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Indigenous Defence Industrial Base (DIB): A Paradox from Self Reliance to Make in India to Atamnirbhar Bharat

The paradox is that though successive Governments have spoken about indigenisation and strengthening of Defence Industrial Base (DIB) but the fact remains that they did little in this context.

The recent border clash (stand-off) of India with China is indeed a wakeup call for the Government to plan ahead for modernization of Armed Forces in advance rather than doing when things go wrong, otherwise it may be too late. With the Government recently, accelerating off-the-shelf import of weaponries on urgent basis in the time of emergency/adversary has yet again bought out India’s unpreparedness for any future warfare and discrepancies in procurement planning. Some of the defence deals that recently got procurement approval on urgent basis to ensure enhanced combat and defence preparedness of the Armed Forces include:

  • Emergency purchase of Excalibur artillery rounds for M777 ultra light howitzers from the United States, Igla-S air defense systems from Russia and Spike Anti-Tank Guided Missiles from Israel.
  • 21 MiG 29 aircrafts, upgradation of 59 MiG-29 aircraft from Russia worth $1 Billion and 12 Russia-manufactured Su-30MKI fighters for $1.53 Billion
  • Immediate purchase of spare parts for Su-30MKI fighters, Kilo-class submarines and T-90 tanks, as well as the emergency purchase of missiles and specialized ammunition for Russian-origin fighter jets, tanks, warships and submarines from Russia which is likely to cost $800-1000 Million approx.

In wake of all these procurements and the recent ‘ Atamnirbhar call’, the question arises that why do India always need to accelerate the procurements in the backdrop of situations such as this face-off? Why the Government has not been taking up adequate policy measures and resource allocation for modernization on regular basis? Why successive Governments only start digging a well only after the house catches fire?

Make In India: A Paradox?

The paradox is that though successive Governments have spoken about indigenisation and strengthening of Defence Industrial Base (DIB) but the fact remains that they did little in this context. Way back in 1990 Self Reliance Review Committee in Defence under Dr. A.P.J. Abdul Kalam, had formulated a 10-year self-reliance plan to achieve 70 percent self-reliance in defence by 2005, being of vital importance for both strategic and economic reasons.

The Government  launched the ‘Make in India’ initiative in 2014 along with introduction of  sub-head policies such as Make-I, Make-II, Strategic Partnership, Indigenous Design and Development and Manufacturing (IDDM) over the years to develop a strong industrial base keeping in focus the enhancement of manufacturing and participation of the private sector in defence. The much hyped 'Make in India' projects involving private sector such as Futuristic Infantry Combat Vehicle (FICV) project, Tactical Communication System (TCS) and Battlefield Management System (BMS), are in limbo even after almost 4 years. The same is the fate of Strategic Partnership. The selection of the Production agencies, placement of orders is yet to be done. The actual production will take another decade. So, as of now the private sector participation is virtually nil when it comes to big ticket programmes that are yet to take off and awarded to them.

Little has changed significantly despite often repeated statements from various Governments with no tangible effect and self-reliance still remains wishful thinking as most weapons and equipment continue to be imported. The matter of the fact is that these are still mostly on paper and little headway has been made in this direction. There is no tangible progress, and as usual, these are being stalled by vested interests.

Rising Imports Burden on the Nation

It is a well known fact that over the years India has emerged as one of the biggest arms importer accounting for 9.5 percent of the volume of global arms imports as per SIPRI data. The country has spent over US $100 billion on arms imports in the last decade and is likely to spend $250 Billion in next ten to fifteen years on high technology military hardware, drones, precision weapons, radars, guns, sensors and aircraft. But the question arises that has these imports made India stronger and more secure? The answer clearly is NO. The imports, far from being enhancing strong defence capabilities to make India a regional power have lacked a clear long-term direction. Also, it entails a certain vulnerability to the technology denial and not getting the technical know-how coupled with a variety of obligations that would leave the imported defence hardware unserviceable at times making the country strategically at risk if supplies are obstructed in times of war/conflict. This so could too happen in spite of ToT, license production, etc. as a part of agreement of the imported defence hardware.

Indigenous Defence Industrial Base (DIB): A Case of Tall Claims

India’s Defence Industrial Base (DIB) continues to be overwhelmingly dominated by the Government sector. Their dominance has been associated with inefficiency and lack of accountability on delivery, productivity and quality, etc. Basically, these development and production agencies, in the past never bothered to develop/acquire knowledge including the “know-why” and “know-how” of developing a certain class of equipment  which has resulted in creating large capability gap in the technology which in turn is met by “off-the-shelf” imports. The DPSUs and OFBs are most of the times only assembling the system even when Technology of Transfer (ToT) is sought from OEMs on built-to-print basis resultantly there is not much technological gain.

India’s Defence Industrial Base (DIB) continues to be overwhelmingly dominated by the Government sector. Their dominance has been associated with inefficiency and lack of accountability on delivery, productivity and quality, etc.

