The Way Ahead
India’s technology roadmap should take into account that future conflicts would be five-dimensional. These would be fought in the domains of aerospace, land, sea, cyber and electro-magnetic. The recent conflicts that the world has witnessed have been short, swift and lethal with increased weapon accuracies and range with the time and space continuum greatly compressed. Situational awareness and battlefield transparency has increased causing a perceptible shift from Platform Centric to Network Centric Warfare (NCW), with simultaneous operations at the strategic and tactical levels. Similarly, there has been an advent of Effect Based Operations (EBOs). The demand, therefore, has to be tailored accordingly for a fully NCW-capable force, better PGMs, improved ISR and communication systems and much more.
The private industry has always been complaining of not being provided a level playing field vis-à-vis the DPSUs…
While the ‘what’ of high technology is well known, it is the ‘how’ of the acquisition, especially indigenous, that needs a serious look. The country’s defence-industrial complex requires a major boost which cannot be achieved without major reforms in government organisations and departments such as the MoD, DPSUs, DRDO and the OFs. The previous government refused even to discuss the Rama Rao Committee Report recommending changes in the DRDO.
A letter written by Manibhai Naik, CEO of L&T, to the then Prime Minister in 2011, probably sums it all, “Defence Production (MoD) Joint Secretaries and Secretaries of the Defence Ministry are on the Boards of all PSUs – sickest of sick units you can think of, who cannot take out one conventional submarine in 15 years now, with the result that the gap is widening between us and China and bulk of the time we resort to imports out of no choice. The defence industry which could have really flowered around very high technological development and taken India to the next level of technological achievement and excellence is not happening.” (Synergy, CENJOWS, Jul 2014).
With a change in the political dispensation, there have been some attempts to stamp out the nexus and simplify processes but the results are yet to be visible. It is going to be a mammoth task if the MoD itself does not undergo a complete exercise in reorganisation, replacing generalist bureaucrats with professional military talent and/or technocrats. The Long Term Integrated Perspective Plan (LTIPP), with a 15-year horizon should be based on the National Security Strategy to make clear the technologies required to be developed/ acquired, within the period. What India needs is a legislation initiated by the Prime Minister himself and promulgated through an Act of Parliament, on the lines of the Goldwater-Nichols Act of USA or other similar decrees that have transformed militaries and defence ministries in various nations across the world.
The key drivers for globalisation of the aerospace industry are growth through new geographies and increasing competitiveness…
Apart from reorganising the MoD as mentioned above, a complete review of the functioning and capabilities of DRDO, DPSUs and OFs is also necessary. The review should specify the development of technology/product either through joint ventures, exclusively indigenous or with a foreign partner. Such an exercise would cut out the podginess that some of these organisations carry and would make them accountable to the nation for their non-performance. The exercise should also specify the budget for R&D as investments in this sector are woefully inadequate. The investments should be concurrent with a technology roadmap, specifying timelines and not what has been happening in the DRDO thus far.
The DPP in its original form was a document that confused even the best of brains. It is now reviewed frequently with a call for suggestions from the industry to streamline the process of acquisitions, be they indigenous or from a foreign vendor. A new DPP issued in 2011 liberalised offsets, after the initial inclusion in the DPP did not really take off. Further doubts that had arisen were clarified with the issuance of a new Offsets Policy in 2013. Despite the annual exercise of clarifications to simplify the DPP, the process has been largely cosmetic as it is done inhouse by the MoD, rather than by an independent body represented by all concerned, especially the private industry.
The reasons for the lack of involvement of the private industry in the defence/aerospace industry, more so when there is enormous business potential in this sector, has not really been in focus of the GoI. The private industry has always been complaining of not being provided a level playing field vis-à-vis the DPSUs. It expects a steady stream of orders and a well-defined production and export policy, with no ambiguities or conjectures and nothing to be read between the lines. A concerted effort is needed in this direction on the part of the GoI. In addition, the DPSUs need to consider the private industry more as an equal rather than an opponent.
The advantages of manufacturing as a joint venture with a foreign vendor in the aerospace sector are multi-fold. It not only would generate employment opportunities, it would also help in achieving technological superiority and increase indigenous capability to become self-reliant. Since the entry barriers are high, once the aerospace industry matures, the country’s global competitiveness would improve and exports would grow. The key drivers for globalisation of the aerospace industry are growth through new geographies and increasing competitiveness as home market demands can tend to be insufficient or stagnate.
