Lok Sabha Question No. 245 (STARRED), answered on 2017-03-20
Subject: Contribution of MSME in Defence Production
Ministry: MICRO,SMALL AND MEDIUM ENTERPRISES
Asked by: Richard Hay

## GOVERNMENT OF INDIA MINISTRY OF MICRO, SMALL AND MEDIUM ENTERPRISES

## LOK SABHA STARRED QUESTION  NO. *245 TO BE ANSWERED ON 20.03.2017

## CONTRIBUTION OF MSME IN DEFENCE PRODUCTION

- *245. PROF.  RICHARD  HAY:

Will the Minister of MICRO, SMALL AND MEDIUM ENTERPRISES be pleased to state:

- (a) whether the Government is planning to boost Micro, Small and Medium Enterprises (MSMEs) Sector's contribution towards indigenous manufacturing in defence sector under 'Make- in- India' Programme in the country; and
- (b) if  so,  the  details  thereof  including  the  target  fixed  in  this  regard    along with its present percentage of contribution, State/UT-wise?

## ANSWER

MINISTER OF MICRO, SMALL AND MEDIUM ENTERPRISES (SHRI KALRAJ MISHRA)

- (a) &(b): A Statement is laid on the Table of the House.

## Statement referred to in reply to Parts (a) and (b) of the Lok Sabha Starred Question no.* 245  for reply on 20 th March 2017.

(a) & (b): Make  in  India  initiative  launched  in  September,  2014  aims  to promote  India  as  an  important  investment  destination  and  a  global  hub  for manufacturing, design and innovation. It also envisages to ease the investment caps and controls and to open up India's industrial sectors to global participation.  Department  of  Industrial  Policy  and  Promotion,  Ministry  of Commerce and Industry is the coordinating agency for implementing the Make in  India  initiative.  Defence  manufacturing  is  one  of  the  twenty  five  sectors identified  for  Make  in  India  programme.  Ministry  of  Defence  has  framed  the Defence Procurement Procedure (DPP) - 2016 which aims at enhancing the role of  Micro,  Small  &  Medium  Enterprises  (MSMEs)  in  the  defence  sector. Following  specific  provisions  have  been  introduced  in  DPP-2016  that  would increase the participation of MSMEs in the defence sector:

- I. 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.
- II. 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.
- III. In the discharge of offset obligations, a multiplier of 1.50 will be permitted where MSMEs are Indian Offset Partners (IOPs).

The Ministry of MSME has also notified 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 MSEs by Central Ministries/Departments/PSUs with effect from April 1, 2015. This also includes Ministry  of  Defence  and  its  Central  Public  Sector  Enterprises.  Further,  358 items  have  been  reserved  for  exclusive  procurement  from  MSEs.  The  policy also provides for MSEs to be issued tender set free of cost and exemption from the  payment  of  earnest  money.  In  the  tendering  process,  participating  MSEs quoting price within price band of L1+15% is also allowed to supply a portion of requirement by bringing down their price to L1 price in a situation where L1 price is from someone other than a MSE.

At  present,  there  is  no  specific  scheme  being  implemented  by  the Ministry of MSME to boost Micro, Small and Medium Enterprises (MSMEs) sector's  contribution  towards  indigenous  manufacturing  in  defence  under  the 'Make  in  India'  programme.  However,  there  are  various  schemes  being implemented  by  the  Ministry  of  MSME  such  as  National  Manufacturing Competitiveness  Programme,  MSE  Cluster  Development  Programme  and Technology  Centre  Systems  Programme  for  promotion  and  development  of MSMEs across various sectors including defence.