India has officially scrapped the 20% Transfer of Technology (ToT) fee, marking a decisive shift towards a “Zero Fee” era in defence production.

This move, announced by Defence Minister Rajnath Singh, is expected to accelerate indigenous manufacturing, reduce costs, and strengthen India’s global competitiveness in defence exports.

The elimination of the ToT fee represents a structural reform in India’s defence ecosystem. For years, private firms collaborating with the Defence Research and Development Organisation (DRDO) as Development cum Production Partners or Production Agencies were required to pay a 20% fee to access indigenous blueprints.

This acted as a significant financial barrier, inflating costs before production even began. By removing this levy, the government has dismantled what was often described as a “tax on innovation,” thereby enabling smoother integration of DRDO’s cutting-edge technologies into industry.

The impact of this reform is immediate and far-reaching. Start-Ups and established defence firms now have zero-cost access to DRDO’s intellectual property, lowering entry barriers and encouraging wider participation in defence manufacturing.

This will make indigenous products more cost-competitive, both for domestic procurement by the armed forces and for international exports. India’s defence exports, which touched ₹38,424 crore in FY 2025–26, are projected to rise further as production costs decline and competitiveness improves.

Defence Minister Rajnath Singh highlighted that DRDO has already transferred over 2,200 technologies to industry, ranging from sonar systems and missile components to medical equipment developed during the pandemic.

Under the new regime, the absorption capacity of industry is expected to grow exponentially, with future transfers likely to be adopted at a faster pace. Singh also announced that DRDO patents have been opened up for free access by Indian industries, while its testing facilities remain available on a payment basis, supporting research and development across hundreds of firms annually.

The policy shift comes at a time when India’s defence production has reached a record ₹1.54 lakh crore in FY 2025–26, with a quarter of the defence R&D budget allocated to industry, academia, and start-ups.

Over ₹4,500 crore from this allocation has already been utilised, underscoring the growing role of private and academic institutions in defence innovation.

Singh urged industry leaders to focus on frontier technologies such as directed energy weapons, hypersonics, quantum systems, artificial intelligence, and underwater domain awareness, stressing that the decisive edge in future warfare will belong to nations that can swiftly integrate emerging technologies.

The Defence Minister also drew attention to the evolving nature of warfare, citing examples from the Russia-Ukraine conflict where drones and sensors rapidly transformed the battlefield, and unconventional attacks such as pager-triggered explosions in Lebanon and Syria forced a reassessment of modern combat methods.

He emphasised that India must remain proactive, cultivating the element of surprise and readiness through sustained research and innovation.

By eliminating the ToT fee, India is not only reducing costs but also saving time in technology adoption. In defence, speed of integration often determines whether a country remains a global player or slips into dependency.

This reform therefore strengthens the Atmanirbhar Bharat initiative, empowering domestic industries, boosting exports, and ensuring that India’s defence sector is future-ready in an era of rapid technological change.

Agencies