Far from self-reliant
The much-touted Atmanirbharta in the defence sector is a bridge too far, going by the Comptroller and Auditor General’s (CAG) report on Management of Defence Offsets, tabled in Parliament on 23 September 2020. The national auditor has taken to task French aerospace major Dassault Aviation and European missile-maker MBDA for not fulfilling their offset obligations of offering high technology to India under the Rs 59,000-crore Rafale aircraft deal. The two firms are yet to provide technological assistance sought by the Defence Research and Development Organisation for indigenous development of an engine for the Light Combat Aircraft Tejas. The CAG has also observed that defence ranks an abysmal 62nd out of 63 sectors receiving FDI (foreign direct investment), while pointing out lacunae in the country’s offset policy. Foreign defence entities are mandated to spend at least 30 per cent of the total contract value in India through procurement of components or setting up of research and development facilities, but there is no effective mechanism to penalise them if they don’t do the needful.
Transfer of technology, facilitation of FDI, reduction in imports and liberal funding of R&D projects are the imperatives for giving a fillip to ‘Make in India’ on the defence front. Last month, the government had announced a phased embargo on the import of 101 weapon systems in an initiative to encourage the domestic industry. Many more such steps are needed to come anywhere near self-sufficiency. For the record, India is the third largest military spender in the world (after the US and China) and the second biggest arms importer (after Saudi Arabia).
The strategic partnership model, which provides for a longterm tie-up of Indian entities with global Original Equipment Manufacturers to set up domestic manufacturing infrastructure and supply chains, needs to offer attractive incentives to woo the world’s best vendors. In October last year, French engine manufacturer Safran had told Defence Minister Rajnath Singh that India’s tax ‘terrorism’ was holding up the company’s plans to make big investments. Let there be an enabling environment for foreign investors, but hold them accountable if they renege on their promises.