Indigenisation Of Defence – Burning Issues

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The Defence Ministry said it has intensified the drive for indigenisation of defence items being carried out by state-run manufacturers.
It said the progress of the indigenisation process by the defence public sector undertakings (DPSUs) is being reviewed on weekly basis by Defence Secretary Ajay Kumar.

What is Indigenisation of Defence?

Indigenisation is the capability of developing and producing any defence equipment within the country for the dual purpose of achieving self reliance and reducing the burden of imports.
Self-reliance in defence manufacturing is one of the key objectives of Department of Defence Production.

Defence Research Development Organisation (DRDO), Defence Public Sector Undertakings (DPSUs), Ordnance Factory Board (OFB) and private organisations are playing a critical role in indigenisation of defence industries.

BACKGROUND

Overdependence on the Soviet Union, brought about a change in India’s approach to defence industrialisation from licence based production to production based on indigenous design.
From the mid-1980s, the government pumped resources into R&D to enable the DRDO to undertake high profile projects.
A significant beginning in defence indigenisation was made in 1983, when the government sanctioned the Integrated Guided Missile Development Programme (IGMDP) to develop four missile systems:

In 1990 Self Reliance Review Committee (SRRV) under P.J. Abdul Kalam, had formulated a 10-year self-reliance plan under which, the self-reliance index (SRI), (defined as the percentage share of indigenous content in total procurement expenditure), was to be increased from 30% in 1992-1993 to 70 % by 2005.
This target has not been achieved till today.
This resulted in the shift of focus towards co-development and co-production in partnership with foreign companies.
A beginning was made in 1998, when India and Russia signed an inter-governmental agreement to jointly produce Brahmos supersonic cruise missile.
Apart from Russia, India has also partnered with other countries such as Israel and France for a number of projects.

UNDER PRESENT GOVERNMENT

From past 8 years Modi government has also been cementing the idea of Atmanirbharta within the defence ecosystem.
The government wants ensure that India, from a major importer of arms, becomes a major exporter of arms.
From setting up defence corridors in various parts of the country to corporatizing the Ordnance factories to an increase in FDI in the defence sectors, many steps have helped in the pace of development.
The results of this reform were evident in the first 6 months itself as these autonomous bodies have started to register profits.
This indicates the capability of the Indian defence industry, to produce products which meet global standards & ensure the safety of the defence forces protecting our borders.

Why Indigenisation?

1) Reducing Fiscal Deficit

India is the second largest arms importer in the world (after Saudi Arabia). Higher import dependency leads to increase in the fiscal deficit.

Despite having the 5^th largest defence budget in the world, India procures 60% of its weapon systems from foreign markets.
India can export its indegeneous defence technology and equipment to the neighbouring nations. Eg- Brahmos missile

2) Security Imperative

Indigenisation in defence is critical to national security It keeps intact the technological expertise and encourages spin-off technologies and innovation that often stem from it.
India being surrounded by porous borders and hostile neighbours needs to be self sufficient and self reliant in defence production.
Indigenisation is needed in order to avert the threats associated with the frequent ceasefire violations .
EG:- Uri, Pathankot and Pulwama attacks.

3) Employment generation

Defence Manufacturing will lead to the generation of satellites industries that in turn will pave the way for generation of employment opportunities.
Like US and China, India can also employ youth to work on projects of Meteor mining and develop infrastructure accordingly under Atmanirbhar Bharat
As per government estimates, a reduction in 20-25% in defence related imports could directly create an additional 100,000 to 120,000 highly skilled jobs in India.

4) Strategic Capability

Self sufficient and self reliant defence industry will place India among the top global powers.
Would indigenously create deterrence from India among enemy nations or other nations

5) Nationalism and Patriotism

Increase with indigenous production of defence equipment, will not only boost the trust and confidence of the Indian forces but will also strengthen a sense of integrity and sovereignty in them.

WHAT ARE POSITIVE INDIGENISATION LIST ?

The positive indigenisation lists contain a roadmap of those weapons, arms and systems that India will not import in future.
Knowing such a roadmap and mandate for domestic procurement helps domestic manufacturers ramp up production.

The Society of Indian Defence Manufacturers (SIDM) welcomed the announcement:
“The list creates long-term business opportunities that will enable the industry to invest and build capacity and capability. The [defence] industry is motivated and stands highly encouraged with the Second Positive List.”
“The list lays special focus on weapons/systems which are currently under development /trials (in India) and are likely to translate into firm orders in the future. Like the first list, import substitution of ammunition, which is a recurring requirement, has been given special focus,” :- Ministry of Defense

GOVERNMENT INITIATIVES :

Atmanirbhar Bharat

1) Defence Procurement Policy

Based on the recommendations of the Dhirendra Singh committee, Defence Procurement Procedure 2016 (replaced DPP 2013) added an additional category “Buy (Indian-IDDM)” e Indigenously Designed, Developed and Manufactured, as the most preferred way of defence goods acquisition.
DPP allowed the Defence Acquisition Council to take a “fast-track” route to acquire weapons (was limited to only the armed forces till now)

2) E-Biz Portal

Process of applying for Industrial License (IL) and Industrial Entrepreneur Memorandum (IEM) has been made completely online on ebiz portal.

