)
In 2001, a growing ministry of defence (MoD) realisation that the public sector could not meet India's defence needs triggered the entry of private companies into this sector. But that laudable policy change was not accompanied by a clear, holistic plan for indigenising defence production. A dozen years later, there is no clarity about what indigenisation means. Instead, indigenisation has been reduced to a slogan - India's current equipment ratio of 30 per cent indigenous and 70 per cent foreign equipment must be reversed to 70 indigenous and 30 foreign.
Nowhere in this oversimplification is the crucial question of what must urgently be indigenised and what can be imported without jeopardising military readiness. With the MoD unwilling or unable to identify critical technologies - the withholding of which would bring the production or operation of a particular system to a halt - foreign original equipment manufacturers (OEMs) pay lip service to indigenisation through low-tech products like packaging and casings.
This indecision permeates policymaking circles, even though the Kelkar Committee - enlightened and experienced experts, all - defined indigenisation in a manner that remains valid today. The Kelkar Report states: "There is an urgent need to review the whole concept of indigenisation and self-reliance and it is time to go beyond the idea of looking at indigenisation purely as import substitution of components, sub-assemblies, etc within the country from raw materials. Today indigenisation as a concept will need to involve capability enhancement and development, increasing know-why, design and system integration, rather than having numerical targets."
A prominent private sector CEO points out, "We could indigenise 70 per cent and still have no real control over a product that we build a large part of. That is because we continue focusing on components and numbers rather than design expertise and on integrating sub-systems and systems into a weapons system. If we build most of a system in India, but cannot tweak, modify or export it, how can we say we have indigenised it?"
Within the MoD there is still no grand strategy for meaningful indigenisation. Until the 1990s, obtaining high-end technologies for defence systems required money, strategic clout, skulduggery or espionage, since military technologies were ahead of civil knowhow and were carefully guarded. Since the digital era began, however, that trend has reversed: most cutting-edge digital technology is first developed for civil applications and later "trickles up" to military use.
Today this is also true for aircraft design, materials for aero and automotive engines, personal armour and surveillance equipment. Only in a handful of areas like night vision and stealth design does military equipment have a technological lead over civil applications. This trend is set to continue. As defence budgets decline in advanced western countries, the money available for military R&D is reducing disproportionately. Consequently, advanced weaponry being developed today contains a great deal of "commercial off-the-shelf" (COTS) equipment, and its ruggedised, but freely available, version, "military off-the-shelf" (MOTS) equipment.
Intelligent conceptualisation and sophisticated design capabilities can integrate COTS and MOTS technologies into highly effective weapons systems and platforms. Apple, it would be recalled, created the iPad almost entirely from technologies that had been freely available for some time. Its success lay in conceptualising a device that consumers would consider useful, and then carrying out the architectural innovations needed to build it. In similar fashion, China has rearranged existing technologies to build the Dong Feng-21B anti-ship ballistic missile, which US strategists have dubbed the "aircraft carrier killer."
This logic works for operational doctrines too. In the 1930s, Germany created the Blitzkrieg from tactical concepts that had been debated since armoured vehicles first appeared on the battlefield in 1916. But German generals employed tanks in a new conceptual framework, in which fast-moving, massed armour, supported by air and artillery firepower, raced on multiple thrust lines into the heart of the enemy, dislocating his battle plan and mentally paralysing the enemy commanders. No revolutionary new weapons were deployed; but existing systems were innovatively combined into a revolutionary battle-plan.
Over the last three decades, India has evolved significant design capabilities, as evident from its missile programme, its nuclear propulsion programme, a series of light helicopters, the Tejas light combat aircraft (LCA), the Arjun tank, and an array of naval technologies that drive warship building. Safeguarded technologies in electronic warfare, combat management systems and secure communications have also been developed. These skills have been combined with COTS and MOTS systems into viable platforms that are less than cutting edge, but highly capable in the South Asian defence environment.
However, analysts and government watchdogs like the Comptroller and Auditor General (CAG) are critical. In August 2010, the CAG criticised the Dhruv helicopter, pointing out that 90 per cent of its systems and sub-systems are sourced from abroad. The Tejas LCA and the Arjun tank also have a high percentage of foreign components. While the warship building programme has made indigenisation a priority, some 60 per cent of the weapons and sensors in most Indian-built warships continue to be sourced from abroad, including in the recently launched aircraft carrier, INS Vikrant.
In fact, the success of design and development has not been followed by the logical next step, which is to indigenise systems, sub-systems and components. For integrators like Hindustan Aeronautics Ltd (HAL), which builds the Dhruv, it is cheaper and less risky to buy COTS and MOTS equipment abroad cheaply, rather than indigenising. And with New Delhi discouraging defence exports, MoD orders alone do not commercially justify the indigenisation of systems and sub-systems.
Interestingly, indigenisation has achieved its greatest success in platforms where India faced the tightest technology denial regimes after the 1998 nuclear tests, such as the integrated guided missile development programme (IGMDP). Dr Avinash Chander, director general, DRDO, says that the denial of even COTS and MOTS sub-systems left the DRDO with no choice but to indigenise every major system and sub-system in its missiles.
Today, India enjoys far easier access to COTS and MOTS systems, but dependency on foreign suppliers has created vulnerabilities like the high cost of maintenance and inventories, and the danger of shortfall of spares later in the life cycle due to the closure of overseas production lines. Also, it is difficult to optimise a platform's design with a high percentage of COTS and MOTS sub-systems and systems, because "systems engineering" demands that sub-systems and systems be specifically engineered and optimised for the platform. Only then can the effectiveness of the platform be more than the sum of its parts.
