National Defence and security is of prime importance for any Government or nation. National Defence means the protection of a country against foreign invasion or aggression. We have several hostile neighbors like Pakistan and China. Unless we improve our relationship with Pakistan and China, strengthening defence sector is an unavoidable necessity. During the period of over 65 years of our country’s existence since Independence, there has been invasions and aggression. This also means that in spite of our country’s efforts to maintain peace in the region and with a population of peace loving nationals, we have been forced to devote a great deal of thought to the necessity of National Defence.
Until the 1960s, India failed to spend a lot on defence and we paid the price in costly wars with neighbors who took us for a pushover. In the global field, if you fail to have a strong deterrent, you will become a football played by other powers. To build a strong economy & eliminate poverty, we need to be sure that our borders are sound. A weak nation cannot grow a strong economy. Since the 1970s, we have been able to avoid direct wars (touchwood) and part of it is owed to our stable position. Besides tackling external security issues, Indian army also helps build the infrastructure of the border areas and help the civilian governments during any emergency (natural or man-made). Some of the defence innovations help scientific progress outside.
We spend huge amounts on strengthening defences, to protect ourselves from such aggressions. India spends 1.8% of its annual income (GDP) on defence and that is exactly the world average. Given that we have two nuclear armed neighbors, a troubled neighborhood that hosts the Talibans, sea pirates, despots and a growing internal menace of communist extremists this is not unjustified. Indian expenditure on defence is necessary. A country as large and diverse as the nation needs to have well established systems of defence and security in place to protect national interests. However, India also has record number of people living below poverty line and problems such as lack of education and infrastructure.
With such a massive need for growth and development, is expenditure on defence justified? Especially with no wars in the offing in the present future. But India’s contentious relations with Pakistan point to the crying need for a well organised and systematic defence system in place. Let us examine if money well spent is how one can define Indian defence expenditure.
- INDIA ASPIRES FOR SUPERPOWER STATUS
This can only be attained if India has well established defence systems in place. India’s aspiration for the regional power status and key player in international affairs can only be achieved through rising military expenditure. Strategic assets also determines the nation's standing in the world. eg- Russia voice in International sphere despite a weak economy, due to its military prowess.
- TODAY THE STRATEGIC AND ECONOMIC BOUNDARIES HAS ALMOST CONVERGED.
The One Belt One Road (OBOR) of china is the best example which shows that economic aspect compliment military aspect and vice-versa. So if India wants to secure vital energy security and if it wants to voice its concern with force regarding freedom of navigation, then it is inevitable that we spend on blue water navy.
- RISING REGIONAL TENSIONS
In light of rising regional tensions, India needs to safeguard and protect its national interests. This is only possible through a healthy budget for defence expenditure.
- INCREASING NUMBER OF MISHAPS
There are rising number of numerous arms of defence forces which provide information regarding the stock the nation currently has. But substandard equipment has led to mishaps and only healthy defence expenditure can undo the damage.
- TERROR THREAT
With increasing terror attacks such as those in Gurdaspur and Pathankot, increasing defence expenditure is fully justified.
- OTHER COUNTRIES ARE ALSO ADVANCING
Defence expenditure is an area where many other nations have advanced beyond a certain point. India needs to stay ahead in the game or risk losing supremacy in the defence
Even military spending can provide much needed employment under the aegis of Make in India.
- TO AVOID UNWANTED WARS
In 1962 we lost the war to China, as a result we decided to modernize our force, this made Pakistan anxious and it attacked us in 1965. Even after 1965 we kept on modernizing, the net result being that 1971 was the last full-fledged war which India fought. (45 years back). So by avoiding wars with modernization, we could use our economic resources for the poor and downtrodden in our country.
- ROCKET SCIENCE
Rocket science which also come under military technology, is used today to launch satellites for weather forecasting, mineral mapping, agricultural damage mapping (Pradhan mantri fasal bhima yojana) etc.
