Introduction :
India is the world’s largest military hardware importer and among top five military spenders. To meet growing modernisation needs of Indian Armed Forces, the Ministry of Defence will need to acquire equipment worth over $25,000 Crore by 2027. However, recent estimate shows that the current delivery capacity of the Defence industry sector in India is $7,500-8,000 Crore annually.
This means the ratio of indigenous to imported equipment is stagnating at 30:70. To achieve the aspirational target of manufacturing 70 per cent of Defence equipment indigenously, it is needed to incentivise private enterprise for development of large scale R&D and manufacturing capabilities. It is therefore necessary to increase the production level of defence manufacturing unit and establish new units for defence manufacturing to cater to the growing need of defence sector of India. We can also reverse the flow of trade: from being the largest importer of defence items to become the largest exporter of defence goods as well.
So to provide the needed thrust to the Defence Manufacturing in India the Hon’ble Union Finance Minister Mr Arun Jaitley announced setting up of two Defence Industrial Corridors in the country through his budget speech on February 1st 2018. Thereafter, Hon’ble Prime Minister Mr Narendra Modi during U.P. Investors Summit 2018 held in Lucknow on 21st February announced setting up of Defence Industrial Corridor in Bundelkhand region of Uttar Pradesh. The second Defence Corridor is being set up between Chennai and Bengaluru.
As per the announcement of Defence Production Corridor in U.P. (Bundelkhand) and Tamil Nadu (Chennai) and to support the Make in India campaign for defence manufacturing, it was proclaimed by the Government to provide the MSMEs all the needed support and assistance through different policies and incentives for active participation in Defence Production in India.
Defence production is a high tech and precision manufacturing activity. Stringent quality standards are also required to be maintained. MSME’s generally are not equipped to produce such products without handholding services from Industry Associations and the Government. Indian Industries Association (IIA) therefore decided to set up “IIA Defence Production Facilitation Centre” (IDPFC) at its Head-Office at IIA Bhavan in Vibhuti Khand, Gomti Nagar, Lucknow for providing all the necessary support and assistance to MSMEs for defence manufacturing.
IDPFC will provide the following services to MSMEs :
- Organise Defence-Industry meets, seminars and conferences for facilitation of MSMEs.
- Provide the information and data related with Defence Manufacturing in India to MSMEs.
- Help the MSMEs by providing them handholding support for starting their manufacturing unit in the U.P Defence Corridor as well as for vendor registration with Defence PSUs and Indian Defence Organisations.
- Work as a link between MSME and Defence Organisations.
- Provide MSME all the necessary support for availing the incentives and subsidies announced by the Central and State Governments as and when required.
- Help in resolving their issues & problems.
- Provide feedback on policy issues to Defence Ministry Govt. of India and to the Defence Department of State Government and to get the timely response from them.
- Organise exhibitions of defence products & supplies as well as items required by Defence establishments for import substitutions.
- To constitute an “IIA Defence Production Committee” & maintain a separate directory of Defence Production Industries so that they are able to establish business links for mutual benefits as well as discuss common issues and problems for taking up with the Government through IIA at appropriate level.
The Defence Industrial Corridor proposed in the arid zone of Bundelkhand, would span several districts for backward linkage viz. Aligarh, Agra, Jhansi, Kanpur, Lucknow, and Chitrakoot. An investment of Rs. 20,000 Crores is likely to flow to the Corridor.
Low cost of land and low wage rate with adequate supply of manpower will be an attraction of the UP Defence Industrial Corridor & it will serve as an engine for economic development and growth of regions of UP, especially Bundelkhand region.
Bundelkhand will benefit from the six-lane highway which the Uttar Pradesh Government has proposed to build up from Chitrakoot to Jhansi and will provide necessary infrastructural support for the Defence Production Units .
Traditionally, UP has possessed skilled workmanship in metals, besides having a vast defence manufacturing base in Kanpur with almost 6 public sector undertakings manufacturing arms and defence related wares. However, these were never leveraged on big scale by successive governments, but this Defence Corridor will definitely provide the needed impetus to the Defence Manufacturing in Uttar Pradesh & will play a significant role in industrial development of Uttar Pradesh simultaneously providing job opportunities to the potential unemployed youth workforce.
The Centre had already announced to set up common facility centres in the corridor to incentivise private companies set up shop and cut their production cost.
What is a Defence Industrial Production Corridor :
A Defence Corridor refers to a route or a path along which domestic productions of defence equipment by public sector, private sector and MSMEs are lined up to enhance the operational capability of the defence forces. The Government has now opened up private investment in defence production including liberalising foreign direct investment.
Apart from improving the connectivity of the defence forces, the move will encourage domestic production of defence equipment’s and benefit all small and medium manufacturers along the corridor. A number of initiatives have been taken to develop and nurture intrinsic defence production capability to make the Nation self-reliant for meeting our defence needs.
Opportunity for MSMEs :
Quality is crucial for precision products in Defence, the Micro, Small and Medium Enterprises (MSMEs) can help in producing small fabrications and various components that can be integrated.
MSMEs need to establish networking to pool their resources for manufacturing and catering orders. IDPFC will try to form group of MSME’s which may develop as aggregators, build capacity and boost the manufacturing value chain. This group would facilitate better B2B (business to business) interactions too and spur better procurement and supply management.