Modi govt needs to learn from US, France. India’s defence industry needs a push for private

Zarvan · Jul 15, 2022

Modi govt needs to learn from US, France. India’s defence industry needs a push for private

If India wants to counter China’s forays into Africa, it must harness the private sector to strike procurement deals on a tricky continent.

SNEHESH ALEX PHILIP
15 July, 2022 10:30 am IST

Rafale jet on a runway at Aero India | Commons
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In heartening news for the defence industry, India’s military export touched a record high of Rs 13,000 crore for the financial year 2021-2022. The figure was eight times the amount of export India had recorded five years ago, Sanjay Jaju, additional secretary, Department of Defence Production, told journalists last week.

India’s defence sector is dominated by the state-run giants making everything under the sun—from rifles to tanks, helicopters and fighters to aircraft carriers and missiles. So it’s naturally assumed that the public sector undertakings (PSUs) will eat up a big slice of defence exports.

Unfortunately, that is not the case. In FY 2021-2022, defence PSUs contributed only about 30 per cent of the exports; the rest went to the nascent private players. This year’s defence PSU share, however, has actually grown because until now, they only contributed to around 10 per cent of India’s total exports.

The growth is easily attributable to the sale of Brahmos supersonic cruise missiles to the Philippines, which was inked earlier this year for over Rs 2,700 crore.

The Narendra Modi government has set tough targets for defence PSUs, asking them to ensure that 25 per cent of their turnover comes from exports by 2022-23. This seems like a tall task. In 2020, the government set a target of Rs 35,000 crore ($5 billion) export in aerospace, and defence goods and services in the next five years. This is part of the turnover of Rs 1.75 lakh crore ($25 billion) in defence manufacturing by 2025 that the government is aiming to achieve.

For India to achieve this target, a lot has to change, not just in terms of policies but also in terms of thinking.

Also Read: Days of soft power are over. Defence is the new diplomacy tool for India around the world

Role of private sector

Last year, I said that India needs deal hunters abroad and intent alone cannot make us exporters. To begin with, talks of hand-holding the private sector for actual exports need to translate into action. While the Modi government has gone ahead and made licensing and clearance for defence simpler, what’s missing is a real push.

The big push can come only if the Modi government can pitch for them just like the Americans and the French when it comes to their defence industry. Numerous niche companies in the private sector are doing amazing work and bagging foreign contracts on their own. The Modi government should actively start pushing for these companies. It should use the Line of Credit extended to various countries to push for the private sector as well.

If New Delhi is looking at countering China’s forays into Africa, then it will have to come up with innovative ways and use the private sector to strike deals on a continent that is known to be very tricky when it comes to procurements.

The push for the private sector has to run parallel to the Modi government’s marketing of bigger weapons systems made by defence PSUs. The aim here should not be to earn profits but establish its foothold in countries even if it means a drastic reduction in the cost of equipment or a more flexible line of credit.

At the end of the day, when defence equipment is being sold, it’s not just about earning money but also a substantial strategic heft—something that the Chinese are already focusing on.

Also Read: Schemes like Agnipath must go to test beds first. They shake up the entire system

Indigenous systems and companies

India’s defence procurement processes also need to be streamlined to ensure that decision-making processes are much faster than they are now. And this is where India’s defence forces also need to focus. No doubt that the three Services are now more intent on indigenous systems because of the constant push by the government, but they need to be proactive as well.

The fear of the ‘system’ is such that many private sectors are quite happy dealing with foreign clients than with Indian forces or defence PSUs. The forces need to be aware of what is happening in the domestic market.

One classic example is a small company called Tonbo Imaging, which is doing excellent work with the Indian forces. They discovered the company because of a joint exercise with NATO a decade ago. The US Army was using weapons that had Tonbo systems on them.

“This came from an engineering centre in Bengaluru, they told the Indians. That’s when the Army reached out to us. Five countries were buying our tech before India bought from us,” Arvind Lakshmikumar, one of the founders of Tonbo Imaging, had told Mint in 2019.

When the company initially began commercial operations around 2012, it focussed on the global market. Industry sources said that Lakshmikumar’s prior work with the US’ DARPA (Defense Advanced Research Projects Agency) helped him get recognition for products early in the US markets.

There are a few more companies like Tonbo Imaging that have been working with foreign countries and firms. And they’re not even big ones like the Tatas or Mahindras.

On 11 July, Defence Minister Rajnath Singh conferred the ‘Raksha Niryat Ratna’ award on state-run Bharat Electronics Limited and on Indo-MIM from the private sector for achieving the highest defence exports in recent years.

It was surprising that many who attended the event had never heard of Indo-MIM before.

There are many such companies in India that are waiting to be explored and fully utilised. And that is where the Indian forces should focus.
Views are personal.
(Edited by Srinjoy Dey)