Start point - disbelief

When the Draft Defence Production and Export Promotion Policy (DPEPP) issued on 03 Aug 2020 by the MoD had stated upfront a goal of achieving defence exports target of Rupees 35000 Crores as a part of the overall defence manufacturing turnover of 175000 Cr by 2025 there were not many takers (read believers).^[1]

Position in April 2023

Govt sources have stated that at the close of the Financial year 2022-23 the value of Indian defence exports have reached a figure of 15920 Crs up from a meagre 1521 Crs just 6 years back (2016-17)^[2]. Not stopping at that, The Defence Minister is on record stating that Indian defence exports will rise to 35000-40000Crs by 2026, thereby meeting the lofty target set forth in DPEPP.

Posers?

This work attempts to find answers to the following posers:-

1. How such a leap has taken place?

2. What challenges lie ahead?

The Figures Revisited

Going by the official figures, the rise in defence exports has indeed been a steep curve. Here are some statistics:-
- Successive defence e exports over five financial years^[3]:-

- The figures above say something in terms of percentages for which a rationale has been attempted later:-

o The leap in defence export volumes comparing 2016-17 to 2022-23 has been over 700% (actual figure 946.6%).

o There have been three significant jumps year-on-year 2017-18 (207.8%), 2018-19 (129.4%) and 2022-23 (24.2%).

o In two successive FY the defence exports have actually fallen; 2019-20 ( by 15.16%) and 2020-21 ( by 7.47%).

o In the last five years alone the defence exports have jumped by 334% and as of Apr 2023, India is exporting to 75 countries. ^[4]
- On the flip side, while India has retained the infamous tag of world’s largest defence importer, its defence imports have declined by 11% compared in two 5 year reference periods of 2013-17 with 2018-2022.^[5] Also its dependence on the imported defence goods has fallen from 46% to 36.7% in the same reference period^[6]

How Such a Leap has Taken Place?

There is no one reason, a multitude of them have contributed to the so called leap. These are briefly captured’

Policy Overhaul

Upon taking over in 2014, the Govt (MoD) issued a document called the Strategy for Defence Exports^[7]. It didn’t ruffle many features as it did not make any earth-shaking change in the status quo ante as was obtaining then. Some points about this strategy document:-

- It based its premise on the fact that Ministry of Commerce and Industry already has an Export Policy in the form of Foreign Trade Policy (FTP).

- Under the FTP Umbrella, the Strategy merely limited itself to promotion/facilitation of defence exports through institutional mechanisms (Export Promotion Body, Defence exports Steering Committee etc.) and streamlining the process of issuing No objection Certificates (NOCs) for clearing the export of military products.

- Except for a little bit of flux in issuance of the NOCs, the behemoth of the official machinery moved at its own ‘pace’.

It was in Aug 2020, when the Govt actually gave a serious Policy push to the defence exports by bringing out the DPEPP. It actually walked the talk by backing the theoretical construct in the DPEPP with the issuance of another document of prime importance called the Defence Acquisition Procedure (DAP) 2020^[8].

In one stroke of name change from ‘Procurement’ ( previously - Defence Procurement Procedure or DPP) to Acquisition Procedure (which the naysayers may view as insignificant), it actually changed the DNA of the whole eco-system of procurement turning on from the passivity and conformity of ‘procurement’ to the assertiveness and ‘Buyer’ primacy of stance contained implied in the word Acquisition. So much for DAP.

The DPEPP brought in fresh air into defence exports. Some points:-

- As stated, it was DPEPP that first set forth the then impossible looking targets for defence manufacturing and defence exports.

- Linking up with Atmanirbhar Bharat, DPEPP maintained focus on two prime needs; 1. Achieving self-reliance in domestic defence needs and 2. Achieving exports targets.

- It called for making the Defence and aerospace Sector dynamic, robust and competitive by reducing import dependence, promoting exports by adding to the global defence value chain, encouraging R&D, rewarding innovation and above, emphasising on Indian Original Equipment Manufacturers (OEMs) to create Indian Intellectual Property ( IP).