The in-house developed technology when evaluated on any performance parameter such as innovation, customer satisfaction, timely delivery, productivity and export earnings portray a rather dismal picture and is definitely not the apt answer to overcome the increasing import dependency of the country. Moreover, by the time it reaches the end user it becomes redundant/outdated as compare to other world class weapons available at that time and even at times more costlier, leading to yet another setback. Though there is no denial that these agencies have leapfrogged in some areas such as missile systems, but it is struggling with basics in many others such as Rifle. At present, various defence programmes undertaken by DRDO and various DPSUs be it production of aircrafts (Tejas), engines (Kaveri engine), manufacturing of submarines/frigates (Project 75, Project 15) or various missile programmes (Agni, NAG ATGM) and also maintenance of current aircraft in service are seen to be lagging behind by years.

Furthermore, the myth of substantial indigenous production that the MoD perpetuates by citing orders placed on DPSUs and OFs. The MoD response does not give details of extent to which orders for “indigenous" weapon systems and equipment actually pay for imported equipment. This is because the equipment supplied by DPSUs and OFs contains many imported components, sub-systems and systems, but are not shown as DPSU or OFs into the “indigenous” kit it supplies. These could be from 30-35% of the supplies which dramatically enhances India's foreign arms dependency. These facts are known to the policy makers since long. Still, the competitive environment has not been created in defence development and manufacturing, which is pre-requisite for reducing import, resultantly the ever increasing import bucket.

The following Table throws light on the high average of total import value year on year despite the Government’s tall claims of 'Make in India'.

Look at this, the Hindustan Aeronautics Limited (HAL) manufactured Sukhoi-30MKI fighter Ltd which is the mainstay aircraft of the India Air Force has 44% import content even after building it in India under license for over a decade. Apart from this various other defence products and technologies that are found to have high import content in them. Refer Table.

To sum up with the allocation of Projects on nomination basis to DPSUs, the ‘Make in India’ is turning as ‘Assembled in India’ through import as on an average, government-owned defence units undertake less than 15% of real value addition on projects they are awarded, with the rest being imports.

To make things worse is the Government’s is biased or discriminatory approach towards Public sector entities, as these have vast infrastructure, nominated order (without competitive bidding), investments, and technology collaborations at their disposal through Government support; thereby resulting in a lack of a level playing field till date and resulting in restricted capability building & underutilization of private sector capacity. The subsequent Governments in power does not have paid attention to the fact that to have a robust DIB, it is essential for any country to have a strong and active private sector in defence manufacturing as well as R&D.

This can be substantiated with the fact that over Rs 4 lakh Crores worth of military purchases have been cleared in the past four years and the Government asserts that two-thirds of the total approvals are under the ‘Make in India’ category. The reality, however, is different. In the same period, only 128 contracts worth about Rs 119000 Crores have been signed with Indian vendors for capital procurement of defence equipment. This is just more than one-fourth of the total, not two-thirds. And out of this 90% of domestic acquisitions are from DPSUs & Ordnance Factories and about 10% from private sector. Of the total programmes cleared for acquisition, the private sector has been allowed to compete for about 35 percent of them by value which of course is disheartening for the private sector. This figure was below 5 percent in the preceding five years.  Refer Diagram.

Even though the private sector has been proving its mettle they are often sidelined and not given fair chance for competing with these government owned production agencies. Most of the times the reason cited is due to so called deep set security concerns. Some of the specific examples of private sector demonstrated capability being Arty Guns K-9 Vajra and M-777 ULH in partnership with OEMs and Pinaka development by Tata Power SED and Larsen & Toubro and ATAG 155 mm Gun in a partnership of Private sector with DRDO.

Bottom-Line

It is a well-established fact that defence preparedness can only be achieved when India is substantively self-reliant in defence production. Thus, unless the government drastically reorients its defence procurement policies and processes, the Indian Armed Forces will continue to lag behind in terms of their modernization plans. The success that India has achieved in indigenous development of technologies in automotive and IT sector by involving the private sector actively and synergising the strengths of public-private sector in developing certain excellent technologies can be a setting example that should be taken in defence sector as well.

Unless the government drastically reorients its defence procurement policies and processes, the Indian Armed Forces will continue to lag behind in terms of their modernization plans.

It is to be seen that the private sector has been relatively more efficient and cost effective particularly in building systems of systems such as optics, electronics and Information Technology (IT) related spheres for defence hardware. Thus, the Government should focus on successfully harness such as well as other energies or strongholds of the private sector for R&D. This can be done by adopting successful models such as Defence Advanced Research Projects Agency (DARPA) of the US Department of Defence which created a transformational innovation ecosystem in partnership with the private sector with regulatory control over Intellectual Property Rights (IPR) and export. Also, it is time that Government adopts the Government Owned Company Operated (GOCO) model under which the private industries need not make investments on land, infrastructure, machinery, manpower and other support systems. Noteworthy, these heavy investments have been a stumbling block for the private sector in entering defence manufacturing. The GOCO model, on the contrary, allows the private sector in operating the assets owned by government and is given full independence in implementing using their best practices when awarded a defence order. This will provide much required level fielding.

Further, it needs to be underlined that synergizing public and private sector is a must for creating robust indigenous defence industrial capabilities and will thereby lead to gradual and systemic reduction of import dependence. It is time for the Government to be realistic and actionable rather than merely coming out with slogans/statements year on year such as ‘Self Reliance in Defence’, ‘Make in India’ and now the latest one to join the bandwagon is ‘Antamnirbhar Bharat’.

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