By Amit Cowshish
The fourth ‘Positive Indigenisation List’ (PIL) of defence products was released by Prime Minister Narendra Modi on October 19 at the opening ceremony of the recently concluded five-day DefExpo 2022 at Gandhinagar. It enumerates 101 items which will be procured only from ‘indigenous sources’ after the expiry of the item-specific cut-off dates which stretch from the end of this year to December 2032.
The previous lists, notified in August 2020, May 2021, and April 2022, had similarly proscribed import of a total of 310 items with effect from various cut-off dates between December 2020 to December 2026. The status of procurement of all the items in respect of which the cut-off date has already passed is unknown.
Like the first three lists, the fourth list also includes ‘highly complex systems, sensors, weapons, and ammunition’ in a bid to ‘further stimulate the potential of Domestic Research & Development by attracting fresh investment into technology and manufacturing capabilities’, according to the official Press Release of October 19.
The items now banned for import include various types of naval vessels, electronic systems, missiles, military vehicles, robots, unmanned aerial vehicles, and ammunition. But also listed alongside these ‘highly complex’ systems are items like tyres, batteries, simulators, invertors, sensors, modems, radars, boiler tubes, and even ‘Augmented Reality (AR) Tools for Technical Type Training in the IAF’.
It is nobody’s case that these are ‘low-technology’ run-of-the-mill products but it’s difficult to accept that the Indian industry lacked the capability to indigenise them in the past and that it will now spring into action to develop or acquire the manufacturing technology to sell the products to the armed forces once the ban kicks in.
Take, for example, aircraft tyres included in the list. These are mostly nose and wheel tyres for AN-32, Jaguar, Hawk, IL-76, IL-78, MiG-29, PC-7 aircrafts, LCA, and Mi-17 helicopters. There is no dearth of tyre manufacturers in India. At least four Indian companies -Apollo, MRF, JK, and CEAT- were among the 30 largest manufacturers in the world in 2021.
These companies were either not prompted by the MoD to take up the challenge or did not consider it commercially viable to manufacture the specialised tyres whose imports are now going to be banned. In the first case, indigenisation directorates of the three services which were set up about two decades back to promote indigenisation of such items will have some explaining to do.
If, however, the Indian companies took little interest because of the commercial unviability of making the tyres in India, it will require some explaining on MoD’s part as to what has now changed to make it viable for them. In fact, this question is relevant in relation to most of the items on the PILs.
In a broad sense, commercial viability of developing a new product, manufacturing a product with transfer of technology from the foreign equipment manufacturer (OEM), or indigenising foreign-origin components incorporated in any equipment, weapon system or platform depends on many factors like the quantum of requirement to be met, visibility about the specifications of the product,the cost of development or indigenisation.
Above all, there has to be some assurance of sustained orders for the Indian company that invests in indigenising the products with the expectation of good and quick returns on investment.It becomes further complicated when more than one company is vying for the same pie. This issue assumes significance because defence is a monopsony with MoD being the major or, in most cases, the only buyer.
It’s axiomatic that no such assurance can be given by the MoD. In fact, in view of the official statement that the ‘orders would be placed on the Indian industry in the next 5-10 years’, there can be no certainty about when the listed products will be procured and, more importantly, no procedural complexities will come in the way after the tender is issued.
This is not the only elephant in the room. As alluded to earlier, the armed forces can be expected to buy a product only if it meets the stringent qualitative requirements (QRs), which the vendors normally get to know about only when the tenders are issued. Many tenders fall through because of unachievable QRs. This has been the bane of many acquisition programmes in the past. It remains unexplained how this issue is going to be addressed in relation to listed items.
One can only hope that while the PILs are just a manifestation of the MoD’s resolve to involve the Indian industry in defence production, that there is a lot of less-publicised activity going on behind the scenes to make sure that these lists serve the intended purpose of achieving self-reliance in defence which is not only an unexceptionable but also an essential goal India must pursue.
The author is Former Financial Advisor (Acquisition), Ministry of Defence.
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