Speed breakers removed for start-ups in defence sector

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The government has eased the way for the Indian start-ups and entrepreneurs to participate in the defence sector especially in aeronautics, nanotechnology and virtual reality, renewable technology, robotics, green technology, and the Internet of Things.

The aim is to reduce dependence on imports by encouraging new companies to undertake research projects to develop or upgrade weapon systems like military aircraft, warships, ammunition and armoured vehicles. Currently, 70% of its defence equipment is procured from abroad.

The new rules specified by the Ministry of Defence have two advantages – it enables Indian startups to take part in military projects and helps the government leverage cutting-edge research and innovation.

The three forces – Army, Air Force and Navy – will now shortlist projects under the specified category. As of now, they have already identified 53 projects that can be taken up on priority under the rules.

Under the new rules

  • Startups in certain categories recognised by the Department of Industrial Policy & Promotion (DIPP) will automatically qualify to take part in specified defence projects.
  • For relatively smaller research and development projects, the government has simplified rules by keeping the doors open for all Indian companies, doing away with any rules of participation.
  • For projects with estimated cost of prototype development phase not exceeding Rs 3 crore, no separate technical or financial criteria (will) be defined for both ‘startups’ and ‘other than startups’, to encourage their participation.
  • New rules apply to the ‘Make II’ category of defence procurement where the private industry funds the research for the product on its own and develops a prototype that is offered to the concerned service for evaluation.
  • Though  government will not fund the development of the prototype, but there is an assurance of orders on successful development and trials of the prototype.
  • These include Maneuverable Expendable Aerial Targets (MEAT) for Army Air Defence, lightweight body armour, a robotic surveillance platform, diesel engines for boats, limpet mines, air to ground rockets and long-range glide bombs.
  • Recently, the Indian government had given a green signal to mega AI-project in the defence sector that will help equip the army with unmanned tanks, vessels, aerial vehicles, and robotic weaponry.

The private sector fulfills only 5%, or approximately Rs 5,000 crore, of the direct manufacturing orders placed by ministry of defence. So far, HAL and the DRDO have been major stakeholders in technology development and implementation in the Indian defence sector.

According to some reports, the defence industry is expected to be worth more than $700 billion by the year 2026.

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