Defence Industry

How to Setup A Modern Defence Industry in India?
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Issue Vol. 29.1 Jan-Mar 2014 | Date : 10 Apr , 2016

Sixty-seven years of Independence and not a single combat aircraft has been produced by India!

Despite the word ‘indigenisation’ featuring repeatedly in political rhetoric, one of the reasons is because of the vested interests within the government of the huge kickbacks associated with imports of military hardware. The perception that in every armament deal massive amounts of taxpayers’ money is siphoned off is largely correct. Blacklisting vendors is merely theatrics to divert public attention from this crass truth. The long, convoluted and tedious process of procurement of military hardware has been created deliberately by the politico-bureaucratic red-tape to extract larger kickbacks which eventually is the taxpayers’ liability!

Worse, it appears that the primary national objective is not to add military capabilities to ensure the nation’s security but to find ways to guarantee maximum kickbacks.

Worse, it appears that the primary national objective is not to add military capabilities to ensure the nation’s security but to find ways to guarantee maximum kickbacks. Frankly, nobody involved in the decision-making process is really concerned about the MMRCA being inducted on time to shore up the rapidly declining firepower of the Indian Air Force; or about the Indian Navy receiving submarines in time; or with the tremendous collateral damage the nation suffers on its borders with Pakistan because the infantry is ill-equipped. Despite similar levels of corruption, China never overlooks the primary objective of building military muscle. Frankly, no other country does except India!

It is amazing that the Indian genius that has successfully launched technologically advanced and sophisticated spacecraft to Mars or has finally mastered ‘cryogenic’ engine technology is unable to produce small arms such as a modern rifle, carbine or a pistol.

India’s increasing dependence on import of arms up to almost 80 per cent is attributable to multiple reasons. Instead of creating competition between the Defence Public Sector Units (DPSUs) and the private sector, the Ministry of Defence (MoD) and the entrenched vested political interests continue to ignore colossal wastage of resources in the public sector. Elements in the government appear to have huge personal stakes in resources being funneled from the meagre defence budget under the guise of secrecy. The case of the Tatra trucks being re-invoiced at higher price by the Indian public sector unit clearly revealed the modus operandi of siphoning public funds.

The truth, however, is that substantial foreign assistance by way of technology was obtained in developing spacecraft, cryogenic engine, Light Combat Aircraft, the Arjun tank or missile systems. While one may take pride in naming the indigenous tank as ‘Arjun’, the fact is that the tank boasts of foreign components up to 55 per cent. In all fairness, even critics will agree there is nothing to be ashamed of in using imported technology till the capability for indigenous design is developed in-house. All modern hospitals in India today rely largely on imported equipment but at the same time, they earn millions in foreign exchange through medical tourism.

…it makes no sense for New Delhi to keep struggling with modernising the bullock cart!

The key to creating a modern defence industrial complex in India is by leapfrogging through the induction of latest defence technologies. Even as the world is awestruck with US ability to control drone attacks against targets in Afghanistan and Pakistan with the operator located in Texas, the Americans themselves moved on and introduced awesome drones underwater. Imagine the tactical havoc it can unleash on the navies of the world. The speed with which defence technologies are rapidly advancing is mind boggling. Therefore, it makes no sense for New Delhi to keep struggling with modernising the bullock cart!

Due to the positive and favourable geo-political environment prevailing, it is possible for India to leapfrog to a higher technological threshold through the induction of advanced defence technologies from the West. To contain the rising threat from China and Islamic fundamentalism, there is a synergy of purpose in the twenty-first century between India and the West. However, India will have to set its house in order by making the business environment friendly and enticing enough to attract massive Foreign Direct Investment and creation of joint ventures.

The key question for India, which in recent times, has flawlessly endeavored to reach Mars, therefore, is how to develop and manufacture a modern rifle, carbine or a pistol?

The answer lies in the promotion of joint ventures in the private sector with foreign companies which boast of know-how in this field. The foreign companies will be willing to bring in sunrise technologies in case they are provided attractive share holding of at least 49 per cent in the joint ventures. If India can encourage its private sector to set up at least two such joint ventures, a fair amount of self-sufficiency to supply small arms to the military, para-military as well as the state police forces will be ensured. This will also create competition for the DPSUs.

Furthermore, if these joint ventures with the help of the Government of India are provided adequate incentives and funds for further research to continuously upgrade technologies and weapons, a time will come when India will manufacture and export small arms to friendly countries. This is possible because of India’s young, technically-savvy demographic profile, which the international companies would like to exploit. New Delhi must intelligently learn to leverage this win-win situation.

The key to creating a modern defence industrial complex in India is by leapfrogging through the induction of latest defence technologies.

