Efforts to Boost Defence Sector


New Delhi/ PIB News: The efforts made by the Government to boost the country’s defense sector during the last two years are as follows:-

  • Industrial licensing: The industrial licensing regime for Indian manufacturers in the Defence sector has been liberalized.  Defense Products list requiring Industrial Licences has been rationalized and the manufacture of most of the parts and components does not require Industrial Licence. The total number of Defence licenses issued has more than doubled from 215 as of 31st March, 2014 to 460 till 31st December, 2019 covering a total of 275 Companies.
  • FDI: FDI Policy has been revised and under the revised policy. Foreign Investment is allowed under automatic route up to 49% and above 49% through government route, wherever it is likely to result in access to modern technology or for other reasons to be recorded. Significant FDI inflows in the Defence and Aerospace sectors have been witnessed.
  • Defense Procurement Procedure (DPP)
  • Defense Procurement Procedure (DPP) was revised in 2016. Specific provisions have been introduced for stimulating the growth of the domestic defense industry. A new category of procurement ‘Buy {Indian-IDDM (Indigenously Designed, Developed and Manufactured)}’ has been introduced in DPP-2016 to promote indigenous design and development of defense equipment.  This category has been accorded topmost priority for the procurement of Capital equipment. Besides this, preference is being given to ‘Buy (Indian)’ and ‘Buy & Make (Indian)’ categories of capital acquisition over ‘Buy (Global)’ & ‘Buy & Make (Global)’ categories. As a result of the aforesaid initiatives, the Government in the last three years i.e. from 2016-17 to 2018-19 and current year till December, 2019, has accorded Acceptance of Necessity (AoN) to 138 proposals worth Rs.2,69,465.26 crore approximately, under these categories of Capital Procurement which promote domestic manufacturing as per DPP-2016.
  • “Make” Procedure: In February, 2018 a separate procedure for the ‘Make-II’ sub-category has been notified wherein a number of industry-friendly provisions have been introduced. This effort of the Government to promote industry participation in indigenous development of defense items has yielded an extremely encouraging response. Make-II Procedure for implementation at OFB/DPSUs has also been notified in February, 2019.
  • Government has notified the ‘Strategic Partnership (SP)’ Model which envisages the 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.
  • iDEX: Innovations for Defence Excellence (iDEX) framework, was launched with the aim to achieve self-reliance and to foster innovation and technology development in Defence and Aerospace Sector by engaging Industries including MSMEs, startups, individual innovators, R&D institutes and academia.
  • Indigenization policy: Government has notified a Policy for indigenization 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 defense equipment and platforms manufactured in India.
  • Defense Corridors: The government has decided to establish two defense industrial corridors to serve as engines of economic development and growth of defense industrial base in the country. They span across Chennai, Hosur, Coimbatore, Salem, and Tiruchirappalli in Tamil Nadu and Aligarh, Agra, Jhansi, Kanpur, Chitrakoot and Lucknow in Uttar Pradesh.
  • Department of Defence Production has notified 127 items under the Public Procurement Order 2017 notified by the Department for Promotion of Industry and Internal Trade (DPIIT). The Defence PSUs and OFB are thereby required to give preference to domestic manufacturers while procuring these items in accordance with the said policy.
  • Testing facilities: The Test facilities/infrastructure available with various Government agencies (OFB, DPSUs, DRDO, DGQA, DGAQA & SHQs) have been made available to the private sector with the objective to assist them in design and development of defense systems. The details of test facilities, procedures, and other Terms and Conditions are available on websites of respective Government Agencies.  An ‘SoP for allocation and utilization of Proof Ranges/Field Firing Ranges for Private Industry’ has also been notified.
  • The Ministry has instituted a new framework titled ‘Mission Raksha Gyan Shakti’ which aims to provide a boost to the IPR culture in the indigenous defense industry.
  • Defense Investor Cell has been created in the Ministry to provide all necessary information including addressing queries related to investment opportunities, procedures and regulatory requirements for investment in the sector.
  • The process for export clearance has been streamlined and made transparent & online.
  • Offset guidelines have been made flexible by allowing change of Indian Offset Partners (IOPs) and offset components, even in signed contracts.

During the last two years, the Government has signed Agreements on Defence Cooperation with Argentina, Russia, Serbia, Myanmar, Indonesia, Comoros, Jordan, Madagascar, Uganda, Zambia, Saudi Arabia, and Finland.