Self-Reliance in Indian Defence

Ajay Singh,Res. Fellow,IDSA

 

Introduction

The defence sector usually operates at technological sophistication levels higher than that generally obtaining in any country. This makes the creation of industrial capabilities in defence a greater challenge. India's quest for self-reliance in defence, therefore, has to be seen in the context of the broader science and technology base in the country in general, and the industrial capability in specific.

At the time of independence, there was no national industrial base of note in India, as the country had been de-industrialised for over 200 years by the British. The effects of de-industrialisation were even more significant considering that it was during these 200 years that the industrial revolution took root and resulted in tremendous growth in technology and industrial capability. During their rule, the British followed a policy of retaining strategic capabilities while allowing the native Indians the tactical dimension in most endeavours. Even after the need to transfer industry increased due to rising costs of labour in the British homeland, strategic industries and facilities were not set up, beyond the bare necessities such as railways and ports needed to rule India.

After independence, and the adoption of a policy of non-alignment, it was also obvious that the foreign policy would need to be reinforced by a policy of self-reliance in defence. Being in a position where self-reliance had to be achieved from a de-industrialised stage, India opted to choose an incremental path along a balanced model of self-reliance in defence requirements. For self-reliance to be achieved, it was necessary to continue meeting urgent requirements through imports while starting work on indigenous capabilities.

The Indian Self-Reliance Model

The self-reliance model adopted in practice by India can best be described as one that fundamentally relied on diversification in the sources of weapons and military technology, while working on establishing and expanding the indigenous base for design, development, and manufacture of weapons and equipment.

Diversification itself could constitute a path of acquisition through direct purchase of new and second-hand equipment from more than one country. On the other hand, license manufacture (as happened with most systems in service starting from 1949 itself) of systems acquired from different sources serves to both enhance diversification of sources of supply as well as strengthen indigenous capabilities. Increasing local manufacture reduces dependence on external sources for a significant proportion of spare parts while the system are in service and in turn, reduces dependence on external sources in an overall sense.

Building up of indigenous sources of supply, in a way, constitutes a component of diversification itself which, in a successful model of self-reliance, would progressively increase as a proportion of the total indigenously acquired and total held in the inventory. License manufacture is a key component of building indigenous capabilities and in practice this aspect was strengthened over the years, substantively due to the willingness of the erstwhile Soviet Union to license manufacture in India. But the key element to achieve a high degree of self-reliance is the ability of design and development of weapon systems in the country as this allows the entire cycle of defence production to be completed within the country. Sophistication of military technology, and more important, the cost and time factor of modern weapon systems do not allow every equipment to be completely developed within the country. In practice, therefore, all countries seeking a self-reliant capability in weapons and equipment seek indigenous design (to suit their particular operational needs) and collaboration on specific systems and sub-systems. A country with low level of indigenous design and development capability and lagging in modern technology base at the broader national level (such as India) perforce must seek greater quantum of foreign collaboration. Unfortunately, this aspect has not been adequately understood in India. The result has been that efforts at collaboration have been handicapped by the nationalist desire to see a purely 'Indian' system.

Over the years, the self-reliance model was re-shaped by a number of factors. In the early 1960s, two wars had given rise to urgent operational demands. It was relatively easy and affordable for the armed forces to access weapons through the license manufacture process, typified by the case of MiG-21 aircraft. On the other hand, indigenous design and development projects had been delayed. This itself was due to two factors--inadequate resource commitment (less than 2 per cent of the defence budget), and an overestimation of indigenous capabilities. The result was an inadequate response of the research and development (R&D) process to user requirements, which strengthened the push for license manufacture. Faith in Defence Research and Development Organisation (DRDO) and indigenous design had begun to erode, and this was in no small measure attributable to the DRDO's tendency to look at reverse engineering as the tool to design. The pre-eminence of the license production regime, which started in the 1960s carried on through the next decade and a half. This process was accompanied by a reduction in indigenous design and development activities. The situation is apparent in the case of the aircraft industry since this industry operates at a high level of technology and therefore, poses greater challenges to indigenisation than those associated with surface forces.

