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Mainstream, Vol LII, No 15, April 5, 2014

Defence and Self-Reliance

Sunday 6 April 2014

[We have come across two articles related to defence and self-reliance in Business Standard of late. Since the subject is under intense discussion in recent times we are reproducing, with due acknowledgement, the two articles for the benefit of our readers.]

The Missing Military-Industrial Complex

Genuine Strategic Autonomy lies in creating Conditions Conducive to Private Participation in the Defence Industry

Hemant Krishan Singh and Sanjay Pulipaka

As Asia grapples with the management of strategic change and related security challenges, countries across the region—from India to Japan—are strengthening their defence capabilities. Meanwhile, despite periodic changes and up-dates of its defence production and procurement policies to try and build indigenous capacity, India’s Ministry of Defence (MOD) has been largely unable to remedy severe constraints in the country’s defence industrial base. Around two-thirds of India’s defence hardware require-ments are still being imported. There are endemic delays in domestic production progra-mmes while costs continue to escalate, seriously undermining India’s defence preparedness. This is an area of vulnerability that India can ill afford.

Symptoms of this deficiency abound. Even after three decades of development, the serial production of the Tejas Light Combat Aircraft is still some years away. Russian-origin SU-30MKI fighters basically continue to be assem-bled, not manufactured, by Hindustan Aeron-autics Ltd. The long-awaited medium multi-role combat aircraft contract remains bogged down over modalities for co-production of the Rafale.

In contrast, as pointed out by former Air Chief N.A.K. Browne, “the streamlined induction and speedy operationalisation of our new assets like Mi-17 v5, C-130J, Pilatus PC-7 and C-17 air-craft have afforded us unprecedented response capabilities”. Sadly, outright imports seem to work, with timely deliveries and without cost overruns.

Even in the middle of a prolonged diplomatic impasse with the US over the past month, it is significant that India concluded a contract worth $ 1.01 billion for the acquisition of six additional C-130J “Super Hercules” aircraft on December 27 last year. This may be welcome for the Indian Air Force but gives rise to concerns in some quarters about “dependence” on the US. However, a growing defence trade and techno-logy partnership with the US is hardly likely to push India into defence dependence. If that were indeed the case, then India’s defence relationship with the erstwhile USSR and now Russia would have to shoulder much of the blame. According to the Stockholm International Peace Research Institute, Russia accounted for 82 per cent of Indian arms imports during 2006-10. Decades of defence ties with Russia have not helped kick-start India’s domestic defence industry, and can only be described as a patron-client relationship.

Therefore, holding up the nascent India-US defence relationship as a signal of India’s dependence on international players would be a wrong diagnosis. The problem lies elsewhere.

There are a number of structural constraints bedevilling India’s domestic defence industry. In the past, India shunned private participation in its defence industry, while Cold War dynamics restricted defence industrial interactions with the West. Defence Public Sector Units (DPSUs) emerged as the principal players, and there are today more than 50 Defence Research and Development Organisation facilities, 41 ordnance factories and nine DPSUs. The fact that this combine is still struggling to meet the growing needs of the Indian defence forces because of inherent limitations speaks for itself. Attempts at indigenisation have been largely rhetorical and less than satisfactory, to say the least.

It was only in 2001 that the defence industry was finally opened up for the Indian private sector, but procurement policies have remained heavily skewed in favour of seemingly overburdened but chronically under-performing DPSUs. The latest iteration of the Defence Procurement Procedure 2013 mandates purchases from an Indian maker as the most preferred option, which could potentially be made to work to the advantage of the Indian private sector, which still lacks operational experience, technology and resources. However, moving from the monopoly of DPSUs to the oligopoly of a few Indian private sector com-panies would not be a sustainable model either. What India requires is a vibrant defence indu-strial base with multiple domestic and international players engaged in healthy part-nerships as well as competition to provide the best weaponry for the armed forces.

In a span of two decades, India has emerged as a globally competitive hub of automotive manufacturing, and it has been suggested that appropriate policy frameworks can bring about similar transformations in the Indian defence industry through growing private sector participation. However, it should be noted that the defence industry, unlike the automobile sector, is a monopolistic market with the government as the only buyer. This structural constraint implies that there is a greater degree of business unpredictability for private players. It is not surprising, therefore, that Indian private companies, while evincing interest, still seem to be hesitant to incur the massive capital expen-diture that is required in the defence industry.

