India’s Ministry of Defence and the country’s arms manufacturers are optimistic about Prime Minister Narendra Modi’s announcement during the COVID-19 pandemic about the “Self-Reliance Initiative”, albeit with some apprehension.
At a digital conference organised in May 2020 by the Society of Indian Defence Manufacturers (SIDM), Defence Minister Rajnath Singh applauded SIDM’s efforts aimed at accelerating the manufacture of DRDO [Defence Research and Development Organisation] designed personal protective equipment (PPE) kits, masks, and ventilator parts within the defence industry, noting that it had done so in a period of less than two months. However, he cautioned that “the manufacturing sector has been affected the most by the lockdown, resulting in disruption to existing supply chains.” Defence Minister Singh characterised MSMEs as the backbone of the Indian economy, able to accelerate GDP growth, earn valuable foreign exchange through exports, and can provide employment opportunities. He said, “There are more than 8,000 MSMEs, tiered partners of many of our organisations – ordnance factories, DPSUs (Defence Public Sector Units) and service organisations. They contribute more than 20% of the total production of these organisations.”
Though the lockdown has affected defence production, Prime Minister Modi has urged the defence sector to view it as an opportunity towards achieving self-reliance. Hence, under the “Atmanirbhar Bharat” initiative, an increasing number of projects are being converted under the Government’s flagship ‘Make in India’ programme. In this regard, Defence Minister Singh stated that this will provide a fantastic opportunity for Indian industry to enter the defence sector and integrate into the supply chains of all arms of the MoD, including the Service Headquarters, ordnance factories, DPSUs, DRDO and OEMs (original equipment manufacturer), on both the domestic and global stage.
Measures Announced by the Ministry of Finance
Some measures announced by Finance Minister Nirmala Sitharaman under the Atmanirbhar Bharat scheme include: (a) collateral-free loans of US$45Bn for MSMEs which will help re-establish about 4.5 million units and save jobs; (b) subordinate debt provision of US$2.86Bn for 200,000 MSMEs, in order to help stressed MSMEs; (c) equity infusion of US$7.14Bn for needy MSMEs; (d) a US$1.43Bn ‘Fund of Funds’ to increase the capacity of these units and for marketing purposes; (e) the definition of MSME has been revised so that MSMEs can be expanded; at the same time, there will be no distinction between manufacturing and service sector MSMEs; (f) global tenders will not be allowed in government contracts (procurements) valued at US$2Bn or less; and (g) the Government and PSUs should ensure clearance of all outstanding payments within 45 days.
The defence sector reforms announced on 16 May 2020 form the basis of the Prime Minister’s self-reliance pitch, and these include:
- Measures to reduce dependence on defence imports:
a. The MoD will issue a list of weapons and platforms which will not be allowed for import. This list will include: (i) artillery equipment, including field guns, rockets and rocket launchers; (ii) missile systems, including missiles and missile launchers; (iii) combat engineering equipment, including military bridges, mine ploughs; (iv) warships of all types; (v) submarines of all types; (vi) all ship-borne subsystems; (vii) torpedo defence systems; (viii) all types of radars; (ix) unmanned aerial systems; (x) armoured fighting vehicles; (xi) mine protected vehicles; (xii) armoured personnel carriers; (xiii) all types of launchers; (xiv) all types of winches; and (xv) naval combat management systems.
b. Indigenisation of imported spares.
c. Separate budgetary support for domestic capital procurement with a recommended list of programmes to be fast tracked for indigenous capital procurement: (i) P75I submarines under the State Procurement model; (ii) naval utility helicopters (NUH) under the SP model; (iii) Pinaka MBRLs under para 72 of the Defence Procurement Procedure (DPP); (iv) Akash SAM systems under para 72 of the DPP; (v) MRSAM and QRSAM systems under para 72 of the DPP; (vi) ASTRA missile systems under para 72 of the DPP; (vii) modular Bbridging systems under para 72 of the DPP; (viii) future infantry combat vehicles (FICV) under the “Make-in-India” Initiative; (ix) tactical communication systems under Make-I; (x)landing platform docks; (xi) warships such as NGOPVs, NG corvettes, NG frigates; and (xii) a BMP-2 upgrade under the revenue route.
2. Corporatisation of the Ordnance Factory Board in order to improve its autonomy, accountability, transparency, and efficiency.
