Defence Industry

Defence Production & Export Promotion Policy will be the oxygen for the industry
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Issue Net Edition | Date : 09 Sep , 2020

IBT: India has recently imposed an import embargo on 101 items in the defence sector. How well is the country positioned for indigenous manufacturing of these items? How can the government make the domestic industry ready?

Lt Gen (Dr) JS Bajwa: On March 18, 1986, India signed a Rs 1,437-crore deal with Swedish arms manufacturer AB Bofors for the supply of 400 x 155 mm Howitzer guns for the Army along with design documents running into over 12,000 pages. These were given to India as part of the first phase of Transfer of Technology (ToT) under the Bofors gun deal. In a year, Bofors became a household word for outrageous political scams. Thence, for more than 25 years these documents lay gathering dust, as anything to do with Bofors was anathema. These documents were not looked at by the Ordinance Factory Board (OFB). As a consequence, India was deprived of getting further supplies of this reliable and effective gun.

OFB is now in the process of manufacturing 114 of these guns, named Dhanush, as the first indigenous 155mm x45 calibre gun. This is the first long-range artillery gun to be produced in India. 

After a bit of gingering up the OFB, some eight to ten years back, these documents were pulled out of the closets, duly dusted and then began the programme to stitch together a gun.

Alongside, deals were scripted for procuring 100 x K9 Vajra self-propelled (SP) guns from South Korea, who is partnering with L&T. L&T is initially assembling and subsequently producing these SP Guns. There is another Government-to-Government deal with USA under its Foreign Military Sales route for the procurement of 145 x 155 mm light howitzers. Twenty five of these will be delivered, fully assembled, by BAE Systems and balance will be manufactured by Mahindra Defence.

This is an ideal example of both the Public and Private sector being in a position to take on the task of manufacturing a sophisticated piece of equipment with blueprints in hand. However, an indigenous defence industrial base cannot be established on borrowed or handed down technology. Integrated R&D is a pre-requisite for an independent defence industry. This in turn, implies that an equally vibrant and technologically advanced network of ancillary units in the MSME sector co-exist in the ecosystem. These together knitted with a competent skilled workforce are perquisites to produce goods of highest precision and quality to compete with similar products produced in advanced industrial economies.

It would be relevant to dwell on the existing defence R&D system. The DRDO has been the hub of R&D. The OF’s (Ordinance Factories) developed those products for which they received blueprints. Surprisingly, the OF’s did not have their integral R&D. As a result, the assembly lines set up exclusively for the product being manufactured were its sole source of existence. The manufacturing of the INSAS Rifle and LMG are apt examples of OFs running assembly lines till they disintegrate! How is it that the OF manufacturing these weapons did not undertake steps to develop and manufacture a state-of-the-art assault rifle? It actually has messed up the Small Arms scene in India.

Then there is the Vehicle Factory, Jabalpur, which started assembling vehicles from Germany and Japan in 1959, and continues to do just that – assembling vehicles and tinkering with the body without producing its own designed vehicle. With the Indian automobile industry and its ancillary network having achieved global recognition, it would be a waste of resources to produce a vehicle in this antiquated plant. When the government proposed to close it down, the powerful trade unions did not allow it to do so taking recourse of the Supreme Court. GTRE Kaveri turbo-fan aircraft engine programme ran from 1989 to 2008 and fizzled out in failure. The issue continues to be the malady of the Defence Public Sector Units even today. When the government proposed corporatisation of the OF’s there is strong trade union resistance to implement the proposed change.

Indigenous development of the cryogenic engine is a good example of the lead time to master sophisticated technologies – 12-15 years. For various reasons, India generally resorted to import of weapons, systems and military hardware and off the shelf purchases because, politically, it had a limited view of the role of the military in the nation’s overall development. India’s pacifist outlook and aversion to military options tended governments to neglect the evolving need of military modernisation requirements.

MSMEs in the defence sector are also important players and require support. In fact, it is these smaller units, which are more innovative and producers of disruptive technologies enabling the larger industries to maintain a cutting edge.

The West is, today, reviewing the role of one of the armed forces most venerated weapon systems, the Main Battle Tank (MBT). The 60-ton monster of a MBT, the Challenger 2 of UK is finding no role in its future army!! The Chinese have deployed a 33-ton indigenous light tank in Tibet recently. The only option India had was that of the T72 and T90 which are 11-15 tons heavier than the Chinese light tank. Not to mention the 59 ton-Arjun. Can the Heavy Vehicle Factory, Avadi effectively respond in a short time frame to such a radically changed war fighting scenario? It is an emphatic NO.

How can the government make the industry ready? Defence industry will flourish in an environment of demand. They are not one-time supply and close shop enterprise. To sustain the industry and its product development, there has to be export of the product. No amount of Government dole can bail it out if there is no export on an ongoing basis.

IBT: The government has announced 100% FDI in the defence sector under the automatic route. What has been the response of foreign companies so far, and what measures would give them further confidence?

Lt Gen (Dr) JS Bajwa: FDI is not panacea for all that ails the defence industry. It cannot be looked at in isolation. There is a web of intricate connections and cross–connections that need to be addressed simultaneously for a holistic picture of the situation.

To facilitate development of a strong industrial foundation, the primary requirement is infrastructure. The quintessential of infrastructure, viz. uninterrupted electricity supply, digital communication network, good road network and modern port facilities integrated with the road network, are the responsibility of the local authorities. The lack of supervision, accountability and the security of a government job with trade union protection is not a recipe for fast track response.

