We have not been able to develop home-grown technologies. The DRDO, defence PSUs and the private defence sector have not invested adequately in R&D. Foreign companies are not ready to transfer the latest technology without having adequate control in decision-making. The FDI limit in 2015 was raised to 49%, but still it did not take off, restricting our indigenisation efforts. Raising the FDI to 74% is likely to attract foreign companies. Make in India: A separate budget for domestic capital procurement will help boost the indigenous defence industry and achieve self-reliance.

by Lt Gen Gyan Bhushan (Retd)

Border clashes with Chinese troops and the rising tension along the northern borders have forced accelerated domestic and foreign purchase of weapons. Whenever there has been a border clash or a major terror attack, we have been resorting to emergency purchases and granting greater financial powers to service headquarters for the purchase of emergent items. It clearly indicates that our defence industry and the regular system laid down for procurements in a certain time frame are not functioning properly, resulting in emergency purchases in times of crises. These drawbacks have been highlighted by many committees as also by the Parliamentary Committee on Defence, but apparently no lessons seem to have been learnt in the 21 years since the Kargil conflict.

Amid the ongoing border tension, the Defence Minister on September 28 unveiled the Defence Acquisition Procedure (DAP) 2020 in which an endeavour has been made to align it with the vision of Atmanirbhar Bharat and empower the domestic industry through the Make in India initiative. It has adequately included provisions to encourage FDI to establish manufacturing hubs, both for import substitution and exports, hence protecting the interests of our domestic industry.

Earlier, the Finance Minister had announced key structural reforms in the defence sector after the Prime Minister announced a special economic and comprehensive package of Rs 20 lakh crore to revive the economy and called for an Atmanirbhar Bharat Abhiyan. As a part of this package, the FDI limit in defence manufacturing under the automatic route is to be raised from 49 per cent to 74 per cent. There will be a time-bound defence procurement process and faster decision-making will be ushered in by the setting up of a project management unit to support contract management, besides a realistic setting of the general staff qualitative requirements (GSQRs) of weapons/platforms and the overhauling of the trial and testing procedures.

As per Stockholm International Peace Research Institute (SIPRI), we are the second largest importer of weapons and equipment in the world, spending approximately $100 billion in defence contracts per year. To become self-reliant in defence production, the Make in India plan is to be promoted by notifying a list of weapons/platforms for a ban on import with year-wise timelines, the indigenisation of imported spares and a separate budget provisioning for domestic capital procurement. This will assist in the reduction of the defence import bill and improve autonomy, accountability and efficiency in ordnance supplies.

We have not been able to develop home-grown technologies. The DRDO, DPSUs and even the private defence sector have not invested adequately in R&D and foreign companies are generally not ready to transfer the latest technology without having adequate control in decision-making in the company.

The FDI limit in 2015 was raised to 49 per cent, but it still did not take off, restricting our indigenisation efforts. Raising the FDI to 74 per cent is likely to attract foreign companies. The imported technologies will act as a catalyst for future development of in-house technologies.

Foreign companies will require an ecosystem to procure some parts and spares from local manufacturers which will provide them the required opportunities. Local availability of spares will be useful in times of crises and also help in providing a better lifetime support to the equipment.

Another major development is the endeavour for the corporatisation of the Ordnance Factory Board (OFB), which formed a part of the Modi 2.0 government’s ‘167 transformative ideas’ to be implemented in 100 days, i.e. by October 2019. The proposal for corporatisation was floated in July/August 2019, but the trade unions called for an indefinite strike against the decision and the strike was called off only after certain assurances by the government. Corporatisation of the OFB is necessary to rouse it from slumber and transform it into a state-of-the-art facility that is more competitive and self-reliant. Hopefully, the recently formed high-powered committee should be able to overcome the resistance and ensure implementation.

The proposal to import certain weapon systems/equipment and indigenisation of imported spares to improve self-reliance will give a boost to the local defence industry. However, there is a need for extreme caution while drawing out the list, which should be in sync with our existing capability and not the futuristic envisaged capability because it can mislead us and completely block the import route to procure these items even in times of crises.

The proposal of a separate budget for domestic capital procurement is yet another step to boost the indigenous defence industry. This provision, coupled with keeping a check on reducing the defence import Bill, should encourage domestic manufacture by facilitating them to assess the exclusive government allocation. However, it needs to be seen whether it will be over and above the defence budget allotment or form a part of the allotted capital outlay, which at the moment is insufficient to even meet the committed liabilities for defence acquisitions.

The process of formulation of GSQRs has been further refined with greater emphasis on identifying verifiable parameters based on analysis of comparative equipment available in the world and domestic markets. Effort has been towards the simplification of trial procedures to conduct trials with an objective of nurturing competition based on the principles of transparency, fairness and equal opportunities to all and not as a process of elimination. The success of these measures will depend largely on the close involvement of uniformed personnel and their predominant role in these set-ups.

These reforms have the potential to achieve self-reliance and provide a much-needed fillip to the defence industry which has historically been plagued by policy paralysis. At present, officials dealing with these crucial issues in the Ministry of Defence are not professionals with experience, but are transients with little experience. Reservation in employing defence personnel in these pivotal roles has to be shed. Success will largely depend on ensuring greater involvement of users — the uniformed community — in key positions of execution. With rising tensions along the northern borders, there is an urgent need to push for these reforms pending for decades for better defence preparedness.