26 Sep , 2014
C-130J Super Hercules
India acknowledges the technological superiority of the US weapon systems and wants to develop and produce them through joint ventures. It seeks partnership and not a seller-buyer relationship. However, India must appreciate that being a global power, US has a different perspective of world issues. It wants to safeguard its knowledge-superiority and prevent proliferation of critical technologies. Therefore, US laws concerning export of weapons are extremely comprehensive.
Within a period of less than ten years, India has emerged as the third largest buyer of US arms.
US readiness to sell AN/TPQ-37 Fire Finder counter-battery artillery radar sets to India in 2002 marked the beginning of a new chapter in Indo-US military cooperation. Although the said deal was worth only US$150 million, it was touted as a breakthrough of strategic proportions. Simultaneously, a Security Cooperation Group (SCG) was constituted to coordinate and expedite defence deals. Within a period of less than ten years, India has emerged as the third largest buyer of US arms. In the fiscal year ending September 2011, India signed contracts worth US$4.5 billion. Only Afghanistan (US$5.4 billion) and Taiwan (US$4.9 billion) were ahead of India. It is estimated that the total value of contracts inked between the US and India during the period 2003-2011 exceed US$12 billion.
Some of the major contracts pertain to the sale of the USS Trenton (now INS Jalashwa) amphibious troop carrier ship, P-8I maritime patrol aircraft, C-130J Hercules aircraft and C-17 Globemaster transport aircraft. In addition to some repeat orders, negotiations are underway for the purchase of 155mm Ultra Light Howitzers and Javelin anti-tank guided missiles. On the face of it, the list appears quite impressive. However, all is not well with the current equation between India and the US – both sides are dissatisfied at the current pace of progress of military trade. Despite regular SCG meetings, the relationship has not acquired the required degree of maturity and mutual comfort.
No deal carries transfer of technology provisions. All are pure ‘cash and carry’ sales.
Indo-US military deals are characterised by three significant features:-
All sales so far have been through government-to-government deals. US companies have not been able to win any major order in open competitive environment. In the case of Medium Multi-Role Combat Aircraft (MMRCA) deal, both the US companies Lockheed Martin (F-16) and Boeing (F-18) failed to make the grade in technical evaluation and got eliminated.
Sales are limited to the equipment in which the US is an undisputed leader. In other words, India approaches the US Government only when it has no alternate procurement source available to it, thereby indicating a certain degree of compulsion in approaching the US.
No deal carries transfer of technology provisions. All are pure ‘cash and carry’ sales. This is not a healthy sign, especially as Indian policy makers keep asserting that they are seeking production-partnership in military deals.
It has been a long, arduous and somewhat exasperating journey for both sides. The initial euphoria has given way to a degree of despondency. The anticipated influx of high-tech US equipment to replace ageing Soviet-era military hardware is yet to take place.
INS Jalashwa (LPD) (seen here as USS Trenton)
Both sides continue to profess their abiding interest in furthering the process and strengthening the bond. India covets a vast array of high-tech US weapons and is ready to pay hard cash for it. On the other hand, the US appreciates India’s needs and is amenable to the sale of latest weaponry. It trusts India with the safeguarding of its exclusive technology. If that be so, the pace of cooperation should have been much faster. Most observers are intrigued by the reasons for a lack of dynamism in Indo-US defence equipment trade.
To start with, there is a need to look at the US defence sales policies and India’s defence procurement regime. It is only then that the degree of their mutual incompatibility and resultant incongruities can be comprehended.
The US appreciates India’s needs and is amenable to the sale of latest weaponry.
Salient Features of the US Defence Sales System
The US is the largest arms exporter in the world. Military hardware is sold either through government-to-government deals (Foreign Military Sales) or directly by the manufacturing companies through Direct Commercial Sales. The US Government also sells stocks held in excess of the requirements of the US forces at highly reduced rates (5 to 50 per cent of original cost) to select countries. Whatever be the mode of sale, all exports are subjected to a rigid licensing regime.
FMS cases are of three types – ‘Defined Orders’ are meant for specific weapon systems, ‘Blanket Orders’ are to cover follow-on support and ‘Cooperative Logistics Supply Support Arrangement’ enables a buyer nation to invest in the US Supply System with access to the US defence stocks. India has been purchasing major equipment from the US under FMS (Defined Orders) route. See Illustration 1.
Illustration 1: Export of Arms through the Foreign Military Sales Route
FMS route is generally preferred in respect of the items which have already been inducted in the US forces. The buyer country gets the benefit of the US experience as regards logistic support, training and operational exploitation. In the case of complex systems, the buyer country gets them fully integrated and configured. Further, these items carry sovereign guarantees, assured after sale support and are sold at the rate at which they had been purchased for the US forces, albeit with additional handling charges.
