Self-reliance in Defence Hinges on Joint Efforts by DPSUs, Private Sector and MSMEs, EEPC India

Over the next 7-8 years, India's defence modernization plan is projected at US$ 130 billion and contracts worth over US$ 55.17 billion are expected to be placed with domestic manufacturers.

With the government promoting the private sector to play a key role in the country's defence sector, engineering MSMEs could seize the opportunity by being part of the indigenous defence ecosystem.

Stating that contribution of private players in the defence sector has steadily grown over the years, Dr. Srikar Reddy, Joint Secretary, Ministry of Commerce & Industry said that self-reliance in defence manufacturing can only be made possible with concerted efforts of DPSUs, major private players and MSMEs.

He noted that many engineering majors have diversified and joined the Defence sector.

"More than 460 licenses have so far been issued to private companies for production of defence equipment," Dr Reddy said in his opening remarks at India MSME Defence Week organized by EEPC India.

Over the next 7-8 years, India's defence modernization plan is projected at US$ 130 billion and contracts worth over US$ 55.17 billion are expected to be placed with domestic manufacturers.

Local requirements and rising defence exports provide immense opportunity to engineering MSMEs to acquire economies of scale and become a formidable part of the global defence supply chain.

Dr Reddy said that the government is taking several initiatives to encourage domestic manufacturing in the entire defence manufacturing value chain and reduce its external dependence for defence procurement under the vision of ‘Atmanirbhar Bharat’ enunciated by Prime Minister Narendra Modi.

In a series of reforms, the government has liberalized the FDI regime in the defence sector and eased regulations. The FDI under the automatic route for the defence sector has been increased to 74% and 100 % through the government route. The government has laid out a clear plan to build an industry ecosystem to indigenize the imported components and sub-assemblies for defense equipment and platforms manufactured in India.

As many as 5,000 such items are proposed to be indigenized by 2025.

"As India is emerging as the world’s largest nation by the middle of the next decade, it has become imperative for her to achieve Atma Nirbharta and global leadership in the critical defence technologies, not just in the interest of country’s security, but also in the larger economic interest," said EEPC India Chairman Mr Mahesh Desai delivering his inaugural address at India MSME Defence Week.

Mr Desai said that with due efforts of the Government, India made a quantum jump in India’s arms exports during the last decade.

According to the latest report by Sweden-based think tank Stockholm International Peace Research Institute (SIPRI), Indian arms exports have risen sharply by 228% between the two interval periods over the last decade i.e. 2011-15 & 2016-20.

Over the last few years the domestic defence manufacturing landscape has been witnessing a major transformation with the increasing participation of MSMEs in the defence manufacturing supply chain.

A broad estimate suggests there are over 24,000 MSMEs currently involved in the defence supply chain contributing from low value added to hi-tech cutting edge systems to the Defence forces.

The country's defence manufacturing sector has wide and strong cross linkages which impacts their development through several manufacturing sectors such as automotive, textiles, optics, machine tools, communication and heavy & light engineering.

In order to tap the growing opportunity in the sector, EEPC India has regularly partnered with Defence PSUs (DPSUs) in showcasing their products and capabilities in both India and overseas. It has also organized several vendor development programmes on various occasions in the past.

As part of the continuing exercise, sessions on vendor development, technology, Make in India and Atma Nirbhar Bharat are planned over the four-day India MSME Defence Week which kicked off virtually today.

Mr Arun Kumar Garodia, Vice Chairman of EEPC said that the virtual event is aimed at creating MSME linkages with the strategic and critical defence sector.

MSMEs, defence start-ups, entrepreneurs, incumbent and prospective vendors, traders and other related professionals are participating in the ongoing virtual programme.

The draft Defence Production and Export Promotion Policy 2020 has aimed to achieve exports of US$5 billion in aerospace and defence goods and services by 2025. This has created an unprecedented opportunity for international trade and collaborations in the defence sector for MSMEs.

Currently, MSMEs engaged in manufacturing defence items depend significantly on DPSUs, Defence Research and Development Organisation (DRDO) etc. Ordnance factories outsource around 40% of their production in the form of components and sub-assembly requirements, mainly from MSMEs.

[Source: EEPC India/23.03.2021]