Indian Defence Review

Though the call for “Make in India” was given by Prime Minister Narendra Modi on August 15 last year, the Defence Minister admitted on the sidelines of the Aero India held at Bengaluru in 2015 that the current DPP is “not conducive” to “Make in India” in Defence. This has remained the state over the past several decades despite annual in-house revision of the DPP in the MoD albeit media blitz claimed every time that each revised DPP had incorporated all that was required. Factually, only cosmetic changes were made in order to retain control by the incompetent and corruption ridden governmental defence-industrial complex, which resulted in India continuing to meeting 70 per cent of its defence requirements through imports. The 2011 DPP had made plenty promises including review of ‘Make’ procedure, separate fund to resource public and private sectors, SMEs and academic and scientific institutions to support R&D for defence but all these promises remained largely unfulfilled.

It has been over a year since Prime Minister Modi gave the call for ‘Make in India’ from the ramparts of the Red Fort on August 15, 2014. This caused a flurry of excitement in the industry. The Foreign Direct Investment (FDI) in defence too was raised from 24 to 49 per cent, with the Parliament approving that this upper limit of 49 per cent in defence be raised on case by case basis depending on the state-of-the-art technology offered including the offer of Transfer of Technology (ToT). There is a need to take stock of what changes have actually happened on the ground and what advantages have accrued to the Armed Forces.

Defence Procurement Procedure (DPP)

Though the call for “Make in India” was given by Prime Minister Narendra Modi on August 15 last year, the Defence Minister admitted on the sidelines of the Aero India held at Bengaluru in 2015 that the current DPP is “not conducive” to “Make in India” in Defence. This has remained the state over the past several decades despite annual in-house revision of the DPP in the Ministry of Defence (MoD) albeit media blitz claimed every time that each revised DPP had incorporated all that was required. Factually, only cosmetic changes were made in order to retain control by the incompetent and corruption ridden governmental defence-industrial complex, which resulted in India continuing to meeting 70 per cent of its defence requirements through imports. The 2011 DPP had made plenty of promises including review of ‘Make’ procedure, separate fund to resource public and private sectors, SMEs, academic and scientific institutions to support R&D for defence but all these promises remained largely unfulfilled.

The present government came to power in May 2014 but the new DPP is yet to be issued. The ten-member committee appointed by the MoD was to submit its report on July 31, 2015. Their task reportedly was to draft an easy-to-comprehend and industry-friendly procedure that would cut down chronic delays in defence procurements. The private industry’s apprehensions are continuing as year after year, the MoD has come out with DPPs with much fanfare but only with cosmetic changes retaining stranglehold of the Defence Research and Development Organisation (DRDO) that heads the defence-industrial complex in the public sector. The expansion of the DRDO with its seven technical clusters and a host of new appointments with enlarged manpower indicate that their hold may well get stronger despite the fact that countries producing modern defence systems have done so through private industry and not through DRDO-like state-owned set ups.

In April 2015, a draft offset policy was put into limited circulation by the MoD for comments by industry associations though it is not known who the recipients were. There is no doubt that defence offsets are incidental to the procurement and import of weapon systems and defence equipment. But these too are vital considering the massive voids in our military. It is obvious that plenty of imports will be required for many years in addition to “Make in India”, including to meet critical requirements to cover the interim period before we start fielding indigenous weapon systems and equipment. Additionally, our indigenous weapon platforms too would in all probability, need imports in considerable quantum of components and parts, as we are doing for the Tejas, which has just been introduced into the IAF.

To this end, the offset policy is important and must be an intrinsic part of the DPP. So what comments were expected on the offset policy in the absence of the new DPP? Did the committee release the draft offset policy earlier by default or was it on purpose? If the new DPP is what the committee was tasked to draft, why not ask for comments of the draft offset policy together with the draft DPP? The question also arises whether we actually need a separate offset policy and why it cannot be part of the DPP itself because any mismatch would have obvious implications unless that is precisely intended. One wonders whether disjointed actions like these are on purpose; the games that the bureaucracy plays.

