India needs outcome oriented defence reforms
By Lt Gen A B Shivane
‘’A nation has security when it does not have to sacrifice its legitimate interests to avoid war and is able to, if challenged to maintain them by war” -Walter Lipman
There have been a plethora of defence policy reform statements over the past one month, ranging from COVID generated cuts in the defence budget, to pragmatism in the formulation of general staff qualitative requirements (GSQR) and thrust on harnessing indigenous defence manufacturing capabilities.
On April 29, Business Standard reports that 20 per cent corona induced shrinkage of the defence budget, minus the payroll, for the financial year 2020-21 is underway.
On May 10, Chief of Defence Staff (CDS) reiterated the need for forces to shun imports, suggesting hand-holding of the domestic industry even if they deliver weapons with only 70 per cent of the GSQRs compliance. On May 16, the Finance Minister made specific announcements for ‘Self-Reliance in Defence’ relating to a yearly escalatory list of weapons/platforms for ‘ban on import’, initiatives to promote indigenisation of imported spares, a separate budget provision for domestic capital procurement in the defence budget, corporatisation of Ordnance Factory Board (OFB) and Foreign Direct Investment (FDI) limits in defence manufacturing under the automatic route to be raised from 49 to 74 per cent. These were sweet dumplings for many defence enthusiasts, but for the more serious defence analyst, a pathway to be treaded with due pragmatism.
The proposed reforms thus need to be examined under the scanner of some certain factual ground realities and related imperatives which cannot be wished away. One, the strategic security environment remains both volatile and dynamic with the heating up of trans-LC (Line of Control) firing, a spike in militancy in the valley and the periodic Chinese faceoff.
The nation thus needs to be sensitive that military capability building takes time and India cannot be found wanting or found compromising its capabilities for budgetary considerations.
Two, in the era of corona induced shrinkage of defence budget by 20 per cent, will pose a challenge for national security with an already dwindling resource crunch. The reality of the present defence budgetary allocation is that it gives extremely limited fiscal space for sustenance and addressing present “hollowness”, new schemes for modernization to address the elusive “30:40:30 equipment profile” or scope for meaningful “Make In India” projects.
A newly founded dangerous term “Procurement Slowdown” will only be at the cost of national security and axing one’s own feet. However, the reform related to the introduction of ‘Capital Procurement Budget’ for domestic industries is a positive step. It must, however, be complemented by a ‘roll on budget’ for the entire defence budget, for a specified duration for optimal utilization.
Three, India has the third-largest military in the world and is also the second biggest importer of arms for the period 2015-19, according to the SIPRI report released on April 28. Also, no Indian defence manufacturing company figures in the top 30 global defence companies. This gap and balance between technology-enabled military might, escalatory threat matrix and a nascent defence industrial base, needs to be addressed for national security and strategic autonomy in an institutionalised, balanced and phased manner.
Four, ‘Make in India’ is not a magic wand; it will require a balance between on-going critical procurement ex-import and fostering future indigenous solutions. In addition, our lessons of the past have clearly indicated that comprehensive transfer of technology is the easier part, the challenge lies in the absorption of technology and ownership of intellectual rights. The transition will thus be escalatory from Make for India, to Make in India, to Made in India (IDDM) for initially domestic needs and then export market.
The bottom line is that, during this transition, time-critical defence capability cannot be compromised by the nation, waiting for the elusive indigenous high technology weapons, which may not in the horizon. Further, fostering indigenous solutions as a manifestation of a vibrant indigenous R&D base and indigenisation of existing ex-import equipment will have to go hand in hand.
The challenge of determining the ‘negative list’ for a ban on import must be sensitive to the operational criticality of the multiple tri-service critical ex-import procurements under progress beyond the Acceptance of Necessity (AoN) stage and apply to future procurements prospectively.
Five, the services rightly aspire to acquire high-technology equipment, in the desired timeframe, for providing the required combat edge to the warfighter. Thus, GSQR’s are evolved through a deliberate multi-agency institutionalized process, based on operational requirement and pragmatism of in-service technology. They have ample flexibility in terms of essential and desired parameters, besides the clause of enhanced performance parameters and reviews at various stages.
No leader puts his soldier to risk with diluted capabilities, for the sake of indigenous solutions. The indigenous defence industry must meet the aspirations of warfighters. In any case, it is not the responsibility of the armed forces to earn profit for domestic industries, the job of armed forces is to win the war for the nation.
Notwithstanding above, if the indigenous capability is, presently, just a notch below the GSQR, the spiral approach must ensure the desired capability manifestation at the time of the deliverance of the first of production model.
Another malice is the low-cost L1 syndrome, which remains a stumbling block, irrespective of the incremental changes in the defence procurement procedure (DPP). Thus, decisions will need to be taken to comprehend the opportunity cost and time criticality to close certain vital capability gaps.
To strengthen the process, “Cost Indexing of Technology and Equipment Pricing Model”, needs to be pragmatically refined with the help of experts in this field, to get the best value for the desired quality equipment in a specified timeframe.
Six proposed enhanced FDI to 74 per cent, through the automatic route, to usher in technology and assist in setting up local R&D laboratories is a positive step. The dispassion of foreign investors toward Make in India in defence could be reversed by a sound offset policy and this enhanced FDI. However, the interests of the domestic stakeholders in the industry and incentives for homegrown R&D must not be diluted.
Seven, periodically every new volume of DPP has only made the process more rigid, cumbersome, limiting flexibility and being subservient to process rather than the outcome. The bigger the procurement ticket in terms of value, the more sluggish is the process. The malice lies in the “skinware” and associated structures, which remain unaddressed due to cultural status quo, lack of accountability and play safe syndrome mindsets of decision-makers. Make cases like the FICV languishing for a decade, are a case study like many others, where decision-makers lacked the will and accountability.
Eight, as a nation we lack a pragmatic institutionalized tri-service integrated defence modernization strategy. The strategy must be built on the pillars of tiered modernization, spiral approach to technology induction with an enhanced focus on fostering indigenous R&D, prioritization based on tri-service risk, vulnerability and value analysis, balancing modernization versus sustenance and encouraging indigenous solutions especially by medium and small enterprises; the glue for a vibrant industrial base and a defence ecosystem.
Lastly but not the least, the driver for self-sufficiency through indigenous solutions, will be the outcome of a robust ecosystem energised and driven by industry-friendly policies, time stipulated outcomes with accountability and a policy of “Risk Sharing Gain Sharing” by all stakeholders catalysed by the stimulus given to industry-driven local R&D.
Presently, indigenisation remains restricted to partnership with foreign defence industries, without investing in local R&D. Unless technology is developed in the country, indigenisation has little meaning. The focus must be on creating an environment that makes Indian firms to be world technologically at par, qualitatively competitive, cost-effective and where all enterprises can flourish in an integrated ecosystem.
While the recent policy reforms and speeding up of acquisition process as part of “Make in India” strategy is laudable, but in recent times, the experience is that they have not commensurately paid off, in terms of their true potential and desired outcome. Thus, there exists a credibility gap between expectations and deliverance, which needs to be addressed both by integrated policy reforms and cultural shift in outcome accountability by decision-makers, to infuse adrenaline in the whole process.
In conclusion, ‘Make in India’ is not just an operational necessity but indeed the enlightened strategic path for this symphony which requires patience, resilience and collective participation by all stakeholders.
The author retired as DG Mechanised Forces, Indian Army and is presently appointed as Consultant MoD/OFB. The views expressed here are personal.