Growing old ties in defence between India and Russia

I have been asked to share a few thoughts today about how we intend to develop the defence manufacturing sector, which is one of the key areas identified in the Make in India initiative.

First, we have initiated a series of policy and procedural changes to facilitate tie-ups, including joint ventures and technology partnerships between Indian and foreign companies. Russian companies, which have a long experience of working in India and working with India, are well placed to take a leading role in this process.

Since the announcement of the ‘Make in India’ initiative by the Hon’ble Prime Minister, we have witnessed tremendous and growing enthusiasm and participation from private companies in the area of defence production. In the days to come, we hope to fully harness the energies, entrepreneurial spirit and enterprise of the private sector in the area of defence manufacturing.

Here again, Russia, as India’s largest, oldest and most trusted partner in defence hardware and equipment, would have a comparative advantage in partnering with Indian companies for realising ‘Make in India’ potential in defence production.

Further, we recognise that technological progress is spread across the spectrum of products from full platforms to the smallest of hardware components or software. We are thus placing great emphasis on development of capacities in the areas of components and sub-systems, with a view to developing a vibrant ecosystem of defence manufacturing. One way in which we seek to accomplish this is by incentivising indigenous content, specifically indigenous design, development and manufacturing (IDDM) in our defence procurement. In the latest edition of the Defence Procurement Procedure (DPP) of 2016, we have introduced a new category of acquisition called ‘Buy (IDDM)’, wherein the first preference would be given to equipment which are designed, developed, and manufactured within the country. We hope this will encourage Indian companies to invest in R&D and technology. The new DPP has also made several other provisions for indigenisation and greater participation of Indian industry in design, development, and manufacturing.

Indian companies are gearing up by developing capabilities for design and development. In this area too, the cost-effective and state-of-the-art technological capabilities of Russian companies can be an important asset.

I invite Russian companies to come forward with proposals for technology transfer to Indian companies and facilitate manufacturing more advanced components/parts and sub-systems. This can start with platforms of Russian origin where the requirement is in large numbers and is recurring in nature.

As an incentive, industrial licensing for manufacturing defence equipment has been significantly liberalised. Now for manufacturing parts, components, sub-systems, production equipment, and testing equipment, no licence is required from the government. Even for the items for which licence is required, the initial validity has been increased from three years to 15 years. As a result of this liberal approach, the presence of private companies in the defence production sector has risen manifold in last two years.

We envisage ‘Make in India’ in the defence sector to not only address domestic requirements, but also to enable Indian firms to become part of the global supply chain. Despite India’s significant domestic requirements in defence, manufacturing and business would be sustainable in the longer term only if companies look at global requirements and create economies of scale.

Russian companies may identify some items for which they can set up joint ventures with Indian companies so that these items can be supplied across the world. Keeping this in mind, we have also streamlined the process of export clearances in the last two years. India’s export control processes and technology security mechanisms are robust as required in the interests of national security. India is likely to soon become a member of the multilateral Wassenaar Arrangement, which will further catalyse our international engagement.

Another area where Russian industry and business houses can join hands with Indian companies is research and development. We are now giving significant emphasis to technology development and innovation in the defence sector. In the Defence Procurement Procedure 2016, we have streamlined the ‘Make’ procedure to encourage and incentivise design and development of defence equipment and systems. We would welcome partnerships between Indian and Russian companies in this area as well.

Cities such as Bengaluru, Delhi and Hyderabad have design centres of many global defence companies. Bengaluru is fast emerging as an aerospace design hub of the world. Russian companies must take advantage of the large skilled manpower available in India. This would be a win-win situation for companies of both countries. In the past three years, the government has introduced several path-breaking policy and procedural changes in the defence production sector for encouraging private investment, R&D, and indigenisation. We are witnessing a significant momentum in industry for setting up manufacturing facilities for defence items.

Russian companies can be natural partners of Indian companies as most of our defence equipment and inventory are of Russian origin. A large industrial base and supply chain can be created for manufacturing spare parts and components of such platforms to be made in India by Indian companies either through transfer of technology from Russian OEMs (original equipment manufacturers) or through joint ventures between Indian and Russian companies. In March this year, we had organised the largest ever India-Russia Military Industrial Conference in New Delhi. Over 600 business representatives of both countries attended the conference. Discussions between our companies have begun. Both governments are fully supportive of these partnerships.

Defence is only one possible area of engagement. We would be glad to facilitate the involvement of Russian companies, especially young, innovation-driven and technology-oriented firms, to explore the enormous opportunities opening up in India’s fastgrowing economy.