Lok Sabha Question No. 6144 (UNSTARRED), answered on 2018-04-04
Subject: Defence Production
Ministry: DEFENCE
Asked by: SUSHMITA DEV, GAURAV GOGOI, VISHNU DAYAL RAM, JYOTIRADITYA MADHAVRAO SCINDIA

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

## LOK  SABHA UNSTARRED QUESTION NO.6144

TO BE ANSWERED ON THE 4 TH  APRIL, 2018

## DEFENCE  PRODUCTION

## 6144.  KUMARI  SUSHMITA DEV:

SHRI  GAURAV  GOGOI:

SHRI  VISHNU  DAYAL  RAM:

SHRI  JYOTIRADITYA  M. SCINDIA:

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

- (a) whether  the  targets  of  Foreign  Direct  Investment  in  defence  production  sector under the 'Make in India' framework during the last three years and the current year have been achieved and if so, the details thereof;
- (b) whether the Government has been importing hardware and software requirements for defence forces and if so, the facts and the details thereof;
- (c) whether the Government has conducted any assessment of decrease in the quantity of defence related imports during the last one year after the implementation of 'Make in India' programme and if so, the details thereof;
- (d) whether the Government's 'Make in India' initiative has completely derailed the defence production industry; and
- (e) if  so,  the  reasons  therefor  and  the  steps  the  Union  Government  has  taken  or proposes to take to meet its various procurement challenges in defence sector?

## A    N    S    W    E    R

MINISTER OF DEFENCE                              (SMT. NIRMALA SITHARAMAN)

j{kk ea=h

¼Jherh  fueZyk lhrkje.k )

(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. 6144 FOR ANSWER ON 4.4.2018

- (a) No specific targets have been fixed by the government for Foreign Direct Investment (FDI) in Defence Production sector under 'Make in India' program.

## (b) & (c): The capital procurement figures are as below:-

(Rs. in crore)

| Year                        |   Total Procurement |   Procurement from Foreign Vendors |   Procurement from Indian Vendors |
|-----------------------------|---------------------|------------------------------------|-----------------------------------|
| 2014-15                     |             77986.3 |                            29159.7 |                           48826.6 |
| 2015-16                     |             76178.8 |                            26190.5 |                           49988.3 |
| 2016-17                     |             84261   |                            30493.8 |                           53767.2 |
| 2017-18 (upto January 2018) |             75916.8 |                            30736.7 |                           45180   |

- (d) & (e): The  steps  taken  by  the  government  to  promote  domestic  defence manufacturing are as below:
- (i) Defence  Procurement  Procedure  (DDP)  has  been  revised  in  2016 wherein  specific  provisions  have  been  introduced  for  stimulating growth of the domestic defence industry.
- (ii) A  new  category  of  acquisition  has  been  introduced  -  Buy  Indian (IDDM), to promote indigenous design development and manufacturing.  Under this category, indigenously designed equipment with minimum of 40% indigenous content (IC), or equipment with 60% IC  will  be  considered  for  acquisition.    This  category  is  the  most preferred  acquisition  category  and  one rank  above  the  'Buy (Indian)' category.
- (iii) 'Buy (Indian)' category of acquisition requires a minimum IC of 40% (as compared to 30% in the previous DPP) and in 'Buy and Make (Indian)' category, minimum IC of 50% will be required in Make portion of the scheme.  Flexibility has been given to Acceptance of Necessity (AoN) according authority to change percentage of IC.
- (iv) Provisions for involving private industry as Production Agencies and Technology Transfer Partners have been incorporated.
- (v) 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.

- (vi)    Make  Procedure  has  been  refined  to  ensure  increased  participation  of Indian industry:
- (a) Make procedure now has two sub categories - Make - I (Government funded), Make - II (Industry funded).  Make - I (Government funded) - involves 90% funding of the development cost, by the Government and  also  provision  for  mobilization  advance.    Make  -  II  (Industry funded)  -  does  not  involve  any  funding  by  the  Government  for prototype development.
- (b) Role  of  MSMEs  has  been  enhanced  with  greater  involvement  in defence  manufacturing.  Projects  in  Make-I  category  upto  Rs.10 Crore and in Make-II category up to Rs.3 Crore, have been reserved for MSMEs.
- (c) Recently, Defence Acquisition Council(DAC) has approved separate procedure on Make-II category.
- (d) List of potential 'Make' projects has been identified and a two year roll  on  plan for 'Make'  cases introduced in the Annual Acquisition Plan (AAP).
- (vii)  FDI Policy has been revised and under the revised policy, 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.
- (viii)  The Defence Products List for the purpose of issuing Industrial Licenses (ILs) under Industries (Development & Regulation) Act has been revised and most of the components, parts, sub-systems, testing equipment and production equipment have been removed from the list, so as to reduce the entry barriers for the industry, particularly small & medium segment.
- (ix) The initial validity of the Industrial License granted under the Industries (Development & Regulation) Act has been increased from 03 years to 15 years with a provision to further extend it by 03 years on a case-to-case basis.
- (x) Offset guidelines have been made flexible by allowing changes of Indian Offset Partners (IOPs) and offset components, even in signed contracts. Foreign Original Equipment Manufacturers (OEMs) are now not required to  indicate  the  details  of  IOPs  and  products  at  the  time  of  signing  of contracts. 'Services' as an avenue of offset have been re-instated.

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