Finance Minister Arun Jaitley has to do balancing act with defence

With Arun Jaitley doffing a dual hat on Tuesday by assuming charge of defence ministry, the finance minister has his task cut out to move a stalled Make in India initiative in defence sector, unlock FDI logjam and decide on reforms that can directly bring to confrontation the two ministries he is heading.

Long considered as a cornerstone for the Make in India initiative, the defence sector has stagnated over past two years with the private sector complaining to the highest echelons of the government about a lack of orders. The compliant, as reported by ET, has been that while the public sector continues to get government orders for ships, helicopters and land systems, not a single major order has been awarded to companies that have invested heavily in defence manufacturing.

Jaitley will be faced with an increasingly impatient industry that has been promised a deluge of work once the defence ministry finalises its strategic partnerships (SP) model -a plan to select key industry players for large manufacturing projects.   Managing the SP question
The SP model has faced opposition from within the government, a lot of it coming from the defence ministry’s finance department. The opposition is centered along the charge that the model is against the basic tenets of competitive bidding as it will authorise the government to select a private sector company for a longterm ‘guaranteed work’ period. While details of the model have not been shared yet, strong opposition is expected from the finance  ..ministry as well due to its long-term implications. Unfortunately, key decisions on major defence contracts have been put on hold for the past 18 months due to this internal debate on the model.


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