Four years ago on 15 August, in his address from the Red Fort, Prime Minister Narendra Modi made the clarion call for “Make in India”. He said, “come make in India, we have steel...we have discipline, we have resolve.. sell anywhere, (but) make in India”. Among the range of opportunities he highlighted, there was the unmissable “satellites to submarines”, implying immense potential in defence and aerospace.
In 1947, India had a reasonable defence industrial base comprising 18 ordnance factories and one defence public sector undertaking (DPSU). Over the years, although the defence public sector expanded to 41 ordnance factories and nine DPSUs, it could not keep pace with the evolving threat and concomitant requirements, resulting in increasing dependency on import. Defence was opened to the private sector in 2001, with each edition of the procurement procedure adding provisions to promote indigenization. But this could not generate enough enthusiasm because of complex processes and difficultly in access.
The “Make in India” initiative is striving to change that. Some very forward-looking policy directions were promulgated through the Defence Procurement Procedure (DPP) 2016 with emphasis on “self-reliance” and “promoting MSME (micro, small and medium enterprises)”. Concomitantly foreign direct investment (FDI) norms were relaxed from 26% to 49% and up to 100% for state of art technology. The strategic partnership policy was announced in 2017. More recently, defence minister Nirmala Sitharaman simplified the industry funded development procedure (Make-II). A new defence production policy that is under deliberation aims to achieve self-reliance in 13 systems latest by 2025. The draft policy has unambiguous targets—achieve a turnover of ₹ 1.7 trillion in defence sector by 2025, with an additional investment of ₹ 70,000 crore, creating two-three million jobs. The defence export target is set at ₹ 35,000 crore.
Defence offsets introduced in 2005 to leverage imports to develop Indian defence industry remain underutilized. The offset guidelines are being reviewed to enlarge avenues for discharge.
The government’s thrust is also evident from the two defence industrial corridors and the launch of the Innovation for Defence Excellence (IDEX). A defence planning committee has been constituted under the national security adviser, with the three service chiefs, and the foreign, defence and expenditure secretaries. The committee is expected to prioritize modernization of the Armed Forces.
India’s growth to a $5 trillion economy has to be undergirded by strong security. To face our security threats and meet international expectations, self-reliance in defence is critical. To achieve self-reliance, it is imperative that these forward-looking policies are actualized. For example, the Make procedure, which is the soul of “Make in India”, needs to be pursued more vigorously for both the government-funded Make 1 and the industry-funded Make 2. To encourage start-ups in defence, we need to learn from Israel. While success is important, even failed projects provide great lessons.
The services need to look beyond the predominantly command orientation towards creating specialists, like technology leaders who understand military requirements and technology to lead the drive. To promote technology through strategic partnership and other provisions such as “enhanced performance parameters”, the services, together with finance authorities, have to devise means for price indexing technology.
India’s excellence in information technology (IT) needs to be optimized for defence. DPP is too cumbersome to keep pace with technological life cycle of IT. Even for other products, including import substitution, the prolonged procurement process upsets industry investment cycles. Predictability, timeliness and continuity are important for industry to sustain the rigorous demands of defence.
The industry is well invested and awaiting projects. The enthusiasm of the MSME is palpable from the preparations of the old participants and surge of new entrants.
The simplification of ministry of defence processes is a constant expectation of the industry. The challenge to simplification, for process managers, is the fear of allegations of scams. To quote a former bureaucrat, “We are so fond of scams, we manufacture one even when it doesn’t exist.” Invariably, defence procurements, whether it’s PT shoes or fighter aircraft, hit headlines, with allegations and counter-allegations resulting in freezing of procurement, collateral effects on other schemes and making the process more knotted. The unnecessary hue and cry discourages both domestic and foreign industrial partners.
For the Armed Forces to modernize and “Make in India” to succeed, this environment has to change. Inherent challenges in an election year notwithstanding, in a democracy there needs to be a larger buy-in for strategic decisions. A possible solution is to empower the parliamentary committee on defence, which cuts across party lines, to scrutinize major procurement decisions and send the right message, while being mindful of security sensitivity. To achieve the objectives of “Make in India” and secure independence from imports in defence, nurturing the right environment for decision making and implementation of these transformational policies is more crucial now than ever before.