Policy measures are needed to address this particularity. Categorising companies as “desig-nated vendors” for defence production in certain areas can give confidence to Indian private players. Developing synergies between civilian and defence needs and harnessing dual-use technologies to serve both can ensure a wider customer base.

Furthermore, India needs a clearly articulated defence export policy, providing access to international markets for domestic and foreign companies operating out of India. Multinational corporations bringing in foreign direct investment (FDI) should be able to export weapons systems or components manufactured in India. China’s defence industry has made great strides and is already the world’s fifth largest defence exporter.

For the Indian private sector to manufacture defence products using high-end technologies, collaboration with leading global defence manufacturers and their vendor base is essential. Enhanced FDI limits, which also mandate techno-logy transfer, collaborative research and co-development, can incentivise foreign partici-pation in developing India’s defence industrial base. As matters stand, under the current FDI cap of 26 per cent, India has received a meagre $ 4.12 million in FDI inflows over the past decade. FDI should preferably be permitted up to 100 per cent. It is remarkable how we are happy to import foreign-made defence equip-ment without realising the need to create a conducive environment for its production within India.

Along with these systemic and regulatory reforms, addressing bureaucratic delays and bottlenecks in MOD is another imperative. With the defence budget under increasing stress following India’s economic downturn, long-projected reforms such as a Chief of Defence Staff are key to establishing well-considered and balanced priorities for defence acquisitions.

Implementation of India’s defence moder-nisation plans has continually fallen behind. India’s MOD must display a stronger sense of strategic purpose in fostering a diversified defence industrial sector, with DPSUs co-existing alongside a multiplicity of private sector players, both domestic and foreign.

MOD would also do well to speedily take forward proposals for joint collaboration with the US that have been on the table since last September. It would be good to test former US Deputy Defence Secretary Ashton Carter’s pledge to provide India with “all the capabilities it needs to meet its security requirements”, and the affirmation in the bilateral joint declaration concluded in September 2013, that “the United States and India share common security interests and place each other at the same level as their closest partners”.

If India aspires to genuine strategic autonomy, building defence industrial capability through the induction of the highest technologies extant would be a good place to start.

(Courtesy: Business Standard, January 21, 2014)

Hemant Krishan Singh holds the Wadhwani US Chair at the ICRIER, New Delhi. Sanjay Pulipaka is a Research Fellow with the Chair.

Some Myths about the Indian Military-Industrial Complex

There are Too Many Uninformed Fallacies about our Defence Production Programmes

Ashok Parthasarathi

As a student of military and security affairs, I find both analysts and the media having many misconceptions about our military industrial complex. This article deals with some major ones to promote a correct understanding of the matter.

First, our defence hardware imports are around 60 per cent, and not 70 per cent. Second, delays and cost over-runs in our defence production programmes also occur in all North Atlantic Treaty Organisation (Nato) countries; the reasons are many and complex. These have been documented in numerous reports of the General Accounting Office of the US Congress. The UK Comptroller and Auditor General has done likewise.

A specific major example is the M-88 aero-engine for the latest French fighter-bomber Rafale. France’s sole and public sector aero-engine manufacturer, Snecma, which has been making military aero-engines for 30 years, took 11 years to design and develop that engine against its commitment of seven years to the French ministry of defence. There was also a 320 per cent cost over-run. As a result, there was also a massive delay in Rafale’s first test flight from 1982 to 1987.

Another misconception is that the design and development (D&D) of the Tejas Light Combat Aircraft (LCA) took three decades. In fact, it took only two, despite encompassing laboratory R&D, production of two technology demonstrators and two prototypes plus 2500 hours of test flying. The Tejas series production plan would be: six LCAs in 2014-15, eight in 2015-16 and 10 in 2016-17, all for induction in operational Indian Air Force (IAF) squadrons against an IAF order of 40 aircraft by 2020—which will be met.

As for the IAF mainstay, the 4.5 generation Sukhoi-30MkI, it is misconceived that the plane continues to be assembled and not manu-fact-ured in depth by Hindustan Aeronautics Ltd (HAL). Actually, the 30MkI (where the I stands for India), is radically different from the Su-30 Russia makes for its own Air Force. Their plane is a pure air-defence fighter; ours is a multi-role aircraft, that is, it also includes air-to-ground attack capabilities. Moreover, the MkI was a joint D&D project with large technical and operational inputs from IAF engineers and Defence Research and Development Organisation (DRDO) scientists working with Russian engin-eers. So, the 30MkI is the creation of joint Indo-Russian knowledge, ingenuity and skill to meet the IAF’s operational needs.

