Defence Testing Infrastructure Scheme – Economics

Table of Contents

Recently, the government has approved the launch of ‘Defence Testing Infrastructure Scheme (DTIS)’.
To give a boost to domestic defence and aerospace manufacturing.

BACKGROUND

The Government has accorded high priority to development of the manufacturing base of Defence and Aerospace sectors in the country under “Make in India” initiative to reduce dependence on imports.
The government has already announced establishment of Defence Industrial Corridors (DICs) in Uttar Pradesh and Tamil Nadu.
But, One of the main impediments for domestic defence production is lack of easily accessible state-of-the-art testing infrastructure.
Defence Testing Infrastructure is capital intensive requiring continuous upgradation and it is not economically viable for individual defence industrial units to set up in-house testing facilities.

Promote indigenous defence production, with special focus on participation of MSMEs and Start Ups by bridging gaps in defence testing infrastructure in the country.
Provide easy access and to meet the testing needs of the domestic defence industry.
Facilitate indigenous defence production, consequently reduce imports of military equipment and help make the country self-reliant.

Outlay of Rs 400 crore for creating state of the art testing infrastructure over the duration of five years.
It envisages to set up test facilities in partnership with private industry.
The projects under the Scheme will be provided with up to 75% government funding in the form of ‘Grant-in-Aid’.
The remaining 25% of the project cost will have to be borne by the Special Purpose Vehicle (SPV) whose constituents will be Indian private entities and State Governments.
Only private entities registered in India and State Government agencies will qualify for forming the implementation agency for the Scheme.
The SPVs under the Scheme will be registered under Companies Act 2013.

A special purpose vehicle, also called a special purpose entity (SPE), is a subsidiary created by a parent company to isolate financial risk.
Its legal status as a separate company makes its obligations secure even if the parent company goes bankrupt.
An SPV is created as a separate company with its own balance sheet.
It may be used to undertake a risky venture while reducing any negative financial impact upon the parent company and its investors.

The Scheme aims at setting up Greenfield Defence Testing Infrastructure mainly in DICs but is not limited to setting up Test Facilities in the DICs only.