India’s Defence Production and Research – Need for Transformational up-gradation
Ajit Doval, KC - Former Director, VIF

Early January 2012, the US Defence Department came out with its Strategic Guidance Document, nineteen years after the last was brought out in 1993. Spelling out American “Priorities for 21st Century Defence,” this document delineates the future arc of competition and conflict extending from Asian Pacific to West Asia. Geographically, the median point of this strategically important region passes through India. This positions India in a setting that accentuates its strategic vulnerability as also provides openings for playing a more dominant and pro-active role in the region. To ward off impending dangers and play a power role commensurate to its size and potential, India needs continuing reinforcement of several elements of its state power –economic, military, technological, international leverages etc. In this pecking order, acquiring credible military deterrence and capabilities to inflict unaffordable losses on the adversaries will be critical.

India having the world’s fourth largest fighting force does not automatically translates into its having capabilities adequate to deter, defeat and degrade external enemies or tackle externally primed violent groups threatening internal security. Defence capability of a nation requires host of other ingredients like qualitative and quantitative superiority in weapons and equipment, leadership and high moral of the fighting forces, intelligence capabilities, a reliable defence industrial infrastructure etc.

It is indeed a sad commentary that 64 years after independence the world’s second fastest growing economy, one of the highest end user of defence equipment, a country having the world’s third largest pool of technical manpower and scientific talent and with a track record of indigenously excelling in high end technologies of space, nuclear, information technology etc., is still dependent on foreign sources to meet 70% of its defence requirements. Notably, being one of the major consumers of defence equipments, it not only has a readily available huge market and concomitant advantage of scale in production but even if a fraction of the large import bill is diverted towards indigenous production, the defence sector will be capable of generating large scale employment opportunities. As strategic analyst Brahma Chellaney rightly observes, India “invests bulk of its defence modernisation resources not on strengthening its own armament base or deterrent capabilities but on subsidizing the military industry complex of others.” Relying on large scale imports to equip the defence forces militates against our larger national interests as many of the imported items are not suitable for operation under Indian climate and environmental conditions, their costs are prohibitive, continuity of supply and replenishment of spares is susceptible to political vagaries and the deals often trigger corruption and briberies in this vital area of national security. Besides, they often entail high costs and time overruns and the possibilities of sanctions, technology denial and vexatious conditionalities make them unreliable.

Historical Perspective:

India inherited a rudimentary defence production infrastructure from the British at the time of gaining independence. Notwithstanding the fact that Indian army was fighting only the wars of the British - either within or outside the country - it was made to bear the costs of British imported weapons from India-generated revenue. It thus sustained the defence industry of UK. The indigenous industrial activity was confined to the lowest spectrum of defence production mainly comprising of repair and overhaul facilities of the imported weapon system. Notable pre - independence defence industries included; (a) Walchand Aircraft Factory in Bangalore which was engaged in repair and maintenance of the aircrafts. During the Second World War it was also employed by the US Air Force for servicing American Air Crafts. (b) Mazagaon Docks in Bombay that undertook repair of warships, (c) Garden Reach Shipyards in Calcutta which engaged in maintenance, repair and overhauling of Naval ships, (d) Gun and Shell Factory at Cossipore, Calcutta, established in 1801, (e) Ammunition Factory in Kirkee in Maharashtra established in 1889, (f) Rifle Factory at Ishapore established in 1901 (g) Gun Carriage Factory at Jabalpur established in 1904. In all, there were 16 ordnance factories, the cumulative value of whose production in 1947-48 stood at $ 8 million.

The first ten years after independence were the wasted years in the area of defence production and developing R&D facilities. No new ordnance factory was established or R&D capabilities developed leading to stagnation. During the Nehruvian era, India had no concept of forward strategic planning while expenditure on strengthening national security was seen as non-productive drain on scarce resources. Nehru thought that overall industrialisation of the country and establishing basic industries – the new temples of modern India - will automatically meet the defence requirements, a low priority item in his national agenda. While self sufficiency was the credo of those times, the basic approach was to develop self sufficiency in core industries completely neglecting either indigenous defence production or importing arms and equipment to keep the army in high state of defence preparedness. What was lost sight of was the fact that defence production was a highly specialised sector requiring heavy investments, a strong R&D back up and actual production, from design to production and eventual integration, had a long gestation period. With the impending threat from China, though Defence Research and Development Organisation (DRDO) was created in 1958, it was but a half hearted exercise and the DRDO was starved of resources, quality technical manpower and lacked high level strategic direction. Reluctance of western countries to transfer defence technologies or agree to industrial collaboration clubbed with bureaucratic controls - bereft both of expertise and security sensitivity – compounded the problem.

