For quite some time now, serious discussions are on towards devising an efficacious strategy to turn India into a hub of defence export from being the largest importer of the combat hardware. In fact, since he took over as the Prime Minister of the country two years ago, Narendra Modi has been repeatedly highlighting the need for the country to shed its “unsavoury distinction of being the largest defence importer” by going in for the large scale export of domestically made weapons systems and fighting platforms. Not surprisingly then, taking a cue from Modi, Defence Minister Manohar Parrikar has made a strong pitch for boosting defence export from India with the target of earning US$2-billion by 2018.
Currently, India’s defence export constitute around 4% of the arms, ammunition and fighting equipment imported by the country. Of course, by boosting defence export, India can stand to derive geo strategic and diplomatic advantages.
As expected, Parrikar has projected India’s fourth generation, supersonic fighter jet Tejas LCA (Light Combat Aircraft) as a prized defence hardware with a reasonably good export potential. Indo Russian BrahMos supersonic cruise missile is another high profile weapon system, in which many countries have evinced keen interest.However, no decision has so far been taken as to which countries it could be exported.
All said and done, Parrikar has been cautious and circumspect on India’s potential to make it big in the global defence market place. “I know it is not easy. Weapons and export of defence goods have double problems. One is whom you are exporting to and the second is one has to go on checking all international requirements,” said Parrikar. Currently, India’s defence export constitute around 4% of the arms, ammunition and fighting equipment imported by the country. Of course, by boosting defence export, India can stand to derive geo strategic and diplomatic advantages.
On another front, it can help the country spread its soft power in a phased manner. “Exports should be encouraged as we have friendly relations with many countries. These countries look towards India for their defence needs and if India does not give them the required equipment, it does not make you real friends,” observed Parrikar.
Everything going as planned, the first squadron of Tejas is likely to fly before the end of this year. According to Parrikar, Tejas is as good as French origin Rafale notwithstanding the fact that its load lifting capability and range is smaller. ”Our Tejas has the same quality as Rafale. Although Tejas is light weight category with its range also half compared with Rafale but in terms of avionics, electronics and fire power, it is no less than Rafale,” noted Parrikar.
…the country would need to overcome six decades of “lost opportunities and shocking neglect” of the domestic defence production industry.
He was also quick to point out that “One Rafale fighter is worth approximately Rs.7000-milion to 7500-million while the Russian origin Su-30 costs about Rs.4750-milion. Compared to these planes, India’s Tejas is in the range of Rs.2,000-million to 2,500-million. We can get two Tejas at the price of one Rafale.” Affordable price tag could be a major attraction for the buyers of Tejas. About the proposal to manufacture multi role fighter aircraft in the country under Make in India category, Parrikar said, “By the end of this year, a decision will be taken on which fighter aircraft will be made in India”.
Of course, for quite sometime now, Defence Research and Development Organisation (DRDO), whose Bangalore based constituent, Aeronautical Development Agency (ADA), had spearheaded the design and development of Tejas, has been hinting at promoting the export of this home grown fighter aircraft. But then, Tejas is yet to enter service and is a long way off from proving its mettle as part of the squadron of the Indian Air Force (IAF).
More importantly, there is a need to enhance the indigenous contents of the aircraft by a substantial extent. Further, an organisational structure need to be created to support maintenance, spares supply and after sales service of the aircraft in a timely and affordable manner. Further, the state owned Indian aeronautical giant Hindustan Aeronautics Limited (HAL) would need to strengthen its assembly line to boost the production rate of the aircraft by a significant extent.
At the end of the day, the question that begs an answer is that India, which has made spectacular technological strides especially in the area of space exploration, should in the first place be dependent on imports for meeting two third of the fighting hardware requirements of the defence forces. On its part, DRDO has all along been stressing the point that there is a huge potential for the export of missiles, fighter aircraft and related defence hardware from India.
Indian Defence Ministry believes that DPP-2016 will create path breaking steps for merit driven acquisition that will ultimately nudge global manufacturers and Indian companies to forge partnerships.