- DPEPP clearly identified 8 priority focus areas to give a boost to defence manufacturing and exports. It went a step further and listed specific action points for each of the above areas in order to get a quick move on.As regards export promotion the DPEPP laid down the following:-

o Mandating Defence Attaches to promote indigenous defence equipment abroad.

o Positioning selected Defence Public Sector Undertakings (DPSUs) to work as export promotion agencies with selected countries.
o Giving encouragement to Govt-to-Govt (G2G) agreements and Line-of-Credit mode of funding.

o Strengthening and professionalising the erstwhile Export Promotion Cells (earlier institutional arrangement which hardly performed).

o Mandating DPSUs and OFB to have at least 25% of their revenue from exports.

o Facilitate on-boarding of Indian Offset Partners (IOPs) for discharging the offset obligations by OEMs.

o Positioning of Defence Expos and Aero India as major global events to encourage and drive defence exports.

o Making the export clearance process seamless and time bound.

o Optimal utilisation of Open General Export Licence (OGEL) to encourage exports to friendly foreign countries.

- Much of the journey to 15920 Crs and counting has been driven by one or the other of the above policy initiatives.

Policy Alone does not Drive Exports

If policies alone could drive exports we could have achieved 100% self-reliance way back in time. Besides bold policies what actually gave a move on to Indian defence exports is the fact that during the time frame 2015-2022 some major platforms got realised to export worthy standards. A brief about these follows:-
- It was in May 2015, when Akash Weapon System having demonstrated all its qualitative requirements successfully got operational clearance to be inducted in the Army, (got inducted in IAF in 2014). From then on the public ( BEL and BDL) as well as the private sector ( L&T and many others) industries dealing with Akash got a shot in the arm to go ahead and realise the weapon in the quantum and range both for meeting the indigenous demand as well as, for exports it to friendly foreign countries (FFCs). In the years that followed an export version of Akash was developed.

It was on 30 Dec 2020, spurred by the interest shown by FFCs in International Exhibitions, Defence Expos and Aero India; the Cabinet approved the exports of Akash Weapon systems and created a committee for faster approval of exports for a number of platforms such as Coastal surveillance systems, sensor systems, aerial platforms and more^[9].

This Committee besides authorising exports to FFC was also tasked to look for G2G opportunities in defence exports.^[10] As on date reports indicate that some nine countries have evinced interest in the weapon systems. These are Philippines, Indonesia, Vietnam, UAE, Saudi Arabia, Chile, and South Africa.

- The other bright spot that became brighter as ‘export-worthy’ was the BrahMos supersonic Cruise missile system. The fastest cruise missile of the world developed as a joint venture between India and Russia. Initially, there were reports of Russian reservations on BrahMos export

Past that^[11], the first major success came on 28 Jan 2021 when Philippines signed a deal worth 374.96 Mn USD for three missile batteries of the shore-based anti-ship variant of the BrahMos. As per their Defence Secretary the weapon system was required for beefing up the fire power of the Philippine Navy, in particular the Marine Corps. ^[12]

As well known, there is an on-going dispute between China and a number of countries namely, Philippines, Malaysia, Taiwan, Vietnam and Brunei over the Spartly islands in South China Sea.^[13] It is reported that talks are in advanced stages with Indonesia for a BrahMos export deal worth 200 Mn USD.^[14]

Complementing the above and encompassing the time frame 2015-2022 following other positive developments took place:-

- In 2016 HAL successfully made the structural airframe of Dornier -228-212 (new generation) aircraft at its Kanpur facility and was able to supply the same to its Swiss OEM M/s RUAG based in Bern Germany all in a matter of four months against export orders. The flow continues.^[15]

- In Mar 2020 DRDO (LRDE) won a USD 40mn contract to supply 4x Swathi Weapon Locating Radars to Armenia beating strong rivals like Russia and Poland.^[16]

- Under PM’s vision of SAGAR ( Security and Growth for all in the Region) India continued its spree of exporting Fast Patrol Vessel ( FPVs) to FFCs. Sri Lanka- May 2017, 2x Advanced Offshore Patrol Vessels ( AOPVs)^[17], Seychelles – Apr 2021,100 cr , gifted an AOPV^[18].

