The private Indian defence sector has taken "unprecedented toll" due to the depreciating value of rupee in the recent past and will have tough times ahead with the free fall of the currency, an industry body said today.
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.
"Especially after the highlights of DPP 2013 released on April 20, 2013 gave hope that Defence Ministry is cognizant of these concerns and would take up the case strongly with the Finance Ministry," it said in a release.
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.
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 problem gets further aggravated due to major delays from Defence Ministry in concluding contract negotiations requiring the vendors to hold prices over long periods," it 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.
