Context- The second negative import list, which has been now rechristened as the positive list, has been delayed due to the ongoing pandemic and will be issued very soon by the Department of Military Affairs (DMA).
- The Additional Secretary Defence Production informed that the final version of the ‘Defence Production and Export Promotion Policy (DPEPP) 2020’ will also be put out very soon.
- The draft DPEPP 2020 was released in August last year for public feedback and once it comes into effect, it will serve as the overarching guiding document of the Defence Ministry for boosting domestic defence manufacturing as well as exports.
- The first negative import list issued last year had listed 101 military items that cannot be imported from abroad.
- As part of efforts to promote the role of the private sector in defence manufacturing, testing facilities of DPSUS and DRDO are being opened up for use by the private sector while new ones are planned to be set up under the Defence testing Infrastructure Scheme (DTIS).
- The DTIS proposes setting up six to eight greenfield testing facilities in partnership with the private sector with a total Grant-in-Aid of ₹400 crore, according to the Directorate General of Quality Assurance.
Defence Production and Export Promotion Policy (DPEPP), 2020
The DPEPP, 2020 has been formulated by the Ministry of Defence as an overarching guiding document to provide a focused, structured and significant thrust to defence production capabilities of the country for self-reliance and exports.
Salient Features of DPEPP, 2020
The Policy brings out multiple strategies under the following focus areas:
- Procurement Reforms
- Indigenization & Support to MSMEs/Startups
- Optimize Resource Allocation
- Investment Promotion, FDI & Ease of Doing Business
- Innovation and R&D
- DPSUs and OFB
- Quality Assurance & Testing Infrastructure
- Export Promotion
Goals and Objectives
- To achieve a turnover of Rs. 1,75,000 crores including exports of Rs. 35,000 crores in Aerospace and Defence goods and services by 2025.
- To develop a dynamic, robust and competitive Defence industry, including Aerospace and Naval Shipbuilding industry to cater to the needs of Armed forces with quality products.
- To reduce the dependence on imports and take forward "Make in India" initiatives through domestic design and development.
- To promote the export of defence products and become part of the global defence value chains.
- To create an environment that encourages research and development (R&D), rewards innovation, creates Indian Intellectual Property (IP) ownership and promotes a robust and self-reliant defence industry.
Strategies outlined under the Policy
- Procurement Reforms
- Setting up of a Project Management Unit (PMU) for the development and production of the technologies involved, life cycle costs and the maintenance requirements of platforms, equipment and weapon systems.
- The policy aims to move away from the licensed production to design, develop and produce indigenously.
- It also aims to own the design rights and IP of the systems projected in the Long Term Integrated Perspective Plan (LTIPP) and a Technology Assessment Cell (TAC) will be created.
- The aim of setting up a TAC is to assess the industrial capability for design, development and production, including re-engineering for production of major systems like the armoured vehicles, fighter aircraft, helicopters and radars with the major industries in the country.
- Indigenisation and Support to MSMEs/ Startups
- The aim of the indigenisation policy is to create an industry ecosystem to indigenise the imported components (including alloys and special materials) and submarines for defence equipment and platforms that are manufactured in India. 5000 such items are proposed to be indigenised by 2025.
- More than 50 startups are currently developing new ‘fit-for-military-use' technologies/ products.
- Optimise Resource Allocation
- The share of domestic procurement in the overall Defence Procurement is about 60 percent.
- There is a need to double the procurements from the current needs from the current Rs. 70,000 crores to Rs. 1,40,000 crores by 2025, in order to enhance the procurements from domestic industry.
- Investment Promotion and Ease of Doing Business (EoDB)
- India is already a large aerospace market with increasing passenger traffic as well as increasing military expenditure, due to which the demand for aircraft (fixed and rotary wings) is also rising.
- Following segments have been identified as opportunities in the aerospace industry- aircraft build work, aircraft maintenance, Repair and Overhaul (MRO), helicopters, engine manufacturing and MRO work, line replaceable units, Unmanned Aerial Vehicles (UAVs) and upgrades and retrofits.
- The improvement in market size, demographic dividend and availability of diverse skill sets are evident from India’s ranking in the World Bank’s Ease of Doing Business (EoDB) index.
- The investments in the defence sector need to regularly sustain the steady supply of orders.
- Innovation and R&D
- Innovations for Defence Excellence (iDEX) has been operationalised to provide necessary incubation and infrastructure support to the startups in the defence area.
- iDEX would be further scaled up to engage with 300 more startups and development of 60 new technologies/ products during the next five years.
- The government has also launched Mission Raksha Gyan Shakti with an aim to promote a greater culture of innovation and technology development and file a higher number of patents in the Defence Public Sector Undertakings (DPSUs), Ordnance Factory Board (OFB). It would be scaled up for promoting the creation of Intellectual Property in the sector and its commercial utilisation.
- FDI limit increased to 74% by automatic route
- The liberalisation of FDI in defence manufacturing, raising the limit under the automatic route to 74%, has opened the door to more joint ventures of foreign and Indian companies for defence manufacturing in India.
- It would also sustain domestic industrial activity in the research, design and manufacture of systems and subsystems.
Need and Significance of Indigenization in defence technology
- Economic- Indigenization of defence procurement will help reduce the huge defence import bill. India was the largest importer in the past decade accounting for about 12% of global arms imports. It would also reduce the overall fiscal deficit of the government.
- Security Imperative- Domestic production reduces vulnerabilities during crises by reducing dependence on imported spares, ammunition and weapons. India being surrounded by porous borders and hostile neighbours needs to be self- sufficient and self- reliant in defence production to meet any unforeseen circumstances.
- Technological- It keeps intact the technological expertise in the country and encourages spin-off technologies and innovation that often stem from it.
- Promote Exports- production of high quality defence equipment within the country can facilitate its sale to other developing countries.
- Employment Generation- it will lead to opening up of new industries as manufacturing hubs for defence procurement and thus create employment for a lot of people in various sectors like designing, manufacturing, innovating, etc.
- Strategic- self-sufficiency in defence production is one of the fundamental steps in realizing the goal of being a global power.
Self-reliance in defence manufacturing is one of the crucial components of effective defence capability for any country and also important to maintain national sovereignty and achieve military superiority. Its attainment will also ensure strategic independence, cost effective defence equipment and can also lead to a reduction in the defence import bill. This can subsequently help in financing the physical as well as social infrastructure of the country. The government aspires to make India ‘Atmanirbhar” or self-reliant and the defence sector is a crucial part of it. Above all, it will also strengthen India’s aspirations of Asian century, SAGAR, secure Indo- Pacific and a multipolar world.