SERVICES OF INDIAN DEFENCE SYSTEM
The President of India is the supreme commander of the Indian defence system. The whole administrative control of the Armed forces lies in the Ministry of Defence. The Defence Minister is responsible to Parliament for all matters concerning defence of the country. Indian defence system has been divided into three services
- Air Force
The Indian Army is the world's second largest army in terms of military personnel. The basic responsibility of the Army is to safeguard the territorial integrity of the nation against external aggression. In addition, the Army is often required to assist the civil administration during internal security disturbances and in the maintenance of law and order, in organising relief operations during natural calamities like floods, earthquakes and cyclones and in the maintenance of essential services. The Indian Army is one of the finest armies in the world. Modernisation and upgradation of Army is a continuous process to keep Armed Forces ready to meet any challenge of tomorrow. It is based on five years plans. Focus and core areas of modernisation has been:-
- Improvement in the Fire Power and increased Mobility
- All Weather Battle Field Surveillance capability
- Night Fighting capabilities
- Enhance capability of Special Force
- Capability for Network Centric Warfare
- Nuclear Biological and Chemical (NBC) Protection
INDIAN AIR FORCE
The Indian Air Force was officially established on 8 October 1932. The past 75 years have been eventful for Indian Air Force (IAF) from a flight of 'Wapitis' in 1932, to the fourth largest, professionally acclaimed, strategic Air Force responsible for guarding Nation's vital interests. From 1948 to Kargil, the IAF has always fielded wining capabilities. IAF's professional and prompt operations in peace time, at home and abroad and in peacekeeping, have earned many accolades.
Indian Air Force (IAF) today is transforming itself into a formidable aerospace force with long reach and superior striking capabilities well supported by technological advancements. The focus over the coming years would be to undertake continuous upgradation in the priority areas of Operational Capabilities, Infrastructure Development and Sound Security Environment. In pursuance of this strategy, IAF has initiated a blueprint for the overhaul of the combat potential of its fleets. It also intends to strengthen the Air Defence network, through induction of modern radars and weapons. The IAF has reinforced its emphasis on Network centric operations, Electronic warfare and Information warfare. Operational capability is being strengthened by bringing these force multipliers in its doctrinal fold. IAF is also focusing on enhancing the quality of training to meet future challenges by inducting Basic, Intermediate and Advance trainers and Simulators. Modernization of the operational and technical infrastructure is also being undertaken to provide the desired combat support. IAF’s plans factor in geo-strategic and security challenges in the region to address operations across the spectrum of war.
The Indian Navy, by virtue of its capabilities, strategic positioning and robust presence in the Indian Ocean Region (IOR), has been a catalyst for peace, tranquility and stability in the IOR. It has been engaged other maritime nations, extending hand of friendship and co-operation. On India attaining Independence, the Royal Indian Navy consisted of 32 ageing vessels suitable only for coastal patrol, along with 11,000 officers and men.
The specific roles of the Indian Navy in future would continue to extend across the entire spectrum of security of the nation; from peace keeping, through the low intensity segment to high-intensity conventional hostilities up to and including nuclear conflict. The Indian Navy will necessarily need to perform its varied tasks in the expanding presence of neutral and multinational/ extra regional forces in the Indian Ocean Region (IOR). In the last two decades, the capabilities available with our potential adversaries have grown considerably and are forecasted to only improve with time. The Indian Navy would therefore acquire adequate deterrent war fighting capabilities.
PRESENT SITUATION OF DEFENCE SECTOR IN INDIA
India has become the world’s fourth largest spender on defence, following a 13.1% increase in its 2016-17 defence budget, according to US research firm IHS Inc. India’s rise in the rankings from sixth position last year is a result of an increase in expenditure to $50.7 billion, combined with cuts to military spending by Russia and Saudi Arabia, where low oil prices have put considerable strain on their finances.
Growth in the Indian budget is expected to outpace that of all other major defence spenders over the next five years. This position is only likely to strengthen further. According to IHS analysis, short-term pressures, caused by increases to military pay and the introduction of one rank, one pension (OROP) are the main reasons for the higher rate of growth in budget allocation to defence. As a result, spending on the acquisition of military equipment remained largely static in real terms and remains lower than its 2013-14 peak, despite an increase in the overall budget.