Hopefully, the new DPP should see the light of the day in the near future. The private industry hopes it will be a fair one. It should logically include meeting the requirements of the armed forces, providing a level playing field for both the public sector defence-industrial complex and the defence industry in the private sector with emphasis more on R&D with respect to the former and focused commercialisation by the latter encompassing both defence production and procurement, laying down clear division between the public and private industry, laying down how much in advance and in sufficient detail what products and technologies are required in what future timeframe by the military in order to provide sufficient and competitive time to undertake R&D and development, including the offset policy as an intrinsic part; defining the scale of funds for R&D to be provided for developing prototypes and beyond and define structures and organisations outside the MoD to implement the defence production and procurement policies. It is about time that we go in for a composite Defence Production and Procurement Policy (DPPP).

Governmental Defence-Industrial Complex

The Ministry of Commerce and Industry acknowledges that 50 per cent of our military’s defence equipment is ‘obsolete’. Nothing can be more pathetic despite the sprawling governmental defence-industrial complex comprising the DRDO-DPSUs-OFs. To top this, the CAG reports over the years indicate massive across-the-board corruption, pointing out that 30 per cent of defence equipment produced indigenously is ‘sub-standard’. This has remained the condition despite Joint Secretary-level officers of MoD and DoDP on the boards of the DRDO, the DPSUs and the OFs.

Not without reason, a former diplomat who started his government career as an IAS officer in the MoD says his first briefing was to look for the defence acquisitions in the pipeline and how much money could be made. Obviously, this is the very reason why the military is being kept away from the MoD and the official defence-industrial complex. It is for the same reason that instead of a CDS as recommended by the Kargil Review Committee and follow-up GoM reports, a Permanent Chairman COSC without any operational powers is being appointed so that bureaucratic control by the MoD remains intact particularly in terms of defence procurements and defence production. The bifurcation of posts of the DRDO Chief and Scientific Advisor to Raksha Mantri sure was a good concept but appointing both incumbents with DRDO background has negated the advantage of checks and balances.

The fact remains that other than missiles and ISRO programs, we have little bright spots to show as part of indigenous defence production though the indigenous Dhanush gun has come up after sitting on the ToT of the Bofors gun for some 30 years. The induction of the Tejas is inordinately delayed. Take the case of the Kaveri engine, which was sanctioned in 1989 with probable date of completion of 1996, which was extended to 2009. In July 2015, the government further approved its continuation within the cost ceiling. The problems revealed are technological difficulties in developing engine system, non-availability of raw materials/critical components, lack of infrastructure/manufacturing/test facilities within the country and non-availability of skilled/technical manpower in the field of aero-engine technology.

Engine development sure is not easy but then a project that was to be completed in 1996 has had to be given further extension 19 years later in 2015. Significantly, the expenditure incurred on the development of the Kaveri engine has already accumulated to Rs 2,101 crore. Now it has been decided to use the Kaveri derivative engine (dry engine) without the after-burner for powering the Indian Unmanned Combat Aircraft. Similarly, the aero engine developed by DRDO has not achieved the required thrust to power the Light Combat Aircraft (LCA).

A lot was in the news during A.K Anthony’s tenure as Defence Minister about his penchant of blacklisting firms even on anonymous complaints without recourse to alternative avenues to make up critical deficiencies. Recently, a Czech company manufacturing anti-mine boots for infantry personnel has been awarded nearly $3 million as compensation and refund of bank guarantee by an arbitration tribunal after the Ministry of Defence (MoD) was found to have rejected their product on the basis of a test that was in “violation of the contract”, indicating all is certainly not well at the MoD level, although this is perhaps the first time that a foreign military equipment supplier has managed to claim compensation from the MoD by contesting that its contract was wrongly terminated.