DSA August 2012 by Defence and Security Alert

Change of Guard at DSA M

r Manvendra Singh, former Member of Indian Parliament (Lok Sabha) was our Editor-in-Chief and provided us the leadership and support during the critical formative years of this magazine. It was entirely due to his untiring efforts that the DSA has emerged as one of India's leading defence and security publications. However with the forthcoming general elections, his political duties are now making increasingly heavy demands on his time and energies. Due to the pressure of these commitments he requested to be relieved of his duties as the Editor-in-Chief. However, at our earnest request he has kindly consented to continue his association with team DSA as our Founding Editor and we are certain that cause of the DSA will remain close to his heart. As a matter of fact I and Mr Manvendra Singh jointly conceptualised and nurtured the dream to project a nationalist viewpoint in the realm of defence and security journalism and together brought it to fruition in the form of Defence and Security Alert (DSA) magazine. He will always be for us, a source of inspiration and strength and we will seek his continued guidance and counsel. He hands over the baton to Maj Gen (Dr) G D Bakshi, our Executive Editor. I on behalf of team DSA wish Mr Manvendra Singh all the very best in his future endeavours and welcome this change of guard. I look forward to DSA scaling newer and greater heights of prestige and popularity under the leadership of Gen Bakshi.

Pawan Agrawal Publisher and CEO

s I have been called upon to devote more time and attention to my political responsibilities, I am reluctantly withdrawing from my active involvement as Editor-in-Chief of DSA. I will however continue to be associated with the publication as Founding Editor and will be happy to contribute in every way possible to the great future that awaits DSA.

I have thoroughly enjoyed my tenure as Editor-in-Chief of DSA and I am happy at the progress the magazine has made since its inception in October 2009. I am sure in our new Editor-in-Chief Gen Bakshi we have a distinguished soldier and an eminent defence and security analyst taking charge of the fortunes of DSA. I am certain under his guidance and scholarly leadership DSA will become the most read and respected defence and security magazine not only in India but globally. I wish him and team DSA the very best.

Manvendra Singh

s the Indian general elections loom around the corner, Mr Manvendra Singh has been called upon to devote increasingly greater amount of his time and attention to his political responsibilities. As such, he wished to be relieved of a share of his duties at the DSA. It is at our earnest request that he has kindly consented to remain associated with us as the Founding Editor. I am personally grateful to him for his stewardship of team DSA. In fact, he has made it one of the leading defence journals of India and I will be hard put to maintain the high standards set by him. We will of course continue to have the benefit of his support and guidance. On behalf of Team DSA, I thank him wholeheartedly for his stewardship and support and we look forward to his continued guidance and patronage.

Maj Gen (Dr) G D Bakshi SM, VSM (retd) August 2012 Defence AND security alert

editor-in-chief

publisher’s view

De fence Forces a nd St atec ra f t "A person who cannot destroy the entire enemy with his allies opens his own doors for destruction" – Chanakya Source:http://www.defence.pk/forums/membersclub/34081-chanakya-quotes.html#ixzz21Yxwkbhr

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Vo l u m e 3 I s s u e 11 A u g u s t 2 0 1 2 chairman shyam sunder publisher and ceo pawan agrawal founding editor manvendra singh editor-in-chief maj gen (dr) g d bakshi SM, VSM (retd) director shishir bhushan corporate consultant k j singh art consultant divya gupta central saint martins college of art & design, university of arts, london corporate communications tejinder singh creative vivek anand pant administration shveta gupta representative (Jammu and Kashmir) salil sharma correspondent (Europe) dominika cosic production dilshad and dabeer webmaster sundar rawat photographer subhash circulation and distribution mithlesh tiwari e-mail: (first name)@dsalert.org info: info@dsalert.org articles: articles@dsalert.org subscription: subscription@dsalert.org online edition: online@dsalert.org advertisement: advt@dsalert.org editorial and business office 4/19 asaf ali road new delhi-110002 (India) t: +91-011-23243999, 23287999, 9958382999 e: info@dsalert.org www.dsalert.org

disclaimer all rights reserved. reproduction and translation in any language in whole or in part by any means without permission from Defence and Security Alert is prohibited. opinions expressed are those of the individual writers and do not necessarily reflect those of the publisher and / or editors. all disputes are subject to jurisdiction of delhi courts. defence and security alert is printed, published and owned by pawan agrawal and printed at graphic world, 1686, kucha dakhini rai, darya ganj, new delhi-110002 and published at 4/19 asaf ali road, new delhi (india). editor: manvendra singh.

I am surprised to see the above quote of my ideal Chanakya on one of Pakistan’s defence websites. DSA’s mission statement is an eloquent quotation from Chanakya’s treasure trove. I wonder if our neighbours have been inspired by DSA! I am sure not many people know that the DSA website is regularly visited by many Pakistani soldiers and officers. The reason is that they very well understand the contemporaneity and relevance of one of Chanakya’s many nuggets of statecraft quoted and enshrined in the Indian national ethos hundreds of years back. Yet I have doubts if this wisdom enlightens any of our current policy and decision makers. We keep hearing day in and day out about modernisation of the defence apparatus but the critical point, which is the mindset at the government level, is yet not prepared or, one suspects, capable of conceptualising and implementing. This stasis is what is really hampering the entire modernisation process in the defence forces. Military officers are emotionally attached to their troops and want to ensure that the best weapon systems are available to them to be able to deal with the many security problems confronting the nation but because of the slow process of decision-making in the government they are bound to see their men sacrificing their lives on the borders to safeguard their Motherland. The government has yet to find a way to get past the self-inflicted logjam caused by bans imposed on supplier companies on the basis of malpractices in contractual obligations. We have seen how China and Pakistan, the two major threats to India, have modernised their defence forces over the past 10 to 20 years and it is so pathetic to see that our Armed Forces have been deprived of sophisticated artillery guns over the past quarter century on grounds that kickbacks were paid in the Bofors deal in which one is still not absolutely sure as who was responsible for it. How can we close our eyes and not excel in the modernisation of our defence forces when we very well know that China and Pakistan are spending huge amounts on this. While China has all the money and more for this indulgence Pakistan has been diverting and spending almost the entire foreign aid on its defence expenditures and the major chunk is spent on the modernisation of its forces. I don’t see any valid reason for the unnecessary delay in modernising our forces which should be our top priority. Our esteemed contributors have highlighted many facts and the vulnerability scenario of our defence forces in this edition. You will also find a comprehensive research based coverage on the defence procurement and its procedures which could be of great value for the industrial houses in India and abroad who wish to manufacture and supply defence products for the Indian forces. Every defence personnel serving or retired has great concern for the security of the country and its forces and thus instead of mere discussions on this matter of urgency, the government should act very speedily to equip the defence forces with all the best equipment to counter every threat be it nuclear, conventional or asymmetric from our neighbours. I think the government should now follow the edicts of Chanakya and make the Indian Armed Forces strong, well equipped and war ready without losing any more time. We will be celebrating the 65th Independence Day on 15th August and I think this will be the best day to announce a comprehensive policy on defence modernisation. This will be the real salute to the Indian soldiers and the people of India.

“The country comes first - always and every time”.

prime requisite for the rise of a major power is the capacity to achieve autarky in critical weapon systems. India has been struggling unsuccessfully to attain this autarky for the last six decades. Self-reliance in defence is a vital imperative not just for achieving strategic autarky but also to urgently generate jobs for a rising youth bulge in our demographic profile. By 2026 we will need to generate some 700 million jobs. Off-shoring defence production jobs to USA or France therefore becomes a particularly bad idea in this context. How do we create a vibrant Defence Industrial Base (DIB) in India? Why have we failed to craft one so far? Till date India has passed through three cycles of weapons modernisation. The first one, post independence, saw us spending a measly one per cent of our GDP on defence. This invited the disaster of 1962. The second, post-1962 cycle of modernisation, saw a massive Soviet effort to subsidise our military build-up. It was in this phase that we saw the onset of licensed production in a big way to achieve self-reliance. This was purely an optical illusion. License production as a quick fix did great damage to our in-house Design and R&D capacities. The HF-24 design team, the teams that made our 75/24 Howitzer and 105 mm Field guns were all disbanded and the experience irrevocably lost. Only the Indian Navy retained its Ship Design teams and is today building, rather than buying a new Navy. The Defence Public Sector with its captive customer base felt no need to innovate or carry out any Product improvement or technology development. It failed to carry out any in-house midlife upgrades of the equipment it was manufacturing. The sudden collapse of the USSR in 1990 highlighted the hollowness and fragility of our self-reliance. We went panic buying for spares to keep our Soviet era fleets of jets, tanks and ships going. As it is, most of these were nearing the end of their life cycle. India had to recapitalise its military stock in a major way. The demise of the Soviet Union eclipsed our highly subsidised source of high-tech weaponry. Our own economy came perilously close to collapse in 1991 and we had to divert all our energies in reviving our economy. Our military modernisation had thus to be postponed by over two decades. We are now into our third cycle of military modernisation. Almost our entire capital military stock of the Soviet era is being replaced. Despite all claims of self-reliance, 74 per cent of this capital military stock is being imported from Russia, Israel, USA and France. Our indigenous Public Sector Defence units have not been able to provide even basic replacement of small arms and rookie trainer aircraft. Some 30 years down the line, we will enter the fourth cycle of military modernisation when the capital stock now being inducted will need to be replaced. Will we still be importing all our weapons in 2030-2040? It is a pathetic thought for a self-confessed Regional Power and an aspiring global power. We need to indigenise with a vengeance – not just for reasons of Strategic autonomy but even more for reasons of economic well being. We need to create a vibrant Public-Private Partnership in Defence. The dynamism of the Private sector must be harnessed at the earliest. Aged and hierarchical defence bureaucracies of the public sector and DRDO by themselves can never deliver self-reliance. Let us not forget that the Private Sector had, in just 17 years, transformed India from a failed economy to a Trillion dollar plus economy. We need to learn lessons from the Chinese Military-Industrial Complex which is also being corporatised. The simply amazing fact is that the failed state of Pakistan next door has been exporting its small arms and low grade military products to some 30 countries. We must get in the Private Sector. We must revise FDI levels in defence Industry to 49 per cent from the unviable 26 per cent. The Defence Industry needs to be given tax concessions and incentives (on par with SEZ). We must get the brightest and the best for our R&D and Design Teams. The Private Sector will be able to get them easily. We must put in place the Public-Private Partnerships for foreign tie-ups for producing high-tech military equipment for 2030-40 in place Now. We must not waste out the design experience gained in the LCA and Arjun Projects and build on this to design gen-next tanks, ICVs and fighter jets. In the here and now we must invite Private Sector Indian consortiums to produce a family of modern small arms, Future MBTs and ICVs, Medium Transport Aircraft, Tactical and MALE UAVs as also Multi-role Helicopters for the Navy at the earliest possible. The Private Sector is already getting in a big way into the Homeland Security Sector. Why can’t it happen in the field of Defence Production? The labyrinth of rules and red tape created by the ponderous Ministry of Defence cannot become an end in itself. The Country needs a DIB not a self-serving and self-perpetuating defence bureaucracy.

Maj Gen (Dr) G D Bakshi SM, VSM (retd)

We at DSA salute each and every defence personnel, serving or retired and all Indians on this Independence Day which commemorates India’s emergence from colonial bondage to freedom. Jai Hind!

pawan agrawal

August 2012 Defence AND security alert

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here is much speculation about the rise of India as a global player, both within the country and outside. Expectations are that the country will grow, in every sense of the word, to claim its place on the global high table. The current economic and political glitches notwithstanding, there is belief that India will find its role, sooner rather than later. Surveys and research papers are produced to underline this expectation. But there are certain fundamentals that have yet to be addressed, let alone overcome, before the country can be considered to have become a world player.

These range from the political, social, economic to the military aspects of being a global power. They are far too many to be discussed and dissected in about 500 words. But for its soft power achievements, India has to go a long way in order to be accepted as a global player. It is important, therefore, to be dispassionate in accepting the shortcomings that prevent India from becoming a world power. Chief amongst which is the role of its military in power projections and power statements. Ever since the disaster of Operation Pawan in Sri Lanka, 1987-90, India as a polity has been chary of discussing the projection of its military power. Granted that the military itself needs to be re-jigged in order to play 21st century power projection roles, but it is largely political deficiencies that prevent India from emerging as a new global power. The political class remains ignorant of military shortcomings, as well the potential of its power.

There is a fundamental defect in the structure and functioning of the Ministry of Defence. Much has been written about this subject. But what remains under-reported and therefore grossly misunderstood, is the importance of a domestic defence industrial base in order for the country to grow as a military power. Defence industry as it currently exists in the country is limited in technology, vision and capabilities. For far too long it has been a preserve of the PSUs and their Ordnance clones. And this is its biggest failing thus far. Even as the people of India globalise and integrate on equal terms with the developed world, the Indian defence sector remains mired in splendid isolation. But for a few technically acceptable items most of the Indian defence industry depends on imports that are assembled in the country and then marketed to the military. This cosy monopoly situation has given the military second rate equipment, at unacceptable prices. The Tatra truck scam is simply the most obvious one. There are many more that are currently happening. The current arrangement is convenient for a few corrupted military men, bureaucrats and politicians. No effort is required to select the best, because that is simply out of reach. So the handout is acceptable and sold as an achievement.

