By Vikas Gupta
Trading Standard, May 17, 2023
For nearly three years, the Ministry of Defense (MoD) has been promoting aatmanirbharta(autonomy) in the acquisition of military equipment by imposing additional restrictions on the import of specified weapons and defense equipment. In December 2020, the MoD for the first time introduced restrictions on the import of line replacement units (LRUs), subsystems, assemblies, spare parts and components of specified defense systems. From the end of this year, 69 types of equipment could no longer be imported. In March 2022, other types of equipment were subject to import bans, and import restrictions were further extended in August 2022. These lists were given a veneer of positivity by labeling them as “Positive Indigenization Lists” or PILs. With a fourth PIL of 928 “strategically important” items promulgated on Sunday, those lists now contain 2,500 items that have already been indigenized and another 1,238 that will be indigenized on schedule. According to data submitted by the Ministry of Defense to Parliament, these measures are having an effect: defense imports, which constituted 46% of capital expenditure in 2018-2019, represented only 36.7% of capital expenditure during of the year ending December 2022.
The domestic defense industry, however, raises three important questions about the notion of protecting domestic defense manufacturing through the issuance of PILs. The first is the argument that it is cheaper – or at least it should be – to design, develop and manufacture defense products in India. If so, why is it necessary to protect domestic industry by banning imports?
The Ministry of Defense says that one of the main intentions of these import embargoes is to provide Indian defense manufacturers with the assurance that they will compete on an equal footing when designing, developing or manufacturing manufacture of defense equipment with their own capabilities or technologies obtained from the Defense R&D Organization. (DRDO). The private defense industry has, too often in the past, spent money and design effort to develop a defense product, only to see the MoD import it from the global market instead. An embargo on imports of specific products would provide insurance against such an eventuality. The 2020 Defense Procurement Procedure already provides a layer of insurance against such an eventuality by stipulating that a “designed, developed and manufactured in India” product would be given priority for procurement over any other category. From now on, there will be additional protection against PIL.
A second question raised is whether the protection provided by a PIL affects defense preparation due to quality and timing issues. In the case of several defense systems and weapons platforms in the past – such as the Arjun tank, the Tejas fighter jet, the Dhruv light helicopter and the Project 15A and 15B destroyers – the native project has been unduly shielded from global competition, leading to time and cost overruns that may never have occurred had the project been exposed to the stormy winds of global competition.
The final question that arises is whether PILs are an appropriate method to increase indigenization. As noted above, it took nearly 15 years to increase the indigenous content of weapon systems purchased by India by 10%. As the level of sophistication of a rig or piece of equipment increases, it becomes increasingly difficult to raise levels of indigenization.
