Guest Column | Shrikumar Sangiah
Not Making in India
Government’s flip flop on self-reliance in defence sector
plagues domestic industry
In June 2023, in the days and
weeks preceding Prime Minister Narendra Modi’s visit to the US, India’s national media was awash with news of
the planned inking of two major defence
contracts.
One of the contracts was for the purchase of 31 Reaper MQ-9 Unmanned Aerial Vehicles (also known as the Predator
B drones) from General Atomics. The procurement of these UAVs (15 for the Indian
Navy and eight each for the army and the
air force) is aimed at bolstering India’s Intelligence-gathering, Surveillance and Reconnaissance (ISR) capabilities.
The Predator-B High Altitude Long
Endurance (HALE) UAVs will provide
India’s defence forces with the ability to
gather real-time intelligence and undertake long-range surveillance and reconnaissance across international boundaries. The Predator-B drone is designed
such that it can be disassembled and
carried on transport aircraft to a forward
location to extend its operational range.
The armed variants of these UAVs
carry a formidable array of weapons, IR
and daylight cameras, and an impressive
suite of sensors to engage air, land, and
sea targets. The naval version of the Predator-B called the ‘Sea Guardian’, besides
being equipped with sonobuoy dispensing and sonobuoy management and control systems to track submarines, comes
armed with precision-guided munitions
and small attack drones.
The Predator-B deal also envisages the
assembly of these drones in India. Additionally, it proposes the setting up of a
global MRO facility in India—to cater to
the needs of the other users of Predator
drones. Further, the deal stipulates that
8-10 per cent of the UAV’s components
be sourced locally from Indian vendors.
During final negotiations, it is probable
that the domestic sourcing limit would
be raised to 15-20 per cent.
The other much-in-the-news contract
is the General Electric (GE)-Hindustan
Aeronautics Ltd (HAL) deal for the licenced production in India of jet engines for fighter aircraft. The jet engine
to be manufactured under the deal is
the high-performance F-414 engine that
will power the indigenous Light Combat Aircraft (LCA) Tejas Mk2. The Tejas
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Mk1 and Mk1A are powered by F-404
engines, the predecessor to the F-414.
The F-414 jet engine deal marks the
first time that consequential US-origin
military equipment will be manufactured in India. Both deals mark a rare
departure from what is the US’s norm for
the transfer of defence equipment/technology to other nations. The exception,
made for India, is significant because India is not a formal US military ally.
Currently, only a small group of nations—the US, Russia, the UK and
France—possess the capability to independently design, develop and manufacture jet engines, civil or military. Even
China, which has otherwise made tremendous progress in the design and development of defence equipment, is not
fully self-reliant in jet-engine technology.
It is hoped that with the signing of the
F-414 jet-engine deal, India will finally
acquire the capabilities necessary to enter this exclusive group. A similar hope
was expressed when an MoU was signed
in October-December 2000 between
HAL and the Russian manufacturer of
Su-30 MKI aircraft for full transfer of
technology and its licenced production
in India. From publicly available information, it is difficult to infer the extent
of indigenous capability that has been
acquired through this MoU. The extent
of proprietary knowledge that will be
shared by GE under the deal and the design capability that HAL will be able to
acquire remains to be seen.
Import Dependence
India has among the largest defence
industrial complexes in the developing
world. It comprises 41 Ordnance Factories (OFs) (reorganised in 2021 into
seven different government companies)
and nine Defence Public Sector Undertakings (DPSUs) under the administrative control of the ministry of defence
(MoD). Further, there are over 150 large,
medium and small-sized defence companies in the private sector. There are
also around 50 dedicated research laboratories and establishments forming
the Defence Research and Development
Organisation (DRDO), the research and
development (R&D) wing of the MoD.
Despite boasting of this infrastruc-
ture, India continues to be overwhelmingly dependent on arms imports to
meet its defence needs. The target of
70 per cent self-reliance in defence
procurement, set for 2005, is yet to be
achieved. Currently, India’s self-reliance
in arms stands at around 30-40 per cent.
India continues to be among the largest
arms importers in the world. During
the same period, China which not so
long ago, was the world’s largest arms
importer, has graduated to being the
world’s third-largest arms exporter—
behind only the US and Russia.
