In a move to encourage foreign defense manufacturing in India, the government has withdrawn the preferential customs and excise duty exemptions that were applicable to products manufactured by the state-owned Ordnance Factories Board and other defense public sector undertakings.

This has been done to level the playing field and neutralize the advantage that the state-owned companies have had when quoting lower rates in open bids, a commerce and industry ministry statement explained.

The move addresses one of the demands of private sector and foreign original equipment manufacturers such as Boeing, Airbus, Lockheed Martin and BAE Systems, which are actively exploring the scope of future investments in India, the statement said. It will also send a positive message to foreign players that India is open to business for defense manufacturing, the notification added.

The Economic Times reports that the withdrawal of exemption will open up possibilities for smaller Indian private players too, who can be sub suppliers and contractors for larger military contracts.

The government has opened up the sector for private investment by raising the cap on foreign direct investment to 49% and rationalizing certain conditions. Almost 60 percent items required for industrial license have now been de-reserved.