DEPARTMENT OF DEFENCE PRODUCTION

DTIS CELL / DGQA

12575/DGQA/DQA(WP)/DTIS Guidelines 14 May 20

DEFENCE TESTING INFRASTRUCTURE SCHEME (DTIS) - GUIDELINES

1. Context

1.1 Under “Make in India”, the Government has accorded high priority to development
of manufacturing base of Defence and Aerospace sectors in the country to reduce
dependence on imports. Towards this, Government has announced establishment of
Defence Industrial Corridors (DICs) in Uttar Pradesh and Tamil Nadu.

1.2 One of the main impediments for domestic defence production is lack of easily
accessible state-of-the-art testing infrastructure. Defence Testing Infrastructure is often
capital intensive requiring continuous upgradation and it is not economically viable for
individual defence industrial units to set up in-house testing facilities. The Scheme aims
at setting up of Greenfield Defence Testing Infrastructure (required for defence and
aerospace related production), as a common facility under private sector with
Government assistance mainly in DICs.

2. Objective

2.1 The objective of the proposed Scheme is to promote indigenous defence

production, with special focus on participation of MSMEs and Start Ups by bridging gaps
in defence testing infrastructure in the country. Setting up of Defence Testing
Infrastructure will provide easy access and thus meet the testing needs of the domestic
defence industry.

3. Scope

3.1 The Scheme would provide financial assistance to private sector for setting up
Testing and Certification facilities for manufacturers of defence equipment/systems. The
financial assistance will be from Central Government in the form of Grant-in-Aid for setting
up of Greenfield Defence Testing Infrastructures (DTIs) in the following verticals:-

(a) Testing facilities for Drones / Unmanned Aerial Vehicles (UAVs)/Remotely

Piloted Aircrafts (RPAs)
(b) EMI/EMC Testing for Radars, UAVs/RPAs and Electronic/Telecom
equipment
(c) Rubber Testing for Defence and Aerospace Sectors
(d) Radiated Noise and Shock Testing
(e) Electronic Warfare
(f) Software Testing
(g) Specialised Test Driving Tracks
(h) Ship Motion Testing
(i) Test Facilities for Aerospace Industry
(j) Ballistic and Blast Testing Facilities
(k) Environmental Test Facilities
 (l) Any other area in Defence manufacturing lacking testing infrastructure.

3.2 The DICs in UP and TN may be given preference for setting up of DTIs, being the
focus areas. These corridors have been selected as they are expected to support large
number of industries involved in defence and aerospace manufacturing in the future.
However, the Scheme is not limited to setting up DTIs in the DICs only.

4. Eligible Agencies

4.1 Each DTI will be setup through a Special Purpose Vehicle (SPV), hereinafter
referred to as the Implementation Agency, which may be promoted/constituted by private
entities (Industry, Industry association, R&D/Academic institution) and State Government
agencies.

4.2 The Implementation Agency under the Scheme shall be a Section 8 company
registered under the Companies Act, 2013.

4.3 Only private entities registered in India and State Government agencies will qualify
for forming the Implementation Agency.

4.4 The Central Govt assistance for setting up DTIs will be in the form of Grant-in-Aid
and will be limited to sum total of Rs 400 Cr. Assistance for individual DTI under the
Scheme shall not exceed 75% of the project cost. The balance of the project cost will be
borne by the Implementation Agency.

4.5 At least 5 private entities and state government agencies may constitute the
Implementation Agency. However, contribution from any of the Implementation Agency
constituents cannot exceed 40% of the share capital of the Implementation Agency.

4.6 All the constituents of SPV (Implementation Agency) shall have positive net worth.
This condition is relaxed for companies registered with Startup India. Any company black
listed by Central or State Government will not be eligible to be part of SPV.

4.7 At least three constituents of the SPV should be in existence for more than three
years and no relaxation will be provided in this regard.

4.8 The SPV (Implementation Agency) shall be responsible for obtaining statutory
clearances required for testing of weapons and ammunition.

5. Role of the Implementation Agency

5.1 The Implementation Agency shall be responsible for setting up of DTI under the
Scheme. The Implementation Agency shall be also responsible for operation and
maintenance of assets created under the Scheme, in a self-sustainable manner, by way
of collecting user charges plus applicable GST.

