“If you want a thing done well, do it yourself.” ― Napoleon Bonaparte
These words indeed hold true for India which is now focusing on becoming self-reliant or what Prime Minister Narendra Modi has been repeatedly saying “Atmanirbhar”. As he said in Jhansi “today the mantra of the country is Make in India, Make for the World. Today India is working to make its (defence) forces self-reliant.”
It is one of the strategic sectors of the Indian economy that has the potential for tremendous growth because of the large talented pool of skill in terms of human resources and large-scale modernisation requirements of the armed forces. The sector will help in strengthening the economy by creating employment opportunities and reducing the import burden. In the defence sector, India has long sought self-reliance, but efforts have yielded few results. India built up its domestic defence production capacity with assistance from countries like the erstwhile Soviet Union and the United Kingdom in the 1960s and 1970s, mostly through assembly under licence.
However, one area in which India did embark with immense focus was indigenously developing key equipment like missile systems. The Defence Research and Development Organisation (DRDO) in 1982-83 started the development of indigenous missile systems under the leadership of late Dr APJ Abdul Kalam. These included the short-range surface-to-air missiles like the ‘Prithvi’, ‘Akash’ and the anti-tank guided missiles like ‘Nag’. The Prithvi missile system was inducted in 1994 while the Akash missile system was inducted in 2014 in the Indian Air Force and in the Indian Army the following year. The user trial of the third-generation Nag was carried out in October 2020 and the system is in the final stages of induction.
With the economy hit by the pandemic, PM Modi on May 12, 2020, launched the Aatmanirbhar Bharat Abhiyaan highlighting the importance of reducing external dependence in the economic sector. The term ‘Vocal for Local’ was also introduced to encourage the purchase of indigenous products so that the local industry can flourish. India’s arms import during 2015-19, for instance, accounted for nearly 10 per cent of the world’s total. India’s arms import though decreased by 33 per cent between 2011–15 and 2016–20. Self-reliance in defence and security needs is critical to reducing India’s dependence on other countries for urgent procurement in times of exigency.
As former DG Artillery Lt Gen (Retd) P.R. Shankar said “in Pinaka, we have the best missile system but it has taken twenty years and with failures. We have to be patient but do we have the staying power. Otherwise, the country can never be Atmanirbhar in the next ten years in indigenization in the defence sector.”
The ongoing border tension with China along the Line of Actual Control (LAC) brought into sharp focus the reality of procurement done on short notice, to enhance combative effectiveness. During the stand-off, reports flagged that the Indian Army lacked terrain-specific weapons like combat vehicles, among others. To overcome these gaps in weaponry pertaining to high-altitude warfare, the Indian armed forces were provided with emergency financial powers for capital and revenue procurements. Such procurement, though, will be invariably expensive. So, this makes it imperative that encouragement is given to indigenous defence procurement. But, clearly one of the positive developments was that under the provisions of the emergency procurement, the Indian Army placed orders for indigenous products like the M4 armoured vehicles from the Pune-based defence company, Bharat Forge of the Kalyani Group. But, much more needs to be done in this direction specially if the government is keen on indigenization in the defence sector and aspires to make the country “Atmanirbhar” in defence equipment manufacturing.
India has been striving for indigenisation of defence production for close to three decades and for this the Defence Ministry set up a committee in the early 1990s under Prof APJ Abdul Kalam which suggested a 10-year roadmap to increase the indigenous component in the total expenditure on capital procurement from 30 per cent in 1992-93 to 70 per cent by 2005. This goal could not be achieved and there continues to be some confusion about the present state of indigenisation.
According to a recent report of the Parliament Standing Committee on Defence (SCoD), only 93 of the 213 contracts worth about Rs 1,76,569 crore were awarded to foreign vendors of the USA, Russia, Israel, France, and some other countries between the financial years (FYs) 2016-17 and 2019-20. The Strategic Partnership Model adopted in 2016, which envisages manufacturing of foreign-origin platforms by the Indian companies with the transfer of technology from the former, is another indication that presently India does not have the capability to design and develop state-of-the-art fighter aircraft, helicopters, submarines, and armoured fighting vehicles/main battle tanks.
Even though the Indian industry has done reasonably well in manufacturing foreign-origin equipment with the help of technology transfer from the foreign Original Equipment Manufacturers and in indigenising components yet lacks the capability to indigenously design and develop major platforms, with a few exceptions like the Light Combat Aircraft Tejas, which is what indigenisation should be all about. The extent of indigenisation of a product matters little if a critical part, even if it constitutes a miniscule percentage of the overall product, is not indigenized. The focus of the DPSUs/OFB has been mainly on the indigenisation of items that can be manufactured in India at a cheaper cost vis-à-vis the cost of importing them. Such items do not generally account for a substantial proportion of the technologies that go into the making of a high-technology product and, therefore, the extent of indigenisation of critical components in various defence products continues to be low.
There is a severe budgetary constraint, making it difficult to earmark substantial sums of money to undertake large-scale efforts, especially for indigenous design, development and production of futuristic equipment, platforms, and weapon systems, which is essential for achieving self-reliance. Indigenisation depends heavily on research and development (R&D), on which the public spending in India has consistently been quite low. Barring a few notable exceptions, even the private sector has been reluctant to make heavy investments in R&D because of the uncertainty that the MoD will procure the indigenously developed product.
