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OpinionsPrivate Sector sees expanding role in India’s Defence Production arena

Private Sector sees expanding role in India’s Defence Production arena

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Must aim to strengthen strategic autonomy, minimize foreign reliance

By Girish Linganna

has one of the largest industrial bases (DIB) on the planet; an extensive network of research and development (R&D); as well as, production entities. The DIBs employ scientists, engineers and other professionals. But the dominance of the public sector has resulted in lacklustre performance. Therefore, India's continued reliance on external sources, a dependence that remains a cause of concern. India, in times of crisis, has found itself reaching out to friendly nations for emergency procurements.

Why has India not been successful in sourcing at least a significant portion of its arms requirements from within India? This is where the accountability of the public sector comes up for scrutiny. The need for an in-depth examination and the challenges before the nation becomes essential before making self-sufficiency the goal; strengthening strategic autonomy and minimizing reliance on external sources.

The debate has centred on whether a developing country should engage in defence production or aspire to achieve self-sufficiency? Some experts have suggested that endeavours towards autarky in defence are largely impractical, asserting that less powerful states should refrain from autonomous arms production, an argument founded on techno-economic considerations.

It is widely acknowledged that modern weapons incorporate advanced and miniaturized , making them exorbitantly expensive. Countries with greater financial resources can establish larger production lines, benefiting from economies of scale—an advantage that eludes limited industrial bases with smaller budgets. The comparative high cost of India's arms production tells the story.

Forces of globalization have compounded the problems. Significant changes have taken place. There is increased collaboration between defence firms. Co-production, development partnerships, mergers, acquisitions and joint ventures—all aimed at mitigating the escalating costs of modern arms. Despite these challenges, India has forged ahead with considerable success systems related to nuclear weapons, missiles and naval shipbuilding. But the overall state of “make/made in India” has been largely unsatisfactory.

Nevertheless, India is in a more robust position in indigenous arms production and the fourth-largest military spender, surpassing even the UK, France and Germany. The continually expanding defence budget is another marker. India's financial capacity to sustain an autonomous DIB is established.

India's customization of imported arms through the incorporation of India-Specific Enhancements (ISE) is a feather in India's cap and tantamount to maintaining technological advantage over adversaries. But the customization by foreign vendors and that by domestic entities are different. Securing a favourable price for ISE has proved to be challenging. Think of the government's negotiations for the purchase of Rafale fighters.

In contrast, the limited experience of customization through the domestic industry has yielded satisfactory outcomes.

India has explored diversifying its supplier base. But this option faces challenges. The arms embargoes, particularly those imposed by the US, following the 1965 war and the 1998 nuclear test have underscored the risks of external dependence.

That said, while Indo-US relations have improved, concerns about potential US sanctions persist. During the Kargil War in 1999, India's need for arms assistance left it begging for quick replenishment from external forces. General VP Malik, then head of the Indian Army, revealed India's delicate position.

The vulnerability of India is highlighted by the ongoing conflict in Ukraine, prompting the Indian Air Force to defer plans to upgrade its Su-30MKI fighters. The link between supply security and tactical advantages is found in Modi's address to the domestic industry, where he noted that “uniqueness and surprise elements can only happen when the equipment is developed in your own country”, underscoring the need for a robust DIB with autonomy and agility.

Despite India's notable achievements in defence capabilities, including being one of the few countries with Multi-Level Strategic Capability, Airborne Early Warning & Control System (AEW&CS), 4th-plus-generation fighter aircraft, Ballistic Missile Defence Programme, Main Battle Tank, Electronic Warfare and Multi-Range Radar Programme, the absence of any Indian company in the 's top 20 defence firms is of considerable  concern.

Moreover, the public sector faces lots of challenges in meeting the expanding requirements. Between 2018-'19 and 2020-'21, the public sector's total sales accounted for only 57% of India's defence procurement. Recent trends indicate a further decline in the public sector's share and the increasing reliance on imports.

The declining share in defence procurement is not the sole concern. A significant portion of the public sector's sales is directed toward non-defence clients and exports. For instance, in 2021-'22, 22% of India's second-largest defence company, Bharat Electronics Limited's (BEL's) sales turnover came from the non-defence segment.

Similarly, over 15% of the Ordnance Factory Board's (OFB's) total sales value was attributed to clients other than the Indian armed forces. This diversification in sales suggests that, while the public sector may not be fully meeting the armed forces' demands, it is engaged in serving a broader customer base, both domestically and internationally.

The landscape of India's arms production underwent a significant transformation in 2001 when the Vajpayee government decided to open up the defence industry to both Indian private companies and foreign entities. The current government has further elevated private sector participation through initiatives like ‘Make in India' and ‘Atmanirbhar Bharat Abhiyan'. Consequently, the role of the private sector in India's defence production, virtually non-existent at the turn of the century, surged to nearly 20% by 2021-'22.

The increasing interest and share of the private sector in defence production are accompanied by its demonstrated capability to deliver items, such as artillery guns, which were previously exclusive to the public sector. In some notable instances, the private sector has secured orders, including artillery guns, electronic surveillance equipment and significant military infrastructure projects, even in direct competition with foreign companies.

The private sector has also made inroads into breaking the monopoly of the public sector in complex areas. For instance, HAL's monopoly in aircraft manufacturing was disrupted when the Ministry of Defence (MoD) signed a contract with Airbus in September 2021, enabling the TATA consortium to manufacture 40 military transport aircraft in India.

The private sector's growing capability to supply essential equipment is evident in the list of items handed over to the Indian Army in August 2022. Out of a dozen pieces of equipment, six were supplied by the private sector, encompassing Multi-Mode Hand Grenades, Downlink Equipment, Landing Craft, Infantry-Protected Mobility Vehicle (IPMV), Quick-Reaction Fighting Vehicles and Long-Range Rockets.

Acknowledging the pivotal role of the private sector, the government has allocated a separate budget for procurement. In the 2022-'23 fiscal year, out of the INR 845.98 billion earmarked for capital procurement from the domestic industry, INR 211.49 billion (25%) is specifically allocated to the private sector. This reflects a concerted effort to encourage and support the private sector's expanding role in India's defence production landscape.

 

(The author is a Defence, Aerospace & Political Analyst based in Bengaluru.)

 

 

Northlines
Northlines
The Northlines is an independent source on the Web for news, facts and figures relating to Jammu, Kashmir and Ladakh and its neighbourhood.

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