Aug 05, 2024The Defence Aatmanirbhar Dream – From ‘Buy For India’ To ‘Make In India’
This article has been published by Mondaq at link.
Introduction:
2023-2024 has proved to be a monumental year for the Indian defence industry, with its exports scaling a record high of INR 21,083 crore and production value crossing the INR 1,00,000 crore mark for the first time.
2023-2024 has proved to be a monumental year for the Indian defence industry, with its exports scaling a record high of INR 21,083 crore and production value crossing the INR 1,00,000 crore mark for the first time. In fact, recent figures show that defence exports have grown by 31 times in the last 10 years1. This feat is a testament of the government’s focused efforts to boost India’s defence sector.
Since independence, India has been primarily dependent on imports to support its defence needs. While India still relies on such imports, the government has been taking calculated steps to propel a shift from ‘Buy for India’ to ‘Make in India’. This is being done through introduction of significant policy reform initiatives aimed at promoting ease of doing business in India.
Efforts are particularly being made to integrate Micro, Small & Medium Enterprises (“MSME”), start-ups and innovators in the defence sector’s growth story. Recently, the Defence Ministry relaxed certain financial and technical eligibility criteria under the Defence Acquisition Procedure 2020 to promote procurement of defence technology from start-ups and MSMEs.2
The success of the government’s efforts can be seen from the 200% jump in the number of defence licenses issued to entities in the last 7-8 years.3
In this article we analyse one such initiative – ‘Innovations For Defence Excellence‘ (“IDEX”) and discuss the manner in which it is fuelling India’s aatmanirbhar dream.
Genesis of IDEX:
IDEX was launched in 2018 with the aim of creating an ecosystem to foster innovation and technology development in defence and aerospace.4 It targets MSMEs, start-ups, individual innovators, R&D institutes and academia as the government believes that these entities have the flexibility and adaptability to supply innovative and indigenous technology solutions to the armed forces.5 These entities are encouraged to create prototypes of products/technologies catering to defence requirements and IDEX then helps them scale such products/technology for the market.
IDEX has 3 primary objectives6, namely (a) ‘facilitate‘ rapid development of new, indigenized and innovative technologies to meet needs of the defence and aerospace sectors in shorter timelines (b) ‘create‘ a culture of engagement with innovative startups, to encourage co-creation for these sectors and (c) ‘empower‘ a culture of technology co-creation and co-innovation within these sectors.
It seeks to achieve these objectives by creating a network of independent defence innovation hubs, setting up communication channels with innovators, funding pilot projects and facilitating dialogue between innovators and armed forces personnel to better address defence needs.
The CODISSIA Defence Innovation and Atal Incubation Centre was the first defence innovation hub established under IDEX in Coimbatore. Since its establishment, it has proved to be a key contributor to the Southern Defence Corridor and helped MSMEs in the region transform into import substitution partners for the armed forces. Similarly, the Nashik Defence Innovation Centre is another hub established under IDEX. It currently coordinates between 16 defence public sector undertakings and about 170 MSMEs and hopes to generate business of approx. INR 50 crore for MSMEs in the next 1-2 years.7
How does IDEX operate?
The IDEX scheme is funded by the Defence Innovation Organisation and has proved to be an effective tool to scout talent inter alia by organising annual challenges and hackathons.
The Defence India Start-up Challenge (“DISC”) is one such program organised under IDEX to identify innovators who have potential. Under this challenge, statements are released highlighting certain problems being faced by the Indian Army, Navy and Air Force. Innovators are invited to submit their solutions to these problems within an identified period.
This challenge is open to any Indian company incorporated under the Companies Act, 2013 (or erstwhile Companies Act, 1956), primarily MSMEs, start-ups (as defined and recognized by Department of Industrial Policy and Promotion, Ministry of Commerce and Industry) and individual innovators (research and academic institutions). Applicants are required to provide technical and financial details of their proposal, highlighting the level of funding they require. They are also required to identify their relevant patents and research papers, if any, as well as a tentative business plan.
The proposals received for each problem are screened by a committee comprising of defence and technology experts screens. The selected innovators are provided a grant of upto INR 1.5 crore in the form of equity/other relevant structures. This amount is disbursed in tranches based on the milestones decided by a selection committee.
In addition to funding, selected innovators are also given entry to accelerator programs run by IDEX partners, where they are mentored by innovation and entrepreneurship experts. They may also be supported in terms of access to defence testing facilities and experts for their product/technology development.8
DISC’s 11th edition was recently concluded under which 22 problem statements were released and innovators were called upon to submit their proposal by 19th April, 2024.
Pursuant to the above efforts, approximately 13 procurement contracts, having a cumulative value of INR 280 crores, have been executed between the winners of such challenges and the armed forces.9
The Acing Development of Innovative Technologies (“ADITI”) is another scheme which has been recently launched under IDEX.10 ADITI targets around 30 critical and advanced technologies which have high capital investment. These include designing and developing satellite communication applications, advanced cyber technology, autonomous weapons, cyber weapons, artificial intelligence, nuclear technology etc. With a grant of upto INR 25 crores up for grabs, ADITI is an endeavour to support development and acceleration of such technologies which are in the nascent stage of research and development.
ADITI targets startups, MSMEs and individual innovators who, if selected, will have to get themselves registered as start-ups/MSMEs. As in the case of DISC, problem statements will be released and innovators will be invited to submit their proposals. Two applicants per challenge, showing capability, intent, and promise will be selected. The proposals will be screened by a high-powered selection committee led by challenge owner, subject matter experts, representatives from academia/industry and other concerned stakeholders. The selected innovators will be entitled to a grant of upto 50% of product development budget with maximum ceiling limit of INR 25 crore per applicant, on a milestone basis.
The first edition of ADITI was launched in March 202411 with innovators having time till April 19, 2024 to submit their proposals. It is hoped that ADITI also achieves the same level success as DISC and helps bolster India’s defence innovation and production.
Conclusion:
As can been seen, the government’s calculated efforts to integrate, support and incentivize start-ups as well as MSME to build the domestic defence industry are bearing fruits. The encouraging numbers in terms of contract value, production and exports show that the government has been largely successful in its endeavours and is on the right track. While the government has managed to give the much needed push to kick-start India’s defence production journey, it will be interesting to see if it is able to sustain this growth and emerge as a formidable frontrunner in the defence sector.
Footnotes:
1. https://pib.gov.in/PressReleasePage.aspx?PRID=2016818
2. https://www.mod.gov.in/dod/sites/default/files/DAP_2020_04042024.pdf.
3. https://pib.gov.in/PressReleaseIframePage.aspx?PRID=1989502.
4. https://www.makeinindiadefence.gov.in/pages/innovations-for-defence-excellence-idex-.
6. https://idex.gov.in/about-idex.
8. https://www.makeinindiadefence.gov.in/pages/defence-india-startup-challenge.
9. https://idex.gov.in/sites/default/files/2024-03/ADITI%20Scheme%20.pdf.
10. https://pib.gov.in/PressReleaseIframePage.aspx?PRID=2011171.
11. https://idex.gov.in/sites/default/files/2024-03/ADITI%20Final.pdf.