All About Technology Development Fund Scheme: Supercharging India’s Defence

Technology Development Fund (TDF)

The Technology Development Fund (TDF) is a program aimed at advancing technological innovation and development. It operates within a framework that promotes the objective, impersonal evaluation of projects based on predetermined criteria.

The fund provides financial support to eligible applicants, allowing for the realization of innovative ideas and their subsequent implementation. Through its project duration and evaluation criteria, TDF ensures accountability and transparency in the allocation of resources.

This article aims to provide an overview of the progress made thus far in TDF-funded projects, recent developments, and the way forward for this important initiative in technology development.

The Technology Development Fund (TDF) scheme was established by the Ministry of Defence in 2016 under the Make in India programme to encourage the participation of public and private industries, particularly MSMEs and startups, in designing and developing indigenous defence technologies.

This initiative aims to promote self-reliance in defence technology by providing financial support to eligible industry partners through grants. The TDF scheme is executed by the Defence Research and Development Organisation (DRDO) with the objective of upgrading existing defence products, systems, and technologies, as well as developing futuristic and innovative technologies for defence applications.

It also seeks to promote import substitution of defence components and build an ecosystem for enhancing cutting-edge technology capability in the defence sector. By facilitating indigenous development and production, this scheme contributes to achieving self-reliance and reducing import dependency in the long run.

Key Features of Technology Development Fund (TDF)

Objectives

• Upgrading existing products/systems
• Developing futuristic technologies
• Import substitution
• Encouraging participation of industry, especially MSMEs and startups

One of the key aims of the scheme is to support the upgradation, improvement, and development of existing defence products, systems, and processes. This objective is in line with the broader Make in India goals and seeks to enhance the capabilities and technological advancements of defence equipment.

Additionally, the scheme aims to foster the development of futuristic and innovative technologies that can be utilized for defence applications in the future. By encouraging import substitution of defence components that are currently not available in the Indian industry, the scheme intends to reduce reliance on imports and promote domestic capability building.

Furthermore, a crucial aspect of this initiative is to actively involve public and private industries, particularly MSMEs and startups. Through financial and technical support to these entities, the scheme strives to create a vibrant ecosystem with wider participation across the entire defence value chain, fostering innovation and self-reliance.

Eligibility Criteria

• Type of organizations – MSMEs, startups, companies etc.
• Ownership requirement
• Foreign investment allowed

Eligibility for participation in the Technology Development Fund scheme is determined by certain criteria. To be eligible, organizations must have registration status as an Indian entity and must be owned and controlled by an Indian citizen. This criterion allows for a wide range of entities to participate, including micro, small and medium enterprises (MSMEs), startups, public limited companies, private limited companies, partnership firms, limited liability partnerships, one-person companies, and sole proprietorships that are registered as per applicable laws.

Additionally, industries with foreign investments of up to 49% or less can also apply if majority Indian ownership and control is maintained. The broad-based eligibility criteria aim to encourage wider participation from Indian entities across various sectors, sizes, and types. This inclusive approach aims to strengthen domestic capability in defense technologies under the Make in India initiative.

Funding Support

• Grant basis
• Funding limit
• Milestone based releases
• Flexible mechanisms – reimbursement and advance

Funding support provided by the Technology Development Fund (TDF) scheme is contingent upon the achievement of mutually agreed milestones between the Defense Research and Development Organization (DRDO) and the industry partner. Disbursements are made only upon successful completion of these milestones.

The TDF scheme offers financial assistance in the form of grants rather than loans or equity investments, ensuring that industry partners receive support without bearing excessive financial burden. Under this scheme, funding can cover up to 90% of the project cost, with a maximum limit of INR 10 crores. Such an approach strikes a balance between providing reasonable financial aid and requiring some contribution from industry entities.

To facilitate wider participation, the TDF scheme employs a flexible funding disbursement mechanism. This includes reimbursement basis, where DRDO’s share is paid out in installments after milestone achievements, or an advance basis with staggered upfront funding subject to bank guarantee.

Project Duration & Evaluation Criteria

The scheme’s project duration is limited to two years, ensuring timely execution and alignment with defence requirements. This time constraint allows for a focused approach towards the development of viable projects that can deliver outcomes and capabilities within the defined timeframe. By capping the project duration, the scheme aims to facilitate efficient and timely execution, thereby meeting the demands of defence production goals.

The Technology Development Fund (TDF) scheme employs a three-tier evaluation process to assess proposals and applicants based on key parameters. This includes evaluating the applying entity’s capabilities across various aspects such as design, fabrication, manufacturing, maintainability, and life cycle support for defence technology. Additionally, proposals are assessed for their commercial viability and their alignment with Make in India objectives.

These evaluation criteria enable the selection of partners that possess proven expertise in defence manufacturing and have the capacity to fulfill indigenous technology development objectives effectively.

Progress So Far

• Budget allocation since inception
• Number of MSMEs and startups supported
• Technologies/projects undertaken
• Funds disbursed

As of 2022, the scheme has witnessed a steady increase in industry participation and disbursals, indicating progress towards building indigenous capabilities in defence manufacturing.

The Technology Development Fund (TDF) scheme, introduced under the Make in India initiative, aims to promote self-reliance in defence technology. With a total budget allocation of Rs 260 crores, the scheme has supported 41 MSMEs and 20 startups through funding and technical expertise for technology development projects.

These projects cover a wide range of domains including electronics, weapons, aerospace, naval systems, and automation.

The executing agency DRDO has disbursed Rs 64.35 crores as grant-in-aid to industry partners against milestones achieved in sanctioned projects.

This increasing industry participation and disbursals highlight the positive impact of the TDF scheme on strengthening the indigenous defence manufacturing ecosystem.

Recent Developments

• Enhancement in funding limit per project (2022)
• MoU between SIDBI and SIATI (2022)

Recent developments have included the signing of an MoU between SIDBI and SIATI, which aims to provide financial and non-financial support to Micro, Small and Medium Enterprises (MSMEs) in the aerospace and defence sectors. This partnership is significant as it will facilitate cooperation between SIDBI, the main financial institution for MSMEs, and SIATI, a society representing Indian aerospace technologies and industries.

Through this collaboration, MSMEs in the aerospace and defence sectors can benefit from SIDBI’s financial assistance as well as non-financial support such as mentorship programs and technical guidance.

These recent developments reflect the government’s commitment to leveraging the Technology Development Fund scheme to boost domestic defence research and development capabilities. By providing increased funding limits per project under this scheme, along with strategic partnerships like that between SIDBI and SIATI, the government aims to foster technological advancements in these critical sectors.

Way Forward

• Key takeaways from the scheme’s progress
• Scope for improvements
• Future outlook

To advance the Technology Development Fund scheme, it is crucial to enhance industry awareness and align project timelines with defence requirements.

Increasing industry participation, particularly among MSMEs and startups, has been a positive development. However, there is still room for improvement in terms of industry awareness and understanding of the scheme.

By conducting targeted awareness campaigns and providing clear guidelines on project timelines, the scheme can attract more industry partners and ensure that projects are aligned with defence requirements. This alignment is essential to enable effective utilization of funds and timely delivery of technological capabilities.

Additionally, expanding the scheme’s objectives to support technology commercialization for dual use would further enhance its impact on both the defence sector and broader industrial ecosystem.

These measures will strengthen India’s self-reliance in defence by leveraging technological advancements through collaborative efforts between industry and government.