The innumerable steps taken by the Ministry of Defence in the recent past, corroborate to India’s ability to attain the vision of an ‘Atmanirbhar Bharat’. The Launch of seven new DPSUs by Prime Minister Modi recently, can play a vital role in augmenting indigenous defence manufacturing to establish regional and global supremacy of the nation. Ministry of Defence has set a target of achieving a turnover of 1.75 lakh crore in aerospace and defence goods and services, including exports of 35,000 crore by 2025.
Chairman & Managing Director,
Munitions India Limited
Government of India
Prime Minister Narendra Modi launched seven new DPSUs on the auspicious day of last Vijayadashami. In his virtual address Prime Minister Modi expressed the belief that these seven new companies would form a strong base for the military capability of the country in the future. Understandably, the new companies are a part of various resolutions which the country has been pursuing to build a new future for them and these would play an important role in import substitution, in line with the vision of ‘Atmanirbhar Bharat’. Clarion call by the Prime Minister for ‘Make in India’ and ‘Atmanirbhar Bharat’, has led to emergence of renewed zeal and optimism amongst the Indian Defence industry to be important pillars in not only achieving self-reliance in Defence manufacturing but also appropriately tap the export market. Indian industry, specifically the defence industry, has grown substantially over the past decade, demonstrating its capability to support the Indian armed forces. Undoubtedly, the self-reliant Defence preparedness coupled with export is pivotal for the country to establish itself as a global, economic and military powerhouse.
Defence expenditure, especially for armament procured from indigenous sources, is an important sector in the Indian economy. A strong and technologically advanced domestic defence industry supports the armed forces in its fights against external and internal threats of armed aggression. The country in the past has mostly relied on imports to meet its defence needs and immediate requirements of defence systems whenever in need due to only limited and conventional options available indigenously.
India has traditionally been one of the top importers of defence goods. The SIPRI indicators for period 2008-2018 suggest that India, Saudi Arabia, China, Australia, Algeria, UAE, Pakistan, South Korea, Egypt and United States were the top ten defence importers.
India has a thriving innovation ecosystem that became evident during the onset of the pandemic as scores of new age startups and young innovators — many mere college students — got into act to fulfil gaps in all fields through innovative options for Masks, Sanitizers, ventilators, oxygen concentrators, PPE kits, contactless payments, on line shopping, home deliveries and more. Now, this booming innovation space is focusing on another emerging challenge - preparing India for the evolving security landscape of the 21st century. The ongoing policy initiatives have established a growing private defence manufacturing sector in India, a space previously occupied solely by the central government.
India has the third largest defence budget in the world next to USA and China. As a matter of fact, India presently tops the list of countries that imported defence equipment over a decade (2008-2018). However, there has been a trend reversal in defence imports in the country leading to a shrinkage in market share of global defence imports from 7.6 per cent in 2008 to 5.6 per cent in 2018.
Over the years, Ministry of Defence has facilitated vide ranging indigenous production facilities through erstwhile OFB and DPSUs apart from issue of licenses to private sector companies starting from the year 2001. The premium research organisation in the field of Defence i.e., DRDO has also been supporting Indian industry through development of state-of-the-art defence equipment and cutting edge defence technologies. Indigenous development and productionisation of some of the strategic platforms like Agni and Prithvi Missiles, Tejas (LCA), Strategic Submarines, Naval Ships, PINAKA, Arjun Tank, Dhanush Artillery Gun and wide range of radars and electronic war fare systems have given a quantum jump to nation’s military might and establishing regional and global dominance.
Many giant and engineering business houses have now joined the efforts of the government to establish a defence industry base in the country with more than 550 licenses issued by MOD apart from support to the bigger industry, from more than 8,000 MSMEs, joining the defence supply chain. The result of all the efforts made in the previous decade have seen contribution of domestic procurement in overall defence procurement rising from 30 per cent to approximately 60 per cent at present with an outlay of approximately 80,000 crores (2019-20).
The nation is continuously and consistently heading to become the leading country of the world in defence sector, Aerospace and Naval Ship Building sectors from design to production fulfilling twin objective of selfreliance and exports supported by innumerable strategic and policy initiatives. The initiatives have been wide ranging from procurement reforms, investment promotion, innovation and R&D to export promotion.
Defence manufacturing is unique and complex due to fast changing cutting-edge technologies. An easy to understand and welldefined acquisition procedure is prerequisite to give impetus to Defence manufacturing in India. There have been consistent efforts by MoD to streamline the procedure and make it pro indigenisation since the publication of the first DPP 2002 almost two decades back.
DAP 2020 is one of the landmark reforms in the process focussing on Self Reliance through the processes of Make, Design and Development and Strategic Partnership. It is acting as a catalyst for ‘Ease of Doing Business’ and encourage foreign OEMs to set up manufacturing establishments in the defence industrial corridors with an ultimate aim to develop India as a global defence manufacturing hub. Further to promote indigenous manufacturing, the priority of buying categories is Buy (Indian – Indigenously Designed Developed and Manufactured (IDDM)) i.e. Buy (Indian-IDDM), Buy (Indian), Buy and Make (Indian), Buy (Global - Manufacture in India) and Buy (Global) in decreasing order.
