Self Reliance in Land Systems through Indigenisation: The Future Perspective

EXECUTIVE SUMMARY

The Indian Armed Forces today have the ownership of a vast array of weapons and equipment. The inventory consists of a mix of vintage equipment as well as state-of–the-art systems, incorporating the current generation of technologies. Such a diverse range demands ingenuity and foresight to address operational sustainment issues. Technological obsolescence has impacted our sustainment efforts adversely impacting mission capability particularly of legacy weapon systems. Over the years operational sustainment of these weapon systems, has thrown up a great challenge in the face of rapidly diminishing product support from the OEM. 

New inductions have also posed fresh challenges due to lack of timely supply of critical spares and ammunition. This scenario has led to an inescapable necessity of self -help. The Army needs to take on these challenges head on, so that our vast array of weapons and equipment can be converted into a potent combat capability. Indigenisation efforts in the armed forces have been vigorously pursued for over a decade now mainly by the in-house Indigenisation Directorates. However, today we have reached a stage, where we need to focus beyond the low technology - high volume spare parts type of indigenisation. Development of complete systems and sub-systems through the indigenisation route would not only provide the necessary boost for self - reliance but also address the issue of future product support and upgrades. A focussed approach towards maximising indigenisation is the only way we can achieve our aim of total self - reliance in defence technology or what can be termed as Technological Security. 

The Indian private sector today possesses the requisite skills and infrastructure for undertaking defence production. The industry must be encouraged to make suitable investments with guaranteed buy-backs, as part of incentivisation. Firms of national repute that are willing to participate in the development model must be encouraged to come forward and take on system and sub-systems development, testing and evaluation, sustenance and re-set of systems through its entire lifecycle. In the case of high technology complex systems, high levels of R&D and investment are required to be made now to yield its results in the future. Projects can progress in conjunction with the DRDO and other R&D establishment. So far DPSUs have been instrumental in developing ancillaries on major and minor aggregates in sufficiently large orders, thereby incentivising participation of small manufacturing enterprises (SMEs). Disaggregating systems into sub-systems and components can facilitate manufacturing by companies having the requisite know-how and expertise within the country. This way, indigenisation can be achieved much more easily. BrahMos is a case in point. 

The way ahead now is to identify self - reliance goals through pragmatic perspective planning and by establishing technology transfer paradigms and unambiguous policy directives with timebound goals to be achieved as a national focus to achieve self-reliance.

A technology base is the need of the hour. This can be accomplished with selective government funding and a collaborative process between the academia, military and the industry. We have to become a breakout nation and are growing faster than others in this class, despite the slowing global growth. A self re-enforcing title of national development and technology security will be the outcome if defence indigenisation is pursued as a long term aim to create a strategic surprise for our adversaries. 

As a matter of fact in recent years, even inter-governmental purchases there has been a shift towards DPP led competitive process. Evidently, India’s domestic demand in this segment is likely to grow for reasons such as geopolitical scenarios, replacement of obsolete equipment, internal security requirements, economic growth that India is bound to witness in the coming years and increased innovation in this sector. It is estimated that by year 2017, offset obligation would offer close to USD 10 million for the domestic industry.  The basic intent of the offset policy is to build a domestic manufacturing base. The most recent amendment to DPP offers opportunity to large private enterprises but also to SMEs and MSMEs to work closely with defence. Indian industry is positioned to cater to domestic defence needs for reasons that are very evident such as:-

•    Cost efficiency.
•    Availability of engineering talent in India.
•    Increased focus on R&D in India.
•    Improved productivity. 
•    Shorter lead times. 

Defence imports are costly and have the additional double whammy of outflow of foreign exchange thus increasing the balance of payment liabilities, thereby having a diverse effect on national economy. We have to make sure our indigenisation efforts include their sustenance requirements in the costing, as well so that their availability should not be doubtful in critical times. Also importing technologies will make us addicted to them and indeed prevent indigenisation. There is also the issue of foreign origin manufacturers, not willing to part with critical technologies and the hurdles of circumventing technology denial regimes. The DARPA model of the US is relevant in this regard. Small and medium enterprises should be important in any country particularly for design and manufacture of sub assemblies, component and systems. Often at times these industries tend to be a lot more innovative than the big players. 

It is important to facilitate academia-industry interactions through innovative interfaces for ‘Pre-competitive Applied Research’ and through ‘Directed Basic Research’, for Industrial Development. Examples: CAR (Automotive), CMAT (Machine Tools) and CAREL (Electronics Hardware) of PSA’s Office. University Research Parks which are a “cluster of technology-based organizations that are located on or near a university campus in order to benefit from the university’s knowledge base and ongoing research” are a great way to facilitate that interaction. Effective parks can aid in the transfer of technology and business skills between universities and industry teams, encourage the creation of start-ups, and promote technology-led economic development. 

Moreover, India should not hesitate to be a first introducer of new technologies. The path to a knowledge-driven economy is paved by new advanced technologies. We should increase our appetite for risk-taking. We should get accustomed to occasional failures when developing new advanced technologies. The so-called proven-technologies, unless subjected to continuous evolutionary improvements are often a synonym for obsolete technologies.  Indeed, the issues which need to be addressed pertain more to policy than technology. These are:-

•    The relationship between the Armed Forces and DRDO should be a partnership and not a vendor-customer relationship.

•    There should be ‘Coherent Synergy’ among the approaches of DRDO, Directorate of Indigenisation, and the Army Technology Board. 

•    While laying down the GSQR for an imported defence system, the Armed Forces group involved could be given a short crash course in DAIT Pune, with additional faculty drawn from academic institutions so that the scientific and technological significance of every specification is fully grasped.

