By Ibu Sanjeeb Garg

Beating the Rhetoric

The Indian defence industry is at a critical juncture at this point. For several years running India has been the top importer for conventional weapons with abysmal indigenisation and virtually non existent exports. Thus it has become important to have a revaluation of defence policies in terms of both the procurement mechanism as well as the extent and scope of indigenisation in the defence industry today.

The Defence Procurement Policy which started in 2001 with subsequent amendments has become not only elaborate but more comprehensive in its approach. Yet for a evolving subject like defence the DPP too has to keep up with changing times. In the present context a major problem with regard to the DPP is the pricing mechanism. There is no relation between the actual cost and the price. There is a lack of commercial intelligence with regard to understanding what price must be paid for a particular product. The time factor in the process involved adds to the escalation of the costs which makes it imperative that better cost management policies are evolved. There is a need for a realistic qualitative minimum cost benefit analysis which and a situation where there are multivendor options available for the end user.

There is also pricing uncertainty in terms of spares and the uncertainty of costs of upgrade and overhaul adds to the quagmire of not being able to decide an effective price mechanism. The focus of the policy has to be the development of a strong industrial defence base with critical value addition in the country. Efforts must be made to develop key process in the country indigenously. Today the Defence PSU’s (DPSU’s) have primarily started operating as aggregators or assembly units sourcing components from private producers. Most of it is outsourced to foreign countries which warrant the need for a proper outsourcing policy for the DPSU’s. While further evaluating the DPP there is a need to differentiate between critical and non critical Services Qualitative Requirements (SQR’s).There is a need to stress on the critical sectors and keep redefining the critical SQR’s with changing defence environment.

Policy and ideological issues sometimes act as a major hindrance towards evolving a realistic defence policy and eventually a better defence procurement procedure. For example it is important to understand and evaluate the need for the necessity of 10000 battle tanks to cut of Pakistan’s supply lines in case of war. Such conventional thinking perhaps dopes not take into account the fact that both India and Pakistan are nuclear states and thus in a nuclear South Asia the needs of tanks in warfare is questionable. There is also absence of goal and an empowered structure in the defence policy mechanism.

Today in a changed industry environment it is important for the Defence Ministry to state its long term plan and objectives in a more transparent manner. This would help the industry to prepare itself and develop its capacities in accordance with the long term goal of the Defence Ministry. Often the backgrounds of the proposals are not evaluated properly and this is one aspect one needs to look at while preparing the policy proposal. The proposal has to be forward looking and must encompass a long term vision as well. The DPP procedure has no clear cut policy on when to have “India” and when to have “Buy and Make Indian” options among other. Such classifications should be laid out well and “Indian” should be the default option for all proposals so that it acts as an impetus for development of our own nascent defence industry. There is also a need to defend decisions which are made in good faith, very often when decisions are question the machinery goes into back-foot. Such positions are not desirable and the government should stand by these decisions. There must also be a mechanism for suggestions of improvement at the trial stage. As the policy evolves there is a need to address issues as they arise and a proper mechanism must be developed to address this issue.

The processes under the DPP must be streamlines as well. On an average a contract takes 8 years under the present policy regime with 4 years on the policy formulation and 4 years for effective weapons procurement. And by the time 8 years pass the equipments need new set of upgrades. Thus we are stuck up in a perpetual “catch-up” policy. There is a need today to involve the end user the soldier too in formulating new policies. It has to be joint effort of all parts of the security apparatus to produce strong and tangible results. Field trials are a lengthy and cost consuming process for industries involved in the defence sector. A solution to this can be found in a cost sharing mechanism where government and industry share a small corpus towards conducting the field trails so that there are stakes at faster completion of field trials.

Rigid compartmentalisation of the defence apparatus has made decision making slow and painful. There is a need for better understanding and coordination among the various agencies working under the gambit of the security apparatus. Successful strategic nations across the world have been able to achieve this coordination among its various agencies and India too needs such a mechanism today. Exchange rate variation too sometimes add to the escalation of the costs of projects hence there is need to fix a price variation clause which is composed of both fixed and variable cost components.

There must be efforts to incentivise the domestic defence industry. Today India lacks a pure domestic defence industry. Efforts must be made to support them by tax incentives among other measures. Various committees formed by the government have repeatedly listed out defence industry as one which is of critical importance to us. Thus it is imperative that the defence production industry is boosted by incentivising it in the lines of other industries like telecom etc.

Today the defence industry needs a “strategic defence review” which eventually can produce a realistic and proactive “war fighting doctrine”. India has already missed two cycles of modernisation and if the defence policies are not set right there is a chance that India might miss the next cycle of modernisation as well. Indigenous technology is the key to achieving this goal. Indian companies often miss deadlines and the Defence PSU’s work at an abysmal pace. This warrants the need for a restructuring of the defence PSU’s and other industries in this field especially in the public sector. Foreign OEM’s are often seen being favoured over Indian companies in terms of defence procurement. This policy needs a revaluation there must be efforts to ensure a level playing field for both domestic and foreign industries.

No industry today can survive without state of the art R&D technologies as well as a pool of specially trained people manning their specified positions at different levels. There is a need to create a pool of trained individuals who can work in a cohesive manner to produce tangible results. This pool should consists of not only systems engineers and defence personals but also lawyers and technocrats so that policy understanding and evaluation is done in a proper manner by trained individuals .Industry tie-ups with universities can act as a big boost in this regard.

The defence industry stands at crossroads today and it is important for national security and integrity that it embarks on the right path.

 ( Views expressed by the author are personal)