http://www.dailypioneer.com/columnists/oped/economics-101-for-the-military.html
Tuesday, 22 July 2014 | Abhijit Iyer-Mitra |
While the Government has done well to keep the public sector out of the HS-748 Avro deal, its decision to replace an aircraft that has almost been retired, is not rational, and shows that the new administration is walking down the same path of fiscal profligacy as its predecessor
In 1952, the British Raj civil servant Ivor Jennings came to the conclusion that Partition had very little to do with the Hindu-Muslim divide. He predicted, rather presciently, that the net effect of Partition was that Pakistan got the military, India got the bureaucracy, and that these would hang around their respective necks like a hangman’s noose. Sixty-seven years down the line, we now have two countries whose deep states are almost mirror images of the other.
In Pakistan, civilian Governments come and go, but the Army goes on forever. In India, Prime Ministers may come and Prime Ministers may go, but the bureaucracy goes on forever. There is probably no better wisdom on how bureaucracies work than the BBC drama Yes Minister. Consider these immortal words regarding the ‘house training’ of overly enthusiastic ministers by bureaucrats — “It used to be said there were two kinds of chairs to go with two kinds of Minister: One sort folds up instantly; the other sort goes round and round in circles”.
In this context, what exactly do we make of this year’s defence allocation? When assessing the Budget, we need to look not just at the figures themselves but also important policy announcements that have followed since. The Budget as a standalone seems to be a continuation of the policy emphases placed by the previous UPA Government. No programmes have been modified and none have been cancelled or rationalised.
The allocations for the Army, Navy and Air Force have all seen increases. The single biggest story is the Air Force allocation of around Rs 30,000 crore, which means that the Rafale deal will not be signed this year. Significant increases, however, have been provided to the Defence Research & Development Organisation, and specifically the Tejas light combat aircraft. All of this indicates an incremental commitment to defence but one that is no different from the previous regime’s.
The big change, however, came earlier this week when the deal for replacing the HS-748 Avro aircraft was announced as a private sector-only bid. The public sector has been excluded. In many ways, this deal and the way it proceeds can be seen as a barometer for the new Government’s performance in the defence sector.
This one decision alone has several complexities and traps, largely borne out of the paucity of information. How the Minister for Defence guides this issue will be critical to deciding if India is on the cusp of an actual revolution in the management of its security, or if the Minister falls in the two categories described in Yes Minister as “folds up” or “goes round and round in circles”.
Broadly speaking, there are three issues here: First, is the question of rationalisation. India currently operates two aircraft that have near similar capabilities. The HS-748 and the Antonov An-32 carry between five and 7.5 tonnes of payload. Once the backbone of the transport fleet, the HS-748 has been relegated largely to communication and liaison roles after the larger, more capable and more versatile An-32s came online. The An-32s also retired the venerable DHC-9 Caribous.
Hence, the current procurement of a replacement for the HS-748 does not make sense, as the original had to be retired anyway, having already been replaced in its primary role. The HS-748’s current role — that of communications — is performed much better by other aircraft manufactured indigenously like the Dornier Do-228. Effectively, the Indian Air Force is seeking a replacement for an already-replaced aircraft, and duplicating roles.
If this procurement goes through, we will have three different aircraft doing three different roles, when, in fact, modern aircraft such as the CASA C-295 and Alenia C-27J are equally capable of replacing all three aircraft (An-32, HS-748 and Do-228). Others, such as the V-22 tilt rotor, have a significantly higher payload than all three classes of aircraft, and can double as a helicopter as well. They can replace not just the IAF’s planes, but also several of the Army and Air Force’s helicopters much more efficiently.
The second issue, flowing from the first, is of economics. By no stretch of industrial, infrastructural or financial logic, will the manufacture of 57 aircraft in India lead to the creation of either economies of scale or any meaningful transfer of technology and industrial equipment. Instead, rationalising all three fleets of aircraft (Dorniers, Avros and Antonovs) creates a replacement programme for well over 150 aircraft. If the helicopter fleet is included, with the consideration of the V-22, then the numbers shoot up to well over 300 aircraft, which bring powerful economies of scale into play.
Economically, the cost of procurement will be offset by the creation of a solid manufacturing base. Also, deep transfer of technology will be made possible, and opportunities for co-production and re-export may also open up.
The last issue here is one of knowledge and management processes. The above issues are rational, yet neither he Air Force nor the defence bureaucracy seems to have given them any serious thought. Why is the Air Force so oblivious of economics, and why is our defence bureaucracy so oblivious of operational reality and technological possibilities?
There are three reasons here: First, the obstinate and deeply malfeasant refusal of the Air Force to rationalise its fleet or understand economics; second, bureaucrats are incapable of providing serious ‘expert’ input to the Defence Minister they seem clueless about technology, logistics and economics; third, the quality of advice given to the political leadership leaves much to be desired. How can the latter then take smart decisions that will bring real changes to the way in which things are done?
While the Defence Minister’s decision to bar Hindustan Aeronautics Limited from the process is welcome, the HS-748 replacement has the potential to forever label him as the sort of Minister who goes around in circles. If we continue down this path, despite more muscular rhetoric, we will see little by way of augmentation to our defence capabilities.
We simply will not have a fully functional military any time soon. Indigenisation will remain as much of a pipe dream today as it has ever been, and India’s ability to project power or even execute retaliatory strikes will remain as constrained as it had been in the last 10 years.
