The Telegraph
Since 1st March, 1999
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- India and the international military market

In the year 2004, India created a record of sorts by surpassing China for the first time in importing military hardware of around $5.7 billion. For the armed forces starved of modern systems for over a decade, faced with procedural bottlenecks that cause fatigue rather than enhanced war-fighting capability, modernization can only be good news. Faced with security challenges that brook neither mediocrity nor a second chance, they have, in the past, filled the void through sheer courage and sacrifice. As modern warfare protagonists know, in the age of a revolution in military affairs, even courage has its limitations. The past tells us that when the moment of reckoning comes, as happened in 1962 against China or more recently in Kargil, our military is ill- equipped. While our lawmakers have spent considerable energy on 'Coffingate', one wishes they had constructively debated on why we are repeatedly caught in a situation where coffins or ammunition have to be imported in a panic after the battle has begun!

One could legitimately ask why our armed forces should be faced with such limitations when, on the face of it, our indigenous defence research and production foundations were well-conceived and laid early on in the republic's history. In furtherance of our avowed policy of self-reliance, we have 51 defence research and development laboratories involved in activities as diverse as weapons and missiles to the life sciences.

Added to this formidable base, we have eight defence public sector units and 39 ordnance factories respectively producing everything from combat aircraft, warships, tanks to clothing and the like. With such formidable capital investments and equally large recurring costs, the nation should have been largely self-sufficient in military hardware and software, relying on imports only in a few selected areas. But as the coffin story tells us, we can boast of nuclear weapons, but cannot bring back a dead soldier with dignity for last rites, unless we import caskets.

It was, perhaps, this realization that prompted the government, in 2001, to declare a new policy, which opened up the defence sector to private enterprise. Subject to licensing, the private sector was allowed unlimited access with foreign direct investment being limited to 26 per cent. Many, including this writer, were delighted at this move and presumed, somewhat optimistically, that this positive policy initiative was merely the first step to be followed by much overdue systemic changes within the ministry of defence and the armed forces' head quarters, which were prerequisites for this initiative to succeed.

Military weapon systems have long design, development and production cycle times and are also subject to technological changes, which bring about early obsolescence. The entire cycle is both capital intensive and risk prone. To cap it all, the market is both captive and limited. Only private companies already established in the defence sector could face these challenges. We have none. It needs recalling that the foundations of today's multinational giants were laid during the World Wars when governments generously promoted them. If the private sector in India is to be encouraged to enter and then nurtured, it would not only need a clear idea of what type of technical risks are involved, investments to be made and what assured orders can be expected, but active support of the services and the government for some years before they can establish themselves with supporting infrastructure and research and development.

On their part, the ministry of defence and the services must acknowledge these challenges and forge partnerships mutually beneficial both to the government and the private sector. Unfortunately no effort seems to have been made to introduce systemic changes that were essential to the success of the new policy. There appeared a notion that merely by announcing policy changes, there would be a rush of private enterprises wanting to join the bandwagon. Clearly, this displayed a lack of understanding of the dynamics of modern military industries and challenges facing the Indian private sector in this field.

The starting point of any weapon system is the service staff requirement, based on futuristic threat and war-fighting perceptions and the evolving technological environment. Once committed, the services should remain steadfast. Industry often complains that the services keep changing their requirements. No sector, public or private, can assess risks and costs in such an environment. It is not uncommon for major changes to be called for with change in personalities whose impact continues to be felt long after the concerned incumbents have left the scene. While it is incumbent on professional enterprises to evaluate technical risks at the start of a programme, they can hardly be expected to cope with a shifting goal post.

The other weakness relates to the subject of investments to be made and orders to be expected. Our annual budgeting system is such that there can be no certainty about budget allocations even for the following year, leave alone for the next ten to fifteen years, which should be the norm for meaningful defence equipment life cycle and production planning. This deprives the services of making meaningful long-term re-equipment plans and associated long-term commitments to the industry. Without this no industry can plan. A logical question would be as to how the system has worked so far. Within the existing system, the users, designers and the industry are all part of the same ministry and the problems largely remain confined to within the system and hence, there is no pressure to rectify systemic weaknesses. It's only in exceptional circumstances like wars that the problems get noticed, but are soon forgotten.

It is hardly surprising, therefore, to learn that in spite of this new policy having been in existence for five years, it has evoked a very poor response from the private sector and attracted no foreign direct investment at all. There is a school of thought that believes that major arms-producing countries would not want to encourage more competition and hence stymie Indian efforts, but this misses the point. As the IT industry has clearly demonstrated, there are no emotions attached to successful private enterprise but cold economic reality. The industry will chase efficiency and profitability irrespective of national boundaries, as the examples that follow will show.

The Kelkar committee appointed to look into the modernizing of the defence procurement system submitted its first report to the defence minister early last year. Having wasted five valuable years, we are now awaiting action on this report. While we continue with these well-meaning, though repetitive exercises, there is a silent revolution going on unnoticed under our very noses. In an article published in a computer journal, the author says that Infosys played a vital role in designing a portion of the Airbus 380's wings and HCL Technologies will provide software and hardware development services to the Boeing 787 'Dreamliner'.

Both are next-generation airliners from prime international aerospace giants. These airliners are destined to guide the future of international commercial aviation into the next decade or more. Similarly, Tata Elxsi is reportedly doing operator envelope design work for helicopter cockpits for a Britain-based customer. The list is indicative and could go on. It illustrates the potential strength of the Indian private sector with its scientific, technological and management genius.

There is adequate evidence that India has the human and capital resources to become a serious competitor in the international military market. What is needed is a vision to develop a coherent national action plan to achieve this objective within a specified time frame. Such a mission needs to be backed by a corporate management model endowed with the necessary authority.

For this to succeed the MOD, the services, defence R&D, the defence PSUs, ordnance factories and the private sector all need to be equal partners and be willing to change their management styles. With the support of the government this partnership can be nurtured till the public and private sectors are mature to face international competition. For a nation aspiring to join the league of developed nations in a few years, we should be aiming to be net exporters of military hardware, not the world's highest importer. If the leadership can display even a fraction of the courage of our soldiers, the task is within our reach.

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