Development and consolidation of Indian Defence Sector
April 12, 2021 1:42 PM
The recently incorporated DAP-2020 seems to be the well-elaborated acquisition process ever introduced, with an unambiguous ambition to make India “Atamnirbhar- self-reliant”. I
The MSMEs participation in the Indian defence sector is coming forth
By Ajay Bedi
India’s endeavour has always been to be self-reliant, self-sufficient and self-sustainable in its security and defence commitments. The recently incorporated DAP-2020 seems to be the well-elaborated acquisition process ever introduced, with an unambiguous ambition to make India “Atamnirbhar- self-reliant”. It is imperative to highlight the incorporation of steps like “Leasing”, giving due importance to “Information & Communication Technology (ICT)” &“Artificial Intelligence (AI)” which are imbibed with a progressive vision towards its dream. Merely incorporating these in the policy document will not be sufficient, we need to watch the progress by involving rigorous efforts in implementation for comprehensive growth of these varied but interrelated sectors.
The defence comprises the enormously technical and extremely collaborative industrial sector, which transcend through a needle to the manufacturing of complicated computer chips, sophisticated Electronic Warfare Systems (EWS), surface warfare to fighter aircraft etc…, all of the above products impact the entire allied industrial sector. Thus, we need to keep a stringent focus on defence sector development, but also require fabricating a policy that promotes the development of associated industries concurrently.
Having underlined those issues, now we need to push for an inclusive policy where we involve the Indian Micro, Small & Medium Enterprise (MSMEs) taking a significant role in the Aerospace & Defence (A&D) sector, particularly on the revenue side. It has to be a resolute effort, where we provide them opportunities to form tie-ups to support an existing inventory or to get involved in a futuristic tie-up for a platform/article/item which India is planning to procure through a foreign vendor. This kind of tie-up will foster comprehensive growth. It will not warrant a great investment however would create an essential support base in all defence applications. Some notable Indian organisations are currently producing intermediary products for the original equipment manufacturers which are sold in the global market. Providing in-situ / in-country support in maintenance and repair, even partially, would infuse confidence and a sense of achievement in our local and small-scale industry base.
We need to look for the best practices applied by the developed countries for involving the Small & medium scale industry. If you analyse the policies involved in European countries EDA(European Defence Agency), it works on priority setting in the areas of capability development (Capability Development Plan), defence research (Overarching Strategic Research Agenda) as well as skills, technologies, manufacturing capabilities (Key Strategic Activities). Besides other initiatives the European Parliament, the European Commission Launched European Defence Technological and Industrial Base-EDTIB, to support a unified action plan for the European Union, with a single industrial base, which will work towards creating a single market base. The same could be witnessed under the United States of America’s Department of Defense, Office of Small Business Programs-(OSBP), where the variety of programs conducted to help the small scale sector to explore its potentials in research & development, technology innovation etc.…. It’s interesting to understand the policy and procedure of the USA in that regard, they created a level playing field for its industry players which helped their small & medium enterprise sector to grow exponentially.
The MSMEs participation in the Indian defence sector is coming forth, approximately 6000 MSMEs are supporting the Defence Public Sector Undertakings, Director General Ordnance Factories and Defence Research and Development Organisation. Private sector MSMEs are still marginal, especially when the government supports its “make in India” initiative. Agreements with foreign organisations would help MSMEs. The work culture exchanges would provide international exposure to our industry.
The large Indian industrial houses with robust financial standing respectively could play a catalyst in creating a stronger foundation of India defence sector by supporting the MSMEs endeavour to be an integral part of this colossal industry, which is perpetually driven by product evolutions and inventions. They could encourage MSMEs participation in a project/programme from the time of its conceptualization.
The major players could develop a stringent vendor selection and development criterion for intermediary products e.g., assemblies, sub-assemblies, chips etc.… for an indigenized defence product. For further encouragement and facilitation, they could introduce a fund which could be called “Defence Development fund-DDF” like the “Corporate Social Responsibility-CSR”, but without any legal stature, governed under the prevalent law. This scheme could further be strengthened by involving Industry Chambers, Bodies or renowned Associations of related sectors.
The stated financial support to be provided to a selected vendor, who has niche capabilities and has a propensity towards the research & development side, with the potential to support the allied industry in the field of defence and aerospace. This approach has an element of risk for the investment provider, but the same could be mitigated by applying some strict rules for dispensation of such funds, the receiver has to satisfy the prerequisite to earn this support. A balance needs to be created between the risk and opportunity for the involved parties.
This would act as a bonding factor amongst the players involved, would initiate fluid dialogue within the participants, which would lay a foundation for faster growth, interdependence, generate confidence which in turn would nurture inventions and innovation of revolutionary products compatible with global quality, consolidation would gradually guide us towards our goal of self-reliant, self-sufficient and self-sustainable- Atamnirbhar.
The Indian government has taken the initiative by taking off 101 items from the import list, and that list is expected to expand soon. The financial support by major private companies would go a long way in the development of the defence industry in India at the core level for a stronger foundation. To facilitate the growth of indigenization the private sector needs to concentrate on inventions, innovations and research & development, whereas the government must ensure the security of supply-SoS, tax benefits, and various other entry relaxations which would add as a stimulus for domestic industrial houses.
The recently placed orders of 1,300 “light specialist fighting vehicles” for the Indian Army to one of the major automobile producers of India and emergency procurement of 27 “M4 wheeled armoured vehicles” for the Indian Army to a Pune based company are the encouraging initiatives that would immensely help the domestic Indian defence sector. However, it’s also a test for the domestic industry to prove its mettle on the following fronts: – 1. The collaboration and assimilation of local MSMEs in the production cycle for actually producing an indigenized product, not merely assembling it in India, 2. A quality product with export potential without inheriting delays.
Further consolidation of our most coveted dream would only take place when we expand our “security of supply” base beyond the local industry, considering exporting our indigenized products to our neighbouring countries in Asia as well as countries from other parts of the globe like Latin and South American countries, the African continent, which are looking for a good quality defence and aerospace products to meet their security requirement without impacting their defence budget severely. The Indian establishment has envisaged this by considering exporting indigenously produced “Light Combat Aircraft (Tejas)” and “BrahMos missile” to various countries. It is in the right direction, however, we need to have a concerted plan in place to maintain and support these items for an initial period, and cannot afford to repeat the “Hindustan Aeronautics Limited manufactured Advanced Light Helicopter (Dhruv) fiasco of Ecuador”.
Indian defence and aerospace sector possess immense potential, we only need to steer it in the right direction by state support and private industry initiatives.
(The author is an Independent Defence Industry Consultant. Email: email@example.com Views expressed are personal and do not reflect the official position or policy of the Financial Express Online.)