India will never be a world power unless it demonstrates a strong domestic defence industrial base. It is only when the Indian military, on overseas missions, fly, drive and sail in Indian made equipment would the country be regarded as having arrived. Because the original owner of the equipment can simply deny India permission from using its equipment outside of the country. Which then means the Indian military is vulnerable to international vendors and their political authorities. This is an unacceptable situation for a country poised to play a greater global role. The sooner this is resolved the better it is for Indian enterprise, innovation, the economy and its military might.

manvendra singh

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August 2012 Defence AND security alert

contents Defence Industrial Base Special Issue August 2012

An ISO 9001:2008 Certified Magazine

Vo l u m e 3 I s s u e 11 A u g u s t 2 0 1 2

A R T I C L E S defence production: enhancing public-private cooperation

buyer to a builder’s Indian military

crafting a vibrant defence industrial base for India

private sector and development of a vibrant defence production sector

defence industry reforms: aviation

defence procurements, policy, procedure, process and practice: an industry perspective

incubating technologies today for a vibrant ‘DIB’ tomorrow

fast track indigenisation strategy for India

naval and merchant ship building: an imperative for a rising power like India to add clout to India's industrial rise

India’s defence industry base

finding nemo - can India ever come up with its own defence industrial base?

neither here nor there

Lt Gen Kamal Davar PVSM, AVSM (retd) Vice adm Barry Bharathan (retd)

Maj Gen (Dr) G D Bakshi SM, VSM (retd)

Maj Gen (Dr) Mrinal Suman AVSM, VSM (retd) Air Vice Marshal A K Tiwary VSM (retd)

Cmde Sujeet Samaddar, NM (retd)

Rear Adm (Dr) S Kulshrestha (retd) Brig Rahul Bhonsle (retd)

Cmde Ranjit Bhawnani Rai (retd) Dr Rajiv Nayan

Pathikrit Payne Cecil Victor

for online edition log on to: www.dsalert.org

August 2012 Defence AND security alert

C O L U M N S radicalization in prisons Dr Rupali Jeswal

making smart procurement decisions Dr Vivek Lall

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F E A T U R E S book review: the fertile soil of jihad

August 2012 Defence AND security alert

defence industrial base

TIME TO TRULY SYNERGISE

M Lt Gen Kamal Davar PVSM, AVSM (retd) The writer is a distinguished soldier having served in all theatres of operations in his 41 years of service. A veteran of the 65 and 71 operations, he was wounded in action in the 1965 ops. Was the first armoured corps officer to be specially selected to be GOC Ladakh where he implemented many operational and logistical innovations. Has been Chief of Staff of a Corps HQ in Jammu and Kashmir and then as GOC 11 Corps responsible for the defence of Punjab. He was especially selected by the government of India to raise the Defence Intelligence Agency after the Kargil War. After retirement the General writes and lectures on security issues. He is widely known to passionately espouse the cause of jointness in the Indian Armed Forces. As the first DG, DIA, many intelligence initiatives including abroad were taken by him.

Among the many causes which have bedevilled the growth of indigenous defence industry in India, among the foremost has been that the nation has failed to synergise the lethargic bureaucratic public sector with the technologically advanced, well established and proven private industry. Will the twain ever meet remains a moot question even now, for the government’s frequent policy assertions of encouraging the private sector in the strategically critical defence sector have, in reality, been just pious pronouncements and never been forcefully implemented.

odernisation of its Armed Forces and the timely induction of critical technologies and state-of-the-art equipment in them is sine qua non for National security. This is, however, only possible if the country and its government step aside from the beaten track, courageously infuse a synergistic approach between its non-performing public sector and the grossly unutilised private sector besides encouraging suitable defence majors from friendly foreign countries across the world to set up manufacturing facilities in India. Defence production was, like in most critical areas, entrusted to the public sector as enunciated in the Industrial Policy Resolution of 1948. The first Defence Procurement Policy (DPP) was enunciated in 2001 with much fanfare permitting private sector participation in the defence sector. This major policy initiative encompassed 100 per cent participation by the private sector with foreign direct investment (FDI) permissible up to 26 per cent subject to security clearances and licensing. The cap of 26 per cent has deterred the inflow of FDI. The Original Equipment Manufacturers (OEMs) were not keen to invest and share critical technologies in a joint venture (JV) where they have only a 26 per cent stake with no significant control over their intellectual property, strict capacity and product constraints, no purchase guarantees, no access to exports for other markets and a perceived unfair advantage to the public sector! In respect of all contracts above Rs 300 crore, 30 per cent offsets have to be provided by the foreign supplier, that is, specified goods and services to the tune of 30 per cent of the value of the contract have to be procured from the Indian industry. 17 offset contracts have been signed so far with a value of US$ 4.279 billion … however most of these offset projects are under implementation and the correct picture will emerge only later. A modest beginning has been made by the government in the “Make” category where two major programmes, the Fighting Infantry Combat Vehicle (FICV) and the Tactical Communication System (TCS) have been opened to both the private and public sectors to compete in showcasing their products for development and subsequent trials. Hopefully this will result in a level playing field.

s India strives to take its rightful place on the global high table, a significant imperative to propel and sustain its aspirations is self-sufficiency in the production of critical military equipment - a capability which has sadly deluded it for a variety of avoidable reasons since independence. Nothing short of a paradigm shift in the entire gamut of defence research and development and thence production in the country is warranted for modernisation of the nation’s Armed Forces has fallen way behind in the desired levels of combat preparedness essential for the nation’s security with many potentially serious dangers looming on India’s security horizon in the foreseeable future. It will perhaps be overstating the obvious that a country which is not reasonably self-sustaining in its defence requirements can ever pursue an independent foreign policy or be secure. Importing arms and weapon systems is only a short-term solution and not an eternal panacea for ensuring modernisation of the Armed Forces to the desired levels. Though, for long, India has echoed sentiments of indigenisation of defence production in keeping with its growing stature, investing heavily in its Defence Public Sector units and ordnance factories - sadly the latter have not been

August 2012 Defence AND security alert

DEFENCE PRODUCTION: ENHANCING PUBLIC-PRIVATE

COOPERATION able to deliver and even after 65 years of independence, India still imports more than 70 per cent of its defence requirements for the three services - a fact which borders on being gravely embarrassing and totally unacceptable from the security point of view.

Modernisation of its Armed Forces and the timely induction of critical technologies and state-of-the-art equipment in them is sine qua non. This is, however, only possible if the country and its government step aside from the beaten track, courageously infuse a synergistic approach between non-performing public sector and the grossly unutilised private sector besides encouraging suitable defence majors from friendly foreign countries across the world to set up manufacturing facilities in India Responding to growing security concerns especially from the gigantic military build-up of an increasingly

assertive China and the likely collusive threat from an unstable, nuclear armed and unfriendly Pakistan and China combined, the Indian Armed Forces are, by expert estimates, likely to spend for modernisation programmes over US$ 100 billion in the coming decade! Should not a generous portion of these astronomical sums be invested on equipment produced by indigenous sources and suppliers, if they could - imagine the fillip to our currently sluggish economy and the lakhs of jobs which will be generated if the Indian defence industry, both public and from the private sectors, could rise to the occasion to meet the critical requirements of our Armed Forces. By 2014 it is expected that India would become the third largest spender after the US and China. This makes India one of the most lucrative markets for military products and thus India needs a visionary nationalistic defence production and equally prudent defence acquisition policies for the stakes, both security-wise and in sheer economics are rather high.

Background

At the dawn of independence when India initiated its five year plans for the industrialisation and development of the country, in pursuit of this aim, defence production was, like in most critical areas, entrusted to the public sector as enunciated in the Industrial Policy Resolution of 1948. Though India at the time of independence had nearly half a dozen ordnance factories established by the British as early as 1801, they barely met the requirements of a newly emerging nation. Accordingly, some Defence Public Sector Undertakings (DPSUs) were raised in the early 50s and the Defence Research and Development Organisation (DRDO) was established in 1958 to give fillip to the indigenous development of arms and ammunition in the country. Though no spectacular results were ever achieved by the many DPSUs or the DRDO, successive governments have been injecting resources liberally into the public sector for enhancing defence production for

August 2012 Defence AND security alert

defence industrial base

TIME TO TRULY SYNERGISE

the three services but even by conservative standards, the results have been dismal and disappointing. India now has 8 gigantic DPSUs, 40 huge ordnance factories and 52 laboratories in the public sector but the goal of self-reliance in defence production remains a distant dream with the nation importing over 70 per cent of its defence requirements especially in the critical areas of high technology and state-of-the-art equipment.

It will perhaps be overstating the obvious that a country which is not reasonably self-sustaining in its defence requirements can ever pursue an independent foreign policy or be secure. Importing arms and weapon systems is only a short-term solution and not an eternal panacea for ensuring modernisation of the Armed Forces to the desired levels. Though, for long, India has echoed sentiments of indigenisation of defence production in keeping with its growing stature, investing heavily in its Defence Public Sector units and ordnance factories - sadly the latter have not been able to deliver and even after 65 years of independence, India still imports more than 70 per cent of its defence requirements for the three services Among the many causes which have bedevilled the growth of indigenous defence industry in India, among the foremost has been that the nation has failed to synergise the lethargic bureaucratic public sector with the technologically advanced, well established and proven private industry. Will the twain ever meet remains a moot question even now, for the government’s frequent policy assertions of encouraging the private sector in the strategically critical defence sector have, in reality, been just pious pronouncements and never been forcefully implemented.

The past decade and DPP 2001 Shaking itself out of the outmoded policy of over-reliance on its mediocrely productive public sector, India commenced the liberalisation process in 1991. However, for inexplicable reasons, the defence sector was still kept shackled to the antiquated past policies till it was realised by the government that private sector participation was critical for defence production and thus the first Defence Procurement Policy (DPP) was enunciated in 2001 with much fanfare permitting private sector participation in the defence sector. This major policy initiative encompassed 100 per cent participation by the private sector with foreign direct investment (FDI) permissible up to 26 per cent subject to security clearances and licensing. This policy was expected to harness the expertise of the private sector and assist in its participation through the infusion of foreign capital and high-technology for enhancing self-reliance in defence production. However, no substantial breakthroughs in defence production resulted owing to a mismatch in governmental decisions and the private sector’s reluctance to adequately invest in research and development (R&D) in frontline technologies and establish vastly capital oriented infrastructure to produce military equipment especially with certainty in governmental orders lacking.

August 2012 Defence AND security alert

The DPP 2001, though well intentioned, also suffered from some handicaps, apart from those mentioned above. Firstly, there was no definition of ‘defence industry’or ‘defence equipment’ under this policy and the FDI in manufacturing for the defence industry is subject to 26 per cent cap under the government route - the cap of 26 per cent has deterred the inflow of FDI. The Original Equipment Manufacturers (OEMs) were not keen to invest and share critical technologies in a joint venture (JV) where they have only a 26 per cent stake with no significant control over their intellectual property, strict capacity and product constraints, no purchase guarantees, no access to exports for other markets and a perceived unfair advantage to the public sector! A detailed analysis of the non-success of the DPP 2001 has been since carried out and its varied inadequacies endeavoured to be addressed now. It must be mentioned however that though the Department of Industrial Policy and Promotion did issue 155 Letters of Intent to Indian companies but nothing much in reality fructified on the ground. In addition, the inflow of FDI has not been encouraging with inflows till December 2011 (a decade since opening up), this sector attracted a meagre investment of US$ 3.2 million only indeed a laughable figure. The Indian private industry has been apprehensive of venturing into the defence sector because of the huge risks involved. However, as regards collaboration with foreign manufacturers, there appears to be a possibility that the upper limit of FDI in defence sector could be raised to 49 per cent in the near future.

Imagine the fillip to our currently sluggish economy and the lakhs of jobs which will be generated if the Indian defence industry, both public and from the private sectors, could rise to the occasion to meet the critical requirements of our Armed Forces. By 2014 it is expected that India would become the third largest spender after the US and China. This makes India one of the most lucrative markets for military products and thus India needs a visionary nationalistic defence production and equally prudent defence acquisition policies for the stakes, both security-wise and in sheer economics are rather high The government of India did carry out a significant policy initiative in 2006 when the MoD brought about a change in the procedure of defence equipment procurements from abroad. In respect of all contracts above Rs 300 crore, 30 per cent offsets have to be provided by the foreign supplier, that is, specified goods and services to the tune of 30 per cent of the value of the contract have to be procured from the Indian industry. This prudent step has helped, in a small way so far, not only the Defence PSUs and ordnance factories in India but outsourcing has developed a wide vendor base incorporating large, medium and even small scale enterprises. In May 2012, Defence Minister A K Antony stated in Parliament that 17 offset contracts have been signed so far with a value of US$ 4.279 billion … however most of these offset projects are under implementation and the correct picture will emerge only later. It is worth noting that the Defence Offsets Policy is indeed a powerful tool to ensure that large purchases from foreign vendors are matched by substantial investments domestically which helps both our public and private sectors to enhance their capabilities.

