Lok Sabha Question No. 2485 (UNSTARRED), answered on 2016-03-11
Subject: Manufacturing of Defence Equipment
Ministry: DEFENCE
Asked by: MANSHANKAR NINAMA

## GOVERNMENT OF INDIA MINISTRY OF DEFENCE

## DEPARTMENT OF DEFENCE PRODUCTION

## LOK  SABHA UNSTARRED QUESTION NO.2485

TO BE ANSWERED ON THE 11 TH  MARCH, 2016

## MANUFACTURING  OF  DEFENCE  EQUIPMENT

2485.  SHRI  MANSHANKAR NINAMA:

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Will the Minister of DEFENCE be pleased to state:

- (a) the  value  of  the  defence  equipment manufactured  in  the  country  during  the  last three years;
- (b) whether there is a proposal to manufacture defence equipment in the country under the 'Make in India' Mission; and
- (c) if so, the details thereof?

## A    N    S    W    E    R

MINISTER OF STATE IN THE MINISTRY OF DEFENCE

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(a) to (c): A Statement is attached.

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(RAO INDERJIT SINGH)

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## STATEMENT  REFERRED  TO  IN  REPLY  TO  PARTS  (a)  TO  (c)  OF  LOK SABHA UNSTARRED QUESTION NO. 2485 FOR ANSWER ON 11.3.2016

- (a) The  Value  of  Procurement  of  defence  items  (both  Capital  & Revenue)  by  the  Armed  forces,  from  Indian  sources  in  the  last  three years is tabulated below:

(Rs in Crore)

| Year                                     |   2012-13 |   2013-14 |   2014-15 |
|------------------------------------------|-----------|-----------|-----------|
| Value of procurement from Indian sources |     52719 |     55014 |     49531 |

- (b) & (c):  Under 'Make in India' programme, the Government proposes to encourage manufacturing of defence equipment in the country through various policy initiatives which , inter-alia , include the following:
- (i) Preference to 'Buy (Indian)', 'Buy and Make (Indian)' & 'Make' categories of capital acquisition over 'Buy & Make (Global)' or 'Buy (Global)' categories in Defence Procurement Procedure.
- (ii) Foreign Direct Investment (FDI) Policy under which  Foreign Investment  upto  49%  is  allowed  through  automatic  route  and above  49% under Government  route on case-to-case basis, wherever it is likely to result in access to modern and 'state-of-art' technology  in  the  country.  The  foreign  investment  in  defence sector is further subject to industrial license under the Industries (Development & Regulation) Act, 1951.
- (iii) Industrial  licencing  regime  for  Indian  manufacturers  has been liberalised and most of the components/ parts/ sub-systems have  been  taken  out  from  the  list  of  defence  products  requiring Industrial  Licence.    This  has  reduced  entry  barriers  for  new entrants in this sector, particularly small and medium enterprises.

The  initial  validity  of  Industrial  Licence  has  been  increased  from 3 years to 15 years with a provision to further extend it by 3 years on a case to case basis.

- (iv) Issues related to level-playing field  between  Indian vs. foreign  manufacturers  and  public  sector  vs.  private  sector  have also  been  addressed.    These  include  Exchange  Rate  Variation (ERV)  protection  for  Indian  vendors,  offset  obligations  in  'Buy (Global)' cases, Excise/ Custom duties on defence equipment, etc.
- (v) 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  for  discharge  of  offsets,  have been re-instated.

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