Last week, the Ministry of Defence came out with the draft Defence Production & Export Promotion Policy (DPEPP) 2020 to provide thrust to India’s defence production capabilities and promote exports. This was in line with India’s ambition to become self-reliant “Atmanirbhar Bharat”. Focus is directed towards achieving the twin objectives of self-reliance and exports through active participation of public and private sectors.
Commenting on the policy, analysts at ICICI Securities had said that this would provide significant thrust to defence manufacturing companies in scaling up their production capabilities in the long term. "In our coverage universe, companies like L&T, Bharat Electronics (BEL) and Cochin Shipyard (CSL) having strong indigenous capabilities are likely to benefit from this policy in the long run."
However, the intent on the paper is good but the execution on ground in terms of rapid indigenisation, pick-up in ordering, allocation of funds to defence capital expenditure would be key monitorables to achieve the desired objectives of the policy, the brokerage had said in a report issued on August 4.
"Given the changing geopolitical landscape, upside to current defence capital expenditure (capex) over two-three years cannot be ruled out despite current challenges on the funding/liquidity front. Successful ramp-up of capabilities/capacity of tier-I players like BEL/HAL etc will largely depend on how well the vendor base (sub-systems, parts, etc) rises to the occasion, greater predictably of contract and transparent framework," Edelweiss Securities had said in a sector update report issued on August 4.