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Sorry state of affairs in Indian defence PSU | idrw.org
The report that Rajiv Gandhi was involved in promoting a Swedish fighter during the Emergency (1975-1977) should not surprise. Thirty five years down the line it helps us locate the beginnings of the dysfunctionality of the country's military industrial complex which depends 70 per cent or more on imported products and components.
In themselves, the Wikileaks documents do not prove much, but they are the smoking gun that point to the manner in which decisions have since been taken despite spending hundreds of thousands of crores in trying to create a military industrial complex that services our huge requirements.
The story line is not familiar to many. But by the time she declared Emergency, Indira Gandhi realised that she had carried on the Left maneuver too far. Indeed, she was convinced that the Nav Nirman agitations of 1974-5 were the handiwork of the Americans. A course correction was needed, and one of its elements was to signal her intent by beginning to purchase defence equipment from the West.
This was the era of Sanjay Gandhi where deals and dealmaking was the norm-for projects, real estate development, you name it. It is not surprising that the prospect of purchases from the West also attracted entrepreneurs, and who better than the elder son of the prime minister.
The Soviet equipment that India was getting was at throwaway "friendship" prices, so there was nothing to be skimmed off there, but five or six per cent from a western deal was eminently doable. This was the template that was used, with the bulk of the money going not to the "agent" who represented the company, but to the political leader who had the power to ensure that a deal could, or could not, go through.
Record
We don't know who got the big bucks for the Jaguar or Mirage 2000 deals, but we do know that the Hindujas were in for 7 per cent for the HDW Class 209 submarines and that a party received a payoff for the Bofors F-77B howitzer. As the more recent AgustaWestland helicopter deal has shown, you can be sure that money was made for every single import deal, barring the US FMS category.
All efforts to utilise deals to create a defence industrial base have failed on account of that reality. They have done so not because Indians are bad managers and bad at learning technology, but because there have been powerful parties at work to ensure that we continue to import, so that they can get their cuts.
At first sight this would seem to be far too sinister an explanation for the phenomenon. There is some truth in that. It is not as though some politicians have sat together and conspired to sabotage indigenisation. But the net effect of their policies have been that. The demand for cash that all political parties have to contest elections has been the fountainhead that has created a bureaucratic, military and defence decision-making structure which ensures that we keep running at the same place when it comes to creating a vibrant military industry complex in the country.
While other sectors of the manufacturing industry, notably automobiles, have become world class, the record of our arms industry remains one of failure and disappointment. Today we have 9 defence public sector units and 41 ordnance factories as well as the laboratories of the DRDO, all of which are reported to employ nearly 1.5 million workers, including 30,000 DRDO employees, of which 7,000 are scientists.
The Arun Singh Committee on Defence Expenditure was the first to point out the obsolescence of the Ordnance Factories and recommended the shutting down of five and letting the private sector handle items like clothing. To this we could now add trucks. The premier Ordnance Factory, the Vehicle Factory Jabalpur is today merely assembling Ashok Leyland Stallion and Tata LPTA 713 trucks.
Trucks
According to a report of the Boston Consulting Group, the annual output per employee in the Ordnance Factories and DPSUs is of the order of Rs.15.4 lakh against an average ofRs.30.4 lakh across the manufacturing sector. Yet, in 2012-13 as much as Rs.556 crore had been allotted for overtime in the Ordnance Factories' budget.
Take the case of the Tatra truck. A CBI probe has revealed that Bharat Earth Movers Ltd (BEML) had in 1986 entered into an agreement with Tatra of the erstwhile Czechoslovakia for supply of Tatra T815 trucks. Simultaneously, under the agreement, documents on technological know-how for manufacture of the trucks were also bought for Rs.3 crore. It was agreed that BEML would progressively indigenise the trucks and the target was fixed at 85 per cent indigenisation by 1991.
We know that none of these targets were attained and that in 2003, BEML actually surrendered the rights to make the axle; even today the level of indigenisation is of the order of less than 50 per cent.
More distressing, however, is the evidence which seems to suggest that the PSU managers were actually going out of the way to serve the interests of the foreign company, rather than the company they headed. Insiders will tell you that this is not as uncommon a phenomenon in our DPSUs and ordnance factories as it may seem.
Paradigm
The effort being made to thwart indigenous development is most obvious when it comes to shipbuilding. India now has several private shipyards which can build world class ships and subs, but they have been assiduously kept out of naval projects. And where permitted, they have been given marginal work. And what is the result? Indian warships are being built way over cost and time estimates. The Godavari class took 72 months to be built and the Delhi class 114. In US and Japan the norm is around 30 months. Delhi may have been the first in its class, but sadly, the follow on Mysore and Mumbai also took 117 and 106 months respectively. The Shivalik class which were contracted for 60 months, took 112 months.
Yet, all this has not moved the Cabinet Committee on Security, the Defence Minister or the babus of the defence ministry a whit. No amount of reform or tinkering can fix this, only a paradigm change which must be led by the very people who have created the present paradigm-the political class.
India is expected to spend as much as $200 billion over the next 15 years in purchasing armaments. There is little in the present experience which tells us that things will change in India. Indeed, we could find that our next cycle of modernisation which will begin sometime in the mid 2020s, is once again based on imported products.
