Rahul Bedi
Indian army’s bid to indigenously build FICVs in the private sector – albeit with foreign partners – reflects the confusions and concerns with Indian defence planning in the medium and long term.
India’s Ministry of Defence (MoD) has resurrected its indigenous $ 11-12 billion Future Infantry Combat Vehicle (FICV) programme to replace the Army’s ageing fleet of some 2500 Soviet-designed BMP-1s and BMP-2s.
Mooted in 2009 as the country’s first locally designed-and-built platform to be developed under the Defence Procurement Procedures (DPP) ‘Make Indian (hi-tech)’ category, the MoD was supposed to finance around 80 per cent of the cost of two 20-22 ton FICV prototypes. One of these was to be selected; following 24 months of field trials in varied terrain sometime around 2020, to eventually series build 2,610 FICVs.
Future Infantry Combat Vehicle
Official sources say, the MoD is presently completing financial details of the complex project -intended to be the world’s most modern FICV – before issuing an Expression of Interest (EOI) over the next few months to eight local companies, inviting them to participate in the ambitious programme.
These include Bharat Forge, Mahindra Defence, Larsen & Toubro (L&T), Punj Lloyd, Roltas, Tata Power SED and Titagarh Wagons from the private sector, and the public sector Ordnance Factory Board (OFB) and Pipavav Defence, all of who will be permitted ‘collaborative tie-ups’ with overseas manufacturers. By late June 2014, all the eight had made their initial FICV presentations to the MoD’s specially instituted Integrated Project Management Team (IPMT).
Industry sources said foreign vendors likely to participate include CMI, Nexter and Thales (France), Rheinmettal (Germany), Elbit Systems, Rafael and Raytheon (Israel), Doosan Group (South Korea), Rosonboronexport (Russia), BAE Systems (UK) and General Dynamics (USA).
In response to the EoI, potential manufacturers will need to submit their Detailed Project Reports, which will include technical details, developmental deadlines and tentative cost projections by the year-end for the IPMTs evaluation. Thereafter, the IPMT will inspect the shortlisted manufacturers’ engineering and design facilities and by late 2015-early 2016 select two vendors to build one FICV prototype each within 24 months, funded largely by the MoD.
The two prototypes would undergo trials after which one would be chosen based on its performance and cost. The MoD would then get into a contract with the project-winning vendor sometime around 2019-20 to build around 60 per cent or 1,566 FICV’s; and the runner-up the remaining 1,044 identical platforms for the same price. Platform inductions would begin in 36-48 months later around 2024.
The Army’s Preliminary Staff Qualitative Requirements (PSQR) of the air-conditioned, amphibious and air-transportable FICV powered by a 600hp engine; however, remain unclear on whether it is to be a tracked or a wheeled platform or both. Earlier around 2010, a handful of contractors like L&T, Mahindra and Tata had worked extensively and at great expense on developing both types, but little came of the initiative.
The FICV is to be operated by a three-man crew, carry a ‘stick’ of seven infantrymen and be equipped with fire-and-forget anti-tank missiles with a 4-5 km range, 40mm grenade launchers – a secondary armament with a 2km strike range – and a coaxial 7.62mm machine gun.
It will also be protected against mines, aerial, kinetic and chemical energy strikes and nuclear, biological and chemical attack. An advanced communications suite and its eventual connectivity to the Indian military’s ‘under-development’ battlefield management system (BMS), completes the FICVs PSQR, which will no doubt alter somewhat, as the programme unfolds.
The FICV project was abandoned in 2011-12 after Russia offered India its BMP-3 ICV but in December 2013, the Indian Army and MoD rejected this proposal and decided in favour of the earlier indigenous option. The projected FICV will need to remain operational for at least 30-40 years; and in keeping with DPP requirements, eventually include an indigenous content of at least 50 per cent in its overall project cost value. Competing vendors acknowledge that crucial FICV inputs like its engine and transmission system would initially necessitate an overseas tie-up, till local technical capability is developed.
“The FICV project is a major opportunity for India’s fledgling defence-related private manufacturing sector, benefitting not only the developmental agencies but also boosting local primary and secondary systems and sub-assembly suppliers” military analyst and retired lieutenant general, Vijay Kapoor said.
Other officials connected with the FICV programme said it was also a ‘test case’ of Prime Minister Narendra Modi’s newly installed administration’s seriousness in involving the private sector in the design and manufacture of a major weapon platforms in keeping with its frequently declared aim of reducing dependency on imported materiel.
Defence Industrial Partnership
India imports nearly 70 per cent of its military equipment requirements. And despite public declamations for over two decades by successive governments of increasing private sector participation in the defence sector, the MoD has openly favoured the monopolistic and grossly under-performing state-run Defence Research and Development Organisation (DRDO), the 41 OFB units and eight Defence Public Sector Units (DPSUs) in awarding design contracts and joint ventures (JVs) with foreign original equipment manufacturers (OEMs).
