The government fine-tunes its procurement policy and pushes for private sector-driven indigenisation of defence production.
Can a nation aspiring to be a super power continue to depend on import of defence equipment and ignore development of its indigenous defence production or defence industrial base? Definitely not; indigenous defence production or defence industrial base is the essential component of long-term strategic planning of a country.
The heavy reliance on imports is not only disturbing from the perspective of strategic policy and the role India has to play in the security of the region, but is also a matter of concern from the economic point of view in terms of the potential for growth and employment generation. Though all the aspects of power constitute a super power, the military power is a key to a nation's rise to great or super power status.
Going back into history, the Indian defence industry has a history of more than 200 years. During the British period, ordnance factories were set up to manufacture guns and ammunition. The first ordnance factory was set up in Cossipore (currently Kashipur, a neighbourhood in north Kolkata) in 1801. A total of 18 factories were set up before independence.
At present, India's defence industrial base comprises 41 ordnance factories geographically spread across the country, nine defence public sector undertakings (DPSUs), more than 200 private sector licence-holder companies and a few thousand medium, small and micro enterprises (MSMEs) feeding to the large manufacturers and DPSUs. More than 50 defence laboratories of Defence Research and Development Organisation (DRDO) are also a part of the entire eco-system of defence manufacturing in the country.
Till about 2000, most of our major defence equipment and weapon systems were either imported or were pro- duced in India by ordnance factories or DPSUs under licensed production. DRDO, being the only defence R&D agency in the country, actively contributed to the technology development and supplemented the efforts of indigenisation to a large extent. As a result of the efforts of DRDO and DPSUs in R&D and manufacturing, the country has reached a stage, where we have developed capabilities in manufacturing of almost all types of defence equipment and systems.
Today, according to a rough analysis, out of our total defence procurement, 40 per cent is indigenous production. In some of the major platforms, a significant amount of indigenisation has been achieved. For example, T-90 tank has 74 per cent indigenisation, infantry combat vehicle BMP II has 97 per cent indigenisation, Sukhoi 30 fighter aircraft has 58 per cent indigenisation, Konkurs missile has 90 per cent indigenisation.
Apart from the indigenisation level achieved in platforms being manufactured under licensed production, we have also achieved success in developing some of the major systems indigenously through our own R&D. These include Akash Missile System, advance light helicopters, light combat aircraft, Pinaca rockets, various types of radars such as central acquisition radar, weapon locating radar, battlefield surveillance radar and so on. These systems also have more than 50 to 60 per cent indigenous content.
With the above progress made through the State-owned manufacturing companies and DRDO, the time was right to expand the defence industrial base by including the private sector in the fold of Indian defence
industry. In 2001, the government allowed entry of private sector into defence manufacturing, along with foreign direct investment up to 26 per cent. It is our endeavour to harness the potential of the entire spectrum of the industry and expertise available in the country in our journey towards building our own defence industrial base, ultimately leading to self-reliance.
Though the entry of private sector was opened up in 2001, growth of private sector participation in defence manufacturing was insignificant till about three to four years ago, and it was largely limited to production of parts and components to be supplied to ordnance factories and DPSUs. With liberalisation in the licensing regime in the last three years, 128 licences have been issued for manufacturing of various defence items, whereas in the last 14 years before that period, only 214 licences were issued.
Defence being a monopsony sector, where the government is the only buyer, the structure and growth of the domestic defence industry is driven by the procurement policy of the government. The government has therefore fine-tuned the procurement policy to give preference to indigenously manufactured equipment.
To further promote manufacturing of strategic platforms, namely, fighter aircraft, helicopters, submarines and armoured vehicles, the government has recently announced Strategic Partnership Policy, where shortlisted Indian companies can form joint ventures (JVs) or establish other kinds of partnerships with foreign original equipment manufacturers (OEMs) to manufacture such platforms in India with transfer of technology. The policies and initiatives taken in the last three years have started showing results. Three years ago, in 2013-14, where only 47.2 per cent of the capital procurement was made from Indian vendors, in 2016-17, it has gone up to 60.6 per cent.
To promote indigenous design, development and manufacturing of defence equipment within the country, the government has undertaken a series of policy and process reforms. A number of steps have also been taken to revitalise the working of DPSUs. All DPSUs and the Ordnance Factory Board (OFB) have been man- dated to increase their outsourcing to SMEs so that an ecosystem for manufacturing develops within the country. The DPSUs and OFB have been given targets for export and for making their processes more efficient by cutting down costs and removing inefficiencies. Our defence shipyards have achieved a significant percentage of indigenisation in shipbuilding. Today, all ships and patrol vessels are being ordered by the Indian Navy and the Indian Coast Guard from the Indian Shipyards. Gradually, disinvestment in DPSUs is also being pursued to make them more accountable and bring in operational efficiency. In the last three years, the value of production (VoP) of DPSUs and OFB has increased by approximately 28 per cent and productivity by 38 per cent.
We are at a crucial and important phase of our journey towards self-reliance as far as defence production is concerned. After independence, while we started with primarily imports, then gradually moved towards licensed production in the '70s, '80s and '90s and now have started moving towards indigenous design, development and manufacturing. Like other sectors such as automobile, computer software and heavy engineering, among others, I am hopeful that with the constant policy push, efficient administrative processes and handholding, the Indian defence industry would rise to the occasion, and we can witness design, development and manufacturing of major defence equipment and platforms in the country in near future.
The process of reforms and the ease of doing business is an ongoing process, and the government and the industry will have to work together to create an ecosystem, which is required for growth and sustainability of this sector. This would be in our long-term interest of national security.
(The author is the Union Minister for Defence, Finance and Corporate Affairs.)
Many of India's defence systems, such as Akash missiles and Pinaca rockets, have more than 60% indigenous content.
Procurement from Indian vendors has shot up from 47.2% in 2013-14 to 60.6% 2016-17.