The report that Rajiv Gandhi was involved in promoting a Swedish fighter during the Emergency (1975-1977) should not surprise. Thirty five years down the line it helps us locate the beginnings of the dysfunctionality of the country's military industrial complex which depends 70 per cent or more on imported products and components.
In themselves, the Wikileaks documents do not prove much, but they are the smoking gun that point to the manner in which decisions have since been taken despite spending hundreds of thousands of crores in trying to create a military industrial complex that services our huge requirements.
The story line is not familiar to many. But by the time she declared Emergency, Indira Gandhi realised that she had carried on the Left maneuver too far. Indeed, she was convinced that the Nav Nirman agitations of 1974-5 were the handiwork of the Americans. A course correction was needed, and one of its elements was to signal her intent by beginning to purchase defence equipment from the West.
This was the era of Sanjay Gandhi where deals and dealmaking was the norm-for projects, real estate development, you name it. It is not surprising that the prospect of purchases from the West also attracted entrepreneurs, and who better than the elder son of the prime minister.
The Soviet equipment that India was getting was at throwaway "friendship" prices, so there was nothing to be skimmed off there, but five or six per cent from a western deal was eminently doable. This was the template that was used, with the bulk of the money going not to the "agent" who represented the company, but to the political leader who had the power to ensure that a deal could, or could not, go through.
Record
We don't know who got the big bucks for the Jaguar or Mirage 2000 deals, but we do know that the Hindujas were in for 7 per cent for the HDW Class 209 submarines and that a party received a payoff for the Bofors F-77B howitzer. As the more recent AgustaWestland helicopter deal has shown, you can be sure that money was made for every single import deal, barring the US FMS category.
All efforts to utilise deals to create a defence industrial base have failed on account of that reality. They have done so not because Indians are bad managers and bad at learning technology, but because there have been powerful parties at work to ensure that we continue to import, so that they can get their cuts.
At first sight this would seem to be far too sinister an explanation for the phenomenon. There is some truth in that. It is not as though some politicians have sat together and conspired to sabotage indigenisation. But the net effect of their policies have been that. The demand for cash that all political parties have to contest elections has been the fountainhead that has created a bureaucratic, military and defence decision-making structure which ensures that we keep running at the same place when it comes to creating a vibrant military industry complex in the country.
While other sectors of the manufacturing industry, notably automobiles, have become world class, the record of our arms industry remains one of failure and disappointment. Today we have 9 defence public sector units and 41 ordnance factories as well as the laboratories of the DRDO, all of which are reported to employ nearly 1.5 million workers, including 30,000 DRDO employees, of which 7,000 are scientists.
The Arun Singh Committee on Defence Expenditure was the first to point out the obsolescence of the Ordnance Factories and recommended the shutting down of five and letting the private sector handle items like clothing. To this we could now add trucks. The premier Ordnance Factory, the Vehicle Factory Jabalpur is today merely assembling Ashok Leyland Stallion and Tata LPTA 713 trucks.
Trucks
According to a report of the Boston Consulting Group, the annual output per employee in the Ordnance Factories and DPSUs is of the order of Rs.15.4 lakh against an average ofRs.30.4 lakh across the manufacturing sector. Yet, in 2012-13 as much as Rs.556 crore had been allotted for overtime in the Ordnance Factories' budget.
Take the case of the Tatra truck. A CBI probe has revealed that Bharat Earth Movers Ltd (BEML) had in 1986 entered into an agreement with Tatra of the erstwhile Czechoslovakia for supply of Tatra T815 trucks. Simultaneously, under the agreement, documents on technological know-how for manufacture of the trucks were also bought for Rs.3 crore. It was agreed that BEML would progressively indigenise the trucks and the target was fixed at 85 per cent indigenisation by 1991.
We know that none of these targets were attained and that in 2003, BEML actually surrendered the rights to make the axle; even today the level of indigenisation is of the order of less than 50 per cent.
More distressing, however, is the evidence which seems to suggest that the PSU managers were actually going out of the way to serve the interests of the foreign company, rather than the company they headed. Insiders will tell you that this is not as uncommon a phenomenon in our DPSUs and ordnance factories as it may seem.
Paradigm
The effort being made to thwart indigenous development is most obvious when it comes to shipbuilding. India now has several private shipyards which can build world class ships and subs, but they have been assiduously kept out of naval projects. And where permitted, they have been given marginal work. And what is the result? Indian warships are being built way over cost and time estimates. The Godavari class took 72 months to be built and the Delhi class 114. In US and Japan the norm is around 30 months. Delhi may have been the first in its class, but sadly, the follow on Mysore and Mumbai also took 117 and 106 months respectively. The Shivalik class which were contracted for 60 months, took 112 months.
Yet, all this has not moved the Cabinet Committee on Security, the Defence Minister or the babus of the defence ministry a whit. No amount of reform or tinkering can fix this, only a paradigm change which must be led by the very people who have created the present paradigm-the political class.
India is expected to spend as much as $200 billion over the next 15 years in purchasing armaments. There is little in the present experience which tells us that things will change in India. Indeed, we could find that our next cycle of modernisation which will begin sometime in the mid 2020s, is once again based on imported products.
