India’s Quest for ‘Atmanirbharta’ in Defence Production

‘Atmanirbharta’ for India’s defence sector will be achieved when the manufacturing capabilities can dependably match the requirements for effective national security - an end state that is yet a long way off

Special Feature

By R Chandrashekhar

The ‘Atmanirbhar Bharat Mission’ announced by Prime Minister Narendra Modi on May 12 this year has the objective of making India a ‘self reliant’ economy. Clarifications that followed emphasising that the ‘self reliance’ does not mean “cutting off from rest of the world” and seeks to take forward the ‘Make in India’ mission to ensure that India plays a “bigger and more important part of the global economy.”

Stockholm International Peace Research Institute’s (SIPRI’s) “Trends in international arms transfers 2019″ mentions India as the second largest global arms importer. Its Armed Forces remain heavily dependent on foreign suppliers for many critical platforms and systems imperative for national security. Self reliance in defence sector would therefore reckon urgency over every other sector.

To attain self-reliance in defence, there is need to enhance manufacturing capabilities in the sector, both quantitatively by better efficiency and utilisation of existing capacities as also qualitatively, through infusion of new technologies and products. The focus needs to be three pronged- revitalise the existing Public Sector Defence Industrial base; encourage and enhance private sector capabilities; and ensure a conducive and vibrant ecosystem for the defence industry to be nurtured and developed.

Revitalising the Public Sector Defence Industrial Base

Provisions of the Industries (Development and Regulation) Act, 1951 and Arms Act, 1959 had for several decades since Independence, restricted defence manufacturing for the Public Sector. Through this period, private sector participation was limited to supply of materials and semi-finished products to Ordnance Factories (OFs), Defence Public Sector Units (DPSUs), the Defence Research and Development Organisation (DRDO) and Armed Forces Repair echelons.

It is only after 2001 that this controlled license regimen has been progressively liberalised. Defence Products List for the purpose of issuing Industrial Licenses has since been revised and several components, parts, subsystems, testing equipment, production equipment etc. delisted. While this no doubt has been a positive initiative, the fact remains that even today, nearly 20 years later, the Armed Forces dependence on imports remains unabated.

Corporatisation of OFs – Significant Step

To attain self-reliance in defence, there is need to enhance manufacturing capabilities in the sector, both quantitatively by better efficiency and utilisation of existing capacities as also qualitatively, through infusion of new technologies and products

India’s 42 Ordnance Factories (OFs) often called the “Fourth Arm of Defence” and touted as the “Force Behind the Armed Forces” are together among the top 50 defence equipment manufacturer in the world. Their contributions have been stupendous but the bane is that they work on the lines of Government Departments, receive annual budgetary allocations upfront and their products have a captive market that has little option but to accept stores supplied. There is hence little inherent incentive for product improvement, even less for technological innovation and this is in spite of their possessing a rich talent bank of employees. The recent decision to ‘corporatise’ the OFs is hence a positive step that would bring a shift in their work culture, higher efficiency and accountability.

Technological Prowess – Continuing Enigma

The DRDO deserves acclaim for its strategic systems programmes. However, its track record for tactical defence systems is not so good. Besides delays in project execution, what is worrisome is the long-standing trust deficit existing between the DRDO and the Armed Forces, who are ‘users’. While the DRDO contends delays in product development being due to frequent changes to their ‘Qualitative Requirements’ (QRs), the Armed Forces hold that QRs become obsolete “well before the DRDO even develops prototypes”. The need for an effective ‘developer – user’ joint mechanism is necessary. Technology development for defence should be a ‘national endeavour’ much beyond the control and domain of just the DRDO. The suggestion is for the DRDO to primarily focus on critical technologies where its strengths have been proven and play a secondary role to lend facilitation, guidance and hand holding for development of other technologies. It is here that initiatives such as according priority to IDDM products, harness technological talents of Private Sector laboratories and involvement of Academia through outreach to Universities and Technological Institutes become very progressive measures that widen the R&D base of the defence sector.

DPSUs Need a Long term Vendor Policy

The DPSUs are mega conglomerates that aggregate major platforms and systems and from the perspective of self-reliance, they are ably by a tiered structure of MSMEs. A major systemic constraint has been the extant regimen of contracting through competitive bids for short-term or annual tenders.  What would promote ‘Atmanirbharta’ is adopting a long-term vendor policy that will enable scope and space for MSMEs to elevate their efficiencies and quality of products to world class standards.

Capability Mapping of MSMEs

Initiatives such as according priority to IDDM products, harness technological talents of Private Sector laboratories and involvement of Academia through outreach to Universities and Technological Institutes become very progressive measures that widen the R&D base of the defence sector

Today, the defence industry is ably supported by a strong base of over 8,000 MSMEs and it is in these that much of the ‘strength and vibrancy’ of the defence supply chain resides. A diligent capability mapping of the Private Sector would bring to the fore the available potential and talent in the country and will become the basis to draw up long term contractual arrangements.

Trust Proven Capabilities

There have been instances where Indian Corporates have even bid successfully on tenders that were in the “Buy global” category.  It is only logical that the proven capabilities of such firms that have successfully won contracts in the face of stiff global competition be leveraged directly without going through the paces of repeated tenders.


