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Wanted: White Paper on Defence Production

D. Raghunandan

11th July 2012

Indias serial imports in military hardware continue unabated, with a string of acquisitions being approved and announced recently. There is regular fine-tuning of the Defence Procurement Policy, mostly at the behest of and oriented towards streamlining procedures for acquisitions from foreign suppliers, who have become the mainstay of Indias somewhat breathless defence modernization. There is also a new so-called Defence Production Policy which is mostly about ensuring that at least 30 percent of the contracted value of large defence hardware imports more than Rs.300 crore is spent in India through offsets in domestic manufacture, services or even training, and utilizing this offsets policy to promote private sector involvement in the defence production sector.

Yet there has been little concerted thinking about, or planning for, building self-reliant design-development and manufacturing capability within India so that the proportion of imports reduces over time and the obvious risks of dependence on foreign suppliers for military equipment decreases. And under the present dispensation, with each passing day, and each successive import order even with offsets, which are mostly in the nature of sub-contracts that might earn money but do not translate into autonomous indigenous capability, the prospects of self-reliance recede further. It is time for urgent steps to undo this trend, which spells serious danger for Indias security and sovereignty, and to initiate equally urgent, systematic, time-bound efforts with stringent monitoring and accountability to re-build and strengthen self-reliance in the crucial defence production sector. A White Paper on the subject is a necessary first step of delineating the current status, including institutional structures and mechanisms, and outlining future plans.

A brief look at the present and projected near-term military acquisitions reveals the broad picture. For the purposes of this article, one may keep aside the issue of whether or not India indeed needs to add these many weapon systems or needs this or that armament. Issue at hand is whether India needs to buy these systems from foreign suppliers and whether there are, or whether there could have been, indigenous alternatives and, additionally, whether or to what extent measures are in place to see that a sound defence industrial base in both manufacturing and research is built to deliver such systems now or in the future.

Aircraft These columns have extensively covered the many military aircraft acquisitions by India in the past several years. We have noted that many of these acquisitions, and the urgency behind them, have taken place in the context of an impending vacuum in critical categories of air assets caused by, among other things, inordinate delays in decision-making as well as the failure of the predominantly state-sector domestic defence industry to develop effective platforms and deliver them in a timely manner. User agencies were left with few options other than procurement from abroad.

The double-decade delay in development of the Tejas Light Combat Aircraft against the background of the obsolescence of the redoubtable MiG-21s, compelled the acquisition of Russian Sukhoi-30s and the French Rafale Medium Multi-Role Combat Aircraft (some of which may also have taken place anyway because these systems fill different slots in the air force fleet compared to the LCA), and the upgradation of the ageing Mirage 2000s and MiG-21 Bisons. Acquisition of the British Aerospace Hawk advance was compelled by the lack of an indigenous aircraft to take over from the 1960s vintage Kiran basic trainers, the obsolescence of which was known for over two decades. The planned Intermediate Jet Trainer is barely off the drawing boards, having been there for again well over a decade and a half. Since such intermediate trainers are necessary to help trainee pilot to move from basic or entry-level flying training to more sophisticated training on near-operational types like the Hawk, it is now almost certain that the Air Force will soon be pressing for overseas acquisition of intermediate trainers. Just last month, the Air Force ordered another 14 Dornier light transport aircraft from HAL which makes this aircraft under license, bringing IAFs Dornier fleet up to 55. It is indeed puzzling why HAL or any other PSU did not, over so many years, come up with an Indian-made equivalent for this simple dual-role aircraft which clearly has high demand from different sectors.

The most shocking foreign acquisition, and one the indigenous aircraft industry will never and should never be allowed to live down, is the recent orders placed for 75 Swiss-made Pilatus P-7 propeller-driven basic trainers for over Rs.3000 crore. Hindustan Aeronautics Limiteds (HAL) basic trainer HPT-32 had long since become obsolete and the fleet was so downgraded that it was forced to be grounded, after even costly parachute systems to safely bring down crippled aircraft were seriously considered and eventually, and thankfully, abandoned! All this resulted not only in the acquisitions from abroad but in the deaths of countless trainee pilots who could not get proper basic training, nor intermediate training, and were forced to prematurely fly the demanding MiG-21s resulting in numerous fatal crashes, apart from the thirty-odd fatalities in the HPT-32 itself.

In all the roughly four decades since the development of the HPT-32, used not only by the air force but by flying clubs and other civilian establishments for training rookie pilots, could not HAL and the Department of Defence Production, or any other aeronautical establishment, conceive and execute a plan to develop the next generation of basic trainers, one of the simplest of aircraft? If HAL or ADE or DRDO were not delivering the goods, what was the Department of Defence Production, with a separate Minister of State, doing? And what was the Raksha Mantri doing, presiding over this vast empire? Or the Scientific Advisor to the Defence Minister? Or indeed the Cabinet as a whole?

What has been the loss caused to the exchequer by all these failures, not counting just the foreign acquisitions made in the recent past that could have been avoided if Indian-made alternatives had been available, but the future foreign acquisitions that are now inevitable because no future planning has been done and because capability to execute any such plans remains low? How far behind does India now lag in autonomous technological capability? Fact is, this has been a colossal failure not only of the defence industry, but also of the political leadership and the civilian bureaucracy tasked with overseeing the former and ultimately accountable to the Indian parliament and people.

Other systems The same scenario prevails in the case of other military hardware too. Indias Main Battle Tank (MBT) has been almost as much delayed as the LCA but appears finally ready for regular production an induction into the Army, although opinion is sharply divided over the quality of the tank and its likely performance under combat conditions.