The MoD could catalyse the building of COTS and MOTS products in India with a policy decision, financial commitment, and by permitting exports by Indian defence manufacturers. But obtaining guarded technologies to build critical components requires more - a centralised, inter-ministerial strategy. China has shown the way, squeezing vendors in major foreign buys for technologies and processes. Airbus, for example, was induced to set up an A-320 production line in Tianjin, providing China's aerospace industries with the technologies, and an understanding of production line processes in manufacturing aircraft.
India too could do the same with its large purchase volumes, such as the combined aircraft procurement of India's many commercial airlines and the IAF's multi-billion dollar aircraft purchases. But the narrow and uncoordinated offset policies (which are separate for defence and for civil buys) have not been managed strategically, allowing foreign OEMs to get away with supplying baggage handling systems and ground administrative services.
Over the years, New Delhi has squandered many opportunities, such as during the setting up of nation-wide cellular networks. The sheer size of those contracts could have brought in the technology and manufacturing expertise needed to create an Indian Huawei and establishing research establishments for sector-specific projects like developing metals for high-tech applications.
A key reason for the neglect of indigenisation is that, every Defence Procurement Policy (DPP) till 2006 was geared exclusively towards importing defence equipment. Subsequent DPPs addressed domestic manufacture but failed to change the basic nature of the document. For example, OEMs must still provide basic spares for two years (Maintenance Repair List of Spares, or MRLS), with subsequent maintenance the responsibility of military repair organisations like the Corps of Electrical and Mechanical Engineers (EME).
This system is wasteful on several counts. It has adversely skewed the military's tooth-to-tail ratio, with the EME - a logistical service - now constituting 15-20 per cent of the army. The EME confines itself mainly to repairs, without any mandate or incentive to improve, upgrade or build products afresh. Several studies, including an authoritative report by the Vice Chief of Army Staff (VCOAS), Lt Gen Chandra Shekhar, in the aftermath of the Kargil Conflict, have suggested downsizing the EME, and outsourcing maintenance, repair and overhaul (MRO) to the private sector.
For private industry - which is rich in managerial expertise and technological skills but short of experience in defence manufacture - Maintenance Transfer of Technology (MToT) provides an ideal entry point. DPP-2013 permits private companies to compete for annual maintenance contracts (AMCs) for equipment being procured, with life-cycle support amounting roughly to four to five times the cost of the initial sale. Indian defence vendors argue that it should be mandatory for Indian vendors to execute the annual maintenance contract (AMC) in every defence contract. Life-cycle costs would dramatically reduce; industry would work with the military in the front lines, developing an understanding of defence; and the more dynamic companies would quickly absorb technology, moving up the value chain from maintenance to upgrading to designing next generation products.
Says Rajinder Bhatia, CEO, Defence & Aerospace, Kalyani Group: "Maintenance ToT to private industry is an important first step towards utilisation of all national resources both in the public and private sectors."
While MRO would facilitate the creation of Tier-3 and Tier-4 contractors that are essential to any defence production eco-system, Tier-1 integrators and Tier-2 systems builders would emerge from the careful implementation of the "Make" category of procurement.
Vivek Rae, the MoD's former Director General (Acquisitions), believed that the market dynamism of the "Make" procedure - in which private vendors compete to develop major platforms, with the MoD contributing 80 per cent of the cost of development - would galvanise the creation of a large, competitive defence industrial base. Speaking at Defexpo 2012 in New Delhi, Rae said, "I think we could energise the defence industrial base of this country by encouraging industry to participate in design and development, sharing risks and costs… it will be a significant step forward. We will make out a list of 150-180 'Make' projects that we will put on the web soon."
In fact, the "Make" category has not got off the ground so far. Only two "Make" projects were tendered, and one of them has been cancelled. Now the MoD has undertaken an extensive rewrite of the "Make" procedure, which could be promulgated later this year as an amendment to DPP-2013.
Another central pillar of the indigenisation process was to be a public version of the military's 15-year Long Term Integrated Perspective Plan (LTIPP), which would inform industry about the military's equipment needs 15 years into the future. Called the Technology Perspective and Capability Roadmap (TPCR), the MoD says it would "provide useful guidance to the Indian Defence Industry for boosting its infrastructural capabilities and directing its R&D and technology investments."
The TPCR that has been put out has failed to enthuse industry. Says Colonel (Retired) H S Shankar, who heads Alpha Design Technologies, "The TPCR lists every possible technology, some of which may never see the light of day. For industry to start R&D activity towards a particular product, the document must give out a detailed description of each product that the military needs, its specifications, the quantities needed and the time frame for its induction.
Another, more blunt CEO, speaking anonymously, said, "I don't know why the MoD took five years to put out this document that has so few actionable items. The first somewhat actionable item that I found (Long Endurance UAVs) was on Page 16 of a 43-page document."
Says the CEO of a private defence company, "Industry was eagerly awaiting the release of the public version of the LTIPP, which has been promised for the last five years. The TPCR that has been put out is a disappointment, particularly the MoD disclaimer on the released document that says industry that participates does so 'solely at its own risk.' This does not argue well for the trust needed to build a robust defence industrial base in India."