The Infantry soldier fights with a World War II carbine while the terrorist is equipped with AK-47; whilst the DRDO has been kept in business by funneling taxpayer’s resources, the INSAS rifles and LMG have not proven successful. The Future Infantry Soldier As A System (FINSAS) project is yet to take off. The DRDO continues to copy ideas from the brochures of the western firms, guzzling huge budgetary allocations yet is unable to produce a simple CQB weapon such as a carbine!

The reason India does produce and launch technology intensive satellites is primarily due to the pragmatic functional approach adopted by ISRO. The fact that it does not produce a modern rifle or a carbine is due to the wrong model adopted by the public sector defence units, which are extremely inefficient, wasteful and unwise. The ordnance factories and other DPSUs are not only mired in corruption but also outdated and antediluvian in their management practices. The entry of the private sector is therefore vital. A good example is the Pipavav Defence and Offshore Engineering Company Limited with ultramodern shipbuilding facilities.

The delay in production of the Scorpene submarine in Mazagon docks in Mumbai was primarily due to the time it took for DCNS France to upgrade and modernise its management practices. Or for that matter to ensure the smooth production of Rafale in India by HAL, Dassault Aviation needs to conduct a gaps analysis to plug the quality loopholes. Unless HAL facilities are brought up to international standards, a modern fourth generation combat aircraft such as the Rafale cannot be built.

Another issue of concern is that HAL itself is overburdened with the production of diverse types of aircraft. With the facilities at HAL fully committed to production of the Su-30 MKI, it is unable to provide product support to the IAF for the Su-30 fleet. It would be prudent for New Delhi to create, back and fund two private sector aviation companies not only as a competitor to HAL but also to allow the creation of an Indian equivalent of ‘Boeing’ or ‘Lockheed’, or ‘Airbus’ group.

New Delhi must learn to walk before it runs. It will be prudent to identify initial and basic areas in aerospace, land, sea and underwater regimes where the energies of the private sector should be encouraged to form joint-ventures with foreign companies.

New Delhi, however, must learn to walk before it runs. It will be prudent to identify initial and basic areas in aerospace, land, sea and underwater regimes where the energies of the private sector should be encouraged to form joint-ventures with foreign companies. For example, the American company that will supply 4,000 LMGs to India also has the technologies to make small arms such as rifles, carbines, pistols, grenades and rocket-launchers. Since small arms like rifles, carbines and pistols are required not only for the military but also for the para-military and the state-police forces, if a company like this sets up a joint-venture in the private sector, this can help meet the huge long-term Indian requirements. There are two aspects involved. First, rapid Transfer of Technology and second, from thereon, the ability of this joint venture to continuously research, develop and upgrade technologies for newer versions and models in the future.

Similarly, blacklisting foreign vendors is counter-productive due to three reasons. First, there are only a few companies that manufacture 155mm guns and if 60 per cent of these are blacklisted by India on charges of corruption, we are axing the very branch we sit on. Second, the blacklisted companies belong to large defence groups of companies. For example, AgustaWestland is part of Finmeccanica group, which is involved in various fruitful activities in India. Third and a vital fact, that it is the Indians sitting in seats of power who are demanding bribes and not the foreign vendor. But no action is ever initiated against Indians who are siphoning off taxpayers’ money through kickbacks. They should be taken to task first.

The primary objective of creating a modern defence industry is to enhance the war fighting capabilities of the armed forces. It will not be possible to overnight produce modern weapons, as these processes will require an initial gestation period. Major imports of weaponry at the initial stage, therefore, would be necessary to keep the military machine lean and mean. Hence New Delhi must resist the temptation to cancel, delay on flimsy pretexts and re-order tenders. India’s inconsistent behavior not only makes her a laughing stock but also increases huge costs subsequently to the taxpayer.

Similarly, as India learns to walk before it runs, it must be farsighted enough to join the global factory hub and supply chain. This is important because no country today is capable of manufacturing armaments in all fields by itself. Leading European aerospace majors manufacture components for military hardware in a number of countries. Similarly, US companies import components from Europe. This is due to the rapidly changing defence technologies and extraordinary costs involved. We must learn to pool in our resources with like-minded countries. Our options are vast – ranging from the West to Israel, Russia and Japan; with our threat perceptions being similar, democracies must stand together.

New Delhi must resist the temptation to cancel, delay on flimsy pretexts and re-order tenders.

With their advanced technologies, defence companies in the West are attracted to the vast Indian market. Similarly, India should aspire to achieve the best defence technologies available in the world to upgrade the military capabilities of its armed forces. Whilst the synergy of interests between both exists, New Delhi has failed to leverage these.

