SOURCE: SUNDAY GUARDIAN LIVE
“India’s self-reliance will boost the country’s image and partnership at the international level. The atmanirbhar mission is not inward looking. It is to make the global economy more stable and resilient,” said the Prime Minister at “Atmanirbhar Bharat: Defence Industry Outreach” on Thursday. The real test however, will lie in implementation and not in the vision and mission statements.
After Prime Minister’s call for Atmanirbhar Bharat in June, several bold steps have been taken to enhance indigenisation in the country’s defence industry. To name a few, a new Defence Acquisition Policy has been unveiled, a few big ticket orders have been placed on the Indian defence industry and an embargo has been placed on the import of certain items to boost indigenous production.
This may or may not achieve the purpose. If the Indian defence industry—made up largely of the public sector with a dismal record—does not deliver, the voids may be critical, as was seen during Kargil and Uri attacks. And the lead time required to make up for these critical shortfalls may be at our peril.
The main factors that keep us from becoming Atmanirbhar Surakshit Bharat are inadequate budgetary support, technology gap and poor business practices and processes.
Financial support will always be a challenge in a developing country like India. There will be competing demands, more so now, because of additional allocations to the health and education sectors. In order to harness better technology, several bold measures had been initiated like strategic partnership, joint ventures and making R&D more participative by incentivising innovations, but these have remained more on paper. The key lies in implementation, in which our track record has not been praiseworthy. Our practices are protectionist and our bureaucracy is generalist. In this era of core competencies, this is a recipe for failure, if not disaster.
Our approach to indigenisation has not been yielding the desired results. It has a basic flaw, that it is majorly dependent on the public sector, for manufacture as well as for research and development (R&D). The private sector should have been involved in a big way, a long time ago. Even now, public and private sectors are competing in the field of defence. There is a need to collaborate more, although some competition is good for both sides. Transformational reforms are required to get industry to participate as an equal in defence manufacture as well as in R&D. Countries like US, UK and Australia have a dynamic public private partnership (PPP) in place, but let us examine the Chinese model, as they have State Owned Enterprises (SOE), very much like our PSUs. Having opened up the defence industry to the private sector in a collaborative model for design and development in addition to manufacturing, their armed forces have to buy indigenously manufactured products, and later execute incremental product improvements.
In our context, let us take the case of the manufacture of the Light Combat Aircraft (LCA) by Hindustan Aeronautics Limited (HAL). Even if LCA is not a top of the rack fighter aircraft in the world, we can make incremental product improvements as we go along. The responsibility for this should be given to the Air Force. In fact, user interface in the aviation industry is low. The Navy, on the other hand, has been in the driver’s seat in ship building ever since the 1960s, when a Directorate of Naval Design was set up. The Air Chief will have to be made responsible for product improvement of the LCA. To accomplish this, he will also have to be given the authority to coordinate the activities of the three major organisations that majorly constitute the aviation industry in the public sector, namely Hindustan Aeronautics Limited (HAL), Aeronautical Development Agency (ADA) and Gas Turbine Research Agency (GTRE).
If the space sector can be a success story in the country, there is no reason why the aviation sector cannot. The public private partnership between ISRO and Godrej is an example to learn from. Space assets and satellites are mostly dual use platforms. Similarly, the aviation sector in India lends itself to combining the buying power of the private sector as well. In the next decade or so, India is forecast to acquire over a thousand commercial aircraft. Our armed forces want to buy roughly the same number of fixed and rotary wing aircraft put together. At the national level, we would do well to leverage this aspect to our advantage. On the converse, India must be the only country that holds separate air shows for military and civil sectors. Even developed countries have combined air shows and efforts. With the scales envisaged, any foreign OEM would be willing to set up shop in India. Some that have already done so are not getting the right magnitude of business or incentive. They will soon run out of patience.
Transformational reforms are required to bolster private industry participation as an equal, not only in defence manufacturing but in research and development (R&D) as well. This will mean incentivising R&D by the private sector. The latest technologies are a serious shortcoming in our country. To bridge this technology gap, a “Strategic Partnership” scheme has been launched for big platforms, so that the domestic private sector can leapfrog to better technology by collaborating with defence majors in the world, the Original Equipment Manufacturers (OEMs). However, with time, it has been diluted and public sector companies like HAL are also vying for strategic partnership with foreign OEMs, which is self-defeating.
