DEFENCE INDIGENISATION

JUN 15

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IN NEWS:

  • In another step towards indigenisation of military platforms, the defence ministry has given the initial approval to projects worth Rs 76,390 crore.

INDIAN DEFENCE INDUSTRY:

  • India’s defence industry is primarily dominated by the government and its agencies:
    • The Indian defence manufacturing sector is largely dominated by the Defence Public Sector Units (DPSUs) and Ordnance Factories (OFs).
    • The Research and Development (R&D) sector is largely controlled by the Defence Research and Development Organisation (DRDO).
  • Currently, India’s defence and aerospace manufacturing market is worth Rs 85,000 crore with a private investment of Rs 18,000 crores.

SIGNIFICANCE OF INDIGENISATION:

  • Reduce import bill:
    • As per Stockholm International Peace Research Institute (SIPRI), between 2016-20, India was the second largest arms importer after Saudi Arabia. Strong indigenous manufacturing capabilities, especially in the MSME sector, can help reduce India’s reliance on import.
  • Enhance strategic autonomy:
    • India is reliant on foreign defence imports, particularly from Russia. Hence, New Delhi has been forced to walk a diplomatic tightrope on the Ukraine-Russia conflict. Such constrains can be avoided by developing indigenous defence capabilities.
  • Make India a manufacturing hub:
    • Defence indigenisation adds impetus to the efforts to meet the ambitious target set by the Government to achieve a manufacturing turnover of USD 25 billion or Rs.1,75,000 crore by 2025.
  • Enhance domestic R&D:
    • A strong domestic defence industry can help bring investment and innovation into the country’s defence manufacturing.
  • Promote defence exports:
    • There is a huge global market for defence equipment. Having strong indigenous capabilities will enable India to promote more exports and strengthen bilateral ties with other nations.
  • Geopolitical significance:
    • Chinese aggressions in Indian Ocean region have increased the demand for arms among South East Asian countries. Indigenous capability can enable India to project itself as a more “reliable security partner” and an “alternative to China”.
  • Adapt to changing warfronts:
    • Future requirements of the armed forces are going to be complex, dynamic and based on future warfare. Eg: Cyber warfare. To meet such demands, India needs a competitive domestic defence industry.

CHALLENGES FOR INDIA:

  • Constrained R&D capabilities:
    • Compared to the US and China which spend in excess of 10 per cent of their defence budget on R&D, India spends only around 5-6 percent.
  • Underdeveloped private sector:
    • The Defence Industry sector was opened up to 100% for Indian private sector participation in 2001. However, only a handful of Indian firms have been established so far.
  • Organisational shortcomings:
    • Lack of higher organisational structure for defence innovation has often led to ad-hoc decision-making, duplication of efforts and waste of resources.
    • Rama Rao Committee, constituted by the MoD to review the functioning of DRDO, in its report identified organisational shortcomings as the key weakness in India’s defence innovation system.
  • Stiff competition:
    • The US, Russia, France, Germany, China and Israel are established players in the international arms market. India needs to develop cutting edge products and competitive prices if it is to compete as a major manufacturer.
  • Deficit of human resource:
    • The DRDO, which is at the heart of the defence innovation, is presently faced with major human resource challenges as seen from poor scientist to other staff ratio, high rate of attrition, low educational background of scientist, and poor level of training.
  • Continuing reliance on technology import:
    • Most of India’s indigenisation success has been in auxiliary and spares. Ambitious projects like the Kaveri engine project failed to meet the expected standards. Hence, India continues to be reliant on other countries for technology transfer.

GOVERNMENT EFFORTS:

  • Efforts under Make in India:
    • Ministry of Defence has signed more than 180 contracts with the Indian industry between 2014 and 2019, worth approximately USD 25.8 billion, under the ‘Make in India’ scheme.
    • The Ministry of Defence has set a target of achieving a turnover of Rs 1.75 lakh crore in aerospace and defence goods and services by 2024, including exports of Rs 35,000 crore.
  • FDI in defence manufacturing
    • Foreign Direct Investment (FDI) in the defence sector is allowed up to 74% through the automatic route and up to 100% by government route.
  • Positive Indigenisation List:
    • A Positive Indigenisation List is a list of defence materials that India will not import. This would offer a great opportunity to the Indian defence industry to manufacture these items to meet the forces’ requirements.
  • Defence Acquisition Procedure 2020:
  • Defence Industrial Corridors:
  • Corporatisation of Ordnance Factory Board:
    • Ordnance Factory Board (OFB) has been split into seven different PSUs to improve functional autonomy, efficiency, growth potential and innovation in the defence sector.
  • Boost for R&D:
    • As per the 2022 budget, 25 percent of the annual research and development budget of the defence ministry will be reserved for private companies and start-ups.
    • Mission Raksha Gyan Shakti was launched in 2018 with the aim to inculcate IP culture in Indian defence manufacturing ecosystem.
  • Diplomatic efforts:
    • Ministry of External Affairs is facilitating Lines of Credit (LOC) for countries to import defence products. In addition, defence attaches in Indian missions abroad have been empowered to promote defence exports.
  • Efforts to enhance ease of doing business:
    • Simplified defence industrial licensing, relaxation of export controls and grant of no-objection certificates and specific incentives under the foreign trade policy.
    • Delegated powers to defence public sector units to explore opportunities for export and participation in global tenders.
    • The draft ‘Defence Production & Export Promotion Policy (DPEPP) 2020’ is expected to be finalised soon.
  • Innovations for Defence Excellence (iDEX):
  • Defence Innovation Hubs (DIHs):
    • iDEX framework under the Defence Ministry is envisaging setting up of independent Defence Innovation Hubs (DIHs) where innovators can get information about needs and feedback from the Armed Services directly and create solutions for India’s major defence problems.
    • DIO has announced setting up of two DIHs in Coimbatore and Nashik
  • Defence India Startup Challenge:
    • Launched by Ministry of Defence in partnership with Atal Innovation Mission, it aims to support Startups/MSMEs/Innovators to create prototypes and to commercialize products or solutions in the area of National Defence and Security.

CONCLUSION:

To take indigenisation to the next level we need to significantly up our investment in R&D and create a cutting-edge military-industrial ecosystem with universities, private sector and defence PSUs working in tandem.

PRACTICE QUESTION:

Q. India should boost its defence indigenisation capabilities, if it wants to play an important role in the regional and global arenas. Discuss?