India has the third largest army, fourth largest navy and air force in the world. And it has the largest paramilitary in the world. It faces terrorism, both cross border and internal and hostile neighbours on both sides of the border, one of whom is a superpower.
A country like India, which faces problems which are equal to the problems of twenty mid sized countries put together, needs an upto date military industrial complex and battle readiness at every given time.
But what is the actual scenario?
Inspite of having a huge defence manufacturing set up, India surprisingly exports 70% of its weapons requirements from overseas. Countries with similar set up like UK and France infact are major weapons exporters. Most of the leading nations in the world are neither dependent on defence imports, nor have their governments play such a huge role in procurement , excluding the private sector completely. Instead, governments outline what they want from, say, a fighter jet and provide financial support to private companies to develop prototypes; the winning model (at times the combination of multiple prototypes) gets the contract.
“India uses about 30% of its defence acquisition budget to import directly, and sends most of the rest to defence PSUs. They, in turn, spend nearly half of that money overseas as well, through an opaque process that sometimes involves a single vendor selected at the executives’ discretion. The New Delhi-based think-tank Institute for Defence Studies and Analyses (IDSA) puts the collective import dependency of defence PSUs at 35-45%.”
India’s defence production is almost entirely state controlled. R&D is done by DRDO (Defence Research and Development Organisation), while the manufacturing is done by nine defence PSUs (public sector undertakings) and the OFB (Ordnance Factory Board) which operates 41 ordnance factories in various parts of the country.
“Ordnance factories employ about 180,000 people; the DRDO another 30,000. Although they manufacture Rs 35,000 crore of defence equipment a year, their productivity is abysmal. The BCG report cited a finance ministry survey to show that productivity in the state-owned defence sector was the lowest among all industries—Rs 15 lakh per employee per year—and half of the national average.”
There are many voices of opposition to privatisation of defence sector in India, the most prominent being that it is a threat to sovereignty, from the forces, from govt, from public, media etc.
Then there are controls by the state, wrt bureaucrats who don’t want the gravy train to be stopped, politicians and people among the top brass who don’t want the kickbacks that they get via any import deal that is made for weapons, or plain old unionism. Tata Power SED, Larsen & Toubro, Mahindra & Mahindra, Bharat Forge, Ashok Leyland and many others have invested in developing defence capabilities and are prepared to invest much more. But they face an uncertain policy environment and future, and staunch opposition from a powerful union of defence public sector employees that opposes any move the government makes to allow the private sector inside.
The political set up in the country pressurises to have this faulty system to continue its disastrous way of functioning. Nehruvian socialist and statist mindset, glorification of defence PSUs & indigenisation , the belief that the private sector is not loyal enough to entrust India’s defense needs to them and the large and unionised workforce that opposes privatisation make any kind of reforms next to impossible. The All-India Defence Employees Federation and other unions oppose any move by the government to allow the industry any space, saying this will compromise national security (In reality, it will just compromise their inefficiency causing cosy existence). As a result, we have a huge government-owned military industrial complex that is paralysed and rotten due to having a monopoly and assured customer, sarkari work culture and little incentive to improve.
And what have these expensive giant public entities given us?
Lets take the example of the Light Combat Aircraft (Tejas). The project was started in 1983 with a target of 1994 for inducting it in IAF to replace the ageing MiG 21. But more than three decades later, MiG 21 still continues to be in IAF and Tejas is still in test phase, merely four aircraft being inducted for test phase. The Indian navy has rejected it for being overweight and unsuitable for its needs.
Or the standard issue rifle of the armed forces and paramilitary ,the INSAS. It is simply nowhere in comparison to the leading assault rifles like the AK series, M16 or TAR-21. It debuted during the Kargil War, and there were instances of the plastic magazines cracking open in the sub zero cold, the rifle firing automatic while even being in the burst fire mode, spraying oil on the handlers face. Though many of these faults have been improved over time, one can’t simply make whisky out of toddy. Forget the Indian army, even CRPF has made its displeasure known.
They are already being replaced, with AK variants and TAR 21 among the frontline troops. But this will take a lot of time, INR 10000 crore is being earmarked for it and the figure could go even higher when one considers the 800000 strong paramilitary forces as well, whose more than half of the arsenal is comprised of this rifle. So far, the Indian army is yet to find a single rifle which can fulfil its operational needs from icy heights to scorching deserts where they serve.
Also, not to mention the instance where hundreds of crores of ammunition manufactured by the OFB is simply unfit for use.
Or the comptroller and auditor general (C&AG) report in 2015, which said that Indian armed forces didn’t even have twenty day’s reserve of ammunition during 2012-13 in case of a two front war (minimum requirement is 40 days, as per war wastage reserve (WWR) ). Is the case any different to date?
Forget about arms, soldiers of the third largest army in the world in many instances have to spend money out of their own pockets to buy their own boots and uniforms because the ones manufactured by OFB have been found out to be substandard. Boots tearing apart and soles dropping off in months or uniform colours fading and mismatching are some of the shocking instances.
So much for protecting unionism and corruption under the guise of protecting sovereignty.
Since 2002, the government has stated its policy to encourage private sector participation in defence production. The calls for indigenisation have been repeated more ever since the Finmeccanica (Augusta Westland) scam. Yet the MoD’s actions run very contrary to such claims. Hundreds of crores of rupees invested in defence deals by major engineering companies have not exactly yielded the expected return of investment , and the future for them is quite uncertain.
