REFORMS IN

DEFENCE SECTOR
Propelling Private Sector Participation
(2014 - 2021)
 We have taken a number of
measures, including delicensing,
deregulation, export promotion,
foreign investment liberalization
in the defence sector. We are
working ahead and focusing on
transparency, predictability and
ease of doing business.

Narendra Modi
Prime Minister of India
With the mantra of “Aatmanirbhar
Bharat” given by the Hon’ble Prime
Minister, the Defence Sector in India
is poised to take a leap forward with
a multi-pronged approach. Now,
with focused attention on promotion
of export of Indian defence products,
India is steadily marching from
“Make in India” towards “Make for
the World”.

Rajnath Singh
Minister of Defence
Government of India
PAVING the WAY FOR PRIVATE SECTOR
The Indian Defence ecosystem is a confluence between the Under the Hon’ble Prime Minister’s leadership, propelled forward by
Government and the defence manufacturing industry. Sustainable the Hon’ble Defence Minister, several policies & initiatives have been
growth in the industry can only be achieved when one propels the implemented to boost the private Defence and Aerospace sector. The
other. Aerospace & Defence is estimated to be a `80,000 Cr industry, to steps taken include digitising internal processes, providing checks and
which the private sector’s contribution has steadily grown to `17,000 Cr. balances to restrict imports and promote exports, formulating schemes
The vision is to make the private defence sector a global leader. aimed at promoting ease-of-doing-business, and encouraging the
manufacture and purchase of indigenous products, which act as the
wings for the private defence sector to take flight.
INDEX
1 Increasing the Share in Domestic Defence Procurement 8 Exhibitions and Outreach Programmes in 2020-21
I Design Capabilities 1 I Aero India 2021 37
II Level Playing Field 2 II Webinar on Budget Announcements 2021-22 40
III Webinar with Foreign Countries to Promote Exports 43
III Local Procurement 3
2 Providing Access to Critical Technologies
I Offset Policy Enabling Access to Critical Technologies 5
II Research and Development 6
3 Encouraging Investments
I Import Embargo 7
II FDI Policy 8
III Defence Industrial Corridors 11
IV Offset Policy Encouraging Investments 13
V Industrial Licensing 14
VI Defence Investor Cell 16
4 Enhancing Indigenisation
I Srijan Portal 17
II Indigenisation of Components 19
III Indo-Russian Cooperation 22
5 Tapping the World Market
I Exports 23
II Open General Export License 29
6 Harnessing Design and Development Capabilities
I Make-I Procedure 30
II Make-II Procedure 31
III Innovations for Defence Excellence 33
7 Easing the Business
I Testing Facilities 34
II Exchange Rate Variation Protection 35
III Third Party Inspection 36
Increasing the Share in Domestic
Defence Procurement
I - DESIGN CAPABILITIES
THE INITIATIVE THE ACHIEVEMENTS
A new category of capital procurement ‘Buy {Indian-IDDM In the last 4 financial years (2016-17 to 2019-20), 86 Capital Acquisition
(Indigenously Designed, Developed and Manufactured)}’ proposals worth �93,727 Cr have been categorised under Buy
has been introduced in Defence Procurement Procedure (Indian-IDDM) category.
(DPP)-2016 to promote indigenous design and
development of defence equipment.
NO. OF ACCEPTANCE OF NECESSITY (AoN) ISSUED
UNDER BUY (INDIAN-IDDM) CATEGORY
THE EXECUTION
It has been accorded top most priority for � IN
procurement of capital equipment. YEAR SCHEMES CRORES
2016-17 8 56,950.48
SITUATION BEFORE REFORM
There was no incentive to Indian companies having
design capabilities. Indian companies had to compete
2017-18 30 7,926.62
with those having only manufacturing capabilities.
2018-19 27 17,589.37
IMPROVEMENT AFTER REFORM
The reform has helped in creating domestic design 2019-20 21 11,260.73
capabilities in the Defence Sector.
TOTAL 86 93,727.20

01
II - LEVEL PLAYING FIELD
THE INITIATIVE
Defence Procurement Procedure (DPP) 2016 has been further revised as
Defence Acquisition Procedure (DAP) 2020 which aims to provide the
highest degree of probity, public accountability, transparency, fair
competition and a level-playing field for Indian Private Defence Industries.

THE EXECUTION
DAP 2020 provided a level-playing field for Indian Private Defence
Industries as elaborated below:
i. Various categories of capital acquisition prescribed under DAP 2020
allow Indian companies, both private and public, to participate in the
acquisition process.
ii. Under Strategic Partnership Model, any Indian company (as defined
under the Companies Act, 2013), owned and controlled by resident
Indian citizen is only eligible for applying under selection process for
strategic partners.
iii. Indian private shipyards have also been made eligible for bidding in
projects along with PSU shipyards.
iv. Trial and testing procedures have been overhauled with the objective
to nurture competition based on principles of transparency, fairness
and equal opportunities to all.
v. Industry friendly commercial terms have been introduced.

SITUATION BEFORE REFORM

For a long time, it has been the demand of the private industry to provide a
level playing field to them.

IMPROVEMENT AFTER REFORM

These reforms have addressed their long pending demand and attempted
to bring transparency, fair competition and a level-playing field for Indian
private industries. 02
III - LOCAL PROCUREMENT
THE INITIATIVE
Department of Defence Production has notified 46
items under the latest Public Procurement Order 2017,
notified by Department for Promotion of Industry and
Internal Trade (DPIIT), for which there is local capacity
and competition.

