How to Setup A Modern Defence Industry in India?

Discussion in 'Defence & Strategic Issues' started by AVERAGE INDIAN, May 29, 2014.

  1. AVERAGE INDIAN

    AVERAGE INDIAN EXORCIST Senior Member

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    Despite the word ‘indigenisation’ featuring repeatedly in political rhetoric, one of the reasons is because of the vested interests within the government of the huge kickbacks associated with imports of military hardware. The perception that in every armament deal massive amounts of taxpayers’ money is siphoned off is largely correct. Blacklisting vendors is merely theatrics to divert public attention from this crass truth. The long, convoluted and tedious process of procurement of military hardware has been created deliberately by the politico-bureaucratic red-tape to extract larger kickbacks which eventually is the taxpayers’ liability!

    Worse, it appears that the primary national objective is not to add military capabilities to ensure the nation’s security but to find ways to guarantee maximum kickbacks.

    Worse, it appears that the primary national objective is not to add military capabilities to ensure the nation’s security but to find ways to guarantee maximum kickbacks. Frankly, nobody involved in the decision-making process is really concerned about the MMRCA being inducted on time to shore up the rapidly declining firepower of the Indian Air Force; or about the Indian Navy receiving submarines in time; or with the tremendous collateral damage the nation suffers on its borders with Pakistan because the infantry is ill-equipped. Despite similar levels of corruption, China never overlooks the primary objective of building military muscle. Frankly, no other country does except India!

    It is amazing that the Indian genius that has successfully launched technologically advanced and sophisticated spacecraft to Mars or has finally mastered ‘cryogenic’ engine technology is unable to produce small arms such as a modern rifle, carbine or a pistol.

    India’s increasing dependence on import of arms up to almost 80 per cent is attributable to multiple reasons. Instead of creating competition between the Defence Public Sector Units (DPSUs) and the private sector, the Ministry of Defence (MoD) and the entrenched vested political interests continue to ignore colossal wastage of resources in the public sector. Elements in the government appear to have huge personal stakes in resources being funneled from the meagre defence budget under the guise of secrecy. The case of the Tatra trucks being re-invoiced at higher price by the Indian public sector unit clearly revealed the modus operandi of siphoning public funds.

    The truth, however, is that substantial foreign assistance by way of technology was obtained in developing spacecraft, cryogenic engine, Light Combat Aircraft, the Arjun tank or missile systems. While one may take pride in naming the indigenous tank as ‘Arjun’, the fact is that the tank boasts of foreign components up to 55 per cent. In all fairness, even critics will agree there is nothing to be ashamed of in using imported technology till the capability for indigenous design is developed in-house. All modern hospitals in India today rely largely on imported equipment but at the same time, they earn millions in foreign exchange through medical tourism.

    …it makes no sense for New Delhi to keep struggling with modernising the bullock cart!
     
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  3. AVERAGE INDIAN

    AVERAGE INDIAN EXORCIST Senior Member

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    The key to creating a modern defence industrial complex in India is by leapfrogging through the induction of latest defence technologies. Even as the world is awestruck with US ability to control drone attacks against targets in Afghanistan and Pakistan with the operator located in Texas, the Americans themselves moved on and introduced awesome drones underwater. Imagine the tactical havoc it can unleash on the navies of the world. The speed with which defence technologies are rapidly advancing is mind boggling. Therefore, it makes no sense for New Delhi to keep struggling with modernising the bullock cart!

    Due to the positive and favourable geo-political environment prevailing, it is possible for India to leapfrog to a higher technological threshold through the induction of advanced defence technologies from the West. To contain the rising threat from China and Islamic fundamentalism, there is a synergy of purpose in the twenty-first century between India and the West. However, India will have to set its house in order by making the business environment friendly and enticing enough to attract massive Foreign Direct Investment and creation of joint ventures.

    The key question for India, which in recent times, has flawlessly endeavored to reach Mars, therefore, is how to develop and manufacture a modern rifle, carbine or a pistol?

