In a major policy shift, the Narendra Modi government has notified a new strategy for export of defence products that not only encourages sale of military equipment to foreign nations but also has set a structure for New Delhi to finance purchase of Indian arms by other countries.

The 'Strategy for Defence Exports', issued by the defence ministry, has been accompanied by a new set of rules for obtaining clearances for export of military stores by both private and public sector enterprises.

Detailing India's new strategy for harnessing defence exports for both commercial opportunity and military diplomacy, the five-page document specifies that a new Defence Export Steering Committee (DESC) will be set up within three months, besides a national defence export facilitation body.

"In the government, a body namely Defence Exports Steering Committee (DESC) under the Chairmanship of Secretary, Department of Defence Production would be constituted. The Committee will have representatives of Armed Forces, DRDO, PIC Wing, Acquisition Wing, MEA, DGFT," said the document.



While India has traditionally shied away from exporting arms and has been reluctant to sell lethal weapons abroad, the new strategy is an extreme shift with a provision for financing 'weaker nations' to buy Indian weapons.

The Line of Credit facility that is extended by the Ministry of External Affairs (MEA) would also be used to leverage sales to foreign nations.

"Wherever feasible, the possibilities will also be explored for financing of defence exports through EXIM Bank. A separate strategy to finance exports to weaker countries would be worked out in consultation with MEA, EXIM Bank, DPSUs, private sector and other financial institutions," it says.

The Modi government has decided to give full diplomatic backing to the export of weapon systems, emphasising that "the world over, defence exports are covered by the defence diplomacy between friendly countries".

"If required, industry delegations would be taken to target countries under the leadership of officials or DPSUs representatives. Indian Embassies and Missions abroad would be associated in making targeted efforts for promoting export of Indian defence products," it says.

The document emphasises that within six months, India will become a part of the Wasssenaar international export control regime after which a detailed list of military stores that can be exported will be drawn up.

"Efforts will be made in collaboration with MEA to finalise the list of military stores as early as possible," the document says.

The government strategy also says that the offset policy - in which a foreign vendor must invest at least 30 per cent of the contract value in the defence production sector - will be reviewed.

Besides the diplomatic push for defence exports, the government will also set up a new export promotion body that will render advice on export related issues export related issues and coordinate all export facilitation schemes of the government.

"The body will identify the suitable export markets in consultation with Ministry of External Affairs and Department of Commerce, keeping in view our foreign policy and various international export control and arms control regimes," said the government notification.

In an attempt to address another long standing demand from the private sector that in the past has complained of back breaking bureaucratic red tape in obtaining clearances for exports, the government will also set up an online, time bound clearance system for requests. A web based system shall receive applications and issues NOCs to companies.

The government has decided not to have a separate Defence Export Policy but will use the strategy paper as a roadmap to promote exports under the ambit of the Foreign Trade Policy (FTP).

India's defence exports have been abysmally low over the years. The export strategy is part of a slew of measures by the new government to promote the domestic defence industry. This includes freeing up of FDI restrictions to 49 per cent and notifying security rules to be followed by defence companies, besides others.