Amit Cowshish
The fifth Positive Indigenisation List (PIL) released by Defence Minister Rajnath Singh on October 04 during the Naval Innovation and Indigenisation International Seminar ‘Swavlamban-2023’ is of a piece with the earlier lists released in the past three years proscribing import of a large number of items from the specified cut-off dates which stretch up to 2032.
The utility of releasing such lists, including another four analogous lists relating to ban on import of mostly nuts and bolts by the Defence Public Sector Undertakings, was and continues to be intriguing. How exactly these lists promote or accelerate self-reliance through indigenisation of defence production remains inadequately explained.
Adding to the 411 previously proscribed items, the latest list of 98 items includes ‘highly complex systems, sensors, weapons and ammunition’ worth ₹ 1,40,000 crore, according to the official Press Release. Closer scrutiny, however, throws up a different picture.
But for Futuristic Infantry Combat Vehicle (FICV) and Future Ready Combat Vehicles (FRCV), CQB Carbines, Heavy Weight Torpedoes (HWT), Quick Range Surface to Air Missiles (QRSAM), Air Launched Anti-Radiation Combat Swarm Drones, and a few other similar items, none of the remaining items can be viewed as major highly complex systems, beyond the existing capability of the Indian companies to manufacture.
Complex projects like FICV, FRCV, HWT, and QRSAM have been in the pipeline for a long time without reaching finality for a variety of reasons. In fact, the project for acquisition of FICV was launched more than a decade ago but it hasn’t fructified despite the Expression of Interest being issued by the Ministry of Defence (MoD) twice during this period.
It is doubtful if imposing a virtual ban on import of complex systems which, among other things, require collaboration with foreign original equipment manufacturers (FOEMs), will remove the impediments which stymied such projects in the past.
In 2016, MoD had promulgated a Strategic Partnership Model (SPM) with a view to reaching out to the Indian industry for mega manufacturing projects in collaboration with FOEMs. The scheme was to be rolled out in four segments: fighter aircraft, helicopters, submarines, and armoured fighting vehicles/main battle tanks. None of these projects have fructified in the past seven years since SPM was rolled out. Whatever be the reasons, it was certainly not because there was no specific ban on their import.
The truth is that the existing procedures anyway do not permit import of any item which is being made, or can be made with or without foreign collaboration, in India. There are several procedural filters which would throw out any proposal for import of such items. Intermittent notification of PILs does not add another layer to these filters or guarantee smoother navigation of acquisition proposals through the bureaucratic maze.
There is a point of view that the PILs provide an indication to the local defence industry of the products the armed forces need and a reasonable assurance that these items will be procured only from the Indian vendors. This is a specious argument.
These PILs are reminiscent of the now-completely-forgotten Technology Perspective and Capability Roadmap (TPCR) released by MoD in 2013 to help Indian industry draw up business plans for developing technologies which could be converted into capabilities required by the armed forces in the ensuing fifteen years. It didn’t help in the absence of any indication of the expected technical specifications, quantities required, and the timeframe within which the industry could expect the procurement to materialise. It defies imagination how the five PILs issued since 2020 are any different from TPCR 2013.
Notification of these PILs has many foreign companies worried about the prospects of doing business in India for the impression that goes around is that the window is being shut on them with the embargo on import of the listed items. Nothing could be farther from the truth, but the apprehensions endure, thanks in large part to the way these PILs are advertised.
The official Press Release accompanying the notification of the third PIL in April 2022, for example, declared that it was ‘a major initiative to achieve self-reliance in defence manufacturing (which) shows the growing confidence of the Government in the domestic industry that they can create and supply equipment of international standards to meet the demand of the Armed Forces’.
It would have been far more reassuring for the domestic and foreign industry, as well as the armed forces and Defence Research and Development Organisation which is the primary government agency for defence R&D, had all the 509 items listed so far in the five PILs been classified into various procurement categories, Acceptance of Necessity (in-principle approval for the uninitiated) granted, and the Expression of Interest or Request for Proposal issued to kickstart the acquisition process.
Depending on the complexity of each item, the listed items could be categorised under any one of the existing procurement categories: Buy (Indian – Indian Designed, Developed and Manufactured), Buy (Indian), Buy and Make (Indian), Make procedure, Development-cum-Production Partner Scheme, or the Strategic Partnership Model. Some of the items seem fit to be brought under the purview of the Defence Technology Fund or iDEX (Innovation for Defence Excellence), of which the MSMEs, start-ups, and individual innovators have been the primary beneficiaries.
There is an equally compelling case for drawing up a list of items to be bought off-the-shelf, as it were, from the FOEMs under the Buy (Global) category, or which they could be asked to make in India under the Buy (Global – Manufacture in India) category. Such clarity can go a long way in restoring the confidence of FOEMs and foreign investors, apart from displaying MoD’s resolve to walk the talk by fast tracking acquisition of the capabilities required by the armed forces.
Why this approach has not been contemplated is hard to say, but it would be fair to assume that, at least in part, it has something to do with the financial constraints. Not long ago, the fifteenth Finance Commission had estimated a shortfall of ₹ 15,24,000 crore for the period 2021-22 to 2025-26 between the armed forces’ requirement and the likely allocation. It was too huge a gap to be plugged by setting up a non-lapsable pool of ₹ 1,88,354 crore for modernising the armed forces, as recommended by the commission.
Putting embargo on import of items would be of little help unless it is a part of a financially viable acquisition plan, carefully formulated and assiduously executed by a dedicated team of professionals functioning at an arm’s length from MoD’s bureaucratic stranglehold, as suggested by a committee set up the MoD itself sometime in 2016.
The author is Former Financial Advisor (Acquisition), Ministry of Defence.
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