MoD Releases DPEPP 2020 Draft Policy; Envisages USD $ 25 Billion Turnover by 2025

The Defense Ministry on August 3, 2020, unveiled a new draft Defense Production and Export Promotion Policy (DPEPP 2020). Notably, the policy comes in the wake of the recent call for “Atma Nirbhar Bharat” as pronounced by Prime Minister Modi. Hence, with self-reliance as its centerpiece, the new draft policy’s goal remains “to position India amongst the leading countries of the world in defense and aerospace sectors.The draft policy laid out a plethora of aims and objectives. These include:

  • Firstly, achieving a turnover of Rs 1,75,000 Crores (US$ 25Bn) including export of Rs 35,000 Crore (US$ 5 Billion) in Aerospace and Defence goods and services by 2025.
  • Secondly, developing a dynamic, robust and competitive Defence industry, including Aerospace and Naval Shipbuilding industry; to cater to the needs of Armed forces with quality products.
  • Thirdly, reducing dependence on imports and take forward “Make in India” initiatives through domestic design and development.
  • Fourthly, creation of an environment that encourages R&D, rewards innovation and creates Indian IP ownership.
  • Finally, the creation of robust and self-reliant defence industry.

DPEPP 2020: What to look out for?

The Ministry of Defence uploaded the DPEPP 2020 on its website which highlights multiple strategies. These include Indigenization & Support to MSMEs/Startups, Procurement Reforms, Optimize Resource Allocation, Innovation and R&D, DPSUs and OFB, Investment Promotion, FDI & Ease of Doing Business, Quality Assurance & Testing Infrastructure and finally Export Promotion.

Indigenization and support to MSMEs/Startups

The indigenization aims to create an industry ecosystem to ‘Indianize’ the otherwise imported components. Primarily, alloys and special materials. Another component of indigenization includes sub-assemblies for defense equipment and platform manufactured in India. To achieve the same, MoD proposed indigenization of 5000 such items by 2025. Hence, Public Procurement Order will be made applicable for procurement preference to those items in the Defence sector for which domestic production capability exists.

Procurement Reforms

In the bid to move away from licensed production to design, develop and produce indigenously; the MoD proposed setting up Project Management Unit (PMU) for the development and production of technologies involved, life cycle costs, and maintenance requirements of platforms, equipment and weapon systems.

Optimization of Resource Allocation

Domestic procurement takes up a 60 percent share in overall Defence procurement. In order to enhance procurement from domestic industry, MoD plans on doubling it from current Rs 70,000 crore to Rs 1,40,000 crore by 2025. For this purpose, MoD shall mandate OFB/DPSUs to increase productivity, enhance quality, reduce costs. Additionally, to ensure timely execution of orders by optimizing inventory management, greater vendor outsourcing at all levels, improving skill levels, as well as overall project management.

Innovation and R&D under DPEPP 2020

Recognizing the requisite Defense Research & Development, DRDO in consultation with the Services and in collaboration with other scientific industrial establishments would set up mission in select areas. Explicitly, this aims at developing futuristic and critical systems/materials. The indicative list of these areas ranges from Ballistic cruise Missiles to a robust cyber security system.

Moreover, Innovations for Defence Excellence (iDEX) has been operationalized to provide necessary incubation and infrastructure support to the start-ups in the defence area. Additionally, Mission Raksha Gyan Shakti was launched to promote a greater culture of innovation and technology development and file a higher number of patents in Defence Public Sector Undertakings (DPSUs), Ordnance Factory Board (OFB).

DPSUs and OFB

Over the years, the Department of Defence Production has set up wide-ranging production facilities for various defence equipment through the 15 Ordnance Factories and Defence Public Sector Undertakings (DPSUs). However, in order to prepare them for the future so that they work in tandem with the private industry; the corporatization of the Ordnance factories shall take place.

Therefore, DPSUs would be encouraged to move towards INDUSTRY 4.0 by using innovative strategies and tools like digital threading to include the Internet of Things (IoT). This includes time-stamping by the use of blockchain technology and Artificial Intelligence and so on.

Investment Promotion, FDI & Ease of Doing Business

The opportunities in the aerospace industry lie in the field of aircraft build work, aircraft Maintenance, Repair and Overhaul (MRO), helicopters, engine manufacturing and MRO work, line replaceable units, Unmanned Aerial Vehicles (UAVs) and upgrades and retrofits etc. 

Quality Assurance & Testing Infrastructure

This includes a comprehensive review and streamlining of the quality control and assurance process; which requires developing an IT platform with an industry interface. Hence, a pool of testbeds/firing ranges/Quality Assurance (QA)-Quality Control (QC) labs/testing infrastructure will be mapped in the country and enhanced to meet the growing requirements of the Industry. 

Export Promotion under DPEPP 2020

Finally, the MoD envisages achieving the target of Rs 35,000 crore (US$ 5 Bn) of Defence Exports by 2025 vide DPEPP 2020. For the same, Govt to Govt agreements and Lines of Credit/Funding shall be used to promote domestically manufactured defence products.

Moreover, another development in this regard includes Export Promotion Cell set up to promote Defence exports; through coordinated action to further support, strengthen and professionalize the industry.

Conclusion

The policy comes after the government in May 2020 made it clear the armed forces will have to shed their penchant for exorbitant foreign weapon systems; unless they can be Indianized through joint ventures with global armament and aviation majors.

As a third largest defence importer of the world, India mouldered in a strategically vulnerable position for a long time. It released a draft policy with similar goals in 2018, although with little impact.

But whether the government fulfills the stated goals of the draft DPEPP 2020, envisaged as an overarching document to provide a focused, structured and a significant thrust to defence production capabilities, remains to be witnessed.