Re-En­er­gis­ing De­fence Start-Ups

FICCI Business Digest - - Contents -

Even as the Cen­tral and state gov­ern­ments con­tinue to push the Start-up In­dia Ini­tia­tive, the Min­istry of De­fence has spec­i­fied new rules for In­dian start-ups to en­able them to take part in mil­i­tary projects with a view to lever­age the cut­tingedge re­search and in­no­va­tion. The min­istry now seeks to en­cour­age new com­pa­nies to un­der­take re­search projects to de­velop or up­grade weapon sys­tems and to work to­wards re­duc­ing im­ports.

Un­der the new rules, start-ups in cer­tain cat­e­gories rec­og­nized by the Depart­ment of In­dus­trial Pol­icy & Pro­mo­tion (DIPP) will au­to­mat­i­cally qual­ify to take part in spec­i­fied de­fence projects. These cat­e­gories in­clude aero­nau­tics, nan­otech­nol­ogy, and vir­tual re­al­ity (VR), re­new­able tech­nol­ogy, ro­bot­ics, green tech­nol­ogy, and the In­ter­net of Things (IoT).

Fur­ther, for rel­a­tively smaller re­search and devel­op­ment projects, the gov­ern­ment has sim­pli­fied rules by keep­ing the doors open for all In­dian com­pa­nies, do­ing away with any rules of par­tic­i­pa­tion. ‘For projects with es­ti­mated cost of pro­to­type devel­op­ment phase not ex­ceed­ing $436.27K (INR 3cr), no sep­a­rate tech­ni­cal or fi­nan­cial cri­te­ria (will) be de­fined for both ‘start-ups’ and ‘other than start-ups’, to en­cour­age their par­tic­i­pa­tion,’ the new rules spec­ify. It is to be noted that these new rules ap­ply to the ‘Make II’ cat­e­gory of de­fence pro­cure­ment where the pri­vate in­dus­try funds the re­search for the prod­uct on its own and develops a pro­to­type that is of­fered to the con­cerned ser­vice for eval­u­a­tion.

How­ever, there will be no gov­ern­ment fund­ing for de­vel­op­ing the pro­to­type, but there is an as­sur­ance of or­ders on suc­cess­ful devel­op­ment and tri­als of the pro­to­type.

The three forces – Army, Air Force and Navy – will now short­list projects un­der the spec­i­fied cat­e­gory. As of now, they have al­ready iden­ti­fied 53 projects that can be taken up on pri­or­ity un­der the rules. These in­clude Ma­neu­ver­able Ex­pend­able Ae­rial Tar­gets (MEAT) for Army Air De­fence, light­weight body ar­mour, a robotic sur­veil­lance platform, diesel engines for boats, limpet mines, air to ground rock­ets and long-range glide bombs.

Re­cently, the In­dian gov­ern­ment had green sig­nalled a mega AI-project in the de­fence sec­tor that will help equip the army with un­manned tanks, ves­sels, ae­rial ve­hi­cles, and robotic weaponry.

With In­dia procur­ing 70 per cent of its de­fence equip­ment from abroad, the gov­ern­ment, un­der the De­fence Pro­duc­tion Pol­icy, aims to en­cour­age lo­cal man­u­fac­tur­ing of mil­i­tary air­craft, war­ships, am­mu­ni­tion and ar­moured ve­hi­cles. The gov­ern­ment had in­tro­duced ‘Buy (In­dia-IDDM (in­dige­nously de­signed, de­vel­oped and man­u­fac­tured))’, a new cat­e­gory of pro­cure­ment. The ‘Make’ Pro­ce­dure had been sim­pli­fied with pro­vi­sions for fund­ing of 90 per cent of devel­op­ment cost by the gov­ern­ment to In­dian in­dus­try for de­sign, de­velop and man­u­fac­ture of de­fence equip­ment.

The pri­vate sec­tor in In­dia has less than 5 per cent nearly $727 Mn (INR 5,000cr) an­nu­ally – share of di­rect or­ders from the de­fence min­istry for man­u­fac­tur­ing and is grad­u­ally mov­ing to­wards 10 per cent in tan­dem with the Make in In­dia Ini­tia­tive.

So far, HAL and the DRDO have been ma­jor stake­hold­ers in tech­nol­ogy devel­op­ment and im­ple­men­ta­tion in the In­dian de­fence sec­tor. While bring­ing in pri­vate com­pa­nies, par­tic­u­larly start-ups, in these projects must be wel­comed – Ben­galuru-based Tonbo Tech­nolo­gies has de­vel­oped some in­no­va­tive imag­ing so­lu­tions for mil­i­tary de­ploy­ment – de­fence is a com­plex sec­tor where the ar­eas of ap­pli­ca­tion are highly spe­cific.

Ac­cord­ing to some re­ports, the de­fence in­dus­try is ex­pected to be worth more than $700 Bn by the year 2026. With Make in In­dia pick­ing up pace, the gov­ern­ment can look to cut down its bil­lions of dol­lars im­ports of de­fence equip­ment with the help of In­dian start-ups.

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