PERSPECTIVE | INDIA’S DEFENCE EXPORTS

INDIA’S DEFENCE EXPORTS

Context

• India’s defence exports have reached an all-time high of Rs 15, 920 crores in FY 2022-2023.

Export Trend

• India’s defence exports in 2017-18 stood at ₹4,682 crore, ₹10,745 crore in 2018-19, ₹9,115 crores in 2019-20, ₹8,434 crore in 2020-21, and ₹12,814 crores in 2021-22, according to government data.
• Total defence export value stands at Rs. 13,399 crores as of 6 March 2023.

Must Read Article on this Topic: https://www.iasgyan.in/daily-current-affairs/defence-exports#:~:text=In%20the%20last%205%20years,the%20fiscal%20year%202024%2D25.

Defence equipment exported

• India is currently exporting military hardware, including missiles, the advanced light helicopter (ALH), offshore patrol vessels, personal protective gear, surveillance systems and a variety of radars to around 85 countries.
• Significant exports are done by Indian companies that have got orders from US defence majors to supply parts of platforms like the F-16 fighter jets, Chinook and Apache helicopters among others.
• The major defence equipment exported during the last 05 years include:
  • Weapon Simulators,
  • Tear Gas Launcher,
  • Torpedo Loading Mechanism,
  • Alarm Monitoring & Control,
  • Night Vision Monocular & Binocular,
  • Light Weight Torpedo & Fire Control Systems,
  • Armoured Protection Vehicle,
  • Weapons Locating Radar,
  • Coastal Surveillance Radar etc.

Budget earmarked

• India has earmarked 75% of this year’s defence capital procurement budget for locally made weapons and systems.
• This move is aimed at unlocking new opportunities for achieving self-reliance targets and ramping up the country’s defence exports.

New Target

• The government has set a target of achieving defence manufacturing worth Rs 1,75,000 crore by 2024-25, which would include exports worth Rs 35,000 crore.

Future Prospects

• Weapons and systems that hold export potential include the –
  • light combat aircraft Tejas,
  • different types of helicopters,
  • artillery guns,
  • Astra beyond-visual-range air-to-air missiles,
  • Akash surface-to-air missile systems,
  • tanks,
  • sonars and
  • radars
• India is in talks with Egypt and Argentina for the possible sale of LCA Tejas to their air forces as the country sharpens its focus on increasing its share in foreign markets.
• Egypt has projected a requirement for 20 aircraft while Argentina needs 15 new fighters.
• Hindustan Aeronautics Limited (HAL), the public sector aerospace and defence company, is also looking at exporting Advanced Light Helicopters (ALH) to the Philippines.

Steps taken by the Government

• In the last few years, the government has taken a series of measures to promote domestic defence production and boost defence exports.
• The push for Made-in-India equipment is a priority for the Indian government as it strengthens and promotes the nation's self-reliance in the defence sector.

Defence Acquisition Procedure (DAP)- 2020
The Defence Acquisition Procedure (DAP)-2020 promotes domestic design and production of defence products and considers the fundamental principles of the "Aatmanirbhar Bharat Abhiyan. "The "Make" procedure seeks to indulge in greater consideration for domestic design and production through the following mechanism:

• Make-I (Government-funded): entails the industrial design and development of significant platforms, systems, and pieces of equipment. Up to 70% of the cost of developing a prototype, or a maximum of Rs. 250 crores are provided by Development Agency (DA).
• Make-II (Industry Funded): This programme comprises design and development work as well as creative solutions from Indian vendors. No government financing is provided for these activities, but there is a guarantee of procurement, on the development of a successful prototype.
• Make-III (Indigenously Funded): The equipment may not be developed locally but is manufactured in India using collaboration or with FOEMs or may have entered a joint venture with FOEM.
• The total investments of US$ 2.4 billion (Rs 20,000 crore) are planned in the Defence corridors in each one of the States of Uttar Pradesh and Tamil Nadu by the year 2024.
• Launch of Srijan portal in August 2020, to facilitate indigenisation for DPSUs, OFBs, and to support private players.

Defence Procurement Procedure (DPP)
A criterion for Indigenous Content (IC) has been established to help Indian component, subsystem, and equipment manufacturers establish themselves in the international defence supply chain.

• Buy Indian-IDDM - (Indigenously Designed, Developed and Manufactured) - means purchase from an Indian vendor with an Indigenous Content (IC) of at least 50%.
• Buy Indian - Buy only from an Indian Vendor. If the design developed is indigenous, then a minimum of 50%: otherwise, 60% if the minimum IC is required.
• Buy Global - Capital procurements bought from foreign or Indian vendors, fall in the category of Government-to-Government deals (G2G)/Inter-Government Agreements (IGA). For a foreign vendor, IC required is nil whereas, for an Indian vendor, at least 30% is required.
• Buy & Make - Capital products procured in a fully formed (FF) state from a foreign vendor followed by indigenous production by an Indian Production Agency (PA), involving Transfer of Technology (ToT). The minimum IC required is 50%.  
• Buy and Make (Indian) - Capital products procured in a fully formed (FF) state from an Indian vendor that has connections with foreign OEMs, involving ToT. A Minimum IC required is 50% of ‘make’.

Other Initiatives

• FDI Policy

Increasing the FDI limit from 49% to 74% under the automatic route in the defence sector. Liberalisation of FDI policy would facilitate the ease of doing business. From 2001- 2014, the FDI flow reported in the defence sector was US$ 169.5 million (Rs 1,382 crore), but after the liberalization, the FDI inflows have spurred by US$ 410.2 million (Rs 3,343 crore) in the last 8 years between 2014-2022.

• Offset Policy
  It aims to encourage investments in the Transfer of Technology (ToT)/Critical Technologies to the Indian industry in the Defence sector. Technology Development Fund (TDF), initiated by the Defence Research and Development Organisation (DRDO) for faster processing of claims, greater transparency, efficiency and accountability in the process, online audit of offset discharge claims, etc.
• Indigenisation list
  It is aimed at helping start-ups, MSMEs, and individual innovators create prototypes and solutions for the problem statements compiled by relevant defence stakeholders. Three platforms—the "Land Based Tactical Communication System," "Light Weight Tanks," and "Light, Medium, and Heavy Combat Armoured and/or Mine Protected Vehicles for Infantry"—are to be produced under the Make II category. The positive indigenisation list encourages MSMEs and start-ups to indulge in developing new technologies from any of the 3 lists, comprising 780 defence platforms, systems and components, announced by the MoD.

The Road Ahead

• The major reforms complement the greater goal of making India an exporter of defence equipment that can compete with the offerings of established global competitors and are a positive step toward enhancing the "Make in India" effort in the defence industry.
• Measures including streamlining the process for purchasing defence equipment, allowing the government to fund up to 70% of development costs, and increasing foreign direct investment (FDI) to 74% through the automatic route are projected to significantly increase investments in the sector.
• From initially just producing parts to now indigenously producing from scratch, the liberalized private sector players have progressed and expanded.
• India is in a good position to seize the potential export opportunity from the current pool of multi-domain engineering talent, cheap production costs, and friendly connections with the majority of countries.

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