However, the biggest challenge is putting in place a resurgent defence production base that is equipped to meet the domestic requirements while taking care of the export needs. But then the country would need to overcome six decades of “lost opportunities and shocking neglect” of the domestic defence production industry. Scams, scandals, impropriety and wrong doings associated with the defence procurementhave taken a heavy toll of the efforts at building a resilient military industrial complex.
The Defence Procurement Procedure (DPP)-2016 is likely to promote defence self reliance in a big way through the appropriate tweaking of the acquisition process. The highpoint of DPP-2016, which is yet to assume a final shape, isthe introduction of a new category called IDDM (Indigenously Designed, Developed and Manufactured). This would be the first choice of defence acquisition. Provisions under IDDM lay down the condition that an Indian vendor should meet either of the two criterion—products that have been indigenously designed, developed and manufactured with a minimum of 40% domestic content on the cost basis of the total contract value and those not indigenously designed and developed should have 60% of the domestic content.
The next in the line of procurement is Buy Indian category where a vendor manufactures an equipment in India designed and developed abroad with 40% indigenous content. Then comes the next option, Buy and Make (Indian) where the entire procurement of the equipment is in a fully formed state from an Indian vendor who has tie up with a global OEM (Original Equipment Manufacturer) and starts manufacturing with 50% indigenous content. Indian Defence Ministry believes that DPP-2016 will create path breaking steps for merit driven acquisition that will ultimately nudge global manufacturers and Indian companies to forge partnerships.
However, to boost defence export India would need to put in place a high powered defence export promotion organisation with representatives from the government, industry as well as trade and industry bodies.
Indian Government is looking at finalizing around half a dozen strategic partners from the Indian private sector to develop vital defence platforms…
As things stand now, the target is to increase indigenous content in the fighting equipment produced in India by 5-10% on an annual basis.The ultimate objective is to bring down import by 35-40%. “We have allowed DPSUs (Defence Public Sector Undertakings) and the units of Ordnance Factory Board (OFB) to export 10% of their production capacity. This will be only in products where they say the capacity is less like missiles ad fighter aircraft. For others, they are free to export any amount,” said Parrikar. For long, nine DPSUs and 41 production units of OFB were synonymous with the Indian defence production.
About the DPP-2016,Parrikar said that its effects will be visible from next year.In the next seven to eight years, the ratio of imports in defence equipment may come down to 30 to 35 percent making India almost self reliant, said Parrikar.”Some items are such that manufacturing them in the country is not profitable.It is better to buy (from abroad) because the cost and numbers do not justify domestic production,” stated Parrikar.
Parrikar is of view that strategic partnership in the critical sectors mooted for the private Indian industry could help strengthen and sharpen defence production base in the country and help meet the domestic requirements while at the same time facilitating export. As it is, Indian Government is looking at finalizing around half a dozen strategic partners from the Indian private sector to develop vital defence platforms including helicopters, combat aircraft, aero engines, warships, submarines, artillery guns, armoured vehicles and main battle tanks. One major aim of the strategic partnership initiative is to bring the private Indian defence industries on par with DPSUs and OFB.
In what can be a major initiative to India’s efforts to step up defence exports, the Indian Government has mooted a proposal to set up exclusive defence SEZs (Special Economic Zones) where in global OEMs can set their shops with a view to use India as a base for third country exports in addition to meeting the requirements of the Indian defence forces.
Dr. A.P.J. Abdul Kalam had envisioned the need for the country to reverse of the ratio of 70% import and 30% indigenous content.
To begin with, dedicated defence SEZs may be considered at Jammu, Chandigarh, Kolkatta, Lucknow, Pune, Jaipur and Hyderabad where the defence establishment boasts of a huge real estate infrastructure.Many Indianindustrial giants have evinced interest in setting up facilities in defence SEZs. Reliance Industries on its part has decided to set up production facilities at two SEZs spread across Maharastra and Madhya Pradesh. Others in the line include Tatas, Mahindra and Bharat Forge. Way back in 2014, New Delhi based think tank, United Services Institute, had come out with a strategy paper outlining parameters of setting up defence SEZs.