India did not procure any Howitzers since the Bofors scandal in the early 1980s and only recently ordered 145 M-777 ultra-light 155mm howitzers from the US in a deal worth USD 647 million (Rupees 3500 crore). The latest procurement approvals include 30mm guns for Navy warships at a cost of USD 200 million for 116 guns. Another artillery acquisition in the pipeline is the over Rs 12,000-crore venture to buy 400 towed 155mm artillery guns, followed by indigenous manufacture of another 1,180 such guns after the obligatory transfer of technology. Other forthcoming foreign acquisitions for artillery include 814 mounted gun systems, 180 self-propelled wheeled guns and 100 tracked guns. Heavy guns, indeed almost any kind of gun including small arms till the INSAS rifle, have never been a strong point of the Indian armaments industry and no sustained effort has ever been made to develop indigenous capability in this area, forcing the user agencies to go in for sequential imports.

The brouhaha over the Tatra trucks procurement has revolved around the alleged scam in over-pricing of the trucks and possible graft involving high officials of Bharat Earth Movers Limited (BEML), the defence PSU manufacturing the vehicles under license from the UK arm of the Czech original equipment manufacturer (OEM), for glossing over the rules stipulating procurement only from the OEM. But what has been ignored by most commentators is the continued licensed manufacturer of these trucks by the PSU for over 18 years without any effort to indigenize the technology or design its own vehicle, even after technology transfer in the Tatra deal. Even if there had been no underhand dealings, it is scandalous that a mini-ratna PSU should merely act as a middle-man for a foreign vendor channeling to it a direct order issued without a tender process, and that the Department of Defence Production puts no pressure on it, or any other Indian company for that matter, to develop its own heavy transportation vehicle.

Fixing responsibility This story of repetitive licensed production with transfer of technology has gone on far too long. At what point will the technology transfers and manufacturing contracts lead to Indian defence PSUs acquiring the capability to develop and make their own systems? Should not concerted measures be taken to ensure that this transition takes place? After all, developing and making a small aircraft or a truck or artillery is not rocket science. But wait a minute! Indian entities have successfully developed rockets, placed satellites in orbit, landed instruments on the moon, and are making several types of missiles. Clearly something is missing, not in terms of talent or basic ability to acquire and apply knowledge, but in institutional terms, in how defence PSUs and other concerned establishments are structured and run, and above all mandated and supervised by the political leadership. That this should be the state of affairs in any branch of industry would be tragic, that it should happen in defence PSUs is criminal.

Unfortunately, there is no indication at all that any change is visible even in the distance. In fact, there is good evidence that India is proceeding in the reverse direction, away from ensuring domestic capability and moving further towards dependence on foreign vendors.

Much is being made of the offsets policy mandating at least 30 percent of the value of foreign military acquisitions to be spent by the vendor within India on sub-contracted manufacture, assembly, services or even, as amended recently, on training. However, as all the licensed production and serial technology transfer arrangements hitherto have shown, sub-contracted part manufacture is no guarantee of absorbing the necessary capability for autonomous development. That requires special, dedicated and goal-oriented effort. But there is no such direction being given to the offsets, whose main goal seems to be for Indian companies to corner a slice of the burgeoning defence acquisitions pie.

The other stated goal is to build capabilities in the Indian private sector so as to broaden the industrial base and build competition to the defence Puss. But it is absolutely clear that, except in a few rare instances, private sector engineering companies in India simply do not have the capability for autonomous development of new military equipment. Therefore there is a clamor from the Indian private sector, vigorously joined by foreign vendors, international consulting organizations and sections of the bureaucratic and political leadership, to increase the FDI ceiling from 26 percent currently even to 100 percent. Without this, the argument goes, foreign manufacturers have no incentive for genuine technology transfer. But with it, foreign companies would only be transferring technology to themselves, and would convert the Indian defence industry into their captive subsidiary.

The gap in defence capability, underlined by the previous Army chiefs letter to the Prime Minister, has provided an additional fillip to the mostly foreign acquisitions spree and has spurred on a campaign to undermine defence PSUs. Recent public remarks by the Defence Minister that no further direct orders would be given to defence PSUs as was done in the Tatra case, that defence PSUs should not expect preferential treatment, and that competitive private sector capability would be promoted, suggest that the trend is to abandon, rather than reform, the state-sector defence industry which will only hand over the industrial base to the fledgling private sector defence entities and, through them, to the US and European military industrial complex. In fact, the answer to the problem lies in the opposite direction, in taking concrete steps to strengthen and re-build the state-sector defence manufacturing and R&D capability. It is already very late in the day to stem the rot that has set in, and further delay may only pave the way for a self-fulfilling prophecy and demise of this vital capability.

It is essential that the government issue a White Paper on the current status and self-reliant capability of the defence PSUs and other defence research and manufacturing entities, focusing not on the financial health of these entities but on analyzing in depth the capabilities for autonomous development. This should be followed in quick time by concerted measures to strengthen these capabilities, notably through a set of missions to develop and manufacture specific need-based defence hardware projected as required in the short to medium term, the aim being not only to deliver these hardware but to promote and ensure self-reliant capability. All offsets projects need to be examined and oriented with this aim in mind rather than being viewed merely in money terms. All these measures should be time-bound, goal-oriented and strictly monitored with accountability at the very top. There is no reason why self-reliant capability cannot be built in the defence industry with economy-wide benefits, as it has in space or atomic energy. The time to act is now.

Last Updated on Wednesday, 11 July 2012 10:58