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Posted at: Apr 20, 2017, 12:12 AM; last updated: Apr 20, 2017, 12:12 AM (IST)

Why we lag behind in defence production

Bhartendu Kumar Singh
While India has seen revolutions in the post-1991 period in IT, aviation and telecom sectors — what has prevented a desirable revolution in defence production? We need to reduce imports in defence procurement.
Why we lag behind in defence production
Officials of the Army inspect a TRG M10 sniper rifle made by Finnish firearm manufacturer Sako during a Defence Expo at Pragati Maidan in New Delhi. AFP
Capital procurement is often perceived as a problem child by the armed forces due to lack of sufficient delegation of financial powers, procedural bottlenecks and infinite delays. Therefore, the recent enhancement of existing delegation of financial powers is a welcome step. Henceforth, capital acquisition proposals upto Rs 2,000 crore can be handled at the level of the Defence Minister, proposals between Rs 2,000 and Rs 3,000 crore would be processed at the level of the Finance Ministry and proposals beyond that would go to the Cabinet Committee on Security (CCS). The Pritam Singh Committee, constituted last year to suggest fast-tracking of defence procurements, has recommended the formation of a central, autonomous, empowered professional organisation to build indigenous defence capability. 

 Resource-intensive and technology-sensitive capital acquisitions carry a long project-development cycle. The services are encouraged to go in for a long-term perspective plan, medium-term five-year plans and annual acquisition plans. Any perceived lack of delegation of power should not be construed as a flaw since the associated finance in the Ministry of Finance is a stone's throw away in the North Block. Not many capital acquisitions are big-ticket purchases going to associated finance. The problems are: 

First, almost the entire allocation for capital acquisition is being spent for foreign procurement. India remains the largest importer of arms for quite some years. It will remain so in the foreseeable future. A clear example of “economics with tears”, India has been funding the revival of military industrial complexes (MICs) in other countries and creating jobs overseas! The dependency has been institutionalised in the last 60 years to such an extent that it is singlehandedly diluting India's efforts to become a great power. 

Second, India is also not getting latest technology despite policy supports like a revamped defence-procurement policy (2016), liberal FDI and defence offset policy. Western countries and companies are loath to transfer recent technology. What we get is a generation behind. For instance, there was a time when the US was unwilling to sell F-16 fighter jets to India. Today, there is no fun in purchasing these old war birds. Third, since many capital acquisition are big-ticket purchases from abroad, there are national security considerations that determine the ultimate purchase. In the process, many times, budgets have been surrendered since there is no time to transfer the fund for other big-ticket purchases. Fourth, India's domestic military industrial complex is too small to absorb this huge allocation of capital acquisition budget due to lack of capacity, low investments in research and development, and above all, obsession with low-value products.The defence PSUs and ordnance factories live in a protected environment and have little patents, copyrights or an in-built desire to compete.

Fifth, India's private sector is shying away from the potentially rich market and is facilitating import substitution. It is sluggish in competing with defence PSUs and ordnance factories, challenge monopoly and win indents from the services. The success in IT, aviation and telecom sectors was achieved without much state support. The same is not true of defence production, despite the state willing to play ball. Do we need a more liberal FDI, say, 100 per cent? Do we need to abolish the remnants of the license raj? Do we need to further revamp the defence-production policy? Do we need to nurture talent in defence engineering as we did in the IT sector? What do we do to produce a world-class arms producing company like Boeing, BAE etc? Will the proposed defence procurement organisation become another bureaucratic set-up based on compartmentalised decision-making  and lack of domain specialisation? These issues need to be researched.

The procurement process needs to work in an environment where the strategic importance of futuristic weapons is appreciated in terms of cost and time. The services must own up weapons’ development, production and procurement. The bitter experience of MBT Arjun and LCA Tejas shows we have a long way to go. In this context, the “Make-in-India” initiative offers a last opportunity of overcoming the stasis in expansion and consolidation of a domestic MIC. A determined state is willing to push for touching 60 per cent indigenous content of total procurements by 2019. Perhaps there is a ray of optimism in weapons procurement and production. 

The writer is in the Indian Defence Accounts Service. 
The views expressed are personal..


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