    The answer lies in the promotion of joint ventures in the private sector with foreign companies which boast of know-how in this field. The foreign companies will be willing to bring in sunrise technologies in case they are provided attractive share holding of at least 49 per cent in the joint ventures. If India can encourage its private sector to set up at least two such joint ventures, a fair amount of self-sufficiency to supply small arms to the military, para-military as well as the state police forces will be ensured. This will also create competition for the DPSUs.

    Furthermore, if these joint ventures with the help of the Government of India are provided adequate incentives and funds for further research to continuously upgrade technologies and weapons, a time will come when India will manufacture and export small arms to friendly countries. This is possible because of India’s young, technically-savvy demographic profile, which the international companies would like to exploit. New Delhi must intelligently learn to leverage this win-win situation.

    The key to creating a modern defence industrial complex in India is by leapfrogging through the induction of latest defence technologies.

    The Infantry soldier fights with a World War II carbine while the terrorist is equipped with AK-47; whilst the DRDO has been kept in business by funneling taxpayer’s resources, the INSAS rifles and LMG have not proven successful. The Future Infantry Soldier As A System (FINSAS) project is yet to take off. The DRDO continues to copy ideas from the brochures of the western firms, guzzling huge budgetary allocations yet is unable to produce a simple CQB weapon such as a carbine!

    The reason India does produce and launch technology intensive satellites is primarily due to the pragmatic functional approach adopted by ISRO. The fact that it does not produce a modern rifle or a carbine is due to the wrong model adopted by the public sector defence units, which are extremely inefficient, wasteful and unwise. The ordnance factories and other DPSUs are not only mired in corruption but also outdated and antediluvian in their management practices. The entry of the private sector is therefore vital. A good example is the Pipavav Defence and Offshore Engineering Company Limited with ultramodern shipbuilding facilities.

    The delay in production of the Scorpene submarine in Mazagon docks in Mumbai was primarily due to the time it took for DCNS France to upgrade and modernise its management practices. Or for that matter to ensure the smooth production of Rafale in India by HAL, Dassault Aviation needs to conduct a gaps analysis to plug the quality loopholes. Unless HAL facilities are brought up to international standards, a modern fourth generation combat aircraft such as the Rafale cannot be built.
     
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  4. AVERAGE INDIAN

    AVERAGE INDIAN EXORCIST Senior Member

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    Another issue of concern is that HAL itself is overburdened with the production of diverse types of aircraft. With the facilities at HAL fully committed to production of the Su-30 MKI, it is unable to provide product support to the IAF for the Su-30 fleet. It would be prudent for New Delhi to create, back and fund two private sector aviation companies not only as a competitor to HAL but also to allow the creation of an Indian equivalent of ‘Boeing’ or ‘Lockheed’, or ‘Airbus’ group.

    New Delhi must learn to walk before it runs. It will be prudent to identify initial and basic areas in aerospace, land, sea and underwater regimes where the energies of the private sector should be encouraged to form joint-ventures with foreign companies.

    New Delhi, however, must learn to walk before it runs. It will be prudent to identify initial and basic areas in aerospace, land, sea and underwater regimes where the energies of the private sector should be encouraged to form joint-ventures with foreign companies. For example, the American company that will supply 4,000 LMGs to India also has the technologies to make small arms such as rifles, carbines, pistols, grenades and rocket-launchers. Since small arms like rifles, carbines and pistols are required not only for the military but also for the para-military and the state-police forces, if a company like this sets up a joint-venture in the private sector, this can help meet the huge long-term Indian requirements. There are two aspects involved. First, rapid Transfer of Technology and second, from thereon, the ability of this joint venture to continuously research, develop and upgrade technologies for newer versions and models in the future.

    Similarly, blacklisting foreign vendors is counter-productive due to three reasons. First, there are only a few companies that manufacture 155mm guns and if 60 per cent of these are blacklisted by India on charges of corruption, we are axing the very branch we sit on. Second, the blacklisted companies belong to large defence groups of companies. For example, AgustaWestland is part of Finmeccanica group, which is involved in various fruitful activities in India. Third and a vital fact, that it is the Indians sitting in seats of power who are demanding bribes and not the foreign vendor. But no action is ever initiated against Indians who are siphoning off taxpayers’ money through kickbacks. They should be taken to task first.
     
