The goal to achieve self-reliance, to become ‘Atmanirbhar’, has always been an integral part of Indian defence strategy. Many initiatives have been taken since Independence in that direction, from establishment of DRDO, setting up Ordinance Factory Board (OFB) and defence PSUs to opening defence production to private sector. In 1992 Self-Reliance Review Committee (SRRV) formulated a 10-year self-reliance plan with the objective to progressively increase self-reliance index to 70 per cent by 2005. The real outcome however is far from what was envisioned.
According to the SIPRI annual study, between 2013 and 2017, India was among the top 10 countries in the world in terms of military expenditure with a 12 per cent share of global imports. Our imports increased by 24 per cent over the previous 10 years (2007-17) and constitute about 60-70 per cent of the total procurement. Additionally the current profile of equipment for India as estimated by experts is 15:45:40 for state-of-the-art to current to nearing obsolescence and the large deviation from the desired equipment profile of 30:40:30 implies the need for aggressive modernisation efforts and procurement/ development of state-of-the-art equipment.
Achieving self-reliance requires manifold approaches. Strong domestic manufacturing base needs to be established along with investment in developing indigenous R&D capability for ownership of strategic technologies. Public sector entities like DPSUs and OFs role needs to be strengthened, bringing more efficiency in production as well as encouraging and utilising private sector’s capability to full extent.
With the above macroscopic view of the Indian defence, we would like to delve into the challenges experienced at microscopic level by companies like us in the start-up and MSME ecosystem. Starting in 2009 as a R&D design house for developing test and measurement solutions, defence was not a target market in the beginning for us. For new start-ups it has not always been easy to enter this market which has high barrier entry with large investment requirement, and stringent product specification that goes through intensive trials and certification processes prolonging the development cycle. However, for the niche technologies we work on defence make up for an important segment, so exploring the right opportunity to enter the market was the logical next step. We were also skeptic of working on government projects on account of perception of slow decision making, red tapes and low budgets compared to international customers.
Our journey in defence industry started seven years ago when we won a tender from Indian Navy to develop a module for Software Defined Radio (SDR). As opposed to the traditional hardware based radios which can be modified only through physical intervention, SDR technology allows to incorporate new and enhanced features using software upgrades, bringing flexibility and cost effectiveness to advance wireless communication. The experience of working with the department burst some myths about working with government defence entities while also giving us some insights into the challenges of developing defence solutions.
Instead of having to navigate through labyrinth of administrative maze to seek response, feedback and make progress in the project, we receive full support so that we could solely focus on solution development. They also guided us on technology front and the discussions led to improvements in the initially defined system requirement. We also decided to develop the IPs required for the solution in-house instead of buying from third-party for enhanced security as our goal while developing any new solution has always been to meet the global benchmarks. Our solution was well received by the customer.
Since then we have worked with many DRDO labs and PSUs to develop solutions for communication, security, data acquisition etc. most of which required us to work on new technologies or indigenise solution available only with select vendors globally. We have worked on both tender based projects as well as challenge based projects offered through schemes like TDFS and iDEX providing us insights into merits and challenges of these platforms.
The process of engaging through open tenders with L1 criteria, while having its merit of transparency, providing opportunity for new players and simplified decision making, poses some challenges in case of new technology development. In some cases, non-serious bidders can be declared as L1 who might not have a full grasp on the complexity and challenges of the system and accordingly have lower cost estimation but later they fail to deliver. This not only discourages serious bidders but also hampers users trust in domestic vendors. Having a more comprehensive selection criterion for evaluating technical capabilities could reduce this risk. At the same time, it creates additional responsibility for user and often financial decision-making authority without technical understanding does not fully comprehend its importance and raises objection on such requirements.
One of the biggest challenges in defence R&D is lack of funds. There is reluctance on government’s part to pay premium for indigenous technologies. The expectation is to get global standard at a very competitive price, and while availability of cheaper manpower among other factors potentially makes India a cost-effective market for scaled up production, it is not the case for new technology development and complex solutions. Additionally, developing new and cutting-edge technology inherently involves many risks. It is time taking process with the risk of inferior or unviable final product. Therefore, in short term, the option of importing proven finished product from a reputed global vendor reducing the risk for everyone involved in the procurement process, seems very lucrative. However, importing often does not provide access to the latest generation of the solution/ product as it is vital for the supplier country to keep their strategic advantage confidential in the event of re-aligned political interest.
These challenges are recognised by the government and some initiatives have been taken to address them. For instance, Technology Development Fund Scheme (TDFS) from DRDO provides opportunity to small and innovative start-ups to address national defence challenges and gives them funds up to 90 per cent of the total development cost with an upper limit of Rs 10 crore. One of the focus areas of the scheme is aerospace. Government has been focusing on excelling the procurement of new aircraft equipped with latest technologies and also upgrading the existing fleet with newer technologies. As one of the winners of the initial set of TDFS projects, we developed a solution for video transmission based on latest protocol which is expected to play an integral role in the upgrading the communication system of existing aircraft like Sukhoi-30, MiG etc. For the development of this product we received tremendous support from the agencies like DARE, Indian Air Force, CEMILAC along with TDFS. Such collaborative efforts are essential for developing critical technologies and our experience has been encouraging.
The participation of domestic private sector including start-ups and MSMEs is a critical aspect for self-reliance and though defence has been open to private sector since 2001, the contribution of the sector is largely limited to supply of component and sub-assemblies with the exception of few large conglomerates. There has been various attempt on both policy and execution front to encourage the sectors’ participation. First ‘Make’ category was introduced in DPP in 2006 to provide impetus to indigenous design, development and production and later in 2016 ‘Indian Indigenous designed, developed and manufactured (IIDDM)’ category was brought in and accorded highest priority in procurement. When ‘Make in India’ initiative was launched in 2014, defence was among one of the 14 champion sectors, setting high hopes for domestic production. For capital infusion FDI has been allowed in defence sector since 2001; while the initial cap was set at 26 per cent through automatic approval route in 2016, it was raised to 49 per cent through automatic route and up to 100 per cent through government approval in case of access to modern technology.
To provide impetus to MSMEs, DPP has mandate to reserve project up to a certain value for them under Make category. Start-up India and Atal Innovation Mission were launched in 2016 to develop ecosystem of innovation and entrepreneurship in the country including in defence sector. A platform like TDFS allows for industry collaboration with DRDO for development of futuristic technologies and import substitution in defence and aerospace sector while another platform iDEX was launched with mandate of setting up Defence Innovation Hubs across the country. How much impetus these programmes can provide to start-ups though remains to be seen.
-Established in 2009 by IIT Alumni, Logic Fruit Technologies is a R&D design house for real time embedded system development and develop solutions for Defence, Aerospace, Test & Measurement, and Telecom and Semiconductor industries. For more information, please check out: www.logic-fruit.com. Views expressed are of the company and do not necessarily carry the views of Raksha Anirveda