Military planners, meanwhile, take small solace not only from the revival of the FICV project programme, but also from two of Defence Minister Arun Jaitley’s recent initiatives in pushing forward the privatisation of India’s defence-industrial sector, albeit to a limited degree.
These include increasing foreign direct investment (FDI) in the defence sector from 26 to 49 per cent and concurrently ending the monopoly of the state-run Hindustan Aeronautics Limited (HAL) in domestic aircraft manufacturing by excluding it from the long-postponed $2 billion Medium Transport Aircraft (MTA) programme for the Indian Air Force (IAF). The MTA project involves the import 16 platforms followed by local licensed production of 40 more via a JV with the OEM to replace the IAF’s obsolete fleet of BAE Systems Avro 748s.
The HAL and associated public sector companies had successfully managed, during the previous Congress Party-led coalition government, to stall the MTA project by insisting on their involvement in the programme, a participation the IAF too strongly opposed. For decades the IAF has ineffectually railed against HAL’s questionable performance in building under licence and maintaining fighters, transport aircrafts and helicopters and interminable delays in designing new platforms like the badly-needed basic and intermediate jet trainers.
Consequently, it seized upon the MTA programme as an opportunity to try and create an alternate supplier to the monopolistic HAL, the success of which remains undecided for now. However, in a related development, the MoD recently met another of the IAF’s long standing demands by appointing its Deputy Chief of Air Staff (DCAS), Air Marshal SBP Sinha to HAL’s board of directors to give it greater say in the functioning of its largest platform supplier.
But the market response to these cautious proposals has been subdued.
FDI in Defence
“Hiking FDI in defence from 26 to 49 per cent and excluding HAL from the MTA programme, though positive developments, do not go far enough” said Major General Mrinal Suman (retd), India’s foremost expert on acquisitions and offsets. Both measures will in no way end the monopoly of the MoD-controlled DRDO, OFB and DPSU’s, he regretfully adds.
Other analysts said increasing the FDI to 49 per cent would in no way alter the prevailing status quo, by increasing the private sector’s role in the domestic defence sector. Insiders suggest that the FDI was not hiked, as demanded by various financial bodies and chambers of commerce, to a more realistic and workable 74 per cent, due to pressure from indigenous public and private sector lobbies, for they remain technologically insecure about competing with established foreign OEMs.
“The 49 per cent hike in defence FDI is disappointing. Technically it makes no difference from 26 per cent. India is the bigger loser. We have just pushed away investments in defence manufacturing by another year. Round one to protectionist forces” said Amar Dubey, head of the defence and aerospace division of financial and business advisory consultants, KPMG
Other market analysts broadly concurred, maintaining that the increase in FDI signaled no material change and not incentive enough for OEMs to augment investments and induct proprietary technology. “The commercial reality of the 49 per cent hike is that though foreign investors would be eligible to repatriate higher profits they will have limited say on major issues like product diversification and exports” declared Gen Suman.
Alongside, Jaitley tellingly almost doubled the DRDO’s capital outlay to assist in India’s military modernisation from the interim defence budgets allocation of Rs 59.85 billion to Rs 92.98 billion. Concomitantly, the capital outlay for OFB’s 41 units that inefficiently build DRDO-designed equipment at hugely inflated prices too increased exponentially from Rs 5.3 billion to Rs 12.07 billion, signaling an even bigger future role for these doubtfully efficient state-run entities.
“There is no way the desperate materiel shortfalls the Indian military faces can ever be met domestically even in the medium term over the next 10-15 years. But a beginning need said military analyst Brigadier Arun Sahgal (retired) of the Forum for Strategic Initiative in New Delhi.
The MoD, he suggested, needs to formulate a realistic and prioritised plan in consultation with the tri-service Integrated Defence Staff (IDS) to fulfill immediate equipment shortages through direct imports. This needs to be followed by launching intermediate and long-term programmes aimed at self-sufficiency over the next 25-30 years with increased private sector involvement.
But to achieve this, the government must ensure a level playing field for the private sector by abolishing exorbitant taxes, tariffs and import duties, which on an average; add nearly 40 per cent to their product developmental and manufacturing costs. Unsurprisingly, the OFB and the DPSU’s are exempt from these liabilities, he added.
Concerns and Challenges
In materiel shortfall the Indian Army is the worst off. It needs carbines, assault, sniper and anti-material rifles, general purpose machine guns, howitzers, night fighting equipment for the bulk of its 59 armour regiments, air defence equipment, light utility, attack and heavy lift helicopters, body armour and assorted ordnance, missiles and ammunition. The 90,000-strong 17 Mountain Strike Corps that is currently under raising for deployment by 2022 along the disputed northeastern Chinese frontier too will need imminent equipping.
