Lok Sabha Question No. 198 (STARRED), answered on 2022-07-29
Subject: Export and Import of Defence Equipment
Ministry: DEFENCE
Asked by: Asaduddin Owaisi

## GOVERNMENT OF INDIA MINISTRY OF DEFENCE DEPARTMENT OF DEFENCE

## LOK SABHA STARRED QUESTION NO. 198

TO BE ANSWERED ON 29 th  July, 2022

## EXPORT AND IMPORT OF DEFENCE EQUIPMENT

*198. SHRI ASADUDDIN OWAISI: Will the Minister of DEFENCE be pleased to state: (a) the total expenditure incurred by the armed forces for import of equipment and machinery during the last three years; (b) whether defence export has also increased during the last three years; (c) if so, the details thereof, year-wise; (d) the countries which are main importers of Indian defence equipment; (e) whether private sector is playing key role in increasing defence export; and (f)  if  so,  the  details  thereof  and  the  steps  taken  or  being  taken  by  the  Government  to

- encourage the private sector in defence production?

## A  N  S  W  E  R

MINISTER OF DEFENCE

- (a) to (f):  A statement is laid on the Table of the House.

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(SHRI RAJNATH SINGH)

## STATEMENT  REFERRED  TO  IN  REPLY  TO  PARTS  (a)  to  (f)  OF  THE  LOK SABHA STARRED QUESTION No. 198 FOR ANSWER ON 29.07.2022 REGARDING 'EXPORT AND IMPORT OF DEFENCE EQUIPMENT'.

- (a):    The  details  of  Capital  expenditure  incurred  by  the  Armed  Forces  for  import  of equipment and machinery during the last three years vis-à-vis percentage of total procurement in this category are as below:-

| Year      | Capital Expenditure on Import Amount (in crore)   |   %age of Capital Procurement |
|-----------|---------------------------------------------------|-------------------------------|
| 2019-20   | 38,156.83                                         |                         41.89 |
| 2020-21   | 42,786.54                                         |                         36    |
| 2021-22 * | 39,650.99                                         |                         35.28 |

(b) to  (f):Many reforms/steps have been taken by Ministry of Defence to enhance Defence Export in the recent times, the details are attached as Annexure-I. Because of these efforts, Defence exports have grown eight fold in the last six years, i.e. from Rs. 1521 Crore in 201617 to Rs. 12815 Crore in 2021-22. The major contribution in this growth has come from the private  sector.  During  2021-22,  the  private  sector  has  contributed  almost  70%  of  the  total exports. The defence exports from private sector during the last six years are as under:-

(Rs. in Crores)

| Year    |   Total Export value |   Contribution of Private Sector |
|---------|----------------------|----------------------------------|
| 2016-17 |                 1521 |                              194 |
| 2017-18 |                 4682 |                             3163 |
| 2018-19 |                10746 |                             9813 |
| 2019-20 |                 9116 |                             8008 |
| 2020-21 |                 8435 |                             7271 |
| 2021-22 |                12815 |                             8800 |

About 80 countries import Indian defence equipment, sub-systems, parts  & components.  However,  the  names  of  the  countries  cannot  be  divulged  due  to  strategic reasons.

A statement highlighting such actions is attached as Annexure-II.

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## ANNEXURE-I  REFERRED  TO  IN  REPLY  TO  PARTS  (b)  to  (f)  OF  THE  LOK SABHA STARRED QUESTION No. 198 FOR ANSWER ON 29.07.2022 REGARDING 'EXPORT AND IMPORT OF DEFENCE EQUIPMENT'.

## Measures Taken By The Government To Promote Defence Exports

1. 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.
2. The  Director  General  of  Foreign  Trade  (DGFT)  vide  Public  Notice  No.  4/2015-20 dated 24th April, 2017 has delegated its authority and 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.
3. Standard Operating Procedure (SOP) for the export of munitions list items have been simplified and placed on the website of the DDP.
4. 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.
5. 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.
6. The  requirement  of  Government  signed  EUC  in  cases  of  providing  engineering services (ToT related to Munitions List) to Wassenaar Arrangement (WA) Countries has been dispensed with.
7. Legitimate export of systems/platforms for civil end use to WA Member countries is considered subject to submission of EUC or import certificate or equivalent document issued by the Government of importing country.
8. The  legitimate  export  of  the  parts  and  components  for  civil  use  are  now  being permitted after prior consultation with MEA.
9. Cases  pertaining  to  grant  of  Export  Authorisation  for  participation  in  Exhibition, consultation with stakeholders will be undertaken if the items of export are lethal in nature, consultation with MEA alone would be carried out for export to negative list of countries.

