Time is Ripe for Private Defence Firms to Prove Mettle
The defence manufacturing sector in India is witnessing a high-level indigenisation as the government is focusing on transforming India into a defence manufacturing hub. Being the third largest armed forces and sixth biggest defence spender in the world, India is striving to become self-reliant in defence by reducing its image of a major defence importer. Various policies are being taken by the Defence Ministry to attract more private players into the sector to promote indigenous manufacturing and to ensure that an eco-system of suppliers is built domestically. Moreover, the tri-services Army, Navy, and Air Force, as well as the defence PSUs are promoting indigenisation with separate roadmaps for the years ahead. Hence, it is the ideal time for private companies in the sector to prove their mettle by supporting the indigenisation drive in defence sector.
The opening of the defence sector for private sector participation is helping foreign original equipment manufacturers (OEMs) enter into strategic partnerships with Indian companies and leverage opportunities in the domestic as well as global markets. The Defence Acquisition Council (DAC) has cleared defence deals worth more than Rs.82000 Crores under ‘Buy and Make (Indian)’ and ‘Buy Indian’ category. The domestic defence manufacturers are provided with a great opportunity to take advantage of the policies in the sector to prosper their defence manufacturing business.
Self-Reliance in Defence Production
The government is pushing hard to achieve self-reliance in defence production, which is a major cornerstone on which the military capability of any nation rests. The Defence Production Policy promulgated by the Government aims at creating conditions conducive for private industry to play an active role in this endeavour; enhancing potential of SMEs in indigenisation and broadening the defence R&D base of the country. Under ‘Make in India’ initiative of the Government, several measures have been taken to promote indigenous design, development, and manufacture of defence equipment in the country by harnessing the capabilities of the public and private sector. These measures include according preference to procurement from Indian vendors under the Defence Procurement Procedure (DPP), simplification of Make procedure, introduction of simplified procedure for Make II sub-category, liberalization of the licensing regime etc.
With the objective of achieving self-reliance in defence production, the Ordnance Factories and DPSUs have been outsourcing many of their requirements and have over the years developed a wide vendor base which includes many medium and small-scale enterprises apart from large scale industries. In addition, the DPSUs and OFB are also striving to increase the indigenous content in equipment and products, manufactured by them.
Armed Forces Indigenisation
Giving enough priority to indigenisation, all three forces are foraying into a new phase of self-reliance by manufacturing technologically advanced equipment within India. The Indian Army holds a sizeable number of equipment of import origin and most of them need upgradation, which makes it inevitable to procure new ones through indigenisation. To keep equipment battle-ready, the Army Indigenisation programme has been instituted which is basically aimed at developing major systems and sub systems, such as propulsion plants, prime-movers for power generation, hydraulic systems, auxiliary system, electrical and electronic systems, weapon system etc.
The Indian Naval Indigenisation Plan (INIP) 2015-2030 has formulated the requirements of Indian Navy and lists out the equipment which can be taken up for indigenisation in the coming years. Navy has further synergised its relationship with the industry and encouraged all sectors including MSMEs to become the stakeholders of the plan and bring the Navy’s concepts and proposed capability to fructification in the form of world class defence hardware. In the ‘FIGHT’ category the Navy has achieved only less than 50% indigenisation. Some of the major equipment where there has not been satisfactory progress are the weapons & sensors, propulsion systems (especially Gas Turbines), Marine Diesel Engines for main propulsion and Gear Boxes under ‘MOVE’ category, which are imported presently and holds much scope for indigenisation.
The Indian Air Force has a well-established indigenisation organisation in place with the Directorate of Indigenisation as the nodal agency for all aspects related to indigenisation. IAF constantly endeavours to modernise for effectively addressing emerging threat perceptions. Indigenisation and self-reliance has remained a Key Result Area (KRA) of IAF for the last few decades. Indigenisation is typically attempted at three distinct levels of complexity viz. System level, subsystem level and MRO spares. IAF now focuses on the indigenisation of complex and high-end spares to achieve the desired serviceability of various weapon platforms and systems. There is a huge potential in Indian private industry that needs to be tapped for meeting the indigenisation requirements of IAF with an aim to reduce the dependence on foreign OEMs.
If both the private and public sector join hands in defence production, India’s dream of achieving self-reliance and become a defence exporter will not be a distant dream.