EX­CLU­SIVE in­ter­view

In a rare me­dia in­ter­ac­tion with SP s Naval Forces, Ashok Kumar Gupta, sec­re­tary, de­fence Pro­duc­tion, out­lined his vi­sion for de­fence man­u­fac­tur­ing in In­dia and ad­dressed a wide range of sub­jects in­clud­ing Make in In­dia, DPP 2016, de­fence off­sets, role o

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SP s Naval Forces (SP s): How ex­actly are the Make in In­dia ini­tia­tives for aerospace and de­fence sec­tor be­ing pro­moted? What has been the re­ac­tion of for­eign OEMs to it till date? Sec­re­tary of De­fence Pro­duc­tion (Sec­re­tary): Make in In­dia ini­tia­tives for aerospace and de­fence sec­tor are be­ing pro­moted though var­i­ous pol­icy ini­tia­tives and amend­ments in pro­cure­ment pro­ce­dures which would re­sult in ease of do­ing busi­ness, en­cour­age and fa­cil­i­tate Indian pri­vate sec­tor to par­tic­i­pate in de­fence man­u­fac­tur­ing, nur­tur­ing R&d cul­ture in de­fence.

Fol­low­ing ini­tia­tives have been taken by the depart­ment of de­fence Pro­duc­tion to boost the Make in In­dia in de­fence sec­tor:

For­eign Direct In­vest­ment: FDI pol­icy un­der which for­eign in­vest­ment is al­lowed through au­to­matic route up to 49 per cent and govern­ment route be­yond 49 per cent wher­ever it is likely to re­sult in ac­cess to mod­ern tech­nol­ogy or for other rea­sons to be recorded.

In­dus­trial Li­cens­ing: The de­fence Prod­ucts List for the pur­pose of is­su­ing in­dus­trial li­cences (ILs) un­der IDR act has been re­vised and most of the com­po­nents, parts, sub­sys­tems, test­ing equip­ment and pro­duc­tion equip­ment have been re­moved from the list so as to re­duce the en­try bar­ri­ers for the in­dus­try, par­tic­u­larly small and medium seg­ment. The ini­tial va­lid­ity of the in­dus­trial li­cence has been in­creased from three years to 15 years with a pro­vi­sion to fur­ther ex­tend it by three years on a case-to-case ba­sis. De­fence Ex­ports: Ñ The list of mil­i­tary stores has been fi­nalised and put in the pub­lic do­main so as to make the process trans­par­ent and un­am­bigu­ous. The process of re­ceiv­ing ap­pli­ca­tions for no ob­jec­tion cer­tifi­cate (NOC) for ex­port of mil­i­tary stores and for is­su­ing Noc has been made on­line. Ñ The stan­dard op­er­at­ing pro­ce­dure (SOP) for the is­sue of NOC for ex­port of mil­i­tary stores has been re­vised and put on the web­site. Un­der the re­vised SOP, the re­quire­ment of en­duser cer­tifi­cate (EUC) to be coun­ter­signed/stamped by the govern­ment au­thor­i­ties has been done away with for the ex­port of parts, com­po­nents, sub­sys­tems, etc. Ñ Recog­nis­ing the need for pro­mo­tion of de­fence ex­ports to make the Indian de­fence in­dus­try economi- cally sus­tain­able, de­fence ex­ports strat­egy out­lin­ing the var­i­ous steps to be taken has been for­mu­lated and put up in pub­lic do­main.

De­fence Off­sets: Off­set im­ple­men­ta­tion process has been made flex­i­ble by al­low­ing change of Indian off­set part­ners (IOPs) and off­set com­po­nents, even in signed con­tracts. ser­vices as an av­enue of off­set have been re­in­stated with cer­tain con­di­tion­al­i­ties.