India has a young demographic profile with an extraordinary reservoir of brainpower to make this a distinct possibility. However, with rapid advancement in defence technologies this is only possible if India stops ‘reinventing the wheel’ and enters into mutually profitable joint ventures with international partners with the aim to leapfrog the technological gap by kick-starting the defence sector at a higher threshold.

This article was first published in IDR Vol. 29 (1) January-March 2014.

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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

Bharat Verma

A former Cavalry Officer and former Editor, Indian Defence Review (IDR), and author of the books, India Under Fire: Essays on National Security, Fault Lines and Indian Armed Forces.

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20 thoughts on “How to Setup A Modern Defence Industry in India?

  1. Thank you sir, for your valuable information.I am a student and I am aspiring to become an entreprenuer.This info is helping me a lot. Keep writing your articles and provide young people like me with your professional guidance.

  2. Hello Sir. Thanks for the article.

    Situation is very grim.

    Performance of DRDO, HAL and other public sector units are in question..

    Govt. need to introduce our private sector units such as Tata, Reliance, L&T etc. in defense sector for fulfilling our make in India dream.

    I think we have enough technocrats, engineers, software professionals in our private sector units who are among the best of the world.

    Govt. need to channelize the private sector companies in defense sector and distribute the work as per their domain expertise. All the projects need to be done in tight time schedule with monitoring and supervision from Govt. agencies.

  3. Hello Sir,

    Thankyou for the very useful and Intellectual article true we need the improvisation in Defence Technology in Modern Age.But here is the problem we know all these things and from 67 years nobody work why Not Start Working and Prove it.

  4. Now iAF have 582 effective fighter planes.
    SU-30 MKI- 224,Jaguar- 145,MIg 27 – 85,Mig 29- 89,Mirage- 59
    Total 582 planes
    In 1971 war IAF used two planes to conduct one sortie. Front plane is called front gunner and other plane is called rear gunner. Those days front gunners had to do so many operations at a time particularly at the time of dog fight. He had to chase the enemy plane and reach very close to the enemy plane to enable the correct hit. The range of fighter planes in those days were very limited particularly Gnat. So the front gunner had to keep a watch on fuel gauge even while chasing . The illumination of the dash board was so poor in Gnat that the pilots had to use torch. The main job of rear gunner is to warn the front gunner whenever he noticed another enemy plane attacking the front gunner. In one case the rear gunner could not give warning to front gunner due to communication failure . In another case a Gnat pilot had gone and landed in a Pakistan air field as the fuel was so low that the plane was likely to crash any moment. All these bottle necks have been taken care of in SU30 MKI and Tejas. Since SU30 MKI is being operated by two pilots there is no need for an extra plane to work as gunner during sortie. So SU30 MKI is equivalent for two planes . Tejas can conduct sortie without gunner because it has been provided with AESA avionic of Israeli design . If we use AWACs, all our fighter planes can conduct sorties without escort plane. AWACSs will give warning . Now we have double the fire power over a period of time. More over if we consider 12 fighter planes in a squadron, it is stated that we have 48 .5 squadrons. If we consider 16 fighter planes in a squadron, we have now 36 squadrons. The important thing consider is the number of planes, not the squadrons.

  5. IAF pilots are very good during war time particularly during 1971 war. But the officers are not technically sound and carried away by foreign arms dealers . It appears that they do not know what is happening in world. Even they do not the number of planes required by them. Pakistani military analysts written after the 1971 war that the Pakistani Air Force (PAF) was heavily outnumbered even in the West. One writer claims that Pakistan had just 10 squadrons against 44 fielded by India. The fact was that in 1971 the Indian Air Force (IAF) had a total of about 34 effective combat squadrons plus three under strength Canberra bomber squadrons and one AN-12 transporter squadron, which as it turned out played a remarkable role as modified bombers during the War.The Indians had 16 aircraft per combat squadron but the effective availability during the war was 12 per squadron. This means that IAF had 408 nos effective availability of planes in 1971 war. It is a known fact that Gnat fighter planes performed much better than any other plane in 1965 and 1971 wars. This was an aircraft which British had rejected. The aircraft was accepted by India as a necessity in a poor country’s fighting outfit, with very little choice. It was giving a thrust of 20.9 Kn. Mig 21 engine is giving a thrust of 28.5 Kn. DRDO had achieved a thrust of 7000kgf ( 68.7KN) 4% less than they planed in Kaveri engine . ““ But it is equivalent to Mig 21 engine 68.5Kn. While designing . we should have some base. Not like IAF quoting a figure of 44 squadrons which was said by PAF. DRDO developed 155 mm artillery gun based on 155 mm Bofors gun. Similarly DRDO taken Mig 21 engine as base. More over at that time most of the countries were manufacturing engine within 70 Kn . GE also never achieved 95 Kn – 97.1 Kn in one shot. More over we have seen thrust is not a big criteria to achieve Air superiority in the case of Gnat.