The current state and DPP 2011 It must be noted that between 2006 and 2010, according to reliable international estimates, India surpassed China as the world’s largest importer of weapon systems reflecting the nation’s will to modernise its armed forces. Since 2001, the country’s defence spending has risen significantly to reach US$ 38 billion from US$ 30.52 billion in 2009. This trend has continued as the budget for 2012-13 has allocated a mammoth US$ 16 billion toward capital expenditure for modernisation of the three services which naturally will include big ticket deals. India’s huge arms market provides significant opportunities for own DPSUs, ordnance factories, the Indian private sector and foreign OEMs to get their act together with the necessary encouragement from the government to induct state-of-the-art equipment for the Indian Armed Forces in an acceptable time frame.

On 16 June 2012, Defence Minister Antony confirmed to the Indian Parliament that India had become the largest importer of defence equipment and accounts for 10 per cent of the global purchases of US$ 200 billion bill annually ... by any standards a disturbing development when by this time we should have been self-reliant and not importing more than 30 per cent of equipment. Owing to the falling value of the rupee, the nation has been further heavily burdened with dollar denominated orders. Thus there is no other option but for the government to energise the DPSUs, ordnance factories, promote public-private partnerships and joint ventures in the lagging Defence sector. Raising of FDI limits in the long term security interests of the nation needs to be also considered Prime Minister Dr Manmohan Singh while speaking at the National Technology Day 2010 Awards Ceremony had emphatically stated that “The government will encourage the participation of India Inc in the defence sector through public-private partnerships. Greater participation of Indian industry in the defence sector is a ‘must’. Our government will encourage public-private partnerships as a catalyst towards achieving this objective.” However, his Defence Minister Antony on 15 December 2010 acknowledged that “... despite our best intentions and earmarking huge budgets and allocating money, the modernisation efforts have not borne the desired results.” With a view to achieving self-reliance in design, development and production of defence equipment, weapon systems and platforms, Defence Minister A K Antony had unfolded the ambitious Defence Production Policy (DPrP) 2011 last year. The policy is also directed at encouraging the private sector to play an active role in the overall aim of achieving self-reliance in the development and production of defence equipment in

the country. The DPrP is designed to act as a catalyst to enhance the potential of Small and Medium Enterprises (SMEs) for indigenisation as also for broadening the defence research and development base of the country. This Document envisages that based on the approved Long Term Integrated Perspective Plan prepared by the Integrated Defence Staff and approved by the government, equipment, weapon systems and platforms required ten years and futher down will, by and large, be developed within the country. Sub-systems that are not economically viable or practical to be manufactured within the country may be imported. It will be ensured that the design and integration of the platforms and systems be undertaken indigenously. The government is committed to building a robust indigenous industrial base by involving the Indian private sector. In a laudable step, the DPrP has enunciated that to synergise and enhance the national competence in producing state-of-the-art defence equipment within the price and time that are globally competitive, all viable approaches such as formation of consortia, joint ventures and public-private partnerships will be undertaken. The academia, R&D and reputed Indian scientific institutions will be involved in achieving design and development goals. The government will further simplify the procedure under the “Make” category of DPP in a manner which facilitates speedy time frames in production of equipment. The Policy Document has further enjoined the Service Headquarters to streamline their making of Qualitative Requirements by bearing in mind the feasibility and practicality of their requirements. However, only the best and cutting edge technologies will be planned for our Armed Forces. To ensure that defence projects are keeping to their schedules, the Defence Minister will hold an annual review of the progress in self-reliance that has been achieved during the year. It is also encouraging to note that 12 Development Centres with the latest CAD / CAM facilities to boost R&D efforts in the ordnance factories have been set-up.

August 2012 Defence AND security alert

defence industrial base

TIME TO TRULY SYNERGISE

The way forward On 16 June 2012, Defence Minister Antony confirmed to the Indian Parliament that India had become the largest importer of defence equipment and accounts for 10 per cent of the global purchases of US$ 200 billion bill annually … by any standards a disturbing development when by this time we should have been self-reliant and not importing more than 30 per cent of equipment. Owing to the falling value of the rupee, the nation has been further heavily burdened with dollar denominated orders. Thus there is no other option but for the government to energise the DPSUs, ordnance factories, promote public-private partnerships and joint ventures in the lagging Defence sector. Raising of FDI limits in the long term security interests of the nation needs to be also considered, of course, with the requisite checks and balances monitored by the government.

Defence Production Policy (DPrP) 2011 is directed at encouraging the private sector to play an active role in the overall aim of achieving self-reliance in the development and production of defence equipment in the country. The DPrP is designed to act as a catalyst to enhance the potential of Small and Medium Enterprises (SMEs) for indigenisation as also for broadening the defence research and development base of the country. This Document envisages that based on the approved Long Term Integrated Perspective Plan prepared by the Integrated Defence Staff and approved by the government, equipment, weapon systems and platforms required ten years and futher down will, by and large, be developed within the country. Sub-systems that are not economically viable or practical to be manufactured within the country may be imported As Defence manufacturing opens up to the private sector, emphasis naturally must be on Indian companies as ISRO has also done in its outsourcing requirements. Another good example has been India’s LCA programme which has reportedly spawned some 300 small and medium Indian companies that have made an important contribution to it. Indian majors like Tata, L&T and Mahindra Defence and the Indian government / DPSUs / DRDO may consider coordinating some of their efforts with proven high technology Defence companies abroad. The Chinese, as always one-up on the world, have invited foreign firms to invest in their defence sector and establish manufacturing facilities in China - with necessary safeguards and partnerships this could be replicated in India too especially in areas where we do not have much expertise yet. Transfer of critical technologies and joint ventures will certainly benefit the nation and our Armed Forces. A modest beginning has been made by the government in the “Make” category where two major programmes, the Fighting Infantry Combat Vehicle (FICV) and the Tactical Communication System (TCS) have been opened to both the private and public sector to compete in showcasing their products for development and subsequent trials hopefully in a level playing field. In any case, many sub-systems for weapons being produced by own DPSUs

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have been contracted since many years from private vendors both Indian and foreign. Overall, currently the indigenous production capabilities do not appear to be bright and it is estimated that a minimum of 65 to 70 per cent of the huge Indian defence budgets in the foreseeable future will be directed to imports. Defence Minister Antony has opined recently that “Our aim is to have a strong industrial base in India, because a country like India cannot indefinitely depend on foreign suppliers for majority of our equipment.” A point in case is the Indian Navy procurement for which public sector shipyards will have to compete with private sector shipyards in India for the Indian Navy orders. According to the Defence Minister, “Buy Indian and Make Indian” will be the guiding factor in India’s procurement policy. Though this policy has been enunciated, some reports in the media have voiced the disappointment of Indian private players when orders recently for six Coast Guard Offshore Patrol Vessels were placed with the public sector Goa Shipyard instead of some of them. The Ministry of Defence will have to ensure that in competition between the public and private sector, a level playing field exists for all otherwise we will be back to square one and the modernisation of our Armed Forces will suffer.

All viable approaches such as formation of consortia, joint ventures and public-private partnerships will be undertaken. The academia, R&D and reputed Indian scientific institutions will be involved in achieving design and development goals. The government will further simplify the procedure under the “Make” category of DPP in a manner which facilitates speedy time frames in production of equipment. The Policy Document has further enjoined the Service Headquarters to streamline their making of Qualitative Requirements by bearing in mind the feasibility and practicality of their requirements

Conclusion As India gears up to meet the formidable security challenges especially in its restive neighbourhood, modernisation of its Armed Forces and the timely induction of critical technologies and state-of-the-art equipment in them is sine qua non. This is, however, only possible if the country and its government step aside from the beaten track, courageously infuse a synergistic approach between non-performing public sector and the grossly unutilised private sector besides encouraging suitable defence majors from friendly foreign countries across the world to set up manufacturing facilities in India. Though “Made by India” should be endeavoured for zealously but as long as the bulk of modern equipment for its forces is “Made in India” it will be eminently acceptable. If India does not accord a level playing field and adequate official support and encouragement to all stakeholders in the arms production cycle, India’s modernisation of its forces will slump further to the detriment of the nation’s security.

defence industrial base

PERSPECTIVE PLANNING

T Vice Adm Barry Bharathan (retd) The writer is former Vice Chief of Naval Staff. He also served as Indian Naval Attache in Washington DC, USA.

The foundation of our Defence technology edifice is ready and strong. Rapid advances in science, material development, electronic-engineering fusion all point towards the advantages of adopting a strategy of technology leapfrog. Reinventing the wheel is no longer needed as India is emerging out of the denial drought. The West woos us while the East engages us vigorously. France and Israel are good examples as is Russia. USA too has had success in India. All this highlights the availability of a span of technologies that can be adopted and adapted to become industrially and Militarily Indian

here should be long term integrated, indigenisation perspective plans similar to military plans. Creation of a Military Industrial Commission with expertise from all entities and empowered to monitor self-reliance standards, performance and progress should become a mandate for the Cabinet Committee on Security. Import imperatives are inescapable till we become robustly indigenised in combat equipment, systems and support logistics. Imports can be cost effectively optimised through collegiate decision making pre-audited acquisition processes. This needs an integrated "Civil-Military" approach with mandated capability assessed procurement. The bureaucracy and the military must be unified to produce time and cost conscious, accountable practices.

0 years down the line, four battle engagements in the annals of our fledgling democratic history, we haplessly, helplessly continue to be a Buyer’s Military. By all reasoning we ought to have been a Builder’s Military. However, our Defence technology story is filled with few unexpected miracles and many unacceptable failures. Why is India in this state? We have the IQ, organisation, bandwidth, robust academic, scientific, technology, industrial base. Yet our percentage of “making in India” is virtually non-existent. Year after year, our honourable Defence minister proclaims from the ramparts of South Block that India will become 70 per cent self-reliant. The hollowness of this statement is so apparent to all in the business, including the minister himself. Is it wishful thinking or an empty promise? The obvious overarching fault lies at the doorstep of the Ministry of Defence. If this is set right it is only a matter of time for India to truly become a “Builder’s Military”. This first fundamental must be understood, accepted and corrected by the political leadership. Only then can there be review, revamp, policy, planning and multilateral participation by all the stakeholders.

Ministry of defence or ministry of military coordination The present organisation, functioning, structure and the lack of an integrated approach within the MoD behoves that it be aptly renamed Ministry of Hopeful Military Coordination. The Ministry of Defence Schematic on the next page highlights the loose limbed arrangement in Responsibility, Authority, Accountability and Ownership. The Armed Forces and the Civilian Bureaucracy are not integrated. Compartmentalisation within both systems is a given. The Chief of Integrated Staff committee (CISC) and his Integrated Headquarters try to coordinate between the Ministry, Service Headquarters. There is no laid down institutionalised coordination between the users i.e. the Military and the DRDO labs, the Defence Public Sector Undertakings. In effect the concept of tasking the DRDO / DPSUs by the Military is unheard of in India. Consequently Buying for “Immediate Operational needs” takes priority than building for India’s sustainable Security needs. There is neither commitment to “Make in India” nor a sense of strategic self-confidence to become a “Builder’s Military” Here again the overarching constraint is the absence of ownership on India’s Military and Security Readiness”. Our Political leadership abdicates its rightful responsibility towards National Security. There is a prevalent and vague Political notion that the elite of both the Civilian and Military Bureaucracy would somehow sort out “Defence Issues” without any direction! Extract of the government of India rules shown below would vindicate the previous statement. The government of India rules of business are distinctly vague on responsibility, accountability of military preparation and readiness. Extracts from the rules of business and MoD website reproduced below, clearly highlight this:

Department of defence (Raksha Vibhag) Defence of India and every part thereof including preparation for defence and all such acts as may be conducive in times of war to its prosecution and after its termination to effective demobilisation.

Buyer to a Builder’s Indian Military

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MoD Organisation

MoD website reads “The Defence Secretary functions as head of the Department of Defence and is additionally responsible for co-ordinating the activities of the four Departments in the Ministry.”

Deterrence of dependency Operational readiness of India for the present is mostly dependent on imports. The deterrence of dependency is a millstone that dangles over our neck. Civil-military understanding of the issues involved is a must if we have to build at home and reduce our external dependencies. “The Philosophy of approach in self-reliant Military technology is based on concept of purpose, vision of intent, relevancy in role, efficient effectiveness in execution, participation in performance with decisive potency in conflict. It is predicated on the civil-military understanding of the full spectrum of self reliance. There has to be blend and balance in dependency, interdependency and independency in military technology”.

Indigenisation means building at home complete systems or parts thereof. Here too we have several achievements in terms of graduating from assembling knock-down kits to building from scratch. All these have been part of a big trial and error process. The services too have set up considerable technology infrastructure. Base repair depots, EME workshops, naval dockyards for operational maintenance and repair Indigenisation imperatives Modern warfare is nothing but techno-superiority advantages. It is akin to the battle between the arrow and the gun. We are understandably lagging in combat; military hardware engineering, metallurgy, defence R&D. All these require considerable gestation time. The DRDO, The Bureaucracy and the Military have a common aim but with differing non-integrated approaches. A few salient pointers to improve upon the existing arrangements, portrays this.

