Rapid progress has been made towards achieving complete Aatmanirbharta (Self-reliance) in the manufacturing of defence equipment required by the Indian Armed Forces within the country.
India’s defence industry is now capable of manufacturing wide variety of high-end requirements e.g. tanks, armoured vehicles, fighter aircrafts, helicopters, warships, submarines, missiles, electronic equipment, special alloys, special purpose steels, and variety of ammunition.
The value of indigenous defence production for Financial Years 2020-2021 and 2021-2022 was Rs 84,643 crore and Rs 94,846 crore respectively.
Domestic Procurements
The Government, in the last three years, ie, from 2019-20 to 2021‑22 and current year (2022-23 up to September, 2022), had accorded Acceptance of Necessity (AoN) to 163 proposals worth Rs 2,46,989.38 crores approximately, under various categories of capital procurement which promote domestic manufacturing as per DAP-2020.
The share of domestic procurement in the total procurement has seen an upward trend. In 2018-19, the domestic procurement stood at 54% of the total procurement; this figure jumped to 59% in 2019-20 and to 64% in 2020-21. In 2022-23, it has been increased to 68% for domestic procurement, of this 25% budget has been earmarked for procurement from private industry.
With focus of Government on indigenisation and procurement of defence products from the domestic resources, the expenditure on defence procurement from foreign sources has reduced from 46% to 36% in the last four years i.e. from 2018-19 to 2021-22.
Domestic Projects Realised
With focus on indigenisation and procurement from domestic industries, all the major areas of domestic defence production ecosystem such as weapons, ammunition, fighter aircrafts, helicopters, missile systems, warships, submarines, armoured vehicles, radars, communication systems, surveillance systems, etc. have benefited from the initiatives and also given boost to the growth of domestic industries including MSMEs and start-ups.
Many significant projects that have been produced in the country during the last few years include (alphabetically listed):
- 155 mm Artillery Gun system ‘Dhanush’
- 25 ton Tugs
- Advanced Light Helicopter
- Anti-Submarine Warfare Corvette (ASWC)
- Arjun Armoured Repair and Recovery Vehicle
- Armoured Personnel Carrier ‘BMP-II/IIK’
- Bi-Modular Charge System (BMCS) for 155mm Ammunition
- Bridge Laying Tank,
- Cheetah Helicopter
- Dornier Do-228
- Fast Interceptor Boat
- High Mobility Trucks
- INS Chennai
- INS Kalvari
- INS Khanderi
- Inshore Patrol Vessel
- Integrated Air Command and Control System (IACCS)
- Lakshya Parachute for Pilotless Target Aircraft
- Landing Craft Utility
- Light Combat Aircraft ‘Tejas’
- Main Battle Tank ‘Arjun’
- Medium Bullet Proof Vehicle (MBPV)
- Offshore Patrol Vessel
- Opto Electronic Sights for Battle Tanks
- Software Defined Radios (SDR)
- Su-30 Mk1
- Surface to Air Missile system ‘Akash’
- T-72 Tank
- T-90 Tan
- Unmanned aerial vehicles
- Water Jet Fast Attack Craft
- Weapon Locating Radar (WLR)
Further, for the first time, a Made-in-India Advanced Towed Artillery Gun (ATAG) howitzer gun developed by our industry was part of the 21-gun salute during the Independence Day celebration at Red Fort in Delhi.
Policy Initiatives to Encourage Self-Reliance
These projects are the result of several policy initiatives and reforms taken by Government in the past few years to encourage indigenous design, development and manufacture of defence equipment, there by promoting self-reliance in defence manufacturing in the country.
These initiatives include:
- According priority to procurement of capital items of Buy Indian (IDDM) category from domestic sources under Defence Acquisition Procedure (DAP)-2020.
- Earmarking of 25% of R&D Budget for Industry led R&D.
- Establishment of two Defence Industrial Corridors, one each in Uttar Pradesh and Tamil Nadu.
- Implementation of Public Procurement (Preference to Make in India) Order 2017.
- Launch of an indigenization portal namely SRIJAN to facilitate indigenisation by Indian Industry including MSMEs.
- Launch of Innovations for Defence Excellence (iDEX) scheme by involving Start-ups & Micro, Small and Medium Enterprises (MSMEs).
- Launch of Mission DefSpace.
- Liberalisation of Foreign Direct Investment(FDI) policy allowing 74% FDI under automatic route.