- India is going steady in its export of Arms and ammunition and parts and accessories to FFCs. 2021 – 252.18 Mn USD, 2022- 206.07 Mn USD. The destinations are Russia, France, Belgium, Israel, USA. ^[19]

- In Feb 2022, Zen Technologies Limited, a front-runner in Combat Training and Anti Drone solutions in India reported that it has export orders worth 172 crs from international clients. ^[20]

- In Nov 2022, Bharat Forge (BF) , a defence major in the private sector bagged an export order of USD 155.5 million for the export of Bharat 52 155mm 52 calibre Towed Artillery gun.^[21]

- In Nov 2022 again, a private player Solar Group engaged in defence manufacturing bagged a 300 Cr order to supply Pinaka rockets to a European country, an order of similar value went to Munitions India Ltd ( MIL) – a company forged out of OFB corporatisation.^[22]

- As of 01 Apr 2023, 792 Indian entities exported 7327 shipments of radar assemblies and sub-assemblies to 1417 buyers internationally.^[23]

- It was around this time ( 2020-2022) that aerial platforms such as Light Combat Aircraft (LCA) Tejas started to appear in the India’s export ‘offer list’. Going forward on this route the new HAL CMD CB Ananth Krishnan has sated as recently as Feb 2023 that four countries, namely Malaysia, Argentina, Egypt and Botswana have evinced interest in the Light Combat Aircraft (LCA) Tejas^[24].

- Similar type of story seemed to be unfolding for HAL Advanced Light Helicopter (ALH)Dhruv. Mauritius in Feb 2022 signed a contract for one ALH Mk III along with associated deliverables adding one more Indian platform to its list after Dornier ( Do228)^[25]

The answer to the poser as to how this leap has happened becomes visible now. It emerges that the journey has been slow and steady with ‘exportable big ticket’ becoming available as the time progressed. Of course we are nowhere near destination and are still shy of 54% to the target figure. That is the state as on date.

Challenges that Lie Ahead

While the foregoing has been the ‘good part’ of the story, it is equally important to keep in focus the challenging part (not necessarily bad part). The author’s take on this is briefly presented:-

- It must be known in no uncertain terms that while the defence exports bring big money, the ‘return to store’ is a national embarrassment and a loss of face. Case in point is the fact that out of seven ALH Dhruv helicopters exported to Ecuador four have crashed in a period from Oct 2009 to 2015^[26].

- While the Govt in Jul 2018 has claimed that the crash of two Dhruv helicopters (out of four) is attributable to pilot error and lack of maintenance more attention needs to be paid the causes for the same and remedial action taken.

- Quality control is non-negotiable. Incidents like the above need to be appropriately investigated; it also has a domino effect on future order prospects by other nations.

- It is the sense of the author that only the platforms and systems that have been tried and tested by own defence forces over a period of time and only those that are well beyond the teething trouble period need to be offered for exports.

- Another issue relates to the life-cycle support of the exported items. It must be ensured by the Indian OEMs that the engineering support package for the entire life-cycle of the equipment is lined up (assured to be available) before a platform is offered out for export.

- Also relevant is the point of parallel demands. When Russia required to beef up its S 400 series on the warfront, it delayed the supplies of the same to India^[27]. In this context it may be pertinent to note that for all the big ticket items on export, there is a considerable outstanding demand for the Indian defence forces (ALH, LCA, BrahMos, Akash etc.) This must be factored in a-priori before offering an equipment for export.

- India has to build a reputation of having an ‘export culture’ by fulfilling many a demands that are tagged to it- ‘prompt after-sales-service’, proven quality and reliability and more. The Make-in-India brand has to scale up in image and sense-of-quality it conveys. Still far to go on this when it comes to compete with products from countries like Japan, Korea and more.

- Then there are institutional problems to be addressed. High costs of exports as compared to rivals, infrastructural bottlenecks such as energy shortages, poor and unreliable transportation and communication facilities, port facility deficits, container handling capacities et al.

- Lastly, weapon platforms that have not found full acceptance in own defence forces as yet (user observations still pending to be resolved) must not be put on the export wish list. Buyers know all.