Procurement of such items shall be done from local

suppliers only, irrespective of the purchase value.

THE EXECUTION
Under this reform, the Department notified those
items for which there is sufficient local capacity and
competition.

Only “Class-I local suppliers” shall be eligible to bid

irrespective of the purchase value.

SITUATION BEFORE REFORM

Before the notification of Public Procurement
(Preference to Make in India) Order 2017, there was no
provision to provide preference to local suppliers in
procurement process.

IMPROVEMENT AFTER REFORM

This reform provides preference to local suppliers in
procurement, thus giving a boost to Make in India.

03
 Great move to earmark more budget Defence Minister’s announcement
for domestic capital procurement. of negative import list of Defence
It fulfils a request by FICCI Defence Systems and Platforms marks the
Committee to provide long-term launch of a new glide path for
visibility on Defence Procurement “Aatmanirbhar Bharat”.
plans. Industry can now plan its
Chandrajit Banerjee
capex and production capacity. DG-CII

S.P. Shukla
Chairman, FICCI Defence Committee

04
Providing Access to
Critical Technologies
I - OFFSET POLICY ENABLING ACCESS TO CRITICAL TECHNOLOGIES
THE INITIATIVE THE EXECUTION SITUATION BEFORE REFORM
Under the new Offset Policy, The Investments have been incentivised through i. There were no such incentives for transfer of
further Offset reforms have higher multipliers for transfer of technology/critical technology to Indian Enterprises and OFB/DPSUs.
been included in Defence technologies under offset discharge as follows:
ii. Further, the value of incentive multiplier for transfer
Acquisition Procedure (DAP)
For Transfer of Technology to Indian Enterprises (x2.0) of critical technologies under offset discharge was
2020, with thrust on attracting
low and such transfer was limited to DRDO. It was
Investment and Technology for For Transfer of Technology to OFB/DPSUs (x3.0)
not extended to Private Industries.
defence manufacturing.
For Transfer of Critical Technology (x4.0)
IMPROVEMENT AFTER REFORM
The new Offset Policy is expected to encourage
investments for Transfer of Technology/Critical
Technologies to Indian Industry in Defence sector.

05
II - RESEARCH AND DEVELOPMENT

01 02 03 04

Defence Research and Technology Development DRDO has idenfitied a DRDO has been
Development Fund (TDF) scheme list of 108 systems and empowered to select a
Organisation (DRDO) has started by DRDO. DRDO subsystems which will be Development cum
promulgated new patent provides financial support designed, developed and Production Partner for its
policy to facilitate Indian to the Indian industries manufactured by projects right from
industries to get free for the design and industry only and will not inception. Multiple
access to use DRDO development of be taken up by DRDO products are now being
patents. This would innovative defence itself for development. co-developed with the
provide an access to products. private industry under
Indian industries to the this protocol.
innovations carried out by
DRDO to further boost up
their R&D and develop
new technologies.

06
Encouraging Investments
I - IMPORT EMBARGO
THE INITIATIVE
As part of the Aatmanirbhar Bharat Package, Ministry
of Defence has notified a ‘Positive (Erstwhile Negative)
List’ of 101 items for which there would be an embargo on
the import beyond the timeline indicated against them.

The second Positive List for indigenisation of 108 more

items has also been notified on 31/05/2021.

THE EXECUTION
These lists include some high technology weapon systems
like artillery guns, assault rifles, corvettes, sonar systems,
transport aircrafts, light combat helicopters (LCHs), radars and
many other items to give a boost to local defence industries.

SITUATION BEFORE REFORM

There was no such identified list of items for import embargo.

IMPROVEMENT AFTER REFORM

i. This would offer a great opportunity to the Indian Defence industries, including private
sector, to manufacture these items using their own design and development capabilities
to meet the requirements of the Armed Forces in the coming years.

ii. This would comply with clarion call of Hon’ble Prime Minister Shri Narendra Modi i.e. Vocal for Local.

iii. It would also provide an impetus to employment efforts of the country.

07
 II - FDI POLICY

THE INITIATIVE THE EXECUTION SITUATION BEFORE REFORM

The Government of India has enhanced FDI in Defence Sector Companies seeking new FDI approval holders had to apply for Government
up to 74% through the Automatic Route for companies seeking defence industrial license approval for change in equity/shareholding pattern
new defence industrial license and up to 100% by Government can bring FDI in Defence under the Automatic Route.
Route wherever it is likely to result in access to modern Sector up to 74% through
The companies not requiring Industrial License were
technology. The obligatory Government approval for existing the Automatic Route.
required to get Government approval for change in
FDI approval holders/current defence licensees for change in
The existing FDI approval equity/shareholding pattern under the Automatic
equity/shareholding pattern up to 49% FDI, has been replaced
holders have to submit a Route. This had also brought many companies
with mandatory declaration for the same within 30 days of
declaration within 30 days unnecessarily under the approval regime.
change of equity/shareholding pattern.
of change in equity/
The proposals for raising FDI beyond 49% from such companies shareholding pattern.
could also be considered with Government approval.
08
IMPROVEMENT AFTER REFORM INCREASE IN FDI INFLOW IN DEFENCE SECTOR POST 2014
Liberalisation of the FDI policy has simplified
the route of flow of FDI. A higher automatic
route limit facilitates ease of doing business.