How much ever emphasis the government continues to give on its Atmanirbhar scheme, there is an imperative need for the Ministry of Defence to formulate a composite policy that focuses on indigenisation in high priority technology areas, shedding the notion that it must necessarily result in savings. The commercial viability of the identified projects and institutional arrangement for financing them, apart from a mechanism to accommodate the cost of failed efforts, must form the bedrock of the policy. There is a need for an organization to coordinate indigenisation efforts currently being made almost independently by several institutions. This organisation will have to work out a system for ensuring deeper involvement of the private sector in the indigenisation effort, apart from engagement with other scientific institutions, innovators, foreign entities and academia.
Indigenisation is driven by commercial considerations. No seller will opt for indigenisation if it involves the risk of conceding a competitive edge to another seller because of the additional cost of indigenisation, or if the delivery schedule is inflexible allowing no room for indulging in time-taking indigenisation efforts, or there is uncertainty about the Defence Ministry’s ability to place follow-on orders for indigenised products because of the enduring financial constraints it has been facing for long.
According to analysts, Modi’s “Make in India” initiative has been characterized more by unrealistic target-setting and policy announcements than by what every analyst and policymaker accepts is the way forward: To empower the private sector to play a greater role in defence research and development (R&D) and manufacture, rather than providing preferential treatment to the Defence Ministry’s nine defence public sector undertakings (DPSUs) and 41 ordnance factories (OFs), which have monopolized defence manufacture for decades and continue to do so despite government promises of a level playing field for the private sector.
The biggest strength of the Indian defence industry is probably the dynamism and entrepreneurship of its private sector, particularly in information technology and software engineering – both crucial fields in defence production. Its biggest weakness is the nexus between government policymakers and the public sector, which continues to skew the playing field in favour of the latter.
The Government has taken several policy initiatives and brought reforms to promote self-reliance in defence manufacturing. These policy initiatives are aimed at encouraging indigenous design, development and manufacture of defence equipment in the country, thereby reducing dependency on imports in long run. The Defence Ministry notified two ‘Positive indigenisation lists’ of 209 items for which there would be an embargo on the import beyond the timeline indicated against them offering tremendous opportunity to the Indian defence industry.
Procedure for ‘Make-II’ category (Industry funded), introduced in DPP-2016 to encourage indigenous development and manufacture of defence equipment has number of industry friendly provisions such as relaxation of eligibility criterion, minimal documentation, provision for considering proposals suggested by industry/ individual etc. So far, 58 projects relating to Army, Navy and Air Force, have been accorded ‘Approval in Principle’. As part of its effort to boost indigenization, the government in August last year launched a portal namely SRIJAN for DPSUs/OFB/Services with an industry interface to provide development support to MSMEs/Startups/Industry for import substitution.
In May 2017, Government notified the ‘Strategic Partnership (SP)’ Model for establishing long-term strategic partnerships with Indian entities through a transparent and competitive process, wherein they may tie up with global Original Equipment Manufacturers (OEMs) to seek technology transfers to set up domestic manufacturing infrastructure and supply chains. In keeping with the policy of boosting indigenization, Government started two Defence Industrial Corridors, one each in Uttar Pradesh and Tamil Nadu. The investments of Rs 20,000 crore are planned in Defence corridors of Uttar Pradesh and Tamil Nadu by 2024. So far, investment of approx. Rs 3342 crore has been made in both the corridors by public as well private sector companies. Moreover, the respective State Governments have also published their Aerospace and Defence Policies to attract private players as well as foreign companies including Original Equipment Manufacturers (OEMs) in these two corridors.
Defence Products list requiring Industrial Licences has been rationalised and manufacture of most of parts or components does not require Industrial License. The initial validity of the Industrial Licence granted under the IDR Act has been increased from three years to 15 years with a provision to further extend it by three years on a case-to-case basis. Department of Defence Production has notified 46 items under the latest Public Procurement Order 2017 notified by Department for Promotion of Industry and Internal Trade (DPIIT), for which there is sufficient local capacity and competition and procurement of these items shall be done from local suppliers only irrespective of the purchase value.
In February 2018, Defence Investor Cell (DIC) was created in the Defence Ministry to provide all necessary information including addressing queries related to investment opportunities, procedures and regulatory requirements for investment in the sector. So far, 1182 queries have been addressed by DIC. It has been decided to earmark an amount of Rs. 71,438.36 crore for domestic capital procurement out of the total allocation of Rs. 1,11,463.21 crore for Capital Acquisition for the current financial year, with the objective to boost capital procurements from domestic sources including private sector.
The First Positive Indigenisation list (erstwhile Negative list)’ of 101 items was notified on August 21, 2020 and the ‘2nd Positive Indigenisation list’ of 108 items was notified on May 31, this year, by the Government for which there would be an embargo on the import beyond the timeline indicated against them. The aim of the Positive Indigenisation list is to give boost to indigenous manufacturing, development of Intellectual Property besides acquiring ‘know-how’ of advanced technologies.
During the last five financial years (2016-17 to 2020-21) and current financial year 2021-22 (up to June 2021), 264 contracts have been signed, out of which 159 contracts have been signed with Indian Vendors for capital procurement of defence equipment for Armed Forces, which is approximately 60% of the total contracts signed.
– The writer is a senior journalist and media consultant. The views expressed are of the writer and do not necessarily reflect the views of Raksha Anirveda
