(Weekly Organ of the Communist Party of India (Marxist)
March 31, 2013
Indigenous Defence Manufacture, But Made By Whom?
expose of alleged
bribery in the Indian deal to buy Agusta Westland
helicopters from the Italian
company, Finmeccanica, led to a brief storm of media debates
commentaries, followed by some official probes and actions.
As often happens in
the most important
point in these debates, for once going beyond the now
commonplace one about
venal politicians and officials possibly including a former
Chief of the Air
Force, is why
The fact that this issue has now come to the fore is therefore indeed welcome. The need for breaking away from dependence on foreign suppliers, and to boost indigenous sourcing in the key sector, has now been underscored by no less than a former defence chief and even by the defence minister. One wonders, though, why the former did not more forcefully push for this when he was in office and why the latter, under whose stewardship no steps at all have been taken towards this goal, is now asking questions rather than providing a direction. The reason is, unfortunately, that both are barking up the wrong tree in their search for answers.
The former Navy chief has called for indigenisation, but in the private sector. The defence minister has said that the defence procurement process would be suitably amended to promote indigenisation. And commerce minister Anand Sharma has added to this chorus by calling for increasing the FDI limit in Indian defence industries to 75 per cent. All these worthies are wrong, on all counts!
SCAMS & INDIAN
Let us first deal with the idea that bribery will go down if there is more procurement from Indian private sector suppliers. Really? Are these people living in some parallel universe where everything is the opposite of what we know?
course, people in
has forgotten the
Satyam scandal when hundreds of millions were siphoned off
from corporate funds
through an accounting fraud with possible collusion of the
The Telecom scam too is fresh in the mind with fresh
revelations pouring out
even today, where not just bribery and malpractices were
involved, but also
attempts to place chosen ministers in the union cabinet.
Then there are the
Karnataka mining scams, the KG Basin deals, the murky goings
How can anyone imagine, let along expect the average Indian to think, that if the Indian private sector were involved in manufacture of defence equipment, then suddenly all the shady dealings will miraculously cease, and crony capitalism will no longer operate? Indeed, the many decades of experience with Indian business show clearly that its dealings with government, be it for licenses in the old days or for contracts in the present “liberalised” era, is characterised by manipulation, bribery, influence-peddling and cronyism. Why would a private sector Indian defence industry be any different?
fact, it is all the
more likely to be riddled with corruption and to involve
manipulation of the system as a whole. Privatisation of the
defence sector in
This is not to argue that private Indian corporations should not be allowed anywhere near the defence or strategic sectors. Far from it. The Indian private sector already plays an important role in many areas of space and missile technology, nuclear engineering, aircraft and ship-building, and so on. For reasons discussed later, most of this involvement is in the nature of sub-contracts rather than as prime contractors. And so it should remain.
Just think… if the Indian Air Force had bought helicopters from a defence public sector undertaking (PSU), who would have paid a bribe to whom?
against the domestic private sector playing a leading role
harsh, what critical defence hardware can one conceive of
that the Indian
private sector could make on its own today and supply to the
Aircraft or UAVs? Artillery or heavy weaponry? Avionics?
Armoured vehicles or
tanks? Foreign companies that are currently supplying
Tinkering with the Defence Procurement Policy or the Defence Production Policy or both, it not being clear which the defence minister had in mind, will not help overcome this basic hurdle. What is the use of pronouncing that such-and-such percentage of procurement will be done from Indian suppliers if there is no capability? This will only give an excuse for someone down the line to later say well, this was the policy but, since there was no supplier, let us buy from abroad. Then questions will be raised as to if this was really so, who facilitated such a decision, whether there was any consideration etc. More scams in the making?
The reality is that, whether one likes it or not, or even if it is because of historical governmental dominance, the Indian private sector is today simply not capable of playing any significant role in design, manufacture, supply and maintenance of critical defence hardware. As things stand now, and for at least a couple of decades more even if things were to start changing today, the Indian private sector could at best be a sub-contractor and, in such a role, could certainly provide time and cost efficiencies. To expect more would be wishful thinking at best and self-defeating at worst.
fact, the repeated
clamour, led by the commerce minister no less, for
increasing the FDI limit in
Indian defence industry to 75 per cent or more is simply a
way of boosting the
private sector role and transferring a larger slice of the
pie to them. It is
indeed a tacit acknowledgement of the lack of capability of
the Indian private
sector, because the expectation is that foreign defence
majors would invest
money in Indian companies acting as very junior partners.
Essentially, we would
have foreign majors setting up shop in
As frequently and regularly argued in these columns, the real answer to the question of indigenisation of defence equipment manufacture lies in a conscious, deliberate and planned building of capability in the State sector, by all means with selected private sector entities as partners in defined roles, taking up of projects meeting requirements of the user agencies, and a system of strict independent monitoring and genuine accountability. All these three essential ingredients are sadly missing today.
What is the way out?
First there needs to be a White Paper on Defence Manufacturing Capability, an honest first-time ever effort to assess indigenous capability in different sectors, status and utilisation of infrastructure and human resources, and performance on different projects. Such an assessment should also encompass monitoring and accountability mechanisms, including the role, performance and accountability of the defence minister, of the minister of state for defence production, and of the scientific advisor to the ministry of defence. This should be a foundation for a thorough overhaul of the system and structures of defence production, and to plan next steps in a concrete manner.
Then a specific need-based set of short-term and medium-term projects should be identified and taken up with expert monitoring and strict accountability, which straddle the defence and civilian sectors so that spin-off benefits can diffuse into the industrial base rapidly and with maximum spread effect. Some projects that suggest themselves are a next-generation basic trainer aircraft that can be a base for a range of models catering to flying clubs, survey and reconnaissance, 2-4 passenger transports and so on; a 70-90 seater jet aircraft that can serve as both a military transporter and a medium-range passenger aircraft for regional routes; completing the LCA and Intermediate Jet Trainers; a set of artillery and armoured vehicles. Just an indicative list.
The point is that the issue of indigenous defence equipment production, with enormous linkages with the broader civilian industrial base, and capabilities therein, is far too serious a matter to be dealt with in a cavalier manner, with off-the-cuff suggestions tinkering at the margins and even grievously harmful to the cause of self-reliance. The time for urgent and serious action is now.