Land acquisition further complicates the matter. Patchy unreliable electricity supply adds to investment costs. Poor digital connectivity and poor road network effects the ‘just in time’ concept of manufacturing forcing additional costs on account of maintaining huge inventories. Further the Indian federal system of governance makes the state government a major player too – which is, at times, not too enthusiastic. In China, land and all essential services are under the control of the government in Beijing. Any new entrant literally just plugs in and plays, giving him a huge advantage in terms of both time and financial saving.

Therefore, unless a holistic system is put in place, the confidence level for foreign companies will be low.

IBT: The DPP for the defence sector has been considered very cumbersome. After multiple reviews, how well is it geared towards facilitating participation by the private sector in defence manufacturing? What further improvements do you recommend in the DPP 2020?

Lt Gen (Dr) JS Bajwa: Does any government document facilitate ‘easy of understanding’ or ‘functioning’? That’s an oxymoron. A government document is designed and drafted to plug all loops holes against all forms of pilferage and fraud, as also that the bureaucracy has ensured that it has secured itself legally. DPP 2020 is doing just that.

Leading original equipment manufacturers (OEMs) have invested heavily in R&D in their fields of specialisation with their Indian partners. They have also undertaken to train and develop the requisite skills in their work force specific to their requirement. The education system in India does not prepare the youth for the current requirements needed for the jobs that are being generated.

Take for instance the issue of indigenous content. To include nuts and bolts and superstructure in indigenous content and use that as a fulfilment of a requirement defeats the spirit of “Make in India”.

The private Indian defence sector does not have the financial capacity to absorb the cost of producing a prototype product and then fail in the competition when its product is not selected for serial production. The government should fund the R&D efforts of all those companies, which are prospective manufactures of that product. In doing so, it will generate competition for a technologically superior product.

MSME’s and start-ups have been finding it difficult to operate independently. Those that are able to sustain themselves are off-shoots of larger private defence sector players. That is not conducive for a vibrant MSME and start-up ecosystem.

IBT: How can India manage a balancing act between domestic and foreign procurement, which helps it progressively build self-reliance and also ensure that the interests of the armed forces are not compromised?

Lt Gen (Dr) JS Bajwa: The governments’ embargo on import in the defence sector is to be fully implemented by 2024. So the time is too short to reinvent the wheel and waste precious resources and time. Nor is a closed economy and autarky warranted. Everything does not need to be made here.

When the PM first announced the requirement of ‘Atmanirbhar Bharat’, there were many in the government who were quick to conclude that only Indian made products would be sold in the country – a totally regressive idea harking back to the days of a closed Indian economy. It required a reversion by the government to clarify that the Indian brand should be a globally competitive brand and not to shut out import of global brands.

Excessive government control and its disdain for the entrepreneur peppered with a heavy dose of crony capitalism had resulted in throwing up a breed of opportunists who were out to make quick money at the cost of quality and innovation. For any country that has industrial leaders focusing on money and not excellence of the product being manufactured, that system will collapse in a competitive environment. India is still recovering from the aftermath of that system which had been in vogue for decades.

R&D is sine qua non for building self-reliance. Linking the 23 IIT’s to DRDO and private defence manufacturing sector will upgrade the quality of research and broaden the base of the scientific community, contributing to defence development. Private engineering colleges are not in the same league, unfortunately. The knowledge imparted in these institutes is theoretical and worthless. An industrialist shared that a graduate from these colleges cannot even undertake the most basic of practical engineering work!!

‘Skill India’ has not yielded results as expected, more so because it got hijacked by ‘fly by night operators’. Consequently, the ‘skilled worker’ required another round of ‘skilling’ and this time by private defence sector entities.

It is a long haul for the country to push itself forward at a fast pace to ensure that it does not get left behind in the race for technological advantage leading to self-reliance.

IBT: What are your views on the DPEPP 2020, its objectives and execution roadmap for self reliance? What global benchmarks do you see in terms of building self reliance in defence production, and what can India learn from them?

Lt Gen (Dr) JS Bajwa: The Defence Production and Export Promotion Policy will be the oxygen for the defence industry. Defence exports will be the lifeline to sustain the industry and make it self-reliant. However, it will not be a cake walk.

India had restricted sale of arms and equipment due to its fundamental aversion to violence. The sale of small arms to the neighbouring countries and even non-lethal military equipment and telecommunication equipment was very restricted. As such, defence industries will require substantial government help and intervention to even get a toehold in countries for them to accept India’s indigenously manufactured weapons and equipment.

MSMEs and start-ups in cutting edge technologies may need government support in facilitating imports of certain material, e.g. rare earth elements, which may be difficult to do so individually.

The Defence Expo and Aero India show are not travelling circuses. It may be politically expedient to claim that moving the venues to different locations around the country enables a wider audience to participate and be ‘educated’ and it allows the foreign guests see more of India!! That, however, is not the aim of an Expo. It is simply sale and signing of contracts. Le Bourget in Paris, Farnborough in UK, Moscow, Beijing, Singapore etc. are permanent venues for air shows and defence expos. We should not lose sight of the basic aim. To make India self-reliant in the defence sector is going to require a committed resolve.

Courtesy: Interview first published on www.ibt.tpci.in

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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

Lt Gen (Dr) JS Bajwa

is Editor Indian Defence Review and former Chief of Staff, Eastern Command and Director General Infantry.  He has authored two books Modernisation of the People's Liberation Army and  Modernisation of the Chinese PLA

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