Lok Sabha Question No. 4559 (UNSTARRED), answered on 2016-08-12
Subject: Role of Small and Medium Enterprises
Ministry: DEFENCE
Asked by: A.P. JITHENDER REDDY, ANANDRAO  ADSUL, DHARMENDRA YADAV, SHIVAJI ADHALRAO PATIL, Shrirang Appa Barne

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

## LOK  SABHA UNSTARRED QUESTION NO.4559

TO BE ANSWERED ON THE 12 TH  AUGUST, 2016

## ROLE OF SMALL AND MEDIUM ENTERPRISES

## 4559.  SHRI  A.P. JITHENDER REDDY:

SHRI ANANDRAO ADSUL:

SHRI DHARMENDRA YADAV:

SHRI ADHALRAO PATIL SHIVAJIRAO:

SHRI SHRIRANG APPA BARNE:

Will the Minister of DEFENCE be pleased to state:

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- (a) the details of initiatives taken by the Government to enhance the role of Small and Medium Enterprises (SMEs) in the defence sector along with the mechanism developed to safeguard the interests of SMEs from international competitors;
- (b) whether the Government has fixed any target of defence procurement from SMEs by  the  year  2027  and  if  so,  the  details  thereof  along  with  the present  level  of  defence procurement from SMEs;
- (c) the  growth  registered  in  the  procurement  of  defence  equipment  /  items  from indigenous sources during the last two years and the current year;
- (d) whether there has also been consistent criticism of defence offset policy and the lack of participation of domestic industries in the defence sector; and
- (e) if so, the details thereof and the corrective measures taken by the Government in this regard?

## A    N    S    W    E    R

MINISTER OF DEFENCE                                      (SHRI MANOHAR PARRIKAR)

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(a) to (e):

A Statement is attached.

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## STATEMENT REFERRED TO IN REPLY TO PARTS (a) TO (e) OF LOK SABHA UNSTARRED QUESTION NO. 4559 FOR ANSWER ON 12.8.2016

- (i) The  Government  has  taken  several  initiatives  to  enhance  the  role  of MSMEs in the defence sector.  Augmenting the role of MSMEs in defence sector is one of the defining features of Defence Procurement Procedure (DPP)-2016.    In  the  DPP-2016,  the  'Make'  procedure  has  been  recast wherein  greater  impetus  has  been  provided  to  MSMEs,  by  reserving certain categories of 'Make' Projects exclusively for them.  The eligibility criteria for Shortlisting Indian Vendors, for participation in 'Make' projects, has  been  made  liberal  for  MSMEs.    Besides  this,  a  multiplier  of  1.5  is permitted for discharging of offset obligations through MSMEs as Indian Offset Partner.
- (ii) In addition, the Government has launched various schemes for supporting MSMEs so  that  they  can  supply  their  products  to  various  organizations including  defence  sector.    The  Lean  Manufacturing  Competitiveness Scheme was launched to improve the quality of the products of MSMEs. The  MSMEs  can  upgrade  their  machinery  under  Credit  Linked  Capital Subsidy Scheme (CLCSS) and Technology Up-gradation Scheme (TEQUP). The units can also avail credit guarantee trust fund for MSEs to raise loan without  collateral  security  for  enhancing  their  competitiveness.    MSMEs can  also  participate  in  Domestic  and  International  Trade  Fairs  under Marketing Assistance and Technology Up-gradation (MATU) scheme.
- (iii) The Government of India has notified Public Procurement Policy for Micro and Small Enterprises (MSEs) Order, 2012, under which a minimum of 20% of the total annual procurement from Micro & Small Enterprises by Central Ministries  /  Departments  /  PSUs  has  become  mandatory  w.e.f.  1 st April, 2015.  The same is also applicable to the defence sector.
- (iv) The details  of  the  total  procurements  of  defence  equipment  from  Indian Vendors and Foreign Vendors for the Armed Forces during the last two years and the current year are placed at Annexure.
- (v) Offset guidelines were introduced for the first time in DPP-2005 and have gradually  evolved  since  then.    Regular  interactions  /  consultations  are being  held  with  the  domestic  industry  association  to  address  their concerns, if any and seek their inputs.  The latest offset guidelines under DPP-2016 have been promulgated from 1 st April, 2016.
- (vi) Offset implementation process has 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 with certain conditionalities.

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ANNEXURE REFERRED IN THE REPLY GIVEN IN THE STATEMENT IN  PARTS (a) TO (e) OF LOK SABHA UNSTARRED QUESTION NO. 4559 FOR ANSWER ON 12.8.2016

## EXPENDITURE ON PURCHASE OF DEFENCE EQUIPMENT

The  expenditure  on  purchase  of  defence  equipment  for  the  three services in the last two years and current financial year, from the Foreign vendors and Indian vendors is as given below:-

(Rs. in crore)

|                                |   Total Procurement |   Procurement from Foreign Vendors |   Procurement from Indian Vendors |
|--------------------------------|---------------------|------------------------------------|-----------------------------------|
| 2014-15                        |             77986.3 |                           29159.7  |                          48826.6  |
| 2015-16                        |             76178.8 |                           26190.5  |                          49988.3  |
| 2016-17 (upto 30 th June 2016) |              9824   |                            3317.54 |                           6506.46 |

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