SOURCE: AFI
India’s defense establishment has delivered a sharp rebuke to its domestic drone industry, terminating three contracts worth over Rs 230 crore for 400 logistics drones from a Chennai-based private company. Signed in 2023 under emergency procurement provisions, these deals—for 200 medium-altitude, 100 heavy-weight, and 100 light-weight drones—were meant to bolster the Indian Army’s capabilities along the tense 3,488-kilometer Line of Actual Control (LAC) with China. But the discovery of Chinese components in these supposedly indigenous systems has sparked a firestorm, exposing deep flaws in India’s defense supply chain—and prompting calls for tougher measures to root out foreign reliance.
The contracts’ cancellation, confirmed in early February 2025, follows a year of scrutiny that began with a suspension in August 2024. Defense sources revealed that investigations uncovered Chinese-origin electronics embedded in the drones, raising fears of cybersecurity breaches—data leaks, malware, or remote hijacking—that could compromise operations along the LAC, where tensions have simmered since the 2020 Galwan clash. The Chennai firm, widely identified as Dhaksha Unmanned Systems in media reports, had secured the deal under a fast-tracked process to meet urgent Army needs. Yet, what was hailed as a “Make in India” triumph unraveled when the Chinese link surfaced, echoing a broader pattern of dependency that industrial watchers say threatens national security.
An unnamed official from a drone company, speaking to idrw.org, admitted that many firms still source materials from China—not as partly assembled components, but as raw materials—due to a lack of cost-competitive local vendors. “The supply chain in India isn’t expanding at the rate we need,” the official lamented. “Companies shift to raw materials to dodge scrutiny, but without viable alternatives, we’re stuck.” This revelation underscores a harsh reality: despite India’s push for self-reliance, its drone sector remains tethered to foreign inputs, particularly from a nation it views as a strategic rival.
Industrial watchers are sounding the alarm. One expert, speaking to idrw.org, warned that if procurement hinges on price over provenance—favoring cheap bids regardless of how much is truly made in India—more such debacles loom. “The government and armed forces aren’t addressing the supply chain bottleneck with the urgency it demands,” the watcher argued. “Without stringent measures to vet components, we’ll see this again.” The terminated contracts, they suggest, are a symptom of a deeper malaise: an ecosystem where ambition outpaces infrastructure.
India’s drone industry, though nascent, is critical to its military modernization. The Army’s pivot to unmanned systems—nano drones, kamikaze swarms, logistics UAVs—aims to match China’s edge along the LAC and Pakistan’s drone incursions across the LoC. Yet, the reliance on Chinese parts isn’t new. A 2023 Reuters report pegged 70% of drone supply chain goods as Chinese-made, a dependency that spiked costs when firms pivoted to pricier Western or Taiwanese alternatives after bans tightened. The Chennai case, involving a mix of 400 drones tailored for high-altitude resupply, shows how even “indigenous” firms skirt these rules, blending Chinese raw materials into their builds.
The Ministry of Defence (MoD) has cracked down, issuing June 2024 directives to industry bodies like FICCI and CII to shun Chinese components, naming Dhaksha, Garuda Aerospace, and Sky Industries as offenders. Post-cancellation, the MoD vowed a “stringent mechanism” to ensure drones lack Chinese parts or malicious code, per Times of India sources. Certifications, counter-checks, and technical audits are in the works—steps hailed as progress but criticized as reactive. “Why wasn’t this caught pre-contract?” one X post fumed, reflecting public frustration over lax oversight.
The unnamed drone official’s take cuts deeper: India’s vendor base can’t match China’s scale or affordability. A 2024 Economic Times piece noted that shifting to non-Chinese suppliers jacked up costs by 50%, a burden small firms like Dhaksha—despite its iDEX wins—struggle to bear. The government’s 1.6 trillion-rupee military modernization budget for 2023-24, with 75% earmarked for domestic industry, fuels demand, but the supply chain lags. “If drones are picked on price alone,” the industrial watcher told idrw.org, “we’re incentivizing corner-cutting, not self-reliance.”
The Chennai fiasco—echoed by a 2024 LoC incident where a drone with Chinese parts crossed into Pakistan—lays bare the stakes. Cybersecurity risks aren’t hypothetical; experts warn of embedded malware relaying intel to adversaries, a threat magnified along the LAC. Yet, the government’s response feels piecemeal. While the Army pivots to fully indigenous options—think NewSpace’s swarm drones or IdeaForge’s ISR birds—the transition’s pace frustrates insiders. “The MoD talks Atmanirbhar Bharat, but where’s the vendor ecosystem?” the drone official asked.
Critics argue India must invest, not just regulate. Building a robust supply chain—subsidizing local chipmakers, scaling component R&D—could wean firms off China’s teat. Posts on X suggest a radical fix: “Ban imports outright and fund desi alternatives, even if it’s costlier short-term.” The watcher’s warning rings true: without such resolve, price-driven tenders will perpetuate this cycle, undermining India’s drone ambitions.
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