Insights into Editorial: India’s security needs call for serious private participants
India is the world’s largest weapons importer over a five-year period according to latest report of the Stockholm International Peace Research Institute (SIPRI) on global arms purchases released recently.
- India accounted for 14% of total imports between 2011 and 2015. China ranks second with 4.7%. It is followed by Australia, Pakistan, Vietnam and South Korea.
- Also, India’s weapons imports rose by 111% between 2004 and 2008 and the 2009-2013 periods.
Why indigenize defence production?
For the year 2015-2016, India’s defence budget was $40.4 billion, an increase of nearly 8% over the previous year, and it is likely to continue growing at a similar rate of growth over the next five years. Given India’s geo-strategic realities, its burgeoning defence needs are only likely to grow. Also, India is far from its objective of substantive self-reliance in defence production. Hence, there is a need for indigenization of defence production.
What has the government done in this regard?
Indian government’s focus for the defence sector in recent times has been indigenization of the industry and acquiring advanced technologies from abroad which will in turn help to reduce dependence on imports from other countries. Currently, virtually nothing material in terms of our defence requirements is made in India.
- In an effort to make it easy for the private sector to participate in the Make in India programme, the government has given licences to many private companies to manufacture products for the country’s defence needs.
- The new defence offset policy, whereby foreign suppliers of equipment need to manufacture a certain percentage of their products in India, has given Indian firms a chance to play partners to global companies.
- Also, the Department of Industrial Policy and Promotion (DIPP) has granted permission to 19 private companies to manufacture defence products.
Lack of a high-powered institution is the greatest weakness that Indian defence sector is facing. Such institutions are required to lay out a long term roadmap for the defence industry, set a target for the industry, monitor the progress, and more importantly bring all the stakeholders on one platform and commit to the common cause of Make in India or self-reliance. In the absence of such an institution, crucial decisions with far reaching implications are being pursued by various stakeholders in a piecemeal fashion, and often at cross-purposes.
Defence Minister’s Council on Production:
Realising the importance of an institutional mechanism, the Group of Ministers (GOM) set up under Vajpayee government, had recommended the creation of a Defence Minister’s Council on Production (DMCP) under the leadership of the Defence Minister himself.
- The GOM had recommended that the high powered body should draw members not only from the top leadership of the defence establishment but also from the departments of space, atomic energy and science and technology, as well as eminent industrialists from the private sector.
- The DMCP would, among other things, “lay down the broad objectives of the long term equipment policies and planning on production, simplification of procedures.”
This crucial recommendation of creating a DMCP has so far been ignored.
Setting up of DAC:
One of the GOM’s recommendations has been accepted and it led to the creation of Defence Acquisition Council (DAC) under the chairmanship of the Defence Minister.
Problem with DAC: The DAC is geared towards addressing the short-term procurement-related hurdles rather than addressing the concerns of the domestic industry for achieving self-reliance in the long term. Indigenisation is a mere by-product of the DAC’s decisions rather than being the cornerstone.
What should be done?
Since much of the success of Make in India lies in translating the long term requirement of the armed forces into technological and industrial outputs, it is necessary that the government comes out with a detailed plan for the industry and R&D agencies at the earliest. The plan must also identify specific projects that would be executed by local agencies.
Looking beyond DRDO:
DRDO, which was established in 1958, has been enjoying monopoly over defence research and development. Over the years, it is evident that the dependence on DRDO for technology has not yielded the desired results. Despite having a large pool of scientists/engineers and over 50 labs and establishments, the DRDO has been beset with many problems leading to failures and cost and time overruns in the projects undertaken. Lack of R&D in industry and academia, has further compelled to source technology from outside, leading to a vicious cycle where initial imports lead to further imports.
- Other advanced defence manufacturing countries encourage R&D at diverse sources that include dedicated research institutes, universities and industry. Israel and the US serve as good examples in this regard.
- So, it is necessary for India to expand its R&D base. A dedicated R&D fund should be set up. This will not only create a healthy competition between DRDO labs and other agencies, but also lead to more innovation.
Role of private sector:
The Indian defence industry was opened to the private sector in 2001. However, their contribution so far has not been encouraging. The biggest hindrance in the private sector’s participation so far has been mistrust and procedural hurdles.
There is a need to change the mind-set and treat the private sector as an equal partner. This can only be demonstrated by awarding big contracts, preferably through the ‘Make’ and ‘Buy and Make (Indian)’ procurement categories, which hold the key to the success of the private sector’s participation in defence production. For the government, it is imperative to announce a list of contracts which can be awarded under these two categories.
It isn’t going to be easy for Indian firms. Data from think tank Stockholm International Peace Research Institute (SIPRI) shows that the defence industry continues to be dominated by companies based in the US and Western Europe, with firms from these areas taking up the top 10 positions on the list of the biggest arms makers.
However, creating a powerhouse in India is crucial to its long-term security needs. But it isn’t going to be easy and is made doubly difficult if too many fly-by-night operators get into the business.
It is time for the government to create a conducive financial framework for the local industry. It is also highly desirable that certain sales of the local industry may be given ‘deemed export status’ whenever such sales are likely to substitute direct import. Special push in infrastructure is also required. The government must ensure that the local industry is geared and incentivised enough to rise up to the expectations and make the government’s ‘Make in India’ initiative a success story.