Defence Industry

Import of Key Technologies: Need to revisit policy
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Issue Vol 26.2 Apr-Jun 2011 | Date : 02 Jul , 2011

Essentials of a Successful ToT Agreement

A successful ToT depends on four essentials – careful identification of technology for import, selection of reliable OEM, objective nomination of recipient and close oversight of technology absorption. ToT must fill critical gaps in indigenous knowledge and help accelerate the process of achieving self reliance. Therefore, its selection should be need-based and not availability-based. Further, technology should be of the latest genre with multiple applications.

It is essential that India selects its negotiating team with due diligence. The current practice of nominating representatives of different agencies must be replaced by nomination of duly trained officials who are well equipped to understand complexities of ToT process.

Selection of suitable OEM is the key to successful implementation of a ToT contract. In addition to his capability to transfer the necessary know-how, OEM should have a track record of honest and diligent adherence to contractual obligations. Unreliable and unscrupulous OEM must be conscientiously avoided. It should also be made certain that there are no strings attached to the said technology as regards its unrestricted use by the recipient.

Once a technology package is broken down into sub-technologies and duly categorised, a market scan should be carried out to identify the entity (private or public sector) most suited to receive and absorb incremental sub-technologies to be able to produce the equipment. Such a course of action will not only cost least but will also expedite indigenous production. Unless fully absorbed and mastered, ToT can prove highly wasteful. Therefore, it is absolutely imperative that the complete process of transfer and absorption is closely monitored by an independent agency.

The Way Forward

Genuine ToT implies transfer of know-how to enable the recipient to produce equipment from component and raw material level. ‘Buy and Make’ has reduced ToT to screwdriver competence. No wonder that ‘Buy and Make’ procedure has totally failed to raise threshold of Indian technological proficiency – ToT is a pretense used by the public sector units to grab orders without competitive bidding and to perpetuate their monopoly.

Worse, the current dispensation has spawned a culture of complacency and lassitude amongst the public sector units. Instead of striving to imbibe new technologies, they are happy to assemble products from sub-assemblies supplied by foreign manufacturers. These are then passed on to the needy services as indigenously produced equipment at a huge profit. There cannot be a bigger travesty of truth. Therefore, the concept of ToT under ‘Buy and Make’ needs to be revisited. Production based on SKD and CKD kits should be excluded from the ambit of ToT.

As OEM is always more knowledgeable about all aspects of his product and the criticality of sub-technologies involved, he is better placed to carry out negotiations. An unwary importer can easily be tricked by small print. For example, critical items and documentation can be deliberately kept out of negotiations by a shrewd OEM. Once the contract gets signed, he starts demanding additional money and the hapless recipient is coerced to incur extra expenditure. This is a standard subterfuge most OEM employ. India has constantly suffered on this account.

India_Defence_ReviewNegotiating ToT deals is by far the most intricate, multifaceted and painstaking task. The functionaries should be fully conversant with the dynamics of ToT practices in vogue in the international arms trade and be aware of the likely pitfalls. It is essential that India selects its negotiating team with due diligence. The current practice of nominating representatives of different agencies must be replaced by nomination of duly trained officials who are well equipped to understand complexities of ToT process. Infusion of technology must provide a platform for the development of higher level technologies, thus promoting self reliance in defence production and reducing dependence on foreign equipment.

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The views expressed are of the author and do not necessarily represent the opinions or policies of the Indian Defence Review.

About the Author

Maj Gen Mrinal Suman

is India’s foremost expert in defence procurement procedures and offsets. He heads Defence Technical Assessment and Advisory Services Group of CII.

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