Once a requested sale is cleared by the US Government, the buyer nation is required to submit a Letter of Acceptance (LOA) along with the initial advance. Every LOA includes Standard Terms and Conditions as dictated by the US laws for acceptance by the buyer. It contains provisions regarding liability, discrepancy reporting and monitoring of equipment usage. A legal contract is signed thereafter. The US Government may supply the item from its own existing stocks or procure it afresh from the producer. One of the major benefits of FMS route is a total absence of middlemen. Being government to government transactions, they remain ‘clean’ and do not invite adverse publicity. For India, this is an important issue.
While valuing the close relationship with the US, India is wary of getting drawn into an exclusive defence embrace.
Attributes of the Indian Defence Procurement Process
Initially promulgated in 2002 for outright purchases, India’s Defence Procurement Procedure (DPP) has undergone five revisions and its scope has been enlarged to include indigenous development of defence equipment. DPP aims to ensure expeditious procurement of the approved requirements of the Indian armed forces in terms of capabilities sought and time frame prescribed by optimally utilising the allocated budgetary resources. Demonstration of the highest degree of probity and public accountability, transparency in operations, free competition and impartiality has been made a cornerstone of the procedure.
As can be seen from Illustration 2, the acquisition process is divided into planning and procurement stages. On receipt of a procurement proposal from the concerned Service Headquarters (SHQ), the Ministry of Defence (MoD) examines its necessity to accord necessary approval and earmark required budgetary support. Procurement stage commences thereafter.
Illustration 2: Indian Defence Acquisition Process
The sponsoring SHQ evolves Qualitative Requirements (QR) of the equipment sought. QRs are minimum military requirements that are essential to the task(s) to be performed by the equipment being procured. All known vendors are invited to submit their technical and commercial proposals. Technical evaluation (including field trials) identifies vendors whose equipment is considered acceptable for procurement. Contract is signed with the lowest bidder amongst the technically successful vendors.
The above process has the following four key essentials:-
Need-based procurement as per the parameters specified by the services.
Maximum competition through invitation to all known vendors.
Technical evaluation to validate performance claims.
All vendors who meet QRs are considered at par and the lowest bidder is declared the winner.
The Indian Air Force’s (IAF) fourth Boeing C-17 Globemaster III departs for India from Long Beach
The Incompatibilities
Following are the fundamental incompatibilities between America’s FMS and India’s DPP:
India is wary of the US laws which impose sanctions even on purely commercial transactions.
DPP mandates procurement on the basis of QRs that reflect Indian military’s requirements in terms of capability desired with minimum required verifiable functional characteristics. On the other hand, FMS offers equipment that has been developed as per the specifications provided by the US armed forces. In other words, India has to accept equipment that may not fully satisfy its QRs but carry many unusable high-tech features.
FMS implies single-source procurement and hence, precludes competition. On the other hand, DPP wants maximum competition to be generated. It considers single-vendor purchases to be the last resort.
FMS exports carry contractual obligations as mandated by the US laws that are heavily loaded in favour of the US Government. For a buyer country, it is purely a ‘take-it or leave-it’ option. It can neither negotiate contractual provisions nor seek price rationalisation. On the other hand, DPP directs that a duly constituted Contract Negotiation Committee (CNC) should safeguard Indian interests through diligent negotiations.
Whereas DPP seeks unencumbered procurements, FMS sales are governed by ‘Golden Sentry’ End Use Monitoring (EUM) programme that covers the complete spectrum of all activities from shipping, receiving, use and final disposition. It is generally called ‘cradle-to-grave’ monitoring.
It is apparent that India opts for FMS route only in respect of high-tech systems, which no other nation possesses or is ready to offer.
Reasons for Sluggish Progress
It will not be correct to assume that incongruities between DPP and FMS are the only reasons for sluggish progress in Indo-US military trade. The following issues also merit discussion:-
The US licensing system is not only rigid and time consuming but also a little unpredictable…
Divergence of Objectives
Sale of weapons is a major strategic and foreign policy tool of the US through which it seeks to develop close military-to-military relationships with recipient countries. India is no exception. The US wants a deeper bonding with India to help it achieve its strategic objectives in East and South East Asia region. For that, it aims at building the military interoperability between the two countries through deeper geo-strategic alliance.
Although the irksome issue of End Use Monitoring appears to have been satisfactorily resolved, the US continues to urge India to sign ‘Logistics Support Agreement’ and ‘Communications Interoperability and Security Memorandum of Agreement’. Both the agreements are considered as essential prerequisites by the US before it agrees to sell sensitive equipment with advanced technologies.
On the other hand, while valuing close relationship with the US, India is wary of getting drawn into an exclusive defence embrace. It appreciates US willingness to sell high-tech defence systems to it, but expects this seller-buyer relationship to be based on an even keel, without any strings attached. More so as India pays full market price for every item it buys with no subsidies or concessions. Additionally, India cherishes its time-tested association with Russia and does not want to weaken it.
