In News:

• Defence Minister has approved the third Positive Indigenisation List (PIL) of 780 strategically important Line Replacement Units (LRUs), sub-systems and components which are being manufactured by defence PSU.
• The indigenisation of the 780 items will be taken up under the ‘Make in India’ category.
  • The category aims to achieve self-reliance by involving greater participation of the Indian industry.

What’s in Today’s Article:

• Indigenisation of Indian Defence Sector – About, background, importance, recent steps taken to promote indigenisation
• News Summary

In Focus: Indigenisation of Indian Defence Sector

• It can be understood as the capability to develop and produce defence equipment within the country for the purpose of achieving self-reliance.
• It helps in reducing the burden of imports.
• It aims to design, develop and lead the production of state-of-the-art sensors, weapon systems, platforms for the Indian Defence Services.

Background:

• Indian Government is pushing towards defence indigenisation. For this, it has, from time to time, released negative import list/positive indigenisation list.
  • The items on the lists cannot be imported by the Services and should be sourced from within the country.
• In August 2020, the government notified the first negative import list of 101 items.
• In May 2021, the government notified the second list, comprising 108 items.
  • It renamed the third list as ‘positive indigenisation list’.

Importance of Indigenisation

• Economic
  • Despite having the fifth largest defence budget, India procures 60% of its weapon systems from foreign markets.
  • Higher import leads to increase in the fiscal deficit.
• Employment generation
  • It will help MSMEs involved in the defence manufacturing and will promote start-ups. This, in turn, will generate employment in India.
• Security
  • India is surrounded by porous borders and hostile neighbours. It needs to be self-sufficient and self-reliant in defence production.
• Geopolitical
  • Given the current geopolitical scenario after the Ukraine war, the importance of being self-reliant in defence production is more apparent than ever.
  • Self-reliance in Defence manufacturing will also promote India as a defence exporter.
    • Recently, India has signed a $375 million deal to export the BrahMos supersonic cruise missile to the Philippines.

Recent steps

• Change in Defence Procurement Policy(DPP)
  • The policy increased the Indigenous Content stipulated in various categories of procurement by about 10% to support the ‘Make in India’ initiative.
  • It added an additional category Buy (Indian-IDDM) as the most preferred way of defence goods acquisition.
    • IDDM - Indigenously Designed, Developed and Manufactured.
  • Preference has been given to 'Buy (Indian)', 'Buy & Make (Indian)' & 'Make' categories of acquisition over 'Buy (Global)' category.
• Negative import list/positive indigenisation list
• Space created for private players
  • Government has incentivised the private sector to invest in defence manufacturing.
  • In this direction, it has relied on transfer of technology, providing a platform for handholding etc.
  • The government recently corporatised the Ordnance Factory Board and converted it into seven DPSUs.
• Enhanced capital outlays
  • A percentage of the capital outlay of the Defence budget had been reserved for procurement from the domestic industry.
    • Of the ₹1.52 lakh crore capital allocation in this year’s Defence budget, 68% had been reserved for procurement from the domestic industry.
• Budget 2022-23
  • The annual Budget of 2022-23 announced that:
    • Defence R&D will be opened up for industry, start-ups and academia
    • 25% of the Defence R&D budget has also been earmarked for this purpose.
  • In addition, this year’s budget also announced that an independent nodal umbrella body will be set up for meeting wide-ranging testing and certification requirements.

News Summary

• The fresh list specifies the timelines beyond which the strategically-important 780 items will be procured only from the domestic industry.
• The new list comes at a time when the US-led western countries have slapped wide-ranging sanctions against Russia for its invasion of Ukraine.
• India is faced with the challenge of maintaining high operational military readiness because almost 70% of its defence hardware and software is of Soviet or Russian-origin.