Hanging Fire

Defence procurement involves long gestation periods and delay in procurement will impact the preparedness of our forces, besides resulting in opportunity cost. The needs of the armed forces being a non-negotiable and an uncompromising aspect, flexibility in the procurement process is required… Thus the DPP favours swift decision making, provides for suitable timelines and delegates powers to the appropriate authorities to ensure an efficient and effective implementation of the procurement process, by all stakeholders concerned.”  

So states the preamble to the Defence Procurement Procedure (DPP) 2016, the key policy document guiding the modernisation of the Indian armed forces through indigenisation and self-sufficiency. But action on the ground seems to be starkly different from what’s professed in the preamble. A number of modernisation projects are stuck at various stages of implementation due to lack of swift decision making and effective implementation of the processes involved. 

“The Expression of Intent (EoI) for Naval Utility Helicopters were issued on 12 Feb 2019. Responses to this were submitted on 26 April 2019. The shortlisting of strategic partners and foreign OEMs is still pending. These were to be completed and Request for Proposal (RFP) issued by September 2019,” says Jayant Patil, Whole-time Director (Defence & Smart Technologies), L&T.  

Similarly, according to Patil, EoI for P75 (I) conventional AIP submarines were issued on 20 June 2019 to Indian companies and on 3 July 2019 to foreign OEMs. These were responded on 11 and 24 September 2019 by Indian and foreign OEMs, respectively. The RFPs were supposed to be issued to shortlisted strategic partners in December 2019, but are still awaited. 

Then, the Future Ready Combat Vehicle (FRCV) and fighter aircraft programmes too are stuck at the pre-EoI stage. 

The modernisation exercise has also been hamstrung by a lack of investments, whether foreign or domestic, government or private. Real investments in production is needed if India wishes to attain self-sufficiency in the manufacture of quality defence equipment. 

The armed forces are always ready with their requirements for modern equipment. But money has been hard to come by so far. In FY2019 the Indian defence sector officially attracted foreign direct investment (FDI) of just $2.18 million. When contacted for their comment, all that the Ministry of Defence (MoD) could say was there is a lack of complete data on this front. It is estimated that 34 companies in the defence and aerospace sector reported a combined FDI of about Rs 1,812 crore after 2014. 

If Indian industry is to become a participant in the national endeavour of achieving self-reliance in defence equipment, it must do so with real term investment. And in order to do that, industry must not only be aware of the capabilities the Armed Forces are seeking, but also the technologies required to achieve these over a reasonable period of time. But neither is the industry buzzing nor do they have any road map to achieve advanced technology. Every new equipment that’s touted as ‘indigenous’ is either assembled or done in association with foreign original equipment manufacturers (OEMs) under a jointly formed entity or an entity that have been granted a license to execute such projects. 

Banking on the budget

In India, defence projects are mainly funded through budgetary allocations. But defence budgets have been grossly inadequate of late. “The capital portion of the budget is simply exhausted to fund existing commitments,” says Patil, adding, “While there has been a gradual increase in defence modernisation budget, the inclusion of GST (since July 2017) and customs duties (since April 2016) as additional outflows from funds allocated to the Ministry of Defence (MoD) has effectively cut the allocations in real terms.” 

After factoring in inflation, the current year’s allocation just matches the budget for FY16-17. “The consequent decrease in funds available for defence modernisation are visible from the dropping volume of orders placed to Indian companies,” says Patil.

Going by the answers provided in the Parliament and the reports of the Parliamentary Standing Committee on Defence, budgetary allocation for defence modernisation has not been sufficient to even cover the committed liabilities of the past two years. Not only that, the foreign companies tend to get paid on the due date but not the domestic industry. Payment deferrals due to lack of funds is a matter of routine for home-grown defence OEMs. The lack of funds for new acquisitions resulted in around Rs 77,000 crore worth of orders placed with Indian industry in the last three years.

However, there have been some shining examples of ‘Make in India’ over the past 3-4 years. These include deliveries of the Akash missile programme, Pinaka MRLS programme, K-9 Vajra tracked self-propelled gun programme, BrahMos programme, army bridging systems, offshore patrol vessels for the Indian Coast Guard as well as the Navy, floating docks for the Navy, interceptor boats for Coast Guard, P75 submarines, P28 ASW corvettes, P15A destroyers, Dhanush howitzers, LCA operationalisation, to name a few significant ones. 

