Lok Sabha Question No. 130 (STARRED), answered on 2016-03-04
Subject: Defence Production by PSU
Ministry: DEFENCE
Asked by: Shrirang Appa Barne, ANANDRAO  ADSUL

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

## LOK  SABHA STARRED QUESTION NO.130

TO BE ANSWERED ON THE 4 TH  MARCH, 2016

## DEFENCE PRODUCTION BY  PSU

- *130.  SHRI  SHRIRANG APPA  BARNE: SHRI  ANANDRAO  ADSUL:

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

- (a) whether  as  per  study  undertaken  recently  the  Hindustan  Aeronautics    Limited, Bharat Electronics Limited, Bharat Dynamics Limited and Mishra Dhatu Nigam Limited are enjoying virtual monopoly in defence aerospace sector, if so, the details thereof;
- (b) whether  these  PSUs  have  been  booking  profits  over  the  years  by  taking  huge advances from the vendors against future deliveries and showing them as profits;
- (c) whether  the  Government  has  taken  cognizance  of  these  matters  and  if  so,  the outcome thereof; and
- (d) the steps taken  by  the  Government  to  make  India  as  a  major  aerospace manufacturer hub?

## A    N    S    W    E    R

MINISTER OF DEFENCE                                            (SHRI MANOHAR PARRIKAR)

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(a) to (d): A Statement is laid on the Table of the House.

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## STATEMENT REFERRED TO IN REPLY TO PARTS (a) TO (d) OF LOK SABHA STARRED QUESTION NO. 130 FOR ANSWER ON 4.3.2016

(a)    In  defence  aerospace  sector  the  requirements  are  being  met  through Hindustan Aeronautics Limited (HAL), other Defence Public Sector Undertakings (DPSUs), and domestic private sector and by procurement from foreign  sources.    HAL  is  the  single  largest  domestic  manufacturer  in  the aerospace sector.

- (b)    No, Madam.
- (c)     Does not arise in view of (b) above.

(d)    Government  has  taken  various  steps  to  encourage  indigenization  of defence manufacturing including defence aerospace as follows:-

- (i) Preference to 'Buy (Indian)', 'Buy  &  Make  (Indian)'  & 'Make' categories of capital acquisition over 'Buy & Make' or 'Buy (Global)' categories in Defence Procurement Procedure.
- (ii) Foreign Direct Investment Policy (FDI) under which Foreign investment Cap upto 49% and  above 49% under Government route on  case  to  case  basis  wherever  it  is  likely  to  result  in  access  to modern and state-of-the-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  licensing  regime  for  Indian  manufacturers  has  been liberalized 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) Inclusion of Design, Development, Manufacture and Upgrade of all types of fixed wing and rotary wing aircraft or their airframes, aero engines, avionics, instruments and related components in the list of eligible products / services for discharge of offset obligations.
- (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  obligation  in  'Buy  (Global) cases, Excise / Custom duties on defence equipment, etc.
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