Following the 1962 Chinese debacle, the wisdom of expanding our defence production sector was realised, albeit at a heavy cost. New ideas were conceived and in course of time a number of new establishments and expansion of some existing units were undertaken. These corporations, commonly known as Defence Public Sector Unit (DPSU), gave a quantum jump to India’s defence industry. Working under the Ministry of Defence Production, eight DPSUs namely Hindustan Aeronautics Limited (HAL), Bharat Electronics Limited (BEL), Bharat Earth Movers Limited (BEML), Mazagaon Dockyard Limited (MDL), Garden Reach Shipbuilders and Engineers Limited, Goa Shipyard, Bharat Dynamics Limited (BDL), and Mishra Dhatu Nigam Limited (MDNL) became the mainstay of India’s indigenisation programme. During 2009-10, Hindustan Shipyard Limited was transferred from the Ministry of Shipping to the Ministry of Defence. Though they substantially contributed, and continue to do so, their overall range of activities and up-gradation capabilities leave large areas uncovered. These DPSUs have developed some useful research and development capabilities.

In the post 1962 scenario, India’s doctrine of self sufficiency in defence items, besides indigenous production, practically meant having reliable foreign sources for acquisition of weapons systems, access to technologies and un-interrupted supply of spares and components. India’s first preference was to develop defence production relationship with the best European manufacturers - particularly Britain, France and Sweden. However, most of the western countries, as also the United States refused to come forward and increasingly, a view started gaining ground in India for justifiable reasons, that the west for political reasons could not be a trusted and dependable long term partner. This led to the entry of the Soviet Union as a major supplier of defence equipment to India and, till today their share is estimated to be over 70%. USSR decided not only to supply the MIG-21 and other weapons but also agreed to licensed production. This ushered India into an era of licensed production. This arrangement, though it served India well for two decades; after the breakup of the USSR and the changed profile of India’s defence requirements, does not adequately address India’s needs any longer. This licensing system also tied India to production stereotypes, thwarting India’s indigenous growth and innovativeness to develop high-end weapon systems from design to production stage.

In the history of India’s defence production and R&D development acquisition of the Bofor’s guns is an important landmark. The irregularities and briberies, whose trail reached right up to then Prime Minister Rajiv Gandhi’s doors, rocked the nation. The nation has not yet been able to recover from its after effects. It continues to haunt India’s defence acquisition programme seriously undermining India’s combat readiness. Since the infamous deal in 1984, the Indian army has not been able to acquire any new artillery guns for more than quarter of a century leaving a big gap in our defence preparedness. The post 1998 Pokhran experience also had its adverse consequences on India’s defence industry and R&D effort. The technology embargo slapped on India hit number of Indian defence programmes, development plans and scientific research.

A month after the Chinese aggression, in November 1962 the Government of India established a Department of Defence Production for indigenous development of a comprehensive defence production infrastructure. As a consequence, besides nine Defence Public Sector undertakings mentioned above, a large number of ordnance factories were commissioned. From 16 in 1947 their number increased to 39, with a total workforce of 1,75,000. Considering India’s overall defence needs, their contribution is, however, still modest as will be evident from the production and turnover figures for last three years:

Year Total sales ordnance factories Total sales public sector undertakings Grand total (Rs. In Cr.)
2007-2008 6937.82 16740.25 23678.06
2008-2009 7229.31 20403.64 27632.95
2009-2010 8715.26 25899.64 34614.90
2010-2011 11208.00 27407.00 38615.00

Besides their overall share in meeting defence requirements, it needs to be maintained that they still, by and large, produce relatively low to medium technology items. Ordnance Factories are mainly producing (i) Ammunitions and explosives, (ii) Weapons, vehicles and equipments, (iii) Materials and components, (iv) Armoured vehicles and (v) Clothings.

One major policy shift was brought about in May 2001 when the GOI allowed participation of private sector in defence production. Under the guidelines issued by the government 100% investment by private sector is allowed in designated fields and 26% through foreign direct investment. Though the Department of Industrial Policy and Promotion has so far issued 155 Letters of Intent to Indian companies no major breakthrough has been achieved in real production during the last 10 years. Bureaucratic delays and complicated procedures are reckoned to be major bottle necks.

Another major policy shift came about in 2006 when the MOD brought about a change in procedures of defence procurement. Under the new policy 30% offsets have been provided in respect of all contracts above Rs. 300 crore. Specified goods or services to the tune of 30% of the value of such contracts have to be procured from indigenous Indian industry.

Current Setting:

The post-Pokhran technology denial came as a blessing in disguise. During the years that followed India increasingly focussed on indigenisation programmes as also diversification of sources of import. The phase of modernising and upgrading that started in 1999 led to widening of product range as also accessing technology from new sources. Induction of the private sector was another welcome change. Outsourcing of many of their requirements by the Defence PSUs and ordnance factories has developed a wide vendor base - that includes not only some of the big enterprises but also a large number of medium and small scale enterprises.

