Adding economy to defence

Make in India for defence equipment is languishing in the absence of large orders that can make local production viable

 

By Ajai Shukla

Business Standard, 3rd Dec 21

 

A fortnight ago in Jhansi, as part of the “Rashtriya Raksha Smarpan Parv” to mark the 75^th year of Indian independence, Prime Minister (PM) Narendra Modi handed over to the Indian Air Force (IAF) a Light Combat Helicopter (LCH), indigenously designed, developed and manufactured by Hindustan Aeronautics Ltd (HAL). There was more than a little irony in making a public relations spectacle of the LCH, given that a request to build 15 of these helicopters for the IAF and army has been languishing before the Union Cabinet for long, after the LCH was granted initial operational clearance in 2017. The Cabinet Committee on Security, the body that clears large defence acquisitions, has been objecting to the LCH on the grounds that its indigenous content is too low for it to qualify as a “Made in India” product. In fact, the LCH does qualify as such, both under the Defence Procurement Procedure of 2016 which mandates a minimum indigenous contentof 40 per cent; and under the Defence Acquisition Policy of 2020, which requires the indigenous contentto be above 50 per cent. More generally, it is baffling how the PM chose the LCH as an indigenous product to celebrate on Rashtriya Raksha Samarpan Parv, even while his cabinet holds up manufacturing clearance for 15 LCHs on the grounds that they are not Indian enough.

 

A central reason for why genuinely Indian-designed, developed and manufactured products fail to qualify for indigenous status is the tendency of the Ministry of Defence (MoD) to place such small orders (for example, 15 LCHs) that it remains uneconomical to manufacture many componentsin the country to carry out import-substitution. That is genuinely difficult for some components, systems or sub-systems that are not used in large numbers. For example, every helicopter has just one control cable. Over the lifetime of India’s light helicopter fleet, just 1,000 cableswould be required. Building a factory to meet that requirement is feasible, but would make the helicopter more expensive than if the cable were bought from a global original equipment manufacturer that builds and supplies worldwide in scale. Bottom line: Indigenisation costs.

 

The cost becomes viable, however, when a piece of defence equipment dovetails into a segment of military doctrine. It can then be designed, developed, manufactured and introduced into service in large numbers. Matching a doctrine with requirement is critical and the LCH example again springs to mind. The combination of rugged, high-altitude terrain along India’s northern borders, along with the sharply reduced physiological capacity of oxygen-starved soldiers make them critically dependent on airborne fire support – especially of the kind that can be poured onto the enemy by highly mobile firing platforms, such as the LCH. Clearly there is a convincing doctrinal base for the large-scale employment of the LCH, both in offensive operations and to provide mobility in defence. A persuasive argument could be made for the integration of such fires into battalion, and certainly brigade, fire plans. Translating this into actual numbers the LCH could be inducted into service in very large numbers, creating an economic argument for indigenising more and more components, sub-systems and systems. Instead of building just a few dozen LCHs, a manufacturing run of several hundred would genuinely lower costs.

 

Along with lowering the domestic cost, the case for the LCH could be made more convincing by boosting export orders through the combination of a low ticker price, and a maintenance and overhaul package fuelled by a performance-based logistics (PBL) package that provided assurances to customers. Already, the MoD is organising exporters into trade bodies that can lobby in prospective buyer countries; and has joined global non-proliferation regimes such as the Missile Technology Control Regime, the Wassenaar Arrangement and the Australia Group, while lobbying for entry into the Nuclear Suppliers Group. The foreign direct investment (FDI) cap has been raised to 74 per cent under the automatic route.The government could do more to provide prospective customers of defence kit with lines of credit that would incentivise purchase. And there is a growing understanding that the real money is not in exporting components for global supply chains of foreign aerospace and defence corporations, but in exporting high-value weapons platforms, such as fighter aircraft, helicopters, tanks, warships and artillery guns. Only then is the MoD likely to come anywhere near its ambition of tripling exports in the next five years, or meetingthe 2018 Defence Production Policy’s annual export target of $5 billion by 2025.

 

Finally, if the defence production eco-system were to examine deeply the question of which areas of technology and equipment present the maximum opportunities for indigenisation, they would not take long to reach the answer: aero engines. Given that aero engines account for one-third the cost of a new military aircraft, it is assessed that India will buy foreign military aero engines worth Rs 350,000-400,000 crore over the next two decades. Yet, in the hoopla over indigenisation, successive governments have neglected the development and manufacture of aero engines.

 

Take the cost of engines for on-going helicopter programmes alone. HAL will build some 400 Dhruvs and about 180 LCHs, both twin-engine choppers. Another 400 single-engine light utility helicopters (LUH) will replace the Chetak and Cheetah fleet. With each of these helicopter engines requiring two replacements during their service lives, that amounts to some 5,000 Shakti engines. With the Shakti currently priced at about eight crore rupees, this adds up to Rs 40,000 crore. Add inflation, the cost of replacing failed components, and the consumption of gaskets and bearings; and the figure would exceed Rs 50,000 crore. This is the expenditure on helicopters alone; the spending on fixed wing aircraft would be several times higher.

 

The world’s big engine vendors happily sell India aero engines; technology-protection is not an issue because reverse-engineering high-performance engines is very difficult. Key aero engine technologies relate to materials (high-temperature composites and alloys); and precision engineering, which are both difficult to copy. With even China having failed to reverse engineer a truly high-performance aero engine, the Defence R&D Organisation (DRDO) has made even less headway in developing the Kaveri engine for the Tejas fighter. As against the 82-90 kiloNewtons (kN) of peak thrust needed, the Kaveri has only managed 72 kN during flight testing in Russia.

 

The DRDO is still seeking a technological breakthrough, but with limited resources. The total budget for the Kaveri, including on engineering and test facilities, has been limited to Rs 2,839 crore (defence minister to parliament in December 2012). India cannot spend on an engine as Beijing can, but the DRDO has a model to replicate --- India’s successful missile development problem. This involved clearly identifying an aim, allocating technological manpower and leadership, and spending about enough to keep the projects going: a budget of at least Rs 14,000-15,000 crore.A breakthrough in developing a genuinely high-performance aero engine would open many doors for the Indian military.