Published in ‘East Asia Forum’, Australian National University, Canberra, Sept 22, 2020 at https://www.eastasiaforum.org/2020/09/22/modis-military-procurement-missteps/
As part of Indian Prime Minister Narendra Modi’s ‘self-reliant India’ policy, Defence Minister Rajnath Singh issued a list of 101 defence items in August with different timelines beyond which their import will be banned, with a second list soon to follow. From December 2020, the armed forces will not be able to purchase some 69 types of foreign-sourced military goods, including many major weapons systems and platforms: ship-borne cruise missiles, diesel submarines, missile destroyers, light combat aircraft and helicopters.
Most of these are already produced in India under licence, so the government is confident the ban will force the Indian defence industry to achieve self-sufficiency within a decade. Because imports will not be allowed for any reason, the military will be compelled to become stakeholders in indigenous programs. However, there has been minor pushback, with immediate purchases from abroad being approved to fill ‘voids’ in the war wastage reserve and the war stock just in case hostilities flare up with China in Ladakh.
Singh promised contracts worth US$54 billion to the Indian defence industry, but instead spawned scepticism because this figure includes funding for procurements that are already underway. The reality is that the Indian government has awarded US$34 billion of contracts to foreign arms suppliers, far exceeding the US$20.25 billion for Indian companies. Since defence budgets are written annually, there is no hint of long-term government funding for particular programs.
There are also more fundamental problems with the plan. It is ironic that a country more-or-less capable of making its own strategic armaments — nuclear warheads, long-distance missiles and ballistic missile submarines — is unable to produce conventional weapons. Because strategic weaponry is not available at some arms bazaar, these were developed in-country under a special dispensation — the ‘technology mission’ mode — directly under the Prime Minister. This precluded the procedural hassles, niggling financial oversight and bureaucratic foot-dragging usually faced by conventional weapons development projects. The arms self-reliance policy will be boosted if all indigenous conventional weapons projects too are developed under a similar regime.
India’s mindbogglingly complex defence procurement system, tilted against local industry, has been only superficially reformed. The latest version of the Defence Procurement Procedure defines a hierarchy topped by indigenously designed, developed and manufactured (IDDM) items. Next are items satisfying the ‘Make in India’ (MII) initiative, which includes equipment reproduced by foreign companies from their international product lines — Lockheed Martin’s F-16 fighter aircraft, for example, which will be sold as the new F-21.
IDDM items must include at least 60 per cent Indian content (whether by weight or value is unclear), with the same requirements applying to spares, special tools and test equipment. The MII category allows foreign firms to get away with only 40 per cent, skewing the competition cost wise in their favour. This pushes the armed services towards the MII option, involving munitions that are proven but that quickly become obsolete.
This process is complicated by the lack of procedures to assess the use of local content in either category — the defence force will have to take foreign firms at their word, which isn’t always reliable. In this case, kicking the crutch of foreign weaponry from underneath the armed services will not advance the cause of a ‘self-reliant India’ without first removing the anomalies in the procurement procedures.
The military has a habit of finding anything imported acceptable and anything Indian-made suspect. The travails of the Indian-designed and developed 4.5 generation, near all-composite Tejas light combat aircraft are well known. The Indian Air Force (IAF) contributed little to the project other than frequently changing the Air Staff Qualitative Requirements, imposing delays in the prototype and certification stages and, when the aircraft rolled out, claiming it was technologically dated. The IAF was finally pressured into buying a squadron’s worth of Tejas, and, with the push for indigenisation, will soon order an additional 83.
The Indian Armed Forces were also unconvinced by the Indian-designed Arjun main battle tank, buying too few to support the necessary economies of scale. Despite outperforming the Russian T-90 MBT in all field tests, the army contends the Arjun is wider and heavier than the specifications. Meanwhile, their T-90 fleet keeps growing.
The precedent for the stepmotherly treatment of locally-produced armaments was established in the mid-1970s, when the IAF favoured the British Jaguar low-level strike aircraft at the expense of the HF-73, the advanced variant of the Indian-designed Marut HF-24 — the first supersonic jet fighter to be produced outside of North America and Europe.
Compared with their peers in the public sector, private-sector defence industrial firms boast better designing wherewithal, work ethic and labour productivity. But the Modi government continues to relegate private firms to the role of sub-contracting for the apathetic and wasteful defence public sector units, resulting in time and cost over-runs, delayed delivery schedules and alienated military customers.
The government has so far ignored the economically sensible solution of making the defence industry more profit and export-minded. That would entail Hindustan Aeronautics Ltd. sharing the design and source code for the Tejas LCA with Tata Aerospace and Mahindra Aerospace, creating multiple production lines for a combat aircraft with a ready market in the developing world. They could also task Larsen & Toubro, the engineering giant that puts together the Arihant SSBN, with producing conventional submarines.
A more ambitious approach would be to divide the public-sector research and development and defence industrial assets into two giant competing combines, each under the managerial control of leading private sector companies such as Tata and L&T. These two complexes would then bid for weapons contracts, with the Defence Ministry funding development in the prototype and selection phase.
Absent such optimal use of defence industrial resources, prospects are bleak for a militarily self-sufficient India.