India - defence importer to exporter? How?

[pmaitra]

How to transform the country from world's largest defence equipment importer to major exporter

~ A M Naik

The government's recent decision to deregulate manufacture of a number of items used by the defence forces will result in new players and SMEs entering the sector. Easy entry will result in an increase in the number of manufactures, with the benefit of competition that will improve both quality and cost-effectiveness. This will also encourage them to seek export markets for their products.

Socio-economic growth and a credible defence capability achieved through self-reliance are fundamental for a nation to secure a globally respectable position. In a world where a few developed countries enforce control regimes on defence equipment and technologies, it is imperative for a country like India — a growing economy with formidable capability, to maximise indigenisation and self-reliance in defence equipment. Further, with defence exports becoming an increa-singly effective diplomatic tool in assuring regional peace and secu-rity, it is crucial for India to be-come a global defence exporter.

A small country like Israel, which gained independence at almost the same time as India and with a population less than 1% of India's, today accounts for 10% of total global defence exports. China which until 2006 was the largest importer of defence goods, is today the fifth largest defence equipment exporter. Paradoxically, India, with its huge pool of technically qualified, globally competitive manpower, in dire need for employment for its population, has emerged as the largest importer.

India has all the attributes of becoming a major exporter of defence equipment. Considerable investments have been made over the years in creating indigenous defence manufacturing infrastructure in the form of DRDO labs, DPSUs, ordnance factories, some highly reputed educational institutions and a few industries in the private sector. The large young population can provide skilled, cost-effective manpower for the defence industry and the huge SME base can contribute effectively, both directly as well as in collaboration with large system integrators.

Recent amendments to the defence procurement policy have provided a new thrust for indigenisation. Introduction of major programmes in the 'make' category, allowing participation of Indian public and private industry, is a big step in the right direction towards developing cutting-edge technology. Defence offsets and the proposed liberalisation of FDI in the defence sector must be leveraged judiciously to enhance indigenous capabilities.

The defence industry is capital intensive and characterised by a cyclical nature in order placement for domestic needs; it typically needs a large customer base to be competitive and to sustain business. This can be achieved only when both domestic and export markets are opened for industry.

A well-defined policy to promote defence exports, complying with international agreements such as the Wassenaar Arrangement and Missile Technology Control Regime, will provide the necessary international legitimacy.

It is time now to shed the public vs private sector mindset and consider the entire defence industrial base in India as the 'national defence sector'. It is important that domestic programmes are opened up for competition wherever possible. SMEs capable of developing niche technologies should be encouraged, while the stalled pro-posal to identify platform builders and system integrators — Raksha Udyog Ratnas, must be immediately implemented.

To safeguard the interests of the defence industry in the private sector, and to derive the maximum benefit from synergies, it is essential to eliminate the conflict of interest inherent in the current structure of ministry of defence. The department of defence production must be made independently responsible for equitably addressing the concerns and synergising strengths of the country's defence industrial base, including the private as well as public sectors. It should also be held accountable for achieving preset time-bound targets for indigenisation and exports.

Globally, respective governments strongly promote sales of their defence exporting firms without discriminating between private and public sectors. UK Trade and Invest and SIBAT-Israel, are good examples. It is common for heads of state of developed nations to actively promote sale of their defence products. In 2013, for the first time, top officials of DRDO led an Indian defence industry delegation to ADEX 2013 in Seoul. Such initiatives should be encouraged and strongly supported by the political leadership.

Increased emphasis on R&D and innovation is vital for achieving self-reliance in defence equipment. In order to realise the untapped potential in indigenous technologies, DRDO must be authorised to form partnerships with organisations of their choice for cutting-edge technology deve-lopment, while simultaneously allowing use of their facilities on commercial terms by companies in the defence field.

Defence exports are often used as a diplomatic tool either through supplies as goodwill gestures or through soft loans and lines of credit. This policy has been used extensively and effectively by China to expand its presence in the Indian Ocean Region, Africa and Latin America. India should evolve its own "Integrated Defence Production and Export Policy" learning from the success stories of countries like China, Israel, South Africa and South Korea.

India's approach to defence exports will be guided by changes in the geopolitical situation, as we build stronger diplomatic ties, particularly with nations in the Indian Ocean Region. If the government and national defence industry embrace the challenge, India can not only effectively meet domestic needs but also emerge as a major exporter of defence products. We need a major thrust — a national mission on defence equipment exports.

The writer is Group Executive Chairman, Larsen & Toubro.

