SOURCE: LIVE MINT
The success of deliveries by Indian domestic manufacturers on the weapons and platforms listed in the defence ministry’s negative list will depend on how far the projects have progressed with embargo dates expected to slip otherwise, said former defence secretary G Mohan Kumar.
He says that the $25 billion target of indigenously manufactured defence hardware set by Prime Minister Narendra Modi by 2025 is ambitious but “heavy” targets coupled with hard work and imaginative planning are required to ensure India makes a dent on the world map as far as defence production is concerned. Kumar said India has made the “fundamental mistake” of neglecting the private sector. Had they been made a partner in R&D earlier, innovation would have flourished.
Edited excerpts from an interview:
The defence ministry earlier this month announced a negative import list for military hardware. Is Indian industry equipped to take on this challenge of making the 101 weapons/platforms in India by the dates mentioned by the ministry?
Many of the embargoed items were in the list annexed to the 2018 Defence Production Policy and therefore the Ministry of Defence(MoD) must have done some groundwork before finalising the list. It appears that the embargo list is based on RFPs already floated or running contracts given to domestic manufacturers or systems under development.
As regards those under development, a lot will depend on the maturity of development efforts in both the DRDO /DPSU (Defence Research and Development Organisation/Defence private Sector Units) and private sectors. If the claims of maturity are exaggerated the embargo will slip to future dates and tie ups with foreign manufacturers either through licensing arrangements or joint ventures through FDI may be necessary to avoid imports. But such investments will be viable only if there is sufficient domestic and export demand.
What are the further steps that the government needs to take to achieve the $25 billion in domestic military hardware production that the PM has targeted? Can India really achieve self reliance in defence?
The target looks quite ambitious but only heavy targets, hard work and imaginative planning and policy making will take us somewhere. We should have planned for self- reliance long ago by adopting a multi pronged strategy. It is one thing to manufacture bullet- proof vests or electronic fuses but another thing to manufacture high-tech systems.
The critical requisites are technology and eco-system building. Till recently, even HAL did not think seriously about an eco-system. The fundamental mistake was that we neglected the private sector. Had the private sector been made a partner in research and development through DRDO and the DPSUs there would have been a stream of innovation. Had off sets been administered creatively good domestic capacity would have been built.
The essence of self -reliance is indigenous development of technology. We need to get a firm foot hold in the hi-tech areas. The new draft Defence Production and Export Policy 2020 identifies 13 advanced systems for development on a mission mode by the DRDO. The DRDO had hardly worked on a mission mode earlier and projects were open- ended with virtually no time limit. For this mission to be a success the DRDO has to outsource development of key subsystems to institutions like the IITs ,Universities and the private sector without monopolizing the entire work.
If the offsets are vigorously administered and the key strategic partnership (SP) projects like submarines , single engine fighter aircraft and naval utility helicopters are allowed to take off expeditiously, substantial progress can be made. Similarly, HAL should fast-track the production of Tejas , light combat and Kamov228T helicopters which also can contribute to the turnover
Is the $5 billion in exports from India by 2025 an achieveable aim? Could you please explain why you think so/or not?
I think it is a very challenging task. The current level of exports is around $1.3 billion. For exports to double in the next three years they have to grow at 25%. We will not achieve significant export output from the DPSUs which are always struggling to meet the MoD’s existing orders. The onus will be on the private sector. In the short term, if they are able to forge partnership with international OEMs under the newly announced FDI policy there could be substantial increase. The discharge of offsets may contribute significantly but a lot will depend on private manufacturing. If Innovation for Defence Excellence(iDEX) succeeds in incubating some innovations they could mature into exportable products. But being a new system, its contribution may not be that significant. Defence electronics,if supported by good policy could also contribute much.
One problem we have is of a shrinking defence budget for procurement particularly. What is your view on this? Will it have a dampening impact on the defence element of Atmanirbhar Bharat?
The defence budget is going to be a limiting factor. The capital budget always increases marginally and budget cuts further introduce uncertainties. In the current situation when government’s revenue is under severe stress increasing the budget may look nearly impossible. The MoD will have to trim its revenue expenditure by creating more jointness through theatre commands and by shelving redundancies of every kind. The capital budget should be made non- lapsable so that there is certainty about the availability of funds for ongoing schemes. The government could even think of floating national defence bonds to augment resources.
What is your understanding of how the strategic partnership model will work after Sunday’s announcement? Will foreign companies be interested in partnering Indian companies for tech transfers after this move?
The strategic partnership policy should be one of the means of implementing the embargo on imports of major platforms. It covers major equipment like fighter aircraft, submarines ,helicopters etc . The platforms selected under the SP will be manufactured within the country but the OEMs will still have some strangle hold over key technologies.
The SP process will be evolutionary. In the initial stages our emphasis should be on the creation of the tiered supplier eco- system of MSMEs. The very involvement of the domestic industry in the supply chain for major platforms is going to spur a lot of innovation and indigenisation of sub- systems leading to self- reliance. Foreign OEMs cannot expect India to be perpetually import dependent and they have to grab whatever business that comes their way. Finally it has to be a win-win situation for the OEMs and their Indian partners.
The PM has been inviting foreign OEMS to set up base in India. The raising of the FDI cap in May was seen as a move to encourage these companies. Why is there so little interest among foreign companies to set up base in India despite what has been seen as a ready market for their products?
I think many OEMs are worried about control over management and protection of their IPRs. The new FDI policy is yet to be approved by the cabinet. Once there is certainty in the policy the OEMs will march in.
One question on R and D. How can the government and industry ensure that the cutting edge Rand D that is required for defence manufacturing takes firm root in India? How long will it take to build up an eco-system that exists in countries like Britain or Germany?
Currently, the DRDO enjoys virtual monopoly in defence research and with exceptions other stakeholders have been left out. It needs to downsize and confine itself to highly strategic areas and start funding premier institutions and the private sector. In advanced countries like the US, the UK and France eco-systems were built over decades by pro-actively encouraging the private sector and making them close partners in R&D. The Defence Advanced Research projects Agency (DARPA) system of the US which unleashed floods of innovation is a fine example. In India also there has to be a paradigm shift by funding private sector and premier institutions liberally in R&D work. The developers in the industry will be interested only if they are given long term production contracts for the developed products.
