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Sansad TV: AIR- India’s Self Reliance in Defence Sector

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Status of exports:

  • The process of developing and manufacturing defence equipment within a country to reduce import dependency and achieve self reliance
  • The Government has taken several policy initiatives in the past few years and brought in reforms to encourage indigenous design, development and manufacture of defence equipment, thereby promoting self-reliance in defence manufacturing & technology in the country.
  • From 2016-17 to 2018-19, the country’s defence exports have increased from ₹1,521 crore to ₹10,745 crore, a staggering 700% growth.
  • The value of exports of defence itemsincluding major items in Financial Year 2014-15 and 2020-21 was ₹1,940.64 crore and ₹8,434.84 crore respectively.
  • India has set itself an ambitious targetto achieve a manufacturing turnover of $25 billion or ₹1,75,000 crore including exports of ₹35,000 crores in aerospace and defence goods and services by 2025.

Initiatives taken up by the government:

  • These initiatives, inter-alia, include according priority to procurement of capital items of Buy Indian (IDDM) category 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; Liberalization 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 by involving Start-ups & Micro, Small and Medium Enterprises (MSMEs); 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; Reforms in Offset policy with thrust on attracting investment and Transfer of Technology for Defence manufacturing by assigning higher multipliers; and Establishment of two Defence Industrial Corridors, one each in Uttar Pradesh and Tamil Nadu.
  • Earmarking of 25% of R&D Budget for Industry led R&D; Progressive increase in allocation of Defence Budget of military modernization for procurement from domestic sources, etc.

Need for defence indigenization: 

  • For self reliance
  • To reduce dependency on foreign player and ensure security of nation
  • To conserve or reduce Balance of Payment deficit
  • To promote employment and also exports
  • To reduce cost of production to India and thereby reduce fiscal deficit. According to the Stockholm International Peace Research Institute (SIPRI), in 2019, India became the third-largest defence spender in the world

Measures being taken by the Government to promote defence exports:

  • Simplified defence industrial licensing
  • Relaxation of export controls and grant of No Objection Certificates (NOC).
  • A committee comprising the Defence Minister, External Affairs Minister and National Security Advisor has been set up to provide faster approvals for the export of major defence platforms.
  • Extending Line of Credit (LoC) to foreign countries to import defence products.
  • Empowering Defence Attaches in Indian missions abroad to promote defence exports.

Challenges

  • Lack of Defence Manufacturing base in India
  • Primarily driven by Government ordnance factories and poor private participation
  • The public sector (DPSUs/OFs) by far has enjoyed the preferred categorization, particularly for big ticket purchases, when considering the Indian route, despite its poor track record as regards time and cost overruns, inefficiencies and poor financial performance.
  • The defence industry per-se being a capital intensive industry with high risks on investments leaves very few private players in the arena. DPSUs, on the other hand, have not done much to promote proficient business practices by involving the industry and Micro, Small,and Medium Enterprises (MSMEs).
  • The report of the 33rd Standing Committee on Defence – Indigenization of Defence Production: Public Private Partnership was highly critical of the steps taken by the government to promote indigenization
  • High costs and involved and lack of assured market
  • Poor technological transfer by foreign companies
  • Lack of Data
  • Assessment of Degree of Indigenisation: As of today, no scientific system is in place to assess the extent/ level of indigenisation achieved by defence production entities in the country.
  • Bureaucratic delay and licensing issues:there is still no eas of doing business in defence industry.: Investment in the defence sector is subject to compliance with the licensing requirements stipulated by the Department of Industrial Policy and Promotion (DIPP)

Conclusion:

  • India has set a target of clocking defence exports worth USD 5 billion by 2024.
  • There is a need to create an environment for greater participation of private industry, a stable macro-economic and political environment, and a transparent business environment which encourages fair competition.
  • To provide faster approvals for export of major defence platforms, a committee comprising of the Defence Minister, External Affairs Minister and National Security Advisor was set up.
  • This Committee would authorise subsequent exports of major indigenous platforms to various countries. The Committee would also explore various available options including the Government-to-Government route