Over the last three decades, India has evolved significant design capabilities, as evident from its missile programme, its nuclear propulsion programme, a series of light helicopters, the Tejas light combat aircraft (LCA), the Arjun tank, and an array of naval technologies that drive warship building. Safeguarded technologies in electronic warfare, combat management systems and secure communications have also been developed.
However, analysts and government watchdogs like the Comptroller and Auditor General (CAG) are critical. In August 2010, the CAG criticised the Dhruv helicopter, pointing out that 90 per cent of its systems and sub-systems are sourced from abroad. The Tejas LCA and the Arjun tank also have a high percentage of foreign components. While the warship building programme has made indigenisation a priority, some 60 per cent of the weapons and sensors in most Indian-built warships continue to be sourced from abroad, including in the recently launched aircraft carrier, INS Vikrant.
What does Indigenization Mean?
In 2001, a growing ministry of defence (MoD) realisation that the public sector could not meet India’s defence needs triggered the entry of private companies into this sector. But that laudable policy change was not accompanied by a clear, holistic plan for indigenizing defence production. A dozen years later, there is no clarity about what indigenisation means. Instead, indigenisation has been reduced to a slogan – India’s current equipment ratio of 30 per cent indigenous and 70 per cent foreign equipment must be reversed to 70 indigenous and 30 foreign.We could indigenize 70 per cent and still have no real control over a product that we build a large part of. That is because we continue focusing on components and numbers rather than design expertise. If we build most of a system in India, but cannot tweak, modify or export it, how can we say we have indigenized it?”
Indigenisation, in a broader sense is being able to master; develop technologies and being proficient in externally acquired technology rather than just production of all defence equipment within India without the knowledge of related technologies.
The Kelkar Report states: “There is an urgent need to review the whole concept of indigenisation and self-reliance and it is time to go beyond the idea of looking at indigenisation purely as import substitution of components, sub-assemblies, etc. within the country from raw materials. Today indigenisation as a concept will need to involve capability enhancement and development, increasing know-why, design and system integration, rather than having numerical targets.”
Indigenisation involves the Defence Research Development Organisation (DRDO), Defence Public Sector Undertakings (DPSUs), and Ordnance Factory Board (OFB), private sector, the Services and the civilian leaders.
Procurement including transfer of technology
India has been manufacturing Russian fighter aircraft and tanks under license for many years, the Russians never actually transferred weapons technology to India. Although the country has now diversified its acquisition sources beyond Russia to the West and Israel, recent deals have failed to include transfer-of-technology (ToT) clauses. India never had a relationship in defence production beyond buyer-seller or patron-client, with Russia or any other nation except in the production of BrahMos missiles. India’s efforts to sign contracts with foreign companies that include both licensing as well as transfer of technology were never fruitful as the trade policy in those countries strictly restricted the companies to only licensing and sale of equipment, denying the transfer of technology.
Whatever India procures now must be procured with a ToT clause 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 to three decades.
Role of Defence Research and Development
Though it seeks to encourage public-private partnerships, privately the government continues to retain its monopoly on research and development and defence production through the DRDO, the ordnance factories and the defence PSUs (DPSUs).
Since its inception in 1958, the DRDO has achieved some spectacular successes like the missile development programme, but also has many failures to its name. Programmes like the Light Combat Aircraft (LCA) and the Main Battle Tank (MBT) Arjun have suffered inordinate delays and time and cost overruns.
However, to its credit, the DRDO worked under extremely restrictive technology denial regimes and with a rather low indigenous technology base. The DRDO is now in the process of implementing the report of the P Rama Rao committee that had asked it to identify eight to 10 critical areas that best fit its existing human resource pool, technological threshold and established capacity to take up new projects. And, it must scrupulously stay out of production as the private sector has shown its readiness and technological proficiency to take up the production of weapons and equipment designed by the DRDO and must be trusted to deliver.
Required strategy for Indigenization
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.
As the largest importer of arms and equipment in the world, India has the advantage of buyers’ clout. This clout must be exploited fully to further India’s quest for self-sufficiency in the indigenous production of weapons and equipment. In all major acquisitions in future, India should insist on joint development, joint testing and trials, joint production, joint marketing and joint product improvement over the life cycle of the equipment. The US and other countries with advanced technologies will surely ask what India can bring to the table to demand participation as a co-equal partner. Besides capital and a production capacity that is becoming increasingly more sophisticated, India has its huge software pool to offer.
Today software already comprises over 50 per cent of the total cost of a modern defence system. In the years ahead, this is expected to go up to almost 70 per cent as software costs increase and hardware production costs decline due to improvements in manufacturing processes.
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 realize.
With the defence budget languishing at less than two per cent of India’s GDP – compared with China’s 3.5 per cent and Pakistan’s 4.5 per cent plus US military aid – it will not be possible for the armed forces to undertake any meaningful modernisation in the foreseeable future.
India is expected to spend approximately USD 100 billion over the 12th and 13thdefence five-year plans on military modernisation. As 80 per cent of weapons and equipment are still imported, there is an urgent need to further refine the defence acquisition process and insulate it from the scourge of corruption that has afflicted all other national endeavours, including major development projects, while simultaneously encouraging self-reliance and indigenisation.
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.
Defence Procurement Procedure undermining the role of Private sectorand MNCs
The Defence Procurement Procedure (DPP) manual was introduced in 2005. Since then it has been revised and modified several time. The Defence Production Policy unveiled in 2011 with major objective of self-reliance in design, development remained wishful as at present most weapons and equipment continue to be imported.
The Defence Procurement Procedure (DPP) was amended once again 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.
Required amendments to DPP
The defence production process must provide a level playing field between defence PSUs and Indian private sector 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.
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