Defence Indigenisation in India

Table of Contents

Context: The fifth Positive Indigenisation List and the Navy’s updated indigenisation road map, “Swavlamban 2.0” was recently released by the Defence Ministry.

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The fifth Positive Indigenization List comprised of 98 items which include highly complex systems, sensors, weapons and ammunition etc.
Understanding the Positive Indigenisation List (PIL):
- The PIL essentially means that the Armed Forces—Army, Navy, and Air Force—will only procure the listed items from domestic manufacturers.
- The manufacturers could be private sector players or Defense Public Sector Undertakings.
- This concept was first rolled out in the Defence Acquisition Procedure (DAP) 2020.
The DAP 2020 is a comprehensive document that outlines the process for the procurement of defense equipment and services in India.
The DAP replaced the erstwhile Defence Procurement Procedure (DPP).
- The PIL is published by the Ministry of Defense (MoD) and is updated on a regular basis.
- The PIL is a key component of its “Atmanirbhar Bharat” (self-reliant India) initiative.
Swavlamban 2.0: The roadmap aims to achieve self-reliance in the design, development, and construction of naval warships and submarines.

What is Defence Indigenisation?

Defence indigenisation is the process of developing and manufacturing defence equipment and systems within the country. It is also known as self-reliance in defence.
Defence Research & Development Organisation (DRDO), Defence Public Sector Undertakings (DPSUs), and private organisations are playing a critical role in indigenisation of defence industries.

Need for Defence Indigenisation

To reduce import dependency: According to SIPRI International Arms Transfers 2022 report, India remained the world’s largest arms importer from 2018 to 2022 followed by Saudi Arabia and Ukraine.
Capacity Building: Developing sophisticated weapons systems for land, sea, and air platforms is vital to address emerging threats and improve operational readiness.
Regional Power Status: To act as a net security provider in South Asia, India must develop advanced defense capabilities, contributing to regional stability.
Employment generation: As per government estimates, a reduction in 20-25% in defence related imports could directly create an additional 100,000 to 120,000 highly skilled jobs in India.

Government Initiatives to Promote Defence Indigenisation

Ministry of Defence has set a target of achieving a turnover of $25 Bn in aerospace and defence Manufacturing by 2025, which includes $5 Bn exports.
Make in India: Under this, the government has established two Defence Industrial Corridors (DICs) in the country, one in Uttar Pradesh and other in Tamil Nadu.
Defence Acquisition Procedure (DAP) 2020: The DAP 2020 introduces a new procurement category called “Buy (Indian – Indigenous Design, Development, and Manufacturing)” or IDDM.
- IDDM category gives preference to defense products that are designed, developed, and manufactured in India with a minimum specified level of indigenous content.
Defence Production and Export Promotion Policy 2020 (DPEPP): Ministry of Defence (MoD) has formulated a draft DPEPP 2020 as guiding document of MoD to provide a focused, structured, and significant thrust to defence production capabilities of the country for self-reliance and exports.
SRIJAN portal: It is a non-transactional online marketplace platform to partner the private sector in indigenisation efforts of DPSU’s and the Armed Forces.
Offset Policy: It mandates that foreign defense vendors invest a certain percentage of the contract value in India’s defense and aerospace sector.
- The policy on offsets was first introduced as part of the Defence Procurement Procedure (DPP) 2005.
Innovation for Defence Excellence (iDEX): It provides funding and other support to startups and individuals to develop new defense technologies.
Technology Development Fund (TDF): To encourage participation of public/ private industries for enhancing cutting-edge technology capability for defence applications.
Foreign investment: In the defence sector, the government has liberalized and allowed FDI under automatic route up to 74% and up to 100% through Government route.

Challenges for Defence Indigenisation in India

Low funding on R&D: India is funding 6% on defence Research & Development (R&D) of the Defence Budget whilst, USA and China are spending approximately 12% and 20%, respectively.
Over-reliance on Public Sector: There is red tapism in defence production and export due to over -reliance on Defence Research and Development Organisation (DRDO), Ordnance Factory Boards, Hindustan Aeronautics Ltd (HAL) etc.
Limited Private Sector Participation: Private sector participation in defense manufacturing, especially by Micro, Small, and Medium Enterprises (MSMEs), is currently insufficient.
Lack of Overarching Organization: The absence of a centralized organization for coordinating defense indigenization efforts leads to a lack of synergy among agencies such as DRDO, and DPSUs.
Infrastructure Lapses: Due to lack of adequate infrastructure, the demand of importer is not met on time. This forces them to look towards other countries.

Way Forward

Support to MSMEs/Startups: Through PLIs the export potential of MSMEs/Startups can be utilised.
Defence Renewal Fund: Ministry of Finance should create a Non-Lapsable Defence Modernisation Fund which can be used exclusively for the procurement of key defence assets at critical times.
- Creation of such fund was also backed by the 15^th Finance Commission.
Funding: Sufficient funding should be allocated to defense research to ensure that strategic projects are pursued with utmost commitment.
Adopt 5 Is: There is need to adopt the concept of 5 Is (Identify, Incubate, Innovate, Integrate and Indigenize) to accelerate progress, reduce costs and complete defence procurement in a time bound manner.