Opportunities for MSME in Defence Sector

By Commander Rahul Sinha (Retd.)

AFP 2017-18

Second Defence Conclave was conducted by Confederation of Indian Industries (CII) at Ahmedabad on Friday 11 May 2018. The theme of the conclave was ‘Role and Opportunities for Micro, Small and Medium Enterprises (MSMEs) in Defence Sector'.   There are emerging opportunities for the agile MSME businesses in the country and the conclave was attended by a host of representatives from these enterprises.  Key functionaries and representatives from Indian Defence Sectors were present to apprise the audience of policies, procedures and opportunities available to MSME. 

Speaking on the occasion Lt Gen Subrata Saha, PVSM, UYSM, YSM, VSM** (Retd.), Director General, SIDM (Society of Indian Defence Manufacturers), a wing of CII, apprised the audiences of numerous opportunities for MSMEs created by the Defence Offset clause imbibed in the import orders placed in defence contracts. He stated that SIDM is ready to play a major role as a facilitator between foreign players and Indian Industries in identifying and developing the right partnerships. 

As per the revised guidelines* in Defence Procurement Procedure (DPP) 2016, any Capital Acquisition categorized as ‘Buy (Global)' or ‘buy or make with TOT', with value of Rs. 300 Crore or more, is required to offset 30% of the value of foreign exchange spent through Indian Offset Partners (IOP). This offset is discharged through various means such as purchase (of goods or services) and investments {both direct (FDI) or in-kind (Transfer of Technology)}.

This clause has been further refined to support the MSMEs through multiplier clause. Offsets made through MSMEs will be counted as 1.5 times the actual offsets made. This provides a great opportunity for MSMEs to enter defence sector by creating mutually beneficial solutions. In less than one year of its existence, SIDM has developed foreign partnerships from 5 countries. SIDM is thus poised to be a catalyst in assisting Indian MSMEs by facilitating IOP partnerships and creating the right ecosystem for the defence industry.  

In their individual talks, both, Mr Atul Gupta, Deputy Director General, Ordinance Factory Board and Mr SV Kameshwar, Addl. Gen. Manager, Bharat Dynamics Limited, informed about the changes in guidelines from the government to incorporate lean-manufacturing practices.  This is a major shift in the policies followed by Defence Public Sector Undertakings' (DPSUs') which, hitherto, were inclined towards end to end production, thus producing every sub-assembly and most of the parts. Defence manufacturing in India was, therefore, primarily an inhouse operation for the DPSUs.   

These new guidelines to DPSUs, too, have major implications for the MSMEs.  A lean-manufacturing set up will imply major thrust towards outsourcing the manufacture and procurement of sub-assemblies and parts to trade. This is a win-win situation for the DPSUs and MSMEs.  These guidelines will allow DPSUs to rapidly expand their capacity to meet changes in demand from the Armed Forces by tapping into the large MSME base in the country. 

Going forward, MSMEs can look forward to cash in on changes in the Defence Sector in the country which is poised to pick up with new production line ups being set up and a shift in policy towards ‘Make in India', lean manufacturing by DPSUs and ‘Make/Buy Indian' clauses. 

#defence #IndianDefence #MoD #MSME #DPP #SIDM #CII #Ahmedabad #OFB #DPSU #DRDO

* https://mod.gov.in/sites/default/files/revised-guidelines.pdf

Photo Caption:

Lt Gen Subrata Saha, PVSM, UYSM, YSM, VSM** (Retd.), Director General, SIDM (Society of Indian Defence Manufacturers), at 2nd Defence Conclave conducted by Confederation of Indian Industries (CII) at Ahmedabad on Friday 11 May 2018.

        
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