10. Export  of  complete  systems  (appendix-II  items)  as  SAMPLE  for  participation  in tender  shall  be  processed  without  consultation  of  Stakeholders,  provided  that  the exporter holds a valid License for manufacturing the item of export.
11. Cases pertaining to export of Items to OEM,  imported  for participation in demo/display/exhibitions/tenders/RFP/ RFQ/NIT in India shall be processed without stakeholder consultation.
12. Powers  have  been  delegated  to  DRDO  and  CMDs  of  DPSUs  for  exploring  export opportunities and participation in global tenders.
13. The  End  User  Certificate  format  has  been  revised  to  cater  to  the  modification  and replication aspect of exported items and to harmonize with Wassenaar Arrangement (WA)  Guidelines which prescribes greater degree of scrutiny for  goods and technologies which are more sensitive in nature. The revised EUC formats have been notified on defenceexim portal.
14. Validity of Export Authorization for export of parts & components has been increased from 02 years to date of completion of order/component whichever is later.
15. 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.
16. MHA vide Notification dated 1.11.2018 has delegated its powers to Department of Defence of Production 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.
17. The  Government  has  notified  the  three  Open  General  Export  License  (OGEL)  for export  of  Parts  and  Components/  Transfer  of  Technology/  Major  Platforms  and Equipments.  OGEL isone 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. OGEL has been integrated with end to end online Portal.
18. 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.
19. Export Promotion cell under DDP, MoD has been formed to co-ordinate and followup on export related action including enquiries received from various countries and facilitate private sector and public sector companies for export promotion.

20. Two export booklets i.e.  'Indian  Defence Industry  a Global reach' and 'Catalogue Indian Defence Industry 2022' for promotion of Indigenous Defence products from both Public and Private sectors have been released during Mar'2022. Soft copies of both the e-booklets have been shared with Indian Defence Attaches posted at Indian Missions  abroad  and  also  available  on  the  websites  http://defenceexim.gov.in  and http://ddpmod.gov.in.  Defence Attaches have also been advised to publish it in local language of their respective countries.
21. A completely end-to-end online portal for receiving and processing export authorisation  permission  has  been  developed.  The  applications  submitted  on  this portal are digitally signed and the authorisation are also issued digitally, at faster pace. This  has  reduced  the  average  time  taken  for  issuance  of  export  Authorisations considerably from 86 days to 35 days in case of Systems/Sub-systems and from 24 days to 10 days in case of components.
22. Export  leads  received  from  various  stakeholders  are  being  disseminated  to  the registered  Indian  Defence  Exporters  through  online  portal.  This  facility  helps  the Indian defence exporters to quickly respond to export opportunities arising in other countries.  The  online  portal  is  being  upgraded  with  a  feedback  mechanism  from Indian Industry for online monitoring/follow-up of the disseminated Export Leads.
23. Defence attaches  are tasked to  take  up actions for  promoting  exports  of  indigenous defence products from both public and private sectors in the countries to which they are accredited. Funds are being provided to them under the Defence Attaches funding scheme to undertake multifarious promotion activities.
24. Webinars  are  being  organized  with  Govt.  and  Industry  Stakeholders  in  Friendly Foreign  Countries  (FFCs)  through  Industry  Associations  with  active  participation from Indian Defence Industries. Twenty Seven such webinars have been organized.

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## ANNEXURE-II  REFERRED  TO  IN  REPLY  TO  PARTS  (b)  to  (f)  OF  THE  LOK SABHA STARRED QUESTION No. 198 FOR ANSWER ON 29.07.2022 REGARDING 'EXPORT AND IMPORT OF DEFENCE EQUIPMENT'.

