GETTING THE BIG GUNS
The government pushes its flagging Make in India initiative with a new defence production policy and by showcasing India’s defence manufacturing potential at the biennial DefExpo-2018
A draft defence policy to spur the floundering Make in India initiative
The Union ministry for defence (MoD) is keen on making a splash this year at the 10th edition of the biennial Def Expo, a land, naval and homeland security exhibition which begins near Chennai on April 15. So very keen, that (according to a story doing the rounds of South Block), it prepared a live fire demonstration of a prototype Indian howitzer at the venue, shooting into the Bay of Bengal. The proposal was nixed after sensible advice prevailed. The exhibition, traditionally a show window for arms and men tie-ups for the armed forces and industry, has veered closer to the government’s goal of making defence hardware indigenously. Its tagline showcases India as an ‘emerging defence and manufacturing hub’ and comes after a three-month policy barrage from Union minister for defence Nirmala Sitharaman aimed at reviving a comatose
Make in India defence policy.
In January, the government released a list of MakeII projects aimed at boosting private sector participation by offering 50 projects where private industries can come up with solutions the MoD guarantees it will buy. This is meant to allay a key industry fear—that the government does not buy products the industry spends time and money on to develop. The MoD also created a defence investor cell under the Department of Defence Production as a singlepoint interface with investors.
DefExpo 2018 unfolds near the ChennaiBengaluru defenceindustry corridor proposed in this year’s budget. The corridor links up the giant L&T shipyard in Kattupalli, north of Chennai, with the SME hub in Coimbatore, the six stateowned ordnance factories in Tamil Nadu and Hindustan Aeronautics Limited in Bengaluru. An MoD selection committee is currently meeting consultants to finalise a project report for both industrial corridors.
On March 23, the MoD released a draft defence industrial manufacturing policy, providing a framework to its goal of making weapons indigenously and reversing India’s dependence on imports, as high as 70 per cent. The policy, to be notified later this year, hopes to make India selfsufficient in hardware by 2025.
“India is already among the top 15 producers of defence hardware in the world. We hope to take it to within the top five by 2025 by incentivising local manufacturing,” says Dr Ajay Kumar, secretary (defence production). He points towards the turnaround in mobile manufacturing where India went from being a net importer to becoming selfsufficient over the past four years, to indicate why this is possible. “In 2014, our turnover of manufacturing mobile phones was Rs 19,000 crore. It stands over Rs 90,000 crore today.”
India procures around Rs 1.25 lakh crore worth of defence products while the public sector manufacturers, ordnance factories and private industries manufacture around 40 per cent. The rest is met through imports. Reversing this is a challenge, and this is what the BJP set out to do when its 2014 election manifesto unveiled a vision for reversing defence import dependence through Make in India.
The force multiplier effect of creating a militaryindustrial complex capable of meeting its requirements are laid out in the draft policy for defence manufacturing—a turnover of approx. $25 billion (Rs 1.6 lakh crore) and 23 million jobs.
Four years later, Make in India is a nonstarter. This has reflected in the abysmal FDI intake for the defence sector despite government policy initiatives. In 2016, the government relaxed foreign participation restrictions in Indian companies from 26 per cent to 49 per cent. Government permission would be needed only for ownership above that. Despite this policy thrust, only Rs 1.17 crore worth of FDI has come in till December 2017. Other sectors have attracted Rs 3.86 lakh crore in the same period. Meanwhile, the only substantial Make in India defence project has been a Rs 4,600 crore contract to manufacture 100 K9 ‘Vajra’ selfpropelled howitzers at the L&T facility in Hazira, Gujarat.
This delay comes at an alarming trijunction—the collusive threat from ChinaPakistan, a bulk of the armed forces’ Sovietera fighter jets, tanks and submarines reaching the end of their service lives and the budget to buy their replacements shrinking. Adding to the mismatch between the life of a government and the time it takes to acquire weapons systems is leadership uncertainty. The present government has had four defence ministers in four years, depriving an already lethargic system of continuous political oversight.
Weapons acquisition is a slow, painful process. It takes months to draft armed forces’ requirements, test the weapons, negotiate prices with the firm that meets all requirements and sign the purchase contract. Unlike consumer goods, which are manufactured in bulk and stocked in warehouses, defence hardware is manufactured only after a contract is signed. Globally, it takes between three and five years to acquire weapons systems. In India, it could take anything from six to 10 years to induct hardware. The K9 Vajra deal signed with South Korean firm HanwhaTechwin created a buzz when it was completed in six years.
Doubts have now been raised whether contracts can be signed at all. Blasting the government for inadequate budgetary support, a parliamentary standing committee on defence said on March 13 this year that the Rs 21,388 crore allotted for buying new weapons in the defence budget was inadquate to pay for the 125 ‘ongoing schemes’ worth Rs 29,033 crore. The challenges for defence modernisation are, clearly, multidimensional.
“We hope to put India among the top five defence hardware producers in the world by 2025 by incentivising local manufacturing” Dr Ajay Kumar, Secretary, Defence production