Even in the equipment being designed and manufactured domestically, the indigenous content is extremely
low. The Comptroller and Auditor General (CAG) of India, in a 2011 report submitted to parliament, had commented
adversely on the import dependency
of the HAL. The report highlighted that
for raw materials and bought-out items
used in the production of the Advanced
Light Helicopter (ALH)—touted as being indigenously designed and developed—there was a 90 per cent import
dependency even though the ALH had,
by then, already been in production for
over a decade.
Technology Transfer
Framework
The General Security of Military Information Agreement (GSOMIA) is one of
four foundational agreements that the
US signs with allies and close partners
to facilitate interoperability between the
militaries and for the sale of high-end
technology. India signed the GSOMIA
with the US in 2002.
The four foundational agreements
which the US signs with countries with
which it has close military ties are—
GSOMIA, Logistics Support Agreement
(LSA), Communications Interoperability and Security Memorandum of Agreement (CISMOA/ COMCASA) and Basic
Exchange and Cooperation Agreement
(BECA) for geo-spatial cooperation.
These agreements are meant to build
the basic groundwork and promote interoperability between militaries by creating common standards and systems.
They also guide the sale and transfer of
high-end technologies.
EFFECTIVE COLLABORATION CMD BrahMos Aerospace Atul Dinkar Rane with Chief of Defence Staff General Anil Chauhan (centre),
Chief of Air Staff Air Chief Marshal V.R. Chaudhari, Chief of Army Staff General Manoj Pande and Vice Chief of Naval Staff Vice Adm.
Sanjay Jasjit Singh during the 25th anniversary celebrations of Brahmos
In mid-December 2019, at the 2+2
dialogue held in Washington, the Industrial Security Annex (ISA) to the
India-US GSOMIA was signed. The ISA
provides the framework for the exchange and protection of classified military information between the US and
Indian defence industries. The ISA, it is
expected, will open the door to greater
cooperation between US defence firms
and firms in the Indian private sector.
Hitherto, under the GSOMIA, military information was exchanged between the governments of the two
countries, but not between private
parties. The signing of the ISA enables
industry-to-industry collaboration for
co-production and co-development in
the defence sector—in alignment with
the government’s objective of promoting ‘Make in India’ in the defence sector. India signed the BECA, the last of
the four foundational agreements, with
the US in 2020. This cleared the way
for the US to be able to supply armed
drones to India.
Impact on Self-Reliance
Unmanned Aerial Vehicles: India has
been pursuing for some time now the indigenous development of UAVs to attain
a range of ISR and offensive goals. However, the progress on this front has been
tardy owing to the all-too-familiar pulls
and pushes between indigenisation targets and the defence forces’ demands
for expeditious equipment induction.
Indigenous development of armament,
although more economical, inevitably
involves a longer design-develop-test-induct timeframe.
To bridge this gap between the time required for indigenisation and the armed
forces’ need for speedy equipment induction, as an interim measure, India acquired 66 Medium Altitude Low Endurance (MALE) Heron UAVs and over 100
tactical kamikaze drones from Israel.
The US first offered the unarmed version of the Predator-B/Sea Guardian
UAVs in 2017. This was unprecedented
since a similar offer had not been made
to any other non-ally country. But the
actual procurement of the drones was
delayed inordinately because of protracted cost negotiations. Fortunately
for the armed forces, around that time,
the revised Defence Acquisition Procedure of 2020 (DAP 2020) introduced a
provision that allowed the armed forces to lease defence equipment. This
enabled the Indian Navy to lease two
Sea Guardian UAVs under emergency
procurement provisions. As of November 2022, the two leased Sea Guardians
have completed 10,000 flight hours and
the navy is reported to be satisfied with
their performance.
While the USD 3 billion deal for the
procurement of armed HALE Predator
drones is a welcome step, since it provides India with significant reconnaissance, surveillance and offensive capabilities, it puts the DRDO in a quandary
over its indigenous HALE development
programme. The Predator deal obliges
the DRDO to re-evaluate its indigenisation plans, maybe even temporarily
suspend its HALE development programme and instead re-direct its energies to enable the speedier development of MALE and kamikaze drones.
The DRDO must also now seek, from
the government and the armed forces,
clarity on their strategic plans for the
indigenisation of HALE drones.
The Predator drones, for beyond-visual-range guidance, require the drone’s
pilots to link up with the US’s encrypted
satellite communication system. The
Predator drones are also designed to
seamlessly interface with the US-supplied P-8 Poseidon maritime surveillance and reconnaissance aircraft and
Apache attack helicopters. This compels the armed forces to be tightly interlinked with and dependent on US military systems.