THE ACHIEVEMENTS
FDI Flow in the country has improved
tremendously within 6 years.

(`IN CRORES)

2871
09
The industry is further energized Increased capabilities in Defence
with the ‘Aatmanirbhar Bharat Production not only offer a great
Abhiyan’ along with the recent economic opportunity for the
easing of FDI regulations in the domestic industry, but also give an
Defence Sector, as a strategic immense strategic advantage to
direction to future. the country in a fast-evolving
geo-political situation.
Jayant Patil
President, SIDM Deepak Sood
Secretary General, ASSOCHAM

10
III - DEFENCE INDUSTRIAL CORRIDORS
THE INITIATIVE THE EXECUTION
In February 2018, the Government decided to establish two The Government of India provides policy intervention for
Defence Industrial Corridors (DICs) in Uttar Pradesh and Tamil
i. infrastructure development;
Nadu to serve as an engine of economic development and
ii. attracting foreign players and OEMs; and
growth of defence industrial base in the country.
iii. strengthening the MSME ecosystem.
Five nodes have been identified for developing the Tamil Nadu
Defence Industrial Corridor (TNDIC), namely Chennai, Responsibility of execution and implementation of all policies
Coimbatore, Hosur, Salem, and Tiruchirappalli. pertaining to the DICs lies with the respective State
Governments.
Similarly, the UP Defence Industrial Corridor (UPDIC) connects
six nodes, i.e. Agra, Aligarh, Chitrakoot, Jhansi, Kanpur and DICs aim to:
Lucknow. i. Provide a fillip to the defence manufacturing ecosystem
through synergistic development of technologies,
These nodes have been selected to harness and channelize the
products and enterprises.
defence manufacturing potential that exists within the MSMEs,
OFB and DPSUs in and around these areas. ii. Create direct and indirect employment opportunities.

A number of private industries have either already invested in iii. Provide impetus to growth of private domestic
or have plans to invest in these DICs. manufacturers including MSMEs and Start-ups.

11
SITUATION BEFORE REFORM IMPROVEMENT AFTER REFORM THE ACHIEVEMENTS
There was no such focused intervention Subsequent to the reform, both the State As on 31/5/2021, these efforts have resulted in
for developing a holistic defence Governments have also adopted attractive Defence an investment of `1135 Cr in the UP Defence
manufacturing ecosystem. and Aerospace policy to attract investment, which Corridor and `966 Cr in the TN Defence
include subsidies on Capital Investment, Skill Corridor by OFB/DPSUs and private industry.
Development, Land Allotment, Certification etc.
and exemptions/concessions on duties/taxes e.g. Moreover, in TNDIC, the existing companies

electricity duty, stamp duty, SGST etc. have additionally invested `1140 Cr.

12
IV - OFFSET POLICY ENCOURAGING INVESTMENTS
THE INITIATIVE THE EXECUTION SITUATION BEFORE REFORM
i. Under the new Offset Policy, offset Under the new Offset Policy, higher preference i. Earlier, the multiplier was restricted to
reforms have also been included in has been given for purchase of defence products purchase defence items from MSMEs only.
the Defence Acquisition Procedure as compared to components through
ii. All transactions under offset contracts
(DAP) 2020, with thrust on incentivisation as under:
were reported by the vendor through
attracting Investment for Defence i. Multiplier for Purchase of Defence Products: manual submission (photocopy of
manufacturing.
‒ For products/systems (x1.0) documents).
ii. Offset guidelines have been made ‒ For components (x0.5) iii. Processing of claims were in manual
flexible by allowing change of
‒ For MSME (x1.5) mode.
Indian Offset Partners (IOPs) and
offset components, even in signed ii. Further, Investments have been incentivised iv. Audit of offset discharge claims were time
contracts. through higher multipliers under offset consuming.
discharge as follows:
iii. Foreign Original Equipment v. There was no dispute settlement
Manufacturers (OEMs) are now ‒ In defence manufacturing (x1.5) mechanism for offset contract.
allowed to provide the details of ‒ In Defence Industrial Corridors (x2.0)
IOPs and products after signing of vi. In case of disagreement, arriving at a
contracts. mutual decision was difficult.

iv. In order to bring more transparency

and efficiency into the Offset
IMPROVEMENT AFTER REFORM
i. The new Offset Policy is expected to ‒ Faster processing of claims.
discharge process, “Offset Portal”
encourage investments, Transfer of
has been created in May 2019. ‒ Greater transparency, efficiency and
Technology to Indian Industry in Defence
accountability in the process.
Sector and growth of MSMEs.
‒ Introduction of disputes settlement
ii. The Offset Portal has resulted in the following
mechanism through Independent
improvements:
Monitors.
‒ Online audit of offset discharge claims.
13
V - INDUSTRIAL LICENSING
THE INITIATIVE THE EXECUTION
Defence Products List requiring Industrial Licences has been rationalised, and manufacture of most Rationalisation of Defence Product List has
parts or components now does not require Industrial License. de-licensed many items in Defence Sector.
Removal of items from Defence Product
The Revised Defence Product List has been notified by DPIIT, Ministry of Commerce & Industry vide
List has reduced the ambiguity regarding
Press Note 1 of 2019 Series dated 01/01/2019.
licensing procedure.
The initial validity of the Industrial Licence granted under the Industries (Development & Regulation)
The applications filed by the industry are
Act - IDR Act has been increased from 3 years to 15 years with a provision to further extend it by 3 years
downloaded and circulated to the SHQs for
on a case-to-case basis.
comments.
A new online portal has been developed for facilitating filing of online applications for Industrial
The comments received are then placed
License under Industries (Development & Regulation) Act - IDR Act 1951/Arms Act 1959.
before the Standing Committee for
recommending or otherwise for grant of IL.