Similarly, in the low tech manufacturing segment too we could adopt more of a joint venture (JV) approach with foreign manufacturers, where required. A good example is the manufacture of rifles in India as a JV with Kalashnikov. Although that is a JV with ordnance factories, a similar model should be followed by private industry for low tech-high population weapons, equipment or even ammunition. These have huge scope for export as well. The “Buy Global, Manufacture in India” category introduced in DAP 2020 should be able to address this.
NEEDED, MONEY
The single biggest challenge in making Bharat Surakshit as well as Atmanirbhar is assured budgetary support. No worthwhile modernisation can take place if you don’t put your money where your mouth is. In a developing country like India, health and education will always be competing with defence. To be realistic, we should look for alternative financing models. It will require bold and imaginative thinking. Setting up Defence Finance Corporation (on the lines of Railway Finance Corporation) can help us realise up to Rs 200,000 cr through Defence Bonds.
Military land holdings have been a subject of much discussion and debate. Surplus defence land can be monetised for modernisation of the armed forces. The capital so generated should form a non-lapsable kitty for modernisation only (not revenue expenditure). A firm recommendation to this effect has been made to the 16th Finance Commission. It merits mention here that monetisation of land under use in cantonments is not being suggested. Only the land which the Army is forced to accept in some unviable location as barter, may as well be monetised.
Another imaginative and effective step can be financial engagement models that can convert capital expenditure (Capex) into operating expenditure (Opex). To give a broad example, instead of buying trucks to ferry all military requirements to their destinations, if the service for transportation is contracted out, we can save on buying trucks, their running costs and maintenance, pay and pension of drivers and maintainers. True, the Army would still require some transport assets for border areas, yet significant savings can be effected. Similarly, instead of buying vehicle spares centrally and supplying the units through military supply chains, each unit should pick it up from the nearest Maruti or Tata dealer. We would end up using their supply chains and they in turn, could be contracted to hold a certain assured level of reserves for the military, just like the arrangements we have with the oil majors for petrol and diesel.
To improve research and development (R&D) there is a need to enhance the participation of the civil sector. Providing loans at very low rates for or R&D and commensurate incentives for genuine indigenous production will help. There is also a crying need to democratise R&D for defence. DRDO monopolises the field. Instead, it should concentrate only on critical technologies and leverage the academia and industry for the rest.
Public sector tends to function more as a department than a business house. They could benefit by inducting personalities from the corporate world and by having joint ventures. A public private partnership (PPP) is another measure that can effectively bring in much needed contemporary business practices. PPP will not only bring in finances, but also much needed contemporary business practices.
The latest version of Defence Procurement Procedure burnished by new provisions has been renamed as Defence Acquisition Procedure (DAP). Started in the wake of the Tehelka scandal one and a half decades ago, both the DPP and DPM have tied up our modernization as well as revenue procurement in avoidable delays, thus affecting operational preparedness. DAP has introduced some new steps and attempted to simplify some of the old ones. But it is simplifying the already complicated procedures that were made stringent by us in light of Tehelka. We made defence acquisition procedures so cumbersome that it was akin to cutting the nose to spite the face. The need of the hour is to make a simple procedure ab-initio.
Defence equipment readiness is getting to be precarious in several aspects. Atmanirbhar Bharat in the field of suraksha is a great idea. It can be accomplished by willing people and simple processes. The biggest process in defence sector is DPP/DAP. In addition to being a cumbersome process, DAP is primarily focused on acquisition /procurement, and not on development, which is essential for atmanibharta. It should be changed totally and simplified boldly. It is time for some very transformational changes, and there’s no space for marginal thinking, lest we learn at our peril. A few more bold steps being recommended are to do with the people involved, in addition to those discussed above. Firstly, Secretary Defence Production should not focus only on DPSUs and OFB. Private sector defence industry is also his charge and their strengths should be leveraged as a national asset. Secondly, the Scientific Advisor to the Raksha Mantri should not be from DRDO. There is a clash of interests, as DRDO helps produce indigenous products through public sector production agencies. The country will benefit if the RM receives unbiased scientific advice.
What benefits the country, should be embraced enthusiastically, in order to make an Atmanirbhar Surakshit Bharat.
Lt General Satish Dua (Retd) is a former Corps Commander in Kashmir, who retired as Chief of Integrated Defence Staff. Views expressed are personal.
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