Although the Predator-B’s standalone
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Guest Column | Shrikumar Sangiah
capabilities and its ability to integrate
and operate with other US-supplied systems create a force multiplier effect, the
deal, simultaneously, raises questions
about the requirement of persisting
with the DRDO’s drone indigenisation
efforts. Willy-nilly, the deal perpetuates
India’s dependence on defence imports
and limits India’s strategic autonomy.
Jet engines: The Kaveri jet engine,
under development by the DRDO since
at least 1986, has symbolised India’s jet
engine development ambitions. It was
originally intended to power the production models of HAL’s Tejas Light
Combat Aircraft (LCA). However, the
Kaveri development programme failed
to meet both its design technical requirements and cost and schedule targets. Consequently, in September 2008,
Kaveri’s development was officially
delinked from the Tejas programme.
India has been locally manufacturing, under licence, Russian, British and
French aircraft and engines for several
decades. But none of the licenced manufacturing arrangements resulted in a
full transfer of technology since many
of the critical components and materials required for engine manufacture
had to be sourced from the licencing
country. Although the present GE deal
mandates that the value of locally-produced components must amount to 80
per cent of the total cost, it is likely that
the critical components will still need to
be sourced from GE.
Undoubtedly, the present GE deal
would introduce the HAL, its partners,
and its vendors to newer manufacturing methods, materials and machinery,
adding substantially to their technical
know-how. But the extent to which this
know-how will be leveraged to speed up
ongoing and future jet engine developments, to end dependence on imports,
is anybody’s guess.
Assistance from France’s SNECMA
was enlisted by the DRDO in 2016 to
revive the Kaveri engine project under
the offsets clause in the contract for the
purchase of 36 Rafale jets for the Indian Air Force. SNECMA was to assist the
DRDO in accelerating the Kaveri engine
development in time for the planned
fifth-generation Advanced Medium
Combat Aircraft (AMCA). The deal for
the indigenous manufacture of GE’s
F-414 engine for LCA Mk2 likely propels
the F-414 to the pole position for the
AMCA too. But in all fairness, it is still
too early to hypothesise if the GE-engine deal jeopardises, in any way, the Rs
7,000 crore SNECMA offsets deal.
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Further, the Indian Navy is in the process of selecting an aircraft for its indigenous aircraft carriers—INS Vikrant
(IAC-1) and INS Vishal (IAC-2). Just
before the Prime Minister’s recent visit
to France as the guest of honour at the
Bastille Day parade (this visit followed
the state visit to the US), the Defence
Acquisition Council (DAC) accorded
Acceptance of Necessity (AON) for the
procurement of 26 Rafale-M marine
fighter jets for INS Vikrant. Boeing’s
F/A-18 Hornet powered by GE’s F-414
engines was among the aircraft in contention with Rafale-M. The Rafale-M
procurement makes it vitally important that the development of the indigenous Twin Engine Deck-Based Fighter (TEDBF) be completed on time if
it is not to end up like the LCA’s naval
variant and the Kaveri jet engine. The
TEDBF is currently under development
by the DRDO’s Aeronautical Development Agency (ADA) for IAC-2 and is to
be powered by the F-414 engines. The
GE F-414 engine deal presents the US/
GE with several follow-on benefits but
as collateral damage, it could end up
scuppering India’s indigenous jet engine
development efforts.
The decision to procure Rafale-M for
INS Vikrant places Rafale in the lead
to potentially also win the contract for
the IAF’s long-pending requirement of
114 multi-role fighter aircraft (MRFA).
There is extreme urgency in the IAF to
get the MRFA procurement under way
to shore up its dwindling aircraft fleet
REACHING NEW HEIGHTS BrahMos
missile is the first Indian weapon system
to find an export customer
strength. With the 36 Rafales procured
in 2016 for the IAF, and the 26 now for
the Indian Navy, it makes eminent operational and logistical sense for the
IAF to pick the Rafale to meet its MRFA
requirement. All this frenzied, but admittedly inescapable, procurement of
defence equipment will prolong India’s
dependence on imports and frustrate,
for the foreseeable future, its ambitions
of self-reliance in defence needs.
Government Support
India’s underfunded defence R&D and
low researcher density have held it back
from developing any breakthrough military technology or weapon system.
