Business Today

In A Rut

Bureaucratic hurdles and inefficient decision making are holding back defence manufacturing. Can the new government change things?
twitter-logo Anilesh S Mahajan   New Delhi     Print Edition: April 21, 2019
In A Rut

India's defence sector does not lack projects or avenues but red tape and inefficient processes coupled with delayed decision-making have meant that India lags on multiple fronts. The Balakot airstrike renewed the focus on criticism that India's arsenal is both depleting and ageing rapidly. New Delhi is coming in for mass criticism on the lack of defence preparedness and its sluggish approach to reforming the manufacturing, acquisition, and future vision processes.

The Indian Air Force, for instance, has 31 squadrons, though experts opine that at least 42 are needed should India need to take on both Pakistan and China. Worse, most of this fleet comprises MiG-21 aircraft that are almost 40 years old.

In the Unmanned Aerial Vehicle or drone arena, experts are unanimous that both civil and defence UAV development and sales will need to be pushed simultaneously if the sector is to take off. Everyone agrees that the Indian defence establishment lacks drone sufficiency. Lengthy decision-making processes, however, have no place in an era of rapidly changing technology in the drone industry.

Despite accounting for 13 per cent of the global defence trade, India was among the world's top three arms importers between 2012 and 2016, say independent reports. Imports meet 70 per cent of our defence requirements. While China has successfully replaced almost all of its arms imports with indigenous products, India remains dependent on weapon technology from multiple sources - Israel, the US, South Korea and the EU. The Modi government has had to approach friendly nations even for its digital warfare and drone needs.

For the last two decades, India has been vocal about creating business opportunities for indigenous players that would simultaneously attract foreign investors. But industry players say 'Make in India' is yet to translate into big-ticket orders for manufacturers, and that this is because the security establishment is still resistant to enlarged private sector participation.

As a result, 'Acceptance of Necessity' and 'Request for Proposal' gambits don't generate the kind of business that would take indigenous players into the big league. In fact, India could not attract even $6 million worth of FDI in the sector, and that too across two decades.

Across the board, players say that the government has demonstrated an intent to move ahead in the defence arena but bureaucratic hurdles and inefficient decision-making propelled by a fear of legal and investigative blow-backs, as well as the fixation on only developing technology indigenously, is retarding business.

Corporate houses feel they are being deprived of big-ticket contracts. Most orders in excess of $500 million are awarded to either public sector enterprises or foreign vendors. Moreover, procedural delays often lead to expensive emergency purchases that are counterproductive to indigenous capability development.

The order of the day is revamped processes that can keep up with rapid technology advances and security requirements.

@anileshmahajan

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