Context: The measures, recently announced by the Finance Minister, to promote self-reliance in defence production will address long-standing strategic and national security concerns about the extent of India’s external dependence for its defence-preparedness.
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- COVID-19 has, once again, focused minds on the impact of supply chain disruptions on both civil and defence sectors.
- It is a no-brainer that with its security environment, its great power ambitions and its technological capacities, India should have a robust defence manufacturing capacity.
- The facts that new Defence Procurement Procedures (DPP) 2020 are under formulation and that we now have a Chief of Defence Staff (CDS) tasked with promoting indigenous equipment in the armed forces, provide a conducive backdrop to this initiative.
- As per the Stockholm International Peace Research Institute,For most of the past decade, India had the dubious distinction of being the world’s largest arms importer, accounting for about 12% of global arms imports.
- Saudi Arabia jumped to first place in 2018 and 2019, but India still takes over 9% of global imports.
- This external dependence for weapons, spares and, in some cases, even ammunition creates vulnerabilities during military crises.
Defence Sector reforms under Atma Nirbhar Initiative:
- Enhancing Self Reliance in Defence Production:
- Make in India for Self-Reliance in Defence Production will be promoted by notifying a list of weapons/platforms for 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.
- Improve autonomy, accountability and efficiency in Ordnance Supplies by Corporatisation of Ordnance Factory Board.
- Policy Reforms in Defence Production:
- FDI limit in the Defence manufacturing under automatic route will be raised from 49% to 74%.
- There will be 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.
Significance of Reforms:
- The decision to notify a list of weapons systems for sourcing entirely from Indian manufacturers will encourage our private defence manufacturers, whose research capacities, technological skills and quality commitment are often better appreciated by foreign clients for whom they are subcontractors.
- The government has promised a time-bound defence procurement process, overhauling trial and testing procedures.
- This move is extremely significant as over the past five years, the Indian government has approved over 200 defence acquisition proposals, valued at over ₹4 trillion, but most are still in relatively early stages of processing.
- The decision to corporatise the Ordnance Factory Board is another long overdue reform.
- Corporatisation, including public listing of some units, ensures a more efficient interface of the manufacturer with the designer and end user.
- The factories would be better integrated into the larger defence manufacturing ecosystem.
- The liberalisation of foreign direct investment in defence manufacturing, raising the limit under the automatic route to 74%, should open the door to more joint ventures of foreign and Indian companies for defence manufacturing in India.
- It would also sustain a beehive of domestic industrial activity in the research, design and manufacture of systems and subsystems.
- Our companies, which have long been sub-contractors to prominent defence manufacturers abroad, would now get the opportunity to directly contribute to Indian defence manufacturing.
- There is a range of platforms and subsystems, developed in India and qualified in trials, some of which face hurdles to their induction by our armed forces because of foreign competition.
- These include missile systems such as Akash and Nag, the Light Combat Aircraft and the Light Combat Helicopter, artillery guns, radars, electronic warfare systems and armoured vehicles.
- Self-reliance should not be taken to overzealous extremes.
- The thrust for indigenous research and development should coexist with the import of cutting-edge military technologies to obviate near-term defence vulnerabilities.
- It is imperative that when we import weapon systems, we should plan for the ammunition and spares for them to be eventually manufactured in India so that we are not driven to seek urgent replenishments from abroad during crises.
- The same goes for repair, maintenance and overhaul facilities and, at the next level, the upgrade of weapons platforms.
- The development of a thriving indigenous defence industry needs an overhaul of existing regulations and practices.
- A long-term integrated perspective plan of the requirements of the armed forces should give industry a clear picture of future requirements.
- DPP 2020 should incorporate guidelines to promote forward-looking strategic partnerships between Indian and foreign companies, with a view to achieving indigenisation over a period of time for even sophisticated platforms.
- Cost evaluation has to evolve from mechanical application of the L1 (lowest financial bid) principle to prioritising indigenous content.
- The definition of indigenisation itself needs to privilege technology over value or volume.
- Investment, Indian or foreign, will be viable only if the door to defence exports is opened, with a transparent policy.
- To give private industry a level playing field for developing defence technologies, conflicts of interest, created by the role of our Defence Research and Development Organisation (DRDO) as the government’s sole adviser, developer and evaluator of technologies have to be addressed.
Above all, a radical reset has to overcome resistance to change. Of the key components of any major reform — money, method and mindset — mindset is the most critical and the most intractable which means it takes a lot to change it.
Image Source: The Hindu