The size of the Indian Defence Industry, including Aerospace and Naval Shipbuilding Industry, is currently estimated to be about Rs 80,000 Cr (2019-20). The Government targets a turnover of Rs 1,75,000 Cr (US$ 25Bn) in Aerospace and Defence goods and services by 2025, for which a number of policy initiatives have been taken, said Raj Kumar, Secretary, Department of Defence Production (DDP), Ministry of Defence. Speaking to Aeromag, he said that the DDP envisions expanding the defense manufacturing base of India with equal participation of both Public and private sector including MSMEs and startups.
With the objective of achieving self-reliance in defence production, the Department of Defence Production (DDP) envisions expanding the defense manufacturing base of India with equal participation of both Public and private sector including MSMEs and startups, said Raj Kumar, Secretary, Defence Production, Ministry of Defence (MoD). Speaking to Aeromag, Raj Kumar said that the Ordnance Factories and DPSUs have been continuously modernizing and upgrading their capabilities and widening their product range. A large number of major products have been developed through in-house research and development initiatives apart from producing a number of products and equipment through transfer of technology.
The secretary said that restructuring of Ordnance Factory Board (OFB) is on the anvil and reforms in DPSUs and inspecting agencies are also being undertaken. He said that in order to expand the indigenous defence manufacturing sector in India, the government has identified broadly three focus areas to achieve this goal- investment promotion, export promotion and innovation. DDP has drafted a Defence Production and Export Promotion Policy, which would be positioned as MoD’s overarching guiding document to provide a focused, structured and significant thrust to defence production capabilities of the country for self-reliance and exports.
“The investments of Rs 20,000 Cr are planned in Defence corridors of Uttar Pradesh and Tamil Nadu by year 2024. The progress is reviewed regularly at apex level. So far, investment of approx. Rs 3000 Cr have been made in both the corridors by public as well private sector companies,” he said.
The government has special focus to promote defence aerospace industry particularly in MROs and indigenous development of aero engines. DDP has also taken up with concerned ministries to align their PLI (Productivity Linked scheme) of the government to include defence products in their schemes.
Speaking on the role of how DPSUs support the modernization of Armed Forces, Raj Kumar said that the DPSUs are being positioned as system integrators and mandated to maximize outsourcing from indigenous sources and create a multi-tier domestic supply chain.
“Strategic / partial Disinvestment of DPSUs will be pursued to bring more accountability, efficiency and greater autonomy. The focus is on modernization and technological upgradation in coordination with Services/DRDO. DPSUs/OFB has been allocated geographical regions/countries to take up focused promotional activities with an objective to enhance their exports,” he said.
The size of the Indian Defence Industry, including Aerospace and Naval Shipbuilding Industry, is currently estimated to be about Rs 80,000 Cr (2019-20). The Government targets a turnover of Rs 1,75,000 Cr (US$ 25Bn) in Aerospace and Defence goods and services by 2025, for which a number of policy initiatives have been taken.
He said that the MoD’s ‘Negative list’ of 101 items was a big step towards self-reliance in defence. It would offer a great opportunity to the Indian defence industry to manufacture these items using their own design and development capabilities to meet the requirements of the Armed Forces in the coming years. This list includes some high technology weapon systems like artillery guns, assault rifles, corvettes, sonar systems, transport aircrafts, light combat helicopters (LCHs), radars and many other items to fulfill the needs of India’s Defence Services.
Moreover, the government’s ‘Policy for Indigenisation of Components and Spares used in Defence Platforms’ in March 2019 has been serving the objective to create an industry ecosystem which is able to indigenize the imported components (including alloys & special materials) and sub-assemblies for defence equipment and platform manufactured in India.
Raj Kumar said that the ‘Strategic Partnership (SP)’ Model notified by the government in May 2017, envisages establishment of long-term strategic partnerships with Indian entities through a transparent and competitive process, wherein they would tie up with global Original Equipment Manufacturers (OEMs) to seek technology transfers to set up domestic manufacturing infrastructure and supply chains.
“The DDP has notified 46 items under the 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,” he said.
India’s Export Business
Raj Kumar said that the Government eagerly looks forward to boost defence exports and targets defence export of Rs 35,000 Crores (US$ 5 Bn) by 2025 from about Rs. 9,100 Crores in 2019-20. To achieve this, a number of export promotion initiatives have been taken. Export Promotion cell under DDP has been coordinating and following-up on export related action including enquiries received from various countries and facilitate private sector and public sector companies for export promotion.
