Ease of Doing Business for MSMEs: The government’s goal of making India, one of the world’s largest importers of guns, 70% self-sufficient in weaponry by 2027 and boosting defence indigenization has a lot to do with its MSMEs.
MSMEs have recognised their position as an untapped force multiplier for the defence sector, not merely the government and large companies. This is attributable not just to the fact that MSMEs have always been a component in the defence supply chain, but also to the manufacturing depth they currently provide as a result of their expanding presence across India and technological prowess.
According to data presented by former MSME Minister Nitin Gadkari in the Rajya Sabha in March 2020, there were 7,591 MSME vendors distributed across the country providing to the Defence Public Sector Units (DPSUs) in FY18, 8,643 in FY19, and 10,506 in Q2 FY20. The overall number of MSME’s had climbed to 12,000 by December 2021.
As a result, DPSUs’ MSMEs procurement value grew from Rs 4842.92 crore in FY19 to Rs 5463.82 crore in FY21. “MSMEs began their journey with DPSUs as their supply chain partners, but today they are playing an important role in discharging offset obligations, revenue procurement, and designing, developing, and manufacturing complete defence systems on their own,” said Dr. Mayank Dwivedi, Director, Industry Interface & Technology Management (DIITM), DRDO, at a panel discussion on the role of MSMEs in making India a defence manufacturing powerhouse. On Wednesday, the discussion was part of the PHD Chamber of Commerce and Industry’s symposium on defence and security.
Given the limited financial and technological bandwidth that Indian MSMEs work with, the number of such systems and subsystems that they are presently capable of manufacturing is more than one might think. According to a list issued by the Ministry of Defense, there are a total of 209 goods that would be made in the country, according to Dwivedi.
According to a statement released by the Ministry of Defence in February 2022, these included artillery cannons, wheeled armoured battle vehicles, missile vessels, land-based high-power radars, short-range surface-to-air missiles, and more.
During the panel discussion, Colonel KV Kuber (Retd), Director Defence & Aerospace at Ernst & Young India, stated that 450 request for proposals (RFPs) were issued between January and March 2022 to provide information to interested companies that may be relevant in submitting their ideas. These suggestions covered a wide range of items, including drones, simulators, ammunition, replacement parts, electronics, and more. “Even if we use a conservative estimate, it’s still a Rs 1,000-crore opportunity, mostly in the MSME space,” Kuber noted.
To make indigenization easier and faster, the government developed the Srijan portal in August 2020, which provides information on things that can be indigenized by the business sector.
Air Vice Marshall PS Sarin, highlighting the portal’s importance, stated that around 600 lines of spares are already posted on the Srijan portal, with another 400 lines in the process of being added.
“All you have to do is scan the QR code (for the product) and you’ll have access to all of the requirements…
Over 60,000 lines of spares have already been indigenized by the Air Force, with over 40,000 lines of parts being consumed on a regular basis. All of these items are primarily sourced from small and medium-sized businesses. “Of the 12,000 MSMEs in the defence sector, close to 700 MSMEs are directly registered with the Indian Air Force,” Sarin said.
‘MAKE Projects’ were also developed by the government in the Defence Acquisition Procedure (DAP) 2020 to facilitate indigenous design and development of defence equipment with both government and industry support.
MAKE Projects have been essential in strengthening the role of MSMEs in the defence industry, according to the Make in India webpage, with over 40% of project sanction orders handed to MSMEs and projects worth over Rs 1,000 crores allocated for MSMEs. The government has also established a Technology Development Fund (TDF) to encourage MSMEs to participate in creating technology competence for defence systems by providing grants.
“The point is that any defence system will include numerous technology and agencies.”
The second option is to choose a product from Srijan and customise it based on your skills. The third strategy is to generate items similar to those produced by DPSUs but at a 50-60% reduced cost. MSMEs’ approach will be welcomed by DPSUs. “This is where the business is for MSMEs,” said Hari Mohan, former Chairman and Director General of the Ministry of Defence’s Indian Ordnance Factories.
However, there are particular areas in which purchasers should exercise caution when dealing with MSMEs, such as sufficient documentation. “So far, we have transferred 1,420 technology at DRDO, with 182 of those being transferred just last year.
” When we analyse SMEs, however, we encounter issues such as inadequate paperwork. While engaging with buyers and other industry members, Dwivedi pushed MSMEs to patent or copyright their ideas, adding that “proper paperwork almost ensures excellence.”