Lok Sabha Question No. 3293 (UNSTARRED), answered on 2016-08-05
Subject: ‘Make in India’ for IAF
Ministry: DEFENCE
Asked by: SUNIL KUMAR SINGH

## GOVERNMENT OF INDIA MINISTRY OF DEFENCE DEPARTMENT OF DEFENCE

## LOK  SABHA

## UNSTARRED QUESTION NO.3293

TO BE ANSWERED ON THE 5 TH  AUGUST, 2016

## 'MAKE IN INDIA' FOR IAF

3293.  SHRI  SUNIL KUMAR SINGH:

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

- (a) whether a one day seminar on 'Make in India' for Air Force was held recently in New Delhi;
- (b) if so, the details thereof;
- (c) the  details  of  suggestions  received  and  projects  identified  by  the  Government under the 'Make in India' programme for Air Force; and
- (d) the details of incentives being provided to the private players for promotion of the said programme and encouraging indigenous defence equipment production?

## A    N    S    W    E    R

MINISTER OF DEFENCE                                      (SHRI MANOHAR PARRIKAR)

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(a) & (b): Yes, Madam.  A seminar on 'Make in India for Indian Air Force' was held at New Delhi on 19 th April, 2016.   Representatives of Ministry of Defence, Defence Public Sector Units (DPSUs), Defence Research Development Organization (DRDO), the three Services and delegates from Indian  industry  & some foreign  companies attended the seminar wherein issues pertaining to indigenous development and manufacture of aviation equipment for IAF, were discussed.

- (c) Main suggestions received during the seminar are as follows:
- Nurture aerospace Research & Development (R&D) in India through full funding and encouraging incentives to private Indian industry.

- Establishment  of  an  aerospace  R&D  centre  to  identify,  design  and develop  equipment  required  for  maintenance  and  sustenance  of combat platforms.
- Programmes may be conducted through leading academic institutions or in Public Private Partnership (PPP) mode for knowledge  and  skill  development  in  the  identified  areas  of  R&D, Manufacture, Quality Assurance, Maintenance etc. in military aviation.
- Periodic interaction with Indian industry.

The major projects planned to be processed under 'Make in India' for Air Force are: Light Combat Aircraft, Light Combat Helicopter, Light Utility Helicopter, Basic Trainer Aircraft, Unmanned Aerial Vehicles, Medium and Short  Range  Surface-to-Air  Missiles,  Air-to-Air  Missiles,  Radars,  other

Avionics, aggregates and ammunition etc. (d) (IndianIndigenously Designed, Developed and Manufactured)',

The  Government  has  implemented  several  incentives  to  promote 'Make in India', such as liberalisation  of FDI  policy & Industrial Licensing Policy, simplification of export procedures, creating level playing field for Indian  private  and  public  sector  companies,  giving  preference  to  'Buy 'Buy (Indian)', 'Buy and Make (Indian)' categories of capital acquisition over 'Buy (Global)'  category  in  Defence  Procurement  Procedure.  The  important initiatives taken in this regard are annexed.

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## ANNEXURE REFERRED IN THE REPLY GIVEN IN PART (d) OF LOK SABHA UNSTARRED QUESTION NO. 3293 FOR ANSWER ON 5.8.2016

## INITIATIVES TAKEN TO PROMOTE 'MAKE IN INDIA' FOR MANUFACTURE OF DEFENCE EQUIPMENT:

The various initiatives taken to promote 'Make In India' for manufacture of defence equipment are given below:

1. 'Make'  Procedure:  The  salient  features  of  'Make'  procedure  in  the Defence Procurement Procedure-2016 (DPP-2016) are as follows:
2. (a) There shall be two categories of 'Make' projects - first, those funded  by  the  Ministry  of  Defence,  and  the  second,  that  are self-funded by the developers.
3. (b) Funding  of  the  projects  by  the  Ministry  of  Defence  has  been increased from 80% to 90%.
4. (c) In case the RFP for the product is not issued within two years of  successful development of the prototype, the balance 10% shall  also  be  re-imbursed.    In  case  of  second  category  of projects, the entire cost of development shall be re-imbursed.

