Cannot defend this lacklustre policy

With the recently announced new policy in defence procurement, we seem to have a come full circle in the matter of choice of sources for defence equipment since the late 1950s.

We cannot but pay tribute to late V.K. Krishna Menon for laying the foundation of a vast network of government-owned Research and Development laboratories, departmentally-run factories and government-owned corporations (PSUs).

At that time, when a private sector cartel would not play ball in providing all-terrain trucks for the military, he signed collaboration agreements with Germany and Japan to produce Shaktiman trucks and Jongas in our country — which can, with ease, crisscross dirt tracks in the Himalayan heights.

When the Germans would not agree to transfer of technology for Leopard tanks, we went ahead in signing for the Vickers tank, which we christened Vijayanta. When we needed to make aircraft we set up three complexes to produce MiG fighters.

We took over civilian shipyards and started constructing frigates. But then, over the decades, the spirit of “we can do” ebbed. Putting out a Defence Procurement Policy annually became a celebratory event.

The ostensible purpose of the latest policy is to say that we will source all our indigenous equipment from Indian public sector and Indian companies before going out to buy them from fully foreign-owned and foreign-managed companies.

POLICY OPTIMISM

The new policy, announced with considerable hubris, does not address the basics. It is not even clear from the policy what procurement strategy the Armed Forces would like to follow, and whether they will lap up a policy shift towards indigenous sourcing as wholeheartedly as civilians in the Ministry of Defence have assumed.

It appears to be a top-down approach, which contains the seeds for conflict between a military which wants the latest and the best, and a civilian set-up which coerces it to accept what can be produced here, even if it is by the relatively agile private sector.

Even as a part of a big picture, it is debatable if the policy will reverse the ratio of imports to local manufacture, which is stuck since 1998 at 70:30.

Impartial observers cannot help feeling that the new policy is aimed more at preventing exposure of corruption scandals in dealing with international arms merchants than laying a solid base for a defence industry in India.

NOTHING FOR INVESTORS

Significantly, missing is the mention of easing the conditions under which international companies will be more willing than before to collaborate with Indian private sector or set up their own subsidiaries, or facilitate transfer of technology.

The future of indigenous defence R&D and its role too are left as vague as before, even after years of the Rama Rao Committee’s recommendations. The fate of the Kelkar Committee’s prescription to corporatise the Ordnance Factory Board and free it from the clutches of joint secretaries has not been acted upon.

The last ten years saw the worst drawing down of defence equipment reserves with no replenishment in sight, which prodded the then Chief Of Army Staff to go public with the data on the parlous state of stocks.

The new policy, even if it were in force, would have hardly helped matters. All the critical items highlighted in his letter, written a year ago, namely, Anti Tank Ammunition, 155 MM Ammunition, 52 Calibre 155 MM Guns, and replacement of obsolete air defence equipment would only fall under the buy (global) category of the new policy.

Since the Ministry of Defence, for the last five years or more, was busy banning even those foreign vendors who were to start co-production here in India, one wonders how the Government is so sanguine about the outcome of the new policy.

UK’S EXAMPLE

With the inveterate public sector culture, it is doubtful if even the new policy of outsourcing maintenance and repair of systems procured abroad will take off.

The UK has decided recently that its outfit, Defence Equipment and Support, which maintains and services defence equipment, will be outsourced.

However, the UK is known for its perseverance and sincerity in privatising or outsourcing a whole range of public enterprises, including Royal Ordnance, since the days of Margaret Thatcher.

Here, it is difficult to see how private sector companies can repair and overhaul ships, aircraft and tanks, which call for logistics to source spare parts and human resources to muster skills to integrate systems.

INDIGENOUS FAILINGS

If the Government is seriously looking for a quantum leap in indigenous sourcing, it has to pull its act together in a holistic manner.

First, it has to integrate military thinking into its policy framework.

Second, for the private sector to participate, it should allow FDI in Defence, set up a defence R&D Fund for giving grants to R&D proposals from both public and private sector, provide collaterals for royalty payments, and have more realistic offset policies, among others.

Lastly, for the government sector, all it needs to do is honestly implement the recommendations already available in reports gathering dust in South Block.

As for the Defence Research and Development Organisation (DRDO), only 29 per cent of the products developed in it the past 17 years have entered service with the armed forces. The organisation is a byword for late arrivals and expensive flops.

A more professional Defence Ministry and a unified defence staff is required to work with the country’s political leadership. It needs to let private and foreign firms into its moribund state-run defence industry.

Does the new Defence Procurement Policy 2013 really represent a paradigm shift, or is it merely old hat?

(The author is former Member, Ordnance Factories Board.)

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