Lok Sabha Question No. 1775 (UNSTARRED), answered on 2016-11-25
Subject: Defence Equipment
Ministry: DEFENCE
Asked by: MAUSAM NOOR

## GOVERNMENT OF INDIA MINISTRY OF DEFENCE DEPARTMENT OF DEFENCE PRODUCTION

## LOK  SABHA UNSTARRED QUESTION NO.1775

TO BE ANSWERED ON THE 25 TH  NOVEMBER, 2016

## DEFENCE EQUIPMENT

1775.  SHRIMATI MAUSAM NOOR:

Will the Minister of DEFENCE j{kk ea=h be pleased to state:

- (a) the  details  of  the  private  defence  equipment  manufacturers  and  joint  ventures involved along with the total investment committed by them in defence manufacturing in the country during the year 2015-16;
- (b) the  number  of  Letters of Intent  received  by  the  Government  for  defence production from private companies in 2014-15;
- (c) whether  the  Government  proposes  to  relax  procedures  and  existing  norms  for encouraging private participation;
- (d) if  so, the details thereof and if not, the reasons therefor; and
- (e) the  details  of  the  ratio  component  of  import  and  indigenous  manufacture  of weapons and ammunition during the last three years, category-wise and year-wise?

## A    N    S    W    E    R

MINISTER OF STATE IN THE MINISTRY OF DEFENCE

(DR. SUBHASH BHAMRE)

र  ा रा य मं ी

(डा. सुभाष भामरे)

(a) to (e): A Statement is attached.

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## STATEMENT  REFERRED  TO  IN  REPLY  TO  PARTS  (a)  TO  (e)  OF  LOK SABHA UNSTARRED QUESTION NO. 1775 FOR ANSWER ON 25.11.2016

- (a) 75 Industrial Licenses have been issued in defence sector during he year  2015-16  to  private  defence  equipment  manufacturers  with  proposed investment of Rs.4842.22 Crore.
- (b) 38 applications have been received for Industrial License for manufacture of defence items from private companies during 2014-15.
- (c) & (d): The  following  major  steps  have  been  taken  for  encouraging private sector participation in defence manufacturing:
- (i) FDI  Policy  in  defence  sector  has  been  reviewed  in  June  2016, and  as  per  the  new  policy,  FDI  up  to  49%  is  allowed  under automatic route and  above  49%  under  Government route wherever it is likely to result in access to modern technology or for other reasons to be recorded.
- (ii) Defence Products List for industrial licensing, has been notified by DIPP, wherein large number of parts / components, castings / forgings etc. have been excluded from the purview of industrial licensing.    Similarly  dual  use  items,  having  military  as  well  as civilian applications (unless classified as defence item) will also not require Industrial License from defence angle.
- (iii) Initial validity of Industrial License for defence sector has been revised to fifteen years, further extendable upto eighteen years for existing as well as future licenses.
- (iv) Defence Exports Strategy has been formulated and put in public domain.    The  Standard  Operating  Procedure  (SOP)  for  issuing NOC for export of military stores has been simplified and made online.
- (v) Original Equipment Manufacturers (OEMs) have been allowed to change Indian Offset partners (IOP).  They are also not required to  indicate  the  details  of  IOPs  and  products  at  the  time  of signing of contracts.  Services as an avenue of offset has been re-instated with certain conditions.
- (vi) Exchange  Rate  Variation  protection  has  been  made  applicable for Indian private sector at par with Public Sector Undertakings for all categories  of capital acquisitions. The  preferential treatment given to Defence Public Sector Undertakings (DPSUs) in excise duty / custom duty has been discontinued.
- (vii) Basic Customs Duty of 5% to 10% has been levied on import of defence  equipment  both  by  Government  and  the  industry,  to discourage the imports and to encourage 'Make in India'.

- (viii)  The  Make  procedure  has  been  revised  to  promote  indigenous design,  development  and  manufacture  of  defence  equipment  / platform  required  by  the  armed  forces  with  a  view  to  achieve self-reliance.  The revised procedure also provides for enhanced Government  funding  and  preference  to  MSMEs  for  certain category of projects.
- (ix) 'Buy (Indian-IDDM)' category has been introduced in DPP-2016. The  category  refers  to  procurement  from  Indian  vendors  of product  that  are  indigenously  designed  and  developed  and manufactured  with  40    per  cent  indigenous  content.    If  the product is not designed and developed indigenously, it will have to  have  60  per  cent  indigenous  content.    Further,  in  the  'Buy (Indian)' category the product should have 40 per cent indigenous content instead of 30 per cent.
- (x) The  Order  of  Preference  is  given  as  'Buy  (Indian-IDDM)',  'Buy (Indian)' and 'Buy and Make (Indian)' over 'Buy & Make' and 'Buy (Global)' in cases of capital acquisition.
- (xi) The Outsourcing and Vendor Development Guidelines has been promulgated  to  promote  participation  of  private  sector.    The guidelines  mandate  each  DPSU  and  Ordnance  Factory  Board (OFB)  to  have  a  short-term  and  long-term  outsourcing  and vendor development plan to gradually increase the outsourcing from Indian private sector.
- (e) The expenditure on purchase of defence equipment for three services in  the  last  three  years,  from  the  Foreign  and  Indian  vendors  is  as  given below:

(Rs. in crore)

|         |   Total Procurement |   Procurement from Foreign vendors |   Procurement from Indian vendors |
|---------|---------------------|------------------------------------|-----------------------------------|
| 2013-14 |             93216.9 |                            38202.7 |                           55014.3 |
| 2014-15 |             77986.3 |                            29159.7 |                           48826.6 |
| 2015-16 |             76178.8 |                            26190.5 |                           49988.3 |

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