“Of the licences issued for defence manufacturing over the past ten years, more than half have been issued in the past six months alone”

Indian defence electronics has evolved significantly over the past decade. Yet, when it comes to the core electronics for defence, we still lag behind the rest of the world, switching between being either the biggest or the second biggest importer of defence products.

On the sidelines of the Strategic Electronics Summit 2018 organised by ELCINA in Bengaluru this July, Sanjay Jaju, joint secretary, DIP, at the Ministry of Defence (MoD), India, shares his views on the current defence IT scenario in the country. He also talks about the various government initiatives and policies that have been implemented in the last few months to improve the situation and how this is helping startups and MSMEs (micro, small and medium enterprises). His thoughts on a range of subjects related to defence electronics in India follow…

Artificial intelligence is gaining importance
There is cutting-edge research going on around the world that is primarily dedicated to defence. Even in the past, the major technology breakthroughs first started with defence, including the Internet. Today, one such technology is artificial intelligence (AI). The Ministry of Defence has created a task force to research AI capabilities and see how it can be used to improve Indian defence electronics. But AI comes with major challenges in terms of security. The data within defence organisations is top secret, and with the Internet and Wi-Fi coming into the picture, the risk of data being exploited is high. But without data, AI has no role to play, so the cyber security risks have to be addressed.

The Defence Production Policy
Today, the local value addition in defence electronics products used in India is a mere 20 per cent. For a country of our size and requirements, it is a shame that our value addition is so low. Defence is one sector in which you will have to invest a lot to bring your product to the prototype stage, and even after that, you might not even get an order. A lot of money gets spent over many years on developing a product, the design of which might have to be scrapped and started from scratch. To facilitate these industries, the Government of India (GoI) has formulated a Defence Production Policy, which has been modified with comments and suggestions from other sectors.

Today, the major challenge is that not many are ready to invest in defence because they have got very little or no returns on investments over the past years. Also, the development and approval cycle can be so long that sometimes, by the time you come up with the product, there may no longer be a market for it. And even if there is a market beyond the defence sector, the product cannot be sold due to security concerns.

C4ISR (Command, control, communications, computers, intelligence, surveillance and reconnaissance)
The Department of Defence Production has strategised and brought in a specific chapter called the C4ISR, which takes a holistic view of the entire strategic electronics picture—be it inland, at sea or in the air. This could provide a huge space for startups, big and small companies and the MSMEs to develop indigenous products.

The Defence Procurement Policy
The updated version of the Defence Procurement Policy focuses mainly on two things. One is on the Make II procedure, under which companies or MSMEs willing to build the prototype do so at their own expense, and if the prototype meets the required criteria, they have assured orders.

The second is the AI revolution. The first World War was fought with air power, the second used nuclear power and the third one will be a cyber war —between intelligent, flexible computer systems and us. Hence, a lot of the challenges to be faced will be related to artificial intelligence. And our AI capabilities will depend largely on the computing products that we have. Strategic electronics should have a solid, globally-competitive hardware industry to back it up and support AI, to make sure systems do not fail at the most critical moments.

Innovations for defence excellence (iDEX)
In April 2018, our Prime Minister also launched the ‘Innovations for defence excellence’ scheme for setting up defence innovation hubs across India. These are to provide the necessary incubation and infrastructure support to startups in the defence space. As a part of the programme, three innovation hubs for startups and five hubs for academic institutions are almost ready. The best part about the programme is that it does not include any entry barrier for startups. There are no financial or technical commitments, thus giving the maximum opportunity for startups to participate. There is also a complete roadmap provided in terms of IP protection and the subsequent stages that follow. This is a huge opportunity for incubators, innovators and startups to apply their solutions to various defence related problems.

The Defence Innovation Fund
Startups and MSMEs are an important sector that can bring about a lot of new innovations and technologies that will help our country grow. The Ministry of Defence has started the Defence Innovation Fund to support businesses and products from the MSME sector. Besides, the export control regulations have been liberalised.

Licensing and liberalisation
Till 2001, the history of the Indian defence industry was characterised by what can be called state-led industrialisation. From 2001 onwards, things changed and the industry has been opened for private sector participation through a licensing system. Today, the entire regime of licensing has been further liberalised for MSMEs, because of which, of the licences issued for defence manufacturing over the past ten years, more than half have been issued in the past six months alone.

The sector is going to be further modified by licensing in such cases that have dual-use possibilities and do not have strategic implications. A fresh and rationalised list of the products that require a licence and those that do not will be published soon.

When a company has a product that does not affect the strategic requirements of the country, it should be able to export it too. Governments can only enable a productive ecosystem to an extent, but the actual business is done by the industries. The less a government is involved in your business, the better you are at it.

With all these policy developments and support from the government, we hope that more MSMEs and startups can get into manufacturing defence products and gradually indigenise all of the electronics used in defence.

As told to Ankita K.S. of the EFY Group