Use that Buying Clout

Over the next five years India will spend over $50 billion on defence acquisitions. Among the weapons systems and equipment to be acquired, the big ticket items will include the aircraft carrier INS Vikramaditya (Admiral Gorshkov), 126 multi-mission, medium-range combat aircraft (MMRCA), six C-130J Hercules transport aircraft for Special Forces, eight Boeing 737 P-8I maritime patrol, surveillance and reconnaissance aircraft, six Scorpène submarines, and a large number of main battle tanks (MBTs), 155 mm artillery guns and equipment for counter-insurgency operations.

Will India’s plans for defence modernisation lead to substantive upgrade of India’s defence technology and manufacturing prowess, or will the country’s defence procurement remain mired in disadvantageous buyer-seller, patron-client relationships?

Though the Indo-US nuclear agreement sounded the death knell of the era of defence technology apartheid practised against India, it will still be a decade or more before the ghosts of technology denial regimes are finally buried. The deeply entrenched bureaucracies in the departments of state, defence and commerce around the Washington beltway will take quite some time to finally accept India as a co-equal partner with whom dual-use technologies can be shared to mutual advantage.

Meanwhile, India too has some growing up of its own to do as the country sheds its suspicions of the past. The government continues to retain its monopoly on defence R&D. It still relies primarily on the public sector for defence production and though it talks about encouraging public-private partnerships, not much has actually happened. The revised Defence Procurement Procedure (DPP 2008) still favours the defence PSUs over the private sector. MNCs are allowed to bring in only up to 26% FDI as against 74% for non-defence sector joint ventures. Procurement of weapons and equipment worth more than Rs 300 crore from MNCs has been linked with 30-50% offsets though it is doubtful whether the economy is ready to absorb such high levels of offsets. These measures will together gradually bring in much needed investment and will result in the infusion of cutting edge defence technology.

The DRDO is in the process of implementing the report of the P Rama Rao committee that had asked it to identify 8 to 10 critical areas that best fit its existing human resource pool, technological threshold and established capacity to take up new projects. Since its inception in 1958, the DRDO has achieved some spectacular successes, but also has many signal failures to its name. Successes include the Integrated Guided Missile Development Programme that produced the Prithvi and Agni series of nuclear-armed ballistic missiles and, subsequently, the BrahMos supersonic cruise missile in a collaborative venture with the Russians.

Among the failures are the MBT Arjun that has suffered huge time and cost overruns and the light combat aircraft that still appears to be light years away from operational induction into the IAF. However, to DRDO’s credit, it worked under extremely restrictive technology denial regimes and with a rather low indigenous technology base. Consequently, India continued to import almost 70% of its defence equipment for over four decades, primarily from the Soviet Union and, later, Russia. Though some MiG-21 aircraft and other weapons systems were produced in India, these were manufactured under licence and no technology was ever transferred to India, with the result that even though India spent large sums of money on defence imports, the technology base remained where it was.

As a growing economic powerhouse that also enjoys considerable buyer’s clout in the defence market, India should no longer be satisfied with buyer-seller, patron-client relationships in its future defence procurement planning. In all major defence acquisitions in future, India should insist on joint development, joint testing and trials, joint production, joint marketing and joint product improvement over the life cycle of the equipment. No company that does not agree to provide genuine transfer of technology should be shortlisted for trials and competitive bidding.

However, India cannot leap-frog to a higher plane virtually overnight. The immediate requirement is to think big in keeping with the country’s growing global status and to plan for the future with a level of confidence that policy planners have not dared to exhibit before. In 10 to 15 years India must acquire all its defence needs only from Indian companies—with or without a joint venture with an MNC. Only then will the era of self reliance dawn on India.

The author is Director, Centre for Land Warfare Studies, New Delhi

Courtsey: The Financial Express, 27 October 2010

(Disclaimer: The views expressed in this article are those of the author and do not represent the views either of the Editorial Committee or the Centre for Land Warfare Studies).