An action plan to energise defence

The Tejas production line at HAL -- one of the indigenous design and development programmes reaching fruition

By Ajai Shukla

Business Standard, 28th May 19

The perception that the outgoing National Democratic Alliance (NDA) government was strong on defence and security was a significant factor in its re-election. In truth, whether in defence allocations, procurement reform, restructuring higher defence management or creating an indigenous defence industry, the NDA only followed in the indifferent footsteps of the United Progressive Alliance (UPA) government before it. Yet, the NDA generated the impression of strength by actions like the cross-border “surgical strikes” of 2016, the Doklam standoff against China in 2017, the February air strikes on a terrorist camp at Balakot in Pakistan and by talking tough on Pakistan and Jammu & Kashmir. The incoming government knows that, had any of this led to serious military escalation, systemic defence weaknesses could have been exposed. Therefore, to redress shortcomings, here are three suggested action points in defence philosophy, three steps for the medium-term, and three immediate measures for South Block’s 100-day agenda.

Changes in philosophy

First, the government must establish a clear threshold for defence capital allocations, which cater for equipment modernisation. Raising capital allocations is not difficult, even given political compulsions for spending on development and populist schemes. With the existing defence allocations already providing fully for revenue spending, any spending rise would go straight into the capital head, creating an out-of-proportion impact. For example, an in-principle decision to devote 30 per cent of the defence budget to capital procurement (against the current, inadequate 25 per cent) would require a Rs 30,000 crore rise in capital allocations over the interim budget of February. Even with this rise, defence allocations would remain at 16.5 per cent of total government spending, unchanged from 2018-19; and at a modest 2.2 per cent of the Gross Domestic Product.

Second, while every government has paid lip service to defence indigenisation, none have thought hard about how to encourage it or what route to take towards building Indian weaponry. Given the technological inferiority complex that plagues our defence ministry and military, they have unwisely plumped for the “strategic partner” (SP) route, in which Indian firms build foreign weaponry based on transfer of technology (ToT) from foreign vendors. In fact, little technology of value is transferred, only “manufacturing ToT” and blueprints, but not the capability to design, develop, test, modify and upgrade weaponry. For that, India must develop systems engineering processes and capabilities, which is achievable through the “Make” route, not the SP route. The latter’s ToT-based manufacture creates dependencies on the foreign vendor that last through the platform’s service lifetime. In contrast, engineering a platform ground-up gives us not just a weapon and the wherewithal to maintain it, but also the design skills, experience and infrastructure needed to evolve that into subsequent generations.

The Defence R&D Organisation (DRDO) has illustrated the benefits of ground-up systems integration in its strategic missiles programme. Its liquid-fuel Prithvi and solid-fuel Agni missiles were incrementally improved into more accurate, longer range, canister-launched missiles like the Agni-IV and V. This accumulated expertise then led to the development of an anti-ballistic missile shield, and those technologies fed into the anti-satellite test in March. 

Similarly the DRDO’s Akash anti-aircraft missile and Pinaka rocket launcher are being incrementally improved into more lethal and accurate weapons. The Advanced Towed Artillery Gun Systems (ATAGS), which the DRDO is developing in partnership with Kalyani Group and the Tatas, will wean us off buying artillery guns from abroad, since the ATAGS design expertise will constitute the foundation for building future artillery guns. Similarly, the Tejas will create an indigenous eco-system for building the advanced medium combat aircraft (AMCA). Hence the government must strongly push indigenously designed and developed platforms, permitting SP projects only as interim solutions to bridge capability gaps until an indigenously designed solution is evolved.

Third, to create the eco-systems for indigenous design, development and manufacture, the defence ministry must unapologetically function as a market maker, given that the weapons bazaar is a distorted market characterised by both monopoly (single seller) and monopsony (single buyer). For most weapons, India’s military can support just one domestic source of supply, especially without the backing of large export orders. Even so, the defence ministry must select and develop a private sector rival to each of the eight defence public sector undertakings, while also exposing the ordnance factories to open competition. With no place for two private firms in each weapons area, hard choices must be made. As part of its market maker role, the defence ministry must also create regulatory frameworks, testing infrastructure, certification agencies and a more credible version of the Technology Perspective and Capability Roadmap (TPCR) was first put out in 2018 – but lacks credibility within industry. A positive first step was the government’s acceptance last week of self-certification by established defence manufacturers.

Medium term steps

First and most essential, make Indian defence industry competitive vis-à-vis foreign competitors and the public sector by reducing the cost of capital. Given inflation and interest rates Indian firms pay 8-10 per cent more each year than their foreign competitors, severely impacting costs over a product gestation period of 7-15 years. Incentives must also be extended for research and development, which Indian industry enjoyed under Section 35 (2)(a)(b) of the Income Tax Act, but which ends in 2020 under a sunset clause. Finally, defence infrastructure, such as testing and certification facilities, must be granted infrastructure status under Section 80L. Even hotels enjoy infrastructure benefits, but defence and aerospace are ineligible. 

Second, a raft of policies initiated under the previous government, such as the Defence Production Policy, need to be finalised and implemented. The idea of Innovations for Defence Excellence (iDEX), which aimed to encourage innovation amongst small firms and individuals, has failed to link up with actual procurement. Similarly, the Technology Development Fund has resulted in no assurance of orders. Direct linkages must be ensured between development, production and procurement.

Thirdly, the government must kick-start the development of information technology based technologies, which are a natural area of excellence given India’s software skills. An immediate investment of Rs 3,000-4,000 crore must go into developing cyber technologies, artificial intelligence (AI) and ISTAR (intelligence, surveillance, target acquisition and reconnaissance) technology – a huge force multiplier that manages battlefield sensors and the information they gather.

100 day programme

Immediately release procurement orders languishing in the pipeline for indigenous defence platforms that are essentially improved versions of platforms already in service – including the Akash, Pinaka, strategic missiles, Tejas Mark 1A. 

Sanction a mission mode project to create an indigenous data link to connect all three services’ drones, fighter aircraft, warships and land combat vehicles. This crucial command and control software should be overseen by a body that incorporates DRDO, the Indian Space Research Organisation, Council for Scientific and Industrial Research, academia and private industry.

In coordination with the foreign ministry and relevant countries, release funding and sanction for defence exports to regional partner countries, such as offshore patrol vessels for Indian Ocean island states, helicopters for small neighbours, etc. Besides their value in defence diplomacy, this would galvanize defence industry.