  6. Nailed it. the other important factors for indigenisation are human resource (not academician, paper writers), institutional knowledge and infrastructure. In our system non of these factors are considered important. Only clerks to civil servants are important and they won’t allow anything to work.

  7. Your analysis has been compiled well … additionally few aspects could also have been mentioned. Eg. you mentioned that HAL is pre-occupied with SU-30, while quality is still questionable; we want HAL to further manufacture Rafale and LCA also. Instead an Indian Industrial gaint like TATA’s can be requested to set up the manufacturing line for Rafale or LCA under a JV with the Govt and a foreign partner.
    There are other industries which have mastered some high end tech like Bharat Forge which is now able to make howitzers, such industries can manage the initial supply while at a later time can transfer the tech to one of the DPSU ot OFs, so that they can concentrate on newer tech (similar to Ashok Leyland transferring the tech to make the stallion).
    Also another aspect which needs to be considered is to bring in better management practices,l quality manufacturing practices to the PSUs from the private sector;
    To summarize, give Indian private industries, a booster in terms of committed orders, which will help them to settle and in due course will bring newer technologies.

  8. we have taken a trail of TEJAS , we should to go for production for the same.

    i think for tanks we can produce , if we give orders to any Indian company ,

    for guns and built s also we can make i think we are able to make maximum item , only our all related department to seat to gather than its possible that Indian companies supply very essay. to many companies like bhel. ets are able to produce arms and ammunition. what we needs and what are in new in markets firstly allover Indian manufacturer to seat in one roof and take decision how much or nation wants , and same to be supplied.

  9. Sir #BharatVerma, It is a well thought & well written article.Your article precisely points out to the areas where our Nehruvian era DPSUS are failing to deliver & stark difference between Private sectors & DPSUS in managerial approach towards the defence projects.

    We all firmly believe that our new Govt & MoD will revamp the procurement process, remove the bureaucratic red tape & firmly support more Pvt sector companies in developing new arms as well as increasing the competition between DPSUS vs Pvt companies.

  10. I think age has taken its toll on mr. Verma. This article contains some factual errors which cannot go unnoticed. the first statement itself is a big lie. What about HF-24 Marut? to my knowledge it was manufactured in India.Anyway it is another story that the aircraft was a failure due to a low powered engine. Moreover, about what kind of WW2 era carbine is the author talking about.? AK-47 is an assault rifle and India has its own INSAS, SLR (earlier) and AK copies to counter along with Tavor rifles with special forces.

    These kind of errors actually spoil the reading experience of a well written article. It screams out that the author even after being an army officer is not aware of the facts or intentionally he is hiding or misrepresenting the facts to make a point.

  11. I salute Bharat Verma for his incisive and illuminating article. I wish the three Service Chiefs and C-in-Cs of all Commands of the Army, Navy & Air Force take note of it and act on it. Instead of looking for post retirement crumbs being thrown at them like a Governor’s post to one of the inconsequential states in the North East or a plum ambassadorial post to countries like Guatemala, Honduras or Nicaragua; in the interest of National Security, it is high time that the three Service Chiefs present a united front and thump the table and tell the PM, President and the Parliamentary Standing Committee on Defense about the gaping holes in India’s Defense preparedness; and, ensure that a time bound plan is drawn up to bolster India’s security. The three Service Chiefs must insist that only Service personnel, either serving or retired, be posted as heads of Defense PSUs. In earlier times, the Chairman & Managing Director of Bharat Earth Movers Limited (BEML) were serving / retired service officers. But when the Bureaucrats & Politicians found that the serving/retired officers appointed as C&MD would not ‘play ball’ in helping the politico-bureaucratic nexus to make money, they threw them out and got pliable civilians posted as C&MD of Defense PSUs. Case in point-BEML. Inspite of clear cut orders & directions that Defense equipment will be procured only from the Original Manufacturers, all rules & regulations were thrown to the winds in the procurement of TATRA vehicles. A TATRA vehicle which would have cost only Rs. 30 lakhs approx were billed to the Army at a cost of Rs. 1.1 crore approx. Sad that our Service Chiefs lack the ‘Dham’ to stand up to the politico-bureaucratic nexus in National Interest. Hamara Bharat Mahan. Sou mein se ninavein Beiman!!

  12. An excellent article giving a birds eye view of the security scenario of our country as to why and how vulnerable we are and what must we do. Thanks for putting this together so lucidly. But I wonder how I easy or difficult it will be to axe the vested interests and move purposefully?

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