3. Establishing a Project Management Unit (PMU) to support contract management.
4. Limit in Foreign Direct Investment in defence manufacturing under the automatic route to be raised from 49% to 74%. The aim is to increase the transfer of technology (ToT). So far, the defence sector has seen investment of less than US$10M despite up to 100% FDI allowed on a case-by-case basis.
It is worth noting that in the MoD’s document on procurement(Defence Procurement Procedure- 2020), it was proposed that private industry should achieve a turnover of approximately US$26Bn in defence goods and services by 2025, thereby creating employment for nearly two to three million Indians and to achieve exports of about US$5Bn in defence goods and services by 2025, thereby reducing dependence on imports and making progress in achieving self-reliance.
The Indian Army
During the COVID-19 pandemic, the Indian Army placed orders from Indian vendors, both government and private industries, for ventilators, PPE and other stores, worth US$2.46Bn.
From the abovementioned list regulating defence equipment imports, those exclusively foreseen for the Indian Army include artillery equipment, including field guns, rockets and rocket launchers, combat engineering equipment, including military bridges and mine ploughs, all types of radars, unmanned aerial systems, armoured fighting vehicles, mine protected vehicles, armoured personnel carriers, and all types of launchers, worth approximately US$30Bn.
The Indian Army’s requirement for 100 K-9 THUNDER VAJRA self-propelled artillery guns signed with South Korean Hanwha Defence worth US$22.5Bn, 145 M-777 from BAE Systems worth US$25Bn are just some of the orders with foreign vendors, but there is also Indian participation; under the ‘Make in India’ programme, the Ordnance Factory Board has an order for 114 long range artillery guns named DHANUSH.
The FICV programme worth US$300M was initiated under the ‘Make in India’ programme and will see 2,610 combat vehicles built to replace the 1980s’ vintage BMP-2 with 49 mechanised infantry battalions foreseen for the Indian Army. Foreign vendors who have shown interest in this project include General Dynamics, BAE Systems, Krauss-Maffei Wegmann, Rosoboronexport, Nexter, Ukrain Export of Ukraine, Polski Holding Obronny and Hyundai Rotem. Indian defence manufacturers also interested includeTATA Power SED, TATA Motors, Mahindra Group, Titagarh Wagons, Tractors India, Bharat Forge, Punj Lloyd, Reliance Defence and Engineering Limited.
The Indian Army’s projection has been for 1,500 light bulletproof vehicles, 4,000 light armoured vehicles, 4,500 light specialist vehicles, 600 light specialty strike vehicles, 230 light strike vehicles (LSVs), totalling over 10,000 vehicles, intended for reconnaissance and internal security roles for the mechanised, armoured and NBC units.
While the Indian private defence manufacturing sector has made considerable progress in the light strike, combat and mine-protected vehicle arena, the most visible 8×8 wheeled armoured fighting vehicle on the Indian defence scene is the KESTREL, a platform developed jointly by the Tata Group and DRDO. The Kestrel is often compared to the US STRYKER.
Light armoured vehicles require integration of various other functions including communications for command and control, weapons consoles, and multi-function activities such as recce operations, border patrolling, and quick reaction.
“Make in India”
In 2017, the Government initiated a Green Channel policy to facilitate the “Make in India” initiative. This policy is expected to institute a mechanism to award Green Channel status to firms with pre-defined financial and quality credentials. In 2019, with the intention of improving its ease of doing business, the Government devised a self-certification policy.
Self-certification is the process adopted to delegate the responsibility of certifying the quality of products to the manufacturer on behalf of the purchaser, after first ensuring the demonstration of the manufacturer’s capability of consistently producing defect-free products over a certain period of time.
Lieutenant General Vinod Bhatia (retired) said, “Indian defence manufacturers have the potential to meaningfully and optimally contribute to self-reliance. The recent defence reforms will facilitate the indigenisation and growth of India’s defence industry. The policy reforms are good; however, these need to be backed by relevant changes in procedures and processes, which continue to be lengthy and lethargic, adding to apprehensions in the industry.”
Clearly, India can make a quantum leap in its defence capabilities and capacities if the MSMEs are incentivised and encouraged by the Government and the Indian Armed Forces.
Suman Sharma is a Delhi-based journalist covering foreign policy and defence. Previously, she was an instruc- tor at the Indian Military Academy.