Page 20 - MSME BULLETIN 2022 NEW LAYOUT 19082022.indd

MSME & START-UP BULLETIN, VOLUME 1, ISSUE 1, AUGUST 2022

country. MSME contribute to almost every sector of offset obligations, revenue procurement, designing &
the economy. Defence sector is no exception. India developing complete defence systems, MSME have
ranks among the top 10 countries in terms of military come a long way. Department of Defence Production
expenditure. Interestingly, around 60% of the defence has notifi ed a list of 127 items where the purchase
procurements are imported. preference is given to local suppliers meeting the
Minimum Local Content (MLC) as prescribed for each
In order to make India self-reliant, government item. 26 items out of this 127 are notifi ed specifi cally
launched Aatmanirbhar Bharat Abhiyan mission to MSME and local suppliers.
in May 2020. Indian government has announced
“liberalisation of defence production” thereby Recognising the contribution made by Indian private
encouraging private sector participation in defence sector, Ministry of Defence made amendments to
manufacturing ecosystem. Several policy initiatives are defence procurement procedures to incorporate new
spanned out in the union budget 2022 such as “Make category “Make and Buy (Indian)”. MSME contribute
in India Programme” for promotion of MSMEs in more towards innovation through R & D in sectors
defence sector in order to make India self - reliant in such as aerospace and defence industry due to low
the defence manufacturing. scale of economies and higher knowledge. MSMEs
can contribute to the following areas but not limited
Initially, Defence being the sensitive and critical sector to aerospace: sub systems and accessories, ground
for the economy, procurements were restricted within equipment and tooling; Naval systems, subsystems and
government jurisdiction coupled with the inability of accessories; Land systems, subsystems and accessories;
private sector to produce quality defence products. The Capital goods; IT hardware and electronics; Casting,
manufacturing of defence products was done largely forging and metal works; R&D; Software, etc.
through backward integration in Ordinance Factories,
Defence PSUs through feeder factories and captive III. Initiatives/Scheme for promotion of
units. The contribution of private sector was restricted MSME in Defence
primarily to sourcing of parts and components. In the 1. Launching of Sirjan Portal in August 2020
year 2001, defence production was opened for private accelerated the process of defence indigenisation.
sector through 100% equity participation and 26% The portal contains complete information on
foreign participation with licensing restrictions. Since items that can be taken up for manufacturing by
then, there has been continuous amendments in the defence sector. Indian Air Force is leading on
Defence Procurement Procedures to boost widespread the portal by indigenising over 60000 lines of
private sector participation. These progressive spares out of which 40000 lines of spares are
initiatives increased the private sector participation consumed regularly which are sourced largely
substantially. However, the potential of MSME still from MSME. Out of the total 12000, around 700
remained untapped. are registered directly with Indian Air Force.

II. Role of MSME in Defence Manufacturing 2. Defence Acquisition Procedure (DAP) 2020
Understanding the contribution made by MSME in emphasise “Make Projects” to promote
the national growth, the “Make in India” initiative of indigenisation of defence equipment through
the government encouraged participation of MSME in funding from government and industry. As per
into defence manufacturing. Indian government aims to ‘Make projects’ scheme, projects amounting to
achieve 70% self-reliance in defence by 2027 thereby over 100 crore/year are reserved for MSME and
reducing dependence on defence imports. MSME till date over 40% sanction orders are issued in
can be construed as the untapped force multiplier for favour of MSME.
the defence sector. As per the data shared by MSME 3. To enhance cutting edge technology capability
minister Mr Nitin Gadkari, total MSME supplying for defence systems, Technology Development
to the defence public sector undertakings increased Fund (TDF) has been set up to provide necessary
from 7591 in 2018 to 12,000 in the year 2021. grants to private sector, especially MSMEs
Consequently, the value of procurement raised to 5464 to facilitate their participation in defence
crores in 2021 from 4843 crore in 2019. Ministry of manufacturing.
Defence is expected to increase the number of MSME
participation in defence to 16000 by 2024. 4. The government of Tamil Nadu and Uttar
Pradesh has signed around 30 MoUs with
From supply chain partners to DPSUs to discharging MSMEs (total 80 MoUs signed) for their

20 The Institute of Cost Accountants of India