12-Dec-2022: Make in India in Defence sector

The Government has taken several policy initiatives in the past few years and brought in reforms to encourage indigenous design, development and manufacture of defence equipment, there by promoting self-reliance in defence manufacturing & technology in the country. These initiatives, inter-alia, include according priority to procurement of capital items from domestic sources under Defence Acquisition Procedure (DAP) 2020;  Announcement of 18 major defence platforms for industry led design & development in March 2022; Notification of  four ‘Positive Indigenisation Lists’ of total 411 items of Services and  three ‘Positive Indigenisation Lists’ of total 3738 items  of Defence Public Sector Undertakings (DPSUs), for which there would be an embargo on the import beyond the timelines indicated against them; Simplification of Industrial licensing process with longer validity period; Liberalisation of Foreign Direct Investment (FDI) policy allowing 74% FDI under automatic route; Simplification of Make Procedure; Launch of Mission DefSpace; Launch of Innovations for Defence Excellence (iDEX) scheme involving start-ups & Micro, Small and Medium Enterprises (MSMEs); Implementation of  Public Procurement (Preference to Make in India) Order 2017; Launch of an indigenisation portal namely SRIJAN to facilitate indigenisation by Indian Industry including MSMEs; Reforms in Offset policy with thrust on attracting investment and  Transfer    of Technology for Defence manufacturing by assigning higher multipliers; and    Establishment of two Defence Industrial Corridors, one each in Uttar Pradesh and Tamil Nadu; Opening up of Defence Research & Development (R&D) for industry, start-ups and academia with 25 percent of defence R&D budget; Progressive increase in allocation of Defence Budget of military modernisation for procurement from domestic sources, etc.

With focus on indigenisation and procurement from domestic industries, all the major areas of domestic defence production ecosystem such as weapons, ammunition, fighter aircrafts, helicopters, missile systems, warships, submarines, armoured vehicles, radars, communication systems, surveillance systems, etc. have benefited from the aforesaid initiatives and also given boost to the growth of domestic industries including MSMEs & start-ups.

7-Feb-2022: Make in India in Defence sector

Many significant projects including 155mm Artillery Gun System ‘Dhanus’, Light Combat Aircraft ‘Tejas’, ‘Akash’ Surface to Air Missile system, INS Kalvari, INS Khanderi, INS Chennai, Anti-Submarine Warfare Corvette (ASWC), Arjun Armoured Repair and Recovery Vehicle, Bridge Laying Tank, Bi-Modular Charge System (BMCS) for 155mm Ammunition, Medium Bullet Proof Vehicle (MBPV), Lakshya Parachute for Pilotless Target Aircraft, Thermal Imaging Sight Mark-II for T-72 tank, Offshore Surveillance Ship, Water Jet Fast Attack Craft, Inshore Patrol Vessel, Offshore Patrol Vessel, Fast Interceptor Boat, Landing Craft Utility, 25T Tugs, etc. have been produced in the country under ‘Make in India’ initiative of the Government in last few years.

The Government has taken several policy initiatives in past few years under ‘Make in India’ program and brought reforms to encourage indigenous design, development and manufacture of defence equipment in the country, thereby reducing dependence on imports continuously.  These initiatives, inter-alia, include according priority to procurement of capital items from domestic sources under Defence Acquisition Procedure (DAP)-2020; Notification of two ‘Positive Indigenisation Lists’ of total 209 items of Services and one ‘Positive Indigenisation List’ of total 2851 items of Defence Public Sector Undertakings (DPSUs), for which there would be an embargo on the import beyond the timelines indicated against them; Simplification of Industrial licensing process with longer validity period; Liberalisation of Foreign Direct Investment (FDI) policy allowing 74% FDI under automatic route; Simplification of Make Procedure; Launch of Innovations for Defence Excellence (iDEX) scheme involving startups & Micro, Small and Medium Enterprises (MSMEs); Implementation of Public Procurement (Preference to Make in India), Order 2017; Launch of an indigenisation portal namely SRIJAN to facilitate indigenisation by Indian Industry including MSMEs; Reforms in Offset policy with thrust on attracting investment and Transfer of Technology for Defence manufacturing by assigning higher multipliers; Establishment of two Defence Industrial Corridors one each in Uttar Pradesh and Tamil Nadu.

The Government, in the last three years i.e. from 2018-19 to 2020-21 and current year till December 2021, has accorded Acceptance of Necessity (AoN) to 150 proposals worth Rs 2,47,515 crore approximately, under various categories of Capital procurement which promote domestic manufacturing as per DAP-2020.

24-Mar-2021: Domestic Defence Production Ecosystem

As part of the recommendations of the Sectoral Group of Secretaries-10 (SGoS-10), Department of Defence Production (DDP) has adopted a Vision and Action Plan 2019-2024 to enhance self-reliance and technologies, leveraging ‘Make in India’ and maximize the untapped employment and economic potential of the Defence Sector.