SITUATION BEFORE IMPROVEMENT AFTER REFORM THE ACHIEVEMENTS

REFORM PROCESS IMPROVEMENT: Total 523 Industrial Licenses
The initial validity of the Industrial Increase in validity of Industrial Licenses has provided sufficient time and have been issued so far.
Licence granted under the IDR Act space for companies to operate and manufacture without hindrance.
was just 3 years, which did not
provide sufficient time span for FINANCIAL BENEFITS:
companies to operate without Easing of licensing procedure has provided companies with better
taking approvals. opportunities to get finances from institutions.

Prior to the online system, the A B2G portal has been developed for filing of online applications for
applications were received by post Industrial License under Industries (Development & Regulation) Act - IDR
and even circulated by post. This Act.
resulted in inordinate delay in
The ease in filing applications for Industrial License has resulted in
disposing of the applications.
increase in number of licenses and faster approvals.
14
 DEFENCE PRODUCTION TURNOVER IN `CRORE

74,054 (2016-17)

78,820 (2017-18)

INCREASE IN
NUMBER OF LICENSES
POST JUNE 2014 81,120 (2018-19)
217 (41%)
Before
June 2014
78,570 (2019-20)

77,640 (2020-21)*

306 (59%)
June 2014 to
*Provisional. Period marred by COVID Pandemic.
March 2021

15
VI - Defence Investor Cell
THE INITIATIVE SITUATION BEFORE REFORM
Defence Investor Cell has been created Prior to it, the situation was hazy for any common
in February 2018 in the Ministry to aspiring entrepreneur/innovator who did not
provide all necessary information know whom to approach and put forth their
including addressing queries related to queries/ideas to.
investment opportunities, procedures
Also, it was difficult for industry, especially MSMEs,
and regularory requirements for
as to whom to put their grievances to.
investment in the sector.

THE EXECUTION IMPROVEMENT AFTER REFORM

DIC is envisaged to act as single point of Post formation of DIC, this haze has withered

contact for addressing all defence and Industry/Entrepreneurs/Innovators find it

production related queries of easy to reach the DIC for redressal of their

entrepreneurs/industry. queries and grievances.

It disseminates information to budding DIC actively takes their cases and resolves

defence entrepreneurs, guides them, them by liaising with SHQs/DPSUs/OFB.

and answers their queries related to

SHQs/DPSUs/OFB. THE ACHIEVEMENTS
DIC has successfully handled more than
DIC disseminates information, answers
1000 cases/queries in the last two years
queries of entrepreneurs and innovators.
since its inception.
It acts as an interface between
Industry/Innovators on one side and
SHQs/DPSUs/OFB on the other.

16
Enhancing Indigenisation
I - SRIJAN PORTAL
THE INITIATIVE
An Indigenisation portal namely SRIJAN has been Thus, through this portal, the Indian Industry is able to identify and express interest in
launched on 14/08/2020 for DPSUs/OFB/Services with the items for which they possess design, development and manufacturing capabilities or
an industry interface to provide development support these capabilities can be attained by them through a joint venture with OEMs.
to MSMEs/Start-ups/Industry for import substitution.
The concerned DPSUs/OFB/SHQs, based on their requirement of the items and their
respective guidelines and procedures, interact with the interested Indian Industry for
THE EXECUTION Indigenisation.
The Department of Defence Production of Ministry of
Defence has developed a portal named, The interested Indian Industry can also interact with concerned DPSUs/OFB/SHQs for any
srijandefence.gov.in, as “Opportunities for Make in queries related to Indigenisation through the contact details provided under each item.
India in Defence”.

The main objective of the portal is to enable the

private sector to become partners in Indigenisation
efforts of Defence Public Sector Undertakings (DPSUs),
OFB and the Armed Forces.

The portal is a non-transactional online market-place,

where DPSUs/OFB/SHQs display the items that they
import or are in the process of importing along with
their quantity and import cost.

DPSUs/OFB/SHQs also display those items on the

portal that have been planned/targeted for
Indigenisation in the coming years.

17
SITUATION BEFORE REFORM
Earlier, the DPSUs/OFB were carrying out
in-house indigenisation with a limited
number of Indian vendors.

Such facility was not available centrally and

all DPSUs/OFB were pursuing
indigenisation at individual levels.

The major focus was on imports.

IMPROVEMENT AFTER
REFORM
Due to a dedicated indigenisation
portal, all stakeholders i.e. the DPSUs/
OFB/SHQs/DRDO and private vendors
are able to interact with each other.

Details of imported items including

specifications, drawings, quantity and
import price on the portal enables
Indian vendors to identify items within
their capabilities.

THE ACHIEVEMENTS
More than 9206 items have been
displayed on the Srijan defence portal.
The Industry has shown interest in 2099
items. These items are being processed
for indigenisation by DPSUs/OFB.