•    The leverage from offset (when importing) should be maximised at RFP stage. The highest possible level of technologies, if introduced in the contract, can help indigenisation in the long term and also help develop OEMs, catering to the global market, in collaboration with the foreign supplier. 

•    When going for visits to the factories of foreign vendors before signing the contract to examine the system or for inspections before accepting the system, DRDO scientists (or scientists from academic institutions) working on similar systems, could be included in the delegation. This will help knowledge to flow into the country. Perhaps this is already being done.

•    We should also examine what advantage does the company get when the manufacturing tender is issued after the development work is complete. Does the tender take into account the indigenous knowledge created in the company during the development process?  How does one balance the L1 Process with assurance of quality in critical technologies?

•    The users should be willing to live with somewhat lower specifications (compared to what established global vendors can provide) in the short term, as long their critical requirements are satisfied.  Then only can India hope to be a global leader in the long term. 

•    There should be continuity in technology development (e.g. we should follow up now for a more advanced version of LCA Tejas). Otherwise knowledge tends to attenuate. Stop-and-Start ordering of advanced systems by user agencies can be disastrous for indigenisation. Finally, a realistic long term capability development plan would be needed to ensure continuity.

Summary of Recommendations

•    A focussed approach towards maximising indigenisation is the only way we can achieve our aim of total self - reliance in defence technology or what can be termed as Technological Security.

•    A common management information grid raising all individual MIS domains in defence technology is the need of the hour. We have to accept that the road to self - reliance starts from interdependence and collaboration between the services, public sector and the private enterprises.

•    Disaggregating systems into sub-systems and components can facilitate manufacturing by companies having the requisite know-how and expertise within the country.

•    The relationship between the Armed Forces and DRDO should be a partnership and not a vendor-customer relationship.

•    There should be ‘Coherent Synergy’ among the approaches of DRDO, Directorate of Indigenisation, and the Army Technology Board. 

•    While laying down the GSQR for an imported defence system, the Armed Forces group involved could be given a short crash course in DAIT Pune, with additional faculty drawn from academic institutions so that the scientific and technological significance of every specification is fully grasped.

•    The leverage from offset (when importing) should be maximised at RFP stage. The highest possible level of technologies, if introduced in the contract, can help indigenisation in the long term and also help develop OEMs, catering to the global market, in collaboration with the foreign supplier. 

•    When going for visits to the factories of foreign vendors before signing the contract to examine the system or for inspections before accepting the system, DRDO scientists (or scientists from academic institutions) working on similar systems, could be included in the delegation. This will help knowledge to flow into the country. Perhaps this is already being done.

•    There should be continuity in technology development (e.g. we should follow up now for a more advanced version of LCA Tejas). Otherwise knowledge tends to attenuate. Stop-and-Start ordering of advanced systems by user agencies can be disastrous for indigenisation. Finally, a realistic long term capability development plan would be needed to ensure continuity.

•    Move away from L1 system by introducing ranking system to incentivize better quality products.

•    Develop mechanisms for price discovery focused on life cycle costs.

•    Move away from NC-NC basis of development, introduce risks and penalties instead. 

•    Increase capacity augmentation by modernisation, value of production being inadequate in PSUs/OFBs, they be told to upgrade and go in for capacity enhancement to keep pace with the orders already placed on them and address quality issues. Capacity assessment of DPSUs/private sector prior nomination as production agency.

•    Streamlining of processes for issue of licences to private sector.

•    Monitoring mechanism for ToT to DPSUs/OFBs be promulgated for the enhanced technology absorption, establishment of a partnership model between DPSUs and private sector for production sharing.

•    Early revision of procedures, appropriate tax/ERV policy guidelines to resolve issues.

•    Empowered committee with enhanced powers for collegiate vetting of indigenous development/import substitution of in-service products, assured repeat orders for specified period specially for low volumes and lastly, development for modalities for academia as a ‘Centres of Excellence’ in key technology areas.

•    Establishing a National Technological Council which essentially identifies which technology we should concentrate or invest in and whether there is an opportunity where we can essentially sign, although we not a part of agreement because there are some technologies which can be re- used but we are not able to get it, can be a way forward. 

•    We also need to have national level testing facilities since it is very difficult for the industry to undertake this from within its own resources. We therefore need some cooperation which can help to move forward from the government for the industrialisation of defence sector. 

•    There is a need for convergence at MoD in terms of indigenisation of defence sector as a policy. 

•    TPCR in its present format it does not assist the industry in making any strategic partnerships or investments. It needs to be redrafted into an action oriented plan with some level of commitment for industry to pursue strategic partnerships and joint ventures with global OEMs. In order to harness the emerging dynamism of the private sector as well as the increasing opportunities to obtain advanced technologies from foreign sources, there is a need to bring about a synergised approach that further the objective of achieving this self-reliance. It is therefore high time that we consider formation of suitable partnerships both with Indian as well as foreign vendors in order to harness new opportunities. These partnerships could be of various forms starting with outsourcing, subcontracting, formation of consortium, projects specific joint ventures etc

•    Harmonisation of FDI to make the defence sector lucrative needs to be taken up in due course to see actions on ground. 

•    Amendment and simplification of the ‘Make’ procedure, to facilitate indigenisation.

•    A DARPA like entity should be established in the form of National Technology Council and the design agency should be shifted to the PSUs. Private players can absorb the maintenance ToT and provide the continuous support to the local equipment. EME is looking after the maintenance and the repair, as of today they do not get any incentives for the upgradation of that equipment, upgradation and modification is another area which can be given to the private industry.