There are definitely strains with regards to the 2016-17 defence budget, not least that last year’s medium-term guidance suggested India would see a growth of 17-18% this year. The pressure on the capital budget will be the main concern from the perspective of both domestic and foreign defence suppliers. Nonetheless, longer-term budgetary prospects have improved and are expected to strengthen further over the next five years. The Indian defence budget is expected to reach $64.8 billion by 2020 with procurement expenditure expected to grow faster than overall spending, according to IHS. India’s aerospace and defence market is among the most attractive globally and the government is keen to leverage this advantage to promote investments in the sector.
According to a report released by PricewaterhouseCoopers Pvt. Ltd and industry lobby group Assocham on 29 March in Goa, India ranks among the top 10 countries in the world in terms of its military expenditure and import of defence equipment and it allocates about 1.8% of its GDP to defence spending, of which 36% is assigned to capital acquisitions. However, only about 35% of defence equipment is manufactured in India, mainly by public sector units. Moreover, even when defence products are made locally, there is a large import component of raw material at both the system and sub-system levels.
The government has allocated funds for the budget based on the orders that it had previously placed and funds are not an issue for future defence acquisitions. India will finalize defence orders worth Rs.2.8 trillion by 2016 even as the defence ministry is pushing for at least 40% indigenous content in the defence products. The strain on the equipment budget was inevitable given the pressures of OROP and the seventh pay commission, but India should now see a period of sustained growth in procurement spending. The increase in capital expenditure will be driven by extensive modernization requirements across the armed forces. It has observed that the majority of the armoured vehicle inventory of the Indian Army has passed their service life while the air Force possesses 34 active combat aircraft squadrons against a sanctioned requirement for 42. As a result of these pressures, procurement spending is expected to rise from $10.4 billion this year to around $15 billion by 2020.
INDIGENOUS DEVELOPMENT AND IMPORT
India’s march towards the acquisition of competitive defence technology and thus gain assured capability against the military threats it confronts has essentially two routes. The first is indigenous development and the second, import.
The first route was adopted in the 1950s when the Defence Research and Development Organisation (DRDO), Defence Public Sector Undertakings (DPSUs) and additional Ordnance Factories (OFs) were established. Despite considerable thrust in that direction, albeit with an understandably limited budget, progress towards self-reliance in defence technology has not reached the milestones that were set. While overall indigenous development and production has significantly increased in technology levels and volumes over the decades, it has been offset by a faster evolution of defence technology in the world. Consequently, the defence forces continue, as in the past, to depend on imports of competitive defence technology systems. Today, India holds the embarrassing distinction of being the largest importer of defence systems in the world.
- IMPORTANCE OF DEFENCE INDIGENISATION
Defence indigenisation has remained the inner calling of a nation, which has the third largest Army, is the eighth largest military spender and has emerged as the largest importer of weapon systems and platforms in the world. As India inches to achieve its rightful strategic autonomy, it needs to do much more in planting the seeds for a commercially viable and technologically robust indigenous defence industrial base.
Indigenisation was earlier included in the primary functions of the Department of Defence Production (DDP) and Directorate General of Quality Assurance (DGQA), however, this responsibility has since been transferred to the Ordnance Factories Board (OFB) and Services . The Services on their part have established a dedicated Directorate of Indigenisation for their respective Services. The Army and Navy, for instance, have even formulated a well articulated 15-year Perspective Plan for Indigenisation with a mission to carry out purposeful indigenisation of spare parts, subsystems, special maintenance tools, test equipment and entire equipment (non-war like) with a view to effecting significant savings in life cycle costs of imported weapon systems. This roadmap gives a clear perspective of technologies and defence products that are likely to be inducted.
India is at the cusp of metamorphosing from a top regional player to one with global clout. As India’s geo-political and economic ambitions grow, it needs to develop robust indigenous manufacturing capabilities and ecosystem to secure its ambition for self-reliance in the Aerospace and Defence industry. Currently, the country allocates about 1.8 percent of its GDP to defence spending and imports about 70 percent of defence equipment. Owing to the dynamic security environment, India’s defence requirements are likely to increase in the foreseeable future making indigenous development of modern defence hardware and technology a top priority for the government.
