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In a special exceptions in its defence procurement policy, government of India will now allow start-up companies to submit bids for defence related contracts that are valued below Rs 150 crore. This special provision from government came in order to promote startups and encourage them to bid for Indian defence related projects. Startups, however, have to prove technical expertise in order to bid, reported Economic Times.

Notably, any business entity willing to bid for government defence contracts will be allowed to have foreign direct investment (FDI) up to 49% and the CEOs must be Indian citizens. The guidelines also state that the board of directors should have a majority representation of Indian citizens.

Moreover, the defence ministry has also put specific requirements such as a clear distinction between startups and new entrants in the field so that the new policy exeption will encurage only startups and not large companies.

In order to make a clear distinction between new start-ups and large & mid-sized companies, the ministry ruled that mid to large-sized groups venturing into defence manufacturing will still need to meet financial criteria that includes credit ratings, revenue and net worth.

Besides allowing early-stage startups to participate in the government’s ambitious ‘Make in India’ programme in the defence sector, the new policy change will also increase competition, which in turn spur innovation for defence contracts.

To recall, government of India has a 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.

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In April this year Chennai-based Big Bang Boom Solutions (BBBS), a defence tech startup, has bagged a Rs 1.5 crore grant for winning the ‘See Through Armor’ challenge under iDEX (Innovations for Defence Excellence), which was launched by the Ministry of Defence in April last year.

Last year in September, Indian Telephone Industries Limited (ITI) signed agreements with 58 startups and original equipment manufacturers (OEMs) covering manufacturing solutions related to information and communication technology (ICT), Internet of Things (IoT) and Defence technology, to give fillip to entrepreneurship. ITI is government-owned manufacturer of telecommunications equipment.

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