Lok Sabha Question No. 1983 (UNSTARRED), answered on 2019-07-03
Subject: Defence Production Infrastructure
Ministry: DEFENCE
Asked by: Ramesh Chander Kaushik, D.K. Suresh

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

## LOK SABHA UNSTARRED QUESTION NO.1983

TO BE ANSWERED ON 03 rd JULY, 2019

## DEFENCE PRODUCTION INFRASTRUCTURE

1983. SHRI RAMESH CHANDER KAUSHIK: SHRI D.K. SURESH:

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

- (a)  whether  India  imports  65  per  cent  of  its  military  equipments  and  its  import dependency in the defence sector is significantly high;
- (b)  if  so,  the  details  thereof  along  with  the  amount  spent  on  import  of  defence equipments during the last three years;
- (c)  whether  development    of  the  infrastructure  of  defence  production  is  not  as  per expectation;
- (d)  if so, the details thereof and the reasons therefor;
- (e)    the  kind  of  framework  being  formulated  by  the  Government  for  developing defence production infrastructure in the country; and
- (f)    whether  the  Government  has  fixed  any  time  limit  in  this  regard  and  if  so,  the details thereof?

## 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 (f) :  A statement is attached.

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## STATEMENT  IN  RESPECT  OF  PARTS  (a)  TO  (f)  OF  LOK  SABHA UNSTARRED QUESTION NO. 1983 REGARDING 'DEFENCE PRODUCTION INFRASTRUCTURE' FOR ANSWER ON 03.07.2019

1. Capital procurement of defence equipment is undertaken from various domestic  as  well  as  foreign  vendors  as  per  extant  Defence  Procurement  Procedure (DPP)  based  on  threat  perception,  operational  challenges  and  technological  change and to keep the Armed Forces in a state of readiness to meet the entire spectrum of Security Challenges. Details of defence procurement undertaken during the last three years is given below:-

## CAPITAL EXPENDITURE

( Rs. in crore )

|         |   Total Procurement |   Procurement from Indian Vendors |   Procurement from Foreign Vendors |
|---------|---------------------|-----------------------------------|------------------------------------|
| 2016-17 |             69150.1 |                           41872   |                            27278.1 |
| 2017-18 |             72732.3 |                           43696.9 |                            29035.4 |
| 2018-19 |             75920.7 |                           38963.7 |                            36957.1 |

2. The following steps have been taken for development of defence manufacturing  infrastructure,  leading  to  development  of  Indigenous  capabilities  in Land, Aero, Missile, Naval and Electronic Systems.
2. (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.
3. (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.
4. (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) 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).

3. In addition, the following steps have been taken to achieve substantive self-reliance 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.
4. As  a  result  of  the  above  measures  for  the  development  of  infrastructure  for defence  production,  the  following  capabilities  have  been  created  in  Naval  System, Aero System, Missile System, Electronic System and Land System;

|   Sl No | Types of System   | Products                                                                                                                                                                                                                            |
|---------|-------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|       1 | Naval System      | Scorpene Submarines, Destroyers, Frigates, Corvettes, Bailey bridges, Offshore Patrol Vessel, Fast Patrol Vessel, Frigates, Fleet Support Ship, Ocean Surveillance Ship, Manufacture of all type of ships etc.                      |
|       2 | Aero System       | LCA, Su-30 MKI, Mirage Upgrade, ALH, LCH, UAVs, Aero engines, Accessories &Avionics, etc.                                                                                                                                           |
|       3 | Missile System    | Akash Weapon System (SAM), Anti-Tank Missile Systems (ATGM): Invars, Konkurs, Long Range SAM, Medium Range SAMs, Torpedos etc.                                                                                                      |
|       4 | Land System       | Tanks, Artillery Guns, Small arms, range of ammunition, Explosives & Propellants, Military Vehicles, Instruments & Optical devices, Parachutes, Troop comfort & General Stores, High Mobility Trucks, Combat Mobility Vehicles etc. |
|       5 | Electronic System | Radars, Electronic systems for missiles, Coastal Surveillance Systems, Electronic fuzes, Electronics for missile systems, SDRs etc.                                                                                                 |

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