Former Indian President and globally acclaimed space and defence scientist, Dr. A.P.J. Abdul Kalam had envisioned the need for the country to reverse of the ratio of 70% import and 30% indigenous content. Against this backdrop, it makes immense sense that the Indian Defence Ministry has initiated an action to make defence sector attractive to MSMEs (Medium, Small and Micro Enterprises) which have all along been making a significant contribution to the Indian defence sector.
Meanwhile, Indian Parliament’s Standing Committee on Defence has expressed its displeasure over the shocking inability of defence PSUs to offer cutting edge solutions including protective gear for the use of Indian soldiers. The report of the Standing Committee sheds light on grey areas—modernisation of the army, shortage of ammunition and bullet proof jackets.These shortcomings in procurements have been adversely impacting on the combat readiness, says the committee. The committee headed by BJP (Bharatiya Janata Party) MP Maj Gen (Rtd) B.C. Khanduri has made it clear that equipment get obsolete by the time they reach army units. The committee also rued the fact Make in India concept has not been given a comprehensive shape baring few isolated steps including the liberalization of FDI (Foreign Direct Investment) in defence sector. “The committee is disappointed to note that while on one hand the Make in India programme envisages to transform India into a global design and manufacturing hub, on the other, no defence public sector undertaking is in a state to offer cutting edge protective gears for the use of our soldiers,” said the report.
Russia and India have agreed to jointly manufacture around 200 Ka-226T helicopters to replace the ageing Chettah and Chetak choppers in service with the Indian defence forces under “Make in India”…
Going specific, the report was quick to note that many of the indigenous fighting platforms produced by defence PSUIs are packed with an appreciable volume of imported components. In this context, it said that HAL depends on foreign supplies for its 44%to 60% of parts. Similarly, ships manufactured in MDL (Mazagaon Docks Limited) depend on 54% to 72% import. Against this backdrop, the committee has asked the government to fix accountability in case of“inordinate delays” in executing projects undertaken by DRDO.
Meanwhile, HAL is looking at involving 4,000 plus vendors spread across the country to help execute the contract to manufacture the Russian Kamov military helicopter. Russia and India have agreed to jointly manufacture around 200 Ka-226T helicopters to replace the ageing Chettah and Chetak choppers in service with the Indian defence forces under “Make in India” flagship programme of the Indian Prime Minister. As per this agreement, 60 helicopter kits will be supplied for assembly at HAL while the remaining 140helicopters are planned to be produced at HAL. HAL was chosen for this project since it had had a long standing experience in designing, developing and producing copters. It is for the first time that HAL would be working with Russian for rotary wing aircraft project.
Clearly and apparently, reducing the import of defence hardware and positioning India as a leading exporter of arms, ammunitions and combat equipment appears a time consuming, complex and challenging task. For bringing about changes at the ground level and nudging the Indian defence industry to inculcate a spirit of innovation to attain global standard in design, development and production is certainly a daunting job. And a beginning in this direction has already been made and how the things would shape for the Indian defence industry, nobody can hazard a guess at this point of time.
As pointed out by Brigadier (Rtd) V. Mahalingam, a well known strategic analyst, “In an age when countries like US, China and Russia are in the final stages of developing Hypersonic Glide Vehicles which have the capability to pierce missile defences and an ability to hit any place in the world with conventional war heads in less than an hour, the Indian army is struggling to get a basic weapon, the artillery gun to replace the existing Bofors gun, a weapon system which has survived beyond its age of entry to a museum system”. This is the unpalatable ground reality that India cannot wish away easily.
Make in India in Defence will only succeed if adequate local as well as export market is provided to investors so that they could earn reasonable return on their investment. Therefore defence procurement policy need to facilitate the indigenous defence industries in accessing local market. Additionally, government should help them to access export market after making full considerations to international relations.
Like all Indians we are a little circumspect and suspicious. If a Rafale cost IRs7500 million and a Tejas costs IRs2500 million, why would the Minister say that we can get 2 Tejas for 1 Rafale? The mathematics doesn’t gel as it would be 3 Tejas for 1 Rafale! Is there some hidden costs associated in making the Tejas?