Lok Sabha Question No. 1444 (UNSTARRED), answered on 2021-02-10
Subject: Defence Exports
Ministry: DEFENCE
Asked by: Maneka Sanjay Gandhi

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

## LOK SABHA UNSTARRED QUESTION NO.1444

TO BE ANSWERED ON 10 th  February, 2021

## DEFENCE EXPORTS

## 1444. SHRIMATI MANEKA SANJAY GANDHI:

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

- (a) whether the Government is considering to take steps to achieve the target of five billion USD of defence export;
- (b) if so, the details thereof;
- (c) whether the Government is planning to bring new defence policy initiatives in the near future; and
- (d) if so, the details of the steps taken by the Government to improve Indian defence products and make them competitive globally?

## A    N    S    W    E    R

MINISTER OF STATE

(SHRI SHRIPAD NAIK)

IN THE MINISTRY OF DEFENCE

- (a)  & (b):   Various reforms/steps have been taken to enhance Defence exports. These reforms have provided a big boost to defence export in recent times. The steps taken to promote defence exports is at Annexure-I.
- (c)  &  (d):    Steps  taken  by  the  Government  to  improve  Indian  defence  products  is  at Annexure - II.

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## ANNEXURE-I  REFERRED  TO  IN  REPLY  TO  PARTS  (a)  &  (b)  OF  LOK  SABHA UNSTARRED  QUESTION  NO.  1444  FOR  ANSWER  ON  10.02.2021  REGARDING 'DEFENCE EXPORTS'.

## Measures taken by the Government to promote Defence exports

- (i) Special  Chemicals,  Organisms,  Materials,  Equipment  and  Technologies  (SCOMET) Category 6 titled  'Munitions List' that was hitherto  'Reserved' has been populated and Military Stores list notified vide Notification No.115(RE-2013)/2009-2014 dated 13th March,  2015 stands rescinded.
- (ii) The  Director  General  of  Foreign  Trade  (DGFT)  vide  Public  Notice  No.  4/2015-20 dated  24th  April,  2017,  notified  Department  of  Defence  Production  (DDP)  as  the Licensing Authority for export items in Category 6 of SCOMET. The export of items specified in Category 6 (Munitions List) except those covered under Notes 2 & 3 of Commodity  Identification  Note  (CIN)  of  the  SCOMET  is  now  governed  by  the Standard  Operating  Procedure  issued  by  the  Department  of  Defence  Production (DDP), Ministry of Defence.
- (iii) Standard Operating Procedure (SOP) for the export of munitions list items has been modified and placed on the website of the DDP.
- (iv) A  completely  end-to-end  online  portal  for  receiving  and  processing  authorisation permission has been developed. The applications submitted on this portal are digitally signed and the authorisation issued is also digitally signed.
- (v) In repeat orders of same product to the same entity, consultation process has been done away with and permission is issued immediately. For the repeat order of same product to  different  entity,  the  consultation  earlier  done  with  all  stakeholders  is  now  limited only with MEA.
- (vi) In  Intra-Company business (which is especially relevant for outsourcing of work by defence  related parent company  abroad  to  its  subsidiary  in India), the earlier requirement of getting End User Certificate (EUC) from the Government of importing country has been done away with and 'Buying' Company is authorized to issue the EUC.
- (vii) The legitimate export of the parts and components of small arms and body armour for civil use are now being permitted after prior consultation with MEA.
- (viii) For  export  of  items  for  exhibition  purposes,  the  requirement  of  consultation  with stakeholders has been done away with (except for select countries).

: 2 :

- (ix) Powers have been delegated to DRDO, DGOF, and CMD's of DPSUs for exploring export opportunities and participation in global tenders.
- (x) New End User Certificate Format for Parts & Components has been provided in SOP.
- (xi) Validity of Export Authorization has been increased for 02 years to date of completion of order/component whichever is later.
- (xii) A  new  provision  for  re-exporting  parts  and  components  for  undertaking  repair  or rework to provide replacement for a component under warranty obligation is inserted in the SOP as a sub-classification of repeat orders.
- (xiii) MHA vide Notification dated 1.11.2018 has delegated its powers to this Department to issue export license under Arms Rules 2016 in Form X-A, for parts & components of small  arms. With this the Department of Defence Production becomes the single point of  contact  for  exporter  for  export  of  parts  and  components  of  Small  Arms  & Ammunitions.
- (xiv) The Government has notified the Open General Export License (OGEL) -  a one time export  license,  which  permits  the  industry  to  export  specified  items  to  specified destinations, enumerated in the OGEL, without seeking export authorisation during the validity of the OGEL.
- (xv) Scheme for Promotion of Defence Exports has been notified to provide an opportunity to the prospective exporters an option to get their product certified by the Govt. and provides  access  to  the  testing  infrastructure  of  Ministry  of  Defence  for  initial validation  of  the  product  and  its  subsequent  field  trials.  The  certificate  can  be produced  by  the  prospective  exporter  for  marketing  their  products  suitably  in  the global market.
- (xvi) A  separate  Cell  has  been  formed  in  the  Department  of  Defence  Production  to  coordinate  and  follow  up  on  export  related  action  including  enquiries  received  from various countries and facilitate private sector and public sector companies for export promotion.
- (xvii) A Scheme to provide financial support to Defence Attaches for taking up actions for promoting exports of Indian made defence products both of public and private sector in the countries to which they are attached has been notified.

