January 15, 2015: In spite of a hike in FDI to 49 per cent in the defence sector and the ‘Make in India’ giving its own boost to the sector, micro, small and medium enterprises (MSMEs) are facing its own challenges to make their mark in defence. The defence tender parameters have been the biggest blockage in their way as most of them don’t come with an ability to meet them. Besides, the Defence Acquisition Council (DAC) is in the practice of handling only high value capital acquisitions, which again act as a big hindrance for the MSMEs. Adding on to these, G. Raj Narayan, founder and managing director of defence MSME firm Radel Advanced Technology, told IANS that the MSMEs also lack high standards of quality, reliability, repeatability and traceability, which form as the key characteristics of the defence sector.
Besides all this, MSMEs don’t have the requisite amount of knowledge in highly specialised materials and components used in the sector. Mounting the pressure on the same is also the stringent certification process that dampens the spirit of the MSMEs even further. Giving comments on this particular challenge, Puneet Kaura, the executive director of Samtel Avionics Ltd, a defence manufacturing company said, “As a policy, MSMEs are allowed to participate in defence ministry tenders right from the Request for Information (RFI) stage. However, most of the RFI and Request for Proposal dealt with at the ministry and DAC require technical competencies that a single MSME may not have. This is one of the main reasons which prevents MSMEs from participating in DAC tenders.”
Size, capacity, reach and the level of practicability and implementation are the departments where the smaller companies have been lagging behind the bigger players. “There do exist some systems that MSMEs can bid – for example in Electronic Warfare Systems or Optronics Systems, that are under the ‘Make in India’ programme. We can partner with a Prime (foreign player or DPSU or enterprise level defence company) and then bid for the same as an MSME,” Kaura said.
Even though the ‘Make in India’ campaign gives a ray of hope to the small and medium defence companies to make full use of an opportunity to be a part of fat money deals, the MSMEs are still skeptical as most of the electronic components used are imported. So important people from the industry are voicing a common opinion of the importance of these components being manufactured in India. Only then there will be a wholeness.
The MSME task force has already listed 14 issues that have been pinching the MSME sector the most, but the major concerns that remain unaddressed are the availability of finance and technology. The task force further stated that the MSME sector contributes eight per cent of the country’s GDP at present, 40 per cent of the manufactured output, 40 percent of its exports and employing about 60 million people through a total of 26 million enterprises.
