Lok Sabha Question No. 4271 (UNSTARRED), answered on 2017-08-11
Subject: Defence Hardware Sector
Ministry: DEFENCE
Asked by: JOSE K. MANI

## GOVERNMENT OF INDIA MINISTRY OF DEFENCE

## DEPARTMENT OF DEFENCE PRODUCTION

## LOK  SABHA UNSTARRED QUESTION NO.4271

TO BE ANSWERED ON THE 11 TH  AUGUST, 2017

## DEFENCE HARDWARE SECTOR

4271.  SHRI  JOSE K. MANI:

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

- (a) whether defence hardware sector mandated with rapid indigenisation of Sukhoi-30 MKI  and  Tejas  fighters,  Hawk  trainer,  Dhruv  helicopter  and  Dornier  228  is  lagging behind  in  the  absence  of  a  strong  hi-tech  manufacturing  sector  and  if  so,  the  details thereof;
- (b) the  present  status  of  indigenisation  of  defence  hardware  and  systems  in  the country;
- (c) whether at present the percentage of weaponry India imports remains much above sixty per cent;
- (d) if so, the details thereof; and
- (e) the other steps taken by the Government to encourage indigenisation of defence hardware and systems?

## 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)      No,  Madam.  Hindustan  Aeronautics  Limited  (HAL)  is  manufacturing Sukhoi-30 MKI, Hawk, and Dornier 228 (DO 228) aircraft under License from foreign Original Equipment Manufacturers (OEMs) for which Technologies have  been  fully  absorbed  to  the  extent  of  Transfer  of  Technology  (ToT) contracts.

Light Combat Aircraft 'TEJAS' and Advanced Light Helicopter (ALH) Dhruv are indigenously designed & developed.

Indigenization  of  components  is  a  continuous  process  involving development  and  qualification.  New  technologies  especially,  advanced avionics, advanced  mechanical  systems, structured  design  capabilities;

several world class high value ground test rigs have been established  and  HAL  has  also  involved  private  industries  to  supply airborne  items,  aircraft/helicopter  sub-assemblies  and  assemblies  which can directly fit on aircraft/helicopter.

- (b) The present status of indigenization of the major platforms manufactured by HAL is as below:-
- (c) & (d):   The expenditure on purchase of defence equipment for  the three services  during  the  last  two  years  from  the  foreign  vendors  and  Indian vendors is as follows :-

|   S. No. | Platform      | Present %age of indigenization content (By number of parts)   |
|----------|---------------|---------------------------------------------------------------|
|        1 | Sukhoi-30 MKI | 75%                                                           |
|        2 | Hawk          | 72%                                                           |
|        3 | LCA           | 75%                                                           |
|        4 | ALH           | 75%                                                           |
|        5 | DO-228        | 74%                                                           |

Capital and Revenue expenditure (Rs. in crore):

| Year    |   Total procurem ent | Procurement from Foreign Vendors   | Procurement from Indian Vendors   |
|---------|----------------------|------------------------------------|-----------------------------------|
| 2015-16 |              76178.8 | 34.38%                             | 65.62%                            |
| 2016-17 |              84261   | 36.19%                             | 63.18%                            |

- (e)  Government has taken various steps to encourage indigenization and self-reliance  in  defence.  Under  'Make  in  India'  initiative,  Government  has taken following initiatives:-
- i. A  new  Defence  Procurement  Procedure  (DPP),  2016  has  been promulgated by the Government to take effect from 01 st April, 2016 whereby a new  category of procurement  'Buy {Indian-IDDM (Indigenously  Designed,  Developed  and  Manufactured)}'  which has  been  accorded  top-most  priority  for  procurement  of  Capital equipment.  Besides  this,  preference  has  been  accorded  to  'Buy (Indian) and 'Buy & Make (Indian)' categories of capital acquisition over  'Buy (Global)' and  'Buy  &  Make (Global)' categories. The

'Make' Procedure has been simplified with provisions for funding of 90% of development cost by the Government to Indian industry and reserving projects not exceeding development cost of Rs. 10 Crore (Government funded) and Rs. 3 Crore (Industry funded) for MSMEs.

- ii. Foreign Direct Investment (FDI) Policy has been revised. FDI up to 49%  is  allowed  through  automatic  route  and  beyond  49%  under Government approval route wherever it is likely to result in access to modern technology or for other reasons to be recorded.
- iii. Indian licensing regime for Indian manufacturers has been liberalized and most of the components/ parts/ sub-systems have been  taken  out  from  the  list  of  Defence  products  requiring industrial  license  which  has  resulted  in  reduction  in  the  entry barriers  for  new  entrants  in  this  sector  particularly  SMEs.    The initial validity of industrial license has been increased from 3 years to  15  years  with  a  provision  to  further  extend  it  by  3  years  on a case to case basis.
- iv. Issues  related  to  level  playing  field  between  Indian  and  foreign manufacturers  and  between  Public  sector  &  Private  sector  have also  been  addressed.  These  include  Exchange  Rate  Variation (ERV) protection for Indian vendors.
- v. Offset guidelines have been made flexible by allowing change 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.
- vi. In HAL, an R&D Corpus of 10% of the operational profit after tax is earmarked  for  R&D  activities  both  in-house  and  with  private vendors.
- vii. Strategic partnership model has been formulated by the Government  in  May,  2017  to  focus  on  substitution  of  imported spares, ensure greater self-reliance and dependability of supplies, essential to meet national security objectives.
- viii. Certain components of some of the defence equipment of Russian origin have been identified and published on the web for identifying Indian private sector companies  for indigenous manufacture under Joint Ventures/Transfer of Technology agreements with Russian OEMs.

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