India’S Defence Procurement Procedure- Make in India in Defense (Important) (Download PDF)

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‘Make in India’ in defence manufacturing driven by capital acquisition of defense equipment and measures for promoting indigenous design, development and manufacture of defence equipment through public and private sector like:

Image of India’s Defence Procurement Procedure

Image of India’s Defence Procurement Procedure

Image of India’s Defence Procurement Procedure

  • Priority and preference to procurement from Indian vendors under the Defense Procurement Procedure (DPP) 2016

  • Liberalization of the licensing regime and FDI policy by raising the cap on FDI in the defence sector

  • Simplification of export procedure

  • Streamlining of defence offset guidelines

Objective of Make in India in Defence

Objective of ‘Make in India’ is to build excellent manufacturing infrastructure to reduce dependence on imports and to reduce the cost.

Strategic Partnership (SP)

  • Government notified the ‘Strategic Partnership (SP) ’ Model to establish strategic partnerships with Indian private entities through a transparent and competitive process. Indian firms could tie up with global OEMs to seek technology transfers for domestic manufacturing.

  • New Defence Procurement Procedure (DPP)

  • Defence procurement procedure from 1st April 2016 has a new category of procurement ‘Buy Indian-IDDM (Indigenously Designed, Developed and Manufactured) ’ accorded top most priority.

  • Preference accorded to procurement under ‘Buy (Indian) ’ and ‘Buy and Make (Indian) ’ categories of capital acquisition over ‘Buy (Global) ’ & ‘Buy & Make (Global) ’ categories.

  • The ‘Make’ Procedure simplified with provisions for funding of 90 % of development cost by the Government and reserving projects not exceeding development cost of Rs. 10 Crore (Government funded) and Rs. 3 Crore (Industry funded) for MSMEs.

New FDI Policy

FDI Policy revised to increase Foreign Investment up to 49 % through automatic route and above 49 % under Government route if it is likely to result in access to modern technology.

Domestic Capital Expenditure, AoN and LOIs

  • Expenditure on procurement of defence equipment from Indian vendors increased from Rs. 31575 Crore (47 % of total procurement value) in 2013 - 14 to Rs. 41873 Crore (60.5 % of total procurement value) in 2016 - 17.

  • Acceptance of Necessity (AoN) granted to 145 proposals worth Rs. 399800 Crore from 2014 - 15 to 2016 - 17 - 103 proposals worth Rs. 2, 46, 400 Crore approved under ‘Buy (Indian-IDDM) ’, ‘Buy (Indian) ’, ‘Buy and Make (Indian) ’ and ‘Make’ categories.

  • Since 2001, 342 Letters of Intents (LOIs) and Industrial Licences (ILs) issued to 205 Indian companies for manufacture defence items to public and private companies.

  • 13 ILs issued to 12 Indian companies for manufacture of fighter aircrafts, helicopter, or their parts

Transfer of Technology

  • Foreign companies allowed having tie-ups with Indian vendors for indigenous production involving Transfer of technology (ToT) under ‘Buy & Make (Indian) ’ and ‘Buy & Make’ categories of capital acquisition.

  • Major projects under these categories in the past three years include 155mm/52 caliber Mounted Gun system, Extended Range (ER) Rockets for 122mm GRAD Multi Barrel Rocket Launcher, Successor to Air Defence Guns, New Generation Ammunition for 84mm Rocket Launcher, and Mine Ploughs Sets

Modified Industrial Infrastructure Upgradation Scheme (MIIUS)

  • Administered by Department of Industrial Policy and Promotion (DIPP) under Ministry of Commerce & Industry

  • Aims for upgradation of common industrial infrastructure in Industrial Clusters.

  • Also includes new project proposals for Defence and Aero Manufacturing Clusters

Other Measures

  • Industrial licensing regime for Indian manufacturers under IDR (Industries Development and Regulation) Act, 1951 liberalized with many components, parts and sub-systems taken out from the list of defence products requiring Industrial License reducing barriers for new entrants

  • The initial validity of Industrial License under IDR Act increased from 3 years to 15 years with a provision to further extend it by 3 years on a case-to-case basis.

  • Issues related to level-playing field like Exchange Rate Variation (ERV) protection for all Indian vendors, removing existing tax anomalies etc. have been addressed

  • Process for export clearance has been streamlined and made transparent & online.

- Published/Last Modified on: September 7, 2017

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