Path to Pride… Feeling the Pulse
Sub Title : The status of Make in India and Atmanirbhar Bharat Abhiyan ( ABA) initiatives
Issues Details : Vol 16 Issue 5 Nov – Dec 2022
Author : Lt Gen (Dr) V K Saxena (Retd), PVSM, AVSM, VSM
Page No. : 42
Category : Military Affairs
: December 15, 2022
India’s quest for self-reliance in defence is being driven by the Make in India and Atmanirbhar Bharat Abhiyan (ABA) initiatives. The article outlines the steps taken by the Government to impel the said quest and the impact thereof. It also brings out contra views about the two initiatives and the author’s take on the issue
India just walked the ‘Path to Pride’ as the 12th edition of the DefExpo 2022 unfolded in its full splendour from 18 to 21 Oct 22. In this mega event if there was one sentiment that was all pervasive whether it be at an Exhibitor’s stall or a Seminar Venue or a Media Briefing it was ATMANIRBHAR BHARAT ABHIYAN (ABA) or a ‘Campaign for Self-Reliant India’. This work attempts to feel the pulse of ABA as regards the defence and the aerospace sectors. This exercise has been done by taking stock of various determinants and checking their present status.
As one of the first steps towards achieving self-reliance, the Ministry of Defence (MoD) in 2020, came up with the idea of banning the import of some specified items in a phased manner. The ban of an item was to be in sync with the production of the same by the domestic defence industry. A brief assessment of this initiative is presented.
Starting Aug 2020, (i.e within three months of the formal launch of ABA) till Aug 2022, a total of six import ban lists were issued. These lists, which started out as Negative Import Lists and later got christened into a more assertive nomenclature of Positive Indigenization List (PILs) contained items that are to be banned from import in a phased manner during the time bracket 2020-2028.
The lists were in two parts. Some details of each part are as follows:-
- In the first part, there were three PILs issued in Aug 2020, May 2021 and Apr 2022. In all these contained a total of 310 items (101+108+101) banned for import wef different cut off years. The items contained in these lists related to major weapons and platforms such as assault rifles, guns and howitzers, light weight tanks, aircrafts, attack helicopters, missiles of different genres and a variety of ammunition etc.
- The second part also had three PILs issued in Dec 2021, Mar 2022 and Aug 2022. These contained a total of 1238 items (351+107+780). These items, unlike the ones mentioned above, related to components such as Line Replacement Units (LRUs) and other assemblies and sub-assemblies that were earlier being imported by Defence Public Sector Undertakings (DPSUs) but will now be indigenised in a phased manner.
Reflection on performance
The PILs have garnered both positive and the negative sentiments. On the positive side the Govt has stated the following:-
- As regards the indigenisation achieved, the Govt along with issuing the PIL in Aug 2022 also issued another sub-list of 2500 items which belong to Part 2 PILs (LRUs etc) that have already been indigenised and another 458 (351+107) which will be indigenised in a phased manner.
- The latest reports indicate that 167 out of the 458 items have been indigenised.
The naysayers have failed the initiative making the following points:-
- The entire PIL exercise is a sham and is an effort to falsely project the MoD’s ABA programme as a great and irreversible success.
- The items claimed to have been indigenised are trivial such as nuts, bolts, sockets, bushes, washers, jets, pipes, nozzles etc. Also, these are all low-technology items.
- Many items in the count of 2500 and 167 are repeated and different sizes of the same items have been counted as separate serials.
- This is forced indigenisation done hurriedly to project the success of ABA. Lack of proper testing of many of these items may even compromise main equipment in the long run.
The author’s take on the above two extremes is briefly stated below:-
- While it is true that a majority of the items claimed to have been indigenised do comprise small, low-technology items but that is not the complete story. The list does contain significant items as well. Sample some of the following :-
◙ Pressurised missile containers.
◙ High pressure air fitting system.
◙ Internal ship navigation system.
◙ ACCS- Advanced Communication Composite System.
◙ Shakti electronic warfare system .
- The fact is, that the already indigenised items list is a mixed bag with a leaning towards small items. Refraining to give undue credit, the point to remember is that it has been only 2+ years since PILs were issued.
- What actually is missing in the current arrangement is the capture of the indigenisation effort of the private sector. While the Srijan portal (https://srijandefence.gov.in) launched by the Govt in Aug 2020 does provide an option to private players to show interest in any of the items waiting to be indigenised, the results of their efforts in doing so are not being captured adequately.