18
II - INDIGENISATION
OF COMPONENTS
THE INITIATIVE
Government has notified a ‘Policy for Indigenisation of
Components and Spares used in Defence Platforms’ in
March 2019.

THE EXECUTION
The Policy aims “to create an industry ecosystem which is
able to indigenise the imported components (including
alloys and special materials) and sub-assemblies for defence
equipment and platform manufactured in India and to
leverage the said capability to create components export
market”.

It is estimated that Defence PSUs will reduce the import bill

by more than `15,000 Cr by 2022 through indigenisation of
products and processes.

The policy envisages strategies which include among others,

preference to indigenous components, resulting in
significant savings in cost, setting up indigenisation portal,
IP policy for indigenised components, support for
development of technological capabilities, testing of items
being indigenised at No-Cost, No-Commitment basis, long
term orders, setting up dedicated Defence Testing
Infrastructure, Indigenisation Fund, Encouraging Export, etc.

19
SITUATION BEFORE
REFORM
Earlier, the DPSUs/OFB were
carrying out in-house
indigenisation with limited
number of Indian vendors.

IMPROVEMENT AFTER
REFORM
Pursuant to the new policy
implementation, detailed
frameworks/notifications for long
term orders, Make II procedure,
third party testing have been
issued which has created
dedicated infrastructure and
procedures for indigenisation.

Now, long term orders enable

DPSUs/OFB to place supply
orders for items required by end
users in a time period of upto 10
years which brings economies of
scale for vendors.

THE ACHIEVEMENTS
So far, total 1499 items have been
indigenized against the target of
1244 for the year 2020-21. DDP
has set the target of
indigenization of 5000
components during the period
2020-25. 20
 We are greatly encouraged and re-energized
by the focused policy interventions and
path-breaking reforms introduced by the
Ministry of Defence with clear focus on
self-reliance and Indigenisation. In line with the
vision of an Aatmanirbhar Bharat, we as Indian
Industry, should now lay heightened emphasis
on development of Indigenous Intellectual
Property (Indian IP) in frontier technologies
and critical weapon systems/platforms.

Baba Kalyani
Chairman, CII Manufacturing Council
and Chairman & MD, Bharat Forge Ltd.

21
III - INDO-RUSSIAN
COOPERATION
THE INITIATIVE
An Inter-Governmental Agreement (IGA) on
“Mutual Cooperation in Joint Manufacturing
of Spares, Components, Aggregates and
other material related to Russian/Soviet
Origin Arms and Defence Equipment” was
signed in September 2019.

THE EXECUTION
The objective of the IGA is to enhance the
“After Sales Support” and operational
availability of Russian origin equipment
currently in service in Indian Armed Forces
by organising production of spares and
components within India by Indian Industry
by way of creation of Joint
Ventures/Partnership with Russian Original
Equipment Manufacturers (OEMs) under the
framework of the “Make in India” initiative.

SITUATION BEFORE REFORM

Before this reform, the spare parts were
being imported from Russia.

IMPROVEMENT AFTER REFORM

After this reform, more than 550 items have
been identified which would now be
manufactured in India.
22
Tapping the World Market
I - EXPORTS
THE INITIATIVE THE EXECUTION
i. Focused attention on promotion of exports of Indian i. Defence Exim Portal is an end-to-end solution.
Defence products.
ii. The online applications filed by the registered exporters are
ii. Export authorisation procedures have been simplified and processed and approved by the Department online.
streamlined through online mechanism.
iii. Digitally signed Export Authorisations are issued online.
iii. Intensive involvement of private industries in Defence
iv. These digitally signed authorisations can be verified by the agencies
production.
from anywhere thereby cutting the chances of any fake certificate.
iv. Targeted outreach programmes.
v. Even consultation with stakeholders is done online.

SITUATION BEFORE REFORM vi. Colour coding has been provided in the portal for indicating the
i. Before the Defence Exim Portal was launched, except for receipt of comments of stakeholders.
receiving applications on website, the entire mechanism
of processing was manual. vii. Alerts are sent to the stakeholders.

ii. The communication used to happen through letters/post viii. Export leads received from the Defence Attachés in various Indian
leading to delays. missions abroad are shared with Exporters online.

iii. At many times, the representatives of the firms used to ix. For repeat orders i.e. export of same items to same countries/entities,
directly approach the Department for clarifications and Export Authorisations are issued within a day.
submission of documents.

iv. Export of Indian Defence products was not a priority area.

No outreach activities were there.

23
IMPROVEMENT AFTER REFORM iv. The average time taken to grant Export Authorisation also reduced from 86
i. Now applications for export Authorisations are received online, days to 35 days for systems/sub-systems and from 24 days to 13 days for
processed and digitally signed Authorisations are issued. parts and components with the introduction of the online system.

ii. Positive impact on the Defence Export Industry. v. Through regular Webinars with involvement of Government and Industries
Associations, many Friendly Foreign Countries (FFCs) have shown their
iii. The number of authorisations issued and the export value based interest in Indian Defence products.
on such authorisations has increased manifold.
vi. DPSUs have been assigned specific geographical regions/countries to
establish their offices and promote exports.

THE ACHIEVEMENTS
The defence export has grown tremendously since 2017-18.

