Lok Sabha Question No. 4426 (UNSTARRED), answered on 2016-08-12
Subject: Aviation Equipment
Ministry: DEFENCE
Asked by: JANAK RAM

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

## LOK  SABHA UNSTARRED QUESTION NO.4426

TO BE ANSWERED ON THE 12 TH  AUGUST, 2016

## AVIATION EQUIPMENT

## 4426.  SHRI  JANAK RAM:

Will the Minister of DEFENCE

be pleased to state:

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- (a) whether the country is self-reliant in the production of aviation equipment for the Indian Armed Forces;
- (b) if so, the details thereof;
- (c) if not, the reasons therefor; and
- (d) 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 (d): A Statement is attached.

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## STATEMENT  REFERRED  TO  IN  REPLY  TO  PARTS  (a)  TO  (d)  OF  LOK SABHA UNSTARRED QUESTION NO. 4426 FOR ANSWER ON 12.8.2016

1. The requirements of Aviation equipment for the Indian Armed Forces are met through both indigenous production and imports. The production details of  Aviation  equipment  are  not  compiled  separately.   However,  the details  of  the  total  procurements  of  defence  equipment  from  Indian Vendors and Foreign Vendors for the Armed Forces in the last two years are placed at Annexure.
2. The Defence Production Policy promulgated in 2011, aims at achieving substantive self-reliance in the design, development and production of equipment, weapon systems, platforms required for defence in as early a time frame as possible; creating conditions conducive for the private  industry  to  take  an  active  role  in  this  endeavour;  enhancing potential  of  Small  and  Medium  Enterprises  (SMEs)  in  indigenisation  and broadening  the  defence  R&D  base  of  the  country.    In  pursuance  of  the aforesaid Policy and 'Make in India' initiative of the Government, following steps  have  been  taken  to  build  a  strong  defence  industrial  base  in  the country:-
3. (a) In  order  to  promote  indigenous  design  and  development  of defence equipment, a new category of procurement 'Buy (IndianIDDM)'  has  been  introduced  in  Defence  Procurement  Procedure2016  and  the  same  has  been  accorded  top  most  priority  for procurement  of capital  equipment.    Besides  this,  preference  has been  accorded  to  'Buy  (Indian)'  and  'Buy  and  Make  (Indian)' categories  of  capital  acquisition  over  'Buy  (Global)'  category  in Defence Procurement Procedure, to make the country self-reliant in  defence  production.  The  'Make'  procedure  has  been  recast  in DPP-2016  wherein  the  share  of  Government  funding  has  been increased to 90% from 80%, so that the risks to the Development Agencies are mitigated to large extent. In addition, greater impetus has been provided to  MSMEs,  by  reserving certain categories  of Make Projects exclusively for them.

.......2/-

- (b) FDI Policy under which Foreign Investment Cap is allowed through automatic  route  upto  49%  and  Government  route  beyond  49% 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.
- (c) Industrial  licensing  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  SMEs.    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.
- (d) Issues  related  to  level-playing  field  between  Indian  &  foreign manufacturers, and public sector & private sector have also been addressed. These include Exchange Rate Variation (ERV) protection for Indian  vendors, Offset obligations in 'Buy (Global)' cases, removing anomalies in taxation in customs/ excise duty etc.
- (e) 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 (d) OF LOK SABHA UNSTARRED QUESTION NO. 4426 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, 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 |             76169.6 |                            26190.5 |                           49979.1 |

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