Business Standard, 8th Jan 08
Despite extensive foreign trade regulations that cover most aspects of commerce, India has, in a remarkable omission, never yet officially enumerated or listed what it considers to be a defence product. Every other country with a significant defence industry has such a list. In India, a listing of defence products is required to determine where manufacturing licenses are required, where foreign participation is restricted to 26%, and the applicability of customs duties and exemptions.
Now, the Ministry of Defence (MoD) is plugging this major loophole. A committee under Additional Secretary of Defence, Mr PK Rastogi, will soon release a “Munitions List” that will constitute India’s official list of defence products. Confirming this to Business Standard just before retiring on 31st December 2007, former Secretary of Defence Production, Mr KP Singh, explained that since defence manufacture had always been done by the public sector for government forces, there had been no need for such a list. Now, with the entry of the private sector into defence, a “Munitions List” had become essential.
This need has been reinforced by the MoD’s defence offsets policy of 2006, which mandates that foreign military vendors must offset every contract by investing 30% of the contract value into the manufacture in India of military equipment. A comprehensive “Munitions List” will be a reference list of what foreign vendors can manufacture, in order to discharge their offsets obligations.
India has moved incrementally towards clarifying its lists of sensitive items. In 2004, the Director General of Foreign Trade, under the Ministry of Commerce, had published what is termed the Special Chemicals, Organisms, Materials, Equipment and Technologies (SCOMET) List. This includes sensitive items relating to nuclear, biological and chemical (NBC) warfare, special materials, stealth technologies, aeronautics and rocket materials.
The SCOMET List contains seven categories (e.g. Category 0: Nuclear materials, Category 1: Toxic chemicals, etc). But Category 6 has so far remained blank, and listed as “Reserved”. The “Munitions List” that the MoD is finalising will now form Category 6 of the SCOMET List. The Ministry of Commerce will notify the list as soon as the MoD forwards it to them.
Interestingly, the list of nuclear materials --- Category 0, the most comprehensive part of the SCOMET List --- was only updated in July 2005, after India passed its Weapons of Mass Destruction and their Delivery Systems (Prohibition of Unlawful Activities Act), 2005, in order to conform to non-proliferation concerns over nuclear commerce. This was one of the pre-conditions laid down by Washington in order to take forward negotiations on the US-India nuclear deal.
Senior MoD officials point out that India’s new “Munitions List” is also modelled on an international non-proliferation structure --- the Wassenaar Arrangement, a multilateral agreement between over forty countries. While India is not a member of the Wassenaar Arrangement, participating states seek, through national policies (such as the new MoD initiative to update the SCOMET list) to bring about greater transparency in the international transfer of military and dual-use goods.
The Wassenaar Arrangement has a comprehensive Munitions List, which has 22 main entries that include “small arms and light weapons and ammunition”; “tanks and other military armed vehicles”; “combat vessels”; and “armoured/protective equipment”.