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The Licensing Authority for Manufacturing Defence Items

By June 25, 2019 November 22nd, 2019 No Comments


The Ministry of
Commerce and Industry (“
MCI”) vide Press Note No. 1 (2019 Series) dated
January 01, 2019 (“
Press Note 2019”), specified the list of defence
items requiring industrial license under Industries (Development and
Regulation) Act, 1951 (the “
IDRA). In addition to the said list of
defence items, the Press Note 2019 also specified the list of items requiring
license for manufacturing and/or proof testing of arms and ammunition in Form-
VII under the Arms Act (“
Arms Act”) for which the power for granting such
license has been delegated to Department of Industrial Policy and Promotion (“
DIPP”).
This Press Note 2019 was issued in supersession of Press No. 3 (2014 Series)
dated June 26, 2014 issued by MCI (“
Press Note 2014”). Therefore, the
Press Note 2019 segregates the defence items in two categories covered by two
different acts i.e., IDRA and the Arms Act.
Earlier, the
manufacturing of defence items was governed by Press Note 2014 until the
release of Press Note 2019. The Press Note 2014
stated that the defence items which were not included in the Press Note 2014
would not require an industrial license for defence purposes under the IDRA.
Further, it was clarified that dual use items, having military as well as
civilian applications would also not require a license from a defence angle.

As per the Press Note
2019, the following list of defence items was finalized by Department of
Defence Production, Ministry of Defence for which license was required to be
obtained by DIPP.
a)          
Defence
aircraft,
b)          
Warships
of all kinds, and
c)          
Allied
items of Defence equipment
The most significant
aspect of the abovementioned list is that warships of all kinds, surface and
sub-surface, have been included in the listing. A detailed defence products
list for which DIPP is the licensing authority under IDRA, has been set out in
Annexure I of the Press Note 2019.
Further, the Press Note 2019 also provided a list of arms and
ammunitions for which
license is required to be obtained in Form VII for the
manufacture and/or proof testing of the following categories of arms and
ammunitions from the DIPP under the Arms Act.
a)          
Tanks and other armoured fighting vehicles, and
b)          
Arms and ammunitions and allied items of defence equipment
other than small arms of caliber 12.7 mm and above as defined under clause 51
of sub-rule 1 of rule 2 of the Arms Rules, 2016.
A
detailed list of items requiring license for manufacturing and/or proof testing
of arms and ammunitions has been provided in Annexure- II of the Press Note
2019.
On
May 19, 2017, the Ministry of Home Affairs (“MHA”) had issued the
Notification S.O. 1636 (E) (“Notification 2017”) granting DIPP the
authority to issue industrial license under Form VII for manufacturing of
defence items such as tanks, defence aircraft, warships and arms and ammunition,
as detailed out in the schedule of the Notification 2017. The Notification 2017
further provided that the authority granted to DIPP was subject to the
supervision and control of the MHA. Thereafter, MHA vide Notification No. S.O.
6203 (E) dated December 14, 2018 revised the schedule to the Notification 2017
including only “tanks and other armoured fighting vehicles” and
“arms and ammunitions and allied items of defence equipment; other than
small arms of caliber 12.7 mm and above” as the defence items requiring
license under Form VII of the Arms Act (“Notification 2018”). 
The
list of defence items requiring license under IDRA and the Arms Act was further
pruned down by removing the words “parts thereof” of defence
aircrafts and space craft under the IDRA and “parts and accessories”
from the category of arms and ammunitions under the Arms Act. As a result, this
will accrue benefits and give a boost to the small and medium enterprises (“SMEs”)
to invest in the defence manufacturing industry.
The
MCI vide Press Note 2019 provided a clarification that the list of arms and
ammunitions requiring license for manufacturing and / or proof testing under
the Arms Act as specified under the Press Note 2019, is similar to the list
notified by the MHA under the Notification 2018. Further, the Press Note 2019
has streamlined the manufacturing of a range of defence items by bringing them
under the licensing authority of DIPP. The Press Note 2019 also clearly
bifurcated the list of defence items requiring a license under IDRA and the
Arms Act.

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