Enhancement in FDI through the direct route in the defence sector to 74 per cent, along with widespread government support, a Defence Expo and ambitions to become a defence manufacturing hub, has made India an attractive destination for global private defence manufacturers. The Ministry of Defence (MoD) has set an ambitious defence exports target of 35,000 crore ($5 Billion) by 2025. The country’s defence exports push is strategic to become part of the global defence value chain and one of the leading countries in the defence sector.
The Ministry of Defence in June 2021 announced a scheme worth 450 crore approx ($67 million) over the next five years to Innovations for Defence Excellence (iDEX) under the Defence Innovation Organisation (DIO), an executive arm of MoD responsible for creating an ecosystem to foster indigenous innovation and technology development in India’s defence and aerospace sectors by engaging with entities such as MSMEs, startups, innovators, academics, and R&D institutions among others. iDEX evaluates various technologies for scalability and works with all three wings of the Indian armed forces to enable their adoption.
MoD has also established a robust relationship with industry associations to conduct numerous seminars and webinars to explore opportunities for the export of defence equipment. Trade shows, like ‘Defexpo’ and ‘Aero India’ have gained international prominence. More than 500 exhibitors participated in Aero India 2021, despite limitations imposed by the pandemic, and the show witnessed over 200 MoUs and product launches.
Setting up defence industrial corridors in Uttar Pradesh and Tamil Nadu which are meant to ensure connectivity among the various defence industrial units and effectively utilise the existing potentialities of PSUs is a leap forward to promote indigenous defence production. This is also attracting private sector investments, which is much needed to support the present expansion programme.
In August 2020, the ‘First Positive Indigenisation’ List comprising 101 items was notified, in pursuance of Government’s endeavor of ‘Atmanirbhar Bharat’ and boost indigenisation in the defence sector. At that time, it was also highlighted that more such equipment would be identified progressively to facilitate and encourage defence manufacturing in the country. In pursuance of the same, MoD notified the ‘Second Positive Indigenisation List’ of 108 items in May 2021 to give further boost to indigenisation with active participation of public and private sector for fulfilling the twin objectives of achieving self-reliance and promoting defence exports. ‘Third positive indigenisation list’ may also get published in the near future going by the trend. A positive indigenisation list comprising of 2,851 items (components/subassemblies) imported by Defence PSUs has also been notified on December 27, 2021 restricting their imports by DPSUs from mentioned dates.
The Cabinet in its meeting held on June 16, 2021 approved to convert the production units of erstwhile OFB into seven DPSUs with 41 Units. This has resolved the long outstanding demand of the private sector of level playing field in defence procurement. The seven new companies are Munitions India Limited, Armoured Vehicles Nigam Limited (AVNL), Advanced Weapons and Equipment India Limited (AWEIL), Troop Comforts Limited (TCL), Yantra India Limited (YIL), India Optel Limited (IOL), and Gliders India Limited (GIL). These companies having come out of the many procedural limitations shall become competitive and explore new opportunities in the market to boost indigenous manufacturing through partnerships.
Enhancement in FDI through the direct route to 74 per cent, along with widespread government support, a Defence Expo and ambitions to become a defence manufacturing hub, has made India an attractive destination for global private defence manufacturers
One major issue with defence industry, has been limited availability of information due to security constraints. Institutional data collection mechanism for land, Aerospace and Naval Ship Building industries in the country including production, export, import thus need to be further strengthened. The multiple stakeholders, viz. private players, both domestic and foreign, need to be apprised about the requirements of the Armed Forces so they are better prepared to realise the goal of indigenisation. Export clearance process also need to be further upgraded to make it seemless and time bound to promote and execute export orders.
Though the country in the recent past has developed many new age defence equipment comprising of unique technologies and wide range of complex systems, further progress in these areas would accelerate the bridging of gaps in critical technologies and materials for new product development. Futuristic technology development can be prioritised with government support especially in the field of cyber security infrastructure, secured communication systems, strategic materials, artificial intelligence & robotics, hypersonic missiles and highpower gas turbine engines etc. The efforts of pooling up of resources for meeting the growing requirements of the industry with respect to testing infrastructure need to be strengthened coupled with establishment of new simulation-based state of the art testing infrastructure. Days are not far when the steps taken would achieve the vision of making India a ‘Net Export Country’.
Defence exports of 10,500 crore have taken the country to the 23rd position as a global arms exporter as per SIPRI in the year 2020, certainly an achievement vis-avis its earlier status. The list of more than 40 nations that India is exporting defence products to, also includes big names such as the USA, Australia, Finland, France, Germany, Israel, South Africa and Sweden. The new formations are certainly poised to capture a significant share of India’s indigenous defence requirement as well as export. Thus, the goal of ‘Net Export Country’ shall be reached sooner rather than later.