Ban of Defence Imports: Unleashing Opportunities for MSMEs

Ban on Defence Imports

Taking another giant leap towards self-reliance, the Ministry of Defence recently announced second list of 108 defence products adding to the previous list of 101 products banned for imports for defence industry.

As per the Ministry of Defence, the decision would boost the indigenisation and strengthen partnerships between public and private sector firms, fulfilling the objectives of self-reliance and promoting exports. It will also attract new investments into sector and boost the domestic R&D and manufacturing capabilities.         

The fresh list includes complex systems, sensors, simulators, weapons and ammunitions like helicopters, mini UAV for surveillance, next generation corvettes, tank engines, medium power radar for mountains, etc. The import restrictions on the items in the second list will be implemented in a phased manner from December 2021 to December 2025.  The ban on the import of 49 items in the second list will be effective from December 2021. All these 108 products will be procured from domestic industries as per the provisions in the Defence Acquisition Procedure 2020.             

Sunil Kumar Singh, Aerospace & Defence Consultant

MSMEs are the backbone of every sector and their contribution in the growth story of the India economy is immense. To encourage more participation from start-ups and MSMEs in defence R&D in achieving ‘Atmanirbhar Bharat’, the GOI released a new of DRDO Procurement Manual 2020. There are plans to establish new infrastructure including a defence park in Kerala to manufacture defence equipment for forces. The project is aimed at promoting MSMEs and bosting ‘Make in India’ initiative in defence manufacturing.

Defence Products List
Defence Products List
Defence Products List
Defence Products List

Vikas Manral, Aerospace & Defence Expert, SolutionBuggy

The list contains systems & equipment. Bigger companies will be the prime contractor of these products and supported by entire ecosystem of smaller companies across India. This will help develop global capabilities in India that were otherwise neglected due to the presence of huge vertically integrated companies and pave way for Défense exports. Starups can play a major role to indigenize these products. They can support in technology development, rapid prototyping and institutional tie-ups for R&D. Starups being small, flat and agile can bring in speed to the otherwise slow A&D industry.

Opportunities for MSMEs in the Industry

The MSMEs play a major role in the continuity of the supply chain in the aerospace and defence industry. These MSMEs in manufacturing often act as the supplier base for vital components and assembly systems to PSUs, ordnance factories and other big privately owned organizations. As per the government, the embargo on defence imports will open up opportunities for small and medium scale industries in the country.              

Ashok Aseri, Senior Consultant​

Banning imports of certain defence products is a very initiative to boost the domestic defence manufacturing industry. With this more, start-ups and small and medium scale industries in the country will get an opportunity to design and manufacture defence products in the country.

The recent ban on defence imports encourages many domestic defence technology start-ups to come up with new ideas and prototypes of new products and technologies. Today, there are more than 10,000 aerospace and defence start-ups in the country. The government is actively working with many start-ups and incubators in the country under ‘Innovations For Defence Excellence (iDEX)’ to develop innovative solutions related to UAVs, AI-enabled robots, individual protection systems, etc. by providing technical support and guidance. The MSMEs can act as the manufacturing partners to these start-ups in the aerospace and defence industry to manufacture products in scale to meet the demands of the Indian armed forces.

To boost MSMEs in the industry, the government is considering to give special incentives like technology transfer, offsets, reservation in procurements, etc. The government is also planning to setup incubation centres and innovation hubs in the country to promote innovation in the sector.

With the government being keen to enhance the manufacturing capabilities of the domestic aerospace and defence sector through import substitutions, new schemes and initiatives, it’s a big opportunity for MSMEs in the sector to capitalize on the market demand and contribute to self-reliant India.

Prabahar Thiyagarajan, Regional Manager Indian Territory, Wesco Aircraft​

Contrary to the misconception that defence manufacturing sector is only for large players, MSMEs have a huge role to play in the sector. When we speak of ecosystem, we start from smaller class c parts manufacturers, logistics, packing to testing, processing and design. Large players would play a role as designers or integrators. However, the rest of the larger chunk of work would be undertaken by small and medium enterprises which would be tier-1, 2 and 3 players to the primes.

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The main objective behind the ban is to promote domestic defence manufacturing and boost MSMEs manufacturing defence equipment in the country.    

The decision would provide tremendous business opportunities for small and medium scale industries in the country.

Considering the low manufacturing costs and innovation in the country, the Indian defence sector has huge scope for exports.  

The government is taking several steps towards MSMEs like technology transfer, reservation in procurement etc. in order to promote them.

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