“The High Level Committee (HLC) constituted under the Chairmanship of Raksha Mantri is facilitating faster clearances to export of major indigenous defence platforms to Friendly Foreign Countries. A scheme for Export promotion of Indian Defence Equipment Manufactured in India by Indian Defence Attache has been rolled out wherein Defence Attachés are provided financial support to promote export of indigenous defence equipment abroad,” Raj Kumar said.
With the new online system created by the government the export leads received from various sources can be sent directly to Indian defence exporters registered on the defence exim portal on their email address. This facility helps the Indian defence exporters to quickly respond to export opportunities arising in other countries.
Standard Operating Procedure (SOP) for the export of munitions list items have been simplified to promote Ease of Doing Business (EODB). The existing online application system of export authorisation has been made more user-friendly to provide end to end solution. Also, DDP has brought in 2 OGEL’s (Open General Export License) one for the select parts and components and the other for intra-company transfer of technology. OGEL is a one-time export license, which permits the industry to export specified items to specified destinations, enumerated in the OGEL, without seeking export authorisation during the validity of the OGEL.
Participation of Private Industry
The private sector has received focused attention during the last 6 years by way of policy initiatives and interventions by the Government to promote their participation in defence, as mentioned below. A number of provisions have been added or amended in DAP 2020 to provide level-playing field for Indian private industry.
“The ‘Make’ Procedure of capital procurement has been simplified. There is a provision for funding of 90% of development cost by the Government to Indian industry under Make-I category. In addition, there are specific reservations for MSMEs under the ‘Make’ procedure. Separate procedure for ‘Make-II’ category (Industry funded) has been notified under Defence Procurement Procedure 2016 to encourage indigenous development and manufacture of defence equipment. Many industry-friendly provisions such as relaxation of eligibility criterion, minimal documentation, provision for considering proposals suggested by industry/individual etc. have been introduced in this procedure. So far, 55 projects relating to Army, Navy & Air Force, have been accorded ‘Approval in Principle’, valuing about Rs. 30,000 Crores,” Raj Kumar said.
He said that the two defence industrial corridors will serve as an engine of economic development and growth of defence industrial base in the country. They span across Chennai, Hosur, Coimbatore, Salem and Tiruchirappalli in Tamil Nadu and across Aligarh, Agra, Jhansi, Kanpur, Chitrakoot and Lucknow in Uttar Pradesh (UP). A number of private industries have either already invested or have plans to invest in these defence industrial corridors.
Defence Products list requiring Industrial Licences has been rationalised and manufacture of most of parts or components now does not require Industrial License. The initial validity of the Industrial Licence granted under the IDR Act has been increased from 03 years to 15 years with a provision to further extend it by 03 years on a case-to-case basis. About 500 Industrial Licenses have been issued so far, about 300 such licenses after the year 2014.
Nurturing Startup Ecosystem
Various initiatives have been taken to promote the startup ecosystem in the defence sector. An innovation ecosystem for defence titled Innovations for Defence Excellence (iDEX) has been launched by the Prime Minister Narendra Modi in April 2018. iDEX is aimed at creation of an ecosystem to foster innovation and technology development in Defence and Aerospace by engaging Industries including MSMEs, Start-ups, Individual Innovators, R&D institutes and Academia and provide them grants/funding and other support to carry out R&D which has potential for future adoption for Indian defence and aerospace needs.
“Under iDEX, Defence India Startup Challenges and open challenges are initiatives to tap startups for finding futuristic indigenous solutions catering to critical needs of the Indian Armed Forces. The indigenization portal SRIJAN, launched in Aug 2020, provides DPSUs /OFB/Services with an industry interface to provide development support to MSMEs/Startups/Industry for import substitution,” he said.
Atal Innovation Mission (AIM) has been partnering with various Global Ministries (Singapore, Australia, Russia, Denmark, Sweden, Saudi Arabia etc.) and multilateral agencies like UNDP, BMGF, World Bank etc. to provide the needed acceleration for the growth of the Indian startup ecosystem.
“As part of the Atmanirbhar Bharat Abhiyan initiative, the government has organized a number of start-up competitions to encourage Indian entrepreneurs to ideate, incubate, build, nurture and sustain tech solutions for the Indian and the global market,” he said.