75% funds under Defence Modernisation Budget meant for domestic procurement: Government informs Lok Sabha

As much as 75% of the funds under the Defence Modernisation Budget (Capital Acquisition) for Financial Year 2023-24, which is to the tune of INR Rs 99,223.03 crore, is for procurement through Domestic sources, the government informed Parliament on Friday (August 11, 2023).

This is in line with the Government of India’s initiative of ‘Aatmanirbhar Bharat’ and to promote self-reliance in the defence sector, Minister of State for Defence Ajay Bhatt said in a written reply to Abhishek Banerjee and Nama Nageswara Rao in the Lok Sabha.

Policy initiatives like 'Make in India' and 'Atmanirbhar Bharat Abhiyan' have given a push to the growth of Industries including MSMEs/Start-ups in Defence Sector which has created tremendous employment opportunities, the reply added.

MoS Bhatt listed several policy initiatives and reforms in the past few years to encourage indigenous design, development and manufacture of defence equipment by Indian Industry including Micro, Small and Medium Enterprises (MSME) and Start-ups, thereby promoting self-reliance in defence manufacturing & technology in the country.

These include:

1. Promotion under various scheme like Innovation for Defence Excellence (iDEX), Technical Development Fund (TDF), Make project of Defence Acquisition Procedure (DAP) 2020, encourage participation of MSMEs/start-ups in development of Defence Products. Many MSMEs & start-ups are involved in design & development of defence products under these schemes.

2. To bring MSMEs into the defence supply chain and thereby boost the self-reliance of the country in defence and also contribute towards defence exports market, DDP has made a scheme of promotion of MSMEs in defence. Under this scheme funds are provided to industry associations to organise seminars in different parts of the country.

3. For procurement cases where the estimated cost is not exceeding Rs 100 crores/year based on delivery schedule at the time of seeking Acceptance of Necessity (AoN) or Rs 150 crore, whichever is higher, to encourage the start-ups/ MSMEs and build Industrial ecosystem, the recognised start-ups/MSMEs in the relevant fields may be considered for issue of Request For Proposal (RFP) without any stipulation of financial parameters except Insolvency and with General and Technical parameters to be decided on case to case basis.

4. Reforms in Offset policy with thrust on attracting investment and Transfer of Technology (ToT) for Defence manufacturing by assigning higher multipliers.

5. EMD/Bank Guarantee is not required from Micro and Small Enterprises (MSEs) as defined in MSE Procurement Policy issued by Department of Micro, Small and Medium Enterprises (MSME).

6. Public Procurement Policy for MSEs Order, 2012 has been implemented at DPSUs under which the price preference is given to MSME bidders under certain conditions.

7. To encourage start-ups and MSMEs to invest/business in defence manufacturing sector, Rs 1,500 crore has been earmarked in Financial Year 2023-24 for start-ups and MSMEs from the budget earmarked for procurement through Domestic Private Industries (DPI) which is to the tune of Rs 24,805.76 crore. Provisions of Department for Promotion of Industry and Internal Trade (DPIIT) in respect of start-ups/MSMEs is being complied with while procuring items from start-ups/MSMEs.