New measures for self-sufficiency in defence – industry perspective

New measures for self-sufficiency in defence – industry perspective

Tue, 05/19/2020 - 17:09
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By Rohit Srivastava

Prime Minister Narendra Modi, on May 12, in his address to the nation called for a self-sufficient India (Atma Nirbhar Bharat). He also announced an economic relief package equivalent to 10 per cent of Indian Gross Domestic Product.

Talking about the pre and post COVID worlds, Prime Minister observed that in order to fulfil the dream of making the 21st century India’s, the way forward is through ensuring that the country becomes self-reliant.

While addressing scientists of Defence Research and Development Organsation (DRDO)  on the occasion of National Technology Day (NTD), on May 11, Defence Minister Rajnath Singh said, ““In the last five years, we have set new targets, and worked hard to formulate the right policy framework to achieve them. I am sure that you can see this change in every field of defence research, development and manufacture.” 

“We always have to keep in mind that there is no alternative to indigenous technology and indigenous manufacture. We will be truly self-reliant only when India succeeds in becoming a net exporter instead of a net importer of technology.”

Finance Minister Nirmala Sitharaman, on May 16, announced structural reforms across eight sectors including defence. The reforms are in two parts - Enhancing Self Reliance in Defence Production and Policy Reforms in Defence Production.

To enhance defence production, India, in near future will “notifying a list of weapons/platforms for a ban on import with year-wise timelines, Indigenisation of imported spares, and separate budget provisioning for domestic capital procurement. This will help reduce the huge Defence import bill.”


In addition, India will corporatize the government-owned Ordnance Factory Board (OFB). This is expected to improve accountability and efficiency in ordnance supplies.

OFB caters to both military and civil forces, manufactures products ranging from cloths to guns and ammunition in its 41 units spread across India.

In last few years, the Indian government has disinvested small part of its share in state-owned defence firms like HAL, BEL and are now listed on the stock exchange. 

In addition, India has also announced an increase in the foreign direct investment (FDI) limit in the defence manufacturing under the automatic route from 49 to 74 per cent.

“So far, FDI inflows of over Rs. 1834 crore have been reported under both government and automatic route till December 2019,” the government said in a reply in parliament on March 4.

Speaking on the announcement, Rahul Chaudhry, Chair, FICCI Committee on Homeland Security, said, “We welcome the reforms in streaming lining the Procurement Process including overhauling Trial and Testing Procedure and coming up with a transparent Band Items list for imports.”

He further asked for rules for “calculating value addition in India, must be linked to GSTN data to create a Transparent Process of identifying Indigenous products (with 50 per cent Plus Domestic Value Addition) in compliance with ‘Make in India’ GFR rules.”

Reacting to the new FDI regulation, Abhishek Jain, Zeus Numerix, said, “The 74 per cent FDI route is good in getting critical technology but we need to be careful as merely getting technology is not enough, we need to absorb it too.”

Adding further he said that “training must be an important part of FDI route. This FDI route should not affect the companies that are engaged in the development of products through the IDDM (Indigenously Designed, Developed and Manufactured) route. We will become self-sufficient (atmnirbhar) only if we develop our own technology where we own the Intellectual property (IP). We as technology developers are hoping that the policy of indigenous software and innovation procurement, the souls of the proposed Defence Procurement Proposal are not diluted because of the FDI limit increase.”

Giving a different perspective on FDI, Lt Gen P Shankar (R) said, “Allowing 74 per cent FDI is fine. However, no defence OEM (original equipment manufacturer) will set shop here unless it has a good chance of getting orders. As per current procurement cycles, it will take another decade. The exception to this is that the government has someone specific in mind for a specific capability that has its own implications.”

Besides these, Government also announced, “time-bound defence procurement process and faster decision making will be ushered in by setting up of a Project Management Unit (PMU) to support contract management; Realistic setting of General Staff Qualitative Requirements (GSQRs) of weapons/platforms and overhauling Trial and Testing procedures.”

Calling PMU as most important reform, Abhishek Jain, said that “vendors should be able to shave off 10 - 20 per cent of the project cost if the procurement is timely.”

“We are hoping that the PMU will be functional until the timely completion of the project. It is also very heartening to note that a separate budget will be kept for the procurement of Indian systems. This is on more leap along with the innovation category procurement proposed in chapter 3 of draft DPP 2020,” he added.

On the rationalisation of GSQR, Jain opined, “This will enable the forces to procure good enough systems at very attractive prices rather than not being able to procure the best system at exorbitant prices. Though it is premature, I would like to suggest that some mathematical/scientific approach be devised on deciding what is a rational specification. Digital twins or computer models are very well capable of doing the same.”

Speaking on the various reforms of the current government to bridge the gap ­between defence ­modernisation and indigenisation in order to boost Make in India, Surendra M Vaidya Executive Vice President and Business Head, Godrej Aerospace said, “Given the current situation, it is imperative to further advance towards the goal of self-reliance by adopting pragmatic measures that will aid us in the times of future crisis.”

“While India may continue to have to import certain niche and state-of-the-art equipment, for the time being, we must focus on battling the other challenges at hand, like upgrading the existing system of field trials and setting realistic SQRs. Make in India aims to simplify a lot of things in defence,” he added.

One of the doyen of the Indian defence sector, J D Patil, whole-time director, L&T, said, “Historically, there are several shining examples in the strategic sectors to prove that our National R&D and Industry can deliver indigenously.”

 “Strategic Submarine Program (ATV Program – INS Arihant and follow-ons complete with underwater Launched Missiles suite), Pinaka, range of Sonars and Radars were indigenously developed and inducted in our Armed Forces. Our Space Industry was built from scratch by ISRO with the help of Academia and the Indian Industry. Similar is the outcome of our strategic Nuclear as well as Civilian Nuclear Power programs, Patil said. 


Appreciating the policy reforms of this government, Patil said that the Indian industry is capable of producing most of the defence equipment through partnering with DRDO and foreign partners.

“Government and Armed Forces must now take the next logical step of entrusting major defence contracts with the Indian Defence manufacturers (Public and Private),” he added.

On the similar line Rahul Choudhary also believes that “given the need for Control Over Data, Security and India's world-class expertise in the field, all security-related software and products must be immediately put a ban for Import List. Let’s walk the talk."

In 2018, the government released a draft Defence Production Policy with a vision to make India one of the top five countries in the defence and aerospace sector. It calls for achieving self-sufficiency in manufacturing of 13 kinds of weapons and platforms by 2025.

 Talking about the draft Defence Production Policy, Patil opined that “it is a definitive policy statement to realise the Prime Minister’s announcement into a reality having defined time-bound goals for Industry growth, exports as well as stopping imports of most major platforms after 2025.”