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RESTRUCTURING THE DEPARTMENT OF DEFENCE PRODUCTION

Prime Minister's Vision for attaining total Self-Reliance in Defence Production and achieving Export potential necessarily calls for a paradigm change in fundamental approach.

It is a well known fact that even after six decades of Independence, more than 70 percent of our inventory of war machinery is directly ex-import or based on foreign technology with strings attached. There is minimal in-house original/de-novo technology, while the domestic defence production is predominantly in Govt's domain. This situation is not at all in consonance with the Defence Production Policy promulgated in Jan 2011, as well as does not gel  well for the long-term National interests and hence rightfully caught the eye of the new Government.

It would also be immediately evident that such a quantam leap cannot be taken unless appropriate fresh thinking, fresh look and fresh initiatives are undertaken, in order to rejuvenate the present somnambulant situation and to overcome years of inertia and loss of direction.  It is indeed laudable that the new regime has expressed its firm resolve to address this situation, and have envisioned seeing India turnaround from a foreign technology & equipment dependant nation to a self-reliant nation in defence preparedness with even export potential.

Since the whole business of Defence Production and attainment of self-sufficiency falls under the aegis of Deptt of Def Production under the Ministry of Defence  (MoD), it is but natural that only  an effective and correctly oriented ministerial structure can bring about this turnaround. A much focused view would therefore be required to ensure achieving of the stated aims.   Post-independence, the only facet which has changed has been the creation and induction of the PSUs into Defence (Def) Production in addition to the Ordnance Factories (OFs), with private sector playing the ancillaries/the feeders  to them , thereby still leaving the overall control with the Govt only. Thus it can be seen, little has changed over the years, which at best can be termed as cosmetic/clinical/symbolic changes.

Present  System Limitations
Initially, in the absence of any tangible or strong indigenous R&D, the Govt   production units viz the OFs and the DPSUs relied solely on and functioned basically on the technology imported/purchased ex-foreign sources by the Govt.

For some strange reasons even long after Independence, tacit but strong control has been excercised over the defence technology so as to ensure its non-proliferation into the private sector. This is also very much evident from the fact that even till date the NPAs (Nominated Production Agencies) to receive any Technology viz  ToT whether ex DRDO or ex-foreign source  still remain as either OFs or the DPSUs.  In fact, it would not be wrong to say that the system and the procedures are still not oriented towards whole-hearted participation by the private sector, and tend to keep them on the margins.  At best, the recently started trend of PPP (Public Private Partnership) model is yet to be fully fine-tuned to maturity and tangible results are still a long time away.

On the other hand, in most of the sovereign and developed nations (few of them being miniscule in size but are exporters to us!!), the Defence Industry was decentralized/deregulated and designated to the pvt and corporate sector long long back - in fact right from the days preceding WW-I, when the major inputs to the world Armed Forces came predominantly from the pvt sector/autonomous enterprises!!  No wonder that the Defence Tech and the Production both grew (and is still growing ) by leaps and bounds in those nations, where as we are still a 70:30 ratio nation.

It would also not be out of place to mention at this juncture, that despite the well intentioned and highly proclaimed (and rightly so) policy of imposing OFFSETs obligation on our foreign trading partners with the aim of getting ourselves a Reverse Buisness Gains for the Indian Industry, the beneficiaries of such provisions too are largely the Govt agencies- mostly the DPSUs !! More often than not, by virtue of inherent and well known limitations aided by reduced degree of accountability, they have not been able to take full advantage of the OFFSET contracts solely because of time and cost overruns !! Such shortfalls in performance have often not only  adversely impacted the main equipment contract besides loss of national credibility, but also deprived the pvt sector from benefitting from such an effective tool as offsets.

Even the noble aim of “ Import Substitution “ as envisaged as the charter for  the erstwhile  Deptt of Def Supplies, has long lost its luster and relevance, for the simple reason that our coveted R&D and Production  agencies instead of developing in-house original/denovo technologies and products , interpreted this term ( import substitute ) as “ Reverse Engineering “ and frittered away precious resources merely on coming out with ' Clones ' of imported equipment. Even the productionisation of such reversely engineered import substitutes never took off in right earnest as the production agencies found it much more convenient to resort to screw-driver technology based on SKDs & CKDs ex OEMs  and pass it on as an indigenous product  !!

Another area where tremendous scope existed for giving a fillip to indigenous production was the very wise step of setting up of the Defence Exhibition Organisation (DEO) in 1981, with the sole charter to promote Export Potential of the Indian defence production agencies. However, over a period of time, the annual expositions/events that the DEO has been organizing appear to be achieving exactly the opposite aim, it has increasingly attracted more & more Foreign vendors to India (In the 2012 DefExpo event, there were 232 foreign companies from over 30 countries) showcasing THEIR products as against hardly any visible presence of Indian stuff for export!! Hence inevitably the business being transacted during such mega events tend to be more Imports oriented rather than Export oriented!!

