Nitin Pai: India’s Air Force can’t afford to fall short of combat aircraft

More resources must be pumped into defense. Yet, for the additional defence rupee to work, the defence ecosystem needs a thorough mental and structural rehaul.
More resources must be pumped into defense. Yet, for the additional defence rupee to work, the defence ecosystem needs a thorough mental and structural rehaul.

Summary

  • Deliveries of the indigenous Tejas fighter jet have been disappointing. Defence production needs lessons from the auto sector. Let’s foster competition and attract private investment to get the fighters we need.

The Indian Air Force (IAF) is not only short of an adequate number of aircraft to protect our skies, but will see its capabilities weaken over time, unless corrective action is taken immediately. In my estimate, a significant proportion of IAF’s fighter aircraft fleet is down due to a shortage of Russian spares, and the rest are sparingly used to ensure that they don’t fly into a spares crunch.

Thus, the effective strength of the Air Force is much smaller than what publicly available numbers indicate. It also means young pilots get fewer hours of flying training. In an age that may see wars fought in the air and space, India ignores the IAF’s problems at great peril.

Speaking at a seminar in New Delhi a few days ago, Air Chief Marshal A.P. Singh pointed out that 40 years after development started and eight years after the first planes were inducted, IAF is yet to receive all 40 of the indigenous Tejas fighters.

Also read: Supply delay drags Hindustan Aeronautics's near-term growth prospects

Although a further 180 have been ordered, Hindustan Aeronautics Ltd’s (HAL) track record and critical dependence on foreign suppliers for jet engines means that on current trends, it will be decades before the IAF sees these aircraft at its bases. By that time, they might be a lot less effective because the rest of the world, especially China, would be two generations ahead.

Recently, I argued that India needs to raise its defence expenditure to 4% of gross domestic product to secure itself amid the current geopolitical turbulence.

More resources must be pumped in across the spectrum, from research, development, production and procurement to organization and training. Yet, for the additional defence rupee to work, the defence ecosystem needs a thorough mental and structural rehaul.

Why is India unable to produce competitive fighter aircraft when it has a successful automobile industry? First off, even before liberalization, Maruti had introduced a technological upgrade to the Indian manufacturing ecosystem. Subsequently, Tata Motors and Mahindra took their own routes to success.

All had to compete with Hyundai, Toyota, Nissan, Ford and other global players. Therein lies the answer. India not only became self-sufficient, but also more competitive because domestic manufacturers were compelled to compete.

The problem with HAL and other public-sector defence companies is not so much government ownership, but lack of competition.

The bureaucratic planner’s mindset of ‘avoiding duplication of efforts’ has been counterproductive. Imagine that there are three companies licensed to make the Tejas aircraft, each with an assured order of 20 aircraft, but another 120 going to the one with a faster delivery rate.

We will have three production lines competing. One will win. The others will be forced to innovate to stay in business. It is likely that they will introduce new products that will push the industry’s capabilities forward.

The combination of some global competition, an unshackled domestic industry and a large domestic market can work for defence manufacturing like it did for automobiles.

This brings us to two controversial questions. One, should politically powerful domestic conglomerates be allowed in the defence industrial sector? Two, should foreign investment be permitted if the goal is to increase indigenous self-sufficiency in defence? The answer to both questions is yes.

Also read: Hypersonic missiles: The age of AI is raising risk levels

HAL’s inability to scale up production despite its best efforts indicates that among the missing ingredients is industrial organization and management that our public sector cannot easily acquire (and may quickly lose). What India’s big private conglomerates lack in innovation, they make up in their ability to execute projects.

They are far better at raising and deploying capital at scale and managing complex high-performance organisations. Yes, they tend to accumulate political power and can influence government policy. Even so, they are part of the solution to India’s defence requirements. Just ensure that there is adequate competition to keep them disciplined.

Allowing 100% FDI in defence is compatible with the goal of self-sufficiency and indigenization. Indeed, FDI is a better route to climb the technological ladder than to seek technology transfers and offsets while buying foreign equipment.

That’s because technology transfer happens through human diffusion, not blueprints. That is how China did it. It developed high levels of technological, managerial and process expertise by attracting FDI in various industries for over four decades.

Chinese engineers, workers and managers learnt how to make advanced industrial products. This human capital enabled the Chinese defence industry to first replicate Russian, European and US designs and then innovate to make its own.

Reforms will give us hundreds of aircraft in the future. If we want them now, there is no choice but to buy them off-the-shelf from foreign manufacturers. This has its policy and strategic downsides.

But lots of planes with downsides is better than having few planes. The latter is all downside. The ‘buy versus build’ dilemma will always exist, but it will be a lot easier to manage if there is more money for both.

Tailpiece: Our trade policies are over-protecting our automobile industry from competition in the electric vehicles market. It’s a matter of concern.

Also read: The calm before the storm: Three defence stocks on radar

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