24
DEFENCE EXPORTS BASED ON AUTHORISATIONS (AMOUNT IN `CRORE)

10,746
9,116
8,435

4,682

1,522

25
 YEAR-WISE NO. OF EXPORT AUTHORISATIONS
1000
925

26
 Average number of days taken in issuing Export Authorisations

AVERAGE NUMBER OF DAYS TAKEN IN ISSUE OF AVERAGE NUMBER OF DAYS TAKEN IN ISSUE OF
EXPORT AUTHORISATIONS OF PARTS/COMPONENTS EXPORT AUTHORISATIONS OF SYSTEMS/SUB-SYSTEMS

27
NO. OF COUNTRIES WHERE EXPORTS DONE

61

76

28
II - OPEN GENERAL EXPORT LICENSE
THE INITIATIVE
Notification of the Open General Export
License (OGEL) and launching of Online Portal.

THE EXECUTION
It is a one-time export license, which permits
the industry to export specified items to
specified destinations, enumerated in the
OGEL, without seeking export authorisation
during the validity of the OGEL.

SITUATION BEFORE REFORM

For every export, the company had to seek
authorisation from the Department.

IMPROVEMENT AFTER REFORM

OGEL permits the firms exporting items
specified in the OGEL to the listed countries
without approaching the Government.

However, it is mandatory for the company to

have an Internal Compliance Plan in place to
get the benefit of OGEL.

29
Harnessing Design and
Development Capabilities
I - MAKE-I PROCEDURE
THE INITIATIVE
The ‘Make’ Procedure of capital procurement
has been simplified. The successfully
developed prototypes under the supervision
of the services are considered for direct
procurement.

There is a provision for funding of 70% of

development cost by the Government to Indian
industry under Make-I category.

In addition, there are specific reservations for

MSMEs under the ‘Make’ procedure.

SITUATION BEFORE REFORMS

The procedure initially promulgated in 2005.
However, due to a lack of clarity and a
cumbersome process, it led to delays.

IMPROVEMENT AFTER REFORM

The revised simplified procedure is more
industry friendly, thus encouraging
participation in Make Process.

30
II - MAKE-II PROCEDURE THE INITIATIVE
Separate procedure for ‘Make-II’ category (Industry
funded) has been notified under Defence Procurement
Procedure 2016 to encourage indigenous development
and manufacture of defence equipment.

THE EXECUTION
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.

SITUATION BEFORE REFORM

There were no enabling provisions available where an
industry could participate in indigenous development
of defence items.

IMPROVEMENT AFTER REFORM

Assurance of orders (on competitive basis) on
successful development of prototype has encouraged
private industry to undertake indigenous development
and manufacture of defence equipment.

THE ACHIEVEMENTS
So far, 56 projects relating to Army, Navy and Air Force,
have been accorded Approval in Principle (AIP), worth
�30,000 Cr.

31
UASS Indigenous Prototype
The indigenously developed The functions of the UASS will be as follows - As per Make-II Procedure, 10 MSMEs participated in the
prototype of Upper Air development of the UASS prototype under guidance of
i. Upper Air Profile for Weather Prediction
Sounding Systems (UASS) the Indian Navy. The estimated cost of the
and Generation of Aviation Met Reports
under Make-II Procedure, is development of the prototype was about �40 Cr. These
for ships and Air stations, comprising of
now ready for trials before prototypes are now ready for trials. Indian Navy has
ground receiving station & antenna.
induction at the Naval Air already placed an order of 60 numbers.
Stations. The system will be ii. Assessment of Anomalous Propagation
This system developed under the Make-II procedure
used for the profiling of Conditions.
has high market potential including exports due to its
upper atmospheric
iii. Ballistic Correction for Ammunition utility in IMD, Indian Armed Forces, as well as the civil
meteorological parameters,
Firing. sector worldwide.
using radio sounds.

32
III - INNOVATIONS FOR DEFENCE EXCELLENCE
THE INITIATIVE
An innovation-based ecosystem for defence entitled
Innovations for Defence Excellence (iDEX) has been
launched in April 2018.

THE EXECUTION
iDEX aims 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
providing them grants/funding and other support to carry
out R&D which has potential for future adoption for Indian
Defence and Aerospace needs.

SITUATION BEFORE REFORM

Prior to this, there was no institutionalised mechanism to
promote innovation in Defence Sector.

IMPROVEMENT AFTER REFORM

Subsequent to launch of iDEX, more than 1200+ Start-ups
and Innovators responded to the 4 rounds of Defence
India Start-up Challenge (DISC) and open challenge.

84 Start-ups/individuals have been selected to receive

innovation grants in 38 technological areas (challenges).
39 contracts have been signed and prototypes are under
development.

33
Easing the Business
I - TESTING FACILITIES
THE INITIATIVE THE ACHIEVEMENTS
Opening up of Testing facilities available Private sector companies now have the option to make use of Government testing facilities
with the Government to the private sector. while carrying out development of defence products.

THE EXECUTION The Government testing infrastructure is optimally utilised bringing efficiency into the system.
All the Government organisations viz
DRDO, DGQA, OFB, DPSUs, SHQs have
uploaded their list of testing facilities and
offered to the private sector along with
procedure and Nodal Officer details, so
that any private company is able to
approach them directly for availing the
testing facility.

SITUATION BEFORE REFORM

Private sector companies had to make their
own arrangements and get the testing
done from Indian/international private
agencies.

