How the Modi-Adani link hurts defence indigenization

Image result for pics of gopla adani and modi

[Gopal Adani and Prime Minister Modi]

In democracies, successful politicians reward their financiers, the money bags who helped them on their way up. This is a different type of beneficiary than the one who opens up his purse to fill the coffers after the ruling party is ensconced. The former kind comprises in some sense visionaries who espy the potential in select politicians and are willing to back their hunch. They are risk-takers, because what they do involves possibly alienating the political competition not so favoured by them. But should the bet come good, it doesn’t just rain goodies, it pours.

The Adani Family is headed by Gautam, who vaulted from a small-time polyvinyl plastics importer in the 1980s to head a $12 billion global conglomerate with diverse interests ranging from mining, energy, to infrastructure today. The Adani Group is in this happy position because of Gautam’s knack for political talent spotting. He got close to Narendra Modi whose rapid ascent from RSS pracharak to BJP apparatchik in Gujarat to chief minister and now Prime Minister paralleled the Adani family’s rocketing prosperity until now when Gautam Adani is Modi’s go-to person in the world of finance and industry.

Being Modi’s mascot has helped Gautam A to speedily and vastly diversify his business and industrial interests and the Adani Group to have a sudden but solid international presence. The latter’s closeness to the source of power has lubricated the growth of the Adani Group in far-off lands. Its controlling interest in the massive Carmichael coalmine project in Queensland that will involve the erection of 9-10 thermal power plants fructified 3 months ago in the teeth of environmental resistance. This may be owed in part to Gautam’s backing Scott Morrison to become the Australian Premier, but equally important was the perception in Canberra that helping the Adanis would win the Australian government the attention of Modi and India. It is no secret that the only other person in the room when Modi met his Australian counterpart Tony Abbott during the former’s state visit in November 2014 was Gautam A, and that the Comprehensive Economic Partnership accord the two countries signed on that occasion pivoted at least partially on the Adani investment in the extractive industry down under being realized.

A go-getter politician’s link up with a go-getting financier is always a paying proposition for the latter. The Birlas and the Bajajs converted their assistance and proximity to Mahatma Gandhi and the Congress Party in the pre-independence era into lucrative licenses and permits Jawaharlal Nehru’s quasi-socialist state bestowed on their one-time benefactors post-1947. Their political investment payed-off handsomely. Little has changed, except the dramatis personae. Dhirubhai Ambani (and now his son Mukesh) and Gautam Adani are the latter day Birlas and the Bajajs. What they want they by and large manage to get from the Modi government. The usually obdurate Indian bureaucracy manned by generalist nincompoops is in this situation rendered a willing handmaiden. (The story of just how Mukesh Ambani’s Jio venture has so quickly become a virtual telecommunications monopoly is illustrative of the state of affairs. Refer Daniel Block, “How government decisions are helping Reliance Jio monopolise the telecom sector”, Caravan, 01 February 2019, at )

Infrastructure is Modi’s priority and also it seems of the Adani Group. Other than ports and Special Economic Zones where this conglomerate has invested heavily, Gautam A desires to have an impact in the civil aviation sphere. And so, as India Today (of Aug 26, 2019) noted, the Airport Authority of India, disregarding the Union Finance Ministry’s criteria, swung into action to ensure his Group, with zero experience in airport management, took control of the Thiruvananthapuram airport. Other airports may in like fashion fall into the Adani lap. Concluding along the lines of an intrepid Filipino entrepreneur who with regard to doing business in India observed that “It is not ‘know how’ but ‘know who’ that matters”, a fortnight back the Abu Dhabi National Oil Company (ADNOC), joined with the chemical majors — the German BASF and the European firm Borealis, to partner the Adanis in setting up a $4 billion chemical complex — where else? — in Mundra, Gujarat, a state that boasts the maximum number of Adani investments and projects. (See “Adani partners UAE’s Adnoc, Germany’s BASF for $4 billion chemical venture”, PTI, Economic Times, Oct 17, 2019).

Adanis and Ambanis not too long ago decided to enter the even more lucrative defence business — the fact that weapon system costs increase exponentially every couple of years may have been the big attraction. Their decision to dive into the deep end meant for instance tie-ups with foreign companies in the combat aircraft and submarine categories. Larsen & Toubro in on the technically complicated nuclear powered ballistic missile firing submarine (SSBN) programme from its initiation in the 1980s is now in a position easily to handle a conventional diesel-electric submarine. For these reasons it was a shoo-in to bag the contract for the navy’s Project 75i. i.e., until Anil Ambani’s Reliance Naval and Engineering Ltd (RNEL) entered the scene as a spoiler by throwing a monkey wrench into the procurement process. RNEL that bought off the Pipavav shipyard and just like that set itself up as a submarine producer, contended the navy’s tilt was due to a son of a Rear Admiral in the procurement loop being employed by L&T. This charge brought the entire 75i project to a juddering halt as the Defence Ministry began its slow, spirit-sapping inquiry. This at a time when the most worrisome aspect of national security is not the decline in the fighter squadron strength as IAF makes out but the sheer falloff in the sea denial capability of the Indian navy with a fast attriting submarine fleet in the face of an expanding Chinese surface combatant presence in what should be India’s lake — the Indian Ocean.

