Defence PSUs told to reduce dependence on imports

Security & Defence · 2 September 2026 · Based on The Hindu (original report)

2-minute summary

Union Defence Minister Rajnath Singh reviewed the performance of India's 16 Defence Public Sector Undertakings (DPSUs), emphasizing the urgent need to reduce import dependence and strengthen domestic research and development (R&D). Highlighting lessons from recent global conflicts, the Minister noted that national security relies on assured supply chains, surge production capacity, and the ability to sustain manufacturing during prolonged crises. In the financial year 2025-26, India achieved a historic defence production value of approximately ₹1.8 lakh crore, with the 16 DPSUs contributing a dominant share of ₹1.29 lakh crore. Seven major DPSUs—including HAL, BEL, and Mazagon Dock—presented dividend cheques worth ₹3,951 crore to the government. The Ministry urged these undertakings to transform into globally competitive giants under the 'Make in India, Make for the World' vision, focusing on tangible R&D outcomes, timely project delivery, and integrating startups and MSMEs into the defence ecosystem.

Why it's in the news

The Defence Minister reviewed the performance of 16 Defence PSUs on September 1, 2026, directing them to aggressively reduce import reliance and scale up domestic R&D. This directive comes amid global supply chain vulnerabilities exposed by recent international conflicts.

Background and context

Historically, India has been one of the world's largest importers of major arms, which exposes its national security to geopolitical vulnerabilities and supply chain disruptions during crises. To address this, the Government of India has pushed for 'Aatmanirbharta' (self-reliance) in defence manufacturing. Key initiatives include the Defence Acquisition Procedure (DAP) 2020, the introduction of Positive Indigenisation Lists, and corporatisation of the Ordnance Factory Board into seven new DPSUs. While India's domestic defence production has grown significantly—reaching ₹1.8 lakh crore in 2025-26—the sector still faces structural challenges. These include a high dependence on imported sub-systems and components, delayed project execution timelines, and historically low private sector participation. Transforming DPSUs into export-oriented, R&D-driven entities is critical to achieving strategic autonomy.

Constitutional provisions

• Seventh Schedule (Article 246) — Defence of India and the Armed Forces are placed under Entry 1 of the Union List (List I), giving Parliament exclusive power to legislate on these matters.

Committees and reports

• Lt. Gen. D.B. Shekatkar Committee — Recommended measures to enhance combat capability and rebalance defence expenditure, emphasizing the need for a robust domestic defence industrial base.
• Vijay Kelkar Committee on Defence Procurement — Recommended strengthening DPSUs, encouraging private sector participation, and establishing a direct link between R&D and manufacturing.

Government schemes

• Innovations for Defence Excellence (iDEX) — Fosters innovation and technology development in Defence and Aerospace by engaging startups, MSMEs, individual innovators, and academia.
• Defence Acquisition Procedure (DAP) 2020 — Promotes indigenous design, development, and manufacturing of defence equipment, establishing procurement categories like 'Buy (Indian-IDDM)'.

Mains practice: Analyze the strategic and economic imperatives of achieving self-reliance in India's defence manufacturing sector. What structural reforms are needed to transform Defence PSUs into globally competitive entities?

Achieving self-reliance (Aatmanirbharta) in defence manufacturing is a critical national security and economic objective for India. Historically dependent on foreign imports for critical military hardware, India is transitioning toward domestic production to secure its strategic autonomy.

**Strategic and Economic Imperatives:**

• **Strategic Autonomy:** Over-reliance on foreign original equipment manufacturers (OEMs) exposes India to supply chain disruptions, diplomatic leverage, and delays in critical spares during active conflicts, as highlighted by recent global crises.

• **Economic Growth and Jobs:** Defence manufacturing has a high multiplier effect. Reducing the import bill conserves foreign exchange and channels capital into the domestic ecosystem, boosting MSMEs and creating high-skilled employment.

• **Technological Leadership:** Developing indigenous intellectual property (IP) ensures that the Indian Armed Forces possess state-of-the-art, customized technology that cannot be compromised or deactivated by external actors.

