Lok Sabha Question No. 3892 (UNSTARRED), answered on 2019-07-17
Subject: Defence PSUs
Ministry: DEFENCE
Asked by: Shrirang Appa Barne, Behanan Benny, Vinayak Bhaurao Raut, Girish Bhalchandra Bapat, Shrikant Eknath Shinde

## GOVERNMENT OF INDIA MINISTRY OF DEFENCE

## DEPARTMENT OF DEFENCE PRODUCTION

## LOK SABHA UNSTARRED QUESTION NO.3892

TO BE ANSWERED ON 17 th JULY, 2019

## DEFENCE PSUs

3892. SHRI SRIRANGA APPA BARNE:

SHRI BENNY BEHANAN:

SHRI VINAYAK RAUT:

SHRI GIRISH BHALCHANDRA BAPAT:

DR. SHRIKANT EKNATH SHINDE:

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

- (a)  whether the issue of the Defence PSUs reportedly being given undue preference by  the  Ministry  for  large  orders  has  been  raised  by  different  quarters  and  if  so,  the details thereof;
- (b)  whether there is an inherent conflict of interest that prevents full unlocking of the 'Make in India' initiative and if so, the facts thereof;
- (c)  whether Union Government is examining recommendations by top two advisory bodies to move public sector units out of the supervision of the Defence Ministry;
- (d)  if so, the details thereof and the reaction of the Government thereto;
- (e) whether National Security Advisory Board (NSAB) has recommended restructuring  of  the  Defence  Ministry  to  promote  'Make  in  India'  if  so,  the  details thereof and the response of the Government thereto; and
- (f)  the other steps taken or proposed to be taken by the Union Government to keep Defence  manufacturing  on  a  competitive  basis,  in  which  both  PSUs  and  private industry may participate?

## A    N    S    W    E    R

MINISTER OF STATE

(SHRI SHRIPAD NAIK)

IN THE MINISTRY OF DEFENCE

रक्षा राज्य मंत्री

( श्री श्रीपाद नाईक )

(a) to (b): No, Sir.

(c)   No such recommendations have been received by this Ministry.

- (d)   Does not arise.

(e) National Security Advisory Board (NSAB) has not made any formal recommendation on restructuring the Ministry of Defence.

(f)   As per Annexure.

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## ANNEXURE  REFERRED  TO  IN  REPLY  TO  PART  (f)  OF  LOK  SABHA UNSTARRED QUESTION NO. 3892 FOR ANSWER ON 17.07.2019 REGARDING 'DEFENCE PSUs'.

The  following  steps  have  been  taken  by  Ministry  of  Defence  to  promote Defence  Manufacturing  on  a  competitive  basis,  in  which  both  PSUs  and  private industry may participate:

- 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.
- vi. 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).
- vii. 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.

- viii. 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
- ix. 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.
- x. 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.
- xi. 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, 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.
- xii. The process for export clearance has been streamlined and made transparent & online.
- xiii. 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.
- xiv. Excise  duty  exemption  to  DPSUs  was  withdrawn  to  make  Level  Playing field with Private Industries.

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