped processing SAA applications and returned the pending ones to DIPP. At this point, the Ministry of Home Affairs also shared with the Defence Ministry its discomfort over the risk of proliferation of SAA in the country once their manufacture took off in the private sector.

The hopeless situation is best illustrated by the case of a small-scale entrepreneur failing to get permission to make sports arms despite a favourable high court verdict!

Industry sources say that such fears are unjustified as there has hardly been any case of illegal sale by manufacturers of small arms and ammunition.

Again, at an inter-ministerial meeting chaired by Special Secretary (Internal Security) in April 2007, it was decided that the Cabinet would be requested to exclude SAA manufacture from the purview of its policy decision of May 2001 to allow the private sector to produce defence hardware. After securing Cabinet approval for this policy change, the Ministry of Home Affairs unveiled the draft Arms and Ammunitions Manufacturing Policy (AAMP) in December 2009 to seek public comments. And in April 2010, it finally notified this policy.

Under this policy, the Ministry of Home Affairs re-affirmed, with an opinion from the Attorney General, that it is the licensing authority for SAA as prescribed in Schedule II of the Arms Rules 1962.

The ray of hope kindled by the fresh policy announcement and re-affirmation of the Home Ministry's mandate has, however, proved to be an illusion for the applicants. Not a single application has so far been approved by the DIPP under the new policy dispensation. The status quo is best embodied by the case of the Jammu-based applicant, Varun Sports Arms Co (VSAC).

VSAC's application dated January 21, 2010, for permission to produce sports weapons was supported by the Ministry of Youth Affairs & Sports. The company has, however, not been able to secure an LOI despite a favourable verdict from the Jammu & Kashmir High Court, which it had moved in 2010.

The company had moved the High Court after the Home Ministry had said in April 2011 that its application would "lie pending till the time, modalities and guidelines to be followed for issue of arms manufacturing licence are finalised under the Arm Rules 1962". On June 8, 2011, the court directed "the respondents to finalise the process of accord of requisite consideration at their respective levels, so as to ensure finalisation as warranted in accordance with the rules within a period of eight weeks and the result thereof shall be communicated to the petitioner".

Taking note of the J&K High Court's verdict, the Licensing Committee decided on July 19, 2011, that the Home Ministry should take a call on VSAC's application. That is where the matter stands.

Moreover, to justify the delay in the implementation of the arms manufacturing policy, the Home Ministry is using the criticism that it earned from the Parliamentary Standing Committee on Home Affairs. In its report submitted on June 2, 2011, the committee deplored the "tearing hurry" shown by the ministry in announcing both the Arms and Ammunitions Manufacturing Policy and the New Arms and Ammunition Policy for Individuals.

The report says: "the Committee is more than convinced that the course adopted by the Ministry of Home Affairs in formulating, finalising and enforcing the New Arms and Ammunition Policy, is ab initio faulty, inasmuch as the steps chosen by the Ministry were in breach of parliamentary proprieties and conventions.

The Arms (Amendment) Bill, 2010, and the Arms (Amendment) Rules, 2010, are consequential to the New Policy. As Policy Documents have not been laid in on the Table of the two Houses of Parliament, which consequently cannot be referred to this Committee by the Presiding Officer, it has taken a conscious decision not to proceed with clause-by-clause consideration of the Bill, which would have been a piecemeal exercise in isolation and therefore not desirable."

The parliamentary panel would perhaps have not passed its judgment about the "tearing hurry" had it been apprised of the turf battle that ultimately led to the announcement of the Arms and Ammunitions Manufacturing Policy.

[HSharief]

Not only FDI in manufacturing, we need FDI (insert your fav abbrev here: fair and decent intelligence) in the babu-dom.