Statistics can sometimes be startling. An initial paper that landed on Manohar Parrikar's desk after he took over as defence minister detailed India's military purchases over the last five years. Its summary: despite the UPA government's reluctance to sign defence contracts and the freeze put in place by a battle-scarred A.K. Antony, New Delhi had paid foreign defence vendors more than Rs.1 lakh crore, making India the world's largest weapons importer
Yet, gaping holes remain in the nation's conventional capabilities-from an ageing fighter aircraft force plagued with a high accident rate to a depleted underwater fleet and an army that has not purchased an artillery gun in three decades. The BJP has inherited a weakened defence force, with high import dependence and a complete loss of faith in the ability of government units to meet requirements.
And that is Parrikar's challenge: to modernise the armed forces to tide over the 'lost decade' of the UPA and end its dependence on imports. It is a race against time and success will depend substantially on how he manages to deliver on the Prime Minister's pet Make in India project without compromising the conventional edge of the forces.
By conservative estimates, India is likely to spend more than $260 billion on military purchases over the next 12 years. A report by the defence and aerospace division of Ernst and Young suggests that in case the Government is able push through the Make in India model, at least $50 billion can be saved.
Thus, most big-ticket projects being touted as "cleared" under the new regime are 'make in India'-from nextgeneration submarines and light choppers for the Army to transport planes for the air force, howitzers and amphibious warships. The combined worth of these projects is well above Rs.1 lakh crore. In fact, out of 21 major procurement projects at various stages of processing at present, excluding the multi-billion-dollar fighter aircraft deal that is in the doldrums-at least 18 are mandated to be made in India.
And private production is the way to go, the Government has figured out. "The private industry has to step forward for us to achieve the goal of indigenisation. The public sector has a role but after their being around for several decades, it is clear that our private players need to step in," Minister of State in charge of defence production Rao Inderjit Singh told INDIA TODAY.
While the initial response of the private industry has been enthusiastic, as realities begin to bite there is an increasing realisation that Make in India is a long haul and that the road ahead is long and requires tough decisions.
Take, for instance, one of the first and biggest make-in-India projects for the private sector: the air force's plans to replace its fleet of 56 Avro medium lift transport aircraft. The IAF wanted a private company to tie up with a foreign vendor and set up a production line in India for the Rs.13,000-crore project. However, despite hectic rounds of negotiations and consultations between Indian and foreign companies, only one joint venture came forward- an Airbus-Tata combine.
In his first meeting on defence procurements, Parrikar has deferred a decision on whether to go ahead with this single-vendor situation or re-tender the process. The latter would mean a delay.
The private sector would also have to take on the well-ensconced public sector undertakings (PSUs), which have created infrastructure over the years. To compete fairly on price with a PSU is thus nearly impossible for private companies, which now need to create assets, invest in manpower and acquire technology-all pushing up costs exponentially.
As the private sector gears to manufacture, and even enter the export market, it will also face the twin challenges of liability and certification. The liability for non-performance or malfunction would lie on the Indian company that sells the product to the armed forces, and given the high-value contracts at hand, most companies would find it hard to have the deep pockets required.
The private sector will also find it hard to get certifications for its products- valid international certificates that guarantee quality control are a must for all military contracts. Certification is a lengthy, painstaking process, taking years to register each part that goes into a military system.
Pilatus Aircraft Ltd, which supplies basic trainers to the air force, has been unsuccessfully looking for a partner in India to manufacture 106 aircraft required by the IAF.
Pilatus Aircraft's Deputy CEO Jim Roach said: "There is not a single entity mature enough yet in India that can manufacture the aircraft, certify it and deliver to the air force in the time envisaged. Flight safety starts with certification and there is no commercial company in India that has the full certification toolkit necessary."
While the biggest demand of the private sector is for a level playing field with PSUs in eligibility criteria, taxes and duties, the Department of Defence Production is at present reviewing a set of recommendations by the industry to find solutions. An equal ground with the PSUs would go a long way towards strengthening the confidence of the private sector. The industry has also requested the ministry to go easy on blacklisting of companies even over minor issues.
Amajor push is also being made by the industry to spur the Government into reviving the make-in-India plan in which the Government will finance 80 per cent of the development cost of a new project-like the next-generation infantry combat vehicle- based on paper plans presented by established industry players with the mandatory 10 years of experience in defence manufacturing. Parrikar will, however, have to sort out the tussle between established players such as Tata and Larsen & Toubro and new entrants such as Reliance Aerospace, which have been lobbying to reduce the experience criterion down to five years to get a toe in.
Though the armed forces endorse the indigenisation plan, there is apprehension that a blind make-in-India policy for every purchase may be suicidal for modernisation, which is struggling after the lost decade under the UPA.
The Indian Navy, with its proven record on self-reliance, also warns that indigenous manufacturing is a multilayered project that requires patience and time. "The Navy had a vision and it started 50 years ago. Now the entire chain is in place," Navy chief Admiral R.K. Dhowan told INDIA TODAY. "Manufacturers will need to understand it is a long-term game and they have to be ready to suffer losses. They also need to be ready to not only manufacture but maintain the product through its service life. It is a tough challenge."
But the consequences can be dire for the armed forces if the Make in India bubble bursts. Already facing fresh tension with Pakistan and an increasingly assertive China, the luxury of time is not at hand to rebuild a credible conventional deterrent. The question is how Parrikar will strike a balance.
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