India's military indigenisation

This apart, even while several countries, including many from the west, are looking forward to India using its space credentials to launch its own satellites through ISRO's rockets—India in the realm of defence acquisition continues to depend pitifully on imports for keeping its defence preparedness on the right track. This paradox has not just been a major drain on the exchequer with the country accounting for 13 per cent of global weapons import between 2012 and 2016, but it also raises pertinent questions on whether India, in spite of its economic wherewithal, can rightfully claim to be a regional powerhouse with global aspirations if it has to depend so much on imports for its defence requirements.

Is there a ray of hope?

Without indulging in the blame game of who essentially is culpable, the time has come for every stakeholder to pull up his socks and do the needful to make India self-reliant in defence manufacturing. It ideally should not be a major problem to develop a defence industrial ecosystem given the country's enormous industrial infrastructure base spread across the public and private sector. Yet, for curious reasons, the potential has never been leveraged to the fullest. For long, the Indian industry too had blamed the Government for a step-motherly attitude for favouring the Defence PSUs often at the cost of the private sector. But, now, hopefully, much of that would change.

With the Modi Government's increasing stress on developing the domestic defence manufacturing base to reduce the quantum of imports down to 20-25 per cent over the next half of a decade, a whole new vista of opportunities is gradually opening up for Indian companies.

One such area is the manufacturing of small arms in the country. Recently, the Defence Acquisition Council (DAC) headed by Defence Minister Nirmala Sitharaman approved the procurement of 7.4 lakh assault rifles for the Indian Armed Forces under the 'Buy & Make (Indian)' category. The estimated Rs 12,000 crore worth of rifles would thus be procured from OFB and the private sector, which has the option of setting up manufacturing plants in collaboration with global OEMs. In spite of being considered at the lower end of the technology spectrum, India's state-owned OFBs has been woefully short of expectations in terms of meeting the requirement of small arms of armed forces and thus, opening up the sector to private enterprises is a step in the right direction. The quantum of this market is huge, which can be gauged from the fact that domestic manufacturers would potentially be catering not just to the 1.4 million strong Indian Armed Forces but also to the million-strong Central Armed Police Forces and the 2.2 million personnel state police forces, in the long run. This apart there would invariably be the option of catering even to the global market through exports.

Importance of small arms

For long, India spent an enormous amount of money for big-ticket acquisitions—from abroad—of critical weapon systems, starting from fighter aircraft to missiles even while literally thrusting on the Armed Forces whatever small arms the state-owned factories produced. While the big-ticket acquisitions and striving for quality indigenisation in the realm of ballistic missile development or combat aircraft is extremely critical, the same kind of importance, ideally, should have been given by the successive governments to small arms development too. The reason being, countries do not fight conventional wars every day. However, it is the humble infantryman of the Indian Army or even the constables of the Central Police Forces who fight out the sub-conventional wars against terrorists and insurgents on a daily basis. Therefore, they deserve as much of the cutting-edge quality small arms as the pilots of the Indian Air Force deserve fourth or fifth generation combat crafts or the sailors deserve state of the art warships.

The road ahead

Recent steps related to simplifying the Export-Import Policy and creating the Standard Operating Procedure for the issuance of No Objection Certificate for the export of military stores indicate the intent of the Government to not just broad base the defence industrial base but also make India a global manufacturing and supply chain hub. This has been given further impetus by the announcement of the Modi Government to develop two defence industrial corridors, one of which will be in Uttar Pradesh while the other would be in Tamil Nadu creating a linkage between Chennai and Bangalore. Add to this, the new category of capital procurement namely 'Buy Indian'- Indigenously Designed, Developed and Manufactured (IDDM) vindicates the eagerness of the Modi Government to promote not just domestic production but also the indigenous development of defence equipment. In addition, the Modi Government recently also allowed the private sector to manufacture eight selected categories of ammunition for the Indian Army along with the commitment for long-term contracts for selected ammunition manufacturers, a significant step towards reducing ammunition imports in the future and developing indigenous capabilities.

Can India emulate the success of China or Brazil?

The possibility of developing an indigenous defence industrial base in India can be gauged by the success of countries like China, which today boasts of a large number of reasonably prominent defence companies such as AVIC, Norinco, China South Industries Group Corp, China Electronics Technology Groups Corp, Chengdu Aircraft Industries Corp, Harbin Aircraft Industries Group and Hangxin Aviation Engineering Group to name a few. Further, the success of Brazil's Embraer in the aerospace arena vindicates that a complex military industrial base can be built from scratch if the intent is right. Offsets provide similar major opportunities for Indian engineering and IT companies to become a critical part of the supply chain of the global arms market. Many reputed Indian industrial giants have now entered the domain of defence platform production – while most of them have deep pockets to sustain for long, putting money into research and development of products is key. Joint ventures with foreign OEMs can provide access to readymade product assembly and component manufacturing business but eventually, it is the capacity to absorb technology and to develop indigenous products from thereon which is key to becoming a major defence OEM company in its own league.

Emulating the success stories in other sectors

There are examples of companies like Hero Motocorp and Bajaj Auto who entered the two-wheeler market in a joint venture with companies like Honda and Kawasaki of Japan and then eventually emerged as global players in the automobile industry on their own. Today, Hero Motocorp and Bajaj Auto are some of the largest two-wheeler manufacturers in the world. Reliance Industries itself is an iconic example of an Indian company starting from scratch and becoming one of the largest integrated oil companies in the world. Thus, there is no reason why similar excellence cannot be replicated in the Indian defence industry. India's private sector has enough engineering depth to achieve that feat.

Course correction needed for Defence PSUs

In the same league, the time has also come for India's Defence PSUs and Ordnance Factory Boards to pull up their socks. If the soldier is accountable for his performance on the battlefield amidst flying bullets and shrapnel, the same kind of accountability should be there for the companies who made his rifle and bullet-proof jackets. For long, India's Defence PSUs and OFBs had taken the Armed Forces for granted and with assured steady work orders from the government, many became complacent.

Take for example the Israeli Aerospace Industries or IAI. It is as much owned by the Government of Israel as OFBs are owned by the Indian Government. And yet, the differences are striking. From drones to military air systems to ground defence systems and patrol boats to missiles systems, IAI is a class apart. Many of their products such as Barak missiles to Phalcon air surveillance systems to Heron and Searcher UAVs are critical parts of the Indian armoury. India's Defence PSUs and OFBs have a long way to go before they can match the likes of the IAI of Israel.

It is also time for the DRDO to analyse how USA's Defence Advanced Research Project Agency (DARPA) has been successful in creating cutting-edge futuristic technologies for the US Armed Forces. Where credit is due, it should definitely be given to DRDO but had it been up to its mark, India's dependence on imports would not have been so high. In many cases, though it was also about the quality platforms developed by DRDO which were poorly-manufactured later by state-owned defence companies. Nevertheless, the time has come for India's state-owned and private enterprises to collaborate for a greater good and develop a symbiotic relationship.

Handholding is critical

On the part of the Ministry of Defence, it is now imperative to do the real time handholding of the private sector and help them develop into world-class entities. And for that to happen, project contracts have to be given to them within a defined timeline. While the intent of the Government in terms of developing a robust military industrial base in the country with considerable participation from the private sector is beyond doubt, not much has happened in the last four years in terms of major contracts going to the private sector. Hopefully, the case of assault rifles production in India would be a new beginning and act as a harbinger for India's quest to reduce its dependence on military imports. The Indian private sector should grab this opportunity at the earliest.