Funding for Atmanirbhar Defence
Amrit Varsha of funding is happening for defence research and product development funding for the private industry. The key highlights are:
- Earmarking 25% defence R&D budget for private companies
- Enhancement of Technology Development Fund (TDF) from 10 Cr to 50Cr
- Launching Innovation for Defence Excellence (IDEX) Prime with funding up to 10 Cr
- EOIs for Make 1 projects issued
- Increase in number of projects in IDEX and TDF
This has been augmented further by the announcement of purchases from Indian companies. This will be a minimum of 68% of the budget. This is a record of sorts for the defence industry, and now the onus is on them to make the best use of it. The funding will have a cascading effect on how it fundamentally changes the defence industry. The below graphic supplies the gist.
Massive Boost to MSMEs/Start-ups
Most of the schemes are for MSMEs and Start-ups. This means that they will be the major beneficiaries of the R&D funds. Chapter 3 of the DAP 2020 concerns innovation buying and mandates the purchase of products developed via IDEX or TDF. This offers a clear path to procurement. With the government allocating the acceptance of necessity (AoN) to 14 products worth 380 Cr in the defence acquisition council (DAC), the intent has been matched with action. The MSMEs will be able to take medium complexity projects freeing up the DRDO for high complexity, risky and strategic projects.
The Cascading Effect
The increased budget for the defence sector will help companies focus better on their core competencies. The mindset that I should do everything to survive will change. This renewed focus will help them innovate and grow and become a global defence design and development hub in their area of specialization.
The change will improve the country’s self-reliance in manufacturing defence equipment and systems. Though not said often, but the R&D process means facing failures frequently; therefore, R&D must get adequate resources so that there is a higher probability of success. This can happen now.
Critical projects are being awarded to multiple vendors, an excellent step forward. Even F22 came out of competition though it was a very large platform.
It is likely that in the short term, we may see an increase in cost for doing the same work compared to other countries. This is inevitable and should not cause alarm. In the long run, due to the presence of multiple innovators and an ecosystem full of energetic and competing companies, the overall cost will come down, and we will have export potential.
Many small, specialised firms that function as Centres of Excellence (COEs) operate in the United States. Indian enterprises will be able to build many such separate COEs once they are able to focus better on their core competencies. COE collaboration will get enhanced. As a result, company leaders like Mr Do All and Mr Know it all, who are unwilling to participate, will see their businesses decline. Companies in positions of leadership will eagerly anticipate partnerships. These companies will not consider who will be the first to act or make the first move. Actions will be quick. This will help in getting more projects done in less time.
Atmamanthan
All great things must have a few repercussions if we are not careful in implementation. Some Atmamanthan must happen. The pitfalls are two-faced, one external and more importantly, the second, the mindset. Let’s tackle the latter first!
Government is Here to Run my Business
The number of projects will increase, and the policies have been modified to suit the industry, especially the MSME/Start-up sector. It may lead to complacency and more focus on legal, IP and all other administrative matters. I fear that technology-related discussion may take a backseat. With limits on companies taking projects through schemes, another worry is incompetent companies getting projects. We must keep inculcating in the companies the habit of facing the technical review with all sincerity. We may like to increase the limit of projects the companies can take. We need to remember: “Ask not how the country is helping me, ask what I can do technologically to help my country”. This maxim should work; if it is harsh on some businesses, so be it!
Centralization of R&D Resource
One of the pitfalls is the future possibility of the creation of more frameworks like IDEX, TDF, etc. Every time there is a new budget, there is someone who feels a need for a new policy. Sometimes, this is from the industry also. We need no more paperwork as the existing regulations are adequate for funding R&D and production by startups, MSMEs, and large corporations. Individual DPSUs and laboratories should be free to spend their own R&D money rather than depend on everything coming from Delhi, and there should be no concentration of authority. There is a requirement for local COEs in design.
Quantification of Research and IP Rights
It is not easy to quantify research and effort, so tit is best to leave it to a competent reviewer from the same technical background. Things that appear simple may be complex in some environments, and making a policy for each and everything is not possible. We must be careful and diligent while choosing the researcher. Once done, we must trust the reviewer’s discretion. We can enforce periodic meetings for review.
IP generated using government research funds must be protected and shared with the Government at least. Govt in turn may not make it public but just have marching rights in case the company goes bust or is intent on fleecing. Secondly, assurance that core technologies rather than peripheral technologies need to be shared, must be kept in mind. This will not only protect government investment, but also disallow the white labelling of foreign products as “Make in India”. To elaborate with an example, suppose we fund R&D for Drones or smart bombs; they function on the eyes and brain i.e., Seeker and Autopilot. If we do not develop these technologies, then, we will have a situation where a brainless and sightless product is delivered to us. Although peripheral technologies may be more expensive in terms of monetary value, they may render the entire process impractical if the core technology is unavailable.
Often, the hardware is created in India, while we import the software from other nations or vice versa. These products are still marketed as Made in India products, which is incorrect. Imported software and hardware should not be labelled and distributed in India with an Indian partner. Software and Electronics are costlier and more critical than mechanical hardware.
Failure Management
Let us address the elephant in the room: failure. We need to understand that R&D projects may fail. There is a higher probability that they will partially succeed. We can attribute this to two reasons – administrative and technical. Administrative reasons are:
- Loss of interest when a new project with better funding is available
- Infighting between the founders
- Underestimation of effort
- Loss of interest in pursuing the project further
The sponsoring agencies cannot manage these issues. The only way is to close the project and cut losses. We must be careful about engaging the same company again, or we should maintain a list of non-performing companies.
In case the failure is due to technical complexity, it is more pardonable provided that the technical reviewer feels enough effort has been put into the project. The committee must have the authority and flexibility to change the end goal or make the deliverables technically feasible. We never know what we might get out of it. At first, the sticky notes of 3M failed as the gum did not hold. Now it is a runaway hit, and a huge business.
Conclusion
The decision to enhance defence R&D spending is a step in the right direction. To top it, schemes are now available which enable us to utilize these funds appropriately. All the processes are in place, and resources available. We should not waste time any more in debate and deliberations. As a country, we should now hit the pedal, accelerate, fail-fall-rise and move forward. Let there be swift action and let this Amrit Varsha of funding bring the desired fruits.
-Abhishek Jain, Chief Business Officer, Zeus Numerix Pvt Ltd (Chairman SIDM Startup Forum and Co-Chair FICCI Task Force for Defence Technology), Gauranshi Chopra, Marketing Intern, Zeus Numerix Pvt Ltd