3) Restriction of annual capacity in the industrial license for defence sector has been removed.
4) Outsourcing and Vendor Development Guidelines

The guidelines mandate that each DPSU and OFB to have a short-term and long-term outsourcing and vendor development plan to gradually increase the outsourcing from private sector including SMEs
The guidelines also include vendor development for import substitution

5) Uniform custom duty

Same kind of excise and custom duty levies for Indian industries (public and private) .

6) The FDI policy

Composite foreign investment upto 49% is allowed through Government route (FIPB) and beyond 49% with the approval of the Cabinet Committee on Security (CCS) on case-to-case basis.
Restrictions such as single largest Indian shareholder to hold at least 51% equity and complete restriction on Foreign Institutional Investor (FII) have been removed to facilitate investment in the sector.

7) ‘Buy (Indian)’, ‘Buy & Make (Indian)’

MILESTONES ACHIEVED: Atmanirbhar Bharat

1) INS Vikrant

1^st aircraft carrier to be built in India for the Navy will be commissioned by August 2022.

2) Arjun MK-1A Battle Tank

Handed over to the Indian Army – in February 2021.
Order for 118 more tanks has been placed.

3) Tejas aircraft

Inducted into the Air Force

4) Project75

Project 75 Submarines INS Kalvari, INS Khanderi, INS Vela, S53, S54 and S55 are constructed by Mazagon Dock Limited and designed by French company DCNS in Mumbai.

5) Shakti

Advanced Electronic Warfare System – was handed over to the Indian Navy

6) Defence Industrial Corridor

The Defence Industrial Corridors (DIC) are intended to provide strength to the defence manufacturing ecosystem in India
Currently, 2 DICs have been developed in the states of Uttar Pradesh and Tamil Nadu.
To ensure proper tracking of progress and on-time delivery of the corridors, they have been made part of the PM Gati Shakti – National Master Plan.

7) iDEX

To promote Indian defence entrepreneurs and start-ups on the global stage, under :- Make in India and Start-Up India schemes. This would help in promoting innovation and the products.

8) Long-range artillery gun “Dhanush“ a.k.a “desi Bofors”

1^st indigenous long-range artillery gun – strike range of 38 km and 81% of its components are indigenously sourced.

9) The Pinaka Multi Barrel Rocket Launcher

Was developed by armament Research Development Establishment (Pune). Pinaka is a precision system with near zero-error probability

10) Supersonic Cruise Missile BRAHMOS

Joint Venture between India and the Russian federation. The Indian contribution is 50.5% and the Russian contribution is 49.5%

STATS

Importer

In a 2011 report to the Parliament, the Comptroller and Auditor General of India (C&AG) highlighted the 90% import dependency of Hindustan Aeronautics Ltd (HAL) for ‘raw materials and bought out items’ for the production of indigenous .

India’s military expenditure

According to the Stockholm International Peace Research Institute (SIPRI), India’s military expenditure rose by 3.1%.

Defence Exports

The Defence Exports of 2021-22 stand at Rs 11,607 crore, which is a 500% rise in just 8 years from nearly Rs. 1,900 crore in 2014-15.
BrahMos Aerospace Private Limited (BAPL) inked a contract with the Philippine Department of National Defence for the procurement of a Shore Based Anti-Ship Missile System in January 2022. (1^st in decades)

Challenges

Lack of an institutional capacity and capability

Result : Policies Failure

Dispute Settlement body

There is an urgent need for a permanent arbitration committee which can settle disputes expeditiously.
In the USA, the procurement agency DARPA has a permanent arbitration committee which resolves such issues amicably and their decision is final.

Infrastructural deficit

Increases India’s logistics costs thus reducing the country’s cost competitiveness and efficiency.

Land acquisition issues

Restrict entry of new players in the defence manufacturing and production.

Policy dilemma

Offset requirements under the DPP doesn’t always help in achieving its goal.

What are Offset ?

Offsets are a portion of a contracted price with a foreign supplier that must be reinvested in the Indian defence sector, or against which the government can purchase technology.

Way Forward
1) Setting up of Permanent Arbitration Cell for dispute redressal
2) Private Sector boost is necessary to infuse efficient and effective technology and human capital required for modernisation of indegenious defence industry.
3) Export capability: If the aim is to achieve export capability, then the weapon system must first be in service with our armed forces.
4) Software Industry and technologies like Artificial intelligence and cyber security should be used to develop and manufacture the “chip” indigenously.
5) Providing Financial and Administrative autonomy to DRDO in order to enhance its confidence and authority.
6) Training and Tenure: The staff at the Department of Defence Production need to be trained and given longer tenures to ensure continuity.
7) Investee Company should be structured to be self-sufficient in areas of product design and development.

The investee/joint venture company along with manufacturing facility should have maintenance and life cycle support facility of the product being manufactured.

8) Improved In⎯house design capability amongst the three services

The Navy has progressed well on the path of indigenisation primarily because of the in⎯house design capability, the Naval Design Bureau.
Hence, they do not have to depend on the DRDO for the design & development of the complete ship, but outsource the sub⎯systems for them to develop.

9) Robust supply chain