The government has notified special exceptions in its defence procurement policy to promote startups and will encourage them to bid for contracts valued less than Rs 150 crore without the burden of providing financial credentials.
The Rajnath Singh-led defence ministry has stipulated that for these relatively small contracts, startups will be encouraged if they can prove technical expertise. It has also made a clear distinction between startups and new entrants in the field, ruling that mid to large-sized groups venturing into defence manufacturing will still need to meet financial criteria that include credit ratings, revenue, and net worth.
The new set of guidelines has been issued for the ‘Make in India’ purchases being planned by the armed forces. Senior officials have emphasized in the past that this will be the main route of procurement for the armed forces in the future.
The government already has the scheme to encourage startups under its Defence Innovation Fund (DIF) with a maximum corpus of Rs 100 crore to identify, promote and fund research and innovation in the private sector.
The ministry also runs an annual Defence India Startup challenge that throws out problem statements and awards winners who come back with innovative solutions. In the last challenge, topics like See Through Armour, 4G/LTE based Tactical Local Area Network and Laser Weaponry were included.
While startups will be encouraged for the smaller contracts, larger procurement plans will require companies to qualify in several parameters that have been officially notified. This includes the requirement of a minimum of two years of experience in the broad area of the procurement case, like manufacturing, electronics or explosives.
Any business entity wishing to bid for the contracts will be allowed to have a foreign direct investment (FDI) up to 49% and the chief executives must be Indian citizens. The guidelines also state that the board of directors should have a majority representation of Indian citizens.
Other rules defined stipulates that the minimum average annual turnover for the last three financial years should be at least 10% of the cost of the project and the company should not be facing any insolvency proceedings.
Source: Economic Times