In 2010, government brought out a Defence Production Policy which had many positive features. It emphasized achieving self reliance in the design, development and production of weapon systems / platforms and equipment. With the objective of achieving greater synergy in production of high-end products it was decided to encourage formation of consortia, joint ventures and public-private partnership. Greater integration between technical and scientific research and production was also envisaged. However, while the laid down policy objectives are laudable, at the execution level nothing much has changed and most of the ideas have remained confined to the paper. The overall indecisiveness, lack of senior direction, gaps in planning of resources and poor executive skills of the UPA-II government have been quite visible in the field of defence production and R&D. The quality management also leaves much to be desired.

Setting up of 12 Development Centres with state of the art CAD/CAM facilities to boost R&D efforts in the ordnance factories is a positive initiative. In real battle conditions more than esoteric high end technologies the day to day usable technology and product up-gradation helps the fighting forces more. The DPSUs have also embarked on intensification of their R&D effort – the initiatives taken by HAL (10 R&D Centres), BEL and BDL are particularly encouraging.

In a transformed setting the country enjoys advantages like availability of investible capital, accessibility to earlier denied dual technologies, willingness for cooperation and collaboration by defence production giants - particularly from the West in the wake of the economic downturn. India today has a scientific community that is globally competitive and a pool of skilled manpower with long years of experience and knowledge relating to Defence industries. Politically, there is a bi-partisan consensus that India should reduce its dependability on imported weapon systems to the extent possible. The changing strategic landscape and China’s aggressive posturing with heavy investments on Defence (estimated to be over $132 billion a year) and fast expansion of its defence production and R&D leaves India with no option but to bring about both a qualitative and quantitative transformation. However, infirmities ranging from decision to shy governance, vested interests of the corrupt, external pressures and security insensitivity of the bureaucracy often nullify these advantages. Unless the entire gamut of higher strategic policy guidance, integrated system of identifying long term defence needs, initiating focussed and relevant research making right resources are available in real time the country may not be able to achieve its full potential. It is also important that right from the initial stage of conceptualisation, the end users are associated in decision making process – from design to production stage. While highest standards of integrity and probity need to be ensured by bringing about systemic and procedural improvements it should not be allowed to become an alibi for indecision, procrastination and bureaucratic indifference. It is a pity that some of our finest scientists in our DRDO establishments have been handicapped in contributing their best due to a bureaucratic work culture, lack of incentives, poor leadership and coordination at the top, resource crunch etc. Whenever given better opportunities, freedom, and incentives they have produced most outstanding results.

There is a powerful lobby in the country supported by a still more powerful and cash rich network of arms manufacturers and their front men who have a vested interest in stemming India’s indigenous defence production programme. Spurious arguments and distorted facts are advanced in a systematic manner to create doubts and suspicious that, at times, influences even the leadership of our armed forces. Denigrating the capabilities of our scientists, DRDO and DPSUs is a part of this campaign. With India’s estimated expenditure of $100 billion on defence acquisitions during the next ten years, they see a great commercial opportunity in the offing. Often, their governments advance their cause and exert political pressures to support their cause. It is also true that India cannot and should not completely insulate itself from the international arms market as it will both be bad economics and bad security planning. India cannot insist on developing technologies or systems that can be internationally accessed at much more competitive prices, without undermining our independence and decisional autonomy in critical sectors. The world is moving towards partnership - interdependence and India stands to gain from it if it positions itself in a commanding position by excelling in some high-end technologies and becoming globally competitive, in terms of quality and costs, for selected products.

India urgently needs to strengthen and streamline the complex regimen of defence production and research comprising of 39 Ordnance Factories, eight Defence Public Sector Undertakings (DPSUs), 50 laboratories under the Defence Research and Development Organisation (DRDO), host of research units working in ordnance factories/DPSUs and widely dispersed private sector players. Some of the bigger private sector outfits like Larsen and Toubro, Mahindra Defence Systems, Pipavav Shipyard, Tata Advanced Systems Limited etc. have displayed willingness to get integrated with this eco-system and contribute their share to augment India’s defence preparedness. They are also willing to upgrade their manufacturing facilities and undertake research and development work provided they are assured of sustained orders and provided R&D costs are shared and international marketing opportunities are allowed to be created. There is also a new enthusiasm in India’s public sector enterprises. For acquiring self reliance – cutting across the barriers of public and private sectors, the Indian Defence Ministry can perhaps take a leaf from the experience of ISRO which outsources components, hardware and sub-systems for its launch vehicles and satellites from the Indian industrial units, both in the private and public sectors.

Vision, convergence, speed and de-bureaucratisation of defence production and technology development should be the guiding Mantra of India in the coming decades.


Published Date : 06th February 2012

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