Question: Will the Minister of DEFENCE be pleased to satate :-

(a) whether it is a fact that Government is considering to strengthen the defence manufacturing base in the country and making the procurement process more efficient and if so, the details thereof; and

(b) whether it is also a fact that henceforth the option of importing a piece of defence equipment will be exercised only after exhausting the option of sourcing it from within the country and if so, the details thereof?

Answer: Minister of Defence (Shri A.K. Antony)

(a) Yes, Sir. Since May 2001, the defence industry sector is open up to 100% for Indian private sector participation with FDI permissible up to 26%, both subject to licensing. However, wherever FDI beyond 26% is likely to result in access to modern and state-of-the-art technology into the country, decisions can be taken to allow higher FDI on a case-to-case basis with the approval of the Cabinet Committee on Security. Defence Offset Policy incorporated in the Defence Procurement Procedure is also intended to strengthen indigenous defence industrial base. Further, the Defence Production Policy, 2011 also endeavours to build up a robust indigenous defence industrial base by proactively encouraging larger involvement of the Indian private sector.

Ministry of Defence has recently promulgated the Defence Procurement Procedure 2013 (DPP-2013) which came into effect from June 1st, 2013. Besides clearly articulating the step by step acquisition process, various clauses to enhance indigenization, expedite acquisition processes, increased transparency, revising Defence Shipbuilding procedure including a separate format for RFP (Request for Proposal) for shipbuilding cases have been incorporated in the procedure. The prioritization of various categories for capital acquisition; clear definition of indigenous content; simplification of ‘Buy & Make (Indian)’ procedure to bring it on par with other categories; permitting Indian Private Industry to receive MToT (Maintenance Transfer of Technology) from Indian vendors in ‘Buy (Global); reducing the period of AoN (Acceptance of Necessity) from two years to one year; freezing GSQR (General Staff Qualitative Requirement) before finalization of AoN; separate RFP for ship building cases are some of the important initiatives under DDP-2013.

The above-mentioned initiatives are expected to further strengthen the defence manufacturing base in the country.

(b) DPP-2013 has introduced a system of ‘Order of preferred categorisation’ in decreasing order as Buy (Indian), Buy & Make (Indian), Make (Indian), Buy & Make, Buy (Global). In accordance with the order of preferred categorization, all Statement of Cases (including cases of Defence Shipbuilding and cases under Fast Track Procedure) seeking AoN shall invariably contain a detailed justification for recommending categorization as well as reasons why each of the higher preferred categorization has not been considered suitable for the purpose.

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Defence Economics & Industry