Civil-military technology strategy for self-reliance The Department of Defence production, the Defence Research Development Organisation, The Armed Forces, The Defence Public Sector Undertakings and the Private industry need to be brought together institutionally to create a robust Military Industrial base. The concept of mutual oversight between the various entities needs to be formalised. There should be long term integrated, indigenisation perspective plans similar to military plans. Creation of a Military Industrial Commission with expertise from all entities and empowered to monitor self-reliance standards, performance and progress should become a mandate for the Cabinet Committee on Security.

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defence industrial base

PERSPECTIVE PLANNING

Import imperatives Import imperatives are inescapable till we become robustly indigenised in combat equipment, systems and support logistics. Imports can be cost-effectively optimised through collegiate decision making pre-audited acquisition processes. This needs an integrated “Civil-Military” approach with mandated capability assessed procurement. The bureaucracy and the military must be unified to produce time and cost conscious, accountable practices.

There should be long term integrated, indigenisation perspective plans similar to military plans. Creation of a Military Industrial Commission with expertise from all entities and empowered to monitor self-reliance standards, performance and progress should become a mandate for the Cabinet Committee on Security

Buying to building defence technology Indian Defence Technology is at the crossroads of a junction. Four roads are there for us to take. What are the four roads, we are talking about! The Import Highway

changed this. The Sino-Indian conflict and the setbacks of the venerated Indian Military came as rude shocks. One expected the establishment to respond. It barely reacted. The military was licking its pride and wounds. The blame game was distracting. Within the three services and the bureaucracy the culture of working in isolation, took deep roots. Our non-aligned posture did nothing to alleviate the military hollowness. The then Soviet Union stepped in to unconditionally support India. That democracy and communism could co-exist as close bedfellows surprised the West. USA hardened its stand and continued its military technology denial strategy. The Soviet military machine rapidly supplied and trained the three services on relatively modern equipment. To their credit the Indian armed forces adopted, adapted and professionally absorbed the Soviet machinery with aplomb and innovation. To our good luck, the Soviet military ensured identical stringent procedures for equipment testing acceptance and supply at so called friendship prices. However expedient and advantageous this arrangement was the principal issue of Making Defence technology at home was again given a go by! “The Indian military now a British clone, mostly using Russian equipment, with western doctrines in Indian terrain, speaking Hinglish (combination of Hindi and English) is an enigma to itself and the World”

DRDO

The Indian Democratic Defence technology omnibus has five drivers at once. Who are these?

In 1958 the country set up the Defence Research and Development Organisation (DRDO). A visionary approach, considering the circumstances and the environs. However the fundamental flaw was in the concept of its operating philosophy and its stand alone structure. Ever since its inception, this opportune Military R&D set up, the Ministry of Defence and the services have stand-off relationships. There are exaggerated mutual expectations and gross misperceptions. The armed forces want DRDO to rapidly produce advanced technology weapons and systems at par with the Western and Soviet military industrial complex. There is neither appreciation nor empathy on the situation obtaining on the ground. The lack of even a basic defence industrial base, the absence of private industry participation and unpreparedness are all discounted.

The Indian Military

Within DRDO

The DRDO / DPSUs

DRDO has an endemic weakness of being hierarchical with seniority taking priority over talent and innovation. The promotion structure, the pulls and pushes of the annual confidential reports result in the sacrifice of true R&D. The armed forces are obtuse in their appreciation of what military technology development entails. Most ironically the concept of tasking DRDO to develop a felt need or upgrade an existing system is never contemplated. Their comfort level of handling imported equipment and pre-occupation with internal security and external security concerns results in dependency on external sources for military needs.

The Indian Route The Private Path The Nowhere Road

The Private Sector The Political Leadership

The people of India Each one of the first three, want to take a different road. Each one is correct and each one is wrong. The fourth one does not have a license of understanding. The fifth one is passive and perhaps indifferent. Since no consensus is obtaining the omnibus has driven itself mostly to the fourth road. The most important aspect of this impasse is the fact that the import highway is used by outsiders to show their advanced technology hardware to the relief and delight of the military. The latter already hard-pressed operationally, wants to use what they perceive would serve them optimally. The Indian route is also slowly gaining in status and repute. It is slowly finding its niche thanks to the persistence of the government that is being pushed to allow both the Import highway and Indian route to coexist. The Private path has just begun to be paved but has to depend on both the Military and DRDO / DPSUs.

Overview assessment 60 years post-independence India has come of age in terms of a capable civil industrial complex and a home-grown military technological complex. All this has been part of a democratic process, plodding, painful, perplexing and persevering. From a completely buyer’s military we are becoming a partial builder’s military. Warships from our Defence shipyards, aircraft, helicopters from HAL, tanks from Avadi tank factory have all appeared on our military horizon. There are debates for and against on their operational viability. These actually do not matter as the country has realised the value of self-reliance and we can only keep on improving. INS Mumbai (D62) India Built

The “Nowhere Road” is an illusion. It looks real and good close at hand but is actually a shimmering mirage. Our country has no choice but to be on this road. Post independence India chose to be non-aligned. The West shunned us and ensured that even great Britain did not pass on military technology. If we missed the industrial revolution in the distant past, we missed the technological evolution of the late 19th and early 20th century. The West led by USA with the experience of two World Wars emerged as a superior military technology power in comparison to the Soviet Union in the communist bloc. Yet both possessed the ability of mass destruction. The cold war era left India stone cold in terms of military technology.

Divide between foreign policy and national security Compounding this was the ironic reality of the Indian Leadership approach of separating foreign policy and security. Consequently, Defence technology was far removed from the Politico-Bureaucratic-Military mind. The bad news is that, Indian Defence technology is never a focus in the minds of the leadership. Even 1962 has not

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defence industrial base

PERSPECTIVE PLANNING

60 years down the line, four battle engagements in the annals of our fledgling democratic history, we haplessly, helplessly continue to be a Buyer's Military. By all reasoning we ought to have been a Builder's Military Many studies ordered by the government have comprehensive pragmatic, cost effective recommendations to bring in much needed reforms in the defence sector. Top down political and bureaucratic directives to actualise these recommendations would go a long way in India becoming a Builder’s Military.

The clarion call of the present

Dhruv Helicopter HAL Made

The state of indianisation and indigenisation Indianisation means converting all equipment to meet our military needs. In this there has been considerable achievement as proven in the 1971 and Kargil Op Vijay. The use of missile boats, MiG 21s, armour and weapons is testimony to our innovative adaptation of equipment.

Overview examination of the current status of India’s military technology complex would reveal that the country needs to achieve near self-reliance in critical areas of weaponry, engineering, electronics and hardware. Propeller shafts, tank and aircraft, ships, engines, heavy guns, precision ammunition, networked surveillance systems, military transportation aircraft and the like all have to be imported. This in itself is understandable considering the fledgling nature of our evolution and the disparateness within our stable secular democracy. In fact the many things that have been achieved should encourage us to look ahead. More importantly the existing infrastructure, the enormous investment made thus far, the readiness of private industry participation make it possible for the country to cross the Rubicon of dependency to self-dependency. Indianisation to indigenisation and finally becoming Indian is definitely possible within the next three decades.

LCA Tajas

Indigenisation means building at home complete systems, or parts thereof. Here too we have several achievements in terms of graduating from assembling knockdown kits to building from scratch. All these have been part of a big trial and error process. The services too have set up considerable technology infrastructure. Base repair depots, EME workshops, naval dockyards for operational maintenance and repair.

Operational readiness of India for the present is mostly dependent on imports. The deterrence of dependency is a millstone that dangles over our neck. Civil-military understanding of the issues involved is a must if we have to build at home and reduce our external dependencies In a nutshell we have indianised well, indigenised satisfactorily and yet nowhere near becoming “Indian” in terms of becoming reasonably self-reliant across the spectrum of Indian battle order needs. This realistic assessment has to be viewed in sanguine terms. Holistic overview would readily point out that India has individual excellence, brilliance and vision. Organisational obtuseness, lack of collective strategic vision, synergy and hands-off Political leadership continue to keep us on the “Nowhere road”. Macro realities highlighted below need openness in understanding the big picture. Only then change can take place for the greater good in becoming a self-reliant military technology complex in the next three decades or so.

Way ahead

Macro realities

Way ahead steps should be:

The way the higher defence decision tree is designed is sub-optimal in function, output and result. The concept of customer satisfaction as an important accountable imperative is more in absence. Lack of ownership approach by the armed forces too is an impacting militating factor. Notable examples are the LCA Tejas, the MBT Arjun, HAL Dhruv Attack light helicopter among the many. In all these, the military virtually took a hands-off approach and wanted the DRDO / DPSUs to hand them over a readymade product. Then they would examine it for failure! Collective participation then, as is beginning to obtain now would have yielded better results at lower costs. On their part the armed forces were made to feel apprehensive about acquisitions from abroad and hence had a mindset of wait and watch on “indigenisation”.

Identification of Self-reliant goals through priority perspective planning including R&D funding.

The department of Defence production, DPSUs, the armed forces, the DRDO, the MoD, Ministry of Finance, the Home Ministry, the Ordnance factories and the private sector need to have direct dynamic, autonomous connectivity. The absence of any viable MIS both within and outside further compounds the situation of this separateness. All resolutions are at the level of the secretary with an approach of “compromising arbitration”. An environment of all round dissatisfaction and mutual distrust tends to prevail. The Private sector has now been given access and opportunity to participate in the defence sector. This is still at the policy stage. Perceptions of stonewalling by DPSUs prevail in the Private sector. The newness of the latter in matters military technology seems a good enough cause to keep them away from defence production.

This clarion call has to be heard, listened to and understood. The government must bring together, the Armed Forces, DPSUs, the Ordnance factories, the private sector, the DRDO etc. through the aegis of a Military Industrial Commission facilitated by CII / FICCI / CSIR.

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Assessment of Armed Forces, critical needs in equipment and force multipliers. Dissemination of these, pan India through the aegis of workshops, conferences and annual conferences. Plans for Investment and funding for the private sector on a participative commitment philosophy for projects from the above. Establishing technology transfer paradigms and policy directives to all DPSUs.

Review of DPP The Defence Procurement Procedures are evolving well through periodic review. These have the pragmatic potential of becoming a tipping point game changer in our Defence technology becoming dominantly “Indian”.

Melding military and civil technology Melding Military technology and Civil technology as an enterprise needs to be proactively encouraged. Funding for this could be allotted within the Defence Budget. The DPP needs to spell out a charter of Inclusiveness through

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defence industrial base

PERSPECTIVE PLANNING

a collegiate system that gives all stakeholders a sense of security in their vertical expertise. The inhibiting “Either or Or” should be replaced by a “Both” bold strategy.

Military and DRDO The present approach of the Armed Forces in expecting and evaluating each DRDO system for full functional compliance needs to be urgently reviewed. The saying that often times the “best becomes the enemy of the good” must be realised by all Military technology players. Illustrative examples could be LCA Tejas, the HAL Dhruv, MBT Arjun, UAV Rustom, the Akash Missile. These need to form part of the operational orbit of the services even if they are not Staff requirement compliant. The Armed Forces and the DRDO need to ensure that combined functional teams operate in the field. This needs to be in addition to the main operational requirements of the Military, met from sources that are suitable. All such procurements must be on an open transparent participative basis. The acquisition, the trial and project teams of the Services must have DRDO / relevant DPSU / Private Industry participation. The present “Buy, Buy and Make, Make” policies must become expansive and not mutually limiting. This if managed well would enable wider access all round in a win-win approach. The biggest win would be in the transfer of technology.

DPSUs / private industry and military maintenance Institutionalised Integration of Military maintenance infrastructure with DPSUs, PSUs, private sector is yet another imperative. It would be a salutary force multiplier. The Military would become relatively freer to focus on its operational ethos. It would enable Indian Industry to gain valuable battle technology insights. Synergy with understanding would also develop between the public and private sector.

Identification of targets on priority focus Establishing combined project teams with targets and periodic review should become a charter of the Defence Acquisition Council (DAC). The armed forces must commit to operationalise all Indian systems despite their limitations. These could be assigned experimental tasks and missions with scope for retrofit and rectification as the case may be. This would be very optimal in terms of learning while using.

Military and DPSUs Enabling the services to have direct strong leverage in all DPSUs in terms of equipment, systems manufacture, specification, quality assurance, compliance and acceptance. Management boards need to be organised accordingly.

Indigenisation perspective planning Indigenisation perspective planning must be factored within the Armed Forces long term integrated perspective planning. In this must be included the overall internal and external security continuum. This would avoid

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duplication as well as bring in optimal synergy.

Salutary effects The above steps will convert the NOWHERE ROAD TO A SOMEWHERE ROAD. It could be first made into a 4 lane road that allows a level playing field to the Indian route and private path with access also available to the import highway. This requires planning, process and participation along with proportionate parity in equity.

