The ministries of defence and small scale industry are working on a proposal that would allow small and medium enterprises (SMEs) to become defence equipment manufacturers. The two ministries are planning to simplify procedures that would enable SMEs to get into the manufacture of defence equipment and ancillary parts.

According to a background note prepared by the Ministry of Small Scale Industries, the idea is to make vendor registration procedure possible online and set a time frame of 45 days for the entire process. This would include factory inspection and capacity assessment of SME units.

The note also stipulates that payments should be made within 21 days.

Earlier, the Vijay Kelkar Committee had recommended that a scheme should be proposed by the commissioner of small scale industries, in collaboration with the department of defence production, to increase awareness among SMEs and provide institutional support in matters such as tendering and contracting for defence supplies.

A task force committee has been set up by the Commissioner of Small Scale Industries under the chairmanship of J K Arya for the purpose. The other members of the task force are Department of Defence Supplies deputy secretary Ashok Kumar and Small Industries Services Institute director Suresh Yadavendra.

At present, ordnance factories procure 50 per cent of the components and sub-assemblies and defence public sector undertakings (PSU) and 20-40 per cent of their requirements from SMEs. Thirty-nine ordnance factories and defence PSUs and 50 R&D laboratories are involved in defence research and production.

Despite these numbers, there are gaps and the government needs support from SMEs for regular defence supplies. In fiscal 2003-04, the combined turnover of ordnance factories and defence PSUs was Rs 1,66,000 crore, providing direct employment to more than 2 lakh people.