AN TPQ-37 Fire Finder Radar
Baggage of History and Trust Deficit
It is a fact that the past track record of the US does not inspire confidence. India is wary of the US laws which impose sanctions even on purely commercial transactions. Having suffered earlier, India is unwilling to have the threat of unilateral abrogation of agreements impinge on its freedom to take decisions in its national interests. Lack of credibility of the US commitments has made India realise the perils and uncertainties of US obligations. When questioned at Aero India 2005, the Defence Minister identified the lack of reliability of supplies to be the primary stumbling block in enhanced Indo-US military trade.
It is also a well-known fact that Indian military leadership carries deep-seated suspicions about US reliability as a supplier especially in times of conflict. Indifferent after sales support for equipment like weapon locating radars has further reinforced the above apprehensions. It must be admitted in support of the US functionaries that they appreciate Indian misgivings and try their best to allay all fears. However, they express their helplessness in view of the US statutes.
No agreement for the transfer of military technology has been signed so far…
Technology Transfer and the US Licensing Regime
All US military sales are governed by Arms Export Control Act and Foreign Assistance Act. All requests are examined, reviewed and validated for their compliance with the US laws and to ascertain whether the requesting country is eligible for the receipt of the said technology or not. Licensing procedure in respect of items categorised as Significant Military Equipment (SME) is more tedious. SME is an item designated in the International Traffic in Arms Regulation that warrants special export controls because of its capacity for substantial military utility.
The US licensing system is not only rigid and time consuming but also a little unpredictable. US companies are hesitant to submit their bids as they are not confident of getting export clearance in the time available.
As stated earlier, no agreement for the transfer of military technology has been signed so far. It is a sore point with India as it wants to develop indigenous defence industry through infusion of technology and joint ventures.
Both sides should strive to draw benefits through bilateral or even multi-lateral consortiums.
Attitudinal Problems
The US is undoubtedly the sole super power and a technology powerhouse. Unfortunately, many US functionaries tend to hurt the sensitivities of others through their condescending attitude. They fail to appreciate the difference between military sales and military aid. Virtually every single clause of the US drafted contract reads like an undertaking being extracted from a helpless buyer.
India’s insistence on field trials to validate performance parameters is seen as an affront. Many US functionaries are convinced that any equipment that has been inducted in the US forces ought to be good enough for India. Very unfairly, a buyer’s right to assure himself and indemnify his interests is totally disregarded.
The sense of shock, hurt and incredulity that the US displayed at the elimination of F-16 and F-18 fighters from MMRCA competition is symptomatic of their haughty and somewhat disdainful mindset. It was hard for them to believe that any country could have the temerity to reject their much-vaunted machines.
The Way Forward
India acknowledges the technological superiority of the US weapon systems and wants to develop and produce them through joint ventures. It seeks partnership and not seller-buyer relationship. However, India must appreciate that being a global power, US has a different perspective of world issues. It wants to safeguard its knowledge-superiority and prevent proliferation of critical technologies. Therefore, US laws concerning export of weapons are extremely comprehensive.
Only a mutually beneficial association based on commonality of interests and realistic expectations can prosper…
India should not let the baggage of the past blinker its vision of the future. There has been a distinct realisation amongst the US law makers that unilateral abrogation of sovereign agreements harms their credibility and shows them as unreliable partners.
On the other hand, the US authorities have to be careful of Indian sensitivities. They must change their condescending attitude. Many US observers express surprise that India shows intolerance for even minor defaults by the US companies in fulfilling their contractual obligations whereas other foreign vendors are dealt with more indulgently. There may be some truth in these allegations. The fact of the matter is that most Indians have an emotional bonding with the US due to the presence of a large Indian diaspora in the US. Resultantly, their expectations from the US tend to be unrealistically high and their non-fulfillment leads to disappointment. On the other hand, relationship with other countries is more formal and restricted to government-to-government contacts.
Both sides should strive to draw benefits through bilateral or even multi-lateral consortiums. Co-development and co-production should be the objective, with shared costs and export potential. India has a huge pool of technical manpower and IT professionals. It will help India graduate from the present position of being a supplier of components to the level of a systems integrator. Due to the cost advantage, it can become a global hub for outsourcing of weapon systems.
Building up relationships between nations is an arduous, excruciatingly slow, challenging and convoluted process. In the case of Indo-US dealings, the burden of long periods of non-engagement and past misapprehensions makes the task more onerous. Only a mutually beneficial association based on commonality of interests and realistic expectations can prosper. No unequal or one-sided relationship can ever be long lasting. Both sides must understand each other’s concerns and try to address them. Spirit of accommodation should be the ruling mantra.
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