Strategy of technology leapfrog The foundation of our Defence technology edifice is ready and strong. Rapid advances in science, material development, electronic-engineering fusion all point towards the advantages of adopting a strategy of technology leapfrog. Reinventing the wheel is no longer needed as India is emerging out of the denial drought. The West woos us while the East engages us vigorously. France and Israel are good examples as is Russia. USA too has had success in India. All this highlights the availability of a span of technologies that can be adopted and adapted to become industrially and militarily Indian.

defence industrial base

PUBLIC-PRIVATE PARTNERSHIP

CRAFTING A VIBRANT

FOR INDIA DEFENCE INDUSTRIAL BASE

MIC The Defence Acquisition Council, the DG acquisition, the Chiefs / Vice / Deputy can all become part of the MIC (Military Industrial Commission). These could be tiered suitably for policy, planning, review and oversight. It could also have representatives from existing entities like CII, FICCI, DRDO, DPSUs, Armed Forces, Private and Public sector companies. The Military Industrial Commission charter could be created from the findings and recommendations of the various committees set up by the government within the last two decades.

Curtain call Dynamics of Defence Technology is complex. It needs a simple strategy of Direction, Determination, Drive, through the aegis of a Military Industrial Commission. Metallurgy, science, technology, industry, security compulsions are interwoven into Indian military technology. We have had reasonable successes in space. We can have salutary results through dynamic management of our existing resources in the Military domain Pan India. We have to accept that the road to self-reliance and independence has to start from interdependence and inter / intra learning. The collateral spin-off benefits in terms of HR, economics, development, home-grown confidence and export potential are catalysts by themselves for India. India in the final analysis has to account for itself. Participative Civil-Military understanding with laid down rules of business will enable Indianisation, Indigenisation, Integration, Industrialisation in Defence technology. Only then can we progressively become a Builder’s Military.

stablishing a vibrant DIB in India is an imperative not just for reasons of Strategic Autarky but also to provide urgently needed Jobs for our rising demographic youth bulge. The very scope and scale of this imperative is little understood in our country. No viable DIB can be established in India without a vibrant Public-Private partnership. The License Production route gave us an optical illusion of self-sufficiency. The DPSUs simply failed to innovate and even improve upon the products they were producing under license. They were not able to do any continuous technology development nor do midlife upgrades on their own. We have so far seen three cycles of military modernisation. The first one, post independence, saw us spending a measly one per cent of our GDP on defence. The second cycle was heavily subsidised by the Soviet Union. The current third cycle is almost entirely premised upon foreign imports - a sad reflection upon our failure to craft a modern DIB. The Fourth cycle will come some two / three decades down the line when the capital military stock being inducted now will have to be replaced. It would be a tragedy if we still have to bank on imports then. To indigenise truly, we will have to visualise the products we would need then and commence preliminary design and R&D work now in terms of Public-Private Partnerships with suitable foreign tie-ups at the earliest feasible. We must exploit the potential of Disruptive technologies.

Maj Gen (Dr) G D Bakshi SM, VSM (retd) The writer is a combat veteran of many skirmishes on the Line of Control and counter-terrorist operations in Jammu and Kashmir and Punjab. He subsequently commanded the reputed Romeo Force during intensive counter-terrorist operations in the Rajouri-Poonch districts. He has served two tenures at the highly prestigious Directorate General of Military Operations. He is a prolific writer on matters military and non-military and has published 24 books and over 100 papers in many prestigious research journals. He is also Executive Editor of Defence and Security Alert (DSA) magazine.

No viable DIB can be established in India without a vibrant Public-Private partnership. Competition and Foreign tie-ups alone will infuse the necessary dynamism and innovativeness. This will require the FDI component to be raised to 49 per cent. MoD will have to secure SEZ type tax concessions for the Private Sector entry into the defence field. We need to identify and field Disruptive technologies that enable us to leapfrog technology bottlenecks and denial regimes. Crafting a viable DIB in India is beyond the purview of the MoD all by itself. The Process would have to be led by the PMO and Planning Commission with suitable induction of talent from the Public / Private sectors and experience from the services. A whole host of ministries would have to be involved in this gigantic enterprise

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defence industrial base

PUBLIC-PRIVATE PARTNERSHIP

ne of the key requirements for a great power to emerge is a capacity to achieve autarky in all critical weapon systems. Self-reliance in defence is of vital importance not just for strategic reasons but equally for economic reasons. Today India has a huge youth bulge in its demographic profile. Out of its 1.2 billion population some 62.8 per cent are in the working age group. By 2026 India’s population will rise to 1.4 billion and overtake that of China. 68.4 per cent of its people will then be in the working age group and the average age of the Indian would be 29 years. India will thus have the youngest population in the world. 68 per cent of 1.4 billion however translates into the need to create 1 billion jobs by 2026 to ensure employment for our rising army of young people. The stark reality today is that all the jobs in the public and private sector (including the unorganised private sector) presently amount to just around 350 million. Our IT and Service sector based economic rise has generated the miracle of “jobless growth”. Creating jobs for our rising youth population now assumes the contours of a crisis. It is not President Obama who needs to go around the world seeking to create jobs and employment for his people. With India’s massive demographic youth bulge, it will be the topmost priority of the Indian leadership to generate some 750 million new jobs between now and 2026. A vibrant Defence Industrial Base therefore is a vital necessity in India, not just for reasons of strategic autarky and self-reliance but even more because we urgently need to create more jobs to cater for our youth bulge. The alternative would be bloody revolutions and anarchy. India simply cannot afford to offshore its arms acquisition needs and create jobs in America and Europe. It needs to generate jobs in India and it needs to do this fast. Off-shoring defence production jobs is a particularly bad idea in this demographic context.

Public vs private sector Indigenisation has been a populist slogan in India. The Industrial Policy resolution of 1948 mandated that Defence Industries and Aeronautical production should be in the Public Sector. The British had left us a rudimentary Defence Industrial Base to meet the needs of the Commonwealth forces in the war against Japan in South and South East Asia. Thus India was producing its basic small arms and ammunition and crude Web equipment for its Infantry predominant forces that at 2.5 million men (sans mobilisation) had been the largest all volunteer army in the history of the world. We inherited 16 Ordnance Factories at the time of Independence. These have today risen to some 40 Ordnance factories and eight major Defence Public Sector Units (DPSUs) and a vast DRDO complex of some 50 laboratories. Unfortunately, with a captive customer base, the Public Sector has shown a typical lethargy and failure to innovate. Its vast infrastructure and manufacturing facilities have

August 2012 Defence AND security alert

primarily been employed to locally assemble foreign Semi / Completely knocked down (SKD / CKD) kits. The quick fix of licensed production lulled the country into a false sense of complacency that has actually killed our in-house design and R&D capabilities. OEMs just supplied SKDs or CKDs. They did not provide any critical technologies or electronic source codes. What we got therefore was an illusion of self-sufficiency that was largely cosmetic. The DPSUs simply failed to innovate and even improve upon the products they were producing under license. They were not able to do any continuous technology development nor do midlife upgrades on their own. The Indian Armed Forces have had considerable amounts of hands on combat experience in the post war era. However we have not been able to exploit this experience to generate ORSA bases or innovate and improve our weapon systems. Contrast this with Israel that has been able to do significant value addition to not just it’s own equipment but also Soviet equipment captured from it’s Arab adversaries. Innovation has been the key to Israel’s survival as a nation state. Our public sector industries however morphed into a tool for welfare policies and political patronage. This lack of any meaningful competition resulted in a sluggish socialist enterprise sans all dynamism and urge for innovation.

The long delayed LCA Aircraft is now approaching the end of a long developemental tunnel. It is vital that this design team is not dissipated and now set to work on the Medium Combat Aircraft (MCA) design and development as well as tasked to work on our generation next fighter (Stealth) with a Private Sector partner that arranges collaboration with a leading Foreign Vendor now. DRDO and Public-Private Partnership consortia would be needed in the here and now to begin the work that will bear fruit some two / three decades later The collapse of the Soviet Union destroyed the optical illusion of India’s self-reliance in defence. The simple fact is that the USSR had heavily subsidised our post 1962 arms build-up. This Soviet funded arms build-up had enabled India to decisively defeat Pakistan in the 1971 war and stare down the US-China combine that had aligned with Pakistan. The Soviet build-up saw us at a millitary peak in the 1970s and 1980’s. By 1990, the time had come to recapitalise our military stock of the Soviet era. Most of it was of the 1960s / 1970s vintage. This was the time when the Soviet Union collapsed and our socialist economy also came perilously close to a collapse. The myth of self-reliance in defence was shattered with the Soviet collapse and India went panic buying for spares for it’s fleets of Soviet MiGs, tanks, destroyers and guns. This desperation led to the lurch towards Israel which had innovated in a major way to upgrade captured Soviet equipment. We were hard put to keep our Soviet era inventories going and thus had to postpone all plans for military modernisation for almost two decades while we were forced to give primacy to reviving our sluggish economy. The economic crisis of 1990 therefore forced us to liberalise our economy and unleash the dynamism of our private sector - especially in the field of IT, services and manufacturing. In manufacturing however, our Private Sector chose industries like automobiles that lent themselves to automation and hence did not produce as many jobs as manpower intensive industries like shipbuilding could have generated.

We have invested in a huge infrastructure and manufacturing facilities in the public sector. These public sector enterprises must have their own design teams and have R&D establishments. They must be specifically tasked with product improvement and midlife upgrades. In all Buy and Make projects we must secure the ToT to manufacture ammunition and basic spares in-house US and Western sanctions spurred our atomic and space research organisations to innovate but our DPSUs failed to come up with any indigenous solution to fulfill our needs to replace the 1960s / 70s era MiG fighters, T series of tanks and Soviet guns, missiles and helicopters. We simply began to buy a whole series of Russian and western replacements for our ageing fleet of Soviet era combat platforms. In the 1990s itself the Indian government had made attempts to involve the private sector to begin producing sub-assemblies and components. Many private industries (especially small and medium scale enterprises) prospered as sub-vendors to the DPSUs. The role of the private sector however, was kept limited to the supply of nuts and bolts. Even as the defence Public sector behemoths went to seed - the Indian private sector truly flourished. By 2002 it had fully unleashed its dynamism and caused the Indian economy to grow at a blistering rate of almost 9 per cent per annum. Since the Indian state owned defence industry was not in a position to deliver even quality small arms or trainer aircraft - India with its revived economy, went on one of the biggest arms buying sprees of recent history. By 2020 - India would have imported arms worth some US$ 150 billion. These would include replacing almost India’s entire capital military stock of the Soviet era. The failure of license production to kick-start an indigenous DIB was now patently obvious. Our major failure has been in the realm of producing engines - whether for jet fighters / tanks or naval ships. The pity is we had allowed our in-house design teams - whether for the HF -24 Marut jet fighters or for the 75 / 24 Howitzer and 105 mm field guns, to totally disperse and atrophy. Only the Indian Navy amongst all three services retained its ship design teams and is today building instead of buying a new navy. The problem even here is the sluggish pace of our public sector shipyards which are slipping behind schedules in a significant manner. By 2002 the dynamism of our private sector was evident for all to see. In January 2002 the MoD opened defence production to the private sector with 100 per cent equity participation and 26 per cent FDI. However these lurching steps lacked any overall vision and strategy. With no assurance of firm orders, the private sector was hesitant to spend huge sums in developing a massive infrastructure. Foreign vendors did not find it worthwhile to invest with only 26 per cent FDI stake. The result of this non-starter policy was that a decade down the line - India’s imports of foreign defence equipment have risen from 70 per cent to 74 per cent.

The simple fact is that given the current state of indigenisation there is unlikely to be any change till the end of the 14th five year plan (2022-2027). Unless effective remedial steps are taken now, this implies that strategic autonomy will remain elusive till 2030. All the pious intentions to indigenise have remained just that. Indians across the board have singularly failed to create a DIB for India. The task is beyond the span of control of just the MoD and must involve the ministries of Commerce and Industry (MOCI), the ministry of Micro, Small and Medium enterprises (MSME), the departments of Atomic Energy and Space. The PMO must provide the national lead at the apex level and the Planning Commission will have to be closely involved if we are really serious in ensuring that the next rearmament cycle (that will come in some three decades down the line) also does not see us importing some 70 per cent of our capital military stock. In-house design teams must not be allowed to dissipate and disperse like hitherto fore. The Army in-house design teams that had built the 75 / 24 mm howitzer and the 105 mm field guns were allowed to die their natural death. The Arjun tank is a clone of the famous German Leopard tank. It took decades to crystallise but has now emerged as a good and reliable tank. This design team must not be allowed to dissipate and must commence work on the MBT of the future. We must build upon the success of the Arjun and despite its weight induct it in large numbers, especially for our formations in the semi-desert / desert terrain. Similarly, the LCA team must take on the MCA (Medium Combat Aircraft) and consolidate its design experience. We have invested in a huge infrastructure and manufacturing facilities in the public sector. These public sector enterprises must have their own design teams and have R&D establishments. They must be specifically tasked with product improvement and midlife upgrades. In all buy and make projects we must secure the ToT to manufacture ammunition and basic spares in-house.

