Despite a budgetary speech promise and detailed inputs by the industry that saw the proposed improvements as significant enablers, the defence ministry was unable to implement the ground-breaking changes in policies on production and offsets

In the midst of the Rafale controversy, the defence ministry had not moved to correct its policies since May 2018 when a draft was presented for comments. A new defence policy was promised in 2018 but has hardly seen any movement after its draft issued in March.

The changes would have allowed the corporation of a fund regulated by the Securities and Exchange Board of India to encourage start-ups to meet the commitments of foreign vendors which are worth billions of dollars.

To invest in the defence manufacturing corridors of Uttar Pradesh and Tamil Nadu, they also offer significant incentives for investment.

The ministry was unable to move forward on implementing the rules. Internal nonconformity and opposing views within the department are believed to have come in the way of achieving progress.

According to the ET reports, despite verbal commitments by some players to set up shop, the absence of incentives on offsets has also resulted in the defence manufacturing corridors remaining stagnant. “Unless the offsets policy is clear and gives a defined multiplier credit, foreign vendors will not venture and cannot make plans for investments in the corridor,” an industry analyst addressed ET.

The draft amendments also stated that foreign companies could invest a notable part of their obligations in SEBI funds for defence, internal security and aerospace, something that has been welcomed by several global members.