Indigenisation of the defense sector is of crucial importance for any sovereign nation and it becomes even more crucial for a country like India with an expanding economy, a wide variety of security challenges, and growing international obligations. India’s complex strategic environment makes it highly imperative for New Delhi to have a valiant defence industry. New Delhi is seen as a bulwark to a rising China, but its defence spending is three times less than that of China. As one of Observer Research Foundation’s (ORF) recent reports on ‘The Future of War in South Asia’ mentions, ‘The face of war is changing alongside the rapid development of advanced war fighting technology. Grabbing these technologies and decoding the strategies to employ them will be key to counter China. In the words of Defence Research and Development Organisation (DRDO) Chief Dr G Satheesh Reddy, “Manned systems are becoming unmanned and unmanned systems are becoming autonomous systems.”
Ushering Policy Initiatives
Changed circumstances over the decades have allowed the government to think out of the box. Under the larger policy establishment of our Make in India initiative, the government has promoted the start-ups and private sectors not only to build manufacturing capacity but also to achieve technological competency. As Defence Minister Rajnath Singh stated at the Startup Manthan seminar on the sidelines of Aero India show, “GoI has given a big push to the indigenisation programmes through major policy changes such as opening up the patents and laboratories of DRDO to private industry, setting up of Young Scientists labs in niche technology areas, programmes like iDEX, Defence India Start-up Challenge (DISC), Technology Development Fund (TDF), iDEX4Fauji, etc. Dare to Dream was another such flagship contest announced by DRDO for individuals and start-ups to come up with innovative ideas in six verticals, viz. artificial intelligence and robotics, quantum computing, autonomous systems, smart materials, hypersonic technologies, and advanced communications technologies.
Defence India Start-up Challenges (DISC) have been launched under iDEX. It was spearheaded by MoD and was formulated by Defence Innovation Organisation (DIO) to manage Defence Innovation Fund (DIF). To quote Cdr Suchin Jain (Retd), Program Director, iDEX, “The DIO has begun to create a viable ecosystem for start-ups to come out with the products that could cater to the specification of military-grade. It began with the corpus of 100 crores contributed equally by HAL and BEL. iDEX came as an operational arm under this initiative with the core aim to create corporate models for Indian Defence needs and allow the sector to harness start-ups. In a continuous bid to reduce cost on defense imports and seeking local solutions to the country’s defence requirements, the government, in December last year, launched the third edition of DISC.
Since 2018, under three iterations of DISC, 18 problem statements have been promulgated by different arms of armed forces on which start-ups must work upon. 44 contracts for building prototypes have been signed from among 700 start-ups that have participated in the challenge. There was a total of 58 winners who got up to 1.5 crores in project funding. The latest iteration of the DISC has witnessed more than half of the challenges in AI and machine learning.
In another remarkable manifestation of continued efforts to add muscle in defence production, government has recently released draft Defence Production and Export Promotion Policy (DPEPP) 2020 which is committed to providing a focused, structured, and significant thrust to defence production capabilities to fulfill the twin objectives of self-reliance and exports.
Start-ups are the latest and most remarkable entrants in the defence manufacturing sector who’ve been given a big boost through Innovation in Defence excellence program. They are currently engaged in building new prototypes, products, and technology. ideaForge is one of the major players which is specialised in making UAVs. It has provided drones to Indian military paramilitary and aero technology is second on the list. Big Bang Boom is another influential case in point. It is working with MoD through the iDEX platform. Within a moderate span of two years, it has done a commendable job of putting a defence start-up ecosystem in place bringing together military users and operators with start-ups, innovators, and entrepreneurs. The iDEX is testimony of the fact that beyond a vibrant defence market, innovation systems and start-ups can unlock a huge homeland security market not just in India but also abroad.
Major accomplishments of the day
In a recent interview at Aero India 2021, the DRDO Chairman quoted Chief of Defence Staff (CDS) General Bipin Rawat who has declared that the next war will be fought with only indigenous weapons. So, all-round development is taking place, from diverse range of missiles, or tanks like Arjun Tank or LCA Tejas or nuclear submarine-like Arihant, DRDO has done it all. The LCA which is designed and developed by Aeronautical Development Agency (ADA) and DRDO and produced by Hindustan Aeronautics Ltd is the first-ever single largest order is a major boost to the Indian aeronautics sector.