India’s defence industry, however, has failed to manage India’s defence requirements as of today. India is one of the largest arms importers in the world as the indigenous production of technology is one area where India continues to struggle. India’s defence preparedness, therefore, remains a question as some of the most crucial requirements in various services of the Armed Forces have not been fulfilled because of severe deficiencies in the defence industry.
India’s land forces lack sophisticated weapons and armoury, the navy’s submarine fleet has dwindled down to 40 percent of the minimum requirements and the fighter squadrons are at the level of 60 percent of the mandatory need which, indeed, is a cause for concern considering the slow pace of India’s defence modernisation. Therefore, when taking into account the changing nature of threats in the emerging geopolitical scenario (also considering the changing nature of warfare with the rise of non-state actors), India has to focus on building capacity for continuous modernisation of the Armed Forces while directing it towards achieving the desired capability which will, in turn, depend on the analysis of threats.
- BENEFITS OF DEFENCE INDIGENIZATION IN INDIA
The following benefits would accrue over the long term:
- Indigenous manufacture assures supplies and prompt maintenance support as and when the country requires it.
- Indigenous manufacture is always cheaper than imports and leads to a smaller defence budget, allowing the country to allocate higher budgets for education, health and improvement of infrastructure.
- Growth of the domestic manufacturing industry and the creation of a strong defence manufacturing ecosystem.
- Growth of design and R&D agencies, both in the private and public sectors, leading to the establishment and growth of a strong technology innovation ecosystem.
- Technology spin-offs to non-defence technology areas such as healthcare, medical diagnosis, automotive engineering, inland security, maritime shipping, etc.
- Potential for the country to grow into a defence exporter over the long-term.
- Overall potential for growth of industry in general leading to employment generation.
However, one needs to appreciate this from a long term perspective. Defence equipment belong to highly specialised and restricted domains and hence it is not easy for any industry to jump into it. Defence equipment are required to conform to very high degrees of ruggedness, reliability, and quality. Further, where armaments are involved, issues of safety against accidental ignition also arise. These are issues that are rarely encountered in normal commercial and industrial equipment. It therefore requires an indigenous industry to sensitize itself to these matters before getting involved in the manufacture of defence equipment.
It is evident from the above that the process of indigenisation needs to be implemented in a planned manner with prioritization based on strategic requirements as well as availability of local talents. Hence, this has to be seen as the long term objective.
- CHALLENGES OF DEFENCE INDIGENISATION IN INDIA
Though the country basks in the glory of Kargil and thumps its chest over an occasional successful missile test, defence development and production remains a joke in India. The list of failures and shocking delays in the country’s defence sector is long. The cloak of secrecy under which research & development in defence operates causes even greater concern about inefficiencies, waste, questionable priorities, and failed or delayed projects the public is not yet aware of. Worse, many heads nod sagely at the mention of foreign direct investment in Indian defence public sector undertakings (DPSU) as if the solution to India’s convoluted woes could be so easily imported.
Many have offered technology transfers and manufacture under license as a solution that would help India leapfrog technological generations. This is an unrealistic assessment, for multiple reasons. First, intellectual property rights may remain with original equipment manufacturer. The impact of this was most visible when US sanctions post-Pokhran II hit the Tejas LCA project. Second, domestic industry may not be able to absorb the technology and may have to import components, reducing the Indian role to mere assembly. Third, countries will not be willing to part with their latest technologies or cooperate too closely with Delhi – despite being an attractive market, India remains non-aligned and hence a question mark in geopolitical calculations.
Offsets are also seen as a mechanism to develop indigenous manufacturing capability. They create jobs, enhance scientific and engineering skills, promote small local manufacturers, and could even lead to exports. They are also, as Transparency International warns, opaque and highly susceptible to corruption. More fundamentally, offsets must come in a value-multiplying form – sourcing aluminium and labour from India may serve the technical definition of offsets but does little to enhance indigenisation. As has been seen after every foreign acquisition such as the MiG-21, T-72, T-90, and others, DPSUs have failed to master the acquired technologies and improve upon them, necessitating further ToTs with each purchase. Operationalisation of manufacturing processes has also remained sluggish in India.
