Lok Sabha Question No. 4084 (UNSTARRED), answered on 2019-07-17
Subject: Manufacturing of Modern Defence Products
Ministry: DEFENCE
Asked by: Andimuthu Raja

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

## LOK SABHA UNSTARRED QUESTION NO.4084

TO BE ANSWERED ON 17 th JULY, 2019

## MANUFACTURING OF MODERN DEFENCE PRODUCTS

4084. SHRI A. RAJA:

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

- (a)  the details of the policies and the steps taken for manufacturing of state-of-the-art defence products;
- (b) whether  the  Government  has  singed  any  strategic  agreement  with  private companies regarding the manufacturing of defence products in the country;
- (c)  if so, the details thereof; and
- (d) the details of the efforts made by the Government for the transfer of state-of-theart  defence  technology  to  India  in  defence  procurement  agreement  with  foreign countries and companies?

## 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 (d):  A statement is attached.

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## STATEMENT  IN  RESPECT  OF  PARTS  (a)  TO  (d)  OF  LOK  SABHA UNSTARRED QUESTION NO. 4084 REGARDING 'MANUFACTURING OF MODERN DEFENCE PRODUCTS' FOR ANSWER ON 17.07.2019

1. Self-reliance  is  a  major  corner-stone  on  which  the  military  capability  of  any nation  rests.    Accordingly,  the  Defence  Production  Policy  promulgated  by  the Government, aims at  achieving  substantive  self-reliance  in  the  design,  development and production of equipment, weapon systems, platforms required for defence in as early a time frame possible, creating conditions conducive for private industry to play an active role in this endeavour; enhancing potential of SMEs in indigenisation and broadening the defence R&D base of the country.
2. 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 manufacturing 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. In  view  of  the  aforesaid  Defence  Production  Policy  and  'Make  in  India' initiative,  several  policy  initiatives  have  been  taken  for  promoting  manufacturing  of State-of-the-art defence products. These include:-
- a.  Innovations  for  Defence  Excellence ( iDEX) :   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 by  the  innovators  for  the  problem  statements  given  by  Armed  forces/Defence Units.
- b. Foreign Direct Investment (FDI) : 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.

- c. 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.
2. d .  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.
- e.    Mission Raksha Gyan Shakti: 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.
- f. Technology Development Fund: 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
4. Provisions  in Defence  Procurement  Procedure  (DPP-2016): Additionally, several  enabling  provisions  have  been  incorporated  in  the  DPP-2016  for promoting manufacture of the State-of-the-art defence products and technologies and transfer of state-of-the-art defence technology to India, which are as under :-
- a.    Buy (Indian-IDDM) in Defence Procurement Procedure (DPP-2016): 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.

b.          'Make'  Procedure :  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.

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.

- c.    Defence Offsets :  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
- d.          Strategic  Partnership  (SP) :  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.
- e. Buy  and  Make  (Indian) :  The  Buy  &  Make  (Indian)  category  has  a provision  for  procurement  from  an  Indian  vendor  engaged  in  a  tie-up  with  a foreign OEM, involving Transfer of Technology (ToT) of critical technologies.
- f. Buy  and  Make :  The  'Buy  &  Make'  category  has  provision  for procurement  from  a  foreign  vendor,  through  an  Indian  Production  Agency (PA), involving Transfer of Technology (ToT) of critical technologies.
- g. Multiplier for Technology Acquisition by DRDO :  A multiplier up to 3  is  permitted  in  the  discharge  of  offset  obligations  relating  to  technology acquisition by DRDO.

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