DEFENCE INNOVATION IN INDIA

BACKGROUND:

• India’s defence innovation is by and large underdeveloped.
• This is evident from high import dependence for weapons systems, lack of critical technologies, and the poor patent scorecard of the DRDO and defence industry.
• According to the Stockholm International Peace Research Institute (SIPRI), India is world’s second largest arms importer during the period of 2015-19.
• India domestically produces only 45% to 50% of defence products it uses, and the rest are imported.

AN OVERVIEW OF INDIAN DEFENCE INDUSTRY:

• At present, Indian defence industry consists of 41 Ordnance Factories (OFs), nine Defence Public Sector Undertakings (DPSUs), and a small but emerging private sector.
• In addition, there are 50-odd defence research and development (R&D) laboratories under the umbrella Defence Research and Development Organisation (DRDO) which is responsible for designing and developing armaments for the armed forces

CHALLENGES IN DEFENCE INNOVATION:

• Lack of Higher Organisational Structure for Defence Innovation: The absence of such an organisation has often led to ad-hoc decision-making, duplication of efforts and waste of resources. Rama Rao Committee (RRC) 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
• Poor human resource base:  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
• Meagre Budget and Lack of Emphasis on Indigenous R&D: Compared to the US and China which spend in excess of 10 per cent of their defence budget on R&D, India’s current spending is less than six per cent
• Low priority given to R&D by defence industry: It is mainly due to the lack of incentives particularly in the case of the private sector which does not have the backing of the government to undertake expensive yet risky R&D projects
• Absence of reform in the state-owned defence enterprises (Defence Public Sector Undertakings (DPSUs) and  Ordnance Factories )
• Management of the DRDO laboratories is ‘excessively centralised’
• Foreign suppliers finds it difficult to fulfil their offset commitments in a cost-effective manner due to regulatory and operational bottlenecks. Hence they outsource only low-end manufacturing and machining jobs to private and public sector companies in India.
• Defence sector fails to attract FDI: The sector attracted only Rs 56 lakh as foreign direct investment (FDI) between 2014 and 2016
• India’s defence innovation system is also constrained due to the weakness in India’s larger innovation system, which is characterised by the poor investment on R&D, low density of scientists or researchers, skill shortages and poor collaboration between research labs and industry.

GOVERNMENT INITIATIVES TO PROMOTE DEFENCE INNOVATION:

• Innovations for Defence Excellence (iDEX): It aims to achieve self-reliance and foster innovation and technology development in Defence and Aerospace by engaging Industries including MSMEs, start-ups, individual innovators, R&D institutes and academia. iDEX will be funded and managed by a  Defence Innovation Organisation (DIO). 
• 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, aimed at supporting Startups/MSMEs/Innovators to create prototypes and to commercialize products or solutions in the area of National Defence and Security
• Setting up of the Defence Innovation Fund: It aims to
  • Facilitate rapid development of new, indigenized, and innovative technologies for the Indian defence and aerospace sector and
  • Create a culture of engagement with innovative startups, to encourage co-creation for defence and aerospace sectors
• Liberalization: Defence manufacturing came out of the stranglehold of Public Sector Undertakings-Ordnance Factories (PSU-OF) monopoly with major liberalisation in 2001 with 100 per cent private sector participation and the recently announced 49 per cent in Foreign Direct Investment.
• Defence Industrial Corridors: Government aims to set up two Defence Industrial Corridors in the Country (one in Uttar Pradesh and another in Tamil Nadu) to ensure connectivity among various defence industrial units.
• Defence Procurement Procedure 2016:  It mainly contains processes that needs to be followed to streamline and simplify defence procurement procedures and ultimately achieve the objective of self-reliance in meeting all the security needs of the Indian Armed Forces by promoting indigenous design, development and manufacture of defence weapon systems.
• The provision of ‘Make’ category of capital acquisition in Defence Procurement Procedure is a vital pillar for fostering indigenous defence capabilities
• The ‘offset policy’ under DPP mandates foreign suppliers to spend at least 30% of the contract value in India.
• Ministry of Defence unveils draft of Defence Procurement Procedure 2020: It aims at further increasing indigenous manufacturing and reducing timelines for procurement of defence equipment. Under DPP 2020, Indigenous Content (IC) stipulated in various categories of procurement has been increased by about 10% to support the ‘Make in India’ initiative.
• Strategic Partnership (SP) Model to promote private sector participation: It identifies a few Indian private companies who would initially tie up with global Original Equipment Manufacturers (OEMs) to seek technology transfers to set up domestic manufacturing infrastructure and supply chains.
• Artificial Intelligence in Defence:
  • N Chadrasekharan Task Force was set up in 2018 to study implications of AI in national security
  • Defence Artificial Intelligence Project Agency (DAIPA) was created in 2019
  •  Establishment of a High Level Defence AI Council (DAIC)

SUGGESTIONS TO IMPROVE DEFENCE INNOVATION ECOSYSTEM:

• As Rama Rao Committee (RRC) suggested  a high-level Defence Technology Commission (DTC) under the chairmanship of the defence minister can be created
• As Kelkar committee suggested all ordnance factories should be corporatised into a single corporation under the leadership of a competitive management. which would enable them to focus on in-house design and development
• Enactment of Indian National Defence University Bill
• As Kelkar committee advocated, ensure greater autonomy and accountability for the DPSUs and they should be allowed to acquire foreign technology by way of making outward investments.
• DPSUs should be listed in stock exchanges for improved corporate governance and access to capital markets.
• Bring a separate IPR framework for defence related inventions
• Utilization of CSR funds to promote defence incubator
• Modernize trial and quality assurance processes. For example; Physical trials can also be substituted by documentation and certification
• India could follow the suit of Brazil’s Embraer aircraft manufacturing programme, which is globally cited as a successful experiment in offset policy implementation.

PRACTICE QUESTION:

Q. Higher import dependence with respect to defence equipment is a great concern for India's national security. Analyse the government measures to overcome this challenge?