Measures Taken by Government to help Domestic Defence Manufacturing: Key Points

Measures Taken by Government to help Domestic Defence Manufacturing: Key Points



Measures Taken by Government to help Domestic Defence Manufacturing:
Ministry of Defence has prepared a ‘Negative list’ of 101 items for which there would be an embargo on the import beyond the timeline indicated against them. This is a big step towards self-reliance in defence. It also offers a great opportunity to the Indian defence industry to rise to the occasion to manufacture the items in the negative list to meet the requirements of the Armed Forces in the coming years. This negative list comprises of not just simple parts but also some high technology weapon systems like artillery guns, assault rifles, corvettes, sonar systems, transport aircrafts, light combat helicopters (LCHs), radars and many other items to fulfil the needs of our Defence Services.

A new category of capital procurement ‘Buy {Indian-IDDM (Indigenously Designed, Developed and Manufactured)}’ has been introduced in Defence Procurement Procedure (DPP)-2016 to promote indigenous design and development of defence equipment. It has been accorded top most priority for procurement of capital equipment.


Measures Taken by Government to help Domestic Defence Manufacturing: Key Points


  • The ‘Make’ Procedure of capital procurement has been simplified. There is a provision for funding of 90% of development cost by the Government to Indian industry under Make-I category. In addition, there are specific reservations for MSMEs under the ‘Make’ procedure.
  • Separate procedure for ‘Make-II’ category (industry funded) has been notified under DPP to encourage indigenous development and manufacture of defence equipment. Number of industry friendly provisions such as relaxation of eligibility criterion, minimal documentation, provision for considering proposals suggested by industry/individual etc. have been introduced in this procedure. So far, 49 projects relating to Army, Navy & Air Force, have been accorded ‘Approval in Principle’, valuing about Rs. 30,000 crores.
  • An innovation ecosystem for Defence titled Innovations for Defence Excellence (iDEX) has been launched in April 2018. iDEX is aimed at creation of an ecosystem to foster innovation and technology development in Defence and Aerospace by engaging Industries including MSMEs, Start-ups, Individual Innovators, R&D institutes and Academia and provide them grants/funding and other support to carry out R&D which has potential for future adoption for Indian defence and aerospace needs. Under the iDEX scheme, a maximum of Rs 1.5 crore funding is available to a participant for development of a prototype.  More than 700 start-ups participated in 18 problem statements pertaining to National Defence requirements, launched under 3 rounds of Defence India Start-up Challenges (DISC). 58 winners were announced after rigorous evaluation of applications by the High-Powered Selection Committees. Contracts have already been signed with several winners followed by release of first tranches and second tranche is also being released for some cases for prototype/ technology development.
  • In Feb 2018, Government decided to establish two defence industrial corridors to serve as an engine of economic development and growth of defence industrial base in the country. They span across Chennai, Hosur, Coimbatore, Salem and Tiruchirappalli in Tamil Nadu and across Aligarh, Agra, Jhansi, Kanpur, Chitrakoot and Lucknow in Uttar Pradesh (UP). About Rs. 880 crores in UP Corridor and Rs. 800 crores in TN corridor have already been invested.
  • An indigenization portal namely SRIJAN DEFENCE has been launched on 14.08.2020 for DPSUs/OFB/Services with an industry interface to provide development support to MSMEs/Startups/Industry for import substitution
  • Defence EXIM portal has been created for enhancing ease of doing business and to streamline Export authorisation procedures.
  • Government has notified the ‘Strategic Partnership (SP)’ Model in May 2017, which envisages establishment of long-term strategic partnerships with Indian entities through a transparent and competitive process, wherein they would tie up with global Original Equipment Manufacturers (OEMs) to seek technology transfers to set up domestic manufacturing infrastructure and supply chains.
  • Government has notified a ‘Policy for indigenisation of components and spares used in Defence Platforms’ in March 2019 with the objective to create an industry ecosystem which is able to indigenize the imported components (including alloys & special materials) and sub-assemblies for defence equipment and platform manufactured in India.
  • An Inter-Governmental Agreement (IGA) on “Mutual Cooperation in Joint Manufacturing of Spares, Components, Aggregates and other material related to Russian/Soviet Origin Arms and Defence Equipment” was signed during the 20th India-Russia Bilateral Summit in Sep 2019. The objective of the IGA is to enhance the After Sales Support and operational availability of Russian origin equipment currently in service in Indian Armed Forces by organizing production of spares and components in the territory of India by Indian Industry by way of creation of Joint Ventures/Partnership with Russian Original Equipment Manufacturers (OEMs) under the framework of the “Make in India” initiative.
  • Department of Defence Production has notified 24 items under the latest Public Procurement Order 2017 notified by Department for Promotion of Industry and Internal Trade (DPIIT), for which there is local capacity and competition and procurement of these items shall be done from local suppliers only irrespective of the purchase value.
  • FDI Policy has been revised in the year 2016 and accordingly, FDI is allowed under automatic route upto 49% and beyond 49% through Government route wherever it is likely to result in access to modern technology or for other reasons to be recorded. So far, FDI inflows of over Rs 3450 crores have been reported in Defence and Aerospace sector.
  • Defence Investor Cell has been created in Feb-2018 in the Ministry to provide all necessary information including addressing queries related to investment opportunities, procedures and regulatory requirements for investment in the sector.
  • Defence Products list requiring Industrial Licences has been rationalised and manufacture of most of parts or components does not require Industrial License. The initial validity of the Industrial Licence 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.  After opening up of the Defence Industry Sector for private Sector participation in 2001, government has issued 488 licenses till 10th Sept, 2020 for manufacture of a wide range of defence items – like EW Systems, Radars, Missiles, Body Armour, Small Arms and their ammunition, Naval Warships, UAVs, Artillery Guns, Armoured Vehicles, Helicopters, Aircrafts, etc. to Indian companies under Industries (Development & Regulation) Act, 1951 and Arms Act, 1959." These industries are spread across various parts of the country

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