Page 462 - ES 2020-21_Volume-1-2 [28-01-21]

Fiscal Developments 89

Policy Initiative
Under the latest Preference to Public Procurement (Make in India) Order 2017, Department of
Defence Production has notified list of 46 items for which there is sufficient local capacity and
competition and thus, the procurement of these items shall be done only from local suppliers,
irrespective of the purchase value

The innovation ecosystem for Defence tilted “Innovation for Defence Excellence” (iDEX),
launched in 2018, intends to engage 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.
Defence Investor Cell functional since January 2018 under DDP is playing a pivotal role of
facilitator and guide to Defence entrepreneurs regarding their queries/grievances. It has
addressed more than 1000 such queries/cases from across the country.

Private sector Participation

In May 2001, the Defence Industry sector, which was hitherto reserved for the public sector, was
opened up to 100 per cent for Indian private sector participation with Foreign Direct Investment
(FDI) up to 26 per cent, both subject to licensing. FDI policy was further liberalized vide Press
Note no. 4(2020 Series) dated 17.09.2020 and FDI has been allowed under automatic route
up to 74% and above 74% through government route wherever it is likely to result in access
to modern technology or for other reasons to be recorded. Foreign Investments in the Defence
Sector shall be subject to scrutiny on grounds of Nations Security and Government reserves the
right to review any foreign investment in the Defence Sector that affects or may affect national
security.

After opening of the Defence Industry Sector for private sector participation, so far 44 FDI
proposals/Joint Ventures have been approved in defence sector for manufacture of various
defence equipment, both in public and private sectors. DPIIT has issued 496 Industrial Licenses
(ILs) to private companies till September 2020 for manufacture of a wide range of defence
items.

Export Promotion
Exports from Ordnance Factory Board (OFB), DPSUs and the private sector (based on
authorization issued by DDP) in the Financial Year have increased from ` 4,682 crore in
FY2017-18 to ` 9116 crore in FY2019-20.

In order to encourage participation of private sector in indigenous design, development and
manufacture of Defence equipment, 'Make' Procedure has been further simplified and incorporated
as Chapter-III of Defence Acquisition Procedure 2020 w.e.f 01.10.2020. Apart from "Make-I
& Make-II' categories, a new category 'Make-III' has been introduced with an objective to get
the defence items already in the inventory of Service, manufactured in the country even if the
design & development is not carried out in India. Framework for implementation on 'Make-II'
procedure at Ordnance Factories and Defence PSUs was also issued in February 2019 enabling
them to take up indigenisation of the items, particularly of import substitution nature, through
Indian private industry