From UPSC perspective, the following things are important :
Prelims level : Ordinance Factory Board
Mains level : Paper 3- Self-sufficiency in defence manufacturing
External dependence for defence equipment could turn out to be the chink in the armour of any country, literally. As one of the major importer of defence equipment, India has been struggling to wean itself away from this vulnerability. This article discusses the recent changes announced by the finance minister in defence procurement and manufacturing policy. So, what are the changes and how will these changes benefit us? Read to know more…
Promoting self-reliance: Addressing strategic and national security concern
- Recently the Finance Minister announced measures to promote self-reliance in defence production.
- This address long-standing strategic and national security concerns about the extent of India’s external dependence for its defence-preparedness.
- For most of the past decade, India had the dubious distinction of being the world’s largest arms importer.
- India accounted for about 12% of global arms imports.
- Saudi Arabia jumped to first place in 2018 and 2019, but India still takes over 9% of global imports.
- This external dependence for weapons, spares and, in some cases, even ammunition creates vulnerabilities during military crises.
- COVID-19 has, once again, focused minds on the impact of supply chain disruptions on both civil and defence sectors.
- With its security environment, its great power ambitions and its technological capacities, India should have a robust defence manufacturing capacity.
- New Defence Procurement Procedures (DPP) 2020 are under formulation.
- We now have a Chief of Defence Staff (CDS) tasked with promoting indigenous equipment in the armed forces.
Following are some of the moves declared by the government and their significance for the country
1. Encouraging private manufacturers
- The decision i) to notify a list of weapons systems for sourcing entirely from Indian manufacturers, ii) the promise to progressively expand this list iii) a separate Budget provision for domestic capital procurement- will encourage our private defence manufacturers.
- The research capacities, technological skills and quality commitment of our private defence manufacturer are often better appreciated by foreign clients for whom they are subcontractors.
- There is a range of platforms and subsystems, developed in India and qualified in trials, some of which face hurdles to their induction by our armed forces because of foreign competition.
- These include missile systems such as Akash and Nag, the Light Combat Aircraft and the Light Combat Helicopter, artillery guns, radars, electronic warfare systems and armoured vehicles.
2. Time-bound procurement
- The government has promised i) a time-bound defence procurement process, ii) overhauling trial and testing procedures iii) establishing a professional project management unit.
- To understand the significance of the above measures consider the fact below-
- Over the past five years, the Indian government has approved over 200 defence acquisition proposals, valued at over ₹4 trillion.
- But most are still in relatively early stages of processing.
- Of course, this delay now provides the opportunity to re-examine them and to prioritise those with indigenous research and development.
- The CDS could also examine them from a tri-service angle, to avoid redundancy of capacities across the services.
3. Corporatisation of Ordnance Factory Board
- Over the decades, our ordnance factories have been the backbone of indigenous supplies to our armed forces.
- Their structure, work culture and product range now need to be responsive to technology and quality demands of modern armed forces.
- Corporatisation, including public listing of some units, ensures a more efficient interface of the manufacturer with the designer and end-user.
- The factories would be better integrated into the larger defence manufacturing ecosystem.
4. Realistic specifications of desired weapon platforms
- Our defence planners will frame “realistic” specifications for their desired weapons platforms.
- These specifications should be based on the requirements of India’s defence strategy, rather than on aspirational considerations which, the Finance Minister said, may lead to a single foreign vendor.
- It is also imperative that when we import weapon systems, we should plan for the ammunitions and spares for them to be eventually manufactured in India.
- This will ensure that we are not driven to seek urgent replenishments from abroad during crises.
- The same goes for repair, maintenance and overhaul facilities and, at the next level, the upgrade of weapons platforms.
5. FDI limit increased to 74% by automatic route
- The liberalisation of foreign direct investment in defence manufacturing, raising the limit under the automatic route to 74%, should open the door to more joint ventures of foreign and Indian companies for defence manufacturing in India.
- It would also sustain domestic industrial activity in the research, design and manufacture of systems and sub-systems.
- Our companies would now get the opportunity to directly contribute to Indian defence manufacturing.
- The development of a thriving indigenous defence industry needs an overhaul of existing regulations and practices.
- A long-term integrated perspective plan of the requirements of the armed forces should give industry a clear picture of future requirements.
- DPP 2020 should incorporate guidelines to promote forward-looking strategic partnerships between Indian and foreign companies.
- This partnership should be with a view to achieving indigenisation over a period of time for even sophisticated platforms.
- Cost evaluation has to evolve from mechanical application of the L1 (lowest financial bid) principle to prioritising indigenous content.
- The definition of indigenisation itself needs to privilege technology over value or volume.
- Investment, Indian or foreign, will be viable only if the door to defence exports is opened, with a transparent policy.
- To give private industry a level playing field for developing defence technologies, conflicts of interest, created by the role of our Defence Research and Development Organisation (DRDO) as the government’s sole adviser, developer and evaluator of technologies have to be addressed.
Consider the question, “India has been aspiring to reduce its external dependence for defence equipment but has not succeeded in doing so. Examine the challenges in the way of self-sufficiency in this area. How effective will be the recent policy changes made in meeting the goal?”
The government has rightly clarified that self-reliance would not be taken to overzealous extremes. The thrust for indigenous research and development will coexist with the import of cutting-edge military technologies to obviate near-term defence vulnerabilities. Of the key components of any major reform — money, method and mindset — mindset is the most critical and the most intractable. It takes a crisis to change it.