Nine major reforms to promote MSMEs in Defence

Government has aggressively strived to engage MSMEs and startups with indigenisation programmes with the Defence sector in the last 2 years.
Nine major reforms to promote MSMEs in Defence

The last two years have seen some major reforms in the Micro, Small and Medium Enterprise (MSME) sector across all industry sectors. The government has paved way through PSU route to develop pool of MSME supplier to leading government companies. Some significant reforms for encouraging MSME sector participation in Defence.  

·  Cases with Acceptance of Necessity (AoN) cost < Rs 100 Crores are reserved for MSMEs, provided there are at least two or more MSMEs eligible to participate in the category.

·  In order to encourage startups/MSMEs, procurement cases where the estimated cost is not exceeding Rs 100 crores/year based on delivery schedule at the time of seeking AoN or Rs 150 crores, whichever is higher, may be considered for issue of RFP without any stipulation of Financial parameters.

·  Project under the Make categories, with procurement not exceeding Rs 100 crores/year based on delivery schedule at the time of seeking AoN are earmarked for MSMEs.

·   Offset Policy has been revised in the year 2020, to provide a multiplier of 1.5 where Indian Offset Partner (IOP) is a MSME.

·  Department of Defence Production (DDP) regularly conducts outreach programs in various parts of the country to interact with industry associations, industry especially MSMEs and academia, to spread awareness about the potential export opportunities. A scheme aimed to promote MSMEs in Defence has been accorded approval.  Under this scheme, conclaves/seminars are organized in Tier II and Tier III cities across the country with strong industrial and MSME presence, with the support of DDP.  Three state level conclaves and one national level conclave in form of webinar have been organized during the last two years under the scheme.

·  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.

· An indigenization portal namely SRIJAN has been launched in August, 2020 for Defence Public Sector Undertakings (DPSUs)/Ordnance Factory Board (OFB)/Services with an industry interface to provide development support to MSMEs/Startups/Industry for import substitution.

· Government has established two Defence Industrial Corridors, one each in Uttar Pradesh and Tamil Nadu to serve as an engine of economic development and growth of Indian defence industry including MSMEs.

· Ministry of MSMEs implement various schemes and programmes for promotion and development of MSMEs including defence sector MSMEs across the country. These include Prime Minister’s Employment Generation Programme (PMEGP), Scheme of fund for Regeneration of Traditional Industries (SFURTI), A scheme for Promotion of Innovation, Rural Industries and Entrepreneurship (ASPIRE), Credit Guarantee scheme, Credit Linked Capital Subsidy and Technology Upgradation Scheme (CLCSSTUS), Technology Centre Systems Programme (TCSP), Micro and Small Enterprises-Cluster Development Programme (MSE-CDP), Procurement and Marketing Support Scheme etc.  Ministry also reviews and monitors the progress of the implementation of the Public Procurement Policy for MSEs Order, 2012.

As per Ministry of MSME, the details of procurement in terms of value from MSEs in Defence Sector by the Defence Department/CPSEs in the last two years and current year is depicted in the table.

Financial Year

Total Procurement (Rs in Crores)

2018-19

12112.03

2019-20

9090.618

2020-21 (As on 11.03.2021)

9293.812

Regular Vendor development programmes and webinars are organized for MSMEs by OFB and DPSUs for the development of the supply chain.  However, during the COVID-19 pandemic, many webinars were conducted due to COVID-19 restrictions on physical accumulation.

The data was obtained as a tabled reply by Shripad Naik, Minister of State for Defence to a question asked by Parvesh Sahib Singh Verma in Lok Sabha today.

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