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SELF RELIANCE IN DEFENCE
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- In pursuance of ‘Make in India’ initiative, following measures were taken to achieve self-reliance in defence production:
- Defence Procurement Procedure (DPP) - It has been revised in 2016 wherein specific provisions have been introduced for stimulating growth of the domestic defence industry.
- Buy IDDM - A new category of procurement ‘Buy {Indian-IDDM (Indigenously Designed, Developed and Manufactured)}’ was introduced in DPP-2016 to promote indigenous design and development of defence equipment. It was accorded top 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.
- SP Model - The government notified the ‘Strategic Partnership (SP)’ Model in which establishment of long-term strategic partnerships will be done by Indian entities with global Original Equipment Manufacturers (OEMs) to seek technology transfers to set up domestic manufacturing infrastructure and supply chains.
- ‘Make’ Procedure simplified - New provisions for funding of 90% of development cost by the Government to Indian industry and reserving projects not exceeding development cost of Rs.10 Crore (Government funded) and Rs.3 Crore (Industry funded) for MSMEs.
- Make-II introduced - Separate procedure for ‘Make-II’ sub-category wherein a number of industry friendly provisions such as relaxation of eligibility criterion, minimal documentation, provision for considering proposals suggested by industry/individual etc., introduced.
- Defence Industrial Corridors - Government decided to establish two defence industrial corridors to be engines of economic development and growth of defence industrial base in the country.
- First spans across Chennai, Hosur, Coimbatore, Salem and Tiruchirappalli in Tamil Nadu
- Second spans across Aligarh, Agra, Jhansi, Kanpur and Lucknow in Uttar Pradesh (UP)
- iDEX - An innovation ecosystem for defence created titled Innovations for Defence Excellence (iDEX). It 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.
- Mission Raksha Gyan Shakti - The Ministry has instituted a new framework titled ‘Mission Raksha Gyan Shakti’ which aims to provide boost to the IPR culture in indigenous industry.
- Policy for indigenization - Government notified a Policy for indigenisation of components and spares used in Defence Platforms in March 2019 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.
- Defence Investor Cell - It 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.
- FDI Policy revised - 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.
- DPL for IL revised - The Defence Products List for the purpose of issuing Industrial Licenses (ILs) under IDR Act has been revised and most of the components, parts, sub-systems, testing equipment and production equipment have been removed from the list, so as to reduce the entry barriers for the industry, particularly small & medium segment.
- TDF - Government has set up the Technology Development Fund (TDF) to encourage participation of public/private industries especially MSMEs, through provision of grants, to create an eco–system for enhancing cutting edge technology capability for defence applications.
- 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. Foreign Original Equipment Manufacturers (OEMs) are now not required to indicate the details of IOPs and products at the time of signing of contracts. ‘Services’ as an avenue of offset have been re-instated.
- Make II Scheme – Simplified ‘Make in India’
- What it is: To push the ‘Make in India’ in Defence, the Defence Acquisition Council (DAC) chaired by Raksha Mantri had in January 2018 cleared the simplified ‘Make-II’ procedure which will enable greater participation of industry in acquisition of defence equipment.
- How it will help: This process will help import substitution and promote innovative solutions. This simplified ‘Make-II’ procedure will amend the existing ‘Make Procedure’ in Defence Procurement Procedure (DPP)-2016.
- Understanding Make: The Make Scheme fosters indigenous capabilities through design & development of required defence equipment/product/upgrades by both public and private sector industry in a faster time.
- Make I scheme is Government-funded and projects involve Government funding of 90%.
- Make II scheme is Industry-funded and projects involve no government funding will for development.
- Salient features of ‘Make II’ process:
- Industry can suggest projects, especially for items currently being imported. Start-ups or individuals can also suggest proposals. Service Headquarters will also list out a series of projects to be undertaken.
- The potential ‘Make-II’ projects will be approved by a collegiate comprising of DRDO, HQ (IDS), Department of Defence under a committee chaired by Secretary (Defence Production).
- Based on the in-principle approval, the projects will be hosted on Ministry of Defence/Department of Defence Production’s website inviting industry to participate.
- A design and development time of 12 to 30 weeks is granted to industry to offer the prototypes.
- After this, a commercial RFP will be issued. Once the RFP is issued, it shall not be retracted. The industry who wins the bid, is assured of order. Service Headquarter (SHQ) constitutes a Project Facilitation Team.
- The case will be progressed even if there is single entity offering an innovative solution.
- The industry who develops the product will retain the title and ownership and all other rights in intellectual property. However, for some specified reasons like National Security, Government shall have ‘March-in’ rights.
- Normally, there shall be no negotiations by Contract Negotiation Committee (CNC) in multi-vendor contracts.
- ‘Make-II’ procedure reduces the total time from in-principle approval to placing of order by 50 percent. The estimated time to finish the whole process has come down to 69 to 103 weeks.
- Projects involving developmental cost of less than three crores will be reserved for MSME.
- Developments in Make-II: The Ministry of Defence has a sub category of suo motu submission of proposals. One proposal cleared was for night vision solution and the other is related to missiles. Another scheme – SPARK (Support for Prototype & Research Kick-start) – supports development of prototypes after selection under various programmes. For this, funds up to ?1.5 crore per project are given by iDEX (Innovations for Defence Excellence). On indigenisation, India is at the macro level playing catch-up. Imported technology is indigenized, but it’s always late. It is time to change the mindset and go for total indigenisation, like that for T-72 /T-90 tank engines.
- Recommendation – Defence and Internal Security
- A dedicated non-lapsable fund called the Modernisation Fund for Defence and Internal Security (MFDIS) will be constituted to primarily bridge the gap between budgetary requirements and allocation for capital outlay in defence and internal security.
- The fund will have an estimated corpus of Rs 2.4 lakh crore over the five years (2021-26). Of this, Rs 1.5 lakh crore will be transferred from the Consolidated Fund of India. Rest of the amount will be generated from measures such as disinvestment of defence public sector enterprises, and monetisation of defence lands.
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