SOURCE: MONEY CONTROL
A nuclear-weapon state with the world’s fourth largest military depending overwhelmingly on imports to maintain its armed forces: this is the irony that India seeks to overcome on the eve of its 74th Independence Day. The declaration of a list of banned defence imports by the Ministry of Defence (MoD) is a good first step in this direction.
On August 10, the MoD announced an “import embargo” on 101 defence platforms, ranging from bulletproof vests, artillery pieces and unmanned aerial vehicles (UAVs) to radar systems, missile destroyers and light transport aircraft (LTA). Defence Minister Rajnath Singh said that this will result in the domestic industry gaining new contracts “worth almost Rs 4 lakh-crore within the next six to seven years”.
To help Indian companies manufacture defence equipment on the embargoed list, the MoD pledged a “coordinated mechanism for hand-holding of the industry by the defence services”. This is obviously also intended to help policy-makers gauge current and future capabilities of the domestic defence industry “for manufacturing various ammunition and equipment within India,” as the ministry observed.
This means the country’s defence industry now has two options: one, it could design and develop the systems in the negative list on its own; or, it could manufacture the systems by using the technologies developed by the Defence Research and Development Organisation (DRDO) to meet the requirements of the armed forces.
The MoD’s announcement of this negative list, however, need not push up many eyebrows. Last February, at the 11th Defence Expo in Lucknow, Prime Minister Narendra Modi had set a $5 billion target in defence exports for India by 2025. The Prime Minister invited private businesses to invest in the country to realise “handsome returns on investment” and, in the process, make India self-reliant in defence manufacturing.
In fact, the 2020-21 defence budget itself was a clear indicator of New Delhi’s seriousness about the new mantra for defence acquisition: build, don’t buy. So small was the budgetary hike in capital allocation—from Rs 115,350 crore in 2019-20 to Rs 118,534 crore in 2020-21—that it came as a big disappointment for the armed forces which had earmarked a large number of weapons systems for procurement.
However, the focus was on enabling the defence industry, particularly private companies, to boost infrastructure capabilities and augment investments in their weak R&D base. In other words, the Indian military was quietly served notice that it must mandatorily exhaust every other option for developing weapon systems indigenously before turning to the global marketplace to buy ‘off the shelf’ as a last resort. It was a matter of time before a negative buy list—a crucial first step in slashing the military’s import bill—was announced.
It may be early days to speculate on policy reforms like this, especially since several weapons systems included in the negative inventory are already made in India. Some platforms like the LTA are totally indigenous. Singh tweeted that this is only an initial list of 101 types of defence equipment and “more such equipment for import embargo would be identified progressively by the Department of Military Affairs in consultation with all stakeholders.” So this mismatch may be resolved soon.
With the Indian Army and the Air Force expected to buy equipment worth Rs 1.3 trillion and the Indian Navy for almost Rs 1.4 trillion from foreign vendors by 2024, there are misgivings—not entirely misplaced—that private companies could lose out on most of the new deals which will go to defence PSUs.
The saving grace for industry, though, could be New Delhi’s seriousness about raising India’s current annual defence production of Rs 80,000 crore to Rs 1.85 lakh-crore in the next five years. If this ambitious goal is realised, India will become one of the world’s top-five defence producers. As Singh puts it, “For this to happen, the Indian defence industry needs to grow at the rate of 15 per cent per annum.”
With the government backing private industry to play a major role in achieving this target, defence companies will have to substantially augment their current annual turnover of Rs 16,000 crore to meet the indigenous production targets set out in the Defence Production Policy of 2018.
Hopefully, the new defence reforms will result in greater synergy between the private sector and the government. Besides helping India shed its dubious tag of being one of the world’s top importers of military hardware, this may enable the country to build its own military industrial complex based on strategic needs.