Lok Sabha Question No. 4908 (UNSTARRED), answered on 2016-12-16
Subject: Defence Production by MSME
Ministry: DEFENCE
Asked by: RAHUL RAMESH SHEWALE

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

## LOK  SABHA UNSTARRED QUESTION NO.4908

TO BE ANSWERED ON THE 16 TH  DECEMBER, 2016

## DEFENCE PRODUCTION BY MSME

4908.  SHRI  RAHUL SHEWALE:

Will the Minister of DEFENCE be pleased to state:

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- (a) whether  the  Government proposes  to  increase  the  participation  of  Micro,  Small and Medium Enterprises (MSMEs) in the defence sector of the country;
- (b) if so, the details thereof including the areas of defence sector wherein the MSMEs can contribute;
- (c) whether MSMEs of the country have the potential or are in a position to meet the requirements  /  procurements  being  made  by  the  defence  sector  in  the  country  in a substantial manner;
- (d) if so, the details thereof along with the action plan prepared / chalked out by the Government to meet the defence requirements indigenously through MSMEs; and
- (e) the steps taken / proposed to be taken by the Government for ensuring aggressive presence of indigenous MSMEs in defence manufacturing?

## 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. 4908 FOR ANSER ON 16.12.2016

1. The  Defence  Production  Policy  aims  at  achieving  substantive  selfreliance in the design, development and production of equipment, weapon systems, platforms required for defence through several measures which, inter alia include enhancing the potential of SMEs in indigenisation.
2. The preamble to the Defence Procurement Procedure (DPP) - 2016, specifically mentions that enhancing the role of Micro, Small and Medium Enterprises (MSMEs) in the Defence Sector is one of the defining features of  DPP.  Following specific provisions have been introduced in DPP-2016 that would increase the participation of MSMEs in the defence sector:
3. 2.1. In the  'Make' category  of  capital  acquisition,  Government funded projects with estimated cost of prototype development phase not exceeding  Rs  10  crore and  Industry funded  projects with estimated cost of prototype development phase not exceeding Rs. 3 crore are reserved for MSMEs.
4. 2.2. In addition, it has been mandated to involve MSME associations while carrying out feasibility studies for 'Make' projects. MSMEs have also  been  granted  relaxation  in  the  registration  and  profitability criteria for consideration as eligible 'Indian Vendor' for participation in the 'Make' projects.
5. 2.3. In  the  discharge  of  offset  obligations,  a  multiplier  of  1.50  is permitted where MSMEs are Indian Offset Partners (IOPs).
3. Government of India has notified the  Public Procurement Policy for Micro and Small Enterprises (MSEs) Order, 2012 under which a minimum of 20%  of  the  total  annual  procurement  is  made  mandatory  from  Micro  & Small  Enterprises  by  Central  Ministries  /  Departments  /  Public  Sector Undertakings w.e.f. 1st April 2015.

- 3.1. The  aforesaid  policy  mandates  that  all  the  Micro  and  Small Enterprises registered with bodies designated/ specified by Ministry of  MSME or having the Udyog Aadhaar Memorandum (UAM) will be issued tender set free of cost and exempted from payment of Earnest money, and will also be allowed to bring down their price to L1 level provided  it  has  bid  in  the  price  band  of  L1+15%,  by  the  Central Ministries  /  Departments  /  Central  Public  Sector  Undertakings.  In addition,  358  items  are  reserved  for  exclusive  procurement  from MSEs.
- 3.2. Additionally, Ministry of  MSME  has issued a circular dated 10 Mar  2016  which  mandated  that  relaxation  may  be  given  by  Central Ministries / Departments / Central Public Sector Undertakings in prior experience / prior turnover criteria to MSEs.
4. The capability and viability of the defence and aerospace industry is built on the strength of supply chains, in which the MSMEs are intricately intertwined.  There  are  substantially  large  number  of  MSMEs  across  the country  supplying  components  and  sub-assemblies  and  systems  to  the Defence Public Sector Undertakings, Ordnance Factories, Defence Research and Development Organisation and private industries.
5. Ministry of  Defence regularly  conduct  conferences and discussions through Annual seminars with an aim to strengthen long term plans and industry capability in defence procurement.  Regular interaction with interested vendors / indigenous developers, including MSME units, through collegiate mechanism of procurement committee and pre-bid meetings are scheduled for clarification on various aspects of the procurement process.

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