- Current scenario
- An opportune moment
- Corporatisation of OFB
- A balanced approach
- FDI Impact
- Road Ahead
Self-reliance in Defence Production
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The measures announced by the Finance Minister recently, to promote self-reliance in defence production, address long-standing strategic and national security concerns about the extent of India’s external dependence for its defence-preparedness. This is significant as the external dependence for weapons, spares and even ammunition creates vulnerabilities during military crises.
- COVID-19 has focused minds on the impact of supply chain disruptions on both civil and defence sectors.
- It is a no-brainer that with India’s security environment, its great power ambitions and its technological capacities, the country should have a robust defence manufacturing capacity.
- For most of the past decade, India had the dubious distinction of being the world’s largest arms importer, accounting for about 12% of global arms imports.
- Saudi Arabia jumped to first place in 2018 and 2019, but India still takes over 9% of global imports.
- The facts that new Defence Procurement Procedures (DPP) 2020 are under formulation and that we now have a Chief of Defence Staff (CDS) tasked with promoting indigenous equipment in the armed forces, provide a conducive backdrop to this initiative.
An opportune moment:
- The decision to notify a list of weapons systems for sourcing entirely from Indian manufacturers, the promise to progressively expand this list and a separate Budget provision for domestic capital procurement will encourage our private defence manufacturers.
- There is a range of platforms and subsystems, developed in India and qualified in trials, some of which face hurdles to their induction by our armed forces because of foreign competition.
- These include missile systems such as Akash and Nag, the Light Combat Aircraft and the Light Combat Helicopter, artillery guns, radars, electronic warfare systems and armoured vehicles.
- The government has promised a time-bound defence procurement process, overhauling trial and testing procedures and establishing a professional project management unit.
- The significance of these measures is underscored by the fact that over the past five years, the Indian government has approved over 200 defence acquisition proposals, valued at over ₹4 trillion, but most are still in relatively early stages of processing.
- The CDS could also examine them from a tri-service angle, to avoid redundancy of capacities across the services.
Corporatisation of OFB:
- The decision to corporatise the Ordnance Factory Board is another long overdue reform.
- Over the decades, our ordnance factories have been the backbone of indigenous supplies to our armed forces, from weapons systems to spares, ammunition and auxiliaries (including uniforms and boots).
- Their structure, work culture and product range now need to be responsive to technology and quality demands of modern armed forces.
- Corporatisation, including public listing of some units, ensures a more efficient interface of the manufacturer with the designer and end user.
- The factories would be better integrated into the larger defence manufacturing ecosystem.
A balanced approach:
- The government has rightly clarified that self-reliance would not be taken to overzealous extremes.
- The thrust for indigenous research and development will coexist with the import of cutting-edge military technologies to obviate near-term defence vulnerabilities.
- At the same time, our defence planners will frame “realistic” specifications for their desired weapons platforms, based on the requirements of India’s defence strategy.
- It is also imperative that when we import weapon systems, we should plan for the ammunition and spares for them to be eventually manufactured in India so that we are not driven to seek urgent replenishments from abroad during crises.
- The same goes for repair, maintenance and overhaul facilities and, at the next level, the upgrade of weapons platforms.
- The liberalisation of foreign direct investment in defence manufacturing, raising the limit under the automatic route to 74%, should open the door to more joint ventures of foreign and Indian companies for defence manufacturing in India.
- It would also sustain a beehive of domestic industrial activity in the research, design and manufacture of systems and subsystems.
- Our companies, which have long been sub-contractors to prominent defence manufacturers abroad, would now get the opportunity to directly contribute to Indian defence manufacturing.
- The development of a thriving indigenous defence industry needs an overhaul of existing regulations and practices.
- A long-term integrated perspective plan of the requirements of the armed forces should give industry a clear picture of future requirements.
- DPP 2020 should incorporate guidelines to promote forward-looking strategic partnerships between Indian and foreign companies, with a view to achieving indigenisation over a period of time for even sophisticated platforms.
- Cost evaluation has to evolve from mechanical application of the L1 (lowest financial bid) principle to prioritising indigenous content.
- The definition of indigenisation itself needs to privilege technology over value or volume.
- Investment, Indian or foreign, will be viable only if the door to defence exports is opened, with a transparent policy.
- To give private industry a level playing field for developing defence technologies, conflicts of interest, created by the role of our Defence Research and Development Organisation (DRDO) as the government’s sole adviser, developer and evaluator of technologies have to be addressed.
Of the key components of any major reform — money, method and mindset — mindset is the most critical and the most intractable. A radical reset is necessary to overcome the resistance to change the old age practices of Defence procurement in the country and making India self reliant in Defence Production.