IMPROVEMENT AFTER
REFORM
Testing facilities available with Government
entities have been made available to the
private sector.

34
II - EXCHANGE RATE VARIATION PROTECTION
THE INITIATIVE
Exchange Rate Variation protection has been
made applicable for Indian Private Sector on
par with Public Sector Undertakings for all
categories of capital acquisitions.

SITUATION BEFORE REFORM

Exchange Rate variation protection was not
applicable in cases categorised as ‘Buy
(Indian)’ except for DPSUs in ab-initio Single
Vendor cases or when nominated as
Production Agency.

IMPROVEMENT AFTER REFORM

By DPP 2016, Exchange Rate variation has
been made applicable for Rupee contracts
with Indian Vendors, based on RFPs issued
under all categories of capital acquisitions.

This has resulted in a level playing field for

Indian private sector on par with Public
Sector Undertakings for all categories of
capital acquisitions.

35
III - THIRD PARTY INSPECTION
THE INITIATIVE IMPROVEMENT AFTER REFORM
Defence Sector, under the ‘Make in India’ initiative of the Government of India, is The scheme aims to fast track the QA process of
being provided the impetus and support for development and manufacturing of defence equipment.
defence products. To augment the resources available with DGQA, a scheme for
The qualified third-party testing agencies are
outsourcing of Third-Party Inspection (TPI) was promulgated on 30/05/2018.
empanelled by DGQA, and Users (Services: Army, Navy,
The EXECUTION Air Force, OFB, DPSUs, DRDO, Industry) have the option
Five firms have been registered as TPI agencies: - to offer some of the stores being procured to these
agencies for testing.
i. M/s Bureau Veritas (India) Pvt. Ltd., Mumbai.

ii. M/s International Certification Service Pvt. Ltd., Mumbai.

iii. M/s TUV India Pvt. Ltd., Mumbai.

iv. M/s TUV SUD Pvt. Ltd., Mumbai.

v. M/s IR Class System & Solutions Pvt. Ltd., Mumbai.

For being eligible to be registered as TPI with DGQA, the firm must have requisite
certifications/accreditations and shall apply for registration to DGQA. DGQA then
conducts an on-site visit to ascertain the capacity/capability of the TPI agency. The
validity of registration is for a period of five years and thereafter renewed
subsequently in cycles of five years based on self-declaration and past performance.

36
Exhibitions and Outreach
Programmes in 2020-21
I - AERO INDIA 2021
i. Aero India 2021, the world’s first ever
hybrid Aero and Defence Exhibition
was held at the Air Force Station,
Yelahanka, Bangalore from 3/02/2021
to 5/02/2021 and was dedicated to
Business Visitors only, due to COVID-19
restrictions. The customary public days
were omitted for the first time due to
the pandemic.

ii. The theme for Aero India 2021 has

been ‘The Runway to a Billion
Opportunities’ aiming at forging
partnerships between Foreign and
Indian firms which translate to
discovery of newer avenues in the
global value chain through
fast-tracking the Indigenisation
process, co-development and
co-production.

37
iii. Aero India 2021 was inaugurated on 3/02/2021 by the Hon’ble Raksha
Mantri with the emphasis on achieving ‘Atmanirbhar Bharat’. The event
witnessed the participation of 602 registered exhibitors (524 Indian
exhibitors and 78 foreign exhibitors) and 338 virtual exhibitors. The
contract for 83 Light Combat Aircraft Tejas was handed over to
Hindustan Aeronautics Limited (HAL) during the Inaugural Ceremony.
The valedictory event was graced by the Hon’ble President of India, Shri
Ramnath Kovind on 5/02/2021.

iv. Hon’ble Raksha Mantri inaugurated India Pavilion based on the theme –
‘Rotary Wings’ i.e., Helicopters. It aimed to depict the journey and the
potential of our indigenous blades of glory along with a glimpse of a
roaring future of rotary wing systems including UAVs in the country
through rapid Indigenisation. India Pavilion witnessed the highest ever
participation from more than 70 exhibitors including Govt.
organisations, PSUs, Indian private majors, MSMEs & Start-ups of the
country.

v. The Chiefs of Air Staff Conclave with the theme ‘Leveraging Aerospace
Power for Security and Stability’ was organised on 3/02/2021 &
4/02/2021. About 40 countries (24 countries physically and 16 virtually)
from across the continents, including USA, Europe, West Asia, Central
Asian Republics, South East Asia, Africa, Indian Ocean Region and the
Indo Pacific Region attended the conclave.

vi. Indian Ocean Region(IOR) Defence Ministers’ Conclave themed on

‘Enhanced peace, security and cooperation in the Indian Ocean Region’
was organised on 4/02/2021 with the view to promote a dialogue and to
strengthen the vision of Security and Growth for All in the
Region(SAGAR) with an emphasis on economic and safety support
among the littoral states, towards sustainable regional development
and towards promoting collective action to deal with threats like
natural disasters, piracy, terrorism, illegal, unreported and unregulated
fishing etc. 38
vii. 26 countries from the IOR
region attended the conclave (18
physical and 8 virtual mode).
The conclave confirmed
physical participation from 18
countries including Defence
Ministers from four countries
(Maldives, Comoros, Iran, and
Madagascar), 6
Ambassadors/High
Commissioners representing
their countries (Australia, Kenya,
Seychelles, Mauritius, Kuwait,
and Myanmar), Defence
Secretary of Sudan and Service
Chiefs of 10 countries.

viii. Aero India 2021 is expected to

boost the growth of the
Aerospace and Defence sector
and promote India as a
preferred global manufacturing
destination. It may attract more
FDI, increase indigenisation,
improve employment
opportunities in defence sector
and promote export furthering
the cause of the ‘Self-Reliant
India’ initiative.