Consequently, India continues to be a
major importer of military equipment. A
well-planned and resolute approach to
the elimination of the weaknesses within the larger defence R&D ecosystem
should be the first step in any move to
attain self-reliance in defence.
In countries with a mature defence
industry, private investment in R&D
(as much as 88 per cent of the total
R&D investment in Israel) outstrips
government investment. However, India’s defence industry is just beginning
to strike out. Its reluctance to commit
investments in defence R&D is understandable. At this stage of the industry’s growth, the government needs to
handhold the private industry and foster a favourable climate for investments
wherein there is a reasonable assurance
of commensurate returns.
Specific provisions in the MoD’s Defence Procurement/Acquisition Procedure since the year 2016 (the Make-I/
II/III categories) address some of the
concerns of the industry and allay some
of its fears around uncertain returns on
investments in defence R&D.
The defence procurement procedure
also stipulates that in all defence procurements, the highest priority is to be
accorded to the Indigenously Designed,
Developed & Manufactured (IDDM)
category of equipment—signalling a
policy level intent to attain self-reliance
in defence. These enabling provisions
have helped encourage the DPSUs and
the private sector to commit more investment in R&D.
Indigenisation Roadblocks
Indian R&D has largely been chasing
technologies developed elsewhere and
has not focused on basic research. Sadly, research in India is very often just
reverse engineering—with labs engaged
in locally developing technologies that
have matured elsewhere but cannot be
accessed either due to strict export control restrictions or the strategic considerations of the other country. This situation can be corrected if Indian R&D
initiatives, both government and industry-funded, shift focus to basic research
and dual-use technologies.
Some data on global defence R&D
spending will help place things in perspective:
n The USA is, by a wide margin, the largest spender on defence R&D in the
world.
n The US accounts for nearly 60 per cent
of global spending on defence R&D.
n In the US, civilian R&D is nearly 10
times as large as defence R&D.
n India spends more or less 0.8 per cent
of the GDP on all R&D and has 156 researchers per million population.
n In comparison, the US spends 2.8 per
cent of the GDP on all R&D and has
4,231 researchers per million population, China spends 2.0 per cent of the
GDP and has 1,113 researchers per
million population, Israel spends 4.8
per cent of the GDP and has 8,255
researchers per million population.
South Korea spends about 5 per cent
of the GDP. In fact, the Korean conglomerate Samsung’s annual spend
on R&D exceeds India’s collective annual R&D spend.
While there is growing recognition
within India that self-reliance in defence
requires greater investments in defence
R&D, there is also the realisation that
India needs to carefully balance greater
investments in defence R&D against the
long-term viability of these investments.
A policy document, Strategy for Defence Exports, posted on the Department of Defence Production’s (DDP)
website, acknowledges that large investments in local R&D and production
would not be viable if they are intended
to only cater to domestic demand. The
document highlights that ‘the policy
of maximising indigenous production
without well supported R&D policy and
export strategy may not bring desired
results. Therefore, the defence industrial policy has to be supplemented by
the strategy for defence exports without
which the economic base of the defence
industry would be difficult to sustain in
the present competitive economic environment.’
Investments in defence technologies are capital-intensive and provide
returns only in the long term. Such
investments are viable only when
exports, which provide economies
Top & above MDL-built destroyer INS Chennai during Ex Tropex-2017; and L&T-built
Offshore Patrol Vessel for the Indian Coast Guard
of scale, are pursued whilst simultaneously fulfilling domestic demand.
But it is unlikely that India will be
able to export any sizeable quantities of defence equipment, developed
and manufactured locally, anytime
soon. The reasons are many and wellknown:
n The arms market is ultra-competitive
with established global players offering equipment that has been proven in
combat by militaries across the world.
n The mature and the new-entrant
(China, South Korea) arms exporters,
amongst themselves, currently receive
the custom of almost all the arms-importing nations of the world and are
strongly entrenched with their core
customers.
n Even in the case of mature and established global firms, their domestic
demand does not provide them with
economies of scale. The established
players are also dependent on exports
for maintaining a sustainable business.
The existing, mature suppliers, well-entrenched with their customers, will not
cede space to new entrants easily.
n Globally, India does not enjoy a favour-
n
n
n
n
able reputation for technology R&D,
high-quality engineering, modern
manufacturing or product reliability.
