The recently announced government policy on defence equipment procurement, clearly intended to jump-start the indigenous defence industry, comes not a day too soon. Much of what appears in the new policy was first mooted six years ago by a committee chaired by Vijay Kelkar. The benefits of such indigenisation extend beyond reducing the country’s reliance on imports. Defence production can have economy-wide synergies, particularly with the manufacturing sector. India’s reliance on defence equipment imports at over 70 per cent of total procurement is unacceptably high. To be sure, there are a few indigenous success stories, notably in metallurgy and special materials (the Chobham armour on the Arjun tank and the composites used in light combat aircraft are world-class), radars and embedded software used to design the mission computer used in frontline aircraft, but wide-ranging success has been largely elusive.
The reasons for this weakness are many. First, spending on indigenous R&D is embarrassingly low. It is simply impossible for the Defence Research and Development Organisation and related agencies to do anything significant with these budgets, which could be charitably described as “shoe string”. These budgets need to increase significantly if the country is to see any meaningful contribution from the defence establishment. Second, even these meagre resources are spread too thin! Defence-sector PSUs are engaged in many unnecessary activities that could be left to others. A corollary of this is considerable redundancy, which needs to be reduced sharply. A rigorous technology audit that identifies existing strengths and weaknesses would identify feasible projects and technologies which could be pursued towards culmination with vigour, simultaneously rejecting (and eliminating) wasteful projects. This would require political will and strong leadership to take the tough decisions that are sure to be resisted by vested interests.
The experience of public-private partnerships in defence production has been disappointing. While there has been some progress recently in transferring technology from defence PSUs to the domestic private sector, it is far from adequate. As a result, private-sector capabilities in project management and execution remain vastly underutilised. Lack of clear procurement policies precludes investment in production facilities by the private sector, which would understandably seek long-term commitments to recover its investment. With defence R&D and production becoming prohibitively expensive, “co-development” and “joint production” are the way forward. It explains why even established superpowers with deep pockets and technological capabilities are opting to share expenses and spread the risk for technologies whose returns cannot be predicted. It is not possible for a country like India, with relatively meagre resources, to succeed by going it alone. As a first step, defence PSUs and indigenous industry must learn to work together. A few demonstrable successes will provide a definitive signal of technological capability, which will enable India to participate in collaborative arrangements as more than a fringe player. Moreover, India’s private sector must be encouraged to invest in defence production. The monopoly of state-owned enterprises must end. The defence industry in the US, European Union, China and other major industrial economies has shown how defence spending can promote industrial and technological development. There is no reason Indian industry should be denied this opportunity for growth.