Leverage the “Strategic Partnership Model” (SPM)

The SPM was launched after due deliberation more than a year of announcement of Defence Procurement Policy (DPP) 2016. It sought to create long-term capacity to produce defence platforms of strategic importance. Tie ups with renowned OEMs would enable the manufacture of the platform in India, receive transfer of technology, provide life-cycle support, and develop an eco-system of domestic manufacturers. However, the Model, though announced with much fanfare, has come short of expectations.

Defence Corridors

What would promote ‘Atmanirbharta’ is adopting a long-term vendor policy that will enable scope and space for MSMEs to elevate their efficiencies and quality of products to world class standards

The two Defence manufacturing corridors, one each in Tamil Nadu and Uttar Pradesh have been announced which aim “to serve as an engine of economic development and growth of defence industrial base in the country”. These corridors should be progressed to their logical end state of being ‘highways of efficient production’. The success or otherwise of Defence corridors is to a significant extent dependent on the sustained enthusiasm and wilful cooperation of the respective State Governments.  A conducive and mutually complementary functioning between Central and State Agencies is of prime national importance as also to set an example to be emulated in other States.

Recent Policy Initiatives

Drafts of two significant policy initiatives placed in the public space recently are indicative of the Government’s intent:

Draft Defence Procurement Policy (DPP) 2020: The recently released Draft DPP 2020 introduces the new category of “Buy (Global-Manufacture in India)” under which Foreign vendors’ products that have a minimum of 50 per cent indigenous content would be eligible. The Policy incentivises use of indigenous raw materials, special alloys and software and importantly, proposes setting up an organisation that can nurture world class R&D for development of products through ideas and innovation of all stakeholders. These are significant improvements upon the earlier versions of the Policy that could not achieve much traction in spite of many initial promises.

 

Draft Defence Production and Export Promotion Policy (DPEPP):   The DPEPP spells out the ambitious aim to achieve a turnover of Rs 1, 75,000 Crores (US$ 25bn) including export of Rs 35,000 Crore (US$ 5bn) in Aerospace and Defence goods and services by 2025. It also aims to develop a dynamic, robust and competitive Defence industry and to reduce dependence on imports and take forward “Make in India” initiatives through domestic design and development.  It further sets an ambitious target for defence exports which, upon achievement, would “raise India’s place in the global defence value chains”. Two pragmatic initiatives included in the DPEPP are:

Systemic changes are urgently required to reduce the acquisition cycle to the minimum, in any case less than three years. Managers who do not comply should face appropriate penalties. This would infuse accountability into bureaucracy who has an equal stake and responsibility to ensure ‘Atmanirbharta’

(a) A negative list of weapons/ platforms being notified with year-wise timelines for placing an embargo on further import on the listed items.

(b) Technology Assessment Cell (TAC) being set up, with representation from the Armed Forces, to assess the Technological Readiness Levels (TRL) available in the country for all the major systems/ platforms.

Enabling a Progressive Ecosystem

Stop import of all stores where manufacturing capability exists within India: There is need for a diligent review of all imported stores, especially sub-assemblies and parts, for which manufacturing capability exists within the country.  In these cases, imports, to the extent that in-country capacities exist, should be stopped forthwith and the existing capacities utilised, wherever required necessary by extending hand holding and support. This would be a pragmatic step that would incentivise local production of hitherto imported stores.

Safeguarding IPR: The aspect of IPR of products developed in India has been one that has engaged Indian corporates for long. The regulatory mechanism for IPRs in India is considered weak. These should be fortified, if necessary, through suitable legislation.

Timely placement of Orders: In the ultimate analysis, the entire process of self-reliance can effectively succeed only if orders for required products are placed with due regularity and production processes initiated to enable supplies.

‘Capping the Acquisition Cycle’: Systemic changes are urgently required to reduce the acquisition cycle to the minimum, in any case less than three years.  Managers who do not /are unable to comply should face appropriate penalties. This would infuse accountability into bureaucracy who has an equal stake and responsibility to ensure ‘Atmanirbharta’.

Setting up a ‘Defence Finance Corporation’: There has been a longstanding suggestion for setting up an Organisation on the lines of, say, the Railways Finance Corporation which does public borrowing through issue of bonds and utilises the money to ensure meeting of defence requirements. The time to reconsider the merits of such an organisation requires review.

Manufacturing capacity – A ‘National Asset’:  The underlying spirit of ‘Make in India’ is that whatever be the product, its manufacturing in India must be promoted. Taking this forward, it goes that every shop floor that has capacity to manufacture any product is, in effect, a ‘National Asset’. Policies and procedures must therefore be so attuned as to ensure that all existing capacities must be fully utilised, irrespective of these being in the public or private sector.

‘Atmanirbharta’ for India’s defence sector will be achieved when the manufacturing capabilities can dependably match the requirements for effective national security – an end state that is yet a long way off.

-The writer is Senior Fellow, Centre for Joint Warfare Studies (CENJOWS). Views expressed are his own, and do not necessarily reflect the views of Raksha Anirveda

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