How To Get ‘Atmanirbhar’ In Defence ProductionBloombergQuintOpinion
Foreign control of cyberspace, Prime Minister Narendra Modi warned in his Independence Day address, “can be a threat to the social fabric of our country, our economy and can even threaten the development of our nation”. While the message may have gotten across to the people, it apparently has not to the officials manning the government.
A day earlier, on Aug. 14, NITI Aayog CEO Amitabh Kant unveiled ‘Aspirational Districts Programme’ for digital connectivity. Bypassing the normal tendering process, NITI Aayog picked Oracle Corp. to provide the cloud-based database management system and software driving this programme. It kept the relevant technology-competent Indian companies out of the game, preventing them from competing for a contract that, should the programme be extended nationwide, will be worth thousands of crores of rupees.
Is All Of Government On Board With The Atmanirbhar Plan?
Had NITI Aayog taken the indigenous route on ADP, other ministries would perforce have taken note. The Department of Telecommunications, notionally responsible for the ADP, is perhaps the most egregious among government agencies in resisting and rejecting indigenous technology.
- Bharat Sanchar Nigam Ltd. signed a contract with Huawei Technologies Co. Ltd. for advancing its 4G network despite clear injunctions from the government not to do so.
- The DoT listed Huawei in the 5G sweepstakes despite national security concerns. Now after being forced to backtrack, an expert committee deciding on non-Huawei choices for 5G is inclining towards Nokia Oyj and Ericsson SA.
- For the fibre-optic project connecting Chennai with Andaman and Nicobar Islands, national security was cited for not going with Huawei which was the lowest bidder. The contract was shifted to the Japanese company NEC, financed by the DoT administered Universal Service Obligation Fund.
The current Bharatiya Janata Party government may be Modi-centered and top-driven. But Modi cannot be everywhere, monitoring everything. Hence, government agencies and departments, rather than being motivated by the principle of self-reliance, seek excuses and loopholes to continue importing goods and technologies, manifesting the characteristic Indian craze for ‘phoren’. It makes nonsense of the prime minister’s call for atmanirbharta (self-reliance).
All these instances suggest the prime minister and the rest of the government are not really on the same page, that Modi decrees something be done in a certain way beneficial to the nation only to have the bureaucrats habituated to doing things another way, carrying on as they have always done.
Modi’s self-reliance policy pivots to a considerable extent on the success of micro, small, and medium enterprises. I have long advocated the need for the government to incentivise in every way possible the emergence of MSMEs as the Indian version of the German ‘Mittelstand’—a concept France has replicated as the source of technological innovation in the country. Unfortunately, other than lip service, the government has done little to encourage and ensure the MSMEs their ease of doing business.
Horror stories abound of would-be startups in the MSME sector, after getting initial clearances, having their projects, capital and other resources held up by rapacious, rent- and bribe-seeking politicians, police, and petty functionaries. Again, it shows a disconnect, this time between what Delhi intends things to be and how entrepreneurs and MSMEs are hobbled at the local level where Modi’s writ doesn’t run.
Cold Turkey Versus Staggered Indigenisation
There is light at the end of the tunnel where military hardware is concerned. I have long maintained that the government should go ‘cold turkey’ on arms imports and simply ban purchases of all armaments. Throwing the Indian defence industry thus into deep water, I argued, is the only way to force it to learn to swim. It is good the Modi government accepted the advice in principle. On Aug. 9, Defence Minister Rajnath Singh released a list of some 101 defence items, each with its own timeline, beyond which their import is banned. It will beneficially shake up the scene.
Sixty-nine of these items have a very short time window and cannot be purchased abroad after December this year. In this section are featured major high-value systems, including ship-borne cruise missiles, towed 155 mm artillery, tactical simulators for various combat arms, missile destroyers, anti-submarine warfare ships, light combat aircraft, light combat helicopters, specialised kinds of shells and ammunition, radars, assault, and long-range sniper rifles, conventional submarines, electronic warfare systems, self-propelled barges, drones, and machine guns.
This list may appear ambitious, but between the private sector and defence PSUs, almost all these items are already being produced in the country. The more important and welcome aspect of the new procurement policy is that the escape route for the armed services to import these items by rejecting the indigenous versions as quality-wise deficient is closed. Meaning, the forces and the relevant combat arms will have to become stakeholders in the indigenous programmes and work with the manufacturers to improve the product, if required.
The fly in the ointment is the possibility that the government will succumb to pressure mounted by the labour unions in defence public sector units to hand over the main manufacturing contracts to them, with private sector firms thrown crumbs as subcontractors. To do so would be a fiasco.
The track record of defence PSUs over the last six decades in terms of product quality and delivery within time and cost constraints is so abysmal, that for the Modi government to appoint them principal contractors would be like taking an axe to its self-reliance policy.
Alternatively, it would make sense, for instance, to assign the Indian Navy’s Project 75i diesel submarine production to Larsen & Toubro Ltd., the only private sector company with the production wherewithal and its invaluable role and experience in building nuclear-powered submarines, and compare its performance with that of public sector Mazgaon Docks Ltd., which has struggled with producing the Scorpene submarine—delivering the first unit 12 years late and at almost twice or more of the stipulated cost.
More Private-Defence PSU Competition
The government will have to begin to trust the profit-driven private sector which cannot afford to waste time or resources nor to violate contract terms or alienate customers by rolling out sub-standard products as defence PSUs routinely do.
The Indian Air Force, for example, has often had to induct into service new Hindustan Aeronautics Ltd.-built Jaguar low-level strike aircraft with leaky fuel lines because they have no choice. The Indian government should ensure private sector companies have a major role hereafter and force the defence PSUs to compete with them. Competition may, in fact, improve defence PSUs’ product quality and delivery schedules.
There is an urgent and large IAF requirement for the Tejas Mk-1A. Even with two assembly lines, HAL cannot produce more than 18 light combat aircraft annually. Getting DRDO-HAL to share the source codes for this aircraft with Mahindra Aerospace and other companies with the capability to—at a minimum—have as many as four Tejas production lines outputting some 72 aircraft a year, will enable a whole big aviation industrial ecosphere to spring up. We would have small and big firms designing and producing components, systems, subsystems, and ancillaries, employing people in thousands with positive cascading effects on the economy.
Mahindra has already been chosen by Boeing Co. to manufacture the F/A-18 E/F Super Hornet carrier aircraft in the hope the Indian Navy will buy it. What is problematic is the Super Hornet’s conforming with the Rajnath Singh list featuring the LCA, whose navalised variant not too long ago passed the carrier landing and takeoff test and may be ready for induction in the same time frame as Mahindra can get up the India-made F-18. In any case, multiple LCA production lines will result in decreasing unit cost, increasing profits from export orders, and internally generated funds being available for the development of the follow-on indigenous advanced medium combat aircraft.
This is the business model for the Modi government to implement and to get its ‘atmanirbharta’ defence policy to take wing. If Modi and Rajnath Singh do follow it, they will be remembered for birthing a multi-faceted, world-class Indian defence industry and for generally seeding a high-value, high-technology sector that will help India pull itself up by its bootstraps.
Bharat Karnad is Emeritus Professor at the Centre for Policy Research and author, most recently of, ‘Staggering Forward: Narendra Modi and India’s Global Ambition’.
The views expressed here are those of the author and do not necessarily represent the views of BloombergQuint or its editorial team.