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Security-Wise : Uncertainity Over Sitharaman’s Latest Defence Industrial Reform Pitch

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The announcement by Finance minister Nirmala Sitharaman that there would be a “ban” on imports of armaments was music to my ears and meant that something I have long been advocating had finally come to pass. This was so until she qualified her remark by adding that the Defence Ministry would produce a negative list of weapons systems whose imports are barred and that there’d be deadlines for each of these items from when this ban will come into effect. So an escape hatch has been left open for the armed services to continue sourcing their high-value hardware/software requirements and keeping them out of this list. Should the Services fail to convince the defence ministry on this, they will no doubt endeavour to extend the deadlines so that most of the arms import transactions in the pipeline come in under the wire.

The point is not that reasons cannot be adduced for this or that military product to not be on this list. But rather that such a course of action will be used by the armed services habituated to “buying foreign” to persist with this habit. As a result, even a modicum of self-sufficiency will be hard to achieve. Because it is certain the Services HQrs will fight tooth and nail to ensure that their main weapons platforms — main battle tanks, combat aircraft, diesel submarines, helicopters and ballistic missile defence systems and the like, inclusive of their associated electronics, and systems and sub-systems, remain outside the negative list. It could, in effect, leave the country still forking out enormous amounts of hard currency to foreign suppliers even as the process to make India self-reliant stays unachieved.

One can only fervently hope that the Modi government will be rude and ruthless in first enlarging the list of defence items that cannot anymore be bought from foreign vendors and, simultaneously, nullifying or at least drastically pruning the underway deals.

Given the capabilities especially in the private sector — navy’s Project 75i cannot, in the context of nuclear submarine building wherewithal in-country, be permitted to import other than the design and certain highly specialized technologies, such as mast optronics from competing submarine builders (Rubin Bureau of Russia or DCN of France or ThyssenKrupp Marine of Germany); there’s absolutely no need for importing self-propelled and towed artillery, or tanks when there’s the Arjun MBT to refine and design-wise down-scale to obtain a 30-ton light tank for Tibetan plateau use prospectively by the offensive mountain corps; and even less point to flying in foreign combat aircraft to fill the IAF’s MMRCA fleet when there are Tejas derivatives, such as the AMCA to fast forward. For sure, there’s need for foreign assistance in re-working the Kaveri jet engine and there’ll be no dearth of companies competing for India’s custom. But that doesn’t mean the country has to buy a combat aircraft with it. Which is to say that the procurement principle the defence ministry should follow is to buy the specific technology India is deficient in, not the whole damned weapons system package that gets us nothing and in the bargain loses us our purse!

Moreover, with the private sector leading the charge the country is primed to realize inside of 5-7 years Prime Minister Modi’s goal of ‘atm nirbharta’ in weaponry if he is serious about it. But this will require the Indian military and government, as I keep iterating, to trust in Indian talent and invest in Indian programmes to deliver the most sophisticated military goods.

The danger to attaining the above goal is in Sitharaman’s announcement of the other defence industry-related reform, namely, the raising of FDI limit to 74%. The expectation apparently is that foreign arms manufacturers allowed to set up shop freely and with no prior authorization, will jump at the opportunity. Not so fast, Speedy! There would be no problem and such ventures would be welcome if foreign defence companies set up their arms production plants here, and benefit from labour cost advantages, using India as a manufacturing hub mainly for exports. They may be induced to do that only if GOI also allows them guaranteed sales in India. This could lead to foreign vendors setting up factories to dump a whole bunch of obsolete or fast obsolescing weapons/platforms by assembling them here for the Indian armed services, thereby pushing off into the indefinite future the possibility of the Indian military becoming technologically in-date and consequential.

Thus, Lockheed, for instance, which has already tied up with Tata to produce in India the F-21 (the vintage F-16 by another numeric) will come in fast and try and seal a deal with the IAF. From the Washington end Trump can be relied on to do the pushing which our main man, Modi, is unlikely to resist, he being only too eager to please Trump at every turn. (Refer the PM’s expressing his gratitude yesterday to Trump for his promise to send, unbidden, some excess ventilators the US has no use for possibly because these Chinese-produced items have been found to be defective!)

But there are larger issues here that remained unaddressed by Sitharaman. 70% equity and controlling shares is all very well, but before foreign Original Equipment Manufacturers take up the offer, won’t they insist, as regards labour, on hire and fire practices prevailing in the West and elsewhere so they don’t ever get stuck with a low productivity workforce they can’t be rid off? And won’t these foreign firms also insist on ‘one window’ clearance for all permits, local level up, so they aren’t mired in red tape nor compelled to function at the sufferance of defence production babus as Indian companies are forced to do? And further, will the potential investors not demand that the land acquisition be simplified and facilitated which will need the centre and the state governments to be on the same page? The Finance Minister said nothing about any of these things. Result: There’ll be some uptick in foreign interest but no rush into India from foreign quarters, unless they too get the sort of consideration that Lockheed is banking on.

Revamping the land and labour laws, rules and regulations, is a prerequisite for the country becoming a workshop to the world. The Modi regime has done next to nothing in the last 6 years in these respects, other than floating the ‘Make in India’ rhetoric, but still wants India to become a manufacturing station servicing global needs. So much for building a house roof down!

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