HAL started its phased manufacturing prog-ramme for the 30MkI in 2004-05. Over 2004-05 to 2012-13, HAL manufactured 174 aircraft. By 2012-13, the air frame was 100 per cent indigenous while the more complex engine was 70 per cent indigenous. This included some 1500 highly sophisticated and complex castings and forgings—to the great surprise of Russian engin-eers. Today, the aircraft’s overall indigenous content is around 75 per cent. A detailed plan is underway to take that to 85 per cent in 2015-16.

Frequently, the Tejas D&D, the Su-30MkI production and the contract between HAL and French aerospace company Dassault for the Rafale medium multi-role combat aircraft are compared in terms of costs and supply time frames with the allegedly “speedy operatio-nalisation” of finished import-based aircraft, such as the Mi-17v5 helicopter from Russia, the C-130J and C-17 transporters from the US and Pilatus PC-7 basic trainer from Switzerland. But doing so is not comparing apples with apples because the latter constituted direct imports. Additionally, Tejas uses indigenous technology.

Direct imports make the user eternally and massively dependent on the foreign supplier for spares and technical services, and when modifications, add-ons and upgrades over the 30- to 40-year lifetime of the aircraft have to be made. Financially, foreign suppliers jack up prices for both spares and service to exorbitant levels.

If an Indo-Pak war occurs or we conduct nuclear device tests, the Nato government of the foreign supplier will embargo all supplies of spares and technical services, thereby immobilising our imported weapon systems. Only Russia has never applied embargoes on us. Another problem with direct import occurs if the foreign supplier phases out production of the supplied weapon system. It then cannot supply spares or technical services, so the weapon system becomes non-operational. This occurred with seven US-origin enemy artillery-location radars India imported in 2005. Consequently, all seven radars have been non-operational for the past six years and more.

A common uninformed allegation is that decades of defence ties with the Soviet Union have not helped “kick-start” our defence industry and that they have the character of a “patron-client” relationship. The contributions of such ties in building our defence industry have been so wide-ranging and deep that they need a separate article to deal with them. Here, however, are some major examples: laying the foundation for the industrial capabilities and capacity for in-depth manufacture of fighter aircraft with the MiG-21 models FL, M and Bis from as far back as 1964 and the MiG-27 fighter-bomber from 1974. Taken together, these projects did, indeed, kick-start our defence aircraft industry by: (i) training a huge number of specialist engineers, technicians and skilled workers; (ii) building a large vendor population; and (iii) supplying highly specialised equipment and facilities to HAL to manufacture, test and prove the aircraft. The Soviet ties built our domestic technological and industrial capabilities so well that our own engineers and technicians were able to upgrade the MiG-27 without any Russian assistance.

Further, the experience and expertise developed as a result of these defence ties played a major role in enabling HAL, DRDO, IAF and the Aeronautical Development Agency to D&D, engineer, flight test, and manufacture the Tejas LCA.

The ties also contributed to numerous other major weapon systems, such as the stealth frigates of the Navy and two generations of main battle tanks for the Army—the T-72 of the 1970s and the T-90 of the early 2000s.

Then there is the major case of the nuclear weapon-tipped ballistic missile firing nuclear submarine, Arihant, and the futuristic Fifth Generation Fighter Aircraft now in progress. These are weapon systems no other country was, or is, willing to even discuss with us, let alone undertaking joint technology development as the Russians have.

The Russians have also provided us enormous technical assistance to overcome our design and engineering problems in successfully launching and targeting the critically important 3500 km Agni-3 intermediate range, nuclear-tipped, strategic ballistic missile developed by DRDO. These few examples put paid to the allegation that Indo-Soviet/Russian defence ties were, and even now are, those of a “patron” vis-à-vis a “client”. Would a “patron” help a so-called “client” overcome problems in a strategic missile developed by the “client”? Would the US be willing to even consider providing us such help?

(Courtesy: Business Standard, February 27, 2014)

The author is the former Science and Technology (S&T) Adviser to the late Prime Minister, Indira Gandhi, and a former Secretary of several major S&T Ministries of the Government of India.