Foreign direct interference?

 10 Jun 2014

Shankar Roychowdhury

The recent announcement by no less than India’s finance-cum-defence minister himself, permitting direct induction in the country’s defence industry of foreign equity to the extent of 100 per cent, would have occasioned unease, curiosity, concern as well as satisfaction. Indigenous capabilities for defence production are a critically important factor in the national security matrix of any country, and India is no exception. Because of this, defence production has traditionally been kept within the sole purview of the government, and attempts at loosening that grip by introducing larger-scale participation by the private sector, especially foreign, which might push back at the all-pervading civil bureaucratic dominance may create anxieties. The Government of India’s apparatchiki have been unable to impose accountability over defence production, long criticised for low quality and delayed products, especially by its captive market of long suffering users in the defence forces who have no other alternatives.

Defence research and defence production operate in tandem, and India is amongst the fortunate countries which have a substantial infrastructure in both. It would be relevant to note that the foundations of defence production in India were initially established by the East India Company, which functioned as the Government of India of its day, with the establishment of the Gun Carriage Factory in 1801 at Dum Dum near Calcutta and the progressive development of a heavy-industrial complex in the same area consisting of the Ishapore Rifle Factory, and the Cossipore Gun and Shell Factory. After Independence the original skeletal structure was progressively fleshed out by the creation of a large number of defence production units and defence research laboratories in the form of 54 ordnance factories and seven defence public sector units on the production side, and 48 laboratories on the research and development side have been established throughout the country, an impressive scientific-industrial network covering a wide range and variety of military research and equipment ranging from boots and clothing to artillery guns, warships, fighter aircraft and sophisticated electronics equipment.

It must also be noted that India’s developing but as yet comparatively limited private sector too has a history of participation in defence production. During the Second World War, Tata Iron and Steel built the Armoured Combat Vehicle, Wheeled (Indian Pattern) or ACV-IP, a wheeled light armoured vehicle dubbed the “Tatanagar” after its place of origin, which saw extensive service in its various versions in several theatres of the war.

The Government of India has already issued an extensive policy document on defence procurement procedures, which has been periodically refined and reviewed, the latest version in the series being Defence Procurement Procedure 2013. The procedure for defence acquisitions is complex and involved, out of the perceived necessity, to avoid “scams” at all costs. The point is well taken — the sums of money involved in acquisition of defence technology are indeed astronomical, and acquisition prices gallop with each day spent in negotiations. Time is literally money, and acquisition procedures are, indeed, complex. Also, there is always the geo-political necessity to remain strategically independent in defence acquisitions. Squaring multiple circles of these varying dimensions may necessitate require a drastic overhaul of current defence production philosophies.

Private investment in defence production can follow several paths, ranging from permitting selected corporate entities, foreign as well Indian, to establish defence manufacturing facilities in India and marketing their products in markets of their choice, guided solely by the profit factor, rather than any geo-political considerations of the host nation. Another alternative can be to permit foreign entities to invest their funds and defence technology in existing Indian industries, possibly restricted to the private sector only, with unrestricted clearance for marketing. Yet another form foreign investment can take is to invest finances and technology in upgrading Indian government’s ordnance and defence public sector units, though the end results of this interface between foreign private entities and defence public sector organisations may have advantages in acquisition of the latest defence technology, but possible political downsides which cannot be discerned immediately.

The United States is the world’s leading military power, and the most prominent example of the involvement of the country’s private corporate sector in the national defence industry. The possibility of a gigantic military industry to influence national policy gravely perturbed General Dwight Eisenhower, President of the United States and a very distinguished soldier himself, and he warned of the dangers to democracy which lurked within such a system.
In the Russian Republic, the defence industry is built around huge production facilities. Originally established during the Soviet era, when the state controlled undertakings, these are now being privatised through a process of selective giveaways at distress sale rates to foreign corporations acting through local oligarchs as middlemen, the latter earning sizeable business profits which are apparently relocated in safe havens abroad.

The days of “friendship prices” are, of course, long gone, and it can be mentioned in passing that the Sukhoi 30, considered the backbone of the fighter arm of the Indian Air Force, as is the T-90 tank of the Indian Army, the Kilo class submarines of the Indian Navy, and also India’s future Fifth Generation fighter, the PAK 50, are all from the Russian stable. Should India be concerned? The People’s Republic of China started early in building its own indigenous industrial base for indigenous armament production early, soon after parting company with its former benefactor, the erstwhile Soviet Union, and is now a world player on the armaments market, offering products at “friendship prices” to selected customers, particularly African countries, besides focusing intensively on India’s neighbours — Pakistan, Bangladesh, Sri Lanka and Myanmar.

The moral of the story is quite clear. Investments in defence production are welcome, but the new political dispensation in India must focus ruthlessly on indigenisation of the country’s own defence industry.

The writer is a former Chief of Army Staff and a former member of Parliament


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