The Defence Research and Development Organisation (DRDO) has launched a ground breaking new Transfer of Technology (ToT) policy in 2025, marking a pivotal shift toward comprehensive private sector engagement in India's defence manufacturing ecosystem.

This strategic initiative represents a significant departure from the organisation's traditional emphasis on public sector undertakings, positioning India to achieve unprecedented levels of self-reliance in defence production while fostering innovation through micro, small, and medium enterprises (MSMEs) and start-ups.

Strategic Framework And Policy Objectives

The revised DRDO ToT policy 2025 establishes a robust framework designed to streamline technology transfer processes and dramatically reduce compliance burdens for private industry participants.

The policy's primary objective centres on disseminating DRDO-developed technologies through mechanisms that ensure seamless and accelerated transfer to industries, particularly emphasising support for MSMEs and start-ups in defence manufacturing and dual-use technologies.

This comprehensive approach aims to provide the necessary impetus for achieving genuine self-reliance in India's defence sector while promoting ease of doing business through simplified procedures and automation of internal processes.

The policy categorises DRDO-developed technologies into two distinct classifications: Category 'A' technologies, which encompass military technologies designated as "MILTECH" exclusively for Indian Armed Forces and government agencies, and Category 'B' technologies, which include dual-use technologies with commercial potential beyond defence applications. This strategic categorisation enables targeted approaches for different technology types while ensuring appropriate security considerations are maintained throughout the transfer process.

Unprecedented Scale of Technology Transfer Achievements

The magnitude of DRDO's technology transfer success has reached remarkable proportions, with the organisation issuing over 2,100 Licensing Agreements for ToT by 2024, including 256 agreements specifically granted in 2024 alone.

This represents an extraordinary acceleration in technology transfer activities, demonstrating the policy's immediate effectiveness in facilitating private sector engagement. The comprehensive nature of these transfers spans multiple defence domains, providing Indian industries with access to cutting-edge technologies developed through decades of research and development investment.

Dr. Chandrika Kaushik, Director General (PC&SI) of DRDO, emphasised the transformative nature of these achievements, noting that over 2,000 licensing agreements for technology transfer were signed in 2024, accompanied by the issuance of more than 200 production licenses.

This unprecedented volume of technology transfers has established a foundation for sustained growth in indigenous defence manufacturing capabilities while creating opportunities for private sector innovation and expansion.

Financial Support Mechanisms And Industry Partnership Models

The new ToT policy incorporates substantial financial incentives designed to encourage broad-based industry participation, particularly targeting MSMEs and start-up's through reduced fee structures and enhanced support mechanisms.

For Category 'A' technologies, the policy eliminates ToT fees entirely for Development cum Production Partners (DcPP), Production Agencies (PA), and other selected industry partners following due process, significantly reducing the financial barriers to technology acquisition. This approach represents a fundamental shift toward collaborative partnerships rather than purely transactional relationships.

The Technology Development Fund (TDF) scheme serves as a cornerstone of DRDO's support framework, providing funding up to ₹50 crore per project through grant-in-aid mechanisms that cover up to 90% of project costs. Since its inception in 2018, the TDF scheme has sanctioned 81 projects with a total commitment of ₹350 crore, successfully developing 26 technologies and disbursing ₹150 crore to industry partners.

The scheme's expansion from a maximum of ₹10 crore per project to ₹50 crore demonstrates the government's increased commitment to supporting large-scale technology development initiatives while accommodating the growing sophistication of defence requirements.

Defence Acquisition Council's Historic Approvals

The Defence Acquisition Council (DAC) has provided unprecedented momentum to India's defence modernisation efforts through its approval of proposals worth ₹1.1 lakh crore in 2024, representing a significant portion of the total ₹5.75 lakh crore in proposals approved for transforming DRDO-developed technologies into operational equipment for the Army, Navy, and Air Force.

These approvals encompass a comprehensive range of defence capabilities, including Future Ready Combat Vehicles (FRCVs), Air Defence Fire Control Radars, Electronic Warfare Systems, and advanced naval platforms designed to enhance India's strategic capabilities across all domains.

