India struggles to break free of imports
India's state-run military-industrial complex is an industry-in-the-making capable of licensed manufacture but limited development.
Rahul Bedi reports
India's Ministry of Defence (MoD) is struggling to break free from its decades-long dependence on imported materiel by developing indigenous capabilities to replace the military's predominantly Soviet and Russian equipment. It is proving to be a struggle.
"With the MoD floundering to lay the foundations for a robust military-industrial base or cutting-edge defence research and development [R&D] by involving the private sector in a big way, India will continue to import huge quantities of armaments and military subsystems for a long, long time to come," said the Comptroller and Auditor General's (CAG's) August 2010 report. For example, the imported content in the country's three major 'indigenous' platforms - the Tejas light combat aircraft, Arjun main battle tank (MBT) and Dhruv advanced light helicopter - averages about 60 per cent, reaching almost 90 per cent for the Dhruv, according to the CAG. Since all three platforms exceed the 50 per cent ceiling on imported content, they cannot be designated as indigenous.
Even the Indian Navy (IN), credited with attempting to methodically indigenise its warship building, merely integrates most imported equipment in the 39 vessels currently being constructed. Additionally, official and industry sources have admitted that, with regard to warship and aircraft construction, India has indigenised barely five per cent of its component requirements with, the remainder being sourced from overseas.
According to official estimates, India imports over 74 per cent of its defence equipment despite successive governmental assertions that the country would become largely self-reliant in this field by 2005. This is a shortcoming that Defence Minister A K Antony recently admitted was "shameful and dangerous", even though efforts to indigenise manufacturing are beset by cumbersome and complex bureaucratic procedures, technological over-reach and limited R&D.
"India has not been able to produce a single defence system with cutting-edge technology, with every critical item being imported," said former major general Mrinal Suman, one of India's foremost experts on military offsets and the domestic defence industry, in July.
As an example, he said that exports from India's 39 Ordnance Factory Board units and eight defence public sector units fell from INR410 million (USD9.11 million) in 2008-09 to just INR122 million in 2009-10, reflecting the "nature and quality of items being produced". These included boots, uniforms, belts and low-technology ordnance.
A recent report published in early 2011 by the Confederation of Indian Industry and global financial consultants KPMG revealed that India had confirmed USD25 billion worth of military purchases since 2007, of which the Indian Air Force's (IAF's) share was USD17.46 billion, the IN's USD6.16 billion, the army's USD420 million and the Indian Coast Guard's USD616 million. "Over the past decade India has been in the process of undertaking one of the largest procurement cycles in the world," the study reported, adding that the country was expected to ink defence deals worth about USD42 billion in the near future. These include the USD10 billion contract for 126 Medium Multi-Role Combat Aircraft (MMRCA) (a purchase that is expected to increase to 200 fighter aircraft worth over USD16 billion), 145 BAE Systems M777 155 mm/39 calibre lightweight howitzers, Laser Inertial Artillery Pointing Systems for USD647 million and 197 light observation helicopters for the IAF and the Army Aviation Corps estimated at USD600-700 million.
Meanwhile, 10 Boeing C-17 Globemaster III airlifters, six C-130J Super Hercules transport aircraft (with repeat orders under discussion for both), 22 attack and 15 heavy-lift helicopters and a number of combat aircraft engines make up the IAF's list of purchases that have either been concluded or are under various stages of evaluation.
Additionally, the MoD's yearly proliferating outlay to procure platforms and force multipliers also necessitates the import of airborne early warning and control aircraft, long-range maritime reconnaissance aircraft and aircraft carrier-based fighters.
The import list also includes frigates, submarines, an aircraft carrier, MBTs, howitzers, unmanned aerial vehicles, infantry equipment and assorted missiles and ordnance for which the capital outlay is projected to double to more than USD30 billion by 2012, climbing to about USD100 billion by 2022.
However, only a limited proportion of this requirement is likely to be locally developed by the Defence Research and Development Organisation (DRDO), which is struggling to maintain its relevance as the country's main weapon designer. "Our [defence] industry has been in the habit of taking transfer of technology and building under licence until the product dies a technological death," the former secretary of defence production, R K Singh, said in 2010. "There is no expenditure on R&D and no technology absorption."
Since the most important equipment components come from abroad, the vendor can turn off the switch any time, said Singh, adding that if India wanted to emerge as a world power its indigenous defence industry has to start developing its own weapon systems in partnership with the MoD. In a recent effort to move towards this goal, the revised Defence Procurement Procedures document that regulates India's materiel acquisitions and defence production policy has included a 'buy and make [Indian]' option to the existing 'buy', 'make', or 'buy and make' categories. Under this new category, Indian companies, including some from the private sector, would be issued tenders following clearance from the Defence Acquisition Council, headed by the defence minister. If short-listed, they would need to form joint ventures with original equipment manufacturers to execute the contract.
It is anticipated that some future tenders like the Future Infantry Combat Vehicle and Future MBT would be issued to these Indian companies and not to original equipment manufacturers, requiring them to have a minimum 50 per cent indigenous content. If implemented, armament industry sources said this new category could allay private industry fears regarding substantial R&D investment without firm order guarantees: a situation almost certain to render their participation commercially untenable. The MoD is also expected to contribute towards R&D.
Another method to kick-start indigenous defence manufacturing capability considered was the transfer of technology through mandatory offsets - 30 per cent in all military contracts over INR3 billion, rising to 50 per cent in some instances like the MMRCA tender.
India does not accept technology transfer against offsets, leaving it to overseas vendors to choose offset programmes. Consequently, each vendor opts for offset activities that are easy to implement, thereby depriving India's moribund defence industry of desperately needed technology and expertise.
Rahul Bedi is a Correspondent, based ináNew Delhi