As a bottomline, it may not come as a dampener that for a second month in a row, Indian exports in general have dipped by 6.58 % in Jan 2023 and by 8.8% in Feb 2023^[28]. These are global realities driven by multiple factors and compulsions; pandemic, persistent high inflation, tightening of monetary policies by respective governments, shrinking global demand to name a few. The challenges are ‘global-commons’; we like the rest of the world are all in it together.
Despite everything – the feel that we are on the way is of course reassuring.

Endnotes

^[1]Draft defence production and export promotion policy,” at www.ddpmod.gov.in. Accessed on 11 Apr 2023
^[2]Atmanirbharta on the rise: Defence exports reach all time high,” at www.pib.gov.in
^[3]ibid
^[4] “India sees 334% jump in defence exports in the last five years,” at www.livemint.com. Accessed on 12 Apr 2023.
^[5] “Defence exports India..”at www.m.economictimes.com. Accessed on 12 Apr 2023.
^[6] “India’s defence exports rise..” at wwwswarajyamag.com.
^[7] “Startegy for defence Exports,” at www.ddpmod.gov.in.Accessed on 13 Apr 2023.
^[8] “DAP 2020,” at www.mod.gov.in.Accessed on 13 Apr 2023.
^[9] “Cabinet approvesexport of Aksah missile system ..” at www.pib.gov.in. Accessed on 14 apr 2023.
^[10]ibid
^[11] “India Russia agree to export BrahMos Missile..,” at www.tass.com. Accessed on 14 Apr 2023.
^[12]Philippines inks deal worth 375 Mn USD..,” at wwwthehindu.com.Accessed on 14 Apr 2023.
^[13] “Spartly islands dispute,” at www.en.wikipedia.org.Accessed on 14 Apr 2023.
^[1]Indonesia close to closing deal for BrahMos..” at www.economictimes.com.Accessed on 14 Apr 2023.
^[15]HAL exports structural assemblies of Dornier to RUAG,” at www.spmai.com.Accessed on 14 Apr 2023.
^[16] “Defenceexperts : analyzing Armenian success. Accessed on 18 Apr 2023
^[17] GSL delivers two AOPVs to Srilanka.” At www.pib.gov.in..Accessed on 18 Apr 2023.
^[18]Handing over of fast patrol vessels to other countries’ at wwwindiashippingnews.com.Accessed on 18 Apr 2023.
^[19]India’s export of arms and ammunition, parts and accessories,” at www.tradingeconomics.com.Accessed on 18 Apr 2023.
^[20]Zen Tech gets export orders worth 13.50 Crs” www.baseline.com.cdn.ampproject.org.Accessed on 18 Apr 2023.
^[21] “Indian Company bags 155.5million export order for artillery guns,” at www.hinustsntimes.com. Accessed on 18 Apr 2023
^[22]Solar Group , MIL bag orders to export of Pinaka rockets” at www.m.timesof India.com. Accessed on 18 Apr 2023.
^[23] “Radar exports from India,” at www.volza.com.Accessed on 18 Apr 2023.
^[24] ‘HAL in talks with four countries to export tejas fighter jets,” at www.hindustantimes.com.Accessed on 23 Apr 2023.
^[25] “HAL signs contract with Mauritius for export of advanced light helicopters.<” at www.indiatoday.in, Accessed on 23 Apr 2023.
^[26] “India’s quantum jump in defence exports is high on rhetoric and low in substance,” at www theprint.in.Accessed on 23 Apr 2023.
^[27] “Russia not in a position to supply S 400 systems to India,” at www eurasiantimes.com. Accessed on 23 Apr 2023.
^[28] “India’s exports decline by 8.8% to 33.88 Bn in feb 2023.” At www.cnbctv18.com.Accessed on 23 Apr 2023.

(The paper is the author’s individual scholastic articulation. The author certifies that the article/paper is original in content, unpublished and it has not been submitted for publication/web upload elsewhere, and that the facts and figures quoted are duly referenced, as needed, and are believed to be correct). (The paper does not necessarily represent the organisational stance... More >>