India's defence production department, the backbone of its defence industrial base, will for the first-time ever be part of the country's five-year planning process, with this branch of the Defence Ministry joining the exercise carried out by the Planning Commission for the 12th Plan Period from 2012 to 2017.
The development is aimed at giving a boost to India's efforts to build an indigenous defence industrial base, an effort that has already attracted the government's attention with the 2011 Defence Procurement Procedure (DPP) providing space for Indian 'Buy and Make' category and the release of the first-ever Defence Production Policy earlier this year.
Defence Minister AK Antony revealed this fact here at a Defence Ministry function to present awards to best performing Defence Public Sector Undertakings (DPSUs), Defence Shipyards and Ordnance Factories.
"It is for the first time the Department of Defence Production has been involved in the Plan exercise of Planning Commission for the 12th Five Year Plan," Antony said at the function.
He also noted that the reports of the Working Group on Defence Equipment and Aerospace under the Steering Committee on Industry for the 12th Five Year Plan that contained some good recommendations would facilitate innovation and development of defence industry.
"We need to accelerate our indigenisation process in a big way," he said.
Antony also noted that the requirements of the Indian defence services will only increase over a period of time. It is estimated that India will spend around $100 billion over the next 10 years to buy defence equipment, platforms and weapons to boost is armed forces modernisation.
India has been a major importer of defence products and official estimates put its import orders to be about 70 per cent of its present requirements.
However, Antony emphasised that India needed to change this trend of being "over-dependent" on imports to meet its defence forces requirements.
"Till now, we have been over-dependent on imports to meet our requirements. The earlier we reverse this trend, the better it is for our defence industry - not only in economic terms, but also in terms of military infrastructure," he said.
Calling for the DPSUs and Ordnance Factory Board (OFB) to meet international standards of excellence, Antony asked them to maintain a sharp focus on their core areas of activity.
"You must factor in the future requirements of the end-users that are our armed forces, by holding regular consultations with them. This will also ensure the best quality and timely delivery of the finished products that match their requirements and also come up to the best international standards," he said.
Antony said the latest DPP aimed at providing a level-playing field to domestic defence industry, be it public or private sector, and it should spur the DPSUs and OFB to boost innovation and modernisation. However, he noted that the present level of innovation was not up to the expectations.
"Our public sector and private sector need to indulge in a healthy competition that further strengthens the defence industry as a whole. Rather than looking at each other as competitors, the public sector and the private sector must become participants in boosting the defence sector in general, and defence production, in particular," he said.
"Our singular objective must be to keep down the import requirements to the bare minimum possible" he added.
The defence minister said the defence offset policy, an integral component of the DPP that envisaged foreign Original Equipment Manufacturers (OEMs) who win contracts worth over Rs 300 crore (about $65 million as per current exchange rate) should invest at least 30 per cent of the deal amount (at least Rs 90 crore or about $ 20 million) back in Indian defence, aerospace, homeland security or training in these sectors.
"It has been visualised to ensure more inflow of technology and foreign investments," he said.
Keeping in mind the investment flow due to offsets, estimated to be at least $30 billion in the next 10 years, Antony asked the DPSUs and OFB to expedite their reform process and innovation, apart from modernising their infrastructure and work culture.
He said it was not just the responsibility of the Defence Research and Development Organisation (DRDO), but of all DPSUs and OFB too, to take a lead in investing more time, money and human resources in research and development. "To achieve this objective, our DPSUs and OFB must develop and encourage in-house capabilities. Increased self-reliance is the best way to strengthen the twin processes of modernisation and indigenisation," he added.