Level Play­ing Field: — Ex­change rate vari­a­tion pro­tec­tion has been made ap­pli­ca­ble for Indian pri­vate sec­tor at par with pub­lic sec­tor un­der­tak­ings for all cat­e­gories of cap­i­tal ac­qui­si­tions. Ñ The pref­er­en­tial treat­ment given to de­fence pub­lic sec­tor un­der­tak­ings (DPSUs) in ex­cise duty/cus­toms duty has been dis­con­tin­ued. as per the re­vised pol­icy, all Indian in­dus­tries (pub­lic and pri­vate) are sub­ject to the same kind of ex­cise and cus­toms duty levies.

Make Pro­ce­dure: The Make pro­ce­dure has been re­vised to pro­mote in­dige­nous de­sign, devel­op­ment and man­u­fac­ture of de­fence equip­ment/plat­form. It pro­vides for en­hanced govern­ment funding of 90 per cent of devel­op­ment cost and pref­er­ence to MSMEs for cer­tain cat­e­gories of projects, which will give a tremen­dous boost to man­u­fac­tur­ing of in­dige­nously de­signed prod­ucts through col­lab­o­ra­tive process with Indian in­dus­try.

Buy (Indian- IDDM) in DPP 2016: One of the no­table fea­tures of DPP 2016 is the in­tro­duc­tion of a new pro­cure­ment cat­e­gory buy (Indian- IDDM) by which pri­or­ity has been ac­corded to pro­cure­ment from Indian ven­dors of prod­ucts that are in­dige­nously de­signed, de­vel­oped and man­u­fac­tured. Pref­er­ence to In­dige­nous Pro­cure­ment: in DPP 2016, pref­er­ence has been pro­vided to pro­cure­ment un­der buy (Indian- IDDM), buy (Indian) and buy and Make (Indian) cat­e­gories of cap­i­tal ac­qui­si­tion over buy & Make or buy (Global) cat­e­gories. The for­eign OEMs have ex­hib­ited a lot of en­thu­si­asm to par­tic­i­pate in Make in In­dia ini­tia­tive. sev­eral OEMS have en­tered into or are in the process of tie-ups with Indian de­fence com­pa­nies for sup­ply of de­fence equip­ment cat­e­gorised as buy and Make (Indian) and buy and Make. SP s: The govern­ment gives some de­fence projects, es­pe­cially for Indian Navy projects, with­out hold­ing a com­pe­ti­tion to state-owned de­fence com­pa­nies. Why isn t the govern­ment en­cour­ag­ing com­pe­ti­tion with state-owned com­pa­nies? Sec­re­tary: as per de­fence Pro­cure­ment Pro­ce­dure 2016, Indian navy car­ries out ca­pac­ity as­sess­ment of the ship­yards (both pub­lic and pri­vate sec­tor) at reg­u­lar in­ter­vals. There­after, based on the re­quire­ment of Indian navy, RFP is is­sued to the short­listed ship­yards based on the afore­said ca­pac­ity as­sess­ment. The present gen­er­a­tion war­ships are weapon in­ten­sive where the ca­pac­ity of pri­vate sec­tor is rather lim­ited. how­ever, as and when the pri­vate sec­tor de­vel­ops these ca­pa­bil­i­ties, RFP will be is­sued to them based on their ca­pac­ity as­sess­ment.

Projects like off­shore pa­trol ves­sels, in­ter­cep­tor boats, float­ing docks, cadet train­ing ships, etc. be­sides re­pairs of war­ships have al­ready been awarded to pri­vate ship­yards. Cur­rently, pri­vate ship­yards are be­ing con­sid­ered for ma­jor ship­build­ing projects like land­ing plat­form docks, fast pa­trol ves­sels, anti-sub­ma­rine war­fare shal­low wa­ter craft, diving sup­port ves­sels and sur­vey ves­sels, etc.

a sub­stan­tial share of de­fence ship­build­ing is be­ing of­fered to pri­vate ship­yards, with ` 7,043 crore worth of com­mit­ted con­tracts, ` 19,810 crore worth of con­tracts in the pipe­line to be con­cluded in the next one or two years. SP s: What role do you see be­ing played by DPSUs in the near fu­ture? Sec­re­tary: Pro­duc­tion of de­fence equip­ment has been the key man­date of DPSUs. how­ever, to pro­mote Make in In­dia ini­tia­tive of the govern­ment and to achieve the sub­stan­tive self-reliance in de­fence pro- duc­tion there is a need for change in role of the DPSUs in near fu­ture.