One key factor for success for such alignments would the commitment of the GoI in terms of volumes and timelines for procurements…
Besides, defence exports have an added advantage of building a long-term relationship between the supplier and customer thus enhancing the country’s diplomatic profile too. The exports therefore, need to be incentivised after clearing the mental block in this area. India, with its dubious reputation as the world’s largest defence and aerospace importer, does offer significant growth opportunities to global aerospace companies to enter joint ventures though risk sharing may take some more time and maturity.
The aerospace industry needs to work on multiple fronts to achieve success. It needs to develop a strong supplier system, innovate/ develop new technologies and acquire expertise by absorption of high-end technology through partnership with foreign manufacturers. While HAL has developed tier-3 and tier-4 suppliers for itself, to develop tier-1 and tier-2 suppliers to global manufacturers, the competition would be from nations such as China and Taiwan. One key factor for success for such alignments would be the commitment of the GoI in terms of volumes and timelines for procurements as well as how investments are managed beyond the tendered procurement.
Disaggregated manufacturing, creating clusters and exports are just three of the many strategies that need to be followed to initiate indigenous manufacture in the aerospace sector. These concepts may not be new but their application to the Indian industry has not fructified so far and hence the mention. Notwithstanding the stagnation of the economy in the past decade, an opening has been provided for development in the defence/aerospace sector, which could lead to autonomy through indigenisation to achieve national objectives.
The new government wants to transform the economy from a services-based one to be manufacturing-based. To meet its objective, the Prime Minister has spread the message of “Make in India”. Policies are evolving in the right direction but a lot more is to be done especially in the aerospace sector, on both fiscal and infrastructure fronts to improve competitiveness in the short and long term.
GoI has to be proactive and clear the cobwebs that have grown due to inaction in the past…
- Clarity of vision and a mission statement is required. The clearances for the Light Utility Helicopters (LUH) and the replacement for Avro aircraft have changed in the past few months.
- National resources need to be integrated through collaboration rather than competition between government organisations, DPSUS/ OFs/ DRDO and the private sector through Public-Private-Partnership (PPP).
- There has to be a clear realisation plan as to the role and functions of each organisation, timelines for approvals and detailed project reports.
- GoI has to be proactive and clear the cobwebs that have grown due to inaction in the past. A National Aerospace Policy has to be formulated and a Department of Aerospace put in place, both to be guided by a long overdue National Aerospace Commission.
- The GoI should ensure an effective institutionalised interface between the MoD, the Armed Forces and the private sector for regular interaction at the policy-making level.
- There are fiscal incentives for other industries, but none for the defence industry. The GoI should grant ‘Industry’ status to the aerospace sector and ‘Infrastructure Industry’ status to defence industry along with tax incentives.
- A prudent taxation policy for the private sector is the need of the hour. The taxes are 41 per cent higher if made in India! The private sector should be on a par with DPSUs and foreign suppliers.
- The Export Policy, DPP and the Offsets Policy need to be simplified.
- Production capacity, technology capability, an inshore supply chain and work force training need to be built up through FDI.
A prudent taxation policy for the private sector is the need of the hour.
While new policies may be being issued and “Make in India” slogans being spread the world over, the shedding of mindsets and the establishment of a favourable ecosystem are not likely to be achieved in the near future. The process can be actualised over a decade if the strategies mentioned are acted upon with a sense of urgency, which would then expand India’s potential in the aerospace and defence industry and contribute to national security. The key is to have a long-term vision and create an environment which motivates the private sector, shakes the lethargy of the government organisations and acts as a catalyst for growth.
Swami Vivekananda had said, “We are responsible for what we are and whatever we wish ourselves to be, we have the power to make ourselves. If what we are now has been the result of our own past actions, it certainly follows that whatever we wish to be in future can be produced by our present actions; so we have to know how to act.” India cannot aspire to be a regional or a global power without being self-reliant in defence production. The aim should be to transform the existing defence/ aerospace-industrial base to become a hub for state-of-the-art exports besides making India self-reliant. The Government needs to focus on these issues. The world is watching!