The economics of defence

by Ajai Shukla

A response to posts: 15th Feb 2007

Thanks for the (sometimes disarmingly frank) responses. The issues that we are talking about are at the heart of India’s defence preparedness and, therefore, the niceties of polite debate can be set aside for now.

Firstly, there’s no denying the advantages of a strong indigenous military-industrial establishment. Even in the interlinked global defence industry of today, where the ownership of multinational defence corporations is not always linked to a single country, being able to draw upon a vibrant domestic R&D and production establishment provides strategic comfort.

So to frame the issue in terms of “should we maintain a capability or not?” is just sloppy analysis. The real questions are two. Firstly, what opportunity cost is India prepared to pay to develop and maintain an indigenous defence capability, because it doesn’t come cheap. Secondly, what is the minimum that must be provided to forces in the field in order to justify continuing research on projects that don’t reach the field?

First question first. The Rs 6000 crores that were spent on the DRDO in financial 2006-07 were Rs 6000 crores that could have been spent on other things that provide national security. Look at it strategically: Rs 6000 crores could have been spent on improving border roads in Arunachal (would have improved national security); it could have been spent on improving local policing in J&K (would have freed up troops, improved local confidence, improved national security); that money could have gone a long way in fencing the Bangladesh border solidly. That would have improved national security too. The country has a finite amount of money it can spend on national security. And the Rs 6000 crores spent on the DRDO has an opportunity cost in terms of money NOT SPENT on other projects where it could have been.

Having put that down, let’s also define what is a “credible indigenous defence capability.” Only one country, the USA, defines its indigenous defence capability today in terms of being able to produce, through a minimum of two separate contractors, all the major weapon systems that are required for fighting both war and peace. Even Europe looks outside for many strategic systems; even capabilities like heavy airlift and battlefield command and control are procured from outside when the need arises.

That’s not because they don’t have the technological capability to produce them. It is simply that the hierarchy of cost-effectiveness prefers off-the-shelf purchases to developmental costs. In simple terms, the cheapest way to obtain a weapon system is to buy it off-the-shelf from a supplier, who has borne the development costs and the risk factors of research. The next cheapest way is to buy the technology and produce the goods in one’s own country. And the most expensive, and risky, method is to develop from scratch the equipment you need. To believe that making and building ones own weaponry is a way to save money is to fly in the face of reality.

Next, the need for “indigenous capability” stems from an anticipation of denial of equipment and technology from an outside supplier. So in deciding what should be India’s “indigenous capability”, the first question is “what is India’s vulnerability?” Should India prepare for surviving an equipment and technology denial regime from each one of its traditional suppliers, meaning Russia, Israel, France, the UK and Uncle Sam? And as relations improve with China, are we definitely ruling out getting supplies from China in the event of a denial regime from all the others? A country’s defence strategy is directly related to it international diplomacy and India’s diplomacy is increasingly bringing us to the point where every one of our traditional suppliers, and a new one, the United States, is keen to supply us equipment. It is therefore our choice. We may or may not buy from them but they are, and are likely to remain, keen to supply us defence equipment.

So rather than wanting to produce everything ourselves --- which would not just be hugely expensive, but also paranoid --- it would be more prudent to make out a list of items that are (a) strategically so vital that we should actually rely on nobody else for them, or (b) that are so sensitive that nobody will part with that technology anyway, or (c) equipment that is so specific to Indian requirements that nobody else build it.

In such a list of things that we MUST develop comes the various facets of our nuclear deterrent, including submarines, missiles, the bomb components, our ballistic missile defence system, electronic warfare and communication systems that involve codes and ciphers and the futuristic technologies that must go into building a few “vital technologies”. It is NOT immediately necessary to build everything from scratch, the way the DRDO is trying to do.

So the “robust and competitive military infrastructure” that Shakti yearns for needs to be conceptualised and defined in clear terms.

Now on to Tejas. Let’s get one thing clear: as a weapon system for the fighting forces in the field, the Tejas is a dud. Why do I say that when (contrary to some uncharitable comments!!) I know that some of its technologies are cutting-edge world class. It’s the most simple military logic: because if it comes to war today, the Tejas is not available to fight, and regardless of what many would like to believe, it will not be available to fight effectively even three years from now. What is needed to be delivered to the IAF is not the comforting knowledge that Tejas has the highest percentage of composites in the world. What they need is a functional weapons platform at the promised time. If the IAF chief has to write to the Defence Minister that by 2017, the IAF and the PAF will have the same squadron strengths, it is because the Tejas is far behind schedule in delivery.

Abhiman, you are right that the JF-17 is no more than generation 3.5. But it’s a Gen 3.5 that will soon fly in combat squadrons while Tejas continues to be a Potential Gen 4.5 that flies only in air shows with everyone keeping their fingers crossed. That is the key difference between a successful programme and one that is not: delivering platforms into service is the vital technology that the DRDO has never mastered. By the time Tejas (or an aircraft that looks like Tejas but has lots of foreign sub-systems) enters service, the technology that you are waving about so proudly will have become outdated. The services don’t fight on technologies; they fight on usable platforms.

Sudeep, your logic about Eurofighter being more expensive than JSF-22 is only partly correct. With close to 800 confirmed orders from the participating countries and orders already starting to come in from abroad (almost 80 from Saudi Arabia), the final Eurofighter figures might well end up costing the participating countries less in the final balance than if they had gone in for F-22s. But to develop a programme successfully and still make it cost-effective, you would need not just R&D burden-sharing amongst several participating countries, but also sell to many foreign buyers. India is nowhere near that.

But the real lesson from Eurofighter is not just the burden-sharing model. The real lesson is the way they have introduced it into service in “tranches”. They made it sufficiently functional as a warfighting machine and then introduced it in a less advanced form into service in all participants’ air forces. Developmental work continues and a more advanced “tranche 2” model will be introduced this year. By 2012 or so, “tranche 3” models will come into service, which are expected to be Generation 5 standard. But here’s the key: THE R&D WAS GOOD ENOUGH TO QUICKLY COME OUT WITH A BASE MODEL. So you quickly reached the point where the Eurofighter was not an expensive drawing-board fantasy, but an aircraft in service in the air forces. And that’s what the LCA has never been able to do, nor looks likely to achieve shortly. 

That’s the crisis of confidence that exists between the scientific community and the military in India. The military (rightly) protests that the R&D whiz kids continually fail to deliver usable systems. The R&D people (rightly) protest that the military keeps setting the bar higher and higher. The military (rightly) says that it does so because the R&D people take so long to deliver that technology has moved along by then. And that is really the bottom line.

So Rammohan (your “my nation” plea is heartrending, but I’m not a colonial occupier; it’s my nation as well!!) the real question is: how long should the R&D people be given? If your suggestion is that just keep handing them 6000 to 10,000 crores each year on an open-ended basis, without demanding accountability in terms of systems delivered, I think that would be a good subject for the next debate.

And Vikram, cheap insinuations about “getting vodka from the Russians” are normally a substitute for sloppy analysis. It would be sad to reduce an important debate to whether one’s liquor comes from the Kremlin or the Swadeshi Jagran Manch! And for those who believe that I’m soft on Russian systems, please do read “From Russia With Love”. It’s just a couple of posts below; it’ll reassure you on that account.