The DAC's systematic approach to approvals has continued throughout 2025, with additional clearances worth ₹1.05 lakh crore in July 2025 for procurement of Armoured Recovery Vehicles, Electronic Warfare Systems, Integrated Common Inventory Management Systems, and Surface-to-Air Missiles.

This sustained pace of approvals demonstrates the government's commitment to rapid modernisation while ensuring maximum indigenous content, with 99% of approved proposals falling under Buy (Indian) and Buy (Indian-Indigenously Designed Developed and Manufactured) categories.

Enhanced Support For MSMEs And Start-Ups

The new ToT policy incorporates specific provisions designed to accelerate MSME and start-up participation in defence manufacturing, including preferential treatment for companies selected under government competitions such as TDF, iDEX, and other deep-tech defence initiatives. MSMEs and start-ups engaged in DRDO development activities receive DRDO-developed feeder technologies at 50% of the estimated ToT fee, significantly reducing their financial burden while enhancing their technological capabilities.

This approach recognises the critical role of smaller enterprises in driving innovation and filling capability gaps within India's defence ecosystem. The Innovations for Defence Excellence (iDEX) initiative has emerged as a complementary framework supporting nearly 300 start-ups, MSMEs, and individual innovators through grants up to ₹1.50 crore (₹10 crore for iDEX Prime cases).

This comprehensive support ecosystem combines financial assistance with mentorship, testing facilities, and market access opportunities, creating an environment conducive to sustained innovation and growth. The success of these initiatives is evidenced by the onboarding of over 130 private industries as development partners or production agencies in the past five years.

Intellectual Property And Hand-Holding Support Framework

The revised ToT policy establishes comprehensive intellectual property management frameworks while providing extensive hand-holding support to ensure successful technology absorption by recipient industries.

Free hand-holding support is provided in phases based on project sanctioned costs, ranging from 15 man-days for projects below ₹50 lakh to 60 man-days for projects above ₹5 crore. This structured approach ensures that industries receive adequate technical assistance during critical phases of technology implementation while maintaining cost-effectiveness for all stakeholders.

DRDO has made its extensive patent portfolio and intellectual property freely available to Indian industries, complemented by access to over 20 testing facilities and field firing ranges. This unprecedented access to research infrastructure enables private companies to validate and refine their products while benefiting from decades of accumulated expertise and specialised facilities that would be prohibitively expensive to develop independently.

Impact On Defence Production And Export Growth

The implementation of the new ToT policy has contributed to remarkable growth in India's defence production, which reached an all-time high of ₹1.51 lakh crore in FY 2024-25, representing an 18% increase over the previous fiscal year's output of ₹1.27 lakh crore.

This growth trajectory demonstrates the tangible impact of enhanced private sector participation, with the private sector's contribution increasing from 21% in FY 2023-24 to 23% in FY 2024-25. The sustained growth reflects both public and private sector expansion, with DPSUs increasing production by 16% and private sector companies achieving 28% growth.

Defence exports have experienced equally impressive growth, reaching a record high of ₹23,622 crore in FY 2024-25, representing a 12.04% increase over the previous year's ₹21,083 crore. This export performance, combined with domestic production growth, positions India as an increasingly significant player in global defence markets while contributing to the government's broader economic objectives under the Atmanirbhar Bharat initiative.

Long-Term Strategic Implications

The DRDO's new ToT policy represents more than a procedural reform; it constitutes a fundamental transformation of India's defence innovation ecosystem designed to position the nation as a global leader in defence technology development and manufacturing.

The policy's emphasis on collaborative partnerships, reduced bureaucratic barriers, and comprehensive support for private sector participation creates conditions for sustained technological advancement while ensuring national security requirements are met through indigenous capabilities.

The integration of advanced technologies such as artificial intelligence, quantum computing, and robotics into the defence sector through enhanced private sector engagement promises to accelerate India's transition toward next-generation defence capabilities.

This technological leap, supported by streamlined processes and substantial financial incentives, establishes the foundation for India's emergence as a net security provider in the Indian Ocean region while contributing to global defence technology advancement through innovative solutions developed by Indian companies in partnership with DRDO's extensive research infrastructure.

IDN (With Agency Inputs)