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Mohit Nayak asked: How can indigenisation in the Indian defence sector be enhanced?

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  • Amit Cowshish replies: As the first step, the Ministry of Defence (MoD) needs to formulate a composite policy that focuses on the indigenisation of high priority technology areas, shedding the notion that it must necessarily result in savings. The commercial viability of the identified projects and institutional arrangement for financing them, apart from a mechanism to accommodate the cost of failed efforts, must form the bedrock of the policy.

    Most importantly, instead of measuring indigenisation in terms of the product cost net of payments made for material and services procured from abroad, the policy should focus on indigenisation of critical technologies that go into making of the equipment which, if hit by sanctions or technology denial regimes, could jeopardise local production. Strategic considerations, not monetary savings, should be the policy’s objective.

    As a matter of policy, a distinction needs to be made between indigenisation of major systems - equipment, weapons, and assorted platforms - and that of components, assemblies, and sub-assemblies. This is important because the challenges faced in the indigenisation of these two categories of defence materiel are different. The composite policy should take cognisance of this.

    Secondly, there must be an overarching organisation to coordinate indigenisation efforts currently being made almost independently by several institutions in the public and private sector, ranging from Indigenisation Directorates of the Services to Defence Research and Development Organisation (DRDO). This organisation will have to work out a system for deeper engagement of the private sector in the indigenisation effort.

    The private sector, especially the micro, small and medium enterprises, and start-ups can play a major role in achieving the intended results. However, funding is a major issue for them, as also the assurance of the follow-on orders being placed on them. These issues will require to be addressed.

    Thirdly, procedural issues need to be resolved to ensure that the testing, quality assurance and certification agencies work more as a part of the team engaged in indigenisation rather than as external technology audit entities. This may also require the quality assurance personnel to acquire and upgrade their domain expertise, as well as test procedures and methodologies.

    This is just an example of the procedural tangles besetting indigenisation. Many other issues, such as the setting of extremely stringent specifications by the Services and lack of clarity about the aggregated long-term demand for the indigenised product also slow down the indigenisation efforts as action cannot be taken in advance in such cases.

    Fourthly, legal issues that often come in the way of indigenisation of products need to be tackled. This is more relevant in the case of substitution of parts and assemblies fitted in the imported equipment through indigenisation efforts which becomes difficult because of the legal constraints imposed by the contract awarded by the MoD/Services to the technology provider concerned. These legal constraints need to be pre-empted.

    Lastly, indigenisation is driven by commercial considerations. No seller will opt for indigenisation if it involves the risk of conceding competitive edge to another seller, or if the delivery schedule is inflexible allowing no room for indulging in time-taking indigenisation efforts, or there is uncertainty about the MoD’s ability to place firm orders for indigenised products because of the enduring financial constraints it has been facing for long.

    A more modest and focussed mission-mode approach to indigenisation can produce better results.

    Posted on June 11, 2021

    Views expressed are of the expert and do not necessarily reflect the views of the Manohar Parrikar IDSA or the Government of India.