For the best part of a quarter century (early 1960s to mid-1980s), license production and direct purchase remained the predominant course of action. During this time there was practically no R&D project that was undertaken. There was a gap of nearly 30 years in design and development of: (i) a fighter aircraft between the Marut and the Light Combat Aircraft (LCA), (ii) a basic trainer aircraft between the HT-2 and HPT-32. The gap is even larger between design and development of an intermediate stage trainer, since after Kiran, the design process for a replacement has not commenced. Another fact that emerges is that while there was a time gap of a quarter century in design and development of aircraft, the total number of design and development projects undertaken also reduced drastically, once again indicating a preference for license production and direct purchase. In the first 15 years after independence, design and development projects accounted for one-third of the total (design, buy, and license production), while for the following 25 years, the figure dropped to one-thirteenth of the total. For a country aiming to be self-reliant, the figure for design and development should have at least risen in comparison to license production and direct purchase. In recent years, there has been an attempt to resurrect the self-reliance model but efforts in this direction seem rather feeble and debatable.

An emphasis on the process of license production along with neglect of design and development also meant that the option of re-equipment was limited to purchase from foreign sources--either for license manufacture or direct purchase. Thus, the self-reliance model has progressed, but with little stress on design and development. Consequently, the path has suffered from inherent limitations in its ability to generate self-reliance. Ignoring design and development for a long period has led to a shortfall in the degree of self-reliance achieved. An attempt to rectify the situation now requires a well-directed strategy, additional resources, and time. It is instructive to note that the budgetary support to defence R&D activities in the first 25 years of independence was around 1 per cent of the defence budget, reaching 2 per cent in 1980, 4 per cent in 1986, and 5 per cent in 1994.

Trends in the Global Defence Industry

Global trends affect us. Therefore, it is necessary to examine trends in the global defence industry and their relevance to India. The problem of resource crunch is a worldwide phenomenon, and with the end of the Cold War, global defence spending has been coming down. The costs of defence R&D have gone up, in turn leading to increasing costs of weapon systems. International collaboration and mergers are seen as methods of sharing R&D costs and stretching production runs, thereby achieving economies of scale. The defence industries of Eastern Europe, including Russia have been particularly affected by the virtual drought in demand since the collapse of the Soviet Union. Although some of these industries have somewhat recovered in the last few years, they are no longer able to provide weapons at erstwhile low costs. Consequently, cheap arms are simply not available anymore in the global market, a factor that affects force levels directly. Defence procurement is coming down not as much in financial terms as in the number of weapon systems due to ever increasing costs. The unit cost of high technology military hardware has been rising exponentially with time.

Although the actual situation may not be so dismal for defence planners, a few issues do come up for consideration in light of reduced defence spending and high unit costs of weapon system. Firstly, production runs are going to be extremely limited in the future especially for high technology weapons. From the era of mass production, we are moving towards an era of de-massification in defence production. Increasingly, weapon systems will be built only in small numbers, just beyond the prototype state. An example is the French Rafale fighter of which only 48 are planned for production, and that too is not certain at this stage.

This leads to a second issue that is part of a vicious cycle in defence production. If production runs are going to be limited, then the cost of dedicated defence R&D will be difficult to recover, which will depress financial commitment to defence R&D unless spin-offs are perceived in the civilian field. It is significant to note that unlike even a decade ago, when military technology was the clear forerunner of civilian technology, a slightly different situation prevails today. This is itself due to two main reasons. One is the fact that modern weapons use a high number of electronic components. Advances in this field, particularly microprocessors, are essentially driven by civilian demands today. Another is the tendency to increase the already high shelf life of defence equipment to cut down on costs. This has resulted, at times, in dated technology being persisted with in the military as compared to civilian equipment. This has resulted in a state where military technology is being derived from civilian technology in key areas such as electronics. It flows from here that in the future we will witness greater allocation of R&D budgets for dual use technology and equipment rather than specialised defence R&D. With shrinking markets for defence equipment, a greater stress by defence industries on diversification of production for civil use may be expected. High costs of re-equipment has not only led to pressure to stretch life cycles of existing weapon systems, but has also introduced a substantial market for upgrade of these systems. This has important connotations for countries with specialised defence industries, such as Israel, that do not have the capacity to perform the role of weapon platform prime manufacturers but possess the capability to enhance the potential of existing forces.

