Big relief to Def industry, existing contracts get 4 months extension

In a big relief to domestic arms and ammunition industry, the Ministry of Defence on Friday issued orders giving a four-month extension of delivery period to all capital acquisition contracts due to Covid pandemic.

The ministry said that they have extended the delivery period for all existing capital acquisition contracts with the Indian vendors by four months due to supply chain disruptions arising out of preventive measures.

“An order to this effect issued today by the acquisition wing of the Ministry, duly approved by Defence Minister Rajnath Singh, states that the “Force Majeure shall be applicable for a period of four months that 25th March 2020 to 24th July 2020”.

It adds that the “Duration of this Force Majeure will be excluded while calculating the delay in delivery of contracted equipment/ service and imposition of Liquidated Damages charges.”

This measure would bring a big relief to the domestic defence industry, whose production schedules have been adversely affected by COVID-19 situation.

The order, however, adds that the Indian vendor is free to deliver the contracted items well within the extended delivery period.

Further as per the order no separate contract specific amendments are required to be made to give effect to this decision.

With respect to the foreign vendors they can approach the Ministry of Defence which may consider cases on the basis of the situation prevailing in their respective countries.

On May 21, acknowledging the hardships faced by the defence industry, Defence Minister Rajnath Singh had said that manufacturing sector has been affected the most due to lockdown and disruption in existing supply chains.

While addressing through video conference of Micro, Small and Medium Enterprises (MSMEs) E-conclave in Delhi, Singh said: “The defence sector is no exception to this. Rather, it can be said that the defence sector is more aggravated than other sectors as the only buyer of defence products is the government.”

The minister had pointed that to tackle these challenges, the ministry has taken several steps for industries, especially MSMEs. He cited that steps such as extension of response dates of RFP/RFI and early clearance of pending payments will help the industry.

“In this crisis, several financial support measures have been announced by the Government and RBI to reduce the financial burden of the industries. These will provide some relief due to the availability of additional working capital, deferment in interest payments,” Singh said.

The minister had also assured that the ‘Aatmanirbhar Bharat’ campaign, inspired by Prime Minister Narendra Modi will provide many opportunities to the Indian industry and will help in restoring millions of jobs.

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