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- (d) The development agencies will also be able to a mobilisation  advance  of  20%  of the  estimated  cost of development.
- (e) Projects with an estimated cost of development of upto Rs.10 crore,  under  Ministry  of  Defence  funded  projects,  and  upto Rs.3  crore,  under  self-funded  projects,  will  be  earmarked  for MSMEs.
2. Buy  (Indian-IDDM):    Another  notable  feature  of  DPP-2016  is  the introduction  of  a  new  procurement  category  Buy  [Indian-Indigenously Designed,  Developed  and  Manufactured-(IDDM)].    This  category  refers  to procurement  from  Indian vendors  of  products  that are  indigenously designed, developed and manufactured, and have atleast 40% indigenous content.  If the product is not designed and developed indigenously, it will have to have 60% indigenous content.  The 'Buy (Indian)'category, in which the product is to be procured from Indian vendors, will now require to have an indigenous content of 40%, instead of the 30% present requirement.

There shall be preference to 'Buy (Indian-IDDM)', 'Buy (Indian)'. 'Buy and Make (Indian)'categories of capital acquisition over 'Buy and Make' or 'Buy (Global)'category in Defence Procurement Procedure.

3. Industrial  Licensing:  The  Defence  Products  List  for  the  purpose  of issuing Industrial Licenses (ILs) under Industries (Development & Regulation) (IDR) Act, 1951 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 License 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.
4. Defence Exports:  The list of military stores has been finalized and put in the public domain  so  as  to make  the  process  transparent and unambiguous.    The  process  of  receiving  applications  for  No  Objection Certificate (NOC) for export of military stores and for issuing NOC has been made  online  to  reduce  the  delay  and  to  remove  human  interface  in  the process.  The Standard Operating Procedure (SOP) for the issue of NOC for export  of  military  stores  has  been  revised.    Under  the  revised  SOP,  the requirement of End User Certificate (EUC) to be countersigned/ stamped by the  Government  authorities  has  been  done  away  with  for  the  export  of parts, components, sub-systems etc.  Recognizing the need for promotion of  defence  exports  to  make  the  Indian  defence  industry  economically sustainable,  Defence  Exports  Strategy  outlining  the  various  steps  to  be taken, has been formulated and put up in public domain.
5. Defence  Offsets:  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.
6. Foreign Direct Investment (FDI): Under the Foreign Direct Investment (FDI)  Policy,  foreign  investment  upto  49%  through  automatic  route  and beyond 49% through Government route has been allowed in defence sector wherever it is likely to result in access to modern technology or for other reasons  to  be  recorded.    The  foreign  investment  in  defence  sector  is further  subject  to  Industrial  license  under  the  Industries  (Development  & Regulation)  Act,  1951;  and  Manufacturing  of  small  arms  and  ammunition under the Arms Act, 1959.
7. Level-Playing  Field:  Issues  related  to  level  playing  field  between Indian vs .  foreign manufacturers and public sector vs private sector have also been addressed.

:  3  :

- These include the following:(a) Exchange Rate Variation protection has been made applicable for Indian private sector at par with Public Sector Undertakings for all categories of capital acquisitions. (b) The  preferential  treatment  given  to  Defence  Public  Sector Undertakings in excise duty/custom duty has been discontinued.   As per the revised policy, all Indian  industries (public and private) are subject to the same kind of excise and custom duty levies. 8. Outsourcing and Vendor Development Guidelines:   To promote  the participation of private sector, particularly SMEs for defence manufacturing, Outsourcing and Vendor Development Guidelines for DPSUs  and  OFB  have  been  formulated.    The  guidelines  mandate  each DPSU and OFB to have a short-term and long-term outsourcing and vendor development  plan  to  gradually  increase  the  outsourcing  from  private sector. 9. Make in India Portal: Make  in  India  portal  for  Defence  Production has been launched.   The  portal provides information related  to  all  policy and  procedural  issues  relevant  for  defence  manufacturing  industry.    It provides link to industrial promotion polices and program of various states and  UTs.    Another  highlight  of  the  portal  is  that  the  Test  facilities  of DPSUs/OFB/DGQA/DGAQA/DRDO/  Forces  which  can  be  utilized  by  the private sector, have been displayed.  The portal also gives an opportunity to an individual company to seek clarifications or ask questions related to Defence Production.

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