5.2 Cost of land is not proposed to be funded under the Scheme. Land for DTIs would
be arranged by the Implementation Agency. In case the Implementation Agency is not
owner of the land, they should have lease for the land for at least 30 years from the date
of response to RFP. Land availability with Implementation Agency shall be essential
condition for consideration of applicant’s response.
5.3 The Implementation Agency will obtain all necessary statutory
approval/clearances including those for environmental compliance and quality standards
as applicable.

5.4 The respondent shall indicate the manner and modalities for operation and
maintenance of the testing facility after its creation in its proposals for consideration of
assistance, as a part of the DPR submitted in response to RFP issued by MoD/DDP.

5.5 The Implementation Agency shall be responsible for ensuring that procurement of
all items, equipment and services, including works, are through a transparent and
competitive bidding process. Appropriate performance guarantees should be built in the
agreement to ensure timely and good quality delivery of goods and services procured.

5.6 The Implementation Agency shall execute an undertaking for proper utilization of
the grant and abide by the target dates, as may be specified in the conditions of the Grant.
It shall not divert the Grant for any other purpose. In the event of failure to comply with
the conditions or breach of the undertaking, it shall be liable to refund to President of
India the entire amount of the Grant. The undertaking is to be submitted by the
Implementation Agency in a format as specified in RFP.

5.7 The Implementation Agency shall also execute an undertaking that the said project
is not being funded under any other scheme of the Government of India. The undertaking
is to be submitted by the Implementation Agency in the prescribed format as may be
specified in the RFP.

6. Extent of Financial Assistance

6.1 The DTI Screening Committee (DTISC) constituted as per Annexure ‘A’ for
approval of the projects will be the final authority to take decision on the proposals
submitted by the Implementation Agency.

6.2 The total Central Govt assistance for setting up 06 to 08 DTIs will be in the form
of Grant-in-Aid not exceeding Rs 400 Cr. The extant GFR provisions will be followed for
setting up the DTIs. The test facilities planned to be set up can be divided into three types,
namely, Small, Medium and Large. The estimated cost of each type of facility is given in
the table below:-

Sl No Type Estimated Cost Nos

(a) Small 0<20 Cr 03
(b) Medium 20-50 Cr 03
(c) Large >50 Cr 02

The number of test facilities under each type may be varied, if need arises.

6.3 Assistance for individual DTI under the Scheme shall not exceed 75% of the
project cost. The remaining project cost will be borne by the Implementation Agency.

6.4 For the purpose of calculating the extent of contribution of the Implementation
Agency under the Scheme, the cost of land or such other component as may be specified
in EoI or RFP shall not be included in the project cost. The broad norms for funding of
DTIs shall be as follows:-

(a) Land - to be provided by SPV

(b) Capex for building < 20% of Project Cost
(c) Test Equipment, Installation, Training > 80% of Project Cost

6.5 No recurring expenditure or any establishment cost will be funded by Central

Government under the Scheme.

6.6 Studies related to identification of defence testing infrastructure gaps and mapping
of facilities, impact study etc may be done by engaging professional help after obtaining
approval of DTISC.

7. Submission of Proposal

7.1 Expression of Interest. Expression of Interest (EoI) may be issued by

DDP/DGQA to seek preliminary response from private entities willing to set up defence
testing infrastructure. The EoI shall clearly indicate the Preliminary Qualitative
Requirements (PQRs) of the testing infrastructure intended to be set up.

7.2 Submission of Response to EOI. The proposal in response to EoI is to be

meticulously formulated after conducting a detailed study based on the Preliminary
Qualitative Requirements (PQRs). Measurable outcomes should be indicated in the
proposal, e.g. expected reduction in testing costs and time if the testing infrastructure is
set up. The Proposal in the prescribed format may be filed by a private entity intending to
form an SPV. The format of the Preliminary Proposal will be as specified in the EoI.

7.3 Request For Proposal. The Staff Qualitative Requirements (SQRs) may be
refined after receipt of responses to EoI. For selection of Implementation Agency for
execution of each DTI project, Request For Proposal (RFP) may be issued to the
shortlisted participants of the EoI who meet the specified criteria.