Involving the private sector The Kelkar Committee in 2004 had made many sensible recommendations for involving the Private sector. As a follow up the Prabir Sengupta Committee had set out to nominate selected private firms as Udyog Ratnas that would be licensed to manufacture defence equipment. Till date this list of chosen firms is yet to be notified. The defence procurement procedure has no provisions currently to promote our own private sector participation. The MoD, on the contrary has reserved the right to nominate Indian recipients for ToT. This had earlier been left to the foreign vendors. MoD has virtually adopted protectionist postures by a policy of placing shipbuilding orders only on PSU shipyards through nomination and thereby insulating them from all competition which alone could unleash dynamism and innovation. Clearly 100 per cent private equity and 26 per cent Foreign equity have failed to incentivise the entry of the private sector in the field of Defence production. We need to forthwith increase FDI limits to 49 per cent to induce major Foreign Players to invest in our DIB. How should

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defence industrial base

PUBLIC-PRIVATE PARTNERSHIP

the Private sector make its debut in defence? There could be two models - a long term road map and a short term design that involves the Private sector in the here and now. The long term model is premised on the fact that so far we have had three cycles of Military modernisation in India. These are as under: First cycle: This commenced soon after independence as we used our sovereign debts to Britain in the Second World War to pay for the initial induction of British / French sub / trans sonic jet fighters, Sherman and Centurion tanks and old British naval warships and guns. Second cycle: Post the 1962 disaster we rapidly expanded and modernised our Armed Forces and raised our defence spending from just one per cent of the GDP to almost 4 per cent of the GDP to make amends. The Soviets heavily subsidised this phase of our military build-up. In pursuit of the goal of self-reliance we now turned in a very major way to license production of Soviet hardware. This proved to be an optical illusion at best. The Soviet aided military build-up enabled us to decisively beat Pakistan in 1971 and stare down the US-China combine that aligned itself with Pakistan in that war. The sudden economic collapse of the Soviet Union in 1990 however, showed up how fragile our license produced model of self-reliance really was. It led to panic buying of Soviet spares from the collapsing segments of the Soviet empire. Our desperation led us to Israel initially for spares to bail out our defunct Soviet era equipment. Third cycle: Most of the Soviet era equipment had become due for replacement by 1990. This was when the USSR collapsed and suddenly dried up overnight as our subsidised source of high-tech weaponry. The Indian economy itself came perilously close to collapse thereafter and we simply had to postpone the recapitalisation of our military stock by some two decades as we set about trying to revive the Indian Economy first. A libereralisation and opening up of our economy worked wonders and in just 17 years we had come from a near failed economy to a Trillion dollars plus economy. This funded the next phase of our military

build-up to replace the Soviet era MiGs, Tanks, Guns and Warships. The failure of our DIB to measure up despite decades of licensed production has now led us to import about 74 per cent of our military hardware. By 2020 we would have spent a colossal US$ 150 billion on military imports to complete the third cycle of our military build-up. Apart from our traditional supplier Russia, India diversified its purchases to buy large quantities of high-tech weaponry from France, Israel and the USA. The infusion of this Western technology and the offsets, it is hoped would help to create a vibrant DIB in India. Fourth cycle: Some 30 years down the line (2030-2040) we will once again have to replace the major weapon systems we have acquired in the current or Third cycle of our military modernisation. We simply cannot conceive of a situation in which we import the entire fourth cycle of our military capital stock. To obviate that we have to commence work now on indigenous replacements for all our major weapon systems. This in turn implies that we look far enough ahead, identify the technologies we will need by that era and start the design work now on our Gen-next Tanks, ICVs, Fighter Jets, UAVs, SAMs, Guns and Naval Warships and Helicopters that we will need to field by 2030-2040. If these are to be indigenous, the design and R&D work on them must commence now. Private sector interventions To achieve this Fourth generation autarky we will have to dynamise our DIB by cementing a strong Public-Private Partnership. The outdated Mahalanobis model of our socialist era DPSUs cannot provide us the dynamism needed to generate a full-fledged autarky that can ensure that the Fourth cycle of our military modernisation does not go the way of the Third. We will need to begin seriously with indigenisation in the here and now. We can commence by inducting the Private Sector now into the following fields: Small arms: Today India is producing some 1,00,000 INSAS 5.56 Cal rifles and some 6,000 odd

August 2012 Defence AND security alert

7.62 rifles. This is pathetic considering that India has an Army of some 1.1 million, Paramilitary forces that number 1.3 million and Police forces that go beyond 2 million. Post 26/11 we have indiscriminately been buying Bulgarian AK-47s or Israeli Galil Assault rifles and Hecklers and Koches. Why canâ&#x20AC;&#x2122;t some of India's leading Buisness houses (Tatas, Mahindras, Reliance or L&T etc.) get into partnerships with top class foreign vendors to mass produce a family of Small arms in India to include an Assault Rifle and its derivative Carbine and LMG as also Machine Pistols with burst fire capability that can replace the largely cosmetic 9 mm pistols. Apart from meeting the needs of various Indian Forces, we should equally look at arms exports on a Chinese scale. The amazing fact is that Pakistan is today exporting small arms and allied equipment to some 30 countries! Medium transport aircraft: To replace the ageing fleet of Avros as also the Russian AN-32s we need to involve the Private sector in the design and fielding of a Medium Transport aircraft. Some 150-250 of them may be needed if we look at replacing all our AN-32s. Fielding the next generation MBTs and ICVs: The much maligned Arjun Project has borne fruit after decades. Today in the Arjun we have a good tank that has beaten the T-90 in the in-house trials. Basically the Arjun was a clone of the German Leopard. There is no need to waste out this achievement. We must field the improved Arjun in large numbers. Its heavy weight should not come in the way of extensive fielding. After all the Centurion that was almost as heavy had done very well in the waterlogged terrain of the Punjab in both the 1965 and 1971 wars. We could focus the fielding of the Arjun in the desert and semi-desert terrains to start with and then extend it to the plains. We must not make the cardinal HF-24 error of dispersing this design team. It must be set to work on the generation next MBT that we wish to field for our fourth cycle of modernisation of our capital military stock. The Private sector partners must be involved from the outset and the MoD could encourage their participation by funding some 80 per cent of the R&D budgets involved. The Private sector

has already been involved in designing and fielding the ICV (Infantry Combat Vehicle) to replace the Russian BMP-2.

We need to identify and field Disruptive technologies that enable us to leapfrog technology bottlenecks and denial regimes.

Multi-role helicopters for the navy: Some 200 Multi-role helicopters would be needed by the Indian Navy in the years ahead and the Private sector could be encouraged to seek tie-ups with leading foreign vendors to bid for these machines now.

All future acquisitions should either be Buy and Make Indian or at best Buy Global and Make Indian routes wherein the Foreign Vendor must be allowed to select its own local partner in the Public or Private Sector. The MoD should not nominate the recipients of ToT.

Retaining the LCA design team: Similarly, the end of a long developemental tunnel. It is vital that this design team is not dissipated and now set to work on the Medium Combat Aircraft (MCA) design and development as well as tasked to work on our generation next fighter (Stealth) with a Private Sector partner that arranges collaboration with a leading Foreign Vendor now. DRDO and Public-Private Partnership consortia would be needed in the here and now to begin the work that will bear fruit some two / three decades later.

Just like Licensed production, Offsets by themselves will not usher in self-reliance. There has to be a well thought out road map for what technology we need to induct via the offset route.

UAVs: The shock therapy of 26/11 has led to the large scale induction and deployment of surveillance equipment. The Private sector has taken significant initiatives in this regard. The Reliance Group of Industries has begun to field Video surveillance cameras in a major way to meet the needs of Homeland Security. This initiative could be extended to produce UAVs in the Private sector with Foreign vendor participation. What we need are the Tactical Class of UAVs like the US Raven (2-3 Kg weight and some 60 minutes endurance). These have proved highly successful in Afghanistan and some 1,300 have been fielded. These would be very useful for surveillance of the large perimeters of major industrial / Petrochemical concerns and shorter length pipelines. In addition we have huge pipeline infrastructure existing and coming up for supply of Natural Gas / Petrochemical products that span thousands of Kilometers. These would need the Israeli Searcher Class or our homegrown Nishant Class Mid-Altitude Long Endurance (MALE) UAVs. Production of these categories of tactical and MALE UAVs would help meet the rising needs of all three services for enhanced levels of situational awareness and could also cater for a substantial export market. We could also develop and field more capable Micro Areal Vehicles (MAVs) for the sub-tactical level requirements of our Armed Forces as also the Police and Paramilitary Forces.

Conclusion Establishing a vibrant DIB in India is an imperative not just for reasons of Strategic Autarky but also to provide urgently needed Jobs for our rising demographic youth bulge. The very scope and scale of this imperative is little understood in our country. No viable DIB can be established in India without a vibrant Public-Private partnership. Competition and Foreign tie-ups alone will infuse the necessary dynamism and innovativeness. This will require the FDI component to be raised to 49 per cent. MoD will have to secure SEZ type tax concessions for the Private Sector entry into the defence field.

We should have in-house design and R&D teams with all our major DPSUs. DPSUs must be made responsible for continuous technology development as also midlife upgrades based on user feedback. We must stress innovation and customisation of the product to our requirements. Services Design teams must be attached to the DPSUs and senior management positions here must be held by service officers. Design teams of the LCA, ALH and Arjun etc. must not be allowed to dissipate and atrophy (like that of the stillborn HF-24). We must build upon the experience gained and graduate to Gen-next requirements in these fields. Vibrant Design Bureaus must come up in India if we are ever to attain self-reliance. We have so far seen three cycles of military modernisation. The current third cycle is almost entirely premised upon foreign imports - a sad reflection upon our failure to craft a modern DIB. The Fourth cycle will come some two / three decades down the line when the capital military stock being inducted now will have to be replaced. It would be a tragedy if we still have to bank on imports then. To indigenise truly, we will have to visualise the products we would need then and commence preliminary design and R&D work now in terms of Public-Private partnerships with suitable foreign tie-ups at the earliest feasible. In the interim we should straightaway involve our Private sector in the manufacture and fielding of Small arms, Medium Transport Aircraft, Gen-next Tanks and ICVs as also Multi-role Helicopters for the Navy as also Tactical Communication Systems. If Pakistan can export its small arms and equipment to some 30 countries we can do much better. Economies of scale can only be achieved if we push exports in a major way. We need to have clarity on this from the very outset. Crafting a viable DIB in India is beyond the purview of the MoD all by itself. The Process would have to be led by the PMO and Planning Commission with suitable induction of talent from the Public / Private sectors and experience from the services. A whole host of ministries would have to be involved in this gigantic enterprise.

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defence industrial base

LEVEL PLAYING FIELD

Maj Gen (Dr) Mrinal Suman AVSM, VSM (retd) The writer heads Defence Technical Assessment and Advisory Service (DTAAS) of Confederation of Indian Industry (CII). He did MSc in Defence Studies and Doctorate in Public Administration. He commanded an Engineer Regiment in the most hostile battlefield in the world i.e., the Siachen Glacier. He was awarded a gold medal for being 'the most outstanding engineer of the year'. He was the first Technical Manager [Land Systems] when the newly created Acquisition Wing was established in the Ministry of Defence in 2001. He has been closely associated with the evolution and promulgation of the new defence procurement mechanism.

It is time India recognises the technological prowess of the private sector. The objective of achieving self-reliance in defence production will remain a pipedream unless the immense potential of the private sector is duly harnessed. It can bring in latest technology, managerial practices, marketing skills and financial management. Both public and private sectors are national assets and should be treated as equal partners for achieving self-reliance in defence production. There is a need for an institutionalised arrangement for regular interaction between MoD and the private companies. MoD must be fully aware of the capabilities and potential of different private sector companies while the private companies should familiarise themselves with procurement structures and procedures

highly insightful article on the actual status of the “Holy Grail“of a DIB in India. Till the opening of the production of components, assemblies and sub-assemblies to the private sector in 1991, defence industry remained the exclusive preserve of the public sector. By 2002, the private sector had emerged as a vibrant and dynamic force, especially in information technology, service sector and manufacturing fields. On the other hand, the public sector entities had stagnated and failed to deliver. Defence production was opened to the private sector in January 2002 – with 100 per cent private equity with 26 per cent Foreign Direct Investment (FDI). The very fact that the proportion of defence imports has increased from the erstwhile 70 per cent to close to 74 per cent during the last decade attests to the failure of the current dispensation. The Kelkar Committee, constituted in 2004, had made many commendable recommendations. These seem to have fallen by the wayside. The Udyog Navratnas are yet to be identified. There is a total absence of an effective institutionalised interface between MoD, the services and the private sector. Resultantly, the private sector continues to be a peripheral player. India’s much overrated Defence Procurement Procedure (DPP) does not include a single word about the promotion of the private sector. All policy provisions are deliberately tweaked to perpetuate preferential treatment of the public sector. For example, to prohibit the private sector from participating in the Rs 10,000 crore Tactical Communication System, a new category called ‘Make by DPSU’ was deceitfully invented. It is time India recognises the technological prowess of the private sector. The objective of achieving self-reliance in defence production will remain a pipedream unless the immense potential of the private sector is duly harnessed.