In 2006, GoI under a new addition of “make” category, in the Defence Procurement Procedure (a key policy document governing purchases )the private sector was allowed to wholly design and develop complex systems, with the government funding 80% of the development cost. Two new projects were announced of a value of over INR 60000 crore under the make category: the TCS (Tactical Communication System) and the FICV (Future Infantary Combat Vehicle) projects. But there was little progress. For 2012-13, the union budget allocated Rs 89 crore for the ‘make’ project. For 2013-14, this amount was slashed to Rs 1 crore. This when India is the world’s largest weapons importer! In comparison, the bribe paid by AugustaWestland to various officials and politicians was 30 million Euros, ie 220 crore rupees!!!
So bribes outstrip budgets by twenty times or hundred times? It’s a wonder that we still have our own flag flying in the capital. The rot is simply unimaginable.
Compare this shameful scenario of India’s state owned set up with that of Israel’s state owned set up , the IMI (Israel Military Industries), a world renowned name in small arms and the Israel Weapon Industries whose rifles, mainly Galil and Tavor are used all over the world. Or their aerospace industry.
How many lighyears is DRDO behind IMI can be seen by a mere comparison of INSAS with TAR-21.The former is an embarrassment, and the latter a next generation rifle.
Instead of encouraging the participation of the private sector, the OFB and DRDO setup often undermines the private sector inspite of their great contributions. The ministry declared a defence production policy in 2011, with a major role for the private sector, with a long term goal to indigenously meet all production. Nothing much has come out of it. Such fluctuating plans and shaky intent from the government is leaving the private sector in the lurch.
E.g., L&T and Tata Power SED have long worked with DRDO on strategic projects. These two built Pinaka multibarrel rocket launcher, and along with Walchandnagar Industries, had a huge role in building INS Arihant, India’s first nuclear-powered submarine. But when it comes to their projects, they get little or no encouragement. Inspite of the work done on Arihant by Tata, L&T and Walchandnagar, the defence establishment always looks overseas first for any conventional submarine or vessel project.
India’s software prowess is also not harnessed by its defence establishment, even when nearly every major defence and aerospace companies in the world get Indian software firms to code for them. Tata Power SED developed a 52 mm caliber short range artillery gun with 52% indigenous components, displaying the finished version in 2012. Their request for test firing was not met with much success, even though artillery at that time needed acquisitions. Thankfully, Dhanush artillery gun (ARDE, Kalyani, Tata Power and OFB effort) did not meet the same fate.
The defence industry in saner parts of the world enhances and improves the industrial capability of the country. In India, the situation is exactly opposite. The defence establishment here does not respect the private sector as a national resource, a clear hangover from the license permit raj era. This is a fatal mistake as there is a history of overseas military suppliers choking up supplies during the time of crisis.
While privately owned arms manufacturers are certainly certain to bring in more expertise and investment, thanks to abysmal industrial infrastructure, India does not have in its private sector (the likes of Tata motors, L&T, Mahindra & Mahindra) even one tenth of the ability of the likes of Boeing, Northrop Grumman or Lockheed Martin. Socialism has bled us and kept us a third world country in about every sector.
HAL merely manufactures what is given to it under transfer of technology, and makes a mess of even that. Earlier with MiG crashes, it was deemed that the problem is MiG alone. But now there has been a spate of Sukhoi crashes as well.
Its not about private or public here. Israel and Russia have largely state owned defence manufacturing, yet quality is never an issue. What India lacks here is capability and quality. Harsh, but true. DRDO is nowhere near IMI nor is HAL near MiG.
Can India rely on its domestic defence industry to come to its aid at any given time?
Can the domestic defence industry keep up the required standards and deliver fault proof products?
Is the domestic defence industry even give half the returns of what has been invested in it?
Is the domestic defence industry comparable anywhere to the world’s standards?
The answer to the above questions is a resounding no.
DRDO, OFB and other similar public sector enterprises simply haven’t been made answerable to their shortcomings. Ideally each and every one of them needs to be privatised but the present government, like all before it hasn’t found the guts to make any major changes to our defence procurement policies.
While it is true that abject failures of very expensive projects is not rare in even the most powerful countries, India’s case is quite crucial because it certainly doesn’t have the amount of resources as countries like United States. Indian economy right now is little less than USD 3 trillion. The amount spent by US govt and Lockheed Martin in the failed projects of F22 and F35 is more than USD 2 trillion.
Apple Inc capital is more than the capital of all 30 companies listed in the BSE. That alone tells you how small the fifth largest economy is compared to the first four. India’s capability in defence spending is limited. Hence it has to use it very judiciously. Continuing to spend it on failed projects and failed enterprises is not the way forward.
India therefore needs a very balanced setup of private enterprises innovation, capital and quality and the public sector’s existing capabilities to ensure that something that should take not more than ten years to roll out doesn’t take thirty, nor does it look like a sorry excuse when it is rolled out.
The days of measuring the armed forces strength by size are long gone. The parameters of today are how well they are equipped, and how battle ready they are, armoury and moralewise, and most of all, how a soldier is treated. No use of glamourising indigenous defence products in the name of self reliance ,if the end products are shoddy and threaten the life of the soldier.
For how long will the life of our soldiers and national security be held hostage by the narrow interests of unions? For how long will the soldiers lose their lives just so that a faulty domestic rifle can be promoted? Lets not make the protector of the country suffer to massage the ego of bureaucracy, unionism and red tape.
