India Development News & Foreign Investment Opportunities

Encouraging Research for Smaller Companies in Defence Projects

Technology Development Fund for MSMEs


Technology Development Fund for MSMEs


Ministry of Defence
Air Force jet (source Ministry of Defence).

Government has taken several steps towards simplifying the rules and promotion of research and innovation in respect of MSMEs in Defence Industry, Minister of State for Defence Ministry, Shripad Naik, updated Rajya Sabha on 15 July 2019.

Defence Procurement Procedure (DPP) were revised in 2016 wherein specific provisions have been introduced for stimulating growth of the domestic defence industry with regard to MSMEs.

A new category of procurement ‘Buy {Indian-IDDM (Indigenously Designed, Developed and Manufactured)}’ has been introduced in DPP-2016 to promote indigenous design and development of defence equipment.

It has been accorded topmost priority for procurement of capital equipment.

Besides this, preference has been accorded to ‘Buy (Indian)’, ‘Buy and Make (Indian)’ & ‘Make’ categories of capital acquisition over ‘Buy (Global)’ & ‘Buy & Make (Global)’ categories.

The ‘Make’ Procedure has been simplified with provisions for funding of 90% of development cost by the Government to Indian industry and reserving projects not exceeding development cost of Rs.10 Crore (Government funded) and Rs.3 Crore (Industry funded) for MSMEs.

Separate procedure for ‘Make-II’ sub-category has been notified wherein projects will involve prototype development of equipment, system, platform or their upgrades or their sub-systems, sub-assembly, assemblies and components primarily for import substitution and innovation solutions, for which no Government funding will be provided for prototype development purposes.

In order to expand the manufacturing infrastructure, Government has decided to establish two defence industrial corridors, one each in Uttar Pradesh and Tamil Nadu, to serve as an engine of growth of defence industrial base in the country.

The Defence Products List for the purpose of issuing Industrial Licenses (ILs) under IDR Act has been revised and most of the components, parts, sub-systems, testing equipment and production equipment have been removed from the list, so as to reduce the entry barriers for the industry, particularly small & medium segment.

The initial validity of the Industrial Licence granted under the IDR Act has been increased from three years to 15 years with a provision to further extend it by 03 years on a case-to-case basis.The process for export clearance has been streamlined and made transparent and online.

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.

Under iDEX, innovative solutions have been successfully identified for 14 problem areas pertaining to national defence requirements. More than 600 startups have been engaged in the process and 44 different solutions have been identified for the problem statements by the innovators.

Government has set up the Technology Development Fund (TDF) to encourage participation of public and private industries especially MSMEs, through provision of grants, so as to create an eco-system for enhancing cutting edge technology capability for defence applications.

The Ministry has instituted a new framework titled ‘Mission Raksha Gyan Shakti’ which aims to provide boost to the IPR culture in indigenous defence industry.

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