The aeronautics sector will have a quantum jump in the ecosystem coming which will pave way for the new and advanced infrastructure, manufacturing capabilities, and technological advancements. In LCA 1, AESC is being tried on the aircraft. The navigation system, the complete software, weapon system, the onboard oxygen generating system have been developed in the country. It has also paved the way for the development of LCA Mark 2 which is a higher weight class that is in advanced stages of development. The Defence Acquisition Council (DAC) granted an Acceptance of Necessity (AoN) last month which pave way for the Indian Army to acquire 118 Arjun Mk1A tanks in a deal worth Rs 8,400 crores in the years ahead. This is one of the best manifestations of ‘Atmanirbhar Bharat’. He also talked about HAL-DRDO Advanced Medium Combat Aircraft (AMCA), a 5.5 generation, the most technologically advanced aircraft in the world being produced by a public-private partnership (PPP). The government has given impetus to push this project very fast so that we can soon have AMCA developed in the country. This is the kind of self-sufficiency and technological base that has been created by the DRDO in the country for the defence system.
India is now the fifth country to have an indigenous nuclear missile tracking ship. This secret ocean surveillance ship, VC 1184, commissioned in October 2020. It will play a crucial role in triangulating incoming ballistic missiles in conjunction with geostationary satellites and land-based radars. It will have a key role in India’s antiballistic missile capabilities. On March 10, 2021 Indian Navy commissioned the third Kalvari class submarine, INS Karanj into service. This is the third in the series of six Scorpene class submarines built by Mazagon Dock Shipbuilders Ltd launched in January 2018. As mentioned by commanding officer Captain Gaurav Mehta, “It is the first truly indigenous submarine which truly encapsulates the spirit of making in India. Karanj is like a child to us we have seen into growing war weapon.” Chief of Naval Staff (CNS) Admiral Karambir Singh said that the Indian Navy has been a strong proponent of indigenisation and self-reliance in defence. At present out of 42 submarines and ships on order, 40 are being built in Indian shipyards.
Marking another major milestone, DRDO has successfully tested the home-grown Air Independent Propulsion (AIP) that is significant stealth to conventional submarines enhancing their operational effectiveness. This system was developed in partnership with the private sector L&T and Thermax.
The deadlocks
The defence sector is very unique where the government is both the largest producer and the only consumer of its manufactures. This is now beginning to change with the ushering in a private sector as the second growth engine which will help in identifying major technological trends and commercialisation. However, the primary problem we are facing is that several private corporations are entering this field and several agreements have been signed for small arms and drones, but we don’t have enough buyers domestically. This issue recently confronted Larsen and Toubro (L&T), one of the largest private company in the defence sector. The company warned GoI that Vajra 9 howitzer that it has manufactured with South Korean company in a joint venture and they are to run out of orders in six months and unless government can provide them another order, they may have to close shop and shift their skilled staff somewhere else. This is going to be a recurring problem.
As defence analyst D Raghunanadan argues, the defence exhibition (DefExpo) that was held in Lucknow last year, we’ve announced our grandeur plans. Our ministers spoke about how our defence exports increased from Rs 2,000 crores to 17,000 crores in last two years and the target for the next five years is export of Rs 35,000 crores, which was highly exaggerated. But the reality is, a large chunk of that amount owes to civilian aerospace parts and components which were exported. And most of the equipment showcased there is produced by DPSUs. The hollowness of the narrative that has been built around about strengthening the private sector was displayed in Defence Expo.
To quote R Shivaraman from BBB, the best part about iDEX is that it entails a feedback mechanism that makes the entire ecosystem a lot more agile. Nonetheless, there are a lot of limitations that haunt start-ups in India. Defence start-ups in India are not a preferred destination for the Venture Capitalists (VCs) to invest the money due to which raising capital becomes extremely challenging. The other reason for the feeble appearance of Indian start-ups is the long procurement cycle and the non-transparent ways in which the defence acquisition takes place today. So, there is a dire need to streamline processes. VC is very important for the working capital and that makes it a big challenge given the current ecosystem.
