Lok Sabha Question No. 2150 (UNSTARRED), answered on 2016-05-06
Subject: DEFEXPO INDIA-2016
Ministry: DEFENCE
Asked by: PARASURAMAN K.

## GOVERNMENT OF INDIA MINISTRY OF DEFENCE

## DEPARTMENT OF DEFENCE PRODUCTION

## LOK  SABHA UNSTARRED QUESTION NO.2150

TO BE ANSWERED ON THE 6 TH  MAY, 2016

## DEFEXPO  INDIA-2016

2150.  SHRI  K. PARASURAMAN:

Will the Minister of DEFENCE be pleased to state:

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- (a) whether the Government had unveiled the DEFEXPO INDIA-2016 in Goa as part of the Defence Procurement Procedure, 2016 with the aim of increasing domestic product of arms, if so, the details thereof;
- (b) whether country's arms imports has already been on high and its share in global arms imports is 140 percent, if so, the details thereof; and
- (c) the corrective measures taken by the Government in this regard?

## A    N    S    W    E    R

MINISTER OF STATE IN THE MINISTRY OF DEFENCE

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(RAO INDERJIT SINGH)

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(a) to (c):

A statement is attached.

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## STATEMENT REFERRED TO IN REPLY TO PARTS (a) TO (c) OF LOK SABHA UNSTARRED QUESTION NO. 2150 FOR ANSWER ON 6.5.2016

- (a) to (c):  The new Defence Procurement Procedure 2016 (DPP 2016) was hosted on the website of Ministry of Defence on 28 th  March 2016 i.e. on the day of the inauguration of the 9 th edition of the DEFEXPO at Goa.    The  DPP  2016  gives  strong  support  to  'Make  in  India'  by according highest priority to Buy  (Indian-IDDM) i.e. Indigenous Designed,  Developed  and  Manufactured  category.  It  focuses  on enhancement  and  rationalization  of  indigenous  content  and  has provisions for involving private industry as production agencies and technology  transfer  partners.    The  'Make'  Procedure  has  also  been simplified  with  provisions  for  earmarking  projects  not  exceeding development cost of Rs.10 crore (Government funded) and Rs.3 crore (industry funded) for MSMEs.
2.  The  expenditure on  purchase of  defence equipment for the three services in  the  last  two  years,  from  the  foreign  sources  and  Indian sources 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 |

3.    A number of measures have already been taken to achieve selfreliance in defence production by harnessing the capabilities of the public  and  private  sector  industry.  The  Defence  Production  Policy, 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  possible; creating  conditions  conducive  for  the  private  industry  to  take  an active  role  in  this  endeavour,  enhancing  potential  of  SMEs  in indigenisation and broadening the defence R&D base of the country. Indigenous manufacturing of defence equipments is  encouraged by the Government through  several  policy

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## measures, which , inter-alia , include the following:

- i. Preference to 'Buy (Indian-IDDM)', 'Buy (Indian)', 'Buy and Make (Indian)',  categories  of  capital  acquisition  over  'Buy  (Global)' category in Defence Procurement Procedure.
- ii.  The revised 'Make' procedure to promote design and development has been promulgated. It provides for Government  funding  upto  90%  and  preferential  treatment  to MSMEs for certain categories of projects.
- iii. Foreign  Direct  Investment  (FDI) Policy has been reviewed  and as per revised policy notified in Nov 2015, Foreign Investment Cap upto 49% is allowed under 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.
- iv. 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 small and medium enterprises.
- v.  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 equipments, etc.
- 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.
7. ******