**Required Structural Reforms for DPSUs:**

• **Outcome-Oriented R&D:** DPSUs must shift from licensed production to indigenous design. R&D investments must be measured by tangible outcomes like patents, prototypes, and operational products rather than capital spent.

• **Corporatisation and Professional Governance:** Building on the corporatisation of the Ordnance Factory Board, DPSUs require professional management, streamlined decision-making, and accountability for project delays.

• **Integration of Private Sector and MSMEs:** DPSUs must act as system integrators, outsourcing component manufacturing to domestic MSMEs and startups via platforms like iDEX, thereby fostering a collaborative defence industrial ecosystem.

• **Export Orientation:** To achieve economies of scale, DPSUs must elevate product quality to international standards, shifting focus from 'Make in India' to 'Make for the World'.

**Conclusion:**

Transforming India's defence industrial base from an import-dependent model to an indigenous powerhouse is no longer just an industrial policy but a national security imperative. Sustained institutional reforms in DPSUs will be the cornerstone of this transition.

Prelims practice questions

Q1. With reference to the Indian defence sector, the term 'Positive Indigenisation Lists' refers to which of the following?

1. A list of military items and sub-systems that are banned for import and must be procured domestically.
2. A list of dual-use technologies shared with friendly foreign nations.
3. A list of strategic minerals reserved exclusively for defence public sector undertakings.
4. A registry of private defence manufacturers eligible for direct government funding.

Answer: A. Positive Indigenisation Lists are issued by the Ministry of Defence to specify military equipment, weapons systems, and sub-systems that cannot be imported, thereby mandating their domestic procurement and manufacturing to boost self-reliance.

Q2. Consider the following statements regarding India's defence production in recent years: 1. The total value of India's defence production has crossed ₹1.5 lakh crore. 2. Defence Public Sector Undertakings (DPSUs) contribute more than half of the total value of India's defence production. Which of the statements given above is/are correct?

1. 1 only
2. 2 only
3. Both 1 and 2
4. Neither 1 nor 2

Answer: C. According to official data, India achieved a defence production value of approximately ₹1.8 lakh crore (crossing ₹1.5 lakh crore) in 2025-26. Out of this, the 16 DPSUs contributed ₹1.29 lakh crore, which is more than 70% (hence, more than half) of the total production value. Both statements are correct.

Q3. The 'Innovations for Defence Excellence' (iDEX) initiative is primarily aimed at:

1. Promoting self-reliance by engaging startups, MSMEs, and innovators to develop technologies for the defence sector.
2. Conducting joint military exercises with regional security partners.
3. Providing single-window clearance for Foreign Direct Investment (FDI) in defence.
4. Facilitating government-to-government defence acquisition agreements.

Answer: A. iDEX was launched to cultivate an innovation ecosystem in the Indian defence and aerospace sector by funding and supporting startups, MSMEs, individual innovators, and academia to develop cutting-edge technologies.

Revision flashcards

• What was India's total defence production value in 2025-26, and how much did DPSUs contribute? Total defence production reached approximately ₹1.8 lakh crore, with the 16 DPSUs contributing ₹1.29 lakh crore.
• What strategic lessons do recent global conflicts offer for India's defence manufacturing? They highlight the critical importance of assured supply chains, surge production capacity, availability of critical spares, rapid repair, and sustaining manufacturing over prolonged conflicts.
• Under which schedule of the Indian Constitution does 'Defence' fall? Seventh Schedule, Entry 1 of the Union List (List I).
• What is the primary objective of the 'Make in India, Make for the World' vision in defence? To transform domestic defence manufacturers (including DPSUs) into global giants that not only meet domestic needs but also export high-quality equipment globally.
• Which committee recommended the corporatisation of the Ordnance Factory Board (OFB)? The T.K.A. Nair Committee and the Lt. Gen. D.B. Shekatkar Committee recommended restructuring the OFB, which led to its conversion into 7 new DPSUs in 2021.