RESERVING A PART OF DEFENCE BUDGET FOR DOMESTIC INDUSTRY
- From the Financial Year (FY) 2013-14 right up to the FY 2018-19, i.e. an year prior to the announcement of ABA, the share of defence budget as a proportion of the National Gross Domestic Product (GDP) as well as, the Central Govt Expenditure (CGE) consistently declined.
- Also, over the years, the percentage of the funds allocated in the defence budget under the head of capital procurement also continuously declined. For the FY 2011-12 this percentage was 40% which declined to 33% in the defence budget for the FY 2017-18.
- Something unprecedented happened in the defence budget of 2019-2020. A 10% increase was made under the capital head over the last year’s figures.
- The ABA was just about taking shape when the budget for the FY 2020-21 was announced. Giving a head-start to the ABA the budget made a very significant announcement of reserving a whopping 58% (51000 Crs) of the capital acquisition budget for procurement from the domestic industry. Out of this 25% was to be from the private industry. This figure in the next budget (FY 2021-22) was enhanced to 64% (70221 Crs).
- The above allocation for the FY 2022-23 stands revised at 68% (84598 Crs). In addition, 25% of the defence R&D budget has been reserved for R&D in private industry, start-ups and academia.
- After keeping the defence budgetary allocation on low priority as the continuously declining percentage share of GDP and CGE in this regard indicates, a bit of an upturn came in the FY 2019-20 with a 10% increase on defence capital outlay.
- While in the years that followed, the overall allocation didn’t change much, a significant figure of 58% of the total capital procurement budget was reserved for the domestic defence industry in the FY 2020-21. A shot in the arm for the ABA initiative.
THE STATE OF INDUSTRIAL LICENSING
The entire eco system of Industrial licencing has seen a lot of flux in the last two decades plus. Some points to take the reader through are enumerated briefly.
- There was a time prior to May 2001 when the entire defence industry sector was reserved only for the public sector. Past the above date, the Govt opened up 100% of the defence industry to the private sector.
- From the above time till Jul 2022, a total of 584 industrial licences have been given to 358 companies for undertaking the manufacture of various types of defence related items.
- In another significant development in 2017, the validity of Industrial Licence (IL) was enhanced from 3 to 15 years with a provision for extension of 3 years. This policy change was aimed to provide adequate time to private players to run the entire cycle from development to manufacture.
- Besides expediting and partly digitising the IL grant procedure there has been a parallel activity of de-licencing the items on defence product list. Many items on the earlier defence product list requiring licencing have been removed.
- In 2019, the Govt announced de-licensing of a large number of parts and components retaining a list of 16 major platforms as a negative list
(i.e. requiring compulsory licensing). These include big ticket items, explosives, protective equipment and simulators etc.
- The IL eco-system has indeed progressed. Since the opening up of the defence sector to private players a total of 217 licences were issued till Jun 2014. The number moving up to 584 licences corroborates this assertion.
- Online applications have certainly removed much of the delays and non-responsiveness of the earlier manual regime of IL. It is, however, still a work-in-progress.
FDI SCENE – BRIEFLY
- Starting from 2001 when the defence industry was opened up 100% for the private sector, the FDI limit (with IL requirement) was 26%.
In 2014, it underwent an upward revision from 26 to 49 %.
- In Sep 2020, the Govt revised the FDI regulations and permitted FDI under the automatic route to 74% and through Govt route to 100% (where such investment is likely to result in access to niche technology).
- Some other initiatives taken by the Govt to attract greater FDI are:-
◙ Assigning higher multipliers under the offset policy to such FDI investments that result in Transfer of Technology (ToT).
◙ Providing a plug-play type of support to Foreign OEMs in the two Defence Industrial Corridors (DICs) in UP and Tamil Nadu.
◙ Organising webinars/expos/conclaves/ workshops with friendly foreign countries to attract FDI.
◙ Providing for Strategic Partnership (SP) model to Foreign OEMs to forge long term partnerships with Indian industry.
- FDI has grown (albeit marginally) over the years. Rs 494 Crs from Sep 2020 to May 2022.
- It is the sense of the author that marginal increase is also due to the poor comprehension and limited visibility of our policies to the Foreign OEMs.
