With Spate of Orders in March, India Spent 64% of Defence Capital Funds on Indigenous Purchases

With a spate of indigenous orders for defence equipment and weapon systems placed last month, the Army, Navy and Indian Air Force (IAF) have not just utilised their entire capital budget for the previous fiscal but have also spent 64 per cent of it on indigenous purchases, defence sources told News18.

Last year, the defence ministry had earmarked 64 per cent of the three services’ capital budget for 2021-22 or Rs 70,000 crore for procurements from the domestic market. For the current financial year, the target has been upped to 68 per cent or Rs 84,597 crore.

In 2020-21, 58 per cent of the defence capital budget was capped for the first time for indigenous procurements.

Multiple sources across the services confirmed to News18 that the slew of purchases from the domestic market last month has helped achieve this target, particularly with the Army and IAF recording a low expenditure of 40 per cent and 70 per cent, respectively, on their overall capital funds.

As reported by News18 last week, India placed a number of indigenous orders in March to exhaust its defence capital funds after it was unable to clear Russia’s scheduled payments worth around Rs 11,500 crore.

The orders include 15 light combat helicopters, instrumented electronic warfare range for the IAF, advanced electronic warfare suite for upgrading MiG-29 fighter jets of the IAF, among others.

Push to private sector, special boost to startups

In a statement on Friday, the defence ministry announced that 25 per cent of the total modernisation funds for 2022-23 earmarked for indigenous procurements will be set aside for purchases from the private sector.

This means Rs 21,149.7 crore will be spent on purchases from the private sector of the domestic market.

Of this, Rs 1,500 crore will be earmarked for purchases from startups, including those under the Innovations for Defence Excellence (iDEX) scheme to “foster innovation and encourage technology development in Defence”.

Multiple orders for micro and mini unmanned aerial vehicles (UAVs) have been placed with the private sector, including 200 swarm drones from Indian private firms Raphe mPhibr and New Space Technologies. The former is also providing logistics drones to the armed forces. Last month, a Rs 887-crore contract was signed with M/s Larsen and Toubro Limited to acquire two multi-purpose vessels for the Navy.

Defence research and development has also been opened up for the private industry, startups and academia for the first time, and 25 per cent of the defence research and development (R&D) budget has been assigned towards this. This was announced in the union budget for 2022-23.

Atmanirbharta efforts

There has been a major push towards achieving maximum indigenisation in defence in the last several months. As reported by News18 in December, a directive seeking a review of all planned foreign procurements, including those for which Acceptance of Necessity (AoNs) approvals were accorded, was sent to the services and were told there would be no defence imports “going forward”.

This was aimed at achieving complete self-reliance in defence —a critical goal with India currently dependent on foreign vendors for spares, ammunition, maintenance and critical technologies—and to boost defence exports.

Defence exports have grown almost six times from Rs 1,500 crore to Rs 9,000 crore in the past five years, in which the participation of the private sector is 90 per cent, the defence ministry had recently told a parliamentary panel, adding that these exports are broadly going to 84 countries.

Among the latest efforts towards Atmanirbharta or self-reliance in defence, minister Rajnath Singh on Thursday made public the third positive indigenisation list of defence equipment, with two other lists released in the last two years.

The list of 101 equipment and weapon systems included naval utility helicopters, anti-ship and anti-radiation missiles.

As per the defence ministry, orders worth more than Rs 2,10,000 crore are likely to be placed with the domestic industry in the next five years from the items under the third list.

The defence budget had also set aside a total of Rs 3,810 crore for the seven new defence public sector undertakings (DPSUs) created out of the erstwhile Ordnance Factory Board—of which Rs 2,500 crore is for emergency authorisation and Rs 1,130 crore is to handhold them in the initial years.

Read all the Latest News India and Breaking News here