In line with the effort to promote self-reliance in defence manufacturing, the Defence Minister has approved the third Positive Indigenisation List (PIL) of 780 strategically important line replacement units (LRU).

What is a Positive Indigenisation List (PIL)?

• The positive indigenisation list essentially means that the Armed Forces—Army, Navy, and Air Force—will only procure the listed items from domestic manufacturers.
• The manufacturers could be private sector players or Defense Public Sector Undertakings (DPSUs).
• This concept was rolled out in the Defence Acquisition Procedure (DAP) 2020.

Why in news?

• This third list is different from the three PILs announced for the armed forces.
• This list is in continuation to the two PILs of LRUs, sub-systems, assemblies, sub-assemblies and components that were published in December 2021 and March 2022.
• These lists contain 2,500 items which are already indigenised and 458 (351+107) items which will be indigenised within the given timelines.
• Out of the 458 items, 167 items (163 from the first PIL, and four from the second PIL) have been indigenised, so far, it stated.

Other steps taken by the Centre to boost defence production

• Licensing relaxation: Measures announced to boost exports since 2014 include simplified defence industrial licensing, relaxation of export controls and grant of no-objection certificates.
• Lines of Credit: Specific incentives were introduced under the foreign trade policy and the Ministry of External Affairs has facilitated Lines of Credit for countries to import defence product.
• Policy boost: The Defence Ministry has also issued a draft Defence Production & Export Promotion Policy 2020.
• Budgetary allocation: In addition, a percentage of the capital outlay of the defence budget has been reserved for procurement from domestic industry.
• Defence Industrial Corridors: The government has also announced 2 dedicated Corridors in the States of TN and UP to act as clusters of defence manufacturing that leverage existing infrastructure, and human capital.
• Long-term vision: The vision of the government is to achieve a turnover of $25 bn including export of $5 bn in Aerospace and Defence goods and services by 2025.
• Push for self-reliance: The govt has identified the Defence and Aerospace sector as a focus area for the ‘Aatmanirbhar Bharat’ or Self-Reliant India initiative.

Issues retarding defence indigenization

• Excess reliance on Public Sector: India has four companies (Indian ordnance factories, Hindustan Aeronautics Limited (HAL), Bharat Electronics Limited (BEL) and Bharat Dynamics Limited (BDL)) among the top 100 biggest arms producers of the world.
• Policy delays: In the past few years, the government has approved over 200 defence acquisition worth Rs 4 trillion, but most are still in relatively early stages of processing.
• Lack of Critical Technologies: Poor design capability in critical technologies, inadequate investment in R&D and the inability to manufacture major subsystems and components hamper the indigenous manufacturing.
• Long gestation: The creation of a manufacturing base is capital and technology-intensive and has a long gestation period. By that time newer technologies make products outdated.
• ‘Unease’ in doing business: An issue related to stringent labour laws, compliance burden and lack of skills, affects the development of indigenous manufacturing in defence.
• Multiple jurisdictions: Overlapping jurisdiction of the Ministry of Defence and Ministry of Industrial Promotion impair India’s capability of defence manufacturing.
• Lack of quality: The higher indigenization in few cases is largely attributed to the low-end technology.
• FDI Policy: The earlier FDI limit of 49% was not enough to enthuse global manufacturing houses to set up bases in India.
• R&D Lacunae: A lip service to technology funding by making token allocations is an adequate commentary on our lack of seriousness in the area of Research and Development.
• Lack of skills: There is a lack of engineering and research capability in our institutions. It again leads us back to the need for a stronger industry-academia interface.

Way forward

• Reducing import dependence: India was the world’s second-largest arms importer from 2014-18, ceding the long-held tag as the largest importer to Saudi Arabia, says 2019 SIPRI report.
• Security Imperative: Indigenization in defence is critical to national security also. It keeps intact the technological expertise and encourages spin-off technologies and innovation that often stem from it.
• Economic boost: Indigenization in defence can help create a large industry which also includes small manufacturers.
• Employment generation: Defence manufacturing will lead to the generation of satellite industries that in turn will pave the way for a generation of employment opportunities.

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