Millennium Post

Indigenising defence production

With the 2014 general election staring, Finance Minister P Chidambaram presented a budget that resembles a financial bulwark for the masses, where defence, like others, has been a casualty in the bargain.

India has always been an important export destination for weaponry and defence equipment. And a defence budget of Rs 2.03 lakh crore is certainly good news for India but not good enough to rejoice because the procurement model itself is fraught with enormous opportunity costs.

For India, having offshore defence deals will only add on to the import bills without concurrent, meaningful, economic advantage. Neither will there be any technological advances, nor would there be any R&D development that could have taken India towards the finishing line of technology optimisation. At present, India is ranked 11th in the world in terms of defence spending, with the currently budgetary allocation for defence standing at an impressive Rs 203,672 crore, enough to make it an enduring market for foreign investment. This magnanimous figure disguises India’s miserly attitude towards indigenisation of the sector. Ironically, in spite of being the largest importer of defence equipment since ages, India still has not understood the importance of indigenised defence manufacturing. On one hand, India alone accounts for 12 per cent of the total global arms trade, whereas our spending on defence R&D is a meagre two per cent of global expenditure, compared to 70 per cent by the US and 16 per cent by China. Worse, this spending on R&D, which is worth peanuts, has not increased since decades. This is not only baffling but also quite worrisome.

Globally, the trend is the opposite. Nations, due to economic meltdown, are cutting down their total military expenditure but have not axed their spending on defence R&D; rather, they have shifted a part of their capital expenditure towards such defence R&D. But there are exceptions in India. Already, certain tie-ups – like Tata group with Sikorsky Aircraft and Mahindra Group with BAE Systems – have raised the bar in the defence sector as they involve production of defence equipment in India. If this becomes a viable model, then India’s yearly procurement expenditure of $13 billion on equipment and services can be dragged down drastically apart from generating employment.

Back in 2006, I had mentioned how even after two and a half decades, DRDO had failed to come up with an indigenous version of the MiG-21 (which anyway has been described variously as a ‘flying coffin’). Even today, most of our police officers, especially in small towns and cities, are provided with pre-World War II weapons to counter Naxalities and Maoists who attack using semi-automatic machine guns. Mind you, whatever warfare equipment we are sold in general are actually obsolete or is two to three generations old; the latest ones are kept exclusively by the exporting nations for their own use; a use that is obvious!

Even from the perspective of geopolitics, this is the most opportune time for India to dash ahead with defence reforms. The cross-border tension with Pakistan is at an all-time low in nearly two decades; and like never before, US is sympathetic to India’s stand in negating the threat from China.

It should take a cue from China, which till 1998 had policy similar to that of India’s but that nation changed its defence focus dramatically, and as of 2010, boasted of 15,000 plus patents in the defence industry – up from just 313 in 1998. This remarkable shift has taken China to the threshold of catching up with Western powers whereas India is still decaying in the ‘technology-denial’ mode. Similarly, US has virtually merged NASA with its defence research in order to manufacture state-of-the-art defence tools, unlike India, where the DRDO works with no coordination with the so-called defence manufacturers.

Merely allocating lakhs of crores to defence would only promise new series of corruption scandals, to say the least. The beginning of the long line of defence scams started with the Bofors scam in 1987 that involved an alleged kickback of Rs 64 crores. The Barak missile scam in 2006 that had a deal amount of $169 million was tainted by the accusation that the government went ahead with it despite opposition from the DRDO. The coffin scam in 1999 was another blot with cases filed against army personnel and American contractors. And finally, the much publicised Tatra truck scam in 2012 where a kickback of Rs 14 crore was allegedly offered – as claimed by Gen V K Singh – and subsequently rejected.

What our defence ministry needs is a sense of budget planning, wherein they must allocate a major pie of our defence budget towards indigenous manufacturing and R&D. The initiative of change must come from the top, as has been the case in China where Hu Jintao himself was the torchbearer for the growth of Science and Technology. Otherwise, India might well be buried under the burden of forever being the world’s largest arms importer – a tag that can prove too costly for the country in the long-run.

The author is a management guru and director of IIPM Think tank
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