Until the technological base of defence industry improves, ‘Make in India’ with transfer of technology and specified indigenous content may be a better bet

by Lt Gen H S Panag (Retd)

On Monday, the Ministry of Defence announced the second negative import list — now renamed as the “positive indigenisation list” — of 108 items that can now be procured only from indigenous sources. This takes the total number on the negative list to 209. The first negative list of 101 items was announced on 9 August 2020. The implementation had begun with effect from December 2020 and will be progressively executed by December 2025. The aim behind promulgation of the list is to apprise the Indian defence industry about the anticipated requirements of the armed forces so that they are better prepared to realise the goal of indigenisation.

The progressively expanding positive indigenisation list is certainly a big step towards self-sufficiency in defence. It is a great opportunity for the Indian defence industry to manufacture the items in the list by using their own design and development capabilities or adopting those developed by the Defence Research and Development Organisation (DRDO) to meet the requirements of the armed forces in the coming years.

India’s quest for self-sufficiency in defence began soon after Independence. The country has created a large defence industrial base comprising 39 ordnance factories, nine defence public sector undertakings, 150 diverse companies in the private sector and 50 dedicated research laboratories and establishments under the umbrella of the DRDO. India has designed and produced a fourth-plus generation fighter aircraft, nuclear submarine, main battle tank, state of the art cruise missile and intercontinental ballistic missile with a range of more than 5,000 km. Our defence exports in 2018-19 were worth Rs 10,745 crore. Ironically, we are also the second largest defence importers, accounting for 9.5 per cent of the world’s market share. That a day after the announcement of the second “negative list”, India floated a Request for Information for import/manufacture of 1,700 Future Ready Combat Vehicles, only confirms the irony.

The positive indigenisation list is an intrinsic part of the Defence Acquisition Procedure 2020. But the impact of the list on self- sufficiency is contingent on a host of factors.

Strategic Review And Defence Reforms

The Ministry of Defence has been at pains to emphasise that all stakeholders, including Army, Air Force, Navy, DRDO, Defence Public Sector Undertakings, Ordnance Factory Board (OFB) and private industry have been consulted to assess current and future capabilities of the Indian industry for manufacturing various ammunition /weapons/platforms/equipment within India. However, the focus seems to be on the current needs of the armed forces, which are structured and organised to fight the wars of a bygone era.

India’s focus should be on conflict/wars that it is likely to fight in the next 30-40 years. The armed forces have to be transformed as also their weapon systems. This requires the armed forces to prepare a technological forecast for the industry. There is no point in producing a world class Advanced Towed Artillery Gun if it is going to fire a round developed 40 years ago.

Indian Designed, Developed And Manufactured

For a product to be considered as an indigenous system, items on the positive indigenisation list must not only use technologies designed and developed by the Indian defence industry or the DRDO but also meet the specified requirement of sourcing indigenous content of 50 per cent.

Practically, it implies that from the date the embargo takes effect with respect to a particular item on the list, it can be procured only under “Buy (IDDM)” category — “Buy (Indian – Indigenously Designed, Developed and Manufactured)”. The rider of indigenous design and development has practically rendered all other procurement categories under Defence Acquisition Procedure 2020 (DAP 2020) irrelevant as they are designed and developed by Original Equipment Manufacturers. DAP 2020 (Paragraph 6 – Weapons/Platforms Banned for Import) has added to the ambiguity by implying that the same can also be done.

It is well known that most of the items in the list are already being manufactured in India. But as emerging technologies, which are not available in India, come to the fore, the rider of “indigenous design and development” will lead to less orders being placed under “Buy IDDM”. Until the research and development, and technological base of the defence industry and the DRDO improves, ‘Make in India’ with transfer of technology and specified indigenous content that can be progressively increased, may be a better bet.

Apprehensions of The Industry

The defence industry requires a long-term forecast of the requirements, government investment in research, design and development and firm orders. The government has committed to spend 50 per cent of the capital budget, that is nearly Rs 70-75,000 crore, on indigenous procurement. There is a need for the MoD and the services to also give a forecast of its procurement plan in financial terms.

Defence industry requires a large initial investment. Domestic requirements cannot sustain it except for low-end technology items. Liberal incentives must be given for exports. Export target of $5 billion is achievable if the government gives liberal incentives for export and actively promotes the same as is done by the leading arms exporting countries.

Armed Forces Involvement

The armed forces need to commit themselves to promote the indigenous defence industry. The Navy has shown the way and promoted indigenous design and development. The Army and the Air Force need to follow the example. General Staff Qualitative Requirements must be realistically made, keeping the technological base of the defence industry. Since major equipment has a life span of 30-odd years, the requirements can be progressive with different Marks of the equipment for specified time periods.

Conclusion

The positive indigenisation list must not be seen in isolation as a panacea to create self-sufficiency in defence up to the desired 70-75 per cent level. It is both a protectionist measure as well as catalyst to invigorate our defence industry. The list is an integral part of DAP 2020 and there is a need for the “indigenous design and development” clause to be reviewed until the defence industry comes of age. China followed this path with Russian equipment from 1949-1990. Today it is almost self sufficient in defence and a major exporter.

There is no doubt that the Narendra Modi government has shown remarkable zeal to promote indigenisation in defence. However, to fructify the vision, dynamic leadership is required. Think out of the box and appoint that leader.

Lt Gen H S Panag PVSM, AVSM (R) served in the Indian Army for 40 years