Speaking at the ET World Leaders Forum last week, Rajnath Singh announced that India will be collaborating with French defence firm Safran to make developed advanced jet engines locally for its indigenous 5th-gen stealth advanced medium combat aircraft (Amca). This came shortly after Narendra Modi's call on Aug 15 for a made-in-India fighter jet engine, which the defence minister reiterated on Wednesday at Ran Samvad 2025 defence conclave at Mhow, Madhya Pradesh.
The partnership with DRDO and its Gas Turbine Research Establishment (GTRE) is expected to involve 100% technology transfer, complete IP rights, and no export restrictions under the G2G framework. This is a new defence procurement model for India.
As these announcements and projections take place, a major non-military exercise is underway within the defence ministry. Defence Acquisition Procedure (DAP) 2020, which guides procurement of military equipment, is currently under review. This policy faced criticism for delays and inefficiencies, with defence secretary Rajesh Singh describing it as 'broken'. Certain procurement categories have had no programmes assigned, while others have failed to deliver results. The review process is complex, but it aims to reshape India's military-industrial landscape for the next five years or more.
India's military-industrial ecosystem has evolved through its defence procurement policies. Until 2002, private firms were not allowed in defence, and the sector was dominated by defence PSUs (DPSUs). This changed with the introduction of the first procedure in 2002, which set out processes for purchasing military equipment from foreign OEMs, or locally from Indian firms.
In 2003, its scope expanded to allow foreign OEMs to manufacture in India through local partners, involving transfer of technology (ToT). As India's local capabilities grew, procurement categories were added to promote Indian companies to make in India, including through licensed production.
In 2016, former defence minister Manohar Parrikar prioritised aatmanirbharta with a new procurement category for equipment that was designed, developed and manufactured indigenously. This marked a strategic shift from 'Make in India' to self-reliance.
Over the past decade, these policies have helped triple defence production and increase exports 30x. Yet, critics say shifting policy goals create uncertainty. For example, foreign defence offsets have largely failed to deliver advanced technologies, so indigenous content is now the focus.
A committee led by MoD's DG (acquisition) has been formed to consult stakeholders for DAP 2020's review. But stakeholders often have conflicting priorities. Foreign OEMs seek higher FDI limits and lower, more flexible indigenous content, while Indian companies strive to maintain FDI limits and higher indigenous content. Where DPSUs aim to retain their dominance, private Indian firms seek a level playing field. Neither DPSUs nor private Indian firms support G2G deals, which foreign OEMs prefer.
The fighter jet engine announcements underscore benefits of ToT from foreign OEMs. Previously, MoD attempted to bring in foreign technologies. The FDI limit in defence was raised from 26% to 49%, then to 74% in 2020 under automatic approval, specifically to attract investment and ToT.
However, over the past five years, there has been little FDI inflow, and no significant foreign JVs have been set up for advanced weapon systems. This indicates that foreign OEMs are unlikely to transfer cutting-edge tech without full ownership and control.
They are also hesitant to seek 100% FDI under the government approval route, as each case depends on factors like access to modern tech or other considerations. With no guidelines defining 'modern technology', conditions for 100% FDI remain ambiguous. The first approval of 100% FDI for Sweden's Saab nearly two years ago is yet to generate any MoD orders.
As an alternative, in areas lacking specific technologies, foreign OEMs could be treated equally with Indian companies, and FDI limit could be raised to 100% under automatic approval. This would allow wholly owned Indian subsidiaries of foreign OEMs from trusted partner countries to locally bid for weapon systems contracts and enable ToT.
Such a move aligns with the 'Make in India' philosophy - procurement in India, from an Indian-registered company, under an Indian contract and in Indian rupees. This carve-out may well lead to the creation of a new procurement category.
A forward-looking DAP 2020 review could potentially unlock foreign ToT and investment opportunities in India. Foreign governments are also keenly awaiting the outcome of the review. Defence industrial cooperation is vital for strengthening bilateral ties between governments.
