Promise of budgetary support for defence innovation

June 21, 2021 12:51 PM

Considering that the budgetary allocations are made annually in the federal budget, the approval given by Rajnath Singh can best be described as the indicative budget for the next five years.

indian armed forcesThe actual allocation of funds to DIO would depend on how much money the finance minister is able to allocate each year for this purpose.

By Amit Cowshish, 

On June 13, Defence Minister Rajnath Singh approved budgetary support of Rs 498.8 crore for the Defence Innovation Organisation (DIO). This will enable DIO to provide funds to nearly 300 aspiring entrepreneurs and 20-odd Partner Incubators (PIs) to undertake R&D and innovation projects. The funds will be released by the Department of Defence Production (DDP) over the next five years.

Considering that the budgetary allocations are made annually in the federal budget, the approval given by Rajnath Singh can best be described as the indicative budget for the next five years. The actual allocation of funds to DIO would depend on how much money the finance minister is able to allocate each year for this purpose.

This five-year budget includes Rs 450 crore for funding the projects, Rs 29.6 crore for the PIs and Rs 19.18 crore for the DIO’s internal operations, including administrative and management cost and the expenditure on monitoring and evaluation of projects.

During the current financial year, DIO is expected to be allocated Rs 66.1 crore. It is now known whether the DDP already has sufficient funds from which this amount will be released, or it will now approach the Ministry of Finance for additional allocation.

Incorporated in 2018 under Section 8 of the Company Act, 2013, DIO is a not-for-profit organisation that manages Innovation for Defence Excellence (iDEX) scheme. The aim of this scheme is to create ‘an ecosystem to foster innovation and technology development in Defence and Aerospace by engaging Industries including MSMEs, start-ups, individual innovators, R&D institutes and academia and provide them grants/funding and other support to carry out R&D development which has good potential for future adoption for Indian defence and aerospace needs’.

This nascent organisation is managed by a Board of Directors, with Secretary (DDP) as the Chairman, Additional Secretary as the Chief Executive Officer, and CMDs of Hindustan Aeronautics Limited (HAL) and Bharat Electronics Limited (BEL), and the MD of Atal Innovation Mission (AIM), as members.

The DIOs’ activities have so far been largely confined to organising Defence India Start-up Challenge, or DISC, though currently it also seems to be running a 45-day awareness programme since June 1 for the aspiring innovators.

The iDEX challenge is open to start-ups, MSMEs (Micro, Small and Medium Enterprises), R&D institutions, academia, and individual innovators. They are required to work on the problem statements prepared by the armed forces, Defence Public Sector Undertakings (DPSUs), Ordnance Factory Board (OFB) -now facing the prospect of being broken up into seven corporations- and by other agencies which have signed Memorandum of Understanding (MoUs) with the DIO.

Milestone-related financial assistance in the form of grant, equity, debt, and other analogous arrangements is provided to the maximum limit of Rs 1.5 crore to entities shortlisted for taking up the challenge and, following an elaborate process of assessment and evaluation, the winners are announced by the DIO.

Four challenges have been conducted so far under the iDEX framework. In addition, at least one challenge seems to have been conducted exclusively for the armed forces personnel.

The iDEX scheme also envisages funding the PIs for undertaking similar activities to the extent of Rs 40 lakh if the program is deemed worthwhile. It, however, remains unclear if any partner has benefitted from this provision so far.

As for the outcome of the past three years that DIO has been in existence, the picture is hazy, as the information available on the iDEX website is too sketchy, disorganised, and difficult to collate. However, a rough count shows that so far at least 72 individual innovators, small companies, military personnel and one institution -IIT Palakkad- have won 30-odd challenges posed by the armed forces, Goa Shipyard Limited (GSL), BEL and HAL.

A wide range of prototypes and technologies have been successfully developed by the winners. The list includes Individual Protection System, See-through Armour, Secure Hardware Encryption Device, Unmanned Surface/Underwater Vehicles, Computer Generated Targets for Virtual Training, 4-G tactical Area Network, Autonomous Underwater Swarm Drones, AI based Satellite Image Analysis, Foliage Penetration Radar, and Remote Real Time In-Flight Health Monitoring of Aircrew.

Credit must be given where it is due. The fact that the four rounds of challenges held so far have elicited good response and quite a few prototypes and technologies have been developed by a cross-section of innovators is both impressive and heartening. However, the mystery surrounding the scheme endures, not least because of the incomprehensibility and disjointedness of the information posted there. Nevertheless, three issues stand out.

First, though many prototypes and technologies have been developed, this cannot be an end in itself. It is not known how many of these have been, or are being, integrated with the in-service, under development or under production equipment, platforms, and weapon systems. This is the only yardstick that can be used to assess the ultimate utility of the solutions developed by the innovators.

Second, the commercial viability of developing the solutions, which may also require the innovators to partially fund the projects themselves, would depend on their ability to sell the product. No information is available on the DIO website about the solutions developed by the innovators being bought by the Indian industry or the MoD, or their export by the innovators.

Third, the iDEX scheme seems to run in parallel with the Technology Development Fund (TDF) managed by the Defence Research and Development Organisation (DRDO) to promote self-reliance in technology development. It would be disingenuous to argue that there is a nuanced difference between the objectives of both these schemes.

Even if it is conceded for argument’s sake that these schemes serve somewhat different purposes, there is no denying that a synergised approach to innovation and R&D can produce better results. Turf war between DDP and DRDO seems to have trumped the need for such synergy.

(The author is former Financial Advisor (Acquisition), Ministry of Defence. Views expressed are personal and do not reflect the official position or policy of Financial Express Online.)

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