Hence it is anybody's guess as to how much of self-reliance can really be envisaged, road mapped and achieved unless there is a paradigm shift in our focus and approach to Def Production.

 Suggested   Way Ahead
Though major and innovative changes can be thought of across the board and applied in many inter-related sectors such as Finance etc, we shall restrict our views on the MoD structure only at this stage. To start with, one fundamental fact stands out that for any meaningful achievement of self-reliance in Def, full and overt participation of the private sector is most essential, albeit in a fully transparent manner.

Once this fundamental Paradigm is accepted in principle by all the stakeholders, the next step would be to make the MoD  "more industry friendly" by way of  having a structure where there is a space for the Industry to amalgamate, contribute and to operate .
The present MoD structure has NO space for the industry to interact with the MoD on equal partner basis. In fact, the private sector is, at best a subordinate/peripheral subset to the individual Govt players like the production agencies or the procurement agencies. They have NO scope or an identity or any Locus-Standii  to have a “say” in the matters of def prodn/procurements , hence their contribution remains minimal and their  vast potential remains Untapped !! Even in the case of being an important stakeholder in PPP ventures, as on date there is no identifiable element in the MoD which represents the industry!!

The only major interactions today are limited to their participation as “ Vendors “, which over a period of time (due to many a factors) have attracted very strong labels and sentiments as being an external/outside party and not a stakeholder, leading to often being looked down  upon with suspicion and with  inherent  guard ON  !!  Such an unsavory situation automatically introduces elements of non-transparency as well as strong degrees of mutual distrust. Also, by virtue of present structure, however inadvertently, inherent priority/preference/bias  does tilt in the favour of Govt units as against even reputed pvt sector corporates.

Hence, there is strong case for taking the Indian Industry “on board” by giving it a distinct identity and position within the structure of the MoD. As a take off point and a bold initiative, it would be worthwhile to consider/suggest a fully Autonomous Wing (ideally a Deptt ) under a Secretary level officer  akin to Def Acquisition Wing , with adequate representation in range & depth from Industrial bodies like FICCI, CII, QCI, BIS etc on board.  This Wing should function closely with all entities of MoD, viz, Users and the Acquisition Wing under DoD, DRDO under D (R&D), and all constituent organizations of DDP. Appropriate interactive channels and protocols could be put in place to ensure their being in the loop in respect of all defence procurement and production related activities, (except of course the sensitive security matters), so as to derive max benefits from the state of the art technologies available indigenously with the civil sector.

Such a wing/deptt ought to be mandated to ensure EQUAL opportunity to the industry in Def prodn  both, as independent contenders as well as on PPP basis including technology & resource sharing in national interest. Such a charter should obviously accord very high Priority to R&D activities so as to minimize dependence on foreign technology as well as to bolster National Confidence. Adequate autonomy to negotiate tie-ups including FDIs, as well as Licensing aspects (presently under the purview of DIPP ) and successful implementation of OFFSETs should also be within the purview of this wing/deptt.

The role and cognizance of such an entity should be well covered by viz dovetailed into DPP, and as applicable in DPM.  Besides, on selective basis, important industrial functionaries/trade appointments can also be considered to be associated with the 3 Boards under the DAC (Defence Acquisition Council )  viz the Def R&D Board, Def Procurement  Board and the Def Production Board. To this extent, this wing/deptt should also be fully aware of the technological implications of the LTIPP [Long Term Integrated Perspective Plan] and SCAP [Services Capital Acquisition Plan] so as to get adequate headstart and time for meaningful deliveries.

For the sake of true autonomy and in order to insulate it from any bias or conflict of interest with the Govt owned suppliers under DDP, it would be ideal to position this Wing anologus to Acquisition Wing so that the Secy of this Wing can act as an Advisor to the Govt through RURM/RM on commercial and industrial aspects of Def Prodn , including  developing military hardware  export potential in consultation with the MEA.

 Conclusion
The Defence Production Policy has very aptly, comprehensively and conclusively spelt out the high priority to be accorded to Self-Reliance in indigenous R & D and production as well as the need to move forward with full involvement of private sector. In fact, it has also envisaged setting up of a separate Fund to provide necessary resources to public and private sector both, including SMEs and academic & scientific institutions.  To this extent, it would be most appropriate now to include reference to enabling mechanisms and tools like Concurrent Engineering, Configuration Management ( especially since “upgrades” find a special mention ), and Resource & Risk Management.

Such a platform and a position in the MoD to the private sector, which envelopes extremely able and world renowned corporates and market leaders, will surely send positive signals to the current largely dormant and unexploited sector, thereby bolstering the new Govt's resolve and efforts towards achieving world-class defence potential within our own nation.

By Maj Gen (Retd) Asit Mehta

By Maj Gen (Retd) Asit Mehta

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