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  5. AVERAGE INDIAN

    AVERAGE INDIAN EXORCIST Senior Member

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    The primary objective of creating a modern defence industry is to enhance the war fighting capabilities of the armed forces. It will not be possible to overnight produce modern weapons, as these processes will require an initial gestation period. Major imports of weaponry at the initial stage, therefore, would be necessary to keep the military machine lean and mean. Hence New Delhi must resist the temptation to cancel, delay on flimsy pretexts and re-order tenders. India’s inconsistent behavior not only makes her a laughing stock but also increases huge costs subsequently to the taxpayer.

    Similarly, as India learns to walk before it runs, it must be farsighted enough to join the global factory hub and supply chain. This is important because no country today is capable of manufacturing armaments in all fields by itself. Leading European aerospace majors manufacture components for military hardware in a number of countries. Similarly, US companies import components from Europe. This is due to the rapidly changing defence technologies and extraordinary costs involved. We must learn to pool in our resources with like-minded countries. Our options are vast – ranging from the West to Israel, Russia and Japan; with our threat perceptions being similar, democracies must stand together.

    New Delhi must resist the temptation to cancel, delay on flimsy pretexts and re-order tenders.

    With their advanced technologies, defence companies in the West are attracted to the vast Indian market. Similarly, India should aspire to achieve the best defence technologies available in the world to upgrade the military capabilities of its armed forces. Whilst the synergy of interests between both exists, New Delhi has failed to leverage these.

    India has a young demographic profile with an extraordinary reservoir of brainpower to make this a distinct possibility. However, with rapid advancement in defence technologies this is only possible if India stops ‘reinventing the wheel’ and enters into mutually profitable joint ventures with international partners with the aim to leapfrog the technological gap by kick-starting the defence sector at a higher threshold.

    How to Setup A Modern Defence Industry in India? » Indian Defence Review
     
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  6. pmaitra

    pmaitra Moderator Moderator

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    Our biggest problem is lack of patronage for domestically produced weapons systems.

    It is good to see some companies coming up.

    Personally, I would like the following:
    • We should encourage domestic companies to compete, and issue orders to the top few companies, instead of the one and one one tender winner or best performer. That way, we will be able to give an opportunity to the first or second runner up to survive the competition.
    • We should get over with the idea that sometimes it is cheaper to import certain components than manufacture them locally. I think it is very important to develop all the components in house, with minimal to zero imports. Even if that means a slight reduction in refinement.
    • We should limit, but not totally stop, foreign arms purchases, as we do want to have the best we can afford. However, we should not make that a choice for bulk purchases.
    • We should get over the idea of morality, and try and reverse engineer as much as we can. Once we get a good kick-start, we will be in a position like PRC, where we can build some of the better things as improvement of our on. What we must understand is, that the end justifies the means, when it comes to national security.
     
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  7. AVERAGE INDIAN

    AVERAGE INDIAN EXORCIST Senior Member

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    Despite expanding opportunities in the Indian defense industry, the government’s comparatively strict regulatory regime poses challenges for foreign investors who are keen to enter the country. With an FDI limit of just 26%, foreign OEMs are unwilling to extend sensitive technologies to their Indian joint venture partners.

    The critical area of concern is the offsets in defense, which have been placed at 30%, and in some cases, such as in the development of Medium Multi-Role Combat Aircraft (MMRCA), offsets rise to 50%.

    Managing their offset obligations will continue to be the biggest challenge for foreign companies, especially due to the restricted FDI limit. However, the recent changes in offset policy indicate that the regulatory regime may ease during the forecast period, making the Indian defense market more competitive.

    With continued pressure on the government from Indian industry bodies and key corporate companies, the FDI limit as part of joint ventures is expected to increase to 49% during the forecast period.

    more info

    http://www.sldinfo.com/wp-content/u...Strategies_Analyses_and_Forecasts_to_2017.pdf
     
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