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RSTV: IN DEPTH- DEFENCE EXPO 2020

RSTV: IN DEPTH- DEFENCE EXPO 2020

RSTV

Introduction:

India’s biennial Defence Expo was held in Lucknow. Aimed at showcasing India’s potential as a global defence manufacturing hub, the 11th edition of the DefenceExpo will bring new technologies and solutions on a single platform for defence manufacturing firms from India and abroad. The theme of the Expo is ‘India: The Emerging Defence Manufacturing Hub’ and the focus is ‘Digital Transformation of Defence’. The five-day mega exhibition saw as many as 856 Indian defence firms unveil their products. The DefenceExpo is an opportunity for the Indian defence industry to promote its export potential

DefExpo-2020:

  • It is a flagship biennial event of the Ministry of Defence, Government of India, one of the largest events of its kind held for the first time in Lucknow, Uttar Pradesh from 5th to 9th Feb 2020.
  • The 11th edition of Def Expo promises to bring new technologies, technological solutions, where Defence manufacturing companies from India and abroad showcase their products and services in Defence arena, on a single platform.
  • The main theme of the DefExpo India- 2020 is ‘India: The Emerging Defence Manufacturing Hub’ and the focus will be on ‘Digital Transformation of Defence’.
  • Reflecting the Government’s focus on ‘Make in India’, Def Expo 2020, would offer an excellent opportunity for the Indian Defence industry to showcase its capabilities and promote its export potential.
  • Defence Expo 2020 would prove to be an effective platform to showcase the unique products that help achieving the Digital Transformation of Defence, where India’s Defence public sector units, and also India’s growing private industry and MSME will be bringing their cutting-edge technological products to be showcased to the World.
  • The number of companies registered for participating in the Def Expo 2020 reached 1,028. In the DefExpo 2018, held in Chennai, 702 companies had participated. Thus, it has become by far the biggest ever DefExpo to be held in India.
  • The number of participating foreign companies has also increased to 172 from the previous figure of 160.
  • The booked exhibition space by exhibitors for DefExpo 2020 has gone up by 96 per cent to over 43,021 square metres, compared to around 27,000 during the last edition.

Funds Allocated to the Armed Forces:
The BE allocations of Army, Navy & Air Force for the last three years is tabulated below:

(Rs. in Crore)

Services 2017-18 2018-19 2019-20
Army 145167.22 153875.22 169909.74
Navy

(Incl. Joint Staff)

37841.98 40419.53 45368.14
Air Force 58372.50 64591.44 68948.88

 

It may be seen from the above table that allocations for all the three Services are consistently increasing over the years in absolute terms.

Impact of FDI in Defence:

 

  • In May, 2001, the Defence Industry sector, which was hitherto reserved for the public sector, was opened upto 100% for Indian private sector participation, with Foreign Direct Investment (FDI) upto 26% both subject to licensing.
  • Further, Department for Promotion of Industry and Internal Trade, Ministry of Commerce & Industry has allowed FDI under automatic route upto 49% and above 49% through government route wherever it is likely to result in access to modern technology or for other reasons to be recorded.
  • Further, FDI in defence industry sector is subject to industrial license under Industries (Development & Regulation) Act, 1951 and manufacturing of small arms and ammunition under the Arms Act, 1959.
  • As per the data furnished by 37 companies operating in Defence and Aerospace sector, so far, FDI inflows of over Rs. 1561 Crores have been reported in defence and aerospace sector after 2014 in automatic route.

Boosting Domestic Production of Defence Equipment:

 

Government has taken following policy initiatives to boost production and promote indigenous design, development & manufacture of defence equipment in collaboration with Indian private sector:

  • Defence Procurement Procedure (DPP) has been revised in 2016 wherein specific provisions have been introduced for stimulating growth of the domestic defence industry including private sector.
  • A new category of procurement “Buy {Indian-IDDM (Indigenously Designed, Developed and Manufactured)}” has been introduced in Defence Procurement Procedure (DPP)-2016 to promote indigenous design and development of defence equipment. It has been accorded top most 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.
  • FDI Policy has been revised and 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.
  • An innovation ecosystem for Defence titled Innovations for Defence Excellence (iDEX) has been launched in April, 2018. iDEX 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 and provide them grants/funding and other support to carry out R&D which has potential for future adoption for Indian defence and aerospace needs.
  • The “Make” Procedure has been simplified with provisions for funding of 90% of development cost by the Government to Indian industry and reserving Government funded Make-I projects not exceeding development cost of Rs.10 Crore & procurement cost Rs. 50 Crore per year for MSMEs.  The industry funded Make-II Projects not exceeding development cost of Rs.3 Crore & procurement cost Rs. 50 Crore per year have also been reserved for MSMEs.
  • Separate procedure for “Make-II” category has been notified under DPP to encourage indigenous development and manufacture of defence equipment. Number of industry friendly provisions such as relaxation of eligibility criterion, minimal documentation, provision for considering proposals suggested by industry/individual etc. have been introduced in this procedure.
  • Government has notified the “Strategic Partnership (SP)” Model which envisages establishment of long-term strategic partnerships with Indian entities through a transparent and competitive process, wherein they would tie up with global Original Equipment Manufacturers (OEMs) to seek technology transfers to set up domestic manufacturing infrastructure and supply chains.
  • Government has notified a Policy for indigenisation of components and spares used in Defence Platforms in March, 2019 with the objective 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.
  • 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 allowed to provide the details of IOPs and products after signing of contracts. In order to bring more transparency and efficiency into the Offset discharge process, “Offset portal” has been created in May, 2019.
  • Defence Products list requiring Industrial Licences has been rationalised and manufacture of most of parts or components does not require Industrial License. The initial validity of the Industrial Licence granted under the IDR Act has been increased from 03 years to 15 years with a provision to further extend it by 03 years on a case-to-case basis.