Discuss the need for defence indigenisation. What are the steps taken and suggest measures in this regard.
Defence indigenisation refers to the strategic objective of a country to develop and enhance its own industrial and technological capabilities for producing essential defence equipment and systems. This approach aims to reduce dependency on foreign sources for military hardware, ensuring self-sufficiency in meeting the national security requirements.
Need for Defence Indigenisation
- India’s goal of defence indigenisation is based on several aspects.
- India’s Share in Global Arms Market: India’s share in the global arms exports market is minimal, accounting for only 0.2 per cent which goes against India’s Balance of Payments.
- SIPRI reports indicate that India ranked 23rd during the period 2017-21, with a marginal presence in the global arms market.
- India as the Largest Importer of Arms: Despite efforts to promote domestic production and reduce imports, India remains the largest importer of arms in the world, accounting for 11 per cent of global arms imports during 2018-22.
- Development of Military Industrial Complex: It is a network of individuals and institutions involved in the production of weapons and military technologies.
- It aims to increase military spending by the national government and its establishment is necessary, ensuring self-reliance and reducing dependence on foreign sources.
- Technology Transfer and Independence: It allows the nation to develop and maintain critical defence capabilities by facilitating technology transfer through foreign collaborations.
- Exports: With the increasing defence indigenisation, India can widen its export base.
- For example, India is in the process of exporting Brahmos Cruise Missiles to the Philippines.
- Research and Development: Defence indigenisation promotes substantial investments in research and development (R&D) contributing to the growth of a defence industrial ecosystem in India and spin-off effects on other manufacturing sectors.
- Volatile geopolitical climate and the possibility of a two pronged war.
Government’s Initiative towards Defence Indigenisation:
Defence Procurement Policy, 2016:
- It was based on Dhirendra Singh committee recommendations and includes the “Buy (Indian-IDDM)” category.
- It empowered the Defence Acquisition Council with a “fast-track” route for acquiring weapons.
Defence Acquisition Procedure 2020: It is a key initiative under the Atmanirbhar Bharat Abhiyaan
- Reservation for Indian Vendors: With up to 100% FDI in defence manufacturing allowed (up to 74% under the Automatic route and beyond 74% under the Government route), the DAP encourages domestic industry participation, fostering increased production.
- Enhancement of Indigenous Content: Across categories, the focus is on procuring indigenously manufactured products and technologies, promoting self-reliance in defence production.
- Make and Innovation: The DAP supports indigenization efforts through initiatives like Make I/II/III, funded by both government and industry and iDEX facilitates the incubation of startups in the defence sector.
- Buy (Global-Manufacturing in India): This new feature mandates that the entire or part of the manufacturing procedure for equipment / spare parts / Maintenance or Repair must be conducted by the Indian subsidiary of foreign investors.
- Ease of Doing Business: Easier and faster facilitation of operations and decision-making through the Project Management Unit, preference is given to manufacturers producing complete defence products, rather than parts
Innovations for Defence Excellence (iDEX), 2018 or iDEX Prime, 2022:
- It engages industries, especially MSMEs, start-ups, individual innovators, research and development (R&D) institutes, and academia.
- iDEX provides grants, funding, and support for innovations and R&D.
SPRINT Challenges:
- The Naval Innovation and Indigenisation Organisation (NIIO) introduced the SPRINT initiative in 2022 in collaboration with the Defence Innovation Organisation (DIO).
- It aims to integrate at least 75 new indigenous technologies/products into the Indian Navy under the SPRINT project.
Indigenous Manufacturing:
- To streamline the industrial landscape, the government has undertaken significant measures.
- These include simplification of the industrial licensing process, extending validity periods and liberalising FDI policy allowing up to 74% FDI under the automatic route.
- The share of domestic procurement in the total procurement has seen a significant uptrend i.e., 54% in 2018-19, 59% in 2019-20, 64% in 2020-21, and a significant increase to 68% in the current year with 25% earmarked for private industry.
- There is a substantial reduction in defence procurement from foreign sources i.e., from 46% to 36% in the last four years (2018-19 to 2021-22).
Defence Industrial Corridors:
The government has established two Defence Industrial Corridors, one each in Uttar Pradesh and Tamil Nadu recognizing the significance of regional hubs for aerospace and defence.
Positive Indigenisation Lists:
It prioritises procurement from domestic sources, specifically under the Buy Indian (IDDM) category with embargoes on imports.
E-Biz Portal:
A major leap towards efficiency was the digitization of the application process for Industrial License (IL) and Industrial Entrepreneur Memorandum (IEM) through the E-Biz Portal.
Custom Duty and FDI Policy:
Creating a level playing field, uniform custom duty imposition on all Indian industries, whether public or private, ensures parity.
- FDI policy allows composite foreign investment of up to 49% through the Government route (FIPB).
- Vendor Development Guidelines: To bolster private sector participation, especially SMEs, in defence manufacturing, comprehensive guidelines for Outsourcing and Vendor Development were introduced for DPSUs and the Ordnance Factory Board (OFB).
Challenges Faced by Defence Indigenisation:
- Lesser Defense Budget and Modernization
- India’s defence budget for FY 2023-24 is ₹5.94 lakh crore, positioning it as the fourth-largest military spender globally.
- Concerns are raised about the budget being below 2 per cent of GDP and recommendations to increase it to 3 per cent for adequate preparedness.
1. Insufficient Infrastructure and Capacity
2. Limited Participation of the Private Sector
3. Inadequate Investments in R&D
4. Establishment of Economies of Scale
Way forward:
- Provide incentives and allocate big projects to private companies for the production of significant defence items, moving beyond the current focus on parts and components
- Enhance Private Sector Contribution: Increase the contribution of defence private companies to at least 50% of total defence production
- Establish a Defense Diplomacy Division within the MEA to implement and coordinate defence diplomacy initiatives
News:
Prime Minister hails unprecedented growth of India’s Defence sector in last 11 Years, strengthening Self-Reliance and Modernisation
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