Business Today

Self-reliance is still a pipe dream

Mrinal Suman | Print Edition: March 17, 2013

The inauguration ceremony of every Defexpo is always a disconcerting experience. Proud of the fact that India is the world's largest importer of defence equipment, every Indian leader flaunts India's huge shopping list. Instead of considering India's inability to produce a single major defence system as a matter of national shame, they bask in the attention showered on them by foreign vendors.

Mrinal Suman
Mrinal Suman
The current dispensation has been an unqualified failure. While self-reliance in defence production continues to be a pipe dream, the lack of a vibrant indigenous defence industry is costing the country dear. Foreign military equipment acts as a crutch. Dependence on it makes a nation hostage to the policies of the exporting nations and the dictates of unscrupulous foreign vendors.

The recent disclosure of alleged transgression in the procurement of helicopters is a matter of serious concern. In case the company is blacklisted, a number of critical projects will get stalled. This would hurt the modernisation of the Indian armed forces, which are already nearly 15 years behind the times. Nearly half the inventory is nearing the end of its useful life and needs replacement.

In 1995, the government announced an ambitious action plan to reduce the share of defence imports from 70 per cent to 30 per cent by 2005. Its utter failure can be gauged from the fact that the imports have climbed to nearly 75 per cent now, making a mockery of much-trumpeted policy initiatives. Worse, indigenous production is limited to low-tech items and components. Assembly of imported subassemblies is passed off as indigenous production and sold at unethically exorbitant profits, as in the case of Tatra vehicles by Bharat Earth Movers.

Most of the blame for the state of India's defence industry can be apportioned to the Department of Defence Production. It perpetuates the monopoly of an inefficient, insecure and inept public sector. Despite repeated assertions about equal opportunities for both sectors, all efforts are made to exclude private companies. As a result, even a decade after the defence sector was opened up, the private sector remains a peripheral player.

With 39 ordnance factories and nine undertakings, the public sector has excellent infrastructure and manufacturing facilities. But it has failed to use the periodic infusion of imported technologies as a springboard to develop newer technologies. Its monopolistic dominance and assured orders have created a culture of complacency.

Aware of its weaknesses, the public sector is wary of competing with a more efficient private sector, and tries to bag contracts through nomination. Regardless of the urgency of a proposal, the public sector stalls its progress unless it is awarded to it. The case of Tactical Communication Systems indicates the extent of its clout. The requirement was first projected in 1996, but it has taken the government 16 years to overcome the obduracy of the public sector, which wanted to keep the private sector out.

The Defence Research and Development Organisation (DRDO) has let the services and the nation down. It has the dubious distinction of never developing any equipment in the required time-frame and conforming to operational parameters.

Most of the blame for the state of India's defence industry lies with the Department of Defence Production, which perpetuates the monopoly of an inefficient, insecure and inept public sector

In the saga of false promises, exaggerated claims, inexplicable delays, cost overruns and sub-optimal products, the only success is the replication of some imported lowtech products, euphemistically called 'reverse engineering' or 'indigenisation'.

DRDO's abysmal failure to develop defence technologies forces India to depend on foreign manufacturers. Not a single state-of-the-art weapons system has been developed indigenously. There are three reasons for its inability to deliver: absence of accountability, lack of focus and failure to develop a scientific disposition.

India has failed to appreciate that the management of defence production and acquisition requires highly specialised handling. One can have the best of organisations and ideal procedures in place, but these are only as good as the people involved. The indifferent quality of functionaries is another reason for the current mess.

Officials who formulate policies and handle acquisition lack the education necessary to understand complex weapons systems. Their approach is entrenched in procedural quagmire

Officials who formulate policies and handle acquisition are drawn from the civil services and defence forces. They are not selected for any demonstrated talent, nor are they given any special training. They also lack the education necessary to understand competing technologies and the technicalities of complex weapons systems. For most of them, it is just another routine assignment, and their approach remains entrenched in bureaucratic mediocrity and procedural quagmire.

Being ill-equipped to understand the impact of the intricate dynamics of the arms trade on the growth of the indigenous defence industry, they formulate policies that are too convoluted to succeed. For example, the policy on foreign direct investment in defence has been a failure, as foreign investors find the 26 per cent cap and associated caveats unattractive. Instead of exploiting the enormous leverage of offsets to acquire cutting-edge technology, they are being wasted on transitory gains of counter-trade.

There was much euphoria when the government issued the Defence Production Policy in January 2011. It was hailed as a catalyst to enhance the potential of the Indian defence industry, especially the private sector, and small and medium enterprises. Optimism has since been replaced by despondency, and the policy has turned out to be a damp squib.

It is time the government shed its propublic-sector mindset and provided equal opportunities to the private sector. It should consider both sectors as national assets and harness their potential. Unfortunately, no encouraging signs are visible as yet.

The author is an expert in defence procurement procedures and offsets

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