What is Defence Production and  Export Promotion Policy 2020?

The Ministry of Defence (MoD) has formulated a draft Defence Production and  Export Promotion Policy 2020 (DPEPP-2020). The DPEPP 2020 is drafted as an overarching guiding document to provide a significant thrust to the defence production of India. This is a step towards the 'Atmanirbhar Bharat Package'. 

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Objectives of DPEPP 2020

1- To achieve a turnover of Rs 1,75,000 Crores (US$ 25Bn) including export of Rs 35,000 Crore (US$ 5 Billion) in Aerospace and Defence goods and services by 2025.

2- To develop a dynamic, robust and competitive Defence industry in India, including Aerospace and Naval Shipbuilding industry to fulfil the needs of the Indian Armed Forces.

3- To make India self-reliant by reducing the dependency on imports.

4- To take forward the 'Make in India' initiative. 

5- To promote the export of defence products and become part of the global defence value chains.

6- To create an encouraging environment for Research and Development, rewards innovation, to create Indian IP ownership and to promote a robust and self-reliant defence industry. 

Multiple strategies are underway with the below-mentioned focus areas: 

1- Procurement Reforms

2- Indigenization & Support to MSMEs/Startups

3- Optimize Resource Allocation

4- Investment Promotion, FDI & Ease of Doing Business

5- Innovation and R&D

6- DPSUs and OFB

7- Quality Assurance & Testing Infrastructure

8- Export Promotion

Outlined strategies:

1- Procurement Reforms: Several reforms in the Defence Procurement Procedure have been proposed. DPP-2020 relies on the emerging dynamism of the Indian industry to build domestic capabilities for designing, developing and manufacturing defence equipment. A negative list of weapons will be updated periodically and notified year-wise for placing an embargo on the import of such items from those dates.

A Project Management Unit (PMU), would be set up for the acquisition and facilitation process of the contracts, building military capabilities.

With the objective of self-reliance, the policy aims at moving away from licensed production to Design, Develop and produce wherein the Nation owns the Design Rights and IP of the systems. For this purpose, a Technology Assessment Cell (TAC) is made to assess the TRL levels in the country and to provide guidance for the initiation of AONs, in addition to the design, development and production. 

A comprehensive review and overhaul of the trials and testing procedures would be done to reduce the procurement cycle time.

All AONs involving procurement from the domestic sources will be reviewed for the timely procurement. 

2- Indigenization & Support to MSMEs/Startups: The indigenization policy aims to create an industry ecosystem to indigenize the imported components and sub-assemblies for defence equipment and platform manufactured in India. 5,000 such items are proposed to be
indigenized by 2025. 

An indigenization portal will be developed for DPSUs/OFB/Services with an industry interface to provide development support to MSMEs/Startups/Industry for import substitution. Furthermore, the Make-II process will be strengthened and monitored, making it easy for the industry to provide indigenous solutions. 

A Public Procurement Order will be released for those items for which the domestic production capability exists.

Defence Investor Cell in Department of Defence Production will provide handholding to MSMEs, investors and vendors in defence production for resolving issues with Central, State and other authorities. Vendor Development would be taken up by OFB/ DPSUs and use of TReDS platform would be mandated for improving their liquidity and timely payments.

3- Optimise Resource Allocation: The Department of Defence Production has laid out a target to achieve a turnover of Rs.1,75,000 crores in Aerospace and Defence Goods & Services by 2025. The share of domestic procurement in overall Defence procurement is about 60 per cent. In order to enhance procurement from domestic industry, it is incumbent that procurement is doubled from the current Rs 70,000 crore to Rs 1,40,000 crore by 2025. 

In addition to this, it aims for the allocation for domestic capital procurement at the rate of a minimum of 15% per annum for the next five years. Also, efforts would be made to scrutinize, evaluate and optimize various items of expenditure in the Defence budget.