## Measures Taken To Simplify Procedures To Promote Domestic Defence Manufacturing

- (i) A  Defence  Product  List  (DPL)  giving  items  that  require  Industrial  License  for manufacture  in  Defence  sector  was  notified  by  the  Government  in  2014.  To promote  manufacturing  in  Defence  sector,  the  DPL  has  been  rationalized  and manufacture of many parts and components are de-licensed.
- (ii) The initial validity of industrial licenses under I(D&R) Act, 1951 has been revised to 15 years, further extendable up to 18 years for existing as well as future licenses vide  Press  Note  10(2015  Series)  dated  22.09.2015.  Increase  in  validity  of Industrial  Licenses  has  provided  sufficient  time  and  space  for  companies  to operate and manufacture without hindrance.
- (iii) Reforms  in  Offset  policy  have  been  included  in  DAP  -  2020,  with  thrust  on attracting investment and Transfer of Technology for Defence manufacturing, by assigning higher multipliers to them.
- (iv) After opening up of the Defence Industry Sector for private Sector participation in 2001,  358  Indian  Companies  have  been  issued  584Industrial  Licenses for manufacture of licensable defence items till June, 2022.
- (v) Defence  Procurement  Procedure  (DPP)  2016  has  been  revised  as  Defence Acquisition  Procedure  (DAP)  2020  aiming  to  provide  the  highest  degree  of probity, public accountability, transparency, fair competition and a level-playing field for Indian Private Defence Industries.
- (vi) Further,  in  order  to  promote  indigenous  design  and  development  of  defence equipment, 'Buy {Indian-IDDM (Indigenously Designed, Developed and Manufactured)}' category has been accorded top most priority for procurement of capital  equipment.  The  'Make'  Procedure  of  capital  procurement  has  been simplified. There is a provision for funding up to 70% of development cost by the Government to Indian industry under Make-I category, whereas Make-II procedure (Industry funded) provides assurance to the industry for procurement. In addition, there are specific preferences  for  MSMEs  under  the  'Make' procedure.  A  newBuy  (Global-Manufacture  in  India)  category  has  also  been added.  Itincorporates ' manufacture  of  either  the  entire / part  of  the  equipment  or spares/assemblies/sub-assemblies/Maintenance, Repair and Overhaul (MRO) facility for the equipment , through its subsidiary in India.
- (vii) Ministry  of  Defence  notified  three  Positive  Indigenisation  Lists  with  total  310 items  for  which  there  would  be  an  embargo  on  the  import  beyond  the  timeline indicated against each of them, offering a great opportunity to the Indian defence industry  to  manufacture  these  items  using  their  own  design  and  development capabilities.

Further,  in  an  effort  to  minimize  import  by  DPSUs,  DDP/MoD  has  notified another Positive Indigenisation List of sub-systems / assemblies / sub-assemblies / components of total 2851 items of DPSUs for which there would be embargo on the import beyond the timeline indicated against each of them.

- (viii) An indigenization portal, namely SRIJAN, has been launched in August 2020 for DPSUs/Services  with  an  industry  interface  to  provide  development  support  to MSMEs/Start-ups/Industry  for import substitution. So  far,  more  than21000 Defence items, which were earlier imported, have been displayed on the portal. Private industry has expressed interest in indigenising more than 4700 items.
- (ix) Government has established two Defence Industrial Corridors (DICs), one each in Uttar Pradesh and Tamil Nadu. It has been envisaged to attract total investments of Rs 20,000 Crore in the two Defence Industrial Corridors of Uttar Pradesh and Tamil Nadu by the year 2024-25.
- (x) In  May, 2001, the Defence Industry sector,  which  was hitherto reserved for the public sector, was opened up to 100% for Indian private sector participation, with Foreign  Direct  Investment  (FDI)  up  to  26%  both  subject  to  licensing.  Further, Department of Industrial Policy & Promotion, Ministry of Commerce & Industry vide Press Note No. 5 (2016 Series), has allowed FDI under automatic route upto 49% and above 49% through government route wherever it is likely to result in access to modern technology or for other reasons to be recorded. The Government further  liberalized  FDI  policy  on  17.09.2020  vide  press  Note  4  of  2020  Series allowing  foreigninvestment  up  to  74%  under  automatic  route  and  beyond  74% upto 100% through Government route wherever it is likely to result in access to modern technology or for other reasons to be recorded.
- (xi) Till  May,  2022  FDI  inflows  of  over  Rs.  4760  crores  have  been  reported  in  the Defence and Aerospace sector.  Further, the total FDI inflow in the period from April, 2014 to May, 2022 is over Rs. 3378 crores.
- (xii) A Scheme for scaling up iDEX has been launched in May 2021 with a budgetary support of Rs. 498.80 crore for the next five years i.e. from 2021-22 to 2025-26. The Scheme aims at providing financial support to nearly 300 Start-ups/ MSMEs/ individual  innovators  and  20  partner  incubators  under  the  Defence  Innovation Organisation (DIO) framework. Moreover, Rs. 1000 Crore have been earmarked in 2021-22 for procurement under iDEX route.
- (xiii) Ministry has introduced an end-to-end online export authorisation system that has resulted in a marked increase in the number of online export authorisations issued.
- (xiv) Defence Investor Cell (DIC) has been created in February 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. So far, DIC has received and addressed more than1364 queries.

- (xv) Further,  Government  has  announced  important  landmark  initiatives  in  Union Budget 2022 - 23.
- a. 68  per  cent  of  the  capital  procurement  budget  will  be  earmarked for domestic industry in 2022-23, up from 58 per cent in 2021-22.
- b. 25 per cent of defence R&D budget earmarked for Industry led R&D.
- c. Setting  up  of  an  independent  nodal  umbrella  body  for  meeting  wide ranging testing and certification requirements.
- (xiv) Announcement of 18 major platforms for industry led design and development under various  routes  namely  Make-I,  Make-II,  SPV  Model  and  iDEX  would  encourage industry to take up new challenges and bring India among top manufacturers of the world.

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