To develop a self-reliant Defence Industry

Context

It is high time for India to become Atma-nirbhar in defence sector.

Background

India's Defence Ministry announced recently that it will ban the imports of 101 items of military equipment in an attempt to boost its indigenous production. The Ministry of Defence has said the embargo will allow India to become more self-reliant in weapons manufacturing.

Government has emphasized the need to make more indigenous weapons, to make the country self-reliant. In the event of 'Atma Nirbhar Saptah', discussions were held at high pitch on necessary steps that would be taken to make the country self-reliant in defence structure, investment infrastructure, manufacturing of weapons in the future. The event was focused on facilitation for modernisation, up-gradation and new infrastructure that will help in our indigenous capability building.

Make in India

In May, The Prime Minister launched the "Atmanirbhar Bharat" campaign, New Delhi said the country will stop importing weapons that can be made domestically so that its economy would become more self-reliant amid the coronavirus pandemic.

A major military equipment spender, India was the third-biggest buyer of military equipment last year after the US and China, according to an April study by the Stockholm International Peace Research Institute.

Foreign Direct Investment

74% Foreign Direct Investment (FDI) under automatic route is a positive policy amendment, although perhaps a little late in coming, given the likely drop in overall defence capital spending. The decision will effect the controversial “Chapter-7” in India’s Defence Procurement Policy (DPP), where the rules had restricted a foreign manufacturer’s stakes to 49% in a partnership. This created a plethora of issues around the willingness of these companies to share the latest technologies to IPR issues.

Negative List

The Department of Military Affairs (DMA) and the Ministry of Defence (MoD) will have to go about framing such a list with careful consideration, because these sorts of lists once formalised are incredibly difficult to roll back or circumvent even in cases of dire need. The list will need to take into consideration the entry barriers in the form of required knowledge, skills and capital required in domestic development and manufacture of major defence systems, such as missiles, aircraft, warships, and even armoured vehicles.

The provision for the list to be periodically revised (and presumably expanded with each revision) makes sense and is a positive policy decision. However, a smaller list of ‘negative’ items to start with and expanded over time will be important, so as not to inadvertently hamstring present or future military planning.

Cost and Technology Constraints

This crucial list while favouring “Make in India” also needs to make provisions to analyze and compare the cost premium and consequent potential decrease in output delivered in implementing such high levels of indigenization in the procurement of platforms. In the past, the DRDO in many acquisition processes has claimed the wherewithal to meet military requirements regardless of its capability to make them. India lacks several core sub-systems manufacturing capability, production expertise, resulting in many of the systems being developed and produced for the first time in India.

Recent Development in Defence Start-ups

Startups recognized by the Department of Industrial Policy & Promotion (DIPP) under certain categories will automatically qualify to take part in specified defence projects. These categories range from aeronautics, nanotechnology and Virtual Reality to renewable technology, robotics, green technology and internet of things.

For projects with estimated cost of prototype development phase not exceeding Rs 3 crore, no separate technical or financial criteria (will) be defined for both ‘start-ups’ and ‘other than startups’, to encourage their participation.

These new rules apply to the 'Make II’ category of defence procurement where the private industry funds the research for the product on its own and develops a prototype that is offered to the concerned service for evaluation.

Conclusion

For years, India has been among the top three defence importers in the world, the government wants to reduce the dependence on imported items in defence and give a shot in the arm to the domestic defence manufacturing industry. By denying the possibility of importing the items on the negative list, the domestic industry is given the opportunity to step up and manufacture them for the needs of the forces.

Connecting the Article

Question for Prelims

With reference to the Defence corridors in India, consider the following statements:

1. India has two defence corridors.
2. Defence corridors allow domestic production of defence equipments only for private sector.

Which of the statements given above is/ are correct ?

(a) 1 only
(b) 2 only
(c) Both 1 and 2
(d) Neither 1 nor 2

Question for Mains

‘In the absence of a well-established and organized defence industry, India cannot follow an independent foreign policy.’ Discuss.