August 2012 Defence AND security alert

efence production sector encompasses all industrial undertakings engaged in the production of hardware and services for use by the defence forces. India’s tryst with indigenous defence production commenced with the establishment of Gun and Shell Factory at Cossipore by the British rulers in 1801. When the British left, India got 16 ordnance factories. As per the British policy, they were producing low-tech and non-critical items only. No private company was allowed to manufacture arms and ammunition.

Private Sector and Development of a

Vibrant Defence Production Sector

Bharat Electronics Ltd was the first defence public sector undertaking (DPSU) established in 1954 to manufacture electronic equipment for the forces. The Industrial Policy Resolution of 1956 further consolidated the hold of the public sector over defence production. It divided industry into three parts: Schedule A: Basic industries which are the preserve of the state, including defence and heavy engineering. Schedule B: Industries in which private industry was allowed to operate. Schedule industries.

All

other

Till the opening of the production of components, assemblies and sub-assemblies to the private sector in 1991, defence industry remained the exclusive preserve of the public sector. Though many private companies prospered as sub-vendors to public sector behemoths, they remained totally dependent on their largesse. Their role was limited to supplying ‘nuts and bolts’. Resultantly, the private sector did not progress technologically and continued to be a peripheral player. By 2002, the private sector had emerged as a vibrant and dynamic force, especially in information technology, service

sector and manufacturing fields. On the other hand, the public sector entities had stagnated and failed to deliver. It was then that it dawned on the Ministry of Defence (MoD) that the enormous potential of the private sector must be harnessed to develop indigenous defence production base. Consequently, defence production was opened to the private sector in January 2002 - with 100 per cent private equity with 26 per cent Foreign Direct Investment (FDI). Detailed guidelines for the issuance of license for the production of arms and ammunition were subsequently issued by the Department of Industrial Policy and Promotion.

A review of the current scene Ten years is a sufficiently long period for any policy initiative to produce results and prove its efficacy. The very fact that the proportion of imports has increased from the erstwhile 70 per cent to close to 74 per cent during the last decade attests to the failure of the current dispensation. Therefore, an objective appraisal is due to ascertain the degree to which the strength of the private sector has been effectively exploited in India’s quest for self-reliance in defence production.

The Kelkar Committee, constituted in 2004, had made many commendable recommendations. It suggested identification of entry-points for the private sector and evolution of a policy to promote participation of small and medium enterprises in defence production. Further, with a view to tap the underlying potential of the private sector, the Committee suggested accreditation of select companies as Raksha Udyog Ratna, to be treated at par with the public sector. Although the government constituted a selection committee in May 2006 under Mr Prabir Sengupta, notification of the chosen companies is still awaited. It is rumoured that the government has shelved the proposal under pressure from the trade unions of the public sector companies. All major procurements continue to be carried out either as outright purchases from foreign arms producers or are being contracted under the ‘Buy and Make’ route. Under the said route, a limited quantity is purchased in fully built-up condition from foreign producers while the bulk quantity is manufactured in India with imported technology. Quite unjustly, MoD nominates a public sector entity to

be the recipient of technology, even if a private sector company is better placed in terms of infrastructure and know-how to absorb the technology. Thus the private sector is denied any role in major production activities.

The Department of Defence Production is a predisposed setup, it must be abolished to free the system of anachronistic and subjective influences. Challenge from private companies will force the public sector to shed its inertia. It will have to choose either to innovate or perish. Only vibrant and dynamic companies can survive in an environment of free competition There is a total absence of an effective institutionalised interface between MoD, the services and the private sector for regular interaction at the policy making level. There are a number of ‘groups’ or ‘partnership forums’ in place, but their utility is limited to exchange of views only. Resultantly, the private sector continues to be a peripheral player, waiting for the day when it would be provided a fair opportunity to compete for orders.

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defence industrial base

LEVEL PLAYING FIELD

Honesty of purpose is suspect Notwithstanding the repeated proclamations of giving due recognition to the private sector, there are clear pointers that raise doubt about MoD’s sincerity. To start with, India’s much overrated Defence Procurement Procedure (DPP) does not include a single word about the promotion of the private sector. For DPP, except for providing inputs at the time of categorisation of proposals, the private sector has no role to play.

The Kelkar Committee, constituted in 2004, had made many commendable recommendations. It suggested identification of entry-points for the private sector and evolution of a policy to promote participation of small and medium enterprises in defence production. Further, with a view to tap the underlying potential of the private sector, the Committee suggested accreditation of select companies as Raksha Udyog Ratna, to be treated at par with the public sector. Although the government constituted a selection committee in May 2006 under Mr Prabir Sengupta, notification of the chosen companies is still awaited. It is rumoured that the government has shelved the proposal under pressure from the trade unions of the public sector companies As seen above, implementation of the recommendations of the Kelkar Committee has lacked earnestness. Worse, all policy provisions are deliberately tweaked to perpetuate preferential treatment of the public sector. For example, to prohibit the private sector from participating in the Rs 10,000 crore Tactical Communication System, a new category called ‘Make by DPSU’ was deceitfully invented. Two provisions introduced in DPP-2011 have taken the private sector by surprise and exposed the true intents of MoD. First, in a retrograde move, MoD has reserved the right to nominate Indian recipient for ‘ToT for Maintenance’. Earlier, it was left to the foreign vendor to choose his Indian partner from the list provided by MoD. Now, MoD will invariably nominate a public sector entity.

benefit, MoD has cleverly reduced it to an outsourcing arrangement. The public sector companies will get orders through nomination and offload excess work to their JVs. Interestingly, MoD has mandated that the board of the public sector unit should retain the right of prior approval of key decisions of the JV, including bidding for major contracts. Needless to say, permission will never be granted to a JV to bid for the projects in which the partnering DPSU is interested. Resultantly, the private sector will never be able to emerge out of the shadows of the big brother public sector to pose any challenge to it.

The way forward Defence production spans a vast array of industrial activities and has a profound effect on the industrial growth of a country. Therefore, in addition to the criticality of a vibrant and dynamic defence industry to national security, defence production is considered to be an instrument of economic prosperity and national sovereignty. As defence production is highly technology driven, it has always been in the forefront of technological breakthroughs. The main reason for the current dismal state of India’s defence industry is the failure of the public sector to keep pace with evolving technologies. Although the public sector possesses excellent infrastructure, manufacturing facilities and a highly experienced task force, it has displayed no urge to innovate. With a captive customer base, it does not consider it necessary to strive to master newer technologies and is content to keep producing outdated goods.

‘Make and Buy’ route has failed to deliver. Instead of MoD nominating a public company as the recipient of technology for indigenous production, it will be better to let the foreign vendor choose his Indian vendor. It should be left to the foreign vendor to select Indian partner for transfer of technology for maintenance

The second provision relates to the shipbuilding industry. With a view to protect highly inefficient public sector shipbuilders from the challenge posed by emerging private shipyards, DPP-2011 has created a new category for placing orders on public sector shipyards through nomination. Needless to say, no proposal will be thrown open to competitive bidding unless the public shipyards are fully loaded and throw their hands up.

While releasing the much hyped Defence Production Policy in January 2011, MoD had announced its intent to setup a separate fund, inter alia, to provide necessary resources to public / private sector including SMEs. Over 18 months have passed but the said fund is yet to be created.

There is a need for an institutionalised arrangement for regular interaction between MoD and the private companies. MoD must be fully aware of the capabilities and potential of different private sector companies while the private companies should familiarise themselves with procurement structures and procedures.

MoD has recently issued policy guidelines for establishing joint venture (JV) companies by DPSUs. Whereas, a public-private sector JV should aim to complement their respective strengths for mutual

However, it can only be achieved through the evolution of a long term strategy to optimally utilise the strengths of public and private sectors. As shown in the Illustration on next page, the government should identify areas in

August 2012 Defence AND security alert

Illustration: Harnessing potential of Public and Private Sectors which focused attention by public and private sectors would yield best results. The objective should be to make use of their inherent potential and avoid wasteful duplication of effort. Further, it should use its persuasive powers to promote close cooperation between DPSUs and competent private companies in duly chosen fields for synergy of operations for necessary economies of scale. However, maximum projects should be kept in the competitive category and must be awarded to the most efficient and cost-effective entity after an open and fair appraisal.

Two provisions introduced in DPP-2011 have taken the private sector by surprise. In a retrograde move, MoD has reserved the right to nominate Indian recipient for ‘ToT for Maintenance’. Earlier, it was left to the foreign vendor to choose his Indian partner from the list provided by MoD. Now, MoD will invariably nominate a public sector entity As stated earlier, ‘Make and Buy’ route has failed to deliver. Instead of

MoD nominating a public company as the recipient of technology for indigenous production, it will be better to let the foreign vendor choose his Indian vendor. It could be a public or a private sector company. Similarly, it should be left to the foreign vendor to select Indian partner for transfer of technology for maintenance.

Bharat Electronics Ltd was the first defence public sector undertaking (DPSU) established in 1954 to manufacture electronic equipment for the forces. The Industrial Policy Resolution of 1956 further consolidated the hold of the public sector over defence production The above changes will have three major advantages. One, foreign vendor will invariably carry out a detailed assessment of the Indian industrial scene to identify the most suitable partner. Two, the onus for ensuring quality and adhering to the delivery schedule will continue to be on the foreign vendor. Finally, the public sector companies will be forced to improve their functioning to remain in the reckoning.

‘Achievement of self-reliance in the production of state-of-the-art defence items within the country through synergising the emerging dynamism of the Indian private sector and increasing opportunities to obtain advanced technologies from foreign sources’ is the stated objective of the JV guidelines issued by MoD. Indisputably, it is a well articulated aspiration. However, even the best of intentions cannot deliver unless diligently translated into policy guidelines and action plans. It is only then that India can hope to build a well-organised and globally competitive defence industrial base. Transparency, impartiality and healthy competition should be the guiding principles. There should be no discrimination whatsoever. As the Department of Defence Production is a predisposed setup, it must be abolished to free the system of anachronistic and subjective influences. Challenge from private companies will force the public sector to shed its inertia. It will have to choose either to innovate or perish. Only vibrant and dynamic companies can survive in an environment of free competition.

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defence industrial base

INDIGENISATION

A Air Vice Marshal A K Tiwary VSM (retd) The writer commanded a MiG-29 Squadron in late 80s. His various command and staff appointments like Chief Operations Officer at a major Wing, operational planning at Command level, Director Concept Studies at Air HQ, Command of a major flying base, Head of the Training Team (Air) at Defence Services Staff College and Senior Directing Staff (Air) at National Defence College have conferred a rich practical experience. The air staff course at DSSC Wellington (TN), Command and Air War Course at the Air University, Maxwell Airbase, Montgomery (USA), all inducted and accelerated his interest in air war studies. After premature retirement he now flies as Commander on Boeing 737-800 NG.

The direct linking of industry with user calls for some organisational structure to be created within IAF, to interact with the DRDO Labs, PSUs and private sector to catalyse and accelerate the pace of indigenisation. Most importantly, the responsibility of indigenisation cannot continue to be vested with TC Aero or DGAQA particularly for aviation items. Indigenisation of any such item, will demand, a day to day and sustained interaction between the user and the prospective vendor

n insightful article on reforms needed to promote indigenisation for the Air Force requirements. The writer suggests that the responsibility for Indigenisation should be completely vested with IAF. DGAQA should play the advisory role to coin specifications and schedules. DGAQA should be fully responsible for quality control. IAF should be authorised to task DRDO, PSUs and Private Industries for import substitution. A National Policy should be formulated to encourage Indigenisation and Import substitution by Private Industry and Academic Institutions by providing: Tax holidays in substantial measure, Finance Import substitutes and partake development cost, Grant export license, Allow transfer of technology to civil sector and provide export market information. An R&D Group should be formed in IAF with SDI, ASTE, ADE, CABS and ASIEO as constituents.

he Indian Air Force, by and large, has about 600 fighter aircraft, 200 transport aircraft and 345 helicopters. IAF also has many Air Launched Guided Missiles and Ground to Air Missiles. Maintenance and Operation of these Weapon Systems, involve a wide array of support. They include Air Defence and Communication Radars, different types of Communication Networks and Communication Equipment, a large fleet of specialist vehicles with specialist mountings, special tools, testers and a variety of ground support equipment.

These trading agencies have no technical background and they are unable to appreciate or solve any of technical queries, associated with procurement and product support. The prices are inflated, from anywhere, between 2 to 6 times. Even after successfully signing a contract, one is not too sure, whether the contract will be honoured at all.