Another major stumbling block as highlighted by Kannappa P from EyeRov (IROV TECHNOLOGIES PRIVATE LIMITED)is that, even with iDEX and Make in India Initiatives the day for ground breaking civilian technology to penetrate defence uses is highly crippled because of three-stage tender policy, extensive certification leading to prolonged cycle time from a prototype to field realisation and often beaten by some foreign Original Equipment Manufacturer (OEM) offering at 10 to 20X price. Multiple certification stages and the huge financial and design stage implications delay the whole process. By then most companies die out of funds. Young companies cannot start or survive only believing on defence clients until some serious measures are taken to finance the product and give Minimum Order Quantity (MOQ) and business guarantee. So, we need multiple phase-wise funding and handholding of companies throughout the product development cycle to launch. We must buckle up in sustaining the momentum in scaling up the technology to actual service.
Loopholes in R&D
India ranks 52nd in the Global Innovation Index and contributes only 2.7 per cent in the Global R&D. Since its very inception, DRDO reminded the primary body for indigenous design and development of defence equipment. Notwithstanding the fact that it has made tremendous achievements in developing a range of complex systems including LCA, Main battle tank Arjun, advanced towed artillery guns, Pinaka multi-barrel rocket system, and myriad weapons and sensors despite consistent lack of human resources and budgetary constraints, its optimal performance is often marred by time and cost overruns.
India’s low inventiveness largely owes to the poor investment, unavailability of a dedicated defence R&D policy, government-led R&D spending, poor HR base, and poor collaboration between research labs and industry. Along with that, there is a desperate lack of funding in training institutes and educational courses to up skill existing human resources. Our industry is service-oriented, and thus our education system caters to that. Moreover, the R&D sector pays you much less than what finance or any other sector does that incentivising the talent.
India’s current spending in R&D as per DRDO is less than six per cent of the defence budget compared to over 10 per cent in countries like the US and China. This investment deficit in R&D limits India’s capacity to innovate new technologies for future use. We can learn from Israel where its defence exports finance the country’s R&D to a great extent. But in India, we have a very meagre fraction of exports. An exporting defence industry can reduce the costs of defence acquisitions and helps subsidise a country’s defence budget.
UAS has seen exponential growth in demand in India over the past five years. But its ecosystem within India is currently host to only a handful of companies that are manufacturing and catering to the consumers including DRDO. These companies are also concerned about the ongoing discussions on UAS regulations and funding crunch. We still don’t have a very conducive ecosystem for the indigenous production of drones.
Road to Self- Reliance
So, it is justified enough to say that the innovation and indigenisation attempts in the defence had a mixed bag of successes and challenges. We are venturing on the twin road of modernisation and indigenisation. Certain areas need timely refinement or else we’ll always lay on the brink of bearing some real costs. As identified by Rear Admiral Ravindra Jayant Nadkarni, Flag Officer of the Offshore Defence Advisory Group, on the sidelines of Aero India, there are two challenges India faces: improving the economic complexity index and quickening the pace of technologies required for a stronger defence.
As highlighted by Dr Abhishek, Co-Founder and Director at EndureAir Systems and Associate Professor IIT Kanpur, the key areas that require effective redressal include administrative hurdles, funding crunch, supply chain management, stagnation in DPSUs, lack of specialisation in MoD and political leadership, lack of long-term spending and lack of confidence in our people. So, there is no single policy that is likely to be a panacea, different challenges demand different solutions. To address these diverse challenges, bureaucratic streamlining, empowerment of JPMT, effective synergy in various stakeholders, limited trials will go a long way. We need to usher in more changes that could promote long-term private sector investment in defence, particularly in R&D. Custom duty exemptions should be given to start-ups that’ll give them leverage to experiment more. Policies could be sufficient but policy stability and predictability in identifying requirements and financial outlay – are of the greatest importance.
We should learn from the mistakes committed by others; life is too short to commit all of them on our own. A case in point here is that the ‘Valley of death’ syndrome witnessed in the US. Bureaucratic obstacles and complex regulations faced by the start-ups and private sector in Silicon Valley debunked the initiative. Lastly, to quote Abhishek Jain from Zeus Numerix, a leading defence start-up, “Time is the essence. About whatever we do we must reduce time now. These policy initiatives have brought down the time-lapse but it needs to go down even further. We need to start working in parallels instead of working in periods. Efficiency in time will bring efficacity in money as well.” We need to march ahead without compromising on quality, cost, and commitment. We’ve come a long way in the last decade, but still there is a long road ahead.
–The writer is a Research Intern, Strategic Studies Programme at ORF. The views expressed are personal and do not necessarily reflect the views of Raksha Anirveda