OTHER DRIVERS OF THE ABA SENTIMENT
Several other initiatives that are driving the ABA sentiment are covered below:-
- Ushering reforms in the procurement ecosystem which in the past has been a quagmire of policies, processes and procedures with layers and layers of approvals required.
- Optimising trials procedures – a nightmare that may stretch for many years in an attempt to comply with the undo-able QRs.
- Initiatives like Innovation for Defence Excellence (iDEX) and Technology Development Fund (TDF)-aimed to impel user innovation and development of technology for modernisation of defence forces.
- Continuous reforms through introduction of many an industry friendly policy in Atmanirbhar driven initiatives like Make procedures, Strategic Partnership (SP) models etc.
- Hand-holding support by providing grant-in-aid of 400 Crs for setting up testing facilities under the Defence Testing and Infrastructure Scheme (DTIS).
- Walking the talk on two Defence industrial Corridors (UP and Tamil Nadu).
WHAT THE NAYSAYERS SAY
While all the above is the story of one side of the fence, the opposite side has the following to say:-
- Atmanirbhar Bharat is essentially a re-packaged Make-in-India in a more alluring re-labelled package.
- Big-ticket items in the Make-in-India/Atmanirbhar basket are few and not commensurate with the type of investments that have gone in.
- Most of the items claimed as successes under the twin schemes (Make-in-India+ABA) actually pre-date Make-in India launch.
- Due to the inefficiencies of the public system, there has not been much forward movement on the Kalam Committee Report which suggested the way forward to take the country’s Self Reliance Index or SRI (ratio of ingenious content to total defence procurement) from the existing 30% to 70 %.
- Ecuador grounded the balance fleet of Dhruv Advanced Light Helicopters and cancelled the contract with HAL after four of the seven supplied by India got involved in accidents.
- Technology transfer has been an issue as public sector seems content with licenced production.
- An indigenous aeroengine, as well as the Active Electronically Scanned Array Radar (AESA) for Light Combat Aircraft (LCA) and Advanced Medium Combat Aircraft (AMCA) for military and civil use remains a distant dream.
- An irresponsible media is ready to toe the Govt line by publishing incorrect facts (e.g. a total of 3.5 lakh Crs of contracts have been signed under the Make in India campaign since 2014 but there is no mention of how many of these have actually fructified).
- Concerted media hype and unprecedented sloganeering is trying to build a positive public perception on MoUs getting signed and big deals happening whereas only a small portion is actually getting converted to business deals.
- There is a danger of a forced induction of mediocre defence equipment propelled by an over-push to the Atmanirbhar campaign.
Perusing the views on both sides of the fence, while the reader is welcome to draw his/her conclusions, the author’s viewpoint is briefly presented:-
- Even the harshest critics of Make-in-India and the ABA do acknowledge that there have been some success stories; albeit many with huge time and cost overruns. Some examples.
◙ Akash weapon system.
◙ K9 Vajra, M 777, Dhanush
◙ Electronic warfare system.
◙ Light combat aircraft.
◙ Shaurya surface to surface tactical missile.
◙ ASTRA beyond visual range air to air missile.
◙ Hypersonic Technology Demonstration vehicle.
◙ Vikrant, Arihant
◙ Prithvi, Agni
◙ Programme AD – Indian BMD system
- Also, where is the doubt that Make-in-India and the ABA are co-terminus since they support the same sentiment of a self-reliant India.
ABA is certainly not a re-packaging job. It is an effort to give a shot-in-the-arm to the Make-in-India initiative by bringing to fore many a new opportunities, policies and platforms (PILs, FDI facilitation, iDEX, TDF, Make II reforms, Industrial corridors etc).
- It is for the reader to assess whether the success story includes ‘big ticket’ or not, the fact is that weapon platforms do not get realised in a matter of years, it is a game of decades.
- Of course, there are quite a few programmes that predate Make-in-India as to their date of start but have seen the light of day only now (some even saw the light of the day before the Make-in-India initiative – e.g Akash).
- SRI was an abysmal 30.1% in the year 1992, the same rose to 38.5% in 2010 while as of Jul 2022 it is 64.2%.
- For whatever reasons, Ecuador has been a blot on our defence exports as our credibility has been dented.
- Nobody will give us niche technology. We have to develop it ourselves. The sooner we realise this, better for the nation.
- Sensationalism and media are synonyms. In essence much of what the critics say in this regard is indeed true.
- Some deliberate sloganeering has been an essential feature of both Make-in-India and ABA.