by Arvind Gupta
The draft defence production policy 2018 put out by the government for public comments sets a target of achieving a turnover of US$ 26 billion in defence production and US$5 billion in defence exports by 2025. An additional investment of nearly Rs.70,000 crores creating employment for nearly 2 to 3 million people will be made. The draft policy outlines a number of steps to achieve self-reliance in the manufacturing of weapons and defence systems ranging from fighter aircraft and warships to missile, guns,ammunition and explosives.
The strategies mentioned in the document to achieve these goals focus, inter-alia, on boosting R&D, supporting MSMEs and start-ups, establishing testing infrastructure, rationalizing the tax structure, enhancing FDI in defence to 74 percent through automatic approval route, exploring the prospects of setting up an aeronautical commission on the lines of atomic energy commission and space commission, liberalizing the defence offsets policy, and improving the ease of doing business in the defence sector.
The past experience shows that achieving self-reliance in defence manufacturing remains an elusive goal. India continues to import 70 percent of its defence equipment. The Make-in India programme in defence has yet to take off despite the raising of the FDI limit to 49 percent, the liberalization of the Defence Procurement Procedure (DPP)in 2016 and the announcement of the Strategic Partnership policy to identify Indian partners from the private sector in 2017.
Some crucial issues have not been addressed in the draft policy.
The private sector has been insisting for a long time that an even playing field should be created between the Defence Public Sector Undertakings (DPSUs) and the private sector companies and orders should be given to them on a sustained basis. This important issue has not been addressed in the draft defence production policy.
The focus of the draft policy remains on the DPSUs and Ordnance Factories Board (OFB) with private sector playing a secondary role. For instance, the government has not followed on recommendations suggesting corporatisation of the OFBs and give them functional autonomy. OFB factories continue to run like a department of the government.
Further, last year’s landmark policy of Strategic Partnerships with private sector has remained unimplemented due to various hesitations on the part of the government.
The draft policy rightly emphasises the need to develop indigenously the cutting edge technologies like artificial intelligence, and cyber security products. The sad fact is that India is very weak in chip manufacturing and electronics hardware.
The setting up of a defence export organization has been suggested. This is a positive step. But before that the country must have a robust defence exports policy.
There is a mention of rationalization of tax structure. However, details are yet to be worked out.
The policy rightly suggests changes in the defence offsets policy which has not worked so well in the past. What is needed is better monitoring and removing unnecessary restrictions. The draft policy suggests linking defence offsets with offset in civil sector. That should be encouraged.
From time to time, a suggestion has been made toprofessionalize the Department of Defence Production itself. The current strength is highly inadequate. It needs more professional staff. This needs to be addressed as well.
A mention has been made of creating a system of innovation. An IPR cell will be created in the department of defence production. That step alone will not be enough. The country needs an elaborate ecosystem of innovation of which defence innovation can be a part.
To begin with, to boost indigenization, the Defence Research & Development Organisation (DRDO) needs to be given more autonomy like space and atomic energy departments. Right now, the armed forces, rightly or wrongly, have little confidence in the DRDO’s capability to deliver indigenously developed technologies in time. DRDO needs to have the powers to acquire technologies from abroad.
The draft policy talks about setting up an aerospace university. One university alone cannot tackle the acute shortage of skills in the country. What is required is establishing courses on defence production across universities. But job opportunities will have to be created for those graduating from these institutions.
The policy suggests setting up two defence industrial corridors. This is an innovative suggestion. However, the past experience shows such corridors are helpful only if the entire industrial ecosystem is developed simultaneously.
The government also needs to address the issue of setting up a professional defence procurement agency. It is understood that some studies have been done in this direction. But the government has not yet taken a decision. This should be expedited.
Meeting the objectives of defence exports, encouraging innovation, streaming lining procurements will require robust defence diplomacy. A cadre of defence diplomats should be created to address these issues.
One hopes that a road map to complement the defence production policy will be worked out soon. Else, the draft policy will remain a mere wish list.