The IAF also faces acute deficiencies. Its fighter squadrons have declined from 39 to around 33 as it eagerly awaits the continually postponed procurement of 126 Dassault Rafale fighters from France to meet its Medium Multi-Role Combat Aircraft (MMRCA) requirement.
This delay has forced it to extend the total technical life of ageing fighters like MiG-21 and MiG-27 variants along with its Kiran trainer aircraft. The IAF also awaits the acquisition of mid-air tankers and the long-delayed Fifth Generation Fighter the DRDO is developing jointly with Russia as well as a basic and intermediate jet trainer. Its transport and rotary fleets too need upgrading as does its air defence capability and high altitude radar.
The Indian Navy (IN) is desperately short of submarines, submersible mines counter measure vessels, anti-submarine patrol ships, naval light utility and multi-role helicopters in addition to varied missiles and on-board 127 mm gun systems, amongst sundry other equipment.
However, the ongoing debate over importing materiel at the cost of indigenous development raises the equally vital issue of systematic defence planning and more importantly managing its economics in times of limited finances.
By now it is more than apparent that India can no longer afford the threat-based continental model of force development, which is not only wasteful but has deprived the country of achieving desired military capability; nor can it sustain extravagant fiscal mismanagement of meager resources.
Defence planners concur that the prevailing ad hoc model of single-Service operational readiness needs replacing with one in which the MoD takes the onus of defining the contours of future national military capability in concert with India’s national security interests and realistic threat assessments.
More importantly the MoD needs to have stakes in its development, rather than leaving the process to the respective Service headquarters, forever squabbling over allocations and me-First doctrines. Alongside, the MoD in concert with the Services also needs to examine carefully the changing nature of the spectrum of war in the region-from nuclear conflict to low level insurgencies-in order to evaluate the relevance of existing force structures required to meet future security challenges.
It is in this context that an articulation of defence strategy in all its aspects and keeping abreast of the revolution in military affairs (RMS) underpinned by sound economics is needed, to ably formulate integrated planning and its oversight.
“Few in India are working on the crucial issue of defence economics except for a handful of researchers and overseas consulting firms” said retired Lt Gen Vijay Kapoor. It’s time to lift the veil of secrecy surrounding defence planning and procurement procedures and conjoin resource utilisation and capability development, he added.
According to a two-star IDS officer associated with defence planning, India’s war waging potential is an amalgam of total optimal capability within outlays provided and keeping competing demands in sight. Therefore, a high modicum of inter-service priortisation, he stated, needs to be effected to prevent duplication or even triplication of assets like in communication and missile systems and rotary and even fixed wing platforms. The delayed appointment of a Permanent Chairman Chief of Staff or alternately a Chief of Defence Staff would go a long way to resolve this quandary.
Perspective planning for military modernisation and to address obsolescence issues is a two-tiered process. A Long-Term Integrated Perspective Plan (LTIPP) is prepared by the individual Services which, in turn, is coordinated and prioritised by the IDS that spells out India’s force structures and military capability profile over a 15-year period.
These recommendations are then discussed by the Defence Acquisition Council headed by the Defence Minister and decisions taken on whether to buy (Indian/global), make (strategic and hi-tech), buy and make (global) and buy and make (Indian), all under the DPP that was first introduced in 2002. The outcome is then factored into five-year defence plans and, theoretically, form part of the capital acquisition planning of individual Services to address respective modernisation needs on an annual basis.
The DPP followed a ministerial review of the 1999 Kargil conflict that severely criticised the MoD’s delays and wasteful expenditure in weapons procurement and modernisation measures. Thereafter, it has undergone several updates, the most recent in mid-2013.
Acquisition plans, however, continue to be subjected to two contrary pulls – the Services’ desire to procure the latest weaponry without thought or consideration about fully integrating the systems; and the MoD’s propensity to be guided continually by the DRDO’s misplaced capabilities for indigenous production. The inevitable result is delays and costly acquisitions that eventually end up merely as “product enhancers” for the military but with limited benefit to boost local industry.
Doubtlessly, all aspects of Indian defence planning remain shrouded in mystery – a complex riddle within a conundrum with little effort on the part of the MoD to demystify itself to the public that finances its operations. The common perception is that it is essentially a question of harnessing resources – financial, technological and human – to create, over time, desired military capabilities which are in concert with national defence and security strategy to protect and enhance national interests.
But sadly, India’s force capabilities over several decades have not seen any revolutionary jump in efficiency whilst its military modernisation drive remains mired by either vacillation, lack of funding, prioritisation, corruption scandals or a combination of all these factors.
This, in turn, has resulted in an increasing qualitative and technological gap with China’s conventional military capabilities and near symmetrical parity with Pakistan’s. In terms of military modernisation China is speeding ahead and is on the threshold of emerging as a first world technologically savvy army, dramatically changing the nature of threat. Even in the case of Pakistan, the relative military advantage that was in India’s favour both operationally and in equipment, is declining rapidly, and needs a completely overhauled approach.
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