Steps taken by Government to enhance the role of SMEs in indegenizatin

Tuesday, April 11, 2017

New Delhi: Steps taken by the Government towards enhancing the role of Private industry and Small & Medium Enterprises (SMEs) by indigenizing and broadening the Defence R&D base of the country include:

• A new Defence Procurement Procedure (DPP), 2016 has been promulgated by the Government to take effect from 01st April, 2016 whereby a new category of procurement ‘Buy {Indian-IDDM (Indigenously Designed, Developed and Manufactured)}’ which has been accorded top–most priority for procurement of Capital equipment. Besides this, preference has been accorded to ‘Buy (Indian) ‘ and ‘Buy & Make (Indian)’ categories of capital acquisition over ‘Buy (Global)’ and ‘Buy & Make (Global)’ categories. The ‘Make’ Procedure has been simplified with 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.

• FDI Policy has been revised. FDI up to 49% is allowed through automatic route and beyond 49% under Government approval route wherever it is likely to result in excess to modern technology or for other reasons to be recorded.

• Indian licensing regime for Indian manufacturers has been liberalized and most of the components/ parts/ sub-systems have been taken out from the list of Defence products requiring industrial license which has resulted in reduction in the entry barriers for new entrants in this sector particularly SMEs. The initial validity of industrial license has been 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 between Indian and foreign manufacturers and between Public sector & Private sector have also been addressed. These include Exchange Rate Variation (ERV) protection for Indian vendors removing anomalies in Customs/Excise duties etc.

• 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.

• The process for export clearance has been streamlined and made transparent and online.

This information was given by Minister of State for Defence Dr. Subhash Bhamre in a written reply to Ch. Sukhram Singh Yadav and others in Rajya Sabha today.