 

[power_monger]

Few points from my side

1) Open Private sector to manufacturing complete defense products not just subsystems.
2) bring the clause buy and sell global i.e if a product is delivered by private company government should be able to sell it all over world.This would avoid private companies buying technologies and putting their lablel.
3) Allow DRDO to select vendors.
4) Failure needs to be accpeted. Just.Just because there is high intolerance to failures,there is huge delay between each test which takes huge time for the project completion.
5) Infuse more money to research.
6) Stop arms lobby.

 

[pmaitra]

@power_monger,

Please explain that "buy and sell global"part. Especially the "buy" part. Why buy global? We want to be self reliant.

 

[abhi_the _gr8_maratha]

we should market our defence equipment to african and some countries lake vietman, phillipines, myanmar, bangladesh etc...... mainly tejas, akash, brahmos etc....

 

[power_monger]

@power_monger,

Please explain that "buy and sell global"part. Especially the "buy" part. Why buy global? We want to be self reliant.

It was buy local and sell global. may be i was not clear.

 

[sorcerer]

BLOOMBERG REPORT: India Wants to be One of the World's Biggest Arms Exporters

• South Asian nation seeking to boost defense sales 20-fold
• Small current private-sector role, complex rules are obstacles

India is seeking to boost arms exports 20-fold in a decade to $3 billion, a push that if successful would transform one of the world’s biggest importers into a major seller of defense equipment.
Steps by Prime Minister Narendra Modi to spur defense manufacturing, if properly implemented, open up the possibility of hitting that figure by 2025, Defense Production Secretary A. K. Gupta said. The challenge is to boost private-sector investment and technological expertise, he said.
"This will not only take us toward the goal of self-reliance in defense production, but will also create tremendous employment opportunities," Gupta, one of the top bureaucrats in India’s Defense Ministry, said in the interview in New Delhi last month.

India sells about $150 million of arms overseas yearly -- a fraction of the $64 billion in worldwide defense trade -- ranging from parts for Russia’s Sukhoi fighter jets to a naval vessel recently commissioned in Mauritius. The nation relies on strained state manufacturers that lack some of the expertise of global defense majors, signaling a need for more private-sector involvement even as companies are wary of difficult business conditions.

"India’s exports target seems ambitious," said Deba R. Mohanty, a defense analyst and chairman of Indicia Research & Advisory in New Delhi. "If it’s able to meet such targets, then it will in all likelihood be a competitor to many countries, including China."
The sectors where India has export potential include naval ships, helicopters and components for aircraft, according to consultant PricewaterhouseCoopers LLP.

China’s defense exports reached $1.5 billion in 2014, the eighth-largest in the world in a ranking dominated by the $23.7 billion sold by the U.S., according to IHS Inc. research. India imported $5.6 billion, the most after Saudi Arabia.


Climbing Shipments
India estimates exports of materiel more than doubled over the two fiscal years ended March 2015 to 9.9 billion rupees ($145 million).
Modi’s policy changes include fewer curbs on foreign investment in defense, looser export controls and a reworked procurement policy that’s set to encourage domestic output. His government has authorized about $65 billion of arms purchases since taking power in May 2014 and is targeting a major naval expansion with locally made ships.


The administration is also sharing the blueprints of state equipment -- such as the Rustom drone -- with the private sector for the first time, to spur technological development and possible overseas sales.


Companies ranging from Larsen & Toubro Ltd., India’s biggest engineer, to Airbus Group SE sense opportunities from less onerous rules and the drive for modernization.

State Companies
But there’s a long way to go.
Modi in April scaled back a long-pending order for 126 Dassault Aviation SA Rafale warplanes, which stalled partly because the tender included the challenge of making 108 of the complex jets at India’s state-run Hindustan Aeronautics Ltd.

In the end, the premier opted for 36 Rafales from France in fly-away condition. France’s Safran SA subsequently shelved plans to make engine parts for Rafale aircraft in India. The episode shows the task Modi faces to catalyze a defense-industrial complex.

State companies account for more than 80 percent of defense production and are already stretched, according to Anurag Garg, a director of defense at Strategy&, a consulting group of PwC. Depending on the private sector to spur exports significantly would need companies to design weapons systems to sell abroad, and that’s no easy task, he said.

The government is trying to do its bit by improving the policy framework, but the push needs the support of industry, said Gupta from the Defense Ministry.
"Industry also needs to come up and accept the challenge," he said.
Source>>>