Defence Industry

Military Spending – Getting Bang for the Buck
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Issue Net Edition | Date : 30 Jun , 2020

A nation maintains its military as an instrument of national power and means of safeguarding national interests. Military capabilities in turn mean expenditure. Universally countries spend in proportion to their economic development or in direct response to immediate security threats. We seem to be guided by neither. Budget speeches by Finance Ministers barely touch defence expenditure much less generate any debate in public or parliament as to what the country needs or can afford to spend on defence.

The defence budget today as a percentage of the GDP at 1.56% is the lowest since 1962. But we have statements that defence spending today is the highest ever – an ingeniously misleading statement by using rupee terms to gloss over value terms.

It is quite clear that we as a nation are unable or unwilling to spend what is required for national security. What then is the alternative? Perhaps improved efficiency and accountability in areas of major defence spending can partially ameliorate the situation; like the Americans say getting more ‘Bang for the Buck’.

Adequate spending under ‘capital’ for acquisition of hardware is a major issue by itself, however, sustaining and keeping the military fully functional falls in the domain of ‘revenue’ expenditure which is more or less obligatory. Myopic considerations project the ‘revenue’ expenditure as a share of the defence budget as excessive ignoring the fact that inadequate defence spending leaves less for ‘capital’ and projects ‘revenue’ as excessive.

Knee jerk reactions like selective increase of retiring ages to reduce pension, merging unit cook houses, constructing temporary shelters or accepting 70% effective equipment etc as suggested by some military planners for reducing ‘revenue’ expenditure are no substitute where major surgery is required.

Besides many others areas in the defence production base, one of the major contributors to the military’s war waging potential is the availability and holding of ammunition which is ‘revenue’ expenditure; much sought to be curtailed. And ammunition is where the real ‘bang’ lies. This is expressed in military jargon as ‘War Wastage Reserve” (WWR) and is expressed in the number of days of WWR indicating as to how many days of fighting does the available ammunition allow.

Without going into specifics, it is well known in the open domain, as highlighted by the Army Chief in 2013, that our holdings are abysmally low thus putting a serious constraint on our military options. During the localised and limited Kargil 1999 operations we had to resort to emergency purchase and airlift of ammunition from abroad and other theatres. This is further compounded by a fair proportion being imported and serious issues of domestic production and quality.

Modern munitions are high precision products requiring stringent quality control. Defective ammunition leading to accidents and casualties has been the bane of the soldier and most damaging to morale. No heads have ever rolled in the production agency; it is always attributed to ‘improper’ handling by the user. Such ammunition, segregated and destroyed, is a total loss. On the other hand, defective ammunition stored in ammunition depots has triggered more than one major accident resulting in loss of thousands of Cr worth.

The entire holding of one type of air defence artillery ammunition was recently declared defective and unfit for use. These deficiencies leading to ‘hollowness’ in WWR cannot be made up in a hurry even if the amount required is made available, and then there are considerations of transporting and making available where it is required.

The sole domestic supplier of practically everything from uniforms to armaments, armoured vehicles like tanks and ammunition are the Ordnance Factories under the Ordnance Factory Board (OFB) comprising of 41 Ordnance factories subordinate to the Department of Defence Production (DoDP) under the Ministry of Defence (MoD). OFB has 82,000 employees, holds over 60,000 acres land and has nine Training Institutes, three Regional Marketing centres and four Regional Controllers of Safety.

More than 80% orders for OFB come from the Army though OFB barely meets 50% of Army requirements. OFB’s archaic structure and red tape precludes any meaningful efficiency, modernization of plant and machinery or dynamism. Accountability, like all government undertakings, is non-existent.

A media report of December 2019 citing the Comptroller and Auditor General (CAG) highlighted shortfalls in production of 32-74% in various types of fuses and in ammunition from 41-94% with material and quality problems with ammunitions worth 1403.27 Cr lying unusable with the Army. Overheads constitute 33% percent of the OFB annual budget.  The Ordnance factories achieved production targets for only 49% of the items.

A significant quantity of Indian Army demand for principal ammunition items remained outstanding. Orders as old as year 2009-10 were yet to be delivered. More than half the inventory (52%) was the store-in-hand procured for manufacture but not used within the year by the factories. Unfinished items lying on the shop floor constituted 32% of the inventory. Unusable stores worth 1,055 Cr were awaiting disposal.

Shortage of ammunition has been explained to be made up by ‘surge capacity’ of production, while the normal production has not been achieved.  Then there is the high cost of OFB products. For example, the 1.3 million strong Army procures combat uniforms from the OFB. The OFB buys the cloth and outsources the stitching, charging four times the cost!

By autumn 1914 shortage of artillery shells had forced the British Army to ration them on daily basis on the Western Front. The ‘Shell Scandal’ caused the fall of the government with Prime Minister Asquith forming a coalition with the appointment of Lloyd George as Minister of Munitions, who later became Prime Minister. 

A Munitions Act of 1915 was enacted to curtail any impediments, including labour, in the production of munitions. That was then. Today we do not have the luxury of a long drawn war of attrition to rectify such fatal shortcomings.

Overhaul of the defence production base is long overdue. There has been no dearth of committees recommending change: TKA Nair Committee (2000), Vijay Kelkar Committee (2005) and Vice Admiral Raman Puri Committee (2015) recommended corporatizing OFB. And there has been no lack of expression of intent, most recently by Finance Ministers Arun Jaitely and Nirmala Sitharaman. In August 2019, government announced the decision to corporatize OFB, following which 60,000 OFB employees struck work for a month; and a committee was constituted to address their concerns!

The Indian soldier has seldom been found wanting in individual courage, tenacity and commitment to his calling, but individual courage is not a substitute for proper and reliable equipment.

The field of Panipat witnessed three epic battles over two and a half centuries which decided the fate of Hindustan. The invader was met sixty miles from Delhi, the political and cultural heart of Hindustan, when the enemy was literally at the gate. We need not wait for another Panipat.

You have to have the powder to keep it dry. The least we can do is ‘Make in India’ what is being ‘Made in India”.

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