Modernisation is not the same as procurement or indigenisation, and neither technology transfers nor FDI will help with the latter. Five vectors pull the indigenisation project in different directions: 1. the military, which is (understandably) only concerned with fighting effectiveness; 2. the DPSUs, who are too busy protecting their own bureaucratic privileges and sinecures; 3. the private sector, who seems to have little faith in Delhi’s long-term vision and therefore is more interested in short-term profits; 4. the political leadership, which remains clueless as ever; and 5. the citizens, who are too jaded to even ask the right questions.
The hard reality is that indigenisation, in the spirit that dependence on foreign sources is nil, is a complex network of operations and dependencies which will take a generation – about 30 years – to achieve fully. Two components of such a project must be human infrastructure and privatisation.
Presently, DPSUs do not feature on the list of dream jobs for most graduates from Caltech, MIT, or Stanford. The bureaucratic environment and the low prioritisation of R&D as evidenced by the paltry budget allocation has resulted in poor facilities and opportunities for employees. In addition, Indian universities have failed spectacularly to produce a rich pool of talent domestically. The shortage of qualified scientists and engineers, something Homi Bhabha had warned about when he put together the nuclear establishment in the late 1940s, has come to haunt Indian R&D and industry.
- ·GLASS HALF FULL: A SEA OF OPPORTUNITY
The fact that India ranks amongst the top 10 countries in the world in terms of its military expenditure, makes it one of the most attractive markets for defence. With the government’s agenda to reduce import dependence in defence by 35-40 percent it is actively promoting indigenous defence manufacturing with initiatives like Make in India and policy reforms. Even the recently launched Defence Procurement Policy (DPP) is seen as a game changer to ensure faster pace in procurement, especially through newly introduced categories under indigenously designed, developed and manufactured (IDDM) provisions. Following the Central government’s footsteps and recognising the huge potential from the defence sector, several states are also offering incentives and concessions in the form of aerospace clusters or Special Economic Zones (SEZs) for developing an ecosystem where all core and ancillary activities related to defence manufacturing can co-exist.
With the Defence Minister’s intention of procuring about US$10 billion worth of defence products per year in the next 5 to 10 years, and the government undertaking several initiatives and reforms, there is a sea of opportunity available for all stakeholders in the sector. For example Original Equipment Manufacturer (OEMs) as well as Small and Medium-sized Enterprises (SMEs) in the defence manufacturing sector are focussing on moving from a buyer-seller to a co-developer and co-manufacturer relationship. They have not only come together and formed strategic partnerships to support the development of a sustainable supplier base for the defence sector, but have also moulded themselves quickly to foster a culture of innovation and R&D. So far, they have demonstrated a huge amount of potential and capability to deliver on this promise.
- ·GLASS HALF EMPTY: NECESSARY STEPS TO HASTEN INDIGENIZATION
India offers tremendous opportunities in engineering services, supply chain sourcing and associated maintenance, repair and overhaul-related activities, however to achieve self-reliance we need to create a robust ecosystem that can address the capacity and capability requirements for the industry. While the government is taking numerous measures to bolster defence manufacturing, the pace of modernisation must be balanced with both short and long term initiatives. Here are some necessary steps that must be adopted to enable long term indigenisation:
a) Partnering for success: We believe that co-development and co-manufacturing is the way forward to achieve the vision of turning India into a global high value manufacturing destination not just for the home market but also for export. India harbours an immense amount of potential that can be tapped into by way of key strategic partnerships that add value across the entire length and breadth of R&D, manufacturing and supply chain. Foreign OEM’s have already started leveraging these benefits, and are encouraging Indian industry to adopt best practices for global quality standards in their manufacturing processes to lead to the creation of a gold standard supply chain and defence manufacturing ecosystem in India.
b) A skilled talent pool: As per government estimates, a reduction in 20-25 percent in defence related imports could directly create an additional 100,000 to 120,000 highly skilled jobs in India. To be ready for the opportunities of the future, the industry needs to build and train talent to address the growing needs of the market. In addition, the academia and industry needs to forge partnerships to encourage research and technological advancements and create a talent pool that is industry ready.