OFB/DPSUs will be mandated to increase productivity, enhance quality, reduce costs and ensure timely execution of orders at all levels. 

4- Investment Promotion, FDI &  Ease of Doing Business: India has improved in the ranking by World Bank in its ‘Ease of Doing Business’ (EoDB) report and has emerged as an attractive investment destination. 

Investments in the aviation sector will be encouraged which will help in co-development and strengthening defence ecosystem and will be facilitated in association with the Ministry of Civil Aviation. Efforts will be made to fulfil the gaps in these segments. 

The Defence Corridors set up in Tamil Nadu and Uttar Pradesh will act as additional support and will also offer higher multipliers for offset discharge for investments flowing into the Defence Corridors.

As per the current FDI policy for the Defence sector, the investments will be made via automatic route up to 49% and via government route above 49%. 

5- Innovation and R&D: By implementing the nationwide Research & Development capabilities, future requirements of the services could be met and critical gaps in related technologies would be fulfilled. For this, the following strategies are proposed: 

1- Gas Turbine Engines

2- Hypersonic Missiles

3- Ballistic & Cruise Missiles

4- Submarines

5- Fifth Generation Fighters

6- Transport Aircrafts to meet military requirements

7- Secure communication devices, secure microprocessors and secure routers

8- Cyber Security Infrastructure

9- Surveillance Systems

10- Artificial Intelligence & Robotics including unmanned platforms

11- Airborne Sensors

12- Strategic Materials

The comprehensive reform of the productionisation process would be undertaken to convert prototypes into commercially useful products, by cutting down production partners at early Technology Readiness Levels (TRLs). 

Innovations for Defence Excellence (iDEX) has been implemented to provide necessary incubation and infrastructure support to the startups in the defence area. More than 50 startups are developing ‘fit-for-military-use’ technologies. iDEX will further scale 300 more startups and will develop 60 more technologies within the next 5 years, under Make-II route of DPP. 

Mission Raksha Mission Raksha Gyan Shakti was launched to promote innovation and technology development and to file patents in Defence PSUs and OFB. 

6- DPSUs and OFB: Department of Defence Production has set up production facilities over the years for defence equipment through the 15 Ordnance Factories and Defence Public Sector Undertakings (DPSUs). Significant progress has been made by these units to manufacture arms and ammunition, tanks, aircraft, etc., but these organizations must be reformed so that they can work with the private industry. For this purpose,  Ordnance factories will be corporatized to make them competitive and to improve their productivity. Efforts will also be made to create a multi-tier domestic supply chain. 

7- Quality Assurance & Testing Infrastructure: Competitiveness of the Defence Industry depends on quality assurance. Thus, to streamline the quality assurance process and to cut down the hold points and reduce the cycle time, an IT platform with an industry interface will be developed. 

For MSMEs, ‘Zero Defect Zero Effect’ policy is encouraged to improve the quality. Efforts would be made to create a testing infrastructure through Defence Testing Infrastructure Scheme (DTIS) by providing assistance to industry
to set up common testing facilities. 

8- Export Promotion: In order to achieve the target of Rs. 35,000 crore of Defence Exports by 2025, the following strategies are proposed: 

1- Defence Attachés have been mandated and are supported to promote export of indigenous defence equipment abroad.

2- Domestically manufactured defence products will be promoted through Govt to Govt agreements and Lines of Credit/Funding, subjected to strategic considerations. 

3- Export Promotion Cell has been set up to promote  Defence exports through coordinated action to support the Industry. 

4- DPSUs and OFB would be mandated to have at least 25% of their revenue from exports. 

5-  DDP would facilitate onboarding of Indian Offset Partners (IOPs) in the discharge of offset obligations by OEMs.

6-  Defence Expo and Aero India will be positioned as major global events to showcase India’s capabilities in defence manufacturing, and also to encourage exports. 

7- The end-to-end export clearance process in the Department of Defence Production would be further upgraded to make the process seamless and time-bound.

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