The missing Made-in-India tag on our guns and jets
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India has once again earned the dubious distinction of being the world’s biggest arms importer.
According to the Stockholm International Peace Research Institute, India had a staggering 13% share in the global arms import during 2012-16, much higher than that of its bigger rival China, which has, in fact, “firmly emerged” as the world’s third biggest arms exporter, behind the US and Russia and ahead of France, Germany and the UK.
The fact that India continues to import more arms than any other country is a rude shock to the “Make in India” programme and especially to Prime Minister Narendra Modi who had emphatically said two years ago that “this is one area where we would not like to be Number One”. Why have things not changed, even marginally, over the years? The simple answer is that the Indian defence establishment is quite content with import, and the happiness is ingrained in its strategic planning and in the way defence procurement and industrial affairs are handled. Very little is being done to change the status quo.
Self-reliance in defence procurement has always been an avowed objective of Indian policy makers since the country’s independence. However, the objective is yet to be translated into a concrete plan of action. This is very much evident in the ministry of defence’s (MoD) approach to defence acquisition on which billions of dollars are spent every year. Within the MoD, there are numerous plan documents, apart from dedicated hierarchical structures, for procurement.
In contrast, there is not a single comprehensive indigenization plan document which would make the MoD accountable to its self-reliance commitment. The absence of the indigenization plan makes the first opening for import that is exploited by various interest groups who profit from foreign purchases.
Any sporadic attempt towards indigenization to reduce the import dependency is marred by mismanagement and inefficiency of the major agencies involved.
Even under the Make in India regime, which talks big on private sector participation, India’s defence industrial base continues to be overwhelmingly dominated by the three state-owned/controlled players: the Defence Public Sector Undertakings (DPSUs), the Ordnance Factories (OFs) and the Defence Research and Development Organisation (DRDO)– all of which function under the watch of the MoD.
The dominance of these entities is, however, associated with a huge amount of inefficiency. Measured in any performance parameter such as innovation, customer satisfaction, timely delivery, productivity and export earnings, they portray a rather dismal picture. Very little reform has been done, in concrete terms, to improve the functioning of these main pillars of India’s defence industrial base.
Instead, the MoD seems to be quite happy in using them as a conduit for what it could not import directly by itself. The DPSUs and OFs, in particular, incur huge sums of foreign exchange for import of parts, components, sub-systems and raw materials. Between 2009-10 and 2014-15, the nine DPSUs alone spent a whopping Rs78,740 crore on these indirect imports. The amount spent represents 57% of their combined turnover, and is comparable to the direct import undertaken by the MoD.
The disquieting fact is that much of the order book of the state-owned entities does not come through an open, competitive process, but on a golden platter handed over to them by the government on nomination basis.
On the other hand, private sector firms are expected to compete to the last pie of their profit margin for each and every contract they participate in. Even then, final orders do not come for years. Suffice to say that not a single major contract of significance has been awarded under the Make in India regime, which is now almost two-and-a-half years old. The discrimination meted out to private companies is nothing but a demonstration of the same attitude that is happy with both direct and indirect import.
A country of India’s size, economy and strategic importance does not deserve to be the world’s largest arms importer. A country which has made giant strides in nuclear and missile technologies and achieved stupendous success in reaching the Mars orbit in the very first attempt can do much more in defence production—provided a clear self-reliance plan is articulated, and a vibrant and efficient industrial base is put in place to translate that vision into reality.
The author is a senior research fellow at the Institute for Defence Studies and Analysis .