7.4 Submission of Response to RFP. The Final Proposal, in the prescribed

format, alongwith Detailed Project Report (DPR) and associated documents shall be
submitted by the respondents in response to the RFP. The format of the Final Proposal
will be specified in the RFP. The respondents will prepare the DPR (as prescribed in
RFP), covering the technical, financial and implementation aspects, timelines for
completion of the project including those for achieving financial closure, and the
monitoring mechanism proposed to be put in place. He shall also submit details of his
associate with whom he intends to form SPV. Respondents would be required to form
an SPV within a time specified in RFP only in case he is selected under the scheme for
setting Defence Testing Infrastructure. The format for DPR shall be such as may be
prescribed in the RFP.

7.5 The proposal shall clearly indicate details related to the mode of Operation and
Maintenance of the asset after its creation. It should also suggest the mechanism for
operation and maintenance of the infrastructure proposed to be created on sustained
basis by levying user charges/fees, etc.
7.6 The project proposal must be complete in all respects including the documents to
be submitted as may be prescribed in RFP.

8. Process of Scrutiny, Selection Criteria and Approval

8.1 The project proposals alongwith DPR submitted by the respondent in response to
RFP shall be technically and financially evaluated by an independent agency as per
evaluation criteria given in RFP. The evaluation will include confirming compliance to
technical criteria, availability of land and financial viability etc. The Respondent requesting
least Grant-in-Aid etc. will be selected.

8.2 The proposals of the respondents alongwith Project Monitoring Committee (PMC)
evaluation report will be considered by the DTISC. While appraising the project, the PMC
would look into justification, including the intended benefit in terms of addressing the
specific bottleneck in defence testing infrastructure, and make recommendation to
DTISC. The respondent shall provide details of the financing tie-ups for the projects which
will be considered before approval of the project.

8.3 Immediately after registration of SPV (Implementing Agency), the respondent shall
inform DDP/DGQA about names of SPV constituents share holding pattern of the SPV
and whether they qualify the eligibility criteria. Hereafter, all correspondence shall be
made by Government with SPV (Implementing Agency).

8.4 Respondent will be liable to forfeiture of earnest money deposit in case of non
formation of SPV.

9. Release of Funds

9.1 Disbursement shall be subject to the Implementation Agency achieving financial

closure.

9.2 The funds shall ordinarily be released to the Implementation Agency for an
approved project in installments as approved by the DTISC. However, the number of
installments may be limited to 5 installments for each project.

9.3 The Implementation Agency shall submit a bond to be executed regarding

utilisation of funds in the format as may be specified in RFP.

9.4 The Implementation Agency will submit a pre-receipt bill for the funds to be
disbursed to it alongwith certificate that it has not indulged in corrupt practices in the
format as may be specified in the RFP.

9.5 The funds will be kept in a separate Escrow Account of the Implementation
Agency.

9.6 The first installment will be released against Bank Guarantee after approval for the
project is accorded by the DTISC. The Implementation Agency shall submit the Utilisation
Certificate (UC) for the amounts utilised as per format as may be specified in the RFP.
9.7 Release of further installments shall be subject to furnishing of complete Utilisation
Certificate, Project Consultant (PC) report and the proof of matching contribution of the
funds having been invested by the Implementation Agency from its own or other sources
on pari-passu basis as per the approved cost sharing. Disbursing Advance Payment of
subsequent installments may be done after recommendation of the DTISC and against
submission of matching Bank Guarantee by the Implementation Agency.

9.8 Certification of the physical and financial progress by the PC would be a pre-
requisite for release of further installments.

10. Evaluation and Monitoring

10.1 The DTISC shall periodically review progress of the approved projects in the
Scheme and will take necessary steps to ensure achievement of objectives of the
Scheme.

10.2 Project Monitoring Committee. A Project Monitoring Committee (PMC) shall be

constituted by MoD/DDP and it shall be responsible for timely and proper implementation
of each DTI Project without time and cost overruns. The composition of the PMC is given
at Annexure ‘A’.

10.3 The PMC shall meet once in every quarter to review the progress report submitted
by the Project Consultant in a format as may be prescribed.

10.4 Project Consultant (PC). Project monitoring shall be done by DDP/DGQA. A

suitable Project Consultant (PC) may be engaged to assist DDP/DGQA in technical and
financial appraisal of all projects under the Scheme. The PC will appraise the DPR
submitted by the Implementation Agency with respect to technical feasibility, financial
viability and optimal utilization of resources. The PC will undertake periodic monitoring of
the projects including their physical progress, quality of execution of work, procurement
of items/equipment and adherence to timelines, and submit reports to the Project
Monitoring Committee (PMC).

