End to “our defence, their weapons”?

Ajay Shankar

REAL strategic autonomy needs national technological and production capabilities in armaments. This is the reason why every major industrial power has nurtured a national defence industry. Even while being secure under the overwhelming military superiority of the US-led NATO alliance system, the French and the British maintained and developed full spectrum national defence production capacities. Staying outside the alliance system, Sweden, a small country, had a globally competitive defence industry and still makes world-class fighter planes. Even the Germans and the Japanese have developed those segments of the defence industry that they were permitted to, following total defeat in World War II. The Germans have been a major partner in the European effort to develop the world-class Euro Fighter plane. 

Credible nuclear deterrent

India, after the traumatic experience of 1962, tried to develop a national defence industry insisting on licensed production with technology transfer in the Ordnance Factories and Defence Public Sector Undertakings. Separately, through the DRDO, India pursued technology and systems development with the expectation that nationally developed platforms would gradually replace the need for imports and self reliance would be achieved. 

The Atomic Energy Commission pursued nuclear capability and India succeeded in creating a credible nuclear deterrent. The DRDO's missiles have been increasing the distances they can target. These capacities have given India credible strategic deterrence. To prevent this, a very stringent international technology denial regime was put in place. India succeeded in spite of this with patience and determination. 

Paradoxically, India today has the distinction of being one of the largest importers of armaments in the world and is expected to remain one in the coming years. Radical transformation is clearly warranted and needs a medium term strategy backed by a coherent action plan with a broad measure of buy in of all stakeholders. A conceptual consensus free from common misperceptions is a prerequisite. 

Ownership and control

Unlike other industries where the neo-liberal globalisation consensus has been that ownership and control do not matter, in defence it does. This is why every major strategic power has a national defence industry. Production by Indian firms under license from technology providers, or, by joint ventures with FDI and foreign control over management and technology are materially the same as imports from this perspective, even though there is greater local value addition and job creation.  It is also not in the commercial interest of major global arms firms that India succeeds in creating a national defence industry as they would stand to lose a large market and profits. 

To illustrate from non-military experience, Bajaj and Hero became "national" in this sense only after they had the confidence to become independent of Vespa and Honda, their technology partners. The key was their development of the capacity to successfully design platforms and undertake system integration. Real wealth and value for firms today flows from this and is generally understood as IPR in the broad sense. The example of these two-wheeler firms also gives a reality check of the extent of our actual national industrial capability as other than Tatas and Mahindras, not many examples of Indian firms developing their own products come to mind easily.

 Established firms do not easily part with critical technologies as they would like to retain their markets. This is also the reason why offsets would not deliver. This has been seen in the experience of licensed production of industrial goods by most Indian firms who have had to repeatedly seek technologies with attendant royalty payments.

A national defence industry has the nation's armed forces as the sole buyers. Platforms and products are developed for specific needs and the development costs are huge. Inherently there is a monopoly supplier and a monopoly buyer situation with a non-competitive, negotiated price system. Development costs, if they are modest, can be incurred by the firm and recovered in the sale price.  Where the costs are large, these are financed for the firms by the government and are not factored into the sale price of the weapon. Exports become relevant only after domestic success.

National defence industries have been nurtured by governments either through government companies which became gradually professionalised with increasing private investment, or, through private firms which were developed as long-term partners for different segments of military equipment. The process has always involved huge costs and willingness to live with delays and failures. Development of new technologies and systems entails risk with uncertain lead time and costs. Only at the stage of serial production is there a reasonable fix on actual costs. The design of the system put in place in the country after 1962 is complex and challenging. Costs in defence are high and so are profits. The note of caution about the "Military Industrial Complex" sounded by President Eisenhower towards the end of his Presidency about 60 years back remains apt in the US even now. 

Financial constraints

The major factors which have delayed success in self reliance in conventional armaments also need to be appreciated. India has faced a two-front situation with acute financial constraints, where there has always been the tension between the needs of the Armed Forces for new equipment and replacement, and the difficulties of the government in providing the requisite financial resources. For the Forces, getting quickly the best possible equipment ( imported, naturally) has been the overriding objective  Then there has been the larger-than-life "ghost" of Bofors and the consequent paralysis in decision making where for procurement, procedure has become paramount and outcomes marginal, if not irrelevant. The classic illustration is the cancellation of the seven- year effort to acquire urgently needed 126 fighter planes in a competitive multi-vendor bid process. Another major factor has been the relative weakness of India's overall technical and industrial development. Even though defence manufacturing was opened up for the private sector about 15 years back, progress has been quite modest so far in the absence of clarity about the medium to long-term role of the private sector and a pragmatic strategy to achieve it. 

Many new decisions are now being taken and initiatives are underway, especially to enhance the contribution of the private sector. It is essential that not only individual decisions be right but that they all add up to a holistic and viable game plan which gives confidence that in about five to seven years there would be a rapid reduction in import dependence. (To be concluded)

The writer is former Secretary DIPP, Govt of India.