Rao Inderjit Singh

Minister of State for Defence, Government of India

Interview

June 7, 2016

/ By / New Delhi

Biz@India

June 2016



Boosting ‘Make in India’ in Defence

rao_interview

Rao Inderjit Singh, Minister of State for Defence, Government of India

From the recent changes in Defence Procurement rules to the latest measures taken to boost ‘Make in India’, at the central government and state levels, Rao Inderjit Singh, Indian Minister of State for Defence, insists on the potential in Defence for Indian and foreign players and explains the steps taken to create a level playing field between private and public sectors.

What are the changes to the key Defence Procurement Rules?

The Defence Procurement Procedure (DPP) has been revised and promulgated on 28th of March 2016. The new DPP-2016 focuses on giving boost to the ‘Make in India’ initiative of the Government of India, through indigenous design, development and manufacturing of defence equipment, platforms and systems.

The salient features of the DPP-2016 include many aspects. First, there is the introduction of a Preamble as the guiding principle for the DPP and the introduction of a new category of acquisition – ‘Buy’ (Indian – IDDM) – with highest priority, to promote indigenous design development and manufacturing; and a requirement of minimum indigenous content which has been enhanced and rationalised in other categories.

Then, the threshold limit for discharge of offset obligations has been increased from existing Acceptance of Necessity (AoN) cost of EUR 40 million to EUR 3 billion. Regarding foreign Original Equipment Manufacturers (OEMs), provisions have been made to allow them to select Indian Production agency of their choice for transfer of technology.

Moreover, single vendor cases at the bid submission and Technical Evaluation Committee (TEC) stages, will not be automatically retracted. They can be processed with due justification and approval of Defence Acquisition Council (DAC).

Also, the scope of Services Qualitative Requirements (SQRs) has been broadened by introducing Essential A Parameters – that are generally a part of the contemporary equipment – and Essential B – though not available originally but which can be developed. In that area, there is also the introduction of the concept of Enhanced Performance Parameters – those parameters enhance the capability of the equipment, vis-à-vis the essential parameters – where vendor will get weightage of upto 10% in price for determination of price bid.

Finally, the Defence Procurement Procedure 2016 has specific provisions that address the issues of pendency, or delays, such as a provision for requirement of draft of request for proposal to be submitted along with proposal for seeking Acceptance of Necessity (AoN) ; a reduction in validity of AoNs from one year to six months in ‘Buy’ and ‘Buy and Make’ and from two years to one year in ‘Buy & Make’ (Indian) cases.

What are the main measures taken to boost ‘Make in India’ in Defence at the government level?

The Department of Defence Production has taken several initiatives to boost the ‘Make in India’ in this sector. First, Foreign Direct Investment (FDI) has been allowed upto 49 pc under automatic route and above 49 pc with Foreign Investment Promotion Board (FIPB) approval on case to case basis, wherever it is likely to result in access to modern and ‘state-of-theart’ technology in the country.

Then, to promote design and development, a revised ‘Make’ procedure has been issued, with Government funding upto 90% and preferential treatment to Micro, Small and Medium Enterprises (MSMEs) for certain categories of projects.

Also, the Industrial Licensing policy has been liberalised. 65% to 70% of the items i.e. parts, components, sub-systems, raw materials etc have been removed from purview of industrial licensing.

In order to achieve an important goal – to establish a level-playing field between Indian private sector and the public sector -, the anomalies in excise duty or custom duty have been removed. As per the revised policy, all Indian industries – public and private – are subjected to the same kind of excise and custom duty levies. On the same line, Exchange Rate Variation (ERV) protection has been extended to Indian private and public sectors for all categories of capital acquisitions.

Other initiatives include the restoration of ‘Services’ as an avenue for discharging offsets; the issuance of ‘Security Manual for Licensed Defence Industry’, which leads to the requirement of affidavit from the applicants to be done away with.

The ‘Make in India Portal for Defence Production’ has been launched in December 2015. The portal provides information related to all policy and procedural issues relevant to defence manufacturing industry. It is an interactive platform where an individual or a company can seek clarifications on policies related to Defence Production.

How do you carry on the ‘Make in India’ effort with Indian states?

The ‘Make in India Portal for Defence Production’ has a dedicated section for ‘State specific promotion’ wherein Defence specific policies of State governments and Union Territories are being uploaded. States and Union Territories have been requested to share the details of such policies with the department so that same are shared with industry through the portal.

How do you encourage big Indian players with relevant technology to enter the Defence Sector, more?

First, we focused on a Strategic Partnership Model. The Expert Committee constituted by the Ministry for suggesting amendments in ‘Defence Procurement Procedure’ had recommended this ‘strategic partnership’ model for creating capacity in the private sector on a long-term basis in six strategic segments such as aircraft/ helicopters, warships/submarines, armoured vehicles, missiles, command control systems and critical materials.

Then, we focused on establishing, as mentioned, a level playing field between the private sector and defence public sector units (DPSUs).

What are the other programmes the Ministry of Defence is focusing on in terms of ‘Make in India’, what are the priorities?

In order to progress the cases under revised ‘Make’ procedure, more than 20 potential ‘Make’ projects have been identified in consultation with the services. A list has been uploaded on ‘Make in India’ portal of defence production, so that the Indian industry is able to carry our preliminary assessment regarding their technical capability to undertake these projects and economic viability.

Also, the Ministry has accorded Acceptance of Necessity (AoNs) for 73 proposals worth around EUR 20 billion under ‘Buy (Indian)’ and ‘Buy & Make (Indian)’ categories of capital acquisition in the last two financial years. In these proposals, request for proposals will be issued to the Indian vendors who will be at the liberty to tie up with the foreign OEMs for transfer of technology wherever required. This will give a big push to the ‘Make in India’ initiative of the Government.

Can you give us your feedback on the last big Defence event, Defexpo 2016, organised in March 28-31 in Goa?

Defexpo was organised successfully for the first time in Goa. The event received tremendous response from the industry both foreign as well as Indian and a record number of 1030 companies including foreign and Indian participated to display their technology and products.

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