The OEMs of the de­fence and aerospace in­dus­try world­wide play the role of sys­tem in­te­gra­tors by out­sourc­ing a sub­stan­tial part of the man­u­fac­tur­ing process to ven­dors. DPSUs also need to shift their strat­egy in a sim­i­lar way from ver­ti­cal in­te­gra­tion busi­ness model to sys­tem in­te­gra­tion busi­ness model. by adopt­ing such a strate­gic shift, DPSUs can serve their ul­ti­mate cus­tomers in a bet­ter way. The out­sourc­ing ef­fort by DPSUs will add to their ca­pac­ity en­hance­ment, at­tain cost-ef­fec­tive­ness and im­prove com­pet­i­tive­ness in global mar­ket.

To achieve the In­dia s cher­ished ob­jec­tive of self-reliance in de­fence pro­duc­tion, DPSUs need to not only in­no­vate in-house but also cre­ate in­sti­tu­tional model to fos­ter in­no­va­tion in the coun­try. They need to ag­gres­sively en­gage with R&d in­sti­tutes, academia, in­dus­tries in­clud­ing MSMEs, start-ups and even in­di­vid­ual in­no­va­tors and pro­vide them award-based grants/ funds to carry out in­no­va­tive devel­op­ment. SP s: Are we likely to see the se­ri­ous in­vest­ments in R&D in In­dia (be­yond DRDO) which can be one of the cat­a­lysts for in­di­geni­sa­tion? Sec­re­tary: The govern­ment is com­mit­ted to­wards fa­cil­i­tat­ing in­vest­ments in R&d de­fence sec­tor in In­dia. ac­cord­ingly en­abling pro­vi­sions have been in­tro­duced in DPP 2016. In or­der to pro­mote in­dige­nous de­sign and devel­op­ment of de­fence equip­ment, DPP 2016 has in­tro­duced the buy (Indian-IddM) cat­e­gory of ac­qui­si­tion and ac­corded it the top most pri­or­ity.

Tech­nol­ogy ac­qui­si­tion by DRDO in the ar­eas of high tech­nol­ogy has been listed as one of the av­enues for dis­charge of off­set obli­ga­tions. More­over, in dis­charge of off­set obli­ga­tions re­lated to tech­nol­ogy ac­qui­si­tion by DRDO a mul­ti­plier up to 3 is per­mit­ted.

Govern­ment plans to of­fer at least 8-10 projects ev­ery year un­der Make pro­ce­dure for devel­op­ment by Indian pri­vate sec­tor. This is likely to give a fil­lip to in­vest­ment in R&d in In­dia.

Tech­nol­ogy devel­op­ment Fund has been es­tab­lished to pro­mote self-reliance in de­fence tech­nol­ogy as a part of Make in In­dia ini­tia­tive. It is a pro­gramme of Min­istry of De­fence ex­e­cuted by DRDO for meeting the re­quire­ments of Tri ser­vices, de­fence Pro­duc­tion and DRDO.

A sub­stan­tial share of de­fence ship­build­ing is be­ing of­fered to pri­vate ship­yards, with ` 7,043 crore worth of com­mit­ted con­tracts, ` 19,810 crore worth of con­tracts in the pipe­line to be con­cluded in the next one or two years

For the com­plete in­ter­view, re­fer to SP s Mil­i­tary Year­book 2016-2017

Ashok Kumar Gupta Sec­re­tary, De­fence Pro­duc­tion


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