Deba R Mohanty
9 Nov, 2014
India's arms import dependency is over 70% while its state-owned defence base has largely failed to meet the growing demands of the armed forces.
The Indian defence sector has been witness to epochal events in recent times. Consider this: defence purchases worth Rs 1,20,000 crore have been approved by the Defence Acquisition Council (DAC) in less than five months.
Of this, Rs 70,000 crore has been earmarked for two indigenous projects — military transport aircraft (to replace the Indian Air Force's ageing fleet of Avro cargo planes) worth Rs 20,000 crore and six submarines (as part of the Indian Navy's ambitious submarine project P75-I) worth Rs 50,000 crore. Both the projects will be executed by Indian private companies, possibly in collaboration with foreign firms.
A few defence projects under the 'Make' category like tactical communication systems (TCS), battlefield management system (BMS) and futuristic infantry combat vehicles (FICV) are already under early stages of development, which would involve Indian private companies. In addition, a recently cancelled tender for 197 helicopters that might be relaunched in the near future could also be awarded to Indian private companies.
Globally, Mostly Private
Although the decision to allow the Indian private sector in defence production, with an eye on creating and nurturing a self-reliant defence science technology and industrial base (DSTI), was taken way back in 2002, precious little has been achieved so far. Viewed against this grim backdrop, the latest decision to award major projects to Indian private companies has the potential to usher in a new beginning in Indian defence industrialization.
Four fundamental questions must be raised to view the decision in the right context. First, should an aspiring power like India necessarily possess a self-reliant DSTI base?
Conventional wisdom as well as contemporary global and neighbourhood realities suggest the affirmative. Great powers invariably possess largely indigenous arms industries. Second, is it really necessary to involve the private sector in defence production? The answer is again yes.
Private arms companies have contributed to military industrialization at national and global levels, with the exception of countries such as Russia, China and a few others whose arms industries are largely state controlled. In fact, more than 70% of the global defence industry is state-led, but privately managed. Factors like capital intensive industrialization as well as defence R&D processes make it a viable option for a state to pass the bulk of responsibilities to the private sector.
Big Question: Can They?
As military products and services are transacted between governments and follow both tightly controlled national as well as international arms trade and control regimes, it makes immense sense for a state to involve the private sector in its defence production efforts.
In India's case, it becomes all the more important as its arms import dependency is over 70% (the defence procurement budget was Rs 95,000 crore in 2014-15) while its state-owned DSTI base has largely failed to meet the growing demands of its armed forces. Contributions from the private sector could thus complement the efforts toward self-reliance. Third, can Indian companies undertake large strategic defence programmes independently? Perhaps not.
But with support, they can deliver as they have in the past. Companies such as Godrej Industries and L&T have delivered critical components in strategic programmes like Brahmos and ATV respectively while companies like Tata Power SED, Mahindra Defence System and many others have a relatively healthy track record of defence supplies.
Companies like Dynamatic Technologies, Astra Microwave, Bharat Forge show promise while many companies like Punj Lloyd and Kineco Kaman recently obtained licences to manufacture different defence items, in addition to over 230 licence holders.
Although five out of the nine defence public sector units (DPSUs) are naval system producers, in the case of submarine production, only Mazagon Dock Limited (MDL) has some capacity. MDL is otherwise overburdened with the Scorpene project, which is facing delays. It would thus be interesting to watch which Indian companies will be invited for the submarine tender.
At the moment, prospects for L&T look bright. It has the capacity to bring in foreign partners (like the Tatas who are joining hands with Boeing to participate in Avro replacement project) like Nevantia, HDW, DCNS or Hyundai Heavy Industries. A meaningful collaborative or consortiumbased approach could always be initiated by Indian companies to prove their worth in programmes like P75-I. Last but not least, can Indian companies be a part of the global supply chain? The answer is again yes.
All categories of Indian companies can demonstrate their capacities in component, sub-system or system supplies, only if they are consciously encouraged by the state. Companies like Dynamatic are already a part of the global supply chain, with many more waiting in the wings. None of the large Indian companies is a true system integrator or defence dependent (like Lockheed or Raytheon), but they can graduate to that level over a period of time, if they are provided with the right incentives, a conducive atmosphere and prudently crafted state direction.
(The author heads Indicia Research & Advisory, a New Delhi-based defence research firm)
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