With the Union Budget around the corner, what would be the wish-list of the private sector, especially for defence? Patil recommends increased allocation for defence acquisition in line with the Acceptance of Necessity (AoN) worth Rs 4,09,000 crore granted since 2014. “This will bring immediate positive impact on the sector with its ecosystem of large players as well as MSMEs leveraging their respective strengths.” 

Levy of the Goods and Services Tax (GST) on defence hardware is another thorny issue that the MoD must take up with the finance ministry. For example, aircraft and ships are levied 5 per cent GST whilst engines and machinery, radars, communications etc. are charged 12-18 per cent. “All defence equipment must attract a uniform rate of 5 per cent GST across the entire value chain. This will release at least Rs 30,000-40,000 crore for procurement,” says Cmdr Sujit Samaddar of NITI Aayog. 

Indigenisation & LTIPP 

As the world’s second largest importer of military hardware after Saudi Arabia, India spends billions of dollars to buy the latest technology and build capability. As such, India’s quest for an indigenous fighter aircraft with comparable 5th generation platform should have been achieved by now. The country could have been saved $50 billion by investing in R&D and setting benchmark time. 

Recently, the Defence Research and Development Organisation (DRDO), India’s sole agency for defence R&D went to town when LCA Tejas completed extensive trials on the shore-based test facility (SBTF), and the naval version of LCA did a successful arrested landing on-board INS Vikramaditya in January as if these were history-making developments. 

In fact, these events were a sad testimony to our capability as ‘arresting cable systems’ were first used by aviation pioneer Eugene Elylon way back in 1911 when he made his first landing on a ship — the armoured cruiser USS Pennsylvania. 

The Long-Term Integrated Perspective Plan (LTIPP) has the work cut out as far as next-generation combat aircraft are concerned. To begin with, LCA Tejas may have started flying but it is still way short of its production target of MK-1 level of worthiness. Another concept—Advance Medium Combat Aircraft (AMCA)—with multi-role capability is still on the drawing board. A generational shift in combat aircraft is indeed challenging to embrace. But that’s what China has managed to do using smart tactics — by leveraging the Russian platform and loading it a bit with advance western platforms. If China could do it, why couldn’t we using various MIGs and Sukhois from Russia and Jaguar from Britain-France? 

Today, India’s fighter aircraft squadrons have virtually dwindled by a fourth — from the sanctioned 42 squadrons (on paper), we are down to 30 squadrons. And we may go down further to 12 squadrons. It is evident now that the Indian Air Force (IAF) is facing a huge aircraft shortfall. This cycle keeps repeating in the absence of robust replacement mechanism and accountability.  

The Aeronautical Development Agency (ADA), which developed the Tejas, has been working for more than a decade to develop a credible design for AMCA. Can they leverage the reach and expertise of global OEMs as it could propel India’s quest for fifth-generation AMCA and Tejas Mk-2 on fast track? On being asked about the feasibility of such a collaboration, Vivek Lall, Vice President, Strategy and Business Development, Lockheed Martin Aeronautics say, “We are certainly open to supporting India’s AMCA and Tejas MK-2 programmes should the Indian government ask us to do so. Public-private-partnerships or PPPs are a key part of building strategic, long-term international defence partnerships that benefit multiple stakeholders.” “Our F-21 proposal for the IAF would be a key enabler of close collaboration on advanced fighter aircraft,” Lall added.  

Need to re-invent DRDO

No account of India’s defence preparedness is complete and meaningful without a mention of the role of the DRDO. “This organisation (DRDO) has to be re-invented. Their structure and charter was relevant 50 years ago. Not anymore,” says Cmde Samaddar of Niti Aayog, an expert on defence.  Cmde Samaddar is not the first to call for the reform of DRDO; it has been bugled by committee after committee (Admiral Puri Committee, Rama Rao Committee etc) over the past several years. 