Options for India

The defence industry as it exists today is not in a position to satisfy most needs of the Indian armed forces, and it would be unrealistic to expect it do so in the near future after years of functioning in a sub-optimal manner. The thrust should be geared to build upon specific expertise gained by the defence industry while focussing on fresh avenues. The strategy for India should be to move on from self-reliance through diversification to a more comprehensive self-reliance through interdependence based on international collaboration. This collaboration must extend not only to production, but also to the R&D, as well as sales.

The strength of the Indian defence industry (also reflective of the overall industrial situation in the country) includes a large established infrastructure with decades of experience in license manufacture and low manpower costs (compared to wages in the Western countries). While there has been substantive acquisition of production technologies for system built under license, we are deficient in design and development of systems. With wars becoming technology intensive, the foremost step that needs to be taken by the Indian defence industry is to enhance its technological level through access to military technology. It would be ideal if the high end of technology can be acquired. However, it must be kept in mind that for the purpose of creating a resilient defence industry, low to medium technologies are more important since they strengthen the foundation for national R&D and the science and technology base.

Financial resources for defence will remain limited in the foreseeable future on the one side and on the other, defence commitments are not likely to reduce drastically. They may even increase, which brings forth a problem of how to do more with less. Under the circumstances, adequate firepower will have to be retained both in terms of quantity, as well as quality. Therefore, the equipment in the armed forces has to be based on a mix of high and low technology. The fact that acquisitions are spaced in terms of time and source in itself creates a mix. We need a conscious and planned approach to achieve the right mix.

In pursuit of technology, there is need for greater R&D effort and investment if the technological base is to continue growing. Some issues involved require a closer examination. A decrease in Indian defence spending has also meant a 35 per cent decline in investment of national resources to defence R&D spending during the last decade. Defence R&D constitutes only 5 per cent of the defence budget. There is a commitment to increase defence R&D spending to 10 per cent of the defence budget in the coming years. There should not be any doubt that R&D will need a high level of commitment of resources to meet the demands of the 21st century. What is more important, however, is how this money is spent.

There will be a need to identify maximum number of R&D projects with dual use benefits and specialised R&D would have to be kept to the bare minimum. This should not be as difficult as it may seem, since most of the technologies needed in the information environment of future wars have application in civil fields as well. This also implies greater involvement of the private sector in R&D activities. On the issue of defence R&D, care should be taken to ensure that resources earmarked for R&D are utilised for R&D activities and not otherwise, which does seem to have taken place in the past.

Although self-reliance in defence equipment has been a stated goal of the Indian government for the last 50 years, the state of the armed forces as a result of the Soviet Union's collapse has driven home the urgency of the requirement for reducing dependence on external suppliers. The Indian Government has announced a self-reliance initiative that aims to increase the level of indigenisation content from 30 per cent in 1995 to 70 per cent in 2005. It may be pointed out that the method of calculating the indigenisation content itself is a matter of debate. Ten committees have been set up under the Department of Defence Production to identify the scope of indigenisation in items such as aircraft, electronics, armament, etc. This plan is under implementation and basically applies to product support for existing equipment, and therefore, is a drive towards import substitution not very different in principle from the self reliance initiatives put forward soon after independence. The next step in the present process is a plan to minimise imports and induct indigenously designed and manufactured systems. The stress on increased R&D and private sector participation is evident in these plans. What is not evident is an effort to restructure the Indian defence industry in terms of orientation and organisation to cope with post-Cold War dynamics.

The role of the private sector will be crucial for the future of the Indian defence industry. Contrary to common perception, the private industry in India has always played a significant role in the defence industry sector. During the early decades after independence, bulk of national industry was in the small-scale sector; and it was this sector that played an important role as sub-contractors and ancillary industry. Over the years, the national industrial base has expanded into major areas of manufacture. It is therefore, logical that the private sector should also step into defence industry field in a larger way. The government will need to be more transparent in the matter to guide the expansion of the private sector into defence industrial activities. Importantly, the fact that a number of emerging technologies for application in future conflicts actually are of dual use value will increase the incentive for the private industry to participate. From low end of technology items such as shoes to high technology areas such as electronics and communications, the private sector has the capability for effective involvement and should be encouraged.