c) Robust supply chain: A strong supply chain is critical for a defence manufacturer looking to optimize costs. Gradually, a handful of Indian SMEs are playing a key role in the global supply chain of OEMs. With the government’s offset policies, procurement policies and regulatory incentives spurring the growth of a domestic defence industry, the SMEs need to play a more active role in developing a robust supply chain.
d) Infrastructure development: Lack of adequate infrastructure drives India's logistics costs upwards thus reducing the country's cost competitiveness and efficiency. While the government is investing in this area the pace of development needs to pick up considerably and public-private participation can go a long way in hastening this process.
e) Privatisation is the other leg of indigenisation. Private firms must be allowed easy entry into the defence sector, allowed to research and develop any product they wish, and solicit their wares not just to the Indian military but to buyers abroad as well. Exports may be regulated through a liberal but effective export controls list and end-user agreements. The export market would encourage private firms to enter defence production as they will not be dependent on the whims of the Indian military and Indian defence bureaucracy. Exports will also allow companies to profit from economies of scale. The government must also push the development of skills in design and manufacture across a wide spectrum of products – chips, hydraulics, supercomputers, weapons-grade steels, composites, engines – at home.
The second route to acquire competitive defence technology is their import. Executed under the rubric of ‘Transfer of Technology’ (ToT), this comprises of arrangements wherein foreign supplier firms provide ‘technology’ for enabling the buyer to manufacture defence systems. Since indigenous capability was limited, India has been using ToT to shore up its defence production capabilities from as far back as the 1960s and 1970s.
- IMPORTANCE OF TRANSFER OF TECHNOLOGY
‘Transfer of Technology’ gives the impression, to the average person not acquainted with the details of such matters, that it will magically elevate defence production capabilities to cutting-edge levels. After which, India would attain self-reliance in that particular domain of technology for all the years to come. If that had been the case, India would have become self-reliant decades ago in fighter aircraft, helicopters, armoured tanks, artillery guns and numerous other defence materiel. India has been the recipient of these technologies since the 1960s and has full-fledged Ordnance Factories and Defence PSUs dedicated to their production. That these factories have not been able to absorb and build on the received technologies is viewed by many as a failing, for reasons of incompetence, poor management and short-sightedness. While these may have been contributory factors, digging a little deeper reveals a whole plethora of factors linked mainly to the legal clauses protecting the rights to industrial/intellectual property (IPR) of technology sellers. While protection of these rights is justifiable considering the substantial investment made by the seller, the generally prevalent oligopolistic environment in defence technology has been exploited by many through the adoption of measures which could, arguably, fall under unreasonable restrictive trade practices.
ToT has not been confined to defence systems only. Firms in the developed world have been selling civil technology to less developed countries as a means to increase the returns on their investment over a wide range of products. Sellers have used numerous ways of excessively milking technology transfer arrangements, till growing resentment prompted the technology buying, less developed, countries to introduce regulations to protect themselves. In 1970, the matter was formally recognised by the United Nations Conference on Trade and Development (UNCTAD) with the setting up of the Inter-Governmental Group on ToT for drawing up a Code of Conduct. Today, the UNCTAD document on Transfer of Technology provides an exhaustive coverage of the various issues of regulatory measures, market competition, protection of IPR, and encouragement of ToT. Defence trade and technology, being highly controlled by a powerful few, is significantly more vulnerable to restrictive trade practices. Foreign firms, which would, in the case of civil technology, be expected to follow the code of conduct, have, in the case of defence systems, a convenient justification for indulging in these restrictive trade practices. A quick look at these practices is illuminating.
- CHALLENGES OF TECHNOLOGY TRANSFER
Technology seller firms have been known to: impose restrictions on field of use, volume and territory; ask for prolonged periods of validity (thus precluding its further development by the buyer); restrict any research and development in the field; impose non-competition clauses on the buyers; tie down the buyer to purchase material and parts from the seller; fix their own prices; impose restrictions in the event of the expiry or loss of secret technical knowhow; prevent challenges to the validity of the rights of the seller; impose grant-back provisions which force the buyer to transfer back to the seller, any improvements, inventions, etc.; and lastly, restrict exports.