Let’s look at the budget allocation for DRDO. For FY20, it was a little over Rs 19,000 crore. It compares poorly with China. “It is spending over 20 per cent of the overall budget for defence on R&D. We, however, are spending not even 5-6 per cent,” says S. Christopher, former Director General, DRDO. The upshot was the Chinese fourth-generation fighter fleet strength increased from 383 jets to 736 jets between 2010 and 2015, a 92 per cent jump in air power. Today, China operates roughly 1,200 short-range fighters. 

The People’s Liberation Army Air Force (PLAAF)’s fleet boasts up to sixth-generation innovation with its own drones and artificial intelligence and everything latest in aerospace. By 2035, China could be closer to the world’s best platforms of fighter aircraft such as Russia’s Sukhoi and F-35 of US. And, that is not a miracle but the result of a dedicated plan and investment on technology and sincere implementation of the application.   

All this is not to say that DRDO, or more precisely the ADA, cannot do what others are doing. To take an example, when it comes to the SONAR system, ADA is among the best in the world. Cmdr Samaddar, however, makes a fundamental point. “DRDO must simply focus on fundamental science and research and not so much on applied research. In effect, it should refrain from making these toys that never work.” 

True, our indigenisation efforts have been very uninspiring so far, if not outright disappointing. The Pralay Short-Range Tactical Ballistic Missile (SRBM) and Agni-1P SSM for the infantry, which were supposed to be a ‘fast-track’ programmes and on trials by DRDO, are still in early stage of development. Similarly, Tejas MK-1 production is behind by 8-16 units a year. The Advance Medium Combat Aircraft and the futuristic Tejas MK-2 are way behind schedule. 

What is the way forward? The government must immediately drive the next-generation technology leveraging India’s IT prowess. The nature of modern warfare also suggests that such a step, if taken now, will propel India among the best in the development of futuristic defence systems viz, artificial intelligence, quantum technologies, cognitive technologies, asymmetric technologies and smart materials. 

As DRDO has recently tied up with leading universities under the DRDO Young Scientist Laboratories (DYSL) programme, it must get the requisite fund and talent. “Focus area must be meta/smart materials, AI, tera hertz electronics, directed energy LASERs, fuel cell, at the fundamental research level,” suggests Cmdr Samaddar. He also suggests that DRDO Chairman and Secretary must be separate positions. “Senior Adviser (SA) to the Defence Minister must be a noted academic and Secretary, Department of Defence R&D must be selected from the larger talent pool of the Civil Services, Technical Services, private sector and Chairman DRDO can be from the cadre,” adds Cmdr Samaddar. 

Action on Make-II & Make-I 

The Make-II category is an important step for our MSMEs. However, of the 44 projects taken up for Make–II since its inception in 2018, only six have reached the project sanction stage. Make-II projects also must be funded adequately as it is not possible for young entrepreneurs to make investments in projects where there is uncertainty – not in terms of product performance, but in terms of purchase. According to Cmdr Samaddar, the entire ‘Make’ idea has to be rethought and a risk and reward sharing model has to be developed. “The government takes the financial risk and the entrepreneur the rewards. India gains strategically,” he says. So the thrust on Make-II must be dealt with lightning speed and awarded on the basis of past acquisition price as the benchmark to an industry proposing such import substitution under Make-II even if it is a single party. 

Similarly, the Make-I procurement procedure was introduced in the DPP to develop complex, indigenous defence solutions through maturing Indian industry with the government providing hand-holding and funding support. Although procurement activity for a few Make-I programmes were initiated in 2009, none of them have taken off yet, probably due to the fear of funding the private sector to do R&D which, by its very nature, is fraught with uncertainties.  

So what’s the way out? Suggests L&T’s Patil, “Getting Make-I programmes on track and announcing many more is a key imperative for long-term indigenisation in the defence sector. While the DRDO gets funding to the tune of about Rs 20,000 crore every year, even if a small proportion of this is earmarked for the private industry through Make-I it will go a long way to encourage R&D in the defence sector.” 

It is time that the government pays heed to such suggestions and make them a reality under the joint leadership of the Defence Secretary and the Chief of Defence Staff at the Department of Military Affairs. Else, we will continue to pretend to ‘Make in India’.