By Amit Cowshish
The report on Arms Production Capabilities in the Indo-Pacific Region, released by the Stockholm International Peace Research Institute (SIPRI) earlier this month, casts some ‘serious doubts about whether India will be able to significantly reduce its dependence on imports in the short and medium term’.
According to the report, 84.3 percent of the major conventional arms procured by India in 2016-2020 were of foreign origin, of which licensed production accounted for 57.8 percent. In a stark contrast, the domestic procurement accounted for a mere 15.7 percent of the total procurement.
Among the five segments monitored by SIPRI, the domestic shipbuilding industry stands out as a shining example of India’s potential in designing and manufacturing major platforms. Most of the ships delivered during the aforesaid period were based on Indian designs. And so was the nuclear-powered ballistic missile submarine Arihant which gave ‘India’s nuclear forces a high level of autonomy’.
Unsurprisingly, the domestic shipbuilding industry accounted for 78.6 percent of the total volume of procurement of naval vessels by the Ministry of Defence (MoD). It is widely believed that further progress depends on the Indian industry’s ability to locally design and manufacture propulsion systems and armament for the ships and submarines.
The Indian industry also did reasonably well in meeting 29.4 percent of the total requirement of air defence systems through locally designed equipment, but it could meet only 6.3 percent of the overall requirement of aircraft and 7.7 percent of missile systems, with the rest of the requirement being met either through outright import or licensed production. In the armour segment, the requirement was met cent per cent via licensed production.
It does not come as a surprise that while ‘much of the licensed production has a substantial Indian content’ by way of locally designed components to replace the foreign components, ‘domestic designs remain dependent on imported key components such as engines and radars’. These are, by no means, the only major components for which India continues to be dependent on foreign sources, even for maintaining legacy systems.
The dependence on import of engines and radars, as indeed many other critical components, is a major hurdle in India’s quest for self-reliance in defence production. Sadly, as the report points out, ‘(an) important objective of licensed production (was) to gain capabilities to develop local design through technology transfers (but) over the decades this has not often been successful’.
The report goes on to cite the example of technology transfer for licensed production of Su-30MKI by the state-owned Hindustan Aeronautics Limited, which is generally considered to be a ‘mistake’ as ‘no real technology transfer took place’. With some rare exceptions, this has been a problem with most of the licensed production projects.
The foreign companies blame the Indian companies for their inability to absorb the transferred technology, while the latter blame the technology providers of not being earnest in transferring technology. The truth lies somewhere in between, but this is not an insurmountable problem. The desired scope, range and depth of technology transfer can be ensured by including unambiguous clauses in the contract which define the responsibilities of the transferor and transferee with absolute precision.
The significance of negotiations and careful drafting of contracts is best illustrated by the $285 million deal signed with the Swedish arms manufacturer Bofors in 1986 for supplying 410 155 mm Howitzer field guns. The deal included nearly unfettered transfer of technology by the company to the erstwhile Ordnance Factory Board (OFB) to manufacture the guns in India. It is another matter that the technology was used only decades later by Advanced Weapons and Equipment India Limited (previously a part of the OFB) for making 155 mm towed howitzer Dhanush. The guns were finally approved for induction in 2019.
Be that as it may, the SIPRI report also seems to suggest that predominance of the Defence Public Sector Undertakings (DPSUs) may not be very conducive to making India self-reliant in the defence production sector. The first five largest companies in India, manufacturing aerospace, land, electronics, and shipbuilding systems are all DPSUs but, as the report observes, ‘(d)espite their size and industry dominance, there are lingering concerns over (their) productivity, their reliance on domestic military orders, and their dependence on foreign resources’, and so these companies ‘have started to diversify their business into the civil market and to set up export offices overseas’. How far this gambit works remain to be seen.
Meanwhile, the government is encouraging the private sector to play a bigger role in defence production under its flagship ‘Make in India’ programme. More than 200 companies have been licensed to produce military equipment and participate in government tenders, preferably on their own, but also in collaboration with the foreign companies, if required. This number does not seem to include a large number of Micro, Small and Medium Enterprises.
However, the private sector has a long way to go to catch up with, much less excel, the public sector undertakings. This is obvious from the fact that Ashok-Leyland, which supplies military trucks to the Indian Army, is the only private sector company ranked among the top 50 in the Indo-Pacific, while other private sector manufacturers like Larsen and Toubro ‘feature neither in the country’s top 5 nor the regional top 50’.
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The report rightly points out that the “current arms industrial policy is included in the broader ‘Make in India’ policy that promotes local production in partnerships with foreign companies”, but its observation that these priorities are clearly reflected in capital outlays, of which a substantial proportion is earmarked for domestic equipment acquisition, as well as ban imposed on import of more than 300 items, seems ingenuous.
These steps are more likely to encourage licensed production in India rather than indigenous design, development and production of large platforms, or even major components, parts, assemblies, and sub-assemblies, at least in the short run. This is borne out by the fact that India, which was the second largest importer of arms in the world in 2016-20, became the largest importer of arms in 2017-2021, going by SIPRI’s earlier reports.
Observing that despite all these ‘setbacks’, India has ambitious acquisition programmes, the report unpropitiously concludes that the ‘earlier experience of Indian domestic arms programmes leave serious doubts about whether India will be able to significantly reduce its dependence on imports in the short or medium term’.
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It will be a mistake to dismiss the report as an attempt to belittle India’s flagship, albeit ambiguous, ‘Make in India’ policy as the facts given therein speak for themselves. The report should trigger an internal reassessment of the efficacy of the policies being pursued by the MoD and whether any course correction is required to achieve the intended objective of self-reliance in defence production which, in true sense, means the local industry’s capability to design, develop and manufacture state-of-the-art futuristic equipment required by the armed forces within the desired timeframe.
The author is Former Financial Advisor (Acquisition), Ministry of Defence.
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