Lok Sabha Question No. 895 (UNSTARRED), answered on 2018-02-07
Subject: Self Reliance in Defence Production
Ministry: DEFENCE
Asked by: RAMESH CHANDER KAUSHIK, RAMCHARAN BOHARA, KIRTI (JHA) AZAD, BHARATI DHIRUBHAI SHIYAL, HARISH DWIVEDI, SHER SINGH GHUBAYA, RAHUL KASWAN, RAVINDRA KUMAR RAY

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

## LOK  SABHA UNSTARRED QUESTION NO.895

TO BE ANSWERED ON THE 7 TH  FEBRUARY, 2018

## SELF RELIANCE IN DEFENCE PRODUCTION

## 895. SHRI  RAMESH CHANDER KAUSHIK:

SHRI RAM CHARAN BOHRA:

SHRI KIRTI AZAD:

DR. BHARATIBEN D. SHYAL:

SHRI HARISH CHANDRA ALIAS HARISH DWIVEDI:

SHRI SHER SINGH GHUBAYA:

SHRI RAHUL KASWAN:

DR. RAVINDRA KUMAR RAY:

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

- (a) whether the country has become self reliant in defence production and if so, the details thereof;
- (b) if not, the reasons therefor and the steps taken / being taken to make the country self reliant along with the time by which it is likely to be done;
- (c) whether the Government proposes to seek suggestions from the Industrial sector specially for the equipments which are being imported and if so, the details thereof and if not, the reasons therefor;
- (d) the details of defence equipment imported and the procurement price of the said equipment during each of the last three years and the current year so far, country-wise;
- (e) whether the  Government has  fixed  any  target  for importing defence  equipments for the current year and the ensuing two years;
- (f) if  so,  the  details  thereof  along  with  the  funds  earmarked  for  the  purpose,  yearwise; and
- (g) the  details  of  procurement  policies  to  promote  greater  collaboration  between international defence manufacturers  and the  Indian private  sector  in  respect of  Foreign Direct Investment (FDI)?
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## A    N    S    W    E    R

MINISTER OF STATE

(DR. SUBHASH BHAMRE)

IN THE MINISTRY OF DEFENCE

र  ा रा य मं ी

(डा. सुभाष भामरे)

(a) to (g): A statement is attached.

## STATEMENT  REFERRED  TO  IN  REPLY  TO  PARTS  (a)  TO  (g)  OF  LOK SABHA UNSTARRED QUESTION NO. 895 FOR ANSWER ON 7.2.2018

1. Self-reliance is a major corner-stone on which the military capability of any nation rests. Accordingly, the Defence Production Policy promulgated  by  the  Government,  aims  at  achieving  substantive  selfreliance in the design, development and production of equipment, weapon systems, platforms required for defence in as early a time frame possible, creating conditions conducive for private industry to play an active role in this endeavour; enhancing potential of SMEs  in indigenisation and broadening the defence R&D base of the country. 2. Defence  manufacturing  is  primarily  driven  by  capital  acquisition  of defence  equipment.  Under  'Make  in  India'  initiative  of  the  Government, several measures have been taken to promote indigenous design, development  and  manufacture  of  defence  equipment  in  the  country  by harnessing  the  capabilities  of  the  public  and  private  sector.    These measures  include according preference to  procurement from Indian vendors under the Defence Procurement Procedure (DPP), simplification of Make  procedure,  introduction  of  simplified  procedure  for  Make  II  subcategory, liberalization of the licensing regime and FDI policy by raising the cap  on  FDI  in  the  defence  sector,  simplification  of  export  procedure, streamlining  of  defence  offset  guidelines  etc.  Recently,  the  Government has notified the 'Strategic  Partnership  (SP)'  Model  which  envisages establishment  of  long-term  strategic  partnerships  with  Indian  entities through a transparent and competitive process, wherein they would tie up with global Original Equipment Manufacturers (OEMs) to seek technology transfers  to  set  up  domestic  manufacturing  infrastructure  and  supply chains. The  expenditure  on  purchase  of  defence  equipment  from  Indian vendors  for  the  three  services  during  the  last  three  years,  is  as  given
3. below:-

## CAPITAL EXPENDITURE:

(Rs. in crore)

|         |   Total Procurement |   Procurement from Indian Vendors |
|---------|---------------------|-----------------------------------|
| 2014-15 |             65583.8 |                           39598.9 |
| 2015-16 |             62341.9 |                           39149.6 |
| 2016-17 |             69150.1 |                           41872   |

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4. The Defence Procurement Procedure (DPP) provides various avenues for  interaction  with  the  industry.  Headquarters  Integrated  Defence  Staff (HQIDS)  /  Service  Headquarters  (SHQs),  as  the  case  may  be,  through regular  and  structured  interactions,  shares  the  details  of  procurement schemes  with  the  industry,  and  the  industry  is  involved  at  the  feasibility stage itself. Draft Preliminary Services Qualitative Requirements (PSQRs), indicative time frame and envisaged quantities of schemes are shared with the  industry.  HQIDS  /  SHQs  upload  the  broad  details  of  the  scheme  on Ministry of Defence and SHQ websites. The Categorisation committees viz., Services Capital Acquisition Categorisation Committee (SCAPCC) / Services Capital Acquisition Categorisation Higher Committee (SCAPCHC) also invite industry representatives, associations / representatives nominated by industry associations, for presentation and clarifications, as and when required. 5. No target is fixed for import of defence equipment. Defence equipment is being imported from various countries as per the operational requirements of the Armed Forces. During the last three financial years and current year (upto 30.11.17), 119 contracts involving Rs 1,16,523 crore have been  signed  with  Indian  vendors  and  68  contracts  involving  Rs.1,24,291 crore  have  been  signed  with  foreign  vendors  for  capital  procurement  of Defence  equipment  for  Armed  forces  including  rockets,  simulator  and component level repair  facility  for  Tanks  from  Russia,  Laser  Designation Pods, radars, Pods for aircraft Radios, Weapons for Garuds and Missiles from  Israel,  Aircraft,  Helicopters,  Missiles,  Artillery  Guns  and  Simulators from  USA  and  Aircraft,  Ammunition,  High  Zone  Modules  of  Bi-Modular Charges from 155mm Guns from France. 6. Department of Industrial Policy & Promotion (DIPP) vide Press Note No.5  (2016  Series)  has  notified  revised  FDI  policy  under  which  FDI  is allowed under  automatic  route  upto  49%  and  beyond  49%  through Government  route  wherever  it  is  likely  to  result  in  access  to  modern technology or for other reasons to be recorded. Further, defence industry is subjected to industrial license under Industries (Development & Regulation)  Act,  1951  and  manufacturing  of  small  arms  and  ammunition under the Arms Act, 1959 and Arms Rules, 2016. Other conditions as per the said press note are as follows:-
2. (i) Infusion of fresh foreign investment within the permitted automatic route level, in a company not seeking industrial license, resulting in change in the ownership pattern or transfer of stake in by existing investor to new foreign investor, will require Government approval.

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- (ii) License applications  will  be  considered  and  licences  given  by  the Department of Industrial Policy and Promotion, Ministry of Commerce & Industry, in consultation with Ministry of Defence and Ministry of External Affairs.
- (iii) Foreign investment in the sector is subject to security clearance and guidelines of Ministry of  Defence.
- (iv)  Investee Company should be structured to be self-sufficient in areas of  product  design  and  development.  The  investee  /  joint  venture company  along  with  manufacture  facility  should  have  maintenance and life  cycle support  facility  of  the product  being  manufactured  in India.

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