Equipment produced in India, even
under ToT/ licencing arrangements,
has not been able to inspire confidence among even domestic buyers
since they have been plagued with several quality issues. Indigenously developed and manufactured equipment
like the Arjun tanks, the light combat
aircraft, and bullet-proof jackets often
cannot be used because of performance issues.
Customers rely on cues that reveal the
qualities of the product. The most important cue in arms purchase is the
proven record of the product’s use by
the exporting country’s armed forces.
India currently does not have any
weapon platform or weapon system
of indigenous design built using indigenous parts, electronics, sub-systems,
etc. that have been proven in operations with India’s armed forces.
The
negative
‘country-of-origin’
perceptions that accompany Indian-made products will also take time
to reverse and dispel.
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Guest Column | Shrikumar Sangiah
of defence preparedness. Whatever the
reasons, the constant back and forth
on indigenisation deters investment
in defence R&D, delaying both—equipment indigenisation and the attainment of self-reliance.
Way Ahead
Top & Above Indigenous Light Combat Aircraft Tejas; HAL-built ALH Dhruv
The Indian industry, for safer R&D investments, should scout for products
that have dual-military and non-military applications. The GPS is probably
the best-known example of a dual-use
technology. The GPS finds application in
watches and mobile phones and on intercontinental ballistic missiles. Similarly, nuclear power is harnessed for powering our homes and for the atomic bomb.
Even seemingly benign technology such
as night vision and thermal imaging
finds applications with firefighters and
photographers and also helps soldiers
kill more efficiently. Dual-use technologies inherently present opportunities for
a wider range of applications and provide economies of scale assuring safer
returns on R&D investments.
Together with concerns related to
R&D investments, the existing structural framework of the R&D eco-system
also requires urgent attention. India’s
R&D and innovation ecosystem is riddled with several fundamental infirmities that include:
n Prioritising applied research over basic research.
n Low researcher/scientist density.
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n
n
n
n
Poor human resource base lacking
the training required to undertake research.
Absence of a dedicated policy on defence R&D and manufacturing.
Lack of a higher organisational structure to provide direction, thrust &
oversight to indigenous R&D.
Inadequate investment in defence
R&D (6 per cent of the defence budget
compared to 10 per cent or higher in
the USA & China).
While on the one hand to spur private
investment in defence R&D, the government introduces forward-looking,
enabling measures such as the promulgation of the three ‘negative lists’ of
defence equipment, yet at the same
time it continues with the outright
purchase of defence equipment (MALE
and kamikaze drones were both listed
in the third negative list). Undoubtedly, the government’s hand is forced by
the DRDO’s inability to adhere to the
promised timelines for technology
development and the armed forces’ legitimate demand for early equipment
induction to maintain requisite levels
The Indian defence industry has a ready
example to emulate in its journey towards self-reliance—the Indian space
establishment. When India’s space establishment was embarking on its quest
for self-reliance, it found itself in a situation not very different from the one the
defence sector is faced with today.
Over the last three decades, the space
establishment deployed well-thoughtout remedial measures that have led to
India now being largely self-reliant in
space and satellite technologies. This
is best evidenced by the very successful launch (at a fraction of the cost of
similar launches by other nations) of
the Mars orbiter Mangalyaan and the
more recent Chandrayaan-3. The Indian
space establishment has successfully
steered the indigenous development of
several globally competitive technologies. It also earns the country significant revenue by undertaking satellite
launches for other nations.
Recent programmes such as the iDEX
(innovation for Defence Excellence)
and the DISC (Defence India Startup
Challenge) are robust initiatives aimed
at strengthening the innovation ecosystem. These programmes aim to mobilise the capabilities available in the
larger Indian startup ecosystem to develop products for the armed forces.
The government’s recent decision to
legislate a National Research Foundation (NRF) with a Rs 50,000 crore corpus
for five years is also a fine idea. But the
most well-intentioned policies come
to nought if they are not implemented
efficiently. Poor implementation has
been a weakness of India’s institutions
over the decades. Greater consistency
in policy-making, improved implementation, and increased government and
private R&D spending are key to attaining self-reliance in defence.
India over the last two decades has
come to be recognised as a hub for international R&D activity in IT, drugs,
aerospace, automobiles, pharmaceuticals, satellite technologies and biotechnology among others. Now is an opportune moment for India to replicate
a similar success story in defence R&D
and pave the way for eventual self-reliance in defence.;