Within the framework for acquisition of technology, it is necessary to focus on specific areas that will throw light on the orientation and structure required by the Indian defence industry. Notwithstanding the reality that aircraft, ships, and tanks (representative of the three services), will increasingly see low production runs, and therefore, be costly to acquire, India will still need adequate numbers of heavy military hardware. The IAF case is the most illustrative of the approach needed since it is equipment intensive. The requirement of 3-400 odd aircraft over the next ten years cannot be fulfilled by acquisition of high technology aircraft without disastrous economic consequences. A high-low mix would naturally raise the question about the low end, since the high end in any case would have to be procured from abroad considering our technological state. At some stage, the low end of the scale may be filled up by the LCA, but it is highly unlikely that this will be achieved in the next two decades.

The delay in the LCA programme has prompted the IAF to upgrade its remaining MiG-21 Bis aircraft. The most prudent and practical choice for the IAF and the aircraft industry is to acquire additional MiG-21 Bis aircraft and upgrade them. The upgraded aircraft would cost less than $5 million apiece compared to $40 million for a new fighter which makes the MiG-21 option extremely attractive. This option would also open access to a lucrative upgrade market share in the world for the Indian defence industry with obvious spin-offs. These platforms could be purchased second-hand from another country, or their manufacturing line can be re-opened at Hindustan Aeronautics Limited (HAL), which would be wiser. In any case, it should be kept in mind that it is the same platform but one that is less capable which will equip our main adversary over the next decade and a half. Both China (and increasingly) Pakistan rely on the Chinese version of the MiG-21--the F-7, which is less capable in performance than the MiG-21 Bis of the IAF, leave alone the upgraded MiG-21 Bis.

The aircraft industry is engaged at present with the LCA. While the success of this programme cannot be predicted with certainty, the design expertise built up should not be wasted. Design and development of another combat aircraft at this stage is not going to serve much purpose. The IAF has had an outstanding requirement of an Advance Jet Trainer (AJT) for more than two decades. There are a number of aircraft under development in the world that fit the role of the AJT. It may not be too late to enter into joint development/production with a country that will utilise our production capacities; while giving the IAF the trainer it needs at a relatively low cost. Such a step may also open avenues for joint sales to third or fourth countries which will be highly beneficial for the defence industry which is restrained in arms exports by the Indian government's 'merchants of death' policy, that precludes offensive weapon systems sales. The Indian Defence Minister's visit to Russia in October 1997 was significant in this regard, when the Russians offered India participation in joint production of the MiG-AT (advanced trainer). It needs to be recognised that the world, including the US is badly in need of a good inexpensive AJT, and an expanding market is expected during the coming decades.

The contribution of the defence industry to the Navy has been noteworthy. This has been made possible by the involvement of the Navy in all aspects of ship design and development. What ails this sector is the lack of follow on orders. There is an urgent need to place orders for warships in the dockyards, since otherwise this carefully built up capability will be irreparably impaired. The requirement for naval ships needs to be reviewed and possibly a course adopted to suit the Navy's perceived role. It is important to revive the nuclear powered submarine project, besides continuing development of electronic systems indigenously for present and future ships. The Army has cleared the Arjun Main Battle Tank (MBT) for serial production. This should be done without further delay. At the same time, the Indian Small Arms Family (INSAS) of 5.56mm weapons has been subject to many delays. These weapons and their ammunition needs to be produced expeditiously, with further R&D in this area to upgrade them at an early date with modern sighting systems.

Apart from the key weapon system programmes of the three services, areas that need special focus are sensor technologies, communication systems, missiles, satellites, Electronic Warfare (EW), and Remotely Piloted Vehicle (RPV). They employ leading edge technologies that will affect our defence capability in the 21st century. In these areas a substantial private industry participation can be expected, since some of these are based on dual use technologies, and therefore, would provide opportunities to the private sector also. Central to the leading edge technologies is computer hardware and software, the latter being a strong point of the Indian industry today in international competition. These technologies also offer an opportunity for the defence industry to compete with the private sector for exports (barring missiles) that will help the industry to generate revenue and, therefore, become financially more viable than at present. In sensor technologies, the industry could concentrate on radar, electro-optical, and infra-red sensor as despite exotic sensor technologies under research, these three are likely to be the most durable for some time to come.