With RNEL playing interference against and essentially seeking to sideline L&T, the Adanis stepped in smartly for what it believes will be easy pickings. Literally out of nowhere and at the proverbial last minute, the Adani-Group bid for the Rs 45,000 cr 75i project to build six conventional submersibles. The other bidders — the wasteful and laggardly defence public sector unit (DFSU) Mazgaon Shipyard Ltd (MDL), L&T, and RNEL all own shipyards. Adani Group’s chutzpah was in bidding with no shipyard of its own but with a prospective tie-up on paper with another equally hapless DPSU, Hindustan Shipyard Ltd (HSL), which has one in Vishakhapatnam. HSL is infamous for taking over a decade to merely refit the navy’s EKM Kilo-class subs! By which standard, the first Adani-HSL diesel sub can be expected to take to water in what, 20-25 years from now even with a chosen foreign (Russian, Swedish, French, or German) partner?!!

But the Adanis are nothing if not politically agile. Couple this fact to a politically fleet of foot Original Equipment Manufacturer (OEM) and what the nation gets is, for example, a facility to assemble. in collaboration with Elbit Systems of Israel. the dated Hermes 450-class drones, rather than the up-to-date Hermes 900 series. All such projects, including the 75i, promoted under cover and rubric of ‘Make in India’ furthers the aim of full armaments indigenization not a whit.

Indeed, in the case of 75i submarine, as I have repeatedly pointed out in my writings, the scam is bigger and deeper. Barring such technologies, such as mast optronics and silencing, the country — thanks to the SSBN production capability — has most technologies and wherewithal to wholly design and build conventional subs. In this situation, the reasonable thing for a self-respecting, resource-scarce, country to do would be to just buy a submarine design along with certain technologies from one of the vendors, rather than the whole boat which will leave the onus with the OEM to decide what technologies to transfer to the Indian partner, eventuating in no worthwhile technologies being transferred. This last is what happened with the Project 75 Scorpene where MDL is contracted to import “black box” technologies for the duration of the production run of this submarine from the French firm, DCNS. And this pattern will definitely be repeated were a new company entirely innocent of any sub production experience, like RNEL or the Adani Group, to be gifted the contract — however this is managed — by the navy at the prompting of the Modi government. Consider moreover the hard currency outgo at the point of first acquisition, i.e., a down payment: Instead of $500 million or Rs 4,000 crore — which is all that a foreign submarine design will cost, the country will be forking out in excess of Rs 50,000 crore — or over ten times as much money. The humungous lifetime costs over 30 years in the latter case will be multiples of this amount!

With defence industry burdened with and suffering from such spurious ‘Make in India’ projects and programmes, India cannot ever hope to be really self-reliant in arms, and hence be really sovereign. This to say that with the Adanis and Ambanis cashing in on their political connections, the national interest gets cashed out.

About Bharat Karnad

Senior Fellow in National Security Studies at the Centre for Policy Research, New Delhi, he was Member of the (1st) National Security Advisory Board and the Nuclear Doctrine-drafting Group, and author, among other books of, 'Nuclear Weapons and Indian Security: The Realist Foundations of Strategy', 'India's Nuclear Policy' and most recently, 'Why India is Not a Great Power (Yet)'. Educated at the University of California (undergrad and grad), he was Visiting Scholar at Princeton University, University of Pennsylvania, the Shanghai Institutes of International Studies, and Henry L. Stimson Center, Washington, DC.
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6 Responses to How the Modi-Adani link hurts defence indigenization

  1. Rupam says:

    Couldn’t Adani tie up with L&T to gain expertise and then go for orders separately. I mean that way, it would be win-win, Adani get expertise, employment generated, new home grown R&D increases etc. and at lesser price. Is it not possible.

  2. Sir. A big fan of yours. Got your 2 books namely :-

    1- Nuclear weapons and indian security
    2- why india is not a great power (yet)

    The thing is i read perhaps in CNAP (center for new american policy) or somewhere else that and i am paraphrasing “the rise of the NON-STATE ACTORS”.

    Given the fact that mercenaries were hired by factions everywhere in the world and by everyone. I wanted to ask about your thoughts in particular about it regarding the indian security (both external and internal) and i know you wrote an article about it regarding the “jungle warrior” sometime back in reference to a kind of a counter response for the internal security problem of maoist terrorism as well.

    So i really do want to know your thoughts on that particular point sir , please respond if you could.

    Thank you for your work on indian strategic affairs and your counter points. No indian could ever repay you in any way, shape or form for standing your ground in front of the americans in the heritage foundation and nobody literally nobody had the counter to your point.


  3. Some random guy says:

    What’s the solution to this? Is Congress any better than Modi?

    Atleast, I am (for now) satisfied with Article370, Triple-Talaq, Ram-mandir, Uniform Civil code (TBD) and the citizenship amend. Bill (TBD). Congress wouldn’t have done these.

    To know why I am satisfied with the above, checkout “Apostate Prophet” on YouTube.

  4. RG says:

    Mr. Karnad, any views on how to handle Gotabaya?

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