In 1947, India had a reasonable defence industrial base comprising 18 ordnance factories and one defence public sector undertaking (DPSU). Over the years, although the defence public sector expanded to 41 ordnance factories and nine DPSUs, it could not keep pace with the evolving threat and concomitant requirements, resulting in increasing dependency on import. Defence was opened to the private sector in 2001, with each edition of the procurement procedure adding provisions to promote indigenization. But this could not generate enough enthusiasm because of complex processes and difficultly in access.
The “Make in India” initiative is striving to change that. Some very forward-looking policy directions were promulgated through the Defence Procurement Procedure (DPP) 2016 with emphasis on “self-reliance” and “promoting MSME (micro, small and medium enterprises)”. Concomitantly foreign direct investment (FDI) norms were relaxed from 26% to 49% and up to 100% for state of art technology. The strategic partnership policy was announced in 2017. More recently, defence minister Nirmala Sitharaman simplified the industry funded development procedure (Make-II). A new defence production policy that is under deliberation aims to achieve self-reliance in 13 systems latest by 2025. The draft policy has unambiguous targets—achieve a turnover of ₹ 1.7 trillion in defence sector by 2025, with an additional investment of ₹ 70,000 crore, creating two-three million jobs. The defence export target is set at ₹ 35,000 crore.
Defence offsets introduced in 2005 to leverage imports to develop Indian defence industry remain underutilized. The offset guidelines are being reviewed to enlarge avenues for discharge.
The government’s thrust is also evident from the two defence industrial corridors and the launch of the Innovation for Defence Excellence (IDEX). A defence planning committee has been constituted under the national security adviser, with the three service chiefs, and the foreign, defence and expenditure secretaries. The committee is expected to prioritize modernization of the Armed Forces.
India’s growth to a $5 trillion economy has to be undergirded by strong security. To face our security threats and meet international expectations, self-reliance in defence is critical. To achieve self-reliance, it is imperative that these forward-looking policies are actualized. For example, the Make procedure, which is the soul of “Make in India”, needs to be pursued more vigorously for both the government-funded Make 1 and the industry-funded Make 2. To encourage start-ups in defence, we need to learn from Israel. While success is important, even failed projects provide great lessons.
The services need to look beyond the predominantly command orientation towards creating specialists, like technology leaders who understand military requirements and technology to lead the drive. To promote technology through strategic partnership and other provisions such as “enhanced performance parameters”, the services, together with finance authorities, have to devise means for price indexing technology.
India’s excellence in information technology (IT) needs to be optimized for defence. DPP is too cumbersome to keep pace with technological life cycle of IT. Even for other products, including import substitution, the prolonged procurement process upsets industry investment cycles. Predictability, timeliness and continuity are important for industry to sustain the rigorous demands of defence.
The industry is well invested and awaiting projects. The enthusiasm of the MSME is palpable from the preparations of the old participants and surge of new entrants.
The simplification of ministry of defence processes is a constant expectation of the industry. The challenge to simplification, for process managers, is the fear of allegations of scams. To quote a former bureaucrat, “We are so fond of scams, we manufacture one even when it doesn’t exist.” Invariably, defence procurements, whether it’s PT shoes or fighter aircraft, hit headlines, with allegations and counter-allegations resulting in freezing of procurement, collateral effects on other schemes and making the process more knotted. The unnecessary hue and cry discourages both domestic and foreign industrial partners.
For the Armed Forces to modernize and “Make in India” to succeed, this environment has to change. Inherent challenges in an election year notwithstanding, in a democracy there needs to be a larger buy-in for strategic decisions. A possible solution is to empower the parliamentary committee on defence, which cuts across party lines, to scrutinize major procurement decisions and send the right message, while being mindful of security sensitivity. To achieve the objectives of “Make in India” and secure independence from imports in defence, nurturing the right environment for decision making and implementation of these transformational policies is more crucial now than ever before.
Source Link: http://www.defencenews.in/article/India-needs-independence-from-defence-imports-570241
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