In addition to these, numerous export control arrangements and non-proliferation treaties such as the Wassenaar arrangement, Nuclear Non-Proliferation Treaty (NPT), Missile Technology Control Regime (MTCR), the Australia Group, etc. impose additional restrictions on export and transfers. While these, no doubt, hold universal acceptance for the righteous cause of preventing technology from falling into the wrong hands, they nevertheless impose heavy restrictions and are accused by some of being propagated by technology denial regimes.
In addition to these restrictive clauses and export controls are the special agreements which supplier countries impose on the buyer. The Logistic Support Agreement (LSA) and others being thrust upon India by the US as pre-conditions for the Defence Trade and Technology Initiative are apt examples in this regard. Apart from compelling countries to compromise upon their foreign policy status, such agreements also seriously hamper ToT.
Finally comes the cost angle. ToTs enabling indigenous manufacture of defence systems appear, prima facie, to be cheaper than outright purchase of the system, given, as is the case for less developed countries like India, the availability of cheaper labour and use of existing infrastructure. Paradoxically, however, it is, in many instances, the other way around. In the 1970s and ‘80s, this aspect was hotly debated when it was noticed that the cost of making the Jaguar aircraft in India would be twice that of buying finished planes from Britain. Reasons for higher costs have been attributed to the costs imposed by the seller firms on patents, licenses, know-how, trademarks, over-pricing of capital goods and equipment supplied, and many others.
- ADVANTAGES OF TOT
So is ToT an undesirable route for India? Would it be better just to keep buying defence systems outright until indigenous development catches up? These are questions which need to be answered keeping in mind the negatives discussed above, while at the same time taking into account the positives in the form of saved foreign exchange, employment generated, modernisation of production facilities, economic and industrial growth, possible spinoffs to commercial use and export. A lot will depend on how well these contracts are negotiated for the long term goal of self-reliance. Therefore, Indian agencies would do well to deploy competent negotiators who are well trained and acquainted on connected matters of patents, licenses, pricing of technology, etc. by a special agency nominated for the purpose. A strong advantage that India has at this point of time is the economic slump prevalent worldwide, which has prompted a surge of competition among the foreign seller firms to partner with India in defence manufacturing. With detailed, well thought out, and executed negotiations, India may possibly be able to leverage the situation to turn ToTs into more effective means of building self-reliance in competitive defence technology.
Indigenisation being limited to absorption of ToT under licensing arrangements by the DPSUs and OFs and indigenising a few components, spares and assemblies do not comprise the answer. These public sector entities are burdened by poor work and management cultures, short on productivity, stringent quality controls, innovation and even devoid of costing transparencies. Subjecting them to market pressures and competition with the private sector would yield the desired results. Creation of joint ventures (JVs) with global defence players by both Indian industry as well as DPSUs will also go a long way in nurturing the growth of this sector. Adopting a collaborative approach involving the public and private sectors in the Public-Private Partnership (PPP) mode will yield rich dividends. The public sector possesses massive infrastructure, facilities and vast skilled workforce. The private sector, on the other hand, is more inclined to handle high end technological advances, have efficient managerial practices, marketing skills and exhibit financial prudence in keeping with efficient business and commercial practices. A synergy of the two can capitalise on their respective strengths and mitigate the risks on account of their individual weaknesses.
No tangible results can be forthcoming without the involvement of the government for which it is essential to evolve a long-term defence procurement and production plan, which will set clear ground rules on a competitive basis between the industry and DPSUs/OFs. The protectionist approach towards the public sector needs to be shed by the bureaucratic structures. We need to look at system and sub-system development competencies and a good hit rate at converting R&D to production in quick time, with stringent quality controls and at competitive costs. Formulation of a National Indigenisation Plan, mechanism and structures to monitor the extent of indigenisation achieved and sharing the same with all stakeholders will be worthwhile. Too much has been said and talked about indigenising our defence sector – it is high time that we now deliver.