The field of communication systems is vast, featuring requirements of high bandwidth, high data rates, security, etc. being met by media such as fibre optics. The private industry may be expected to lead its defence counterpart owing to much larger application in the civil arena. Missile technology is essentially the territory of the defence industry, although extensive use has been made of private agencies through subcontracting even presently. However, missile technology will continue to remain primarily dependent on government support, as sales are likely to be restricted for India's own defence requirements. Both the defence and private sector with other government agencies such as Indian Space Research Organisation (ISRO) will be involved in satellite technology. ISRO actually would naturally take the lead in this field, but commitment from the defence industry would be necessary to allow the military to take advantage of civil satellites while adding a military dimension of low response time satellites with specialised sensors. Electronic warfare and RPV technology may not witness the same degree of civil participation. Joint ventures in these areas hold great promise, if they can be achieved at the political level.

On the one hand, the Indian defence industry needs a new orientation in terms of its focus on key areas, while on the other hand it needs a restructuring to meet the changed demands of the future, and to make it more efficient. The Indian defence industry has almost become an end in itself over the years and its restructuring is not going to be an easy task, albeit there is little doubt about the need to do so. The first step that needs to be taken is to identify the elements of the defence industry that are likely to contribute in the future, and which ones can be simply wound down due to the irrelevance of their output to future defence needs, or the capability of the private sector to take up their place. It has been reported that 60 per cent of India's defence industries are functioning to 50 per cent of their capacity, while the remaining 40 per cent are functioning to partial capacity. The government's solution has been to ask the industries to take up production of civil items. This approach seems to be less concerned with optimising defence production and more bothered about generating employment. Such ideas need to change in the present scenario of economic reforms. If the world over, defence industries are either winding down or merging to cut overheads and increase efficiency, then there is no sustainable reason for the Indian defence industry not to learn from the experience of others. The elements of the defence industry that are functioning below a desirable level, and where there is little hope for improvement as far as defence production is concerned, should be shut down, their assets transferred or sold, and staff retrenched to other organisations. Mergers between defence production agencies themselves should be possible in some cases. Asking a defence production agency to take up manufacture of items like clothing and shoes today is highly sub-optimal when such items can be easily purchased from civil sources often at cheaper rates, and of better quality.

Another aspect of restructuring is privatisation, particularly that of the defence public sector units (PSUs). While the government has taken some commendable steps with regard to privatisation of other PSUs in the country as part of the economic reforms, it has applied the 'holy cow' template of defence related issues to privatisation of the defence PSUs (DPSUs). The need for government control over these PSUs may be understood to an extent since it is a matter of retaining control over elements that contribute to national security. However, in the interest of better efficiency, the DPSUs must be freed from bureaucratic control at the earliest if they are expected to be positive contributors to the country's economy and drive to achieve more with less. Perhaps, we could emulate the example of some American firms here that follow a 'GOCO' concept--government owned, civilian operated. This would serve the purpose of retaining government control over defence in broad strategic terms, leaving the management to civilian experts who have the freedom and incentive to improve efficiency.

A third issue in the restructuring effort is the R&D set up in defence production. There is no denying the fact that R&D needs greater commitment in terms of resources, but a critical look at DRDO, the premier agency for defence R&D may be in order. From 1958 when DRDO was established, R&D has gradually shifted from the factories to the laboratories. There is nothing wrong in this concept by itself. However, the result has been a near total lack of any 'innovative' activities at the factory level, while the labs continue research, at times, not related to the requirements stated by the armed forces. An associated problem of productionising designs exists when the production factories and R&D agencies are separate. What was needed was a gradual build up of capabilities towards high-end research or innovations followed by inventions, which is the essence of an incremental approach. This has not taken place. But it is not too late to shift the focus back to the factories along side the work being done by DRDO. In the process, the 50 laboratories set up by DRDO need to be revamped to an extent. Perhaps, as many as 20 per cent of these labs need to be merged or closed down. As an example, the requirement for defence labs to carry out research into foods is highly debatable, as also there being no rationale in tasking DRDO to study management techniques when such study is being done in detail by institutes both within the services and in civil.