The details of action taken by the Government are as follows:-

• The Government is focusing on development of suitable human resource pool to support indigenization of the science intensive industry like special technology universities and special departments within existing universities.
• The R&D Infrastructure Schemes such as Sophisticated Analytical and Technical Help Institutes (SATHI) and Promotion of University Research in Scientific Excellence (PURSE) are open to start ups and manufacturing industries along with the researchers/scientists of academic organizations including development of suitable human resource pool to support indigenization of the science intensive industry like special technology universities and special departments within existing universities.
• Under the SATHI scheme, dedicated manpower will be made available to help with the data collection, interpretation and dissemination of the information.  The aims of this scheme are: (a) procurement and maintenance of high-end equipment and infrastructure facility necessary for research/testing/manufacturing/fabrication to cater to the demands of researchers, scientists, students, start-ups, manufacturing units, industries and R&D Labs; (b) Providing access and sharing of scientific equipment and infrastructure; (c) Capacity Building of operators and technicians for efficient operations and interpretations of results/outcome; and (d) Monitoring of usage of expensive scientific research infrastructure for maximum utilization of Infrastructure Management with efficient operations and to be a part of ‘Aatmanirbhar Bharat Abhiyan’ (Self Reliant India Campaign).  Currently, three SATHI Centres have been established at IIT Delhi, BHU Varanasi and IIT Kharagpur.
• The PURSE program is an on-going scheme exclusively for the University Sector being implemented by R&D Infrastructure Division of Department of Science & Technology since 2009.  This program has broadened and created excellence in the R&D base around the performing Universities in India.  The synergy and focus of research under this scheme may preferably be aligned to National Missions/priorities.  The broad objective in each case is to support potentially high impact, interdisciplinary research (both basic and applied) aligned to National Priorities/Missions.  Currently, 54 Universities have been identified for support under the PURSE Program.
• In addition, Department of Defence Production through Innovations for Defence Excellence (iDEX) framework aims to achieve self-reliance and foster innovation and technology development in Defence and Aerospace by engaging industries including MSMEs, start-ups, individual innovators, R&D institutes and academia. iDEX has forged strategic partnerships with premier institutions of the country such as IIT Madras, IIT Bombay, IIT Delhi, IISc Bangalore, T-Hub, IIIT Hyderabad,  IIT Hyderabad, IIM Ahmedabad, Forge Coimbatore and Maker Village, Kerala.  These Partner Incubators help discover, explore and support startups/MSMEs and develop human resource pool to support indigenization of the science intensive industry.

14-Sep-2020: Measures to help domestic Defence manufacturing

The Government has taken the following policy initiatives to promote ‘Make in India’ in defence sector: -

• 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.
• 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.

10-Feb-2020: Boosting Domestic Production of Defence Equipment

Government has taken following policy initiatives to boost production and promote indigenous design, development & manufacture of defence equipment in collaboration with Indian private sector:-

1. Defence Procurement Procedure (DPP) has been revised in 2016 wherein specific provisions have been introduced for stimulating growth of the domestic defence industry including private sector.
2. A new category of 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. Besides this, preference has been accorded to ‘Buy (Indian)’, ‘Buy and Make (Indian)’ & ‘Make’ categories of capital acquisition over ‘Buy (Global)’ & ‘Buy & Make (Global)’ categories.
3. FDI Policy has been revised and under the revised policy, 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.
4. 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.
5. The “Make” Procedure has been simplified with provisions for funding of 90% of development cost by the Government to Indian industry and reserving Government funded Make-I projects not exceeding development cost of Rs.10 Crore & procurement cost Rs. 50 Crore per year for MSMEs.  The industry funded Make-II Projects not exceeding development cost of Rs.3 Crore & procurement cost Rs. 50 Crore per year have also been reserved for MSMEs.
6. Separate procedure for “Make-II” category 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.
7. Government has notified the “Strategic Partnership (SP)” Model 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.
8. 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.
9. Offset guidelines have 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 allowed to provide the details of IOPs and products after signing of contracts. In order to bring more transparency and efficiency into the Offset discharge process, “Offset portal” has been created in May, 2019.
10. 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.

As a result of the aforesaid initiatives undertaken, from April, 2014 till September, 2019, the Government has accorded Acceptance of Necessity (AoN) to 218 proposals, worth Rs. 409,244 Crore approximately, under ‘Buy (Indian-IDDM)’, ‘Buy (Indian)’, ‘Buy and Make (Indian)’, ‘Buy and Make’, Strategic Partnership Model or ‘Make’ categories of capital procurement as per Defence Procurement Procedure (DPP).

Till date, 281 Indian Companies have been issued 461 Licenses for manufacturing in defence sector, out of which 73 licensed companies covering 118 licenses have reported commencement of production. Besides, there are more than 8000 MSMEs which are among the vendor base of OFB & Defence PSUs supplying various items to them.

The trends in Value of Production (VoP) in the last three years are indicated as below:-

Capital procurement of defence equipment is undertaken from various domestic as well as foreign vendors as per extant Defence Procurement Procedure (DPP) based on threat perception, operational challenges and technological change and to keep the Armed Forces in a state of readiness to meet the entire spectrum of Security Challenges.

1. Import Data – DGFT vide Notification dated 28.05.2018 delegated powers to Department of Defence Production for issuance of licence for import of restricted items for defence use. Therefore, the data for 2019-20 (till 27.01.2020) is as under:

   1. 2019-20 (till 27.01.2020)

      Rs. 742.33 crores

2. Export Data

Export value is based on the value of Authorisation / Licence issued by DDP to private companies, actual export by DPSUs/OFB.