- Notification of four ‘Positive Indigenisation Lists’ of total 411 items of Services and three ‘Positive Indigenisation Lists’ of total 3738 items of Defence Public Sector Undertakings (DPSUs), for which there would be an embargo on the import beyond the timelines indicated against them.
- Opening up of Defence Research & Development (R&D) for industry, start-ups and academia with 25 percent of defence R&D budget.
- Progressive increase in allocation of Defence Budget of military modernisation for procurement from domestic sources, etc.
- Reforms in Offset policy with thrust on attracting investment and Transfer of Technology for Defence manufacturing by assigning higher multipliers.
- Simplification of Industrial licensing process with longer validity period.
- Simplification of Make Procedure.
Specific provisions have been introduced in DAP-2020 under ‘Buy and Make (Indian)’ and ‘Buy (Global – Manufacture in India)’ category, wherein indigenous production is carried out with Transfer of Technology (ToT) from foreign OEM.
To enable adoption of Artificial Intelligence in defence, Defence AI Council (DAIC) and Defence AI Project Agency (DAIPA) has been created. Further, an AI roadmap has also been finalised for each Defence Public Sector Undertaking (DPSU) under which 70 defence specific AI projects have been identified for development.
Government has notified the ‘Strategic Partnership (SP)’ Model which 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 expenditure on defence procurement from foreign sources has reduced from 46% of overall expenditure in 2018-19 to 36.7% as per data till December 2022.
Research & Development
Defence Research & Development (R&D) has been opened up for industry, start-ups and academia with 25 percent of defence R&D budget earmarked, to promote development of defence technology in the country.
Defence Research and Development Organisation (DRDO) identified nine thrust areas for focused research, namely Platforms, Weapon System, Strategic Systems, Sensors & Communication Systems, Space, Cyber Security, Artificial Intelligence & Robotics, Material & Devices and Soldier Support.
Technology Development Fund (TDF) Scheme also funds industries, especially – Start-ups and MSMEs upto an amount of Rs. 10 Crore, for innovation, research and development of defence Technologies in the field of defence and Aerospace.
Defence Industrial Corridors
To achieve ‘Aatmanirbharta’ and realise the goal of ‘Make in India’, Government of India has established two Defence Industrial Corridors (DICs) in the country, one in Uttar Pradesh and other in Tamil Nadu. These are expected to attract investments in Aerospace & Defence sector and established a comprehensive defence manufacturing ecosystem in the country. Moreover, the respective State Governments have also published their Aerospace & Defence Policies to attract private players as well as foreign companies including Original Equipment Manufacturers (OEMs) in these two corridors. The two State Governments have already signed MoUs/Agreements with various industries for investment worth total value of about Rs 24,000 crore. Investments worth Rs 2,242 crore and Rs 3,847 crore have been made in Uttar Pradesh Defence Industrial Corridor (UPDIC) and Tamil Nadu Defence Industrial Corridor (TNDIC) respectively.
DPSUs carved out of OFB
The seven new DPSUs carved out of erstwhile Ordnance Factory Board have been incorporated as wholly owned Government companies under the Companies Act 2013 in October 2021. Government has taken steps to initially handhold and support these new defence companies in starting their business as corporate entities. In this regard, outstanding indents with erstwhile OFB were grandfathered and converted into deemed contracts valuing about Rs 70,776 crore for the next five years. These deemed contracts provide annual targets for delivery of products. Every year, 60% of amount pertaining to that year’s target would be paid by the Services to the new DPSUs as advance as per the terms and conditions stipulated in the deemed contract. The advances provide the working capital to the newly constituted DPSUs. With more functional and financial autonomy, these new DPSUs are focusing on widening their customer base, including exports to augment the volume of defence production.
Defence Innovations
An innovation ecosystem for Defence titled Innovations for Defence Excellence (iDEX) was launched in April 2018 to foster innovation and technology development in Defence and Aerospace by engaging Industries including MSMEs, Start-ups, Individual Innovators, R&D institutes and Academia. iDEX provides them grants/funding and other support to carry out innovations/R&D which has potential for future adoption for Indian defence and aerospace needs. Under iDEX, 233 problems have been opened, 310 Start-ups have been engaged, 140 contracts have been signed. ‘iDEX Prime’ framework under iDEX has been launched in 2022 to support Start-ups with Grant-in-Aid up to Rs 10 crore to enable the development of high-end solutions.
Till October 2022, a total of 595 Industrial Licences have been issued to 366 companies operating in Defence Sector.
