Increase in FDI limit in the defence manufacturing under automatic route to 74% was an old pending demand of foreign OEMs as it would help them in protecting IP in high tech areas.
As India comes face to face with an impending economic crisis, the government has gone into overdrive to kickstart an economic revival with a slew of measures which includes self-reliance in defence manufacturing. “For all their good intentions, this will be easier said than done”, experts say. The views come close on the heels of the announcements made by the government in an effort to give a boost to the Defence Sector Post COVID-19.
Sharing his views on the four points which were announced, Air Marshal Nirdosh Tyagi (retd), former Deputy Chief of Air Staff, says :
a) Increase in FDI limit in the defence manufacturing under automatic route to 74%. This was an old pending demand of foreign OEMs as it would help them in protecting IP in high tech areas. However, even now 100% FDI is permitted through the approval route. No major OEM has come forward to utilise it. Defence manufacturing is unlikely to get any boost due to this single factor. Foreign vendors will set shop here only when they see bright prospects of purchase orders matching their investment.
b) Time-bound defence procurement process and faster decision making. This issue has been under deliberation for over a decade now. Every revision of DPP has been done with this issue as its prime objective. Three-pronged approach envisioned now does not incorporate any fresh idea. All major projects already have Project Management Teams. How will a name change to Project Management Unit help? The second point is about making realistic GSQRs. Who is going to set criteria for considering a GSQR realistic? Even now all GSQRs are expected to be realistic and there is a well-defined process to ensure that. There is some scope of simplifying trial and testing process, particularly for the land systems. The main requirement in this area is to improve processing efficiency of Procurement Wing of MoD.
c) Restriction on import of defence equipment. There can be no disagreement on this issue. Any item that can be made in India should not be imported. The existing categorisation process is supposed to ensure that. One has to follow a case by case approach in this matter. We must not forget that our defence manufacturing sector, dominated by DPSUs, has very limited capability in certain areas. For example, take the development time frame of Basic Trainer and Intermediate Jet Trainer (IJT) by HAL. Order for IJT was placed in 2007 or so. The aircraft is yet to reach the production stage. Basic Trainer has also been under development for over a decade. As long as we remain totally dependent on DPSUs, there is hardly any hope for import substitution of more complex equipment, such as a multi-role transport aircraft or medium-lift helicopter, without engaging with a suitable foreign OEM.
d) The corporatisation of Ordnance factories. Desirable, if these cannot be shut. It will make these like DPSUs. Will induce minor improvement in accountability. Privatisation is a better option.
And to sum up, the former deputy Air Chief says, “The all changes announced today are desirable but these are not going to game-changers. In any case, these have little relevance to Covid-19 induced financial crunch.”
Commodore Anil Jai Singh (retd), Vice President, Indian Maritime Foundation, sharing his views states “The inefficiencies that have taken deep root; the lack of any structural reform over the years in the DPSUs and OFB and the step-motherly treatment to the private industry despite the requirement for these staring the MoD in the face will take a very concerted effort to overcome. I am not sure the MoD bureaucracy is up to the task. The less than satisfactory outcomes of the Prime Minister’s ambitious ‘Make in India’ vision in which also defence was a key sector is there for all to see.”
“However, what is of concern is that in its zeal to show results, the MoD will compromise the requirements of the Indian Armed Forces with sub-optimal equipment which will further widen the capability gaps that are becoming increasingly evident by the day. Gen Bipin Rawat, the CDS who should be batting for the Armed Forces as its bureaucratic head in New Delhi is instead, singing a different tune and is even willing to settle for 70 % or less capability that the Armed forces desire. This is a terribly retrograde step and will have long term repercussions on the country’s military preparedness and consequently on national security,” says Commodore Singh.
“Our neighbours are constantly sniping at our heels and spending large sums on their militaries. This is something we cannot ignore. The success at Uri or Balakot should not lull us into a false sense of security as these were just tactical missions in a less than war situation”
In conclusion he says, “Perhaps it is time for three Service Chiefs to collectively to highlight these issues directly at the highest level and not let the CDShijack the narrative to what the MoD wants to hear. In the present organisation, the CDS is neither an operational authority nor superior to the Service Chiefs. He is the First among Equals and it is the Service Chiefs who are the operational heads of their respective services.”