Towards atmanirbharta in defense production

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By supporting industry players’ in-house R&D, the new measure is likely to shorten the time between the development of prototypes and their eventual production and help speed up procurement.

By Laxman Kumar Behera

By opening up defense R&D beyond the DRDO, the government has taken a key policy decision to bring major technology development closer to production centers rather than keeping them in distant labs, as was the usual practice until here. By supporting industry players’ in-house R&D, the new measure is likely to shorten the time between the development of prototypes and their eventual production and help speed up procurement.

The FY23 budget is of immense significance to India’s defense establishment. While the finance minister planned a 10% increase in overall allocations for the Ministry of Defense (MoD), she increased defense capital expenditure by 14%, to 1.6 lakh crore. A substantial part of the increased capital expenditure will be devoted to the acquisition of armaments and the development of key infrastructure such as strategic border roads, tunnels and bridges, and will add to the weight of the defense forces which must face an increasingly belligerent China along the border. Border of Ladakh and immediate vicinity of India.

The main takeaway for the Ministry of Defense from FM’s announcement, however, relates to the Indian defense industry domain. Continuing on from its previous initiatives articulated under the Modi government’s flagship project, Atmanirbhar Bharat Abhiyan, the FM has announced four more measures to further enhance India’s self-reliance in defence. First, it announced an increase in domestic industry’s share of the capital procurement budget to 68% in FY23 from 58% in the previous fiscal year. A higher share of the vast supply budget of 1.24 lakh crore in FY23 (compared to1.11 lakh crore in FY22) will not only provide a boost to local industry, especially the private sector, but also send a strong signal to foreign companies that are used to winning large arms contracts directly with the Ministry of Defence.

With a smaller budget reserved for off-the-shelf purchases from outside the country, foreign suppliers would inevitably seek industrial collaboration with their Indian counterparts in order to obtain a share of India’s arms purchases, albeit indirectly. Their industrial participation, which the current policy attempts to facilitate through an enhanced FDI cap of up to 74% automatically, is likely to bolster India’s indigenization efforts.

Second, in a move that has far-reaching implications for the future development and diffusion of Indian technology, the FM announced that 25% of the defense R&D budget would be earmarked for local industry, start-ups and universities. This translates to an R&D budget of 53,300 crore for FY23, which will be spent outside the labs of DRDO, India’s premier defense R&D agency which has so far enjoyed a monopoly in the defense technology development in India.

By opening up defense R&D beyond the DRDO, the government has taken a key policy decision to bring major technology development closer to production centers rather than keeping them in distant labs, as was the usual practice until here. By supporting industry players’ in-house R&D, the new measure is likely to shorten the time between the development of prototypes and their eventual production and help speed up procurement.

Importantly, the decision to open up defense R&D is a logical step and follows several steps the Modi government has taken in recent years to spread and leverage the existing capacity of the wider innovation ecosystem. from India. These include an all-new procurement category that prioritizes domestically designed defense equipment over imported equipment, programs such as Innovations for Defense Excellence (iDEX) and the Technology Development Fund (TDF), and the simplified “Make” procedure, under which industry can benefit from government money or use its resources for the development of prototype weapons, systems and sub- key systems.

Importantly, some of these programs have started to bear fruit, indicating the ability of Indian industry to undertake defense R&D. Moreover, in view of the maturation of the Indian defense industry, even DRDO, which previously developed all technologies for defense, has now decided to outsource the design and development work of more than 100 systems and systems to industry. In light of these developments, it makes sense that Indian industry would be given a greater role in R&D.

That said, some might see the R&D budget split as an attempt to marginalize DRDO. Nothing could be further from the truth. DRDO’s prominence as India’s leading defense technology agency will continue for the foreseeable future. In fact, its relevance is further enhanced by FM’s third defense specific announcement for the establishment of an SPV whereby Indian industry can collaborate with DRDO and other organizations to undertake the design and development of defense equipment.

Admittedly, the collaborative model is not a new concept. The existing MoD Procurement Manual allows industry to partner with DRDO as a Development and Production Partner (DcPP) for many sensitive products. The DcPP led to the successful development of several products such as the artillery gun, the long-range glide bomb and the Pinaka pinion system and contributed positively to the brand image of the DRDO. The SPV model will further institutionalize the DcPP model and involve industry as an important stakeholder from the start of the design and development work.

Fourth, the FM announced the establishment of an “independent nodal coordination body” to meet the national industry testing and certification requirements. This seemingly innocuous measure nevertheless has a huge implication on the Indian defense industry, especially small and medium enterprises, start-ups and individual innovators who now have to race from pillar to post to get their products certified. Although the Department of Defense has made available over 130 test labs and 25 test ranges for industry use, there is no single agency to coordinate their efforts, resulting in undue delays. Consolidation of all trial, testing and certification agencies under one administrative agency will fill this vital gap and intensify atmanirbharta in defense production.

(The author is Associate Professor, Special Center for National Security Studies, Jawaharlal Nehru University. The opinions expressed are personal and do not reflect the official position or policy of Financial Express Online.)

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