10.5 The Implementation Agency would be required to maintain subsidiary accounts of

the Government Grant and furnish to the PC a set of audited statement of accounts as
per Companies Act. These audited statement of accounts shall be furnished after
utilization of the Grant-in-Aid or whenever called for. The requirement for submission of
the audited accounts/ statements shall be as specified in the RFP.

11. Administrative Expenses

11.1 The administrative expenses of DDP/DGQA connected with the implementation of

each DTI project including hiring of PC are not to exceed 3% of the funds available under
the Scheme.
12. Assets

12.1 The assets created by the Implementation Agency shall be owned by it after
completion of the DTI project.

12.2 The assets acquired/created by the Implementation Agency out of government

assistance under the Scheme shall not be disposed, encumbered or utilized for purposes
other than those for which funds have been released.

12.3 A register of permanent and semi-permanent assets acquired wholly or partly out
of the funds provided by the Central Govt under the Scheme should be maintained in the
Form GFR 21.

12.4 In case of cancellation of any DTI project at any point of time, all assets and any
unutilized grant shall vest with the Government of India.

13. Accreditation

13.1 The Implementation Agency will mandatorily obtain certification/ accreditation from
appropriate National/International Agencies.

14. Operation and Maintenance of Assets

14.1 The Implementation Agency shall be responsible for Operation & Maintenance of
assets created under the Scheme by way of collecting user charges.

14.2 The Implementation Agency shall ensure that the services at the facilities created
under the Scheme are extended to the users on pay and use basis without discrimination.

15. Recall of the Central Grant

15.1 In case of unsatisfactory use of the Grant by the SPV including compromise with
the quality of work envisaged, or partial/incomplete implementation of the project, the
Central Govt shall cancel the project and for the purpose of recovery of Grant in Aid
retains the rights to the following, but not limited to:-

(a) disposing of all assets acquired by the SPV for the DTI project and vested
with the Central Govt.

(b) recall unspent amount of grant lying in the escrow account and

(c) encashment of Bank Guarantee.

16. Debarment

16.1 The Implementation Agency or any of its constituents shall be debarred if:-

(a) It has been convicted of an offence under the Prevention of Corruption Act,
1988

(b) It has been convicted for an offence under the Indian Penal Code or any
other law for the time being in force, for causing any loss of life or property or
causing a threat to public health as part of execution of a public procurement
contract.

(c) Proceedings against any of its constituents are running under Insolvency
and Bankruptcy code (IBC).

(d) The constituents of SPV (Implementation Agency) are black listed by

Government of India/ State Government.

16.2 The Implementation Agency or any of its constituents debarred under any of the
sub-sections mentioned above or any successor of the Implementation Agency/its
constituents shall not be eligible to participate in a procurement process of any procuring
entity for a period not exceeding three years commencing from the date of debarment.

17. The Department of Defence Production may issue directions/clarification from time
to time for smooth implementation of the Scheme.

(Nagesh Jain)
Captain (IN) QA - DTIS
for ADGQA(WP)

Copy to.:-

All Concerned Ministries / Departments of Government of India.

All Concerned State Governments.
Niti Aayog.
All Concerned Industry Associations.
Internal Circulation
MoD DDP website
DGQA website
 Annexure ‘A’

Composition of Monitoring Committees/Agencies

Defence Testing Infrastructure Screening Committee(DTISC)

1. Secretary, DP, MoD Chairman

2. Secretary (Def Fin) Member
3. Addl Secy (DP) Member
4. Rep State Gov (TN & UP) Member
5. Joint Secretary (NS) Member
6. Joint Secretary (DIP) Member
7. DGQA Member
8. DGAQA Member
9. ADGQA(WP) Member
10. Rep Niti Aayog Member
11. Captain QA Member Secy
12. Any other member Co-opted by the Chairman, DTISC

Project Monitoring Committee (PMC)

1. Addl DGQA (WP) Chairman

2. Director DIP, DDP Member
3. Director from Min of MSME Member
4. Director DGAQA Member
5. Rep Niti Aayog Member
6. Rep SIDM Member
7. Rep Project Consultant (PC) Member
8. Capt QA Member Secy
9. Any other member Co-opted by the Chairman, PMC

Project Consultant (PC)

Independent Project Consultant (PC) hired by DDP/DGQA for appraisal of

proposals submitted by Implementation Agency and progress monitoring.