Tuesday, 22 July 2014 | Abhijit Iyer-Mitra |
While the Government has done well to keep the public sector out of the HS-748 Avro deal, its decision to replace an aircraft that has almost been retired, is not rational, and shows that the new administration is walking down the same path of fiscal profligacy as its predecessor
In 1952, the British Raj civil servant Ivor Jennings came to the conclusion that Partition had very little to do with the Hindu-Muslim divide. He predicted, rather presciently, that the net effect of Partition was that Pakistan got the military, India got the bureaucracy, and that these would hang around their respective necks like a hangman’s noose. Sixty-seven years down the line, we now have two countries whose deep states are almost mirror images of the other.
In Pakistan, civilian Governments come and go, but the Army goes on forever. In India, Prime Ministers may come and Prime Ministers may go, but the bureaucracy goes on forever. There is probably no better wisdom on how bureaucracies work than the BBC drama Yes Minister. Consider these immortal words regarding the ‘house training’ of overly enthusiastic ministers by bureaucrats — “It used to be said there were two kinds of chairs to go with two kinds of Minister: One sort folds up instantly; the other sort goes round and round in circles”.
In this context, what exactly do we make of this year’s defence allocation? When assessing the Budget, we need to look not just at the figures themselves but also important policy announcements that have followed since. The Budget as a standalone seems to be a continuation of the policy emphases placed by the previous UPA Government. No programmes have been modified and none have been cancelled or rationalised.
The allocations for the Army, Navy and Air Force have all seen increases. The single biggest story is the Air Force allocation of around Rs 30,000 crore, which means that the Rafale deal will not be signed this year. Significant increases, however, have been provided to the Defence Research & Development Organisation, and specifically the Tejas light combat aircraft. All of this indicates an incremental commitment to defence but one that is no different from the previous regime’s.
The big change, however, came earlier this week when the deal for replacing the HS-748 Avro aircraft was announced as a private sector-only bid. The public sector has been excluded. In many ways, this deal and the way it proceeds can be seen as a barometer for the new Government’s performance in the defence sector.
This one decision alone has several complexities and traps, largely borne out of the paucity of information. How the Minister for Defence guides this issue will be critical to deciding if India is on the cusp of an actual revolution in the management of its security, or if the Minister falls in the two categories described in Yes Minister as “folds up” or “goes round and round in circles”.
Broadly speaking, there are three issues here: First, is the question of rationalisation. India currently operates two aircraft that have near similar capabilities. The HS-748 and the Antonov An-32 carry between five and 7.5 tonnes of payload. Once the backbone of the transport fleet, the HS-748 has been relegated largely to communication and liaison roles after the larger, more capable and more versatile An-32s came online. The An-32s also retired the venerable DHC-9 Caribous.
Hence, the current procurement of a replacement for the HS-748 does not make sense, as the original had to be retired anyway, having already been replaced in its primary role. The HS-748’s current role — that of communications — is performed much better by other aircraft manufactured indigenously like the Dornier Do-228. Effectively, the Indian Air Force is seeking a replacement for an already-replaced aircraft, and duplicating roles.
If this procurement goes through, we will have three different aircraft doing three different roles, when, in fact, modern aircraft such as the CASA C-295 and Alenia C-27J are equally capable of replacing all three aircraft (An-32, HS-748 and Do-228). Others, such as the V-22 tilt rotor, have a significantly higher payload than all three classes of aircraft, and can double as a helicopter as well. They can replace not just the IAF’s planes, but also several of the Army and Air Force’s helicopters much more efficiently.
The second issue, flowing from the first, is of economics. By no stretch of industrial, infrastructural or financial logic, will the manufacture of 57 aircraft in India lead to the creation of either economies of scale or any meaningful transfer of technology and industrial equipment. Instead, rationalising all three fleets of aircraft (Dorniers, Avros and Antonovs) creates a replacement programme for well over 150 aircraft. If the helicopter fleet is included, with the consideration of the V-22, then the numbers shoot up to well over 300 aircraft, which bring powerful economies of scale into play.
Economically, the cost of procurement will be offset by the creation of a solid manufacturing base. Also, deep transfer of technology will be made possible, and opportunities for co-production and re-export may also open up.
The last issue here is one of knowledge and management processes. The above issues are rational, yet neither he Air Force nor the defence bureaucracy seems to have given them any serious thought. Why is the Air Force so oblivious of economics, and why is our defence bureaucracy so oblivious of operational reality and technological possibilities?
There are three reasons here: First, the obstinate and deeply malfeasant refusal of the Air Force to rationalise its fleet or understand economics; second, bureaucrats are incapable of providing serious ‘expert’ input to the Defence Minister they seem clueless about technology, logistics and economics; third, the quality of advice given to the political leadership leaves much to be desired. How can the latter then take smart decisions that will bring real changes to the way in which things are done?
While the Defence Minister’s decision to bar Hindustan Aeronautics Limited from the process is welcome, the HS-748 replacement has the potential to forever label him as the sort of Minister who goes around in circles. If we continue down this path, despite more muscular rhetoric, we will see little by way of augmentation to our defence capabilities.
We simply will not have a fully functional military any time soon. Indigenisation will remain as much of a pipe dream today as it has ever been, and India’s ability to project power or even execute retaliatory strikes will remain as constrained as it had been in the last 10 years.
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