With the right policy frameworks, foreign OEMs can become trusted partners in India's growing defence ecosystem. MoD has taken a positive step by appointing former DG (acquisition) Apurva Chandra as principal adviser to oversee the review process. It must continue to make sensible policy choices, as much is at stake in this year of defence reforms.
The partnership with DRDO and its Gas Turbine Research Establishment (GTRE) is expected to involve 100% technology transfer, complete IP rights, and no export restrictions under the G2G framework. This is a new defence procurement model for India.
As these announcements and projections take place, a major non-military exercise is underway within the defence ministry. Defence Acquisition Procedure (DAP) 2020, which guides procurement of military equipment, is currently under review. This policy faced criticism for delays and inefficiencies, with defence secretary Rajesh Singh describing it as 'broken'. Certain procurement categories have had no programmes assigned, while others have failed to deliver results. The review process is complex, but it aims to reshape India's military-industrial landscape for the next five years or more.
India's military-industrial ecosystem has evolved through its defence procurement policies. Until 2002, private firms were not allowed in defence, and the sector was dominated by defence PSUs (DPSUs). This changed with the introduction of the first procedure in 2002, which set out processes for purchasing military equipment from foreign OEMs, or locally from Indian firms.
In 2003, its scope expanded to allow foreign OEMs to manufacture in India through local partners, involving transfer of technology (ToT). As India's local capabilities grew, procurement categories were added to promote Indian companies to make in India, including through licensed production.
In 2016, former defence minister Manohar Parrikar prioritised aatmanirbharta with a new procurement category for equipment that was designed, developed and manufactured indigenously. This marked a strategic shift from 'Make in India' to self-reliance.
Over the past decade, these policies have helped triple defence production and increase exports 30x. Yet, critics say shifting policy goals create uncertainty. For example, foreign defence offsets have largely failed to deliver advanced technologies, so indigenous content is now the focus.
A committee led by MoD's DG (acquisition) has been formed to consult stakeholders for DAP 2020's review. But stakeholders often have conflicting priorities. Foreign OEMs seek higher FDI limits and lower, more flexible indigenous content, while Indian companies strive to maintain FDI limits and higher indigenous content. Where DPSUs aim to retain their dominance, private Indian firms seek a level playing field. Neither DPSUs nor private Indian firms support G2G deals, which foreign OEMs prefer.
The fighter jet engine announcements underscore benefits of ToT from foreign OEMs. Previously, MoD attempted to bring in foreign technologies. The FDI limit in defence was raised from 26% to 49%, then to 74% in 2020 under automatic approval, specifically to attract investment and ToT.
However, over the past five years, there has been little FDI inflow, and no significant foreign JVs have been set up for advanced weapon systems. This indicates that foreign OEMs are unlikely to transfer cutting-edge tech without full ownership and control.
They are also hesitant to seek 100% FDI under the government approval route, as each case depends on factors like access to modern tech or other considerations. With no guidelines defining 'modern technology', conditions for 100% FDI remain ambiguous. The first approval of 100% FDI for Sweden's Saab nearly two years ago is yet to generate any MoD orders.
As an alternative, in areas lacking specific technologies, foreign OEMs could be treated equally with Indian companies, and FDI limit could be raised to 100% under automatic approval. This would allow wholly owned Indian subsidiaries of foreign OEMs from trusted partner countries to locally bid for weapon systems contracts and enable ToT.
Such a move aligns with the 'Make in India' philosophy - procurement in India, from an Indian-registered company, under an Indian contract and in Indian rupees. This carve-out may well lead to the creation of a new procurement category.
A forward-looking DAP 2020 review could potentially unlock foreign ToT and investment opportunities in India. Foreign governments are also keenly awaiting the outcome of the review. Defence industrial cooperation is vital for strengthening bilateral ties between governments.
With the right policy frameworks, foreign OEMs can become trusted partners in India's growing defence ecosystem. MoD has taken a positive step by appointing former DG (acquisition) Apurva Chandra as principal adviser to oversee the review process. It must continue to make sensible policy choices, as much is at stake in this year of defence reforms.
(Disclaimer: The opinions expressed in this column are that of the writer. The facts and opinions expressed here do not reflect the views of www.economictimes.com.)
