Self-reliance in Defence Manufacturing

Several policy initiatives and reforms have been taken by the Union Government in the past few years to encourage indigenous design, development and manufacture of defence equipment, thereby promoting self-reliance in defence manufacturing in the country.

These initiatives, inter-alia, include according priority to procurement of capital items from domestic sources under Defence Acquisition Procedure (DAP)-2020; Notification of four ‘Positive Indigenisation Lists’ of total 411 items of Services and three ‘Positive Indigenisation Lists’ of total 3,738 items of Defence Public Sector Undertakings (DPSUs), for which there would be an embargo on the import beyond the timelines indicated against them; Simplification of Industrial licensing process with longer validity period; Liberalisation of Foreign Direct Investment (FDI) policy allowing 74% FDI under automatic route; Simplification of Make Procedure; Launch of Mission DefSpace; Launch of Innovations for Defence Excellence (iDEX) scheme involving start-ups & Micro, Small and Medium Enterprises (MSMEs); Implementation of Public Procurement (Preference to Make in India) Order 2017; Launch of an indigenisation portal namely SRIJAN to facilitate indigenisation by Indian Industry including MSMEs; Reforms in Offset policy with thrust on attracting investment and Transfer of Technology (ToT) for Defence manufacturing by assigning higher multipliers; and Establishment of two Defence Industrial Corridors, one each in Uttar Pradesh and Tamil Nadu; 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 modernization for procurement from domestic sources, etc.

These policy initiatives have given a push to the growth of Industries including MSMEs in the defence sector which have created tremendous employment opportunities. However, no employment data is maintained by Ministry of Defence. The information cannot be shared being strategic and sensitive in nature.

The Aatmanirbhar Bharat initiative has helped the country by encouraging indigenous design, development and manufacture of defence equipment in the country, thereby reducing dependency on imports in the long run. The expenditure on defence procurement from foreign sources has reduced from 46% of overall expenditure in 2018-19 to 36.7% in December, 2022.

With focus on Aatmanirbharta and efforts made to achieve self-reliance, the value of Defence Production has increased as follows in the last three years.

In the Financial Year 2019-2020, Value of Defence Production was 79,071 crores of rupees. In the years 2020-21 and 201-22, the corresponding figures were 84,643 crore and 94,845 crore.

Further, with consistent efforts in last few years, many significant projects including 155mm Artillery Gun system ‘Dhanush’, Advanced Towed Artillary Guns (ATAGs), Light Combat Aircraft ‘Tejas’, Surface to Air Missile system ‘Akash’, Main Battle Tank ‘Arjun’, T-90 Tank, T-72 Tank, Armoured Personnel Carrier ‘BMP-II/IIK’, Su-30 MK1, Cheetah Helicopter, Advanced Light Helicopter, Dornier Do-228, High Mobility Trucks, INS Kalvari, INS Khanderi, INS Chennai, Anti-Submarine Warfare Corvette (ASWC), Arjun Armoured Repair and Recovery Vehicle, Bridge Laying Tank, Bi-Modular Charge System (BMCS) for 155mm Ammunition, Medium Bullet Proof Vehicle (MBPV), Weapon Locating Radar (WLR), Integrated Air Command and Control System (IACCS), Software Defined Radios (SDR), Lakshya Parachute for Pilotless Target Aircraft, Opto Electronic Sights for Battle Tanks, Water Jet Fast Attack Craft, Inshore Patrol Vessel, Offshore Patrol Vessel, Fast Interceptor Boat, Landing Craft Utility, 25 T Tugs, etc. have been produced in the country.

Moreover, the Indian defence export has risen by more than eight times since 2016-17. In 2016-17, the defence exports were worth Rs 1,522 crore which has gone up to Rs 13,800 crore till date.

The Indian defence industry is now capable of manufacturing a wide variety of high-end requirements . Rapid progress has been made towards achieving complete Aatmanirbharta in the manufacturing of defence equipment required by our Armed Forces within the country.

It may be noted that 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.

Government has also established two Defence Industrial Corridors, one each in Uttar Pradesh and Tamil Nadu to attract investments in the 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 a 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.

The Government, in the last three years i.e. from 2019-20 to 2021‑22 and current year (2022-23 up to September, 2022), has 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 been on an uptrend. 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. This year it has been increased to 68% for domestic procurement, of this 25% budget has been earmarked for procurement from private industry.

With focus of the Government on indigenisation and procurement of defence products from the domestic resources, it is no wonder that 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.