NEW DELHI — India's Ministry of Defence has created a new scheme to fund research and development by micro, small and medium-sized defense enterprises (MSME) with the aim of benefiting the domestic defense industry.
The Technology Development Fund, or TDF, will provide the defense companies with up to $1.5 million per project.
"The stated objective of the TDF is to fund the development of defense and dual-use technologies that are currently not available with the Indian defense industry, or have not been developed so far. This is intended to create an ecosystem for enhancing cutting-edge technology capability for defense application," said Amit Cowshish, the MoD's former additional financial adviser.
While the proposal to raise a dedicated fund to support R&D for MSME was first mooted in 2011, "it took the initiative of the ruling National Democratic Alliance government to put into place such a fund," a senior MoD official claimed.
Nitin Mehta, a defense analyst here, said $1.5 million "appears too low" and will cover very few companies.
The senior MoD official agreed that since the maximum funding allowed for a single project is only $1.5 million, TDF is limited to only funding eight to 10 projects.
Though Cowshish differed: "This is not a small amount to meet the cost of development of technologies. ... I think it is good to be pragmatic and cautious while treading into unknown territory."
India has about 6,000 MSME associated with the defense sector. They supply up to 25 percent of local components and subsystems. The companies contribute to meet the offset business in the aerospace and defense sector.
"Some of the MSME defense companies have done quite well. But for those that have not done very well, the main problem remains access to capital at reasonable costs," according to one CEO of an MSME, who spoke on condition of anonymity.
Mehta, the local defense analyst, said that because the fund is operated by state-owned Defence Research and Development Organization, "utilization of the fund" could be an issue.
"Selection of MSMEs from amongst thousands of small companies could be challenging and at risk of being controversial," he said.
The senior MoD official, however, insisted there is solid assessment criteria. "It shall be ensured that the evaluation criteria relate only to the research, design and development capabilities in India, including past experience, other relevant parameters and performance of the recipients."
India continues to import up to 70 percent of its weapons and equipment requirements from overseas; the government aims to reduce this to at least 50 percent in the next 10 years
However, given the slow pace of indigenization and delays in defense procurement combined with a lack of recent big-ticket orders in the private sector, it is unlikely that India will be able to achieve the aim of reducing dependence on imports, analysts say.
"India's research and development budget is less than 6 percent of the total spending budget of $40 billion, and no major Make [in] India project has yet been executed," claimed a military official, who spoke on condition of anonymity.
Vivek Raghuvanshi is the India correspondent for Defense News.
