The SCO is a China-led eight-member economic and security bloc in which India and Pakistan were admitted as full members in 2017.
The National Disaster Response Force is hosting the exercise with the aim to rehearse disaster response mechanisms.
Rajnath Singh, who is in Uzbekistan to attend the meeting of state heads of SCO, will also hold bilateral defence dialogue with the host country.
The SCO is an influential regional security grouping which is seen as a counterweight to NATO.
The already tumultuous India-Pakistan ties have strained further after the government abrogated provisions of Article 370.
At the conference, the inaugural session of which was addressed by Defence Minister Rajnath Singh, the seat allotted to Pakistan was vacant.
Inaugurating the conference, Defence Minister Rajanth Singh stressed on the menace of bioterrorism and exhorted the military representatives of the participating countries to work on it.
Xi, also host of the 18th SCO summit, called for the pursuit of common, comprehensive, cooperative and sustainable security.
Ministry of Public Security Liao Jinrong said the SCO is building measures to tackle challenges posed by cross-border crimes including terrorism and drug trafficking.
Prime Minister Modi is also scheduled to hold bilateral talks with Chinese President Xi Jinping later in the day.
Modi and Xi are expected to explore ways to deepen ties in areas of trade and investment besides reviewing the overall bilateral cooperation.
The meeting came hours after Modi landed in this picturesque coastal city of China's Shandong province.
PM Modi arrives in Qingdao to attend SCO summit, set to hold talks with Chinese President Xi Jinping
The summit is also likely to explore ways to deepen cooperation among the SCO member countries in dealing with threats of terrorism, extremism, and radicalisation.
Defence Minister Nirmala Sitharaman also landed in Beijing earlier on Tuesday to attend preparatory meetings with the External Affairs Minister on the sidelines of the SCO meeting.
Doval's meeting with Yang, the Politburo member of the CPC, comes ahead of several key dialogues between the two countries after the Dokalam stand-off.