39
II - WEBINAR ON BUDGET
ANNOUNCEMENTS 2021-22
i. A webinar on Budget announcements 2021-22 was
organised by the Ministry of Defence, Government of
India on 22/02/2021 to bring together all stake holders
contributing to the Defence ecosystem in the country.

ii. The objective was to stimulate discussion on future

roadmap for Indigenisation and growth of Defence &
Aerospace sector in the country.

iii. Hon’ble Prime Minister, Shri Narendra Modi delivered a

keynote address in the inaugural session. In his speech,
he shared his vision of ‘Aatmanirbhar Bharat’ in Defence
through greater private sector participation in design and
development of defence systems, Positive List of defence
items to increase the manufacturing capacity of the
country, transitioning the country from one of the world’s
biggest arms importer to a major defence exporter and
capacity/expertise building within the country by our
Academic and Research Institutions.

iv. Hon’ble Raksha Mantri, Shri Rajnath Singh in his opening

remarks stressed on the impact of Budget in accelerating
economic growth and creating job opportunities in the
Defence & Aerospace sector. He also highlighted that the
investment of 63 percent of the Capital outlay kept for
military modernisation for 2021-22 has been planned for
domestic procurement.

40
v Hon’ble Raksha Mantri also touched upon
the initiatives taken up by the Ministry of
Defence in recent times to give a boost to
defence capabilities in the country,
including enhanced delegation of
financial powers under capital
procurement for faster processing and
implementation of projects, approval of
AONs worth �75,000 Cr, out of which 87%
relate to Make in India, moving towards
greater ease of doing business through
online issuance of Open General Export
Licence (OGEL) and Import Licences and
enhancing the financial powers under
‘Make-I’.

vi. The webinar was participated by Services/

ICG, Officials of MoD, DPSUs/OFB, Industry
Associations such as FICCI, ASSOCHAM,
SIDM and CII and PHD Chamber of
Commerce & Industry, domestic and
foreign industries including MSMEs &
Start-ups, and iDEX partner organisations.
All put together, the webinar was attended
by about 2000 participants. Hon’ble
Raksha Mantri made the following
announcements to encourage the private
sector to play a pivotal role in Aerospace
and Defence sector:

41
‒ Domestic procurement to be about 63% of the allocated amount ‒ Approval in Principle (AIP) will be accorded for at least 5 Make-I
for military modernisation i.e., about �70,221 Cr for 2021-22. Projects in 2021-22.

‒ Second Positive List for Aatmanirbhar Bharat to be notified soon. ‒ Start-ups and MSMEs may offer indigenous products/solutions to
the Services under ‘iDEX - open challenge’ route or ‘Make-II Suo
‒ Issuance of Letter of Intent (LoI) to HAL for Light Utility
Moto’.
Helicopter (LUH) so that the platform can be inducted in the
Services on the occasion of India@75 i.e., August 2022 to ‒ For indigenisation of military materials including critical and
commemorate the 75th Anniversary of India’s Independence. strategic raw materials, a Task Force comprising of officers from
MoD, Services, Industry and Academic Institutions will be
constituted. The task force will assist in preparing a roadmap

‒ Efforts will be made to increase direct procurement from the and an implementation framework for the same.

domestic private sector to more than 15% of the total capital

procurement in the financial year 2021-22.
‒ To give a major boost to development of innovative defence

‒ Endeavour will be made to ensure that the period from grant of technologies and support a growing Start-up base in the

AON to signing of contract is shortened and limited to two years, country, Ministry of Defence would channelize ₹ 1,000 Crore

for which close monitoring will be done. during 2021-22 for procurement from the iDEX Start Ups.

‒ Efforts will be made to accord Approval in Principle (AIP) and

finalize some projects having value from �500 Cr to �2000 Cr on
competitive basis in the next financial year.

‒ To address the funding issues of MSMEs and Startups, �10,000 Cr

‘Fund of Funds’ has already been created by the Government of
India. Complete support will be extended to the Defence and
Aerospace Sector in utilising the fund.

42
III - Webinar with Foreign Countries to Promote Exports
India has set a defence export target of US $5 billion by the year 2024. As on date, webinars with 15 FFCs, namely Israel, Cambodia,
Several initiatives are being taken by the Department of Defence Production Kazakhstan, UAE, Myanmar, Indonesia, Uzbekistan, Bangladesh,
(DDP) to achieve the same. In this connection, webinars and expos are being South Africa, Nigeria, Australia, Turkmenistan, Brazil, Maldives, and
organised with Friendly Foreign Countries(FFCs) by the Department of Nepal have been held. Virtual exhibitions were also set up as digital
Defence Production with assistance from industry associations like FICCI solutions due to the ongoing pandemic. Webinars with many more
and SIDM. High level participation is ensured in these webinars including countries are in the pipeline.
officials of MoD, MEA, Industry associations and defence industries of India
and respective countries. Defence industries of India, both public and
private, showcased their products and capabilities in these webinars.

43