Indian Defence Review

The Defence Minister, Shri A. K. Antony inaugurated the Defexpo-2014, at Pragati Maidan, in New Delhi on February 06, 2014. The Minister of State for Defence, Shri Jitendra Singh, the Defence Secretary, Shri R.K. Mathur, the Secretary (Defence Production), Shri G.C. Pati, the Scientific Advisor to RM, Shri Avinash Chander and the President, FICCI, Shri Sidharth Birla are also seen.

When it became known some years ago that India planned to spend over a $100 billion in buying military equipment over the ensuing decade, foreign military equipment makers salivated at the opportunity, and rushed to India, building offices in Delhi and engineering and R&D centres and partnerships, signing up Indian partners for joint ventures, showing their “commitment to India”, and pouring thousands of dollars into participating in India’s two biannual flagship military exhibitions, DefExpo in the capital’s Pragati Maidan and AeroIndia Show at the Yelahanka Air Force Station in Bengaluru. Cut to February 2014, as the eighth edition of DefExpo got underway on Thursday, the mood — especially among the foreign manufacturers, but also among Indian private and public sector companies — has soured.

Three sections of Hall 7 at Pragati Maidan are closed and an entire floor in Hall 18 is unoccupied because enough exhibitors haven’t turned up at DefExpo this year, and the mood among those who have, is downbeat. The reasons are not far to seek: An already notoriously slow, complicated and often controversial military procurement process has been pushed into near paralysis — over two dozen foreign companies stand ‘blacklisted’ by the MoD, some high profile procurement decisions have stalled, new layers of red tape have been added in what’s apparently an effort to curb corruption in defence procurement, and new rules — such as requiring guarantees from foreign companies for equipment produced by Indian defence PSUs under licence.

To add to all this, A.K. Anthony, in what may well have been his last appearance at DefExpo as Defence minister, on Thursday cited the one excuse that no Indian Defence minister has ever used in answering questions about the delay in inking the deal for 126 fighter jets for the Indian Air Force from France’s Rafale: There’s no money, and so the long-delayed deal will not see the light of day this financial year!

Mr. Anthony said the Ministry of Defence had exhausted some 92 per cent of the budget allocated for military acquisitions this year and was left with only eight per cent of the money for the financial year. To be sure, the economic slowdown is one reason why the government could not allocate even that part of the money that would have been needed this financial year if it had inked the Rafale buy. To be sure, also, the UPA government is in its last months and no one expects it to take any major procurement decisions, but there are even stronger reasons for the depressed mood at DefExpo.

Twenty seven major foreign companies have been blacklisted and the acquisition of BAE Systems’ M777 Howitzer guns for the Army’s artillery units in a direct government-to-government deal with the US has stalled. On many other major procurement programmes, RFPs have been issued and withdrawn, in some cases, more than once. And then there is the spectacle of a former air chief being investigated for corruption in the now-cancelled VVIP helicopters deal.

“You cannot blacklist 27 global companies and kick them out of DefExpo, and then expect it to be a roaring success”, says Capt. Bharat Verma, editor of Indian Defence Review. “It’s a much smaller show this time”.

“If there is money for VIP helicopters”, Capt. Verma says, referring to the fact that after cancelling the deal for 12 AgustaWestland copters, the MoD is said to be considering restarting the procurement process, “why’s there no money for fighters that the Air Force desperately needs, is a question Mr. Anthony must answer”.

BAE Systems officials, meanwhile, discounted that lack of money could have stalled the deal for the M777. It’s a $600-million-plus deal, not a multi-billion dollar deal like the one for Rafale jets. “We have not heard from the Indian government since mid-October when we gave them the eighth iteration of our Offset proposal for the deal. If they want a ninth iteration, we have said we will scramble to do it. But we have gotten no reply”.

“Too much stalling, too many cancellations (of procurement deals) are hurting. Mr. Anthony’s intentions are good, but he has made the system unresponsive,” says defence analyst Deba Mohanty.

But there may be a silver-lining to the clouds over Pragati Maidan, if the MoD plays the game well enough. There is grudging respect among foreign companies that Mr. Anthony has made indigenisation of military equipment manufacturing the highest priority in the latest iteration of the Defence Procurement Policy and that it leaves foreign companies no option but to partner with Indian companies and adopt the indigenisation mantra themselves.

“The latest DPP makes imports the last resort. ‘Buy Indian’ and ‘Buy Global and Make Indian’ are the highest priority. We have no choice but to go along. BAE Systems has aligned itself along these lines”, the BAE Systems officials said.

Mr. Anthony himself claimed that during his 10 years as Defence minister, the indigenous-to-imported ratio had moved from 30:70 to 40:60. “In 5-10 years’ time, we will be able to procure a substantial part of our defence requirements within India”, he told reporters, “We will not only be producing for ourselves, we will be exporting, too”.

“Yes, but to do so, we must join the global supply chain, because today no country, not even the US, can produce all of it by itself”, Capt. Verma says, “We must partner with like-minded nations such as Israel, the US and UK, Japan, Russia”.

(A version of this story first appeared in The Asian Age)