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## ANNEXURE-II  REFERRED  TO  IN  REPLY  TO  PARTS  (c)  &  (d)  OF  LOK  SABHA UNSTARRED  QUESTION  NO.  1444  FOR  ANSWER  ON  10.02.2021  REGARDING 'DEFENCE EXPORTS'.

## Initiatives undertaken to promote 'Make in India' in Defence Sector : -

- i. DPP 2016 has been revised as Defence Acquisition Procedure (DAP)- 2020, which is driven by the tenets of Defence Reforms announced as part of 'Aatmanirbhar Bharat Abhiyan'.
- ii. In  order  to  promote indigenous design and development of defence equipment 'Buy {Indian-IDDM  (Indigenously  Designed,  Developed  and  Manufactured)}'  category was introduced in 2016 and was accorded top most priority for procurement of capital equipment.
- iii. Ministry of Defence has notified a 'Negative list' of 101 items for which there would be an embargo on the import beyond the timeline indicated against them. This is a big step  towards  self-reliance  in  defence.  This  would  offer  a  great  opportunity  to  the Indian  defence  industry  to  manufacture  these  items  using  their  own  design  and development capabilities to meet the requirements of the Armed Forces in the coming years.  This  list  includes  some  high  technology  weapon  systems  like  artillery  guns, assault  rifles,  corvettes,  sonar  systems,  transport  aircrafts,  light  combat  helicopters (LCHs), radars and many other items to fulfil the needs of our Defence Services.
- iv. The 'Make' Procedure of capital procurement has been simplified. There is a provision for funding upto 70% of development cost by the Government to Indian industry under Make-I  category.  In  addition,  there  are  specific  reservations  for  MSMEs  under  the 'Make' procedure.
- v. Procedure  for  'Make-II'  category  (Industry  funded),  introduced  in  DPP-2016  to encourage  indigenous  development  and  manufacture  of  defence  equipment  has number  of  industry  friendly  provisions  such  as  relaxation  of  eligibility  criterion, minimal documentation, provision for considering proposals suggested by industry/individual etc. So far, 55 projects relating to Army, Navy & Air Force, have been accorded 'Approval in Principle', valuing about Rs. 30,000 Crores.
- vi. The Government of India has enhanced FDI in Defence Sector up to 74% through the Automatic  Route  for  companies  seeking  new  defence  industrial  license  and  up  to 100%  by  Government  Route  wherever  it  is  likely  to  result  in  access  to  modern technology  or  for  other  reasons to be recorded. The obligatory government approval

for existing FDI  approval  holders / current  defence  licensees  for change in equity / shareholding pattern up to 49% FDI has been replaced with mandatory declaration for the same within 30 days of change of equity / shareholding pattern. The proposals for raising  FDI  beyond  49%  from  such  companies  could  also  be  considered  with Government approval.

- 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. An  indigenization  portal  namely  SRIJAN  has  been  launched  in  August,  2020  for DPSUs/OFB/Services  with  an  industry  interface  to  provide  development  support  to MSMEs/Startups/Industry for import substitution.
- ix. 'Offset  portal'  has  been  created  in  May,  2019  to  ensure  greater  transparency, efficiency  and  accountability  in  the  process.  Reforms  in  Offset  policy  have  been included  in  DAP-2020,  with  thrust  on  attracting  investment  and  Technology  for Defence manufacturing.
- x. Government has notified the 'Strategic Partnership (SP)' Model in May, 2017, 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.
- 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. An Inter-Governmental Agreement (IGA) on 'Mutual Cooperation in Joint Manufacturing  of  Spares,  Components,  Aggregates  and  other  material  related  to Russian/Soviet Origin Arms and Defence Equipment' was signed in September 2019. The  objective  of  the  IGA  is  to  enhance  the  After  Sales  Support  and operational

availability of Russian origin equipment currently in service in Indian Armed Forces by organizing production of spares and components in the territory of India by Indian Industry  by  way  of  creation  of  Joint  Ventures/Partnership  with  Russian  Original Equipment  Manufacturers  (OEMs)  under  the  framework  of  the  'Make  in  India' initiative.

- xiii. 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 caseto-case basis. About 500 Industrial Licenses have been issued so far.
- xiv. Department  of  Defence  Production  has  notified  46  items  under  the  latest  Public Procurement  Order,  2017  notified  by  Department  for  Promotion  of  Industry  and Internal  Trade  (DPIIT),  for  which  there  is  sufficient  local  capacity  and  competition and procurement of these items shall be done from local suppliers only irrespective of the purchase value.
- xv. Defence Investor Cell has been created in February, 2018 the Ministry to provide all necessary information including addressing queries related to investment opportunities, procedures and regulatory requirements for investment in the sector.

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