MAKE IN INDIA: A DREAM OR REALITY FOR THE ARMED FORCES BY MAJOR GENERAL RAJAN KOCHHAR

The unleashing of COVID 19 on humanity is possibly the event of the century. It has caused massive turbulence all over the world. Needless to say it has left a deep impact on how businesses will get conducted post this period. The stock markets have taken a dive and are behaving in the most bullish manner. Every day there is a rise and fall, making a common investor puzzled. China has earned itself a bad name and tarnished its credibility and reputation. Its manipulation of the WHO is an open secret now. Already Nations are inimical to China and raging with pain and anger and want to be avenged.

In the scenario of Multi nationals moving their industries out of China, a wonderful opportunity presents itself to other nations to galvanize their diplomatic and economic efforts to make it conducive for these investments to be moved to their countries. India is in my mind is a front runner for such enterprises. The Govt has also eased its FDI policy to ensure adequate control mechanisms are in place. Therefore, the time has come now to shore up our so called defence corridors which were set up with much fanfare.

India is probably the only large country in the world which is overwhelmingly dependent on external sources for its defence requirements. According to Stockholm International Peace Research Institute (SIPRI), the latest data on global arms transfer shows that Indian arms imports have come down significantly (by 32%) since 2015, indicating that the ‘Make in India’ initiative is gaining ground, however, the country is still ranked as the world’s second biggest weapons buyers, just behind Saudi Arabia. The silver lining for India, along with the 32% dip in imports has been the entry into the exporters list. At present, the exports shown are modest – they account for only 0.2% of the global arms market – but the start is significant. India’s biggest clients are Myanmar, which accounts for 46% of exports, Sri Lanka at 25% and Mauritius at 14%.

This dependency on arms import is a stark reminder of how far India is from the objective of substantive self-reliance in defence production that it has aspired to since the early days of independence. The Govt of India had identified 25 sectors including defence manufacturing to further its programme of ‘Make in India’ which was launched almost four years back. What then has been the cause of this entire initiative becoming a non starter? Let us make an endeavour to analyse this.

Our greatest weakness has been the lack of overall perspective towards defence manufacturing. We have being giving undue importance to institutions such as Defence Research and Development Organisation (DRDO), the premier R&D agency of the Ministry of Defence (MoD)and Director General of Ordnance Factories(DGOF) to cater to our defence requirements. These organisations do not have a laid down road map and decisions are taken in a compartmentalised environment bereft of the involvement of stakeholders. Is it not a matter of surprise that Indian Army accounts for more than 80% of its orders on OFB and still doesn’t have any member in the advisory board of Ordnance Factory Board (OFB). The absence of stake holders in the decision making process has a catastrophic effect on defence manufacturing and procurement. The Armed Forces are interested in getting the equipment in the shortest time frame, whereas these organisations have scant respect for timelines and the sanctioned budgets.

The other important aspect is the way defence procurements are done. We have a Defence Procurement Procedure (DPP) Manual 2016, which lays down how the procurement is required to be done. Unfortunately the entire process is so time consuming and bureaucratic, that from the time an item is identified for procurement till the time it is physically received is anywhere between 3 to 4 years.

The need of the hour is to get the private sector involved in defence production. The biggest hindrance in the private sector’s participation so far has been mistrust. When it comes to big contracts, procedural hurdles come in the way, making it virtually impossible for the private sector to get into complex defence manufacturing. Moreover, single source procurement from the private sector is still considered a taboo, whereas import without competition is greatly admired. There is therefore a requirement to change mindsets and treat the private sector as an equal partner. This can only be demonstrated by awarding big contracts, preferably through the ‘Make’ and ‘Buy and Make (Indian)’ procurement categories, which hold the key to the success of the private sector’s participation in defence production.

It is therefore distressing to hear that post COVID 19, out of 56 companies which have closed shop in China only 3 have come to India. Maximum have shifted base to countries like Indonesia, Taiwan and Thailand. As per the official estimate of the MoD, India is likely to spend around $130 billion on defence modernisation in the coming seven-to-eight years. While this makes India one of the largest defence markets in the world, the opportunity it offers should be fully exploited for the benefit of local industry. This will not only improve India’s self-reliance in defence production but will have a multiplier effect on the wider economy. The government must ensure that the local industry is geared and incentivised enough to rise up to the expectations and make the government’s ‘Make in India’ initiative a success story.

In order for Make in India to be a success story there needs to be two primary objectives, i.e.

           # Reduce own dependence on imports.

           # Enhance our export potential.

The next question which would arise is how we meet these objectives. Some of the measures which could be undertaken are enunciated as under:-

# Identification of relevant weapon systems and technologies of the next decade i.e. UAVs, electronics, avionics, IT, Missile technologies, Sensor technologies, ATVs, small boats, to name a few. Thereafter, a comprehensive exercise be undertaken to identify the sources of supply/vendors.

# An incentive scheme be finalised to lure the vendors, assuring them of reasonable margins of profit and assured orders.

# A procedure for transfer of technology be formulated which may not happen initially but over a period of 5 to 7 years.

# A fast track procedure for procurement be formulated with single window clearances inclusive of provision of infrastructure as well as export incentive.

# In order to oversee the entire process, there would be a need to set up empowered committees which would function on womb to tomb concept. If need be these empowered committees could have members from the concerned states where the defence corridors would be coming up. All processes must become outcome oriented. Bureaucratic red tape should be reduced with time bound clearances at each stage. If required, the entire system should be monitored by the PMO on a regular basis.

We need to therefore, gear ourselves up to rise to this challenge,. The manufacturing sector has to build up its processes and contribute 25% to the GDP in the coming years. Procedural and regulatory clearances have to hasten up. The present state of being ranked ’low on the ease of doing business’ needs to improve. It is high time that we put our house in order; otherwise we will miss the bus.