The Ministry of Defence has been allocated a total budget of Rs 5.25 lakh crore for the Financial Year 2022-23. The total allocation under Capital Outlay of the Defence Services is 1.52 lakh crore. The focus is on modernisation of Defence Services and Defence Security Infrastructure development.
68 per cent of the capital procurement budget will be earmarked for domestic industry. This is to reduce imports and promote Atmanirbharta in equipment for the Armed Forces. While Defence R&D will be opened up for industry, start-ups and academia, Private industry will also be encouraged to take up design and development of military platforms and equipment.
Self-reliance is Crucial
- Reducing import dependence. India is one of the world’s largest arms importers. Such higher import dependency leads to an increase in the fiscal deficit.
- Security Imperative. It is critical to national security. India is surrounded by porous borders and hostile neighbours and needs to be self-sufficient and self-reliant in defence production.
- Economic Growth. It can help create a large industry base (including small manufacturers), contributing to economic growth as well. It will further conserve or reduce the Balance of Payment deficit.
- Employment generation. Defence manufacturing will lead to the generation of satellites industries that in turn will pave the way for a generation of employment opportunities.
Impediments so far
- Excess reliance on Public Sector (Indian ordnance factories, Hindustan Aeronautics Limited, Bharat Electronics Limited and Bharat Dynamics Limited).
- Policy delays.
- Lack of critical technologies, poor design capability (in certain areas), inadequate investment in R&D and the inability to manufacture major subsystems and components.
- Long gestation periods of manufacturing, making the products outdated.
- Unease in doing business due to stringent labour laws and compliance rules.
- Multiple and overlapping jurisdictions between various ministries.
- Lack of skill, workmanship, and quality control.
- FDI Policy limits discouraged global manufacturing houses to set up bases in India.
- R&D Lacunae and lack of engineering and research capability in our institutions.
- Lack of Defence Manufacturing base.
- Non-involvement of Micro, Small, and Medium Enterprises (MSMEs).
- High costs and involved and lack of assured market.
- Poor technological transfer by foreign companies.
Some Initiatives
- Licensing relaxation. Measures include simplified defence industrial licensing, relaxation of export controls and grant of no-objection certificates.
- Specific incentives have been introduced under the foreign trade policy and the Ministry of External Affairs has facilitated Lines of Credit for countries to import defence products.
- Indigenization lists.To boost indigenous manufacturing, the Government has issued “positive indigenization lists” consisting of items that cannot be imported.
- Budgetary allocation.A percentage of the capital outlay of the defence budget has been reserved for procurement from domestic industry.
- Opening the defence R&D beyond the DRDO, and reserving a percentage of the defence R&D budget for the local industry, start-ups and academia.
- The corporatisation of the Ordnance Factory Board, converting it into seven defence PSUs.
- Launch of a new edition of the Innovation for Defence Excellence (iDEX) initiative. iDEX Prime is a key initiative to promote innovators and startups. Under this, the defence ministry, armed forces, coast guard and defence PSUs share problem statements with the industry, in search of solutions. Projects selected under this are funded by the government.
- Allowing over 130 test labs and 25 proof ranges to be used by the industry.
- Creation of an “independent nodal umbrella body” to meet the testing and certification requirement of the domestic industry, bringing all the trial, testing and certification agencies under one administrative agency.
- DPEPP. The Defence Ministry has also issued a Defence Production & Export Promotion Policy.
Defence Production and Export Promotion Policy.
The DPEPP 2020 is envisaged as overarching guiding document of MoD to provide a focused, structured and significant thrust to defence production capabilities of the country for self-reliance and exports.
The policy lays out the following goals and objectives:
- To reduce dependence on imports and take forward “Make in India” initiatives through domestic design and development.
- To create an environment that encourages R&D rewards innovation creates Indian IP ownership and promotes a robust and self-reliant defence industry.
- To develop a dynamic, robust and competitive Defence industry, including Aerospace and Naval Shipbuilding industry to cater to the needs of Armed forces with quality products.
- To promote the export of defence products and become part of the global defence value chains.
- To achieve a turnover of Rs 1,75,000 Crores (US$ 25Bn) including export of Rs 35,000 Crore (US$ 5 Billion) in Aerospace and Defence goods and services by 2025.
The Policy brings out multiple strategies under the following focus areas:
- Procurement Reforms.
- Indigenization & Support to MSMEs/Startups.
- Optimize Resource Allocation.
- Investment Promotion, FDI & Ease of Doing Business.
- Innovation and R&D.
- DPSUs and OFB.
- Quality Assurance & Testing Infrastructure.
- Export Promotion.
The way forward: Focus areas
- The development of a thriving indigenous defence industry needs an overhaul of existing regulations and practices.
- A long-term integrated perspective plan of the requirements of the armed forces should give industry a clear picture of future requirements.
- DPP should incorporate guidelines to promote forward-looking strategic partnerships between Indian and foreign companies.
- The IPR (Intellectual Property Rights) is a key ingredient of an ecosystem which stimulates innovation and ingenuity. It needs to be exploited to its full potential.
- 100% FDI in defence sector, would give private players an opportunity, bringing in the money as well as competition to the Defence PSUs.
- Setting up of more number of defence industrial corridors.
- Setting up of a Defence Export Organisation to promote the export of defence equipment.
- Instituting an Independent Audit addressing issues of inefficiency and accountability.
- A scientific system to assess the extent/ level of indigenisation achieved by defence production entities in the country.
- Better monitoring of Defence offset policies, removing unnecessary restrictions and encouraging linking of defence offsets even in the civil sector.
- Encourage private players to enter the defence sector by reserving some percentage of the defence R&D budget for industry-led projects.
- Creation of an even playing field should be created between the Defence Public Sector Undertakings (DPSUs) and the private sector companies.
- Revival and revitalisation of Indian defence PSUs and ordnance factories to make them more dynamic.
- Establishing courses on defence production across universities and creating job opportunities for the graduates.
Conclusion
Self-reliance boosts national security and is a major cornerstone on which the military capability of any nation rests.
Indigenous defence production is an essential capability to provide strategic independence to a nation.
Bottom Line
Self-Reliance is the only way to ensure national security in the long run.
All the associated agencies of the ecosystem need to work in a focused manner, in unison with dedication and accountability
Suggestions and value additions are most welcome
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