Thursday, May 16, 2013

Lip Service is Still Being Paid to Defence Indigenisation

Brig (retd) Gurmeet Kanwal, 
Visiting Fellow, VIF

The Defence Minister, Mr A K Antony, has repeatedly exhorted the armed forces to procure their weapons and equipment from indigenous sources in recent months. It is a well-established fact that no nation aspiring to great power status can expect to achieve it without being substantively self-reliant in defence production. However, it is not the armed forces that are the stumbling block. Unless the government drastically reorients its policies, the import content of defence acquisitions will continue to remain over 80 per cent.

India’s procurement of weapons platforms and other equipment as part of its plans for defence modernisation, must simultaneously lead to a transformative change in the country’s defence technology base and manufacturing prowess. Or else, defence procurement will remain mired in disadvantageous buyer-seller, patron-client relationships like that with the erstwhile Soviet Union and now Russia. While we manufactured Russian fighter aircraft and tanks under license, the Russians never actually transferred technology to India. Whatever India procures now must be procured with the transfer of technology being built into the contract even if it means having to pay a higher price. The aim should be to make India a design, development, manufacturing and export hub for defence equipment in two decades.

Though it seeks to encourage public-private partnerships, the government continues to retain its monopoly on defence production and R&D. The latest Defence Procurement Procedure (DPP) was amended in April 2013 to reflect the current thinking on ‘buying Indian’. However, in effect it still favours the defence PSUs over the private sector. MNCs are allowed to bring in only up to 26 per cent FDI as against 74 per cent for non-defence sector joint ventures. Though the procurement of weapons and equipment worth more than Rs 300 crore from MNCs has been linked with 30-50 per cent offsets, it is doubtful whether the economy is ready to absorb such high levels of offsets.

The DRDO is in the process of implementing the report of the P Rama Rao committee that had asked it to identify 8 to 10 critical areas that best fit its existing human resource pool, technological threshold and established capacity to take up new projects. Since its inception in 1958, the DRDO has achieved some spectacular successes, but also has many failures to its name. However, to its credit, it worked under extremely restrictive technology denial regimes and with a rather low indigenous technology base.

The DRDO must now concentrate its efforts on developing critical cutting edge technologies that no strategic partner is likely to be willing to share; for example, ballistic missile defence (BMD) technology. Other future weapons platforms should be jointly developed, produced and marketed with India’s strategic partners in conjunction with the private sector. The development of technologies that are not critical should be outsourced completely to the private sector. Also, the armed forces should be given funding support to undertake research geared towards the improvement of in-service equipment with a view to enhancing operational performance and increasing service life. Gradually, the universities and the IITs should be involved in undertaking defence R&D. This five-pronged approach will help to raise India’s technological threshold over the next two decades by an order of magnitude.
The defence production process must provide a level playing field between defence PSUs and private Indian companies forming joint ventures with MNCs where necessary. The amount of FDI that MNCs can bring in must be raised to 49 per cent immediately and to 74 per cent in due course to make it attractive for MNCs. However, no MNC that is unable to provide transfer of technology – either due to the home country’s restrictive laws or due to proprietary considerations – should be considered for future defence acquisitions.

India cannot leap-frog to a higher defence technology trajectory virtually overnight. Transforming a low technology base to a higher plane will need time, patience and large-scale capital investment. It will also need strong support across the political spectrum. In the interim period, there will be a further dip in defence preparedness. This short-term weakness in capacity building will need to be carefully weighed against long-term gains that will be strategic in nature.

The immediate requirement is to think big in keeping with the country’s growing economic clout and to plan for the future with a level of confidence that policy planners have not dared to exhibit before. In 10 to 15 years India must begin to acquire most of its defence equipment needs from Indian companies—with or without a joint venture with an MNC. Only then will the era of self-reliance in defence acquisition truly dawn on the country. It will be a difficult quest, but not one that a great nation cannot realise.

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