The Defence Production Policy (DPrP) 2011 was issued by the Department of Defence Production (DDP), Ministry of Defence (MoD). It outlines the framework within which domestic industries are expected to pursue indigenous design and manufacture of defence equipment.The policy recognises Micro, Small andMedium Enterprises (MSMEs) as an integralpart of the defence production supply chains. As per policy guidelines, manufacturers of the equipment or platform are required to purchase at least 20 per cent of components or raw materials from domestic vendors, mainlyMSMEs. However, the clause does not elaborate on indigenous content within the material supplied to the manufacturer,which are the Defence Public Sector Undertakings (DPSUs) for the most part. This provides room for MSMEstoimport the materials or components for supply to the DPSU; which is against the spirit of indigenization goals
The policy mentions the role of strategic partners and their importance for offset management owing to globalized defence production. Sustainability and preference for indigenously designed, developed and manufactured (IDDM) products has beenreiterated in DPrP 2018. The policy provides for a separate fund for MSMEstosupport development of equipment. However, the distribution strategy for the fundis missing.
DPrP 2018 essentially expands on the goals of the 2011 policy. The 2018 policy explains and simplifies various aspects of the guidelines laid down earlier. It acknowledges the fact that significant quantity of weapons continue to be importeddespite the stipulations given inDPrP 2011.The policy also lays down goals to expand the research and development (R&D) activities of both public and private enterprises in defence. Goals such as strategic independence, sovereign capability in selected areas, cost effective defence equipment and collateral benefits ensuing from endeavours of the defence industry set out in DPrP 2018 show a clearer and better articulated policy perspective.
Considering that India is the third largest start-up ecosystem globally, the DPrP 2018incorporates ease of doing business practices for MSMEs. DPrP 2018 states that handholding for start-ups will be done. However, there are very few incubation centres that support start-ups across the country. The required infrastructure for training and development is not in place. Given that military technology requirements are different from commercial technology, separate incubation centres are required for defence start-ups.
The percentage of Foreign Direct Investment (FDI) has been increased from 49 per cent to 74 per cent under DPrP 2018. An emphasis on research and development (R&D) and increase in FDI will facilitate improvements in the aerospace industry within the civilian domain as well. Unlike the DPrP 2011document,DPrP 2018has specific heads under which aspirations for India to become an exporter of weapon systems have been discussed.
Currently MSMEs employ approximately 80 million people.The policy estimates an addition of 2 to 3 million jobsin defence manufacturingby 2025. This is an increase of a mere 3 per centin total employment provided byMSMEs.
The DPrP2018continues the non-committal and under-aspiring stance taken by previous documents in setting goals for MSMEs as a robust part of the defence supply chain. It also mentions the restructuring of the DPSUs and Ordinance Factories (OFs) so that they match the competitive market of the future. However, given the current functioning and delivery status of any product from DPSUs or OFs, disinvestment is touted as the most preferred option to enhance productivity and efficiency. Infrastructure of public sector units could be used by private players to set up new assembly lines or strengthen existing ones.
The DPrP 2018also discusses offset obligationsand their management. These obligations are to be met by foreign original equipment manufacturers (OEMs) in the domestic defence ecosystem through cyber means. The aim is to reduce the time required for product development and improve on product delivery timelines. Even though the policy specifies digital/cyber infrastructure as the medium of offset management, there has been no tracking of offsets discharged thus far.Therefore,before the cyber infrastructure is set up, baseline data and estimates of offsets discharged since 2005 when the defence offsets policy was introduced needs to be established. Since the DPrP 2018 only elaborates on its precursor, it will require a lot of refining for seamless execution. DPSUs and OFs, will have to establish credibility before competing at the global level, given that other international players have been in the business for more