Millennium Post

Not a single bullet

India’s private sector defence manufacturing will need to answer to history. Years after being mollycoddled as the country’s response to expensive imports, it remains a non-starter

Don't let me tell you years from now that COVID-19 had the last laugh. It made us lock ourselves in our homes to deny it, taunted us enough to put on masks, gloves, glasses, even face shields. Its mirthless grin was sinister and its countenance so ominous that we washed and sanitised ourselves and everything that entered our main door — our hands, faces, foodstuff, pets. Even our mothers, brothers and sisters, turning us into petulant turnips that couldn't be turned, roasted or trusted. Not anymore. The mere thought of the virus entering our lives turned everything flaccid. It brought our airlines, railways, bus services, and all that moves — humans, animals, emotions, sentiments, et al, to a screeching halt.

COVID-19 saw us nonchalantly force our friends, relatives and maids out of our homes, cut salaries of those employees that we didn't sack, provided of course that we didn't lose our jobs ourselves. It also did something more heinous. It killed the budding promise of a free India, maimed 30 years of economic reforms and progress and in one sledgehammer blow, put paid to India's aspirational private sector manufacturing companies, further exacerbating their already perilous situation. Ruthlessly, it pushed India's manufacturing sector into a puissant corner, cackling away and thumping its minuscule chest. It all but broke our backs, and none more so than India's fledgeling private sector defence space.

Who shall history judge?

Inevitably, we shall have to answer. Someday. Especially so as the Government's outlined estimates have fallen flat. The Government of India planned to spend $130 billion (around Rs 9,75,000 crore) on military modernisation in the next five years. Defence sector manufacturing was opened up to the private sector a few years back under the 'Make in India' initiative, in an attempt to provide impetus to indigenous manufacturing. The opening up of the industry saw international original equipment manufacturers (OEMs) enter into strategic partnerships with Indian companies. As per Government norms, 74 per cent foreign direct investment (FDI) is now allowed in the defence industry in India under the automatic route, and beyond that, up to a 100 per cent, with special approvals after scrutiny.

The Government of India's 'Make in India' campaign saw a lot of hoopla and a truck-load of hype. India, we shouted from the rooftops, would now arrive on the world stage in ways hitherto unimaginable. We would manufacture guns, assault trucks, ballistic missiles, mortars and more, adding to the few things that we do make — the essentials of submarines and the superstructure of ocean-going vessels. But for one reason or the other, the listed projects have all been non-starters.

The men in the middle

For years, the defence industry space in India has been dense with middlemen. They are omnipresent and potent, yet invisible. Few surfaces in the shiny sun and fewer still have the temerity of donning an open garb. They are our night-riders. For nearly seven decades, they have facilitated foreign deals in the defence arena, mediating purchases running into billions of dollars of vital foreign exchange. And you have to remember that the defence sector has always been under scrutiny, both by the opposition and the media, as was witnessed in the case of Bofors, AgustaWestland and, more recently, Rafale.

FDI numbers are puny

India's defence industry received foreign direct investment (FDI) of a meagre $2.18 million during 2018-19, Parliament was informed in July 2019. In 2014-15, 2015-16, and 2017-18, respectively, the sector attracted FDI worth $0.08 million, $0.10 million and $0.01 million. Shockingly, in 2016-17, the industry failed to attract any overseas investments at all. Keeping the Indian defence industry company, in terms of similar nil inflows during this last fiscal, were industries such as photographic raw film, paper and coir.

Rajeev Oberoi, who works and specialises in the defence sector, explains why without mincing words. "India is yet to really make any kind of mark in the field of defence manufacturing, seven decades after independence. In the few things that we do manufacture in the country, our companies procure most of their basic raw material from Chinese firms, even for humble defence products such as bullet-proof jackets supplied to the Indian Army. The smallest Indian companies, including some based in Kanpur, produce the best of products, be it climbing ropes, bullet-proof vests, even simple PT shoes, but they have all been reigned in over the years, bit by bit. Orders do not get through, letters of intent are not issued on time — how do you expect Indian companies to survive, let alone grow?"

Stalwarts stay the course

The Mahindras carry on. As do the Tatas. The Kalyanis. And PSU giants like L&T. They soldier on, in the true sense. For long, they have been the country's manufacturing backbone, institutions that we have proudly showcased to the world. But for all their achievements and experience, their projects in the defence space haven't really taken off. One does hope that this changes soon and that India, over 70 years after independence, can begin to get its act together. For nearly 60 years now, we have had the Indian Institute of Technology (IITs), the Defense Research and Development Organisation (DRDO) and institutions of the calibre of Hindustan Aeronautics Limited (HAL). Surely, with the right approach and intent, and with a single dynastic ruling party at the Centre, we should have graduated in these six decades to making a Rafale or two, or more, ourselves?

India's private sector is to blame for the country's defence debacle too, especially those companies and groups that announced an early march into this space. Corporate giants like the Adani Group, Anil Ambani's Reliance Group, Bharat Forge and the Hindujas made vociferous proclamations, triggering media reports and social media festivities over projects that held huge potential, ones that would change the face of India's defence preparedness. It would lead to record foreign exchange savings too, the announcements claimed. Over time, though, when there was no real, actual on-ground production or even transfer of critical and nation-building defence technologies, these promises ran thin and the script went bland. Resultantly, it eroded national confidence and stunted the euphoria – eventually leading to indifference, a loss of faith in the very prospect of Corporate India having the ability, or the required will, to actually get things moving in the defence manufacturing space.

From Lockheed Martin to Saab AB, from Airbus SE to Dassault Aviation, and from Thalles to Hanwha Defense, international defence manufacturers have been lining up for decades with their offers of military hardware to India. But repeated delays and a funding crunch has made future deals next to impossible — and with all the monies that the Government has had to fork out to battle the COVID-19 pandemic, the funding situation is only going to get worse for the foreseeable future.

Massive push by Govt

Amid all the clamour and clatter of COVID-19 bailout announcements, Union Finance Minister Nirmala Sitharaman has provided a lifeline of sorts to the defence manufacturing space, part of the Rs 20 lakh-crore package and privatisation reforms in the coal, defence, power distribution and space exploration sectors.

India has all the ingredients in place to make a major dent in the massive international market for military and defence equipment — in fact, handled right by the private entities and given the necessary impetus and support of the Government, defence manufacturing holds the potential to be one of India's greatest grossers of both technology transfers, FDI and foreign exchange. As mentioned earlier, through the IITs, DRDO and HAL, India has all the ingredients required to develop capabilities and emerge as a force to reckon with in the defence design, development and manufacturing space. Sure, it will take some time, but a beginning has to be made.

As a nation, we should not wait much longer for this, especially not when we have two oft-repeated threats at our borders, Pakistan and China, who are constantly nipping away at our resolve and patience, and who necessitate the need for the country to be at the cutting edge of weaponry, and defence capabilities and self-sufficiency.

The writer is a business analyst and communications specialist. Views expressed are personal

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