Lok Sabha Question No. 1830 (UNSTARRED), answered on 2019-07-03
Subject: Defence Production under Make in India
Ministry: DEFENCE
Asked by: P.P. Chaudhary

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

## LOK SABHA UNSTARRED QUESTION NO.1830

TO BE ANSWERED ON 03 rd JULY, 2019

## DEFENCE PRODUCTION UNDER MAKE IN INDIA

1830. SHRI P.P. CHAUDHARY:

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

- (a)  the steps taken by the Government to ensure that the country becomes self-reliant in production of defence equipments;
- (b)  the details of procurement and production undertaken during the last five years;
- (c)  whether the Government is considering to expedite the implementation of 'Make in India' initiative for manufacturing of defence equipments in the country and if so, the details of the framework prepared in this regard;
- (d)  whether any targets have been set for the next five years regarding production of indigenous defence equipments and if so, the details thereof; and
- (e)  if not, the framework made by the Government in this regard?

## A    N    S    W    E    R

MINISTER OF STATE IN THE MINISTRY OF DEFENCE

(SHRI SHRIPAD NAIK)

रक्षा राज्य मंत्री

( श्री श्रीपाद नाईक )

- (a)  to (e) :  A statement is attached.

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## STATEMENT  IN  RESPECT  OF  PARTS  (a)  TO  (e)  OF  LOK  SABHA UNSTARRED QUESTION NO. 1830 REGARDING 'DEFENCE PRODUCTION UNDER MAKE IN INDIA' FOR ANSWER ON 03.07.19

1. The following steps have been taken for ensuring that the country becomes selfreliant in production of defence equipments.

- (i) Defence Production in India is led by Ordnance Factories and Defence Public Sector  Undertakings  which  have  played  a  huge  role  in  making  our  country  a defence production hub.  There are 41 Ordnance Factories and 9 DPSUs in our country contributing to more than Rs.58,000 crores approx. in defence production every year. Government provides support to Defence Public Sector Undertakings and Ordnance Factories to expand their activities.
- (ii) Government has issued 439 licenses covering 264 companies till March, 2019. Industrial  Licenses  are  issued  for  manufacturing  of  tanks  and  other  armoured fighting vehicles, defence aircraft, space craft and parts thereof, warship, arms and ammunition and allied items of defence equipment, parts and accessories thereof. In  addition,  for  a  large  number  of  defence  components,  no  license  is  required. There are more than 8000 MSMEs which are among the vendor base of OFB & Defence PSUs supplying various items to them.
- (iii) An  innovation ecosystem  for Defence  titled Innovations for  Defence Excellence (iDEX) has been launched in April, 2018. iDEX  is  aimed  at  creation of  an  ecosystem  to  foster  innovation  and  technology development  in Defence and Aerospace  by engaging  Industries  including  MSMEs, Start-ups, Individual Innovators,  R&D institutes  and  Academia  and  provide  them  grants/funding  and other support to carry out R&D which has potential for future adoption for Indian defence  and  aerospace  needs.  Under  iDEX,  innovative    solutions  have  been successfully  identified    for  14    problem  areas  pertaining  to  national  defence requirements. More than 600 startups  have been engaged in the process and 44 different  solutions  have  been  identified  for  the  problem  statements  by  the innovators.
- (iv)  In order to expand the manufacturing infrastructure, Government has decided to  establish  two  defence  industrial  corridors  to  serve  as  an  engine  of  economic development  and  growth  of  defence  industrial  base  in  the  country.  These  are spanning across Chennai, Hosur, Coimbatore, Salem and Tiruchirappalli in Tamil Nadu  and  spanning  across  Aligarh, Agra, Jhansi, Kanpur,  Chitrakoot  and Lucknow in Uttar Pradesh (UP).

2. In  addition,  the  following  steps  have  been  taken  to  achieve  substantive  selfreliance in defence production for meeting requirements of Armed Forces: -
- i. Defence Procurement Procedure (DPP) has been revised in 2016 wherein specific  provisions  have  been  introduced  for  stimulating  growth  of  the domestic defence industry.
- ii. A new category of procurement 'Buy {Indian-IDDM (Indigenously Designed,  Developed  and  Manufactured)}'  has  been  introduced  in  DPP2016 to promote indigenous design and development of defence equipment. It has been accorded top most priority for procurement of capital equipment. Besides  this,  preference  has  been  accorded  to  'Buy  (Indian)',  'Buy  and Make  (Indian)'  &  'Make'  categories  of  capital  acquisition  over  'Buy (Global)' & 'Buy & Make (Global)' categories.
- iii. 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.
- iv. 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.
- v. Separate procedure for 'Make-II' sub-category has been notified wherein a number  of  industry  friendly  provisions  such  as  relaxation  of  eligibility criterion, minimal  documentation,  provision  for  considering  proposals suggested  by  industry/individual  etc.,  have  been  introduced.  Till  date,  36 proposals  for  development  by  industry  have  been  given  'in-principle' approval under Make-II.
- vi. 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.
- vii. The  Defence  Products  List  for  the  purpose  of  issuing  Industrial  Licenses (ILs) under IDR 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.  The initial validity of the Industrial Licence granted under the IDR 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.  So  far,  the  process  for  export  clearance  has  been  streamlined  and made transparent & online.

- viii. 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.
- ix. Government  has  set  up  the  Technology  Development  Fund  (TDF)  to encourage  participation  of  public/private  industries  especially  MSMEs, through  provision  of  grants,  so  as  to  create  an  eco-system  for  enhancing cutting edge technology capability for defence applications.
- x. The Ministry has instituted a new framework titled 'Mission Raksha Gyan Shakti'  which  aims  to  provide  boost  to  the  IPR  culture  in  indigenous defence industry.
- xi. Government  has  notified  a  Policy  for  indigenisation  of  components  and spares  used  in  Defence  Platforms  in  March,  2019  with  the  objective  to create  an  industry  ecosystem  which  is  able  to  indigenize  the  imported components (including alloys & special  materials)  and  sub-assemblies  for defence equipment and platform manufactured in India.
- xii. Defence  Investor  Cell  has  been  created  in  the  Ministry  to  provide  all necessary  information  including  addressing  queries  related  to  investment opportunities, procedures and regulatory requirements for investment in the sector.
3. The details of procurement and production undertaken during the last five years is as given below :-

( Rs. in Crore )

| Financial Year   |   Total Capital Procurement | Total Production of DPSUs/OFB   |
|------------------|-----------------------------|---------------------------------|
| 2014-15          |                     65860   | 46,380                          |
| 2015-16          |                     62341.9 | 52,392                          |
| 2016-17          |                     69150.1 | 55,252                          |
| 2017-18          |                     72732.3 | 58,314                          |
| 2018-19          |                     75920.7 | 57,641                          |

Besides, a substantive production of defence equipments takes place in other units like M/s BrahMos Pvt Ltd , PSUs,(BHEL) and also defence licensee companies.

4. As a result of the Make in India initiative of the government for strengthening the  defence  manufacturing  base  in  the  country,  in  the  last  three  financial  years  i.e. from 2016-17 to 2018-19, Government has accorded Acceptance of Necessity (AoN) to  113  proposals,  worth  Rs.  2,39,074  Crore  approximately  under  'Buy(IndianIDDM)',  'Buy(Indian)',  'Buy  and  Make(Indian)',  'Strategic  Partnership  Model'  or 'Make'  categories  of  capital  procurement  as  per  Defence  Procurement  Procedure (DPP), 2016, in which Request for Proposal(RFP) is issued only to Indian Vendors.

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