Seeking protection in the present situation, FICCI said the recently released Defence Procurement Procedure (DPP) is "failing to address the critical survival issue before the private sector today of risk cover against Exchange Rate Variation (ERV)."
The companies are left to fend for themselves in the tough economic conditions, it noted.
FICCI Secretary General A Didar Singh has written to Defence Minister A K Antony stating the denial to recognise the realities faced by the defence industry on ERV and need for rationalisation of taxes and duties for private sector in the revised policy has left the industry sour.
The lack of protection in this regard would mean that the private sector will continue to reel under the effects of a depreciating value of rupee and high cost of inflation losing on competitiveness vis a vis foreign original equipment manufacturers (OEMs), the release added.
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This will also continue to hamper selection of Indian private sector companies in global programmes thus ultimately hampering indigenisation, the Federation of Indian Chambers of Commerce and Industry said.
The DPP 2013 also fails to reaffirm the Minister's publicly shared intent of ending the practice of nomination of DPSUs for major defence programs and conferring a 'level playing field' to private sector with respect to foreign manufacturers as well as DPSUs, the release said.