Lok Sabha Question No. 603 (UNSTARRED), answered on 2019-11-20
Subject: Production of Defence Equipment
Ministry: DEFENCE
Asked by: Rajiv Pratap Rudy

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

## LOK SABHA UNSTARRED QUESTION NO.603

TO BE ANSWERED ON 20 th  November, 2019

## PRODUCTION OF DEFENCE EQUIPMENT

## 603. SHRI RAJIV PRATAP RUDY:

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

- (a) whether the Government has been successful in boosting domestic production of defence equipment under the 'Make in India' scheme;
- (b) if so, the details thereof and if not, the reasons therefor;
- (c) whether  the Government  has  taken/is taking any steps/measures to boost production of defence equipments in the country and if so, the details thereof;
- (d) whether the country's defence imports are likely to reduce in the next three years as  a  result  of  those  steps/measures,  if  so,  the  details  thereof  and  if  not,  the  reasons therefor; and
- (e)  the  details  of  the  imports  and  exports  made  by  the  Government  in  the  defence sector during the last five years, year-wise?

## 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 laid on the Table of the House.

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## STATEMENT  IN  RESPECT  OF  PARTS  (a)  TO  (e)  OF  LOKSABHA UNSTARRED  QUESTIO02N  NO.  603  REGARDING  'PRODUCTION  OF DEFENCE EQUIPMENT'FOR ANSWER ON 20.11.19

- (a) to  (c):  In  pursuance  of  'Make  in  India'  initiative  of  the  Government,  following policy measures have been taken by Ministry of Defence: -
- 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 DPP-2016 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. 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.
- iv. 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.  24 contracts have been signed so far by the implementing agency -Defence Innovation Organisation (DIO).
- v. The 'Make' Procedure has been simplified with provisions for funding of 90% of  development  cost  by  the  Government  to  Indian  industry  and  reserving Government funded Make-I projects not exceeding development cost of Rs.10 Crore &procurement cost Rs. 50 Cr per year for MSMEs.  The industry funded Make-II Projects not exceeding development cost of Rs.3 Crore &procurement cost Rs. 50 Cr per year have also been reserved for MSMEs.
- vi. Separate  procedure  for  'Make-II'  category  has  been  notified  under  DPP  to encourage  indigenous  development  and  manufacture  of  defence  equipment. 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  in  this  procedure.  Till  date,  44 proposals have been accorded Acceptance in Principle.

- vii. 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.
- 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. 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. They span across Chennai, Hosur, Coimbatore, Salem and Tiruchirappalli  in  Tamil  Nadu  and  spanning  across  Aligarh,  Agra,  Jhansi, Kanpur, Chitrakoot and Lucknow in Uttar Pradesh (UP).
- x. A Policy on 'Utilisation of Third Party Inspection Services' has been notified in May 2018 for effective administration of inspection Services with involvement of  third  parties  and  promote  Ease  of  Doing  Business  for  MSMEs  and  private sector.
- xi. 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  allowed  to  provide  the details  of  IOPs  and  products after signing of contracts. In order to bring  more transparency and efficiency into the Offset discharge process, 'Offset portal' has been created in May 2019.
- xii. The  Ministry  has  instituted  a  new  framework  titled  'Mission  Raksha  Gyan Shakti'  in  November  2018  which  aims  to  provide  boost  to  the  Intellectual Property Rights (IPR) culture in indigenous defence industry.
- xiii. Defence Investor Cell has been created in Feb-2018 in the Ministry to provide all necessary information including addressing queries related to investment opportunities,  procedures  and  regulatory  requirements  for  investment  in  the sector.
- xiv. Defence  Products  list  requiring  Industrial  Licences  has  been  rationalised  and manufacture of most of parts or components does not require Industrial License. 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.

- xv. The process for export clearance has been streamlined and made transparent & online. An Export Promotion Cell has been setup to co-ordinate and follow-up on export related action including enquiries received from various countries and facilitate private sector and public sector companies for export promotion.
- xvi. Department of Defence Production has notified 112 items under Public Procurement Order 2017 notified by Department for Promotion of Industry and Internal Trade (DPIIT). The Defence PSUs and OFB are thereby required to give preference to domestic manufacturers while procuring these items in accordance with the said policy.
- xvii. In the last five years from 2014-15 to 2018-19 and current year till Sept 2019, Government  has  accorded  Acceptance  of  Necessity  (AoN)  to  218  proposals, worth  Rs.  409,244  Crore  approximately,  under  various  categories  of  Capital procurement which promotes domestic manufacturing as per DPP 2016.
4. (d)  &  (e):  The  aforesaid  policy  initiatives  are  aimed  at  reducing  import  of  defence equipment  and  achieve  substantive  self-reliance  in  defence  manufacturing.  The values of import & export of defence equipment in the last five years are given below:

(Value in Rs Cr)

| Year    | Capital &Revenue Expenditure through Foreign sources ( Based on data received from CGDA )   | Value of Defence Exports ( Based on the value of Authorization/Licence issued by DDP to Private companies and actual export by DPSUs/OFB )   |
|---------|---------------------------------------------------------------------------------------------|----------------------------------------------------------------------------------------------------------------------------------------------|
| 29222.3 | 1940.64                                                                                     | 2014-15                                                                                                                                      |
| 2015-16 | 26190.46 2059.18                                                                            |                                                                                                                                              |
|         | 30483.78 1521.91                                                                            | 2016-17                                                                                                                                      |
| 2017-18 | 33413.31 4682.36                                                                            |                                                                                                                                              |
| 2018-19 | 42974.1                                                                                     | 10745.77                                                                                                                                     |

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