India is fast emerging as an attractive investment destination with World Bank’s ‘Ease of Doing Business (EoDB) ranking, market size as well as the capability, ability and skill to develop futuristic Defence systems. Given the pace at which things are moving, India will soon emerge as a Defence production hub offering a wide range of armaments and equipment made in India in the defence, aerospace and shipbuilding sectors.
Already more than 50 startups are developing new ‘fit-for-military-use’ technologies/ products and 300 others may be developing 60 new technologies/ products in the next five years. Towards this end, Mission Raksha Gyan Shakti has contributed to promoting a culture of innovation and technology development and a greater number of patents in the Defence manufacturing ecosystem.
India is looking to develop the capability to design, develop and produce as well as re-engineer spares and consumables for major systems like Armoured Vehicles, Submarines, Fighter Aircraft, Helicopters, and Radars with the active participation of the public and private sector.
To get things moving it has been decided to set up two Defence Industrial Corridors — one in Uttar Pradesh and another in Tamil Nadu. Subsequently, six nodes have been identified in Uttar Pradesh Defence Corridor at a cost of over Rs.3700 crore at Agra, Aligarh, Chitrakoot, Jhansi, Kanpur and Lucknow. Likewise, the five nodes Tamil Nadu Defence Corridor identified at Chennai, Coimbatore, Hosur, Salem, and Tiruchirappalli will require an investment of over Rs.3100 crore.
Apart from the above, Hindustan Aeronautics Limited (HAL) has planned a capital investment of Rs.1200 crore in its units located at Lucknow, Kanpur, Korwa and Naini over the period of 5 years.
Recently, the Ministry of Defence formulated a draft Defence Production and Export Promotion Policy 2020 (DPEPP 2020) to promote self-reliance in defence and aerospace sectors and achieve a turnover of Rs 1,75,000 Crores (US$ 25Bn) including export of Rs. 35,000 crore by 2025.
The main idea behind the initiative is to streamline defence production and exports in keeping with the Atmanirbhar Bharat and “Make in India” initiatives through domestic design and development. The policy visualizes India ranking among the leading countries of the world with proven skills and capability from design to production to meet the twin objectives of self-reliance and exports in Defence, Aerospace and Naval Shipbuilding sectors.
The policy envisages reduced dependence on imports and the development of a dynamic, robust and competitive Defence industry, including the Aerospace and Naval Shipbuilding industry to cater to the needs of Armed forces with quality products.
The Defence Production and Export Promotion Policy brings out multiple strategies under the following focus areas:
- Procurement Reforms
- Indigenization & Support to MSMEs/Startups
- Optimize Resource Allocation
- Investment Promotion, FDI & Ease of Doing Business
- Innovation and R&D
- DPSUs and OFB
- Quality Assurance & Testing Infrastructure
- Export Promotion
In the last nearly one decade the Department of Defence Production (DDP), Ministry of Defence, Government of India has produced a wide range of defence paraphernalia through Ordnance Factories, Defence Public Sector Undertakings (DPSUs) and, licensed private sector companies including arms and ammunition, tanks, armoured vehicles, heavy vehicles, fighter aircraft and helicopters, warships, submarines, missiles, ammunition, electronic equipment, earth moving equipment, special alloys and special purpose steels.
Defence Research & Development Organisation (DRDO), the R&D wing of the Ministry of Defence have designed and developed a number of weapon systems to meet the requirement of the armed forces like Agni and Prithvi series of missiles; Tejas-light combat aircraft; Pinaka-multi-barrel rocket launcher; Akash-air defence system; Dhanush-artillery gun; Arjun-main battle tank and a wide range of radars and electronic warfare systems.
DRDO’s assorted wish list also includes gas turbine engines, hypersonic missiles, ballistic & cruise missiles, armoured vehicles, submarines, fifth-generation fighters, transport aircraft, unmanned platforms, strategic materials, cybersecurity infrastructure, surveillance systems, artificial intelligence & robotics, airborne sensors as well as secure communication devices, microprocessors and routers.
India is already a large aerospace market with rising passenger traffic and increasing military expenditure, as a result of which the demand for aircraft (fixed and rotary wings) is rising.
The opportunities in the aerospace industry have been identified in the following segments – aircraft build work, aircraft Maintenance, Repair and Overhaul (MRO), helicopters, engine manufacturing and MRO work, line replaceable units, Unmanned Aerial Vehicles (UAVs) and upgrades and retrofits.
The Defence Production and Export Promotion Policy envisions creating an industry ecosystem to indigenize the imported components (including alloys and special materials) and sub-assemblies for over 5,000 defence equipment and platform manufactured in India by 2025.
To get things moving, the following strategies have been proposed:
- Corporatization of Ordnance factories to make them competitive and to improve their productivity
- Efforts to position DPSUs as system integrators and create a multi-tier domestic supply chain
- OFB/DPSUs will be mandated to maximize outsourcing from indigenous sources
- Disinvestment of DPSUs
- Focus on modernization and technological up-gradation
- DPSUs would be encouraged to move towards Industry 4.0 to boost efficiency, improve quality, agility to respond to market unpredictability, and enable new business models.
- A partnership model would be formulated in DPSUs/OFB for the development of critical technologies and components
In order to achieve the target of Rs 35,000 crore (US$ 5 Bn) of Defence Exports by 2025, the Defence Production and Export Promotion Policy has proposed the following strategies:
- Defence Attachés to be tasked to promote export of indigenous defence equipment abroad. This effort would be supplemented by selected DPSUs which would be positioned as export promotion agencies for export of defence products abroad.
- DPSUs and OFB would be required to earn at least 25% of their revenue from exports as target by 2025.
- Defence Expo and Aero India to be positioned as major global events to showcase India’s capabilities in defence manufacturing, and encourage exports. This would be supplemented by branding the Indian Defence products.
- Defence Industry delegations to visit targeted countries.
- The end-to-end export clearance process to be made seamless and time-bound.
- Open General Export License (OGEL) to encourage export of selected defence equipment to friendly countries.
- Achievements of the Indian Defence industry to be showcased on Indian Embassy web-sites
- Active support of services for exploring opportunities for export of defence products
As this stand, the share of domestic procurement in overall Defence procurement at present is about 60 per cent. In what is seen as a big boost for the private sector, the Defence Production and Export Promotion Policy suggests doubling the procurement from the domestic industry from Rs 70,000 crore to Rs 1,40,000 crore by 2025.
To achieve this target, OFB/DPSUs will be mandated to increase productivity, enhance quality, reduce costs and ensure timely execution of orders by optimizing inventory management, greater vendor outsourcing at all levels, improving skill levels and overall project management.