A new book says defence startups struggle with testing gaps, long certification cycles and delayed payments. Despite reforms and the Samadhaan portal showing ₹48,000 crore dues, MSMEs still face cash flow risks, limited certified test facilities.
New Delhi: A new book has detailed hardships faced by startups in the defence sector. It cites various examples to stress that defence startups face multiple challenges, which include a lack of testing facilities to excessive delay in payments.
It also lists hurdle of quality control and certification faced by defence sector startups.
“An MSME can design a world-beating gadget, but if it cannot clear the gauntlet of defence testing and quality assurance, it’s game over. Consider a fictional composite: Aarav Electronics, a Pune-based MSME that developed a rugged radio for the army. Enthused by Make in India,
Aarav’s team toiled on the design and even got an opportunity to field-test under a MakeII proposal. That’s when they hit the wall called DGQA — the Directorate General of Quality Assurance,” wrote P Sesh Kumar, former joint secretary in the Ministry of MSME in his new book Unfolded: What Ails India’s MSME and Startup Ecosystem?
Kafkaesque inspections
He states that the rigorous inspections and trials supervised by DGQA process “turned Kafkaesque”, as “tests were scheduled, delayed, repeated, documentation was sent back for tiny errors, and as soon as one round of trials passed, another round of ‘confirmatory trials’ was mandated.”
“Months stretched into years. It felt like a never ending loop—test, tweak, re-test — while our order hung in the balance,” he quoted the founder recounting.
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Kumar notes that “such stories are common folklore among defence suppliers. In fact, the MoD itself eventually recognised this bottleneck.”
“In 2024, it announced a major reorganisation of DGQA to speed up quality assurance and ‘reduce layers of decision-making’, conceding that the old ways were too slow. The restructure aims to provide single-point QA (Quality Assurance) support and even set up a dedicated testing facilitation unit,” added Kumar, while giving the reality check as he stated that MSMEs still await relief.
“Delayed payments pose another deadly threat to MSME survival. Defence procurement is notorious for its long payment cycles — a small firm might supply parts to a giant PSU or directly to a military workshop, only to wait months beyond the contractual 30- or 45-day period for their money,” he adds in the book, while raising the issue of delay in payment to Defence sector MSMEs.
He stressed that “delay in payment for a tiny supplier can be a life-and-death cash flow crunch.”
India’s MSME ministry set up an online portal, Samadhaan, for small businesses to report and resolve delayed payments, and the data is eye-opening, he added.
“As of January 2025, over 2.18 lakh delayed payment complaints had been filed by micro and small enterprises, amounting to nearly ₹48,000 crore in dues. Tellingly, central public sector units (which would include defence PSUs) accounted for over ₹5,500 crore of these unpaid bills,” Kumar wrote in the book, which is published by The Browser.
He also cited examples to sufferings of MSMEs which face payment delays from big Defence PSU.
“Government rules ostensibly mandate interest on late payments to MSMEs, and even threaten tax disallowances for late-paying buyers, but enforcement is weak. Until the culture shifts to ‘pay up on time, every time’, MSMEs will remain financially fragile when selling to MoD or its primes,” wrote Kumar in the book.
He also raised the issue of testing infrastructure. Raising the issue of an MSME, which developed a new drone as part of an air force innovation challenge, Kumar detailed that “when it came time to test the drone’s endurance and sensor range, the startup team found there was no readily available facility to simulate the required conditions.”
“Private labs were not certified for defence standards; DRDO and service labs were booked solid for months with their own projects. This delay in testing meant a delay in certification, which meant a delay in any potential order — a chain reaction all too familiar to small defence tech firms,” wrote Kumar in the book.
He stated that while the DTIS aimed to plug this gap by co-funding new test ranges and labs accessible to industry, progress has been slow.
“By mid-2023, a few projects were in the pipeline (e.g. an advanced materials test facility in Tamil Nadu, an unmanned systems test site in Uttar Pradesh’s defence corridor), but most MSMEs haven’t felt relief yet,” added Kumar.
He mentioned that the DGQA reorganisation in 2024 talked of a new Directorate of Defence Testing and Evaluation Promotion to better allocate test facilities.