For the IAF to fight a winning battle, the serviceability and availability of the entire range of the equipment is crucial. To be a winner in any encounter with the enemy, IAF needs to maintain the fleet serviceability at high levels. It is relevant to note here, that, during operations, the utilisation rate of aircraft goes up multiple times and the product support and maintenance support, should be able to support it and sustain it till the war lasts. If one were to ponder, on the reasons, for this not being so, one realises that the present situation is not necessarily due to paucity of funds. IAF has been parking an amount, to the tune of Rs 1200-1500 crore, with the PSUs, at the end of each financial year because of unfulfilled promises. Another main problem is the Russian supplies for their equipment.

This is basically because, the manufacturing plants, like UFA, RIZAN, CHERNESHOV, EKATARIN-BURG and a host of others, having turned private, are not dependent on these agencies, as they were, at the time of Communist regime. These plants are starved of funds for opening the production lines, many of which have been closed and demand advance, which these agencies are reluctant to part with. Very poor product support is received by the middle agencies. It can be seen that just about 30 per cent of items indented are offered and out of the items contracted, many fail to get delivered and the eventual fill rate hovers around 28 per cent or so, at the maximum. Usually it takes about 3 months for offers by suppliers and another 4 to 6 months for signing of contract. Thereafter supplies materialise in 6 to 12 months time.

Russian Ministry of Trade in late 90s stipulated that all military acquisitions can be done only through Russian government appointed trading agencies, namely ROSVO, MAPO, Promexport and Russian Technologies, AVIA EXPORT and AVIAZAPCHAST. It became virtually impossible, to have any meaningful and productive dealings with these trading agencies for many reasons, important ones being:

Self-reliance is the best policy. How can this be improved? It is in this area, that DRDO Labs, PSUs and even private sector have a vital role to play. We have set up sound Defence R&D, industrial infrastructure by way of DRDO Labs, Defence Public Sector Undertakings (DPSUs), Ordnance Factory Board (OFB) etc. The Private Sector has also grown by leaps and bounds but not in defence field. Our country is being increasingly recognised as

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Defence Industry Reforms: Aviation

an industrialised nation. With this kind of Research and Industrial infrastructure already established and talented manpower available in the country, our pace on self-reliance should shift gears and translate these assets into real benefits. We can look around for ourselves and see the missed opportunities. Some of the items which could have been indigenised are: Aircraft Tyres, Aero engine compressor and turbine blades, polymers and glues, air armament, parachutes, Arrester Barriers, Aviation Bearings, Radar spares, special alloys and equipment for airfield lighting.

Air Force has been laying increasing emphasis on enhancing the survivability of aircraft by integrating modern Electronic Counter Measures (ECM) / Electronic Counter Counter Measures (ECCM) equipment. In all such cases, while the actual hardware is easy to procure, the problem arises in integrating the new generation systems on older platforms, so that they function in total harmony with the existing system architecture in a compatible manner Though this potential exists, as

of now except for making some nuts, bolts, washers, bulbs and gaskets we have not availed our potential for import substitution. Till recently, TC (Aero) functioning under DGAQA, were responsible for giving the import clearance. The table below lists possibilities for indigenisation. Capability for Indigenisation Items

Potential Agencies

Aircraft Tyres

Joint Ventures

Compressor / Turbine Blades

HAL, Koraput

Adhesives and Glues

DMSRDE

Air Armament

Ordnance Factories

Parachutes and Arrester Barriers

ADRDE

Bearings

Private Sector

Ground Support Equipment

HAL / Private Sector

Radar Spares

Bharat Electronics Ltd / Private Sector

Isolating Transformers

Private Sector

Special Alloys

MIDHANI / DMRL

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INDIGENISATION

any such item, will demand, a day to day and sustained interaction between the user and the prospective vendor; whether it is a DRDO Lab, PSU or a Private industry. DGAQA, unlike at present, should only act in an advisory capacity to coin the specifications and schedules, in liaison with the user and provide the support, in terms of quality control. In this connection, it is relevant to mention that, Committee on Fighter Aircraft Accidents (COFAA) in its report has recommended that in view of the magnitude of Quality Assurance (QA) functions, DGAQA should not be entrusted with any development activities and must concentrate purely on quality assurance functions. As such, the responsibility of indigenisation should be entrusted to IAF.

There is a requirement to have a degree of resident capability within the Air Force to conceive and manage upgrades of medium complexity involving various aeronautical disciplines. An apt example for such need is the case of fitment of Gasha 23 mm cannon on MiG-21 when preparing for 1971 war. The cannons had been lying at HAL for one year when 71 war clouds started appearing on the horizon. Pressed for urgency HAL stated a time frame of one year to complete the task. This was not acceptable. Hence IAF undertook the job in-house completing it in a record three months The broad framework of the organisational structure will look somewhat like given below: The proposed IAF central indigenisation project group will consist of Reps of Users, CEMILAC, DGAQA and MoD (Fin). Sufficient Funds with delegated financial power in consultation with IFA will be allotted for this purpose. The requirement of indigenisation will be communicated for process development clearance. Depending upon the availability of resources and infrastructure, the manufacturing order will be

placed through DRDO Labs, PSUs, Private Industries and Ordnance Factories.

Some of the items which could have been indigenised are: Aircraft Tyres, Aero engine compressor and turbine blades, polymers and glues, air armament, parachutes, Arrester Barriers, Aviation Bearings, Radar spares, special alloys and equipment for airfield lighting The supply of products will be made directly to IAF. The quality control on the supplies will be exercised by DGAQA. The channels will be created for intra-communication with manufacturing organisations and the IAF. Provision for indigenisation of small items directly through local vendors by IAF will also be available. While the proposed project group, by virtue of its cohesive composition and â&#x20AC;&#x2DC;user driven characterâ&#x20AC;&#x2122; can be expected to place indigenisation on a fast-track, the talent available in the civil sector and academic institutions should not go untapped. Design and development of modern weapons, often entails working at the frontiers of technology. It is, therefore, desirable to harness complete national talent, wherever it lies i.e., IITs, other Universities, Private Sector etc. Casting the net wider would ensure greater competition and greater returns. A national policy, to encourage design development, production and where possible, export of high-tech defence equipment needs to be formulated. The key areas, which deserve attention in this regard are: Granting tax-holidays, in substantial measure, especially during the design and development phase. Defence R&D requires, a fair amount of up-front investment. Presently, very limited amount can be given to private sector, only as advance, for contracted projects. Procedures and modalities are therefore, required to provide, the private sector, with the necessary

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finance to take-up import substitution projects. Quantities required in the country are often too small to permit economic viability of the projects. Hence, license to export, would have to be considered. Defence technologies, invariably have spin-offs and uses in the civil sector. Transfer of technology, to the civil sector, should be permitted. The industry may also be supported with information on Export market, for Defence products, especially for indigenised items and spares, to various countries. IITs and other academic institutions should be encouraged to take up Defence projects of import substitution by funding them and attractively rewarding them for successful projects.

The Private Sector has also grown by leaps and bounds but not in defence field. Our country is being increasingly recognised as an industrialised nation. With this kind of Research and Industrial infrastructure already established and talented manpower available in the country, our pace on self-reliance should shift gears and translate these assets into real benefits

Indian Air Force R&D group Due to rapid advances in technology, it has become incumbent upon the Air Force to continuously upgrade the existing fleets to maintain their operational relevance. In most of the upgrades, the main accent is on incorporation of more capable and survivable avionics. Also, with lethality of the combat environment increasing rapidly, the Air Force has been laying increasing emphasis on enhancing the survivability of aircraft by integrating modern Electronic Counter Measures (ECM) / Electronic Counter Counter Measures (ECCM) equipment. In all such cases, while the actual hardware is easy to procure, the problem arises in integrating the new generation systems on older platforms, so that they function in total harmony with the existing system architecture in

a compatible manner. In short, the most vital aspect of upgradation remains system integration. We need to study the Battle lab concept employed by the USAF, which has resulted in accelerated advancements in use of new technology as well as its development.

For the IAF to fight a winning battle, the serviceability and availability of the entire range of the equipment is crucial. To be a winner in any encounter with the enemy, IAF needs to maintain the fleet serviceability at high levels While large scale upgradation involving total replacement of entire suite of avionics and structural changes would require participation of an aircraft house as well as many developmental agencies, the work of relatively simpler upgrades can be better handled by the Air Force with due regard to the time factor. So far, even for such incremental improvements, the Air Force has been relying on the help of PSUs such as HAL, BEL and various DRDO Labs resulting in avoidable delays besides adding to the complexities of programme management. Also, with such activities now becoming more frequent, there is a requirement to have a degree of resident capability within the Air Force to conceive and manage upgrades of medium complexity involving various aeronautical disciplines. An apt example for such need is the case of fitment of Gasha 23 mm cannon on MiG-21 when preparing for 1971 war. The cannons had been lying at HAL for one year when 71 war clouds started appearing on the horizon. Pressed for urgency HAL stated a time frame of one year to complete the task. This was not acceptable. Hence IAF undertook the job in-house completing it in a record three months. Lo and behold, as the war started the first MiG-21 kill on a PAF Starfighter was by Flt Lt B B Soni firing the Gasha cannon at 1,200 kmph over the Jamnagar sea. Monopoly creates lethargy whereas competition generates creative energy. We must have competition even if we have to duplicate PSUs due to nature of work. DRDO

has

three

Labs

namely Aeronautical Development Establishment (ADE), Advance System Integration and Evaluation Organisation (ASIEO) and Centre for Airborne Systems (CABS) which specifically deal with the development of technologies and products related to military avionics and EW systems. These Labs are, therefore, Air Force specific but operate independent of the Air Force managerial control or participation. For optimising the output of various agencies, both in the Air Force and in the DRDO dealing with system integration and avionics development, they need to be brought in together to work as one cohesive entity, which is user driven. Like many western countries we also need to place projects under monitoring by User agency.

The Indian Air Force, by and large, has about 600 fighter aircraft, 200 transport aircraft and 345 helicopters. IAF also has many Air Launched Guided Missiles and Ground to Air Missiles. Maintenance and Operation of these Weapon Systems, involve a wide array of support A beginning can be made by creating a Systems Group under which SDI, ASTE, ADE, ASIEO and CABS will be brought together and administered as one central organisation. The intention is to ensure that the programmes dealing with integration and avionics development are

expeditiously administered under the user guidance. It also offers the advantage of having a permanent pool of civilian scientists, who would provide the continuity in the organisation and allow for consolidation of experience and expertise while getting continuous operational grade inputs through user participation. Establishment of such a group would be a national asset, capable of supporting major upgrades progressively, as it matures and consolidates its professional and managerial expertise. In conclusion, the responsibility for Indigenisation should be completely vested with IAF. DGAQA should play the advisory role to coin specifications and schedules. DGAQA should be fully responsible for quality control. IAF should be authorised to task DRDO, PSUs and Private Industries for import substitution. A National Policy should be formulated to encourage Indigenisation and Import substitution by Private Industry and Academic Institutions by providing: Tax holidays in substantial measure, Finance Import substitutes and partake development cost, Grant export license, Allow transfer of technology to civil sector and provide export market information. An R&D Group should be formed in IAF with SDI, ASTE, ADE, CABS and ASIEO as constituents.

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CHALLENGES AND OPPORTUNITIES

A Cmde Sujeet Samaddar NM (retd) The writer retired as the Principal Director Naval Plans. He served NOVA Integrated Systems - A TATA Enterprise as Vice President (Operations) until October 2011. He is presently Director and CEO, ShinMaywa Industries India Limited.

This is a project of strategic importance for the aerospace sector of our country. This project can lay the foundations for a flourishing and genuine indigenous aerospace industry in India of the future. This one project would determine if India is to remain a screwdriver technology nation under the licensed production route or build genuine capability through Joint Ventures / Consortia under the Buy and Make Indian Route with 50 per cent indigenous content and only 10 per cent proprietary technology with OEM. So far the lead players, apart from TATA Group, would be Mahindra & Mahindra and L&T. There are a large number of other players such as GMR, Punj Lloyd, Axis, TAAL etc. who have specific strengths and would partner with the Prime Contractor in some way or the other. In addition, many vendors in the SME segment are already supplying world class products to HAL. Of course, engines would have to be imported but given the numbers creating a final assembly and engine test bed in India, purely as a business proposition is also attractive

n invaluable article that provides in-depth research and insights into the defence Procurement Process, Procedures and Practice and provides an industry perspective. The writer contends that the way forward is to promote the Buy and Make Indian procedure to be the default procedure. Buy Global acquisitions should be the last resort as the MoD and the Indian regulatory framework leak like a sieve in the monitoring of offset contracts and no real capacity is being built through this process. On the other hand in Buy and Make Indian categorisations, foreign OEMs will have no choice but to engage with Indian industry, both DPSUs and Private, to win projects in India. Since these are competitive no Indian Prime will ever accept loading the commercials with ToT costs as that would be lose-lose for both foreign OEM and Indian Prime. Therefore, the Non-recurring Expenditure burden would have to be mostly borne by the foreign OEM and hence the induction of technology would be cheaper and faster. Forming JVs with Indian partners will build Indian capacity and open the route for India to become part of the global supply chain for the aerospace and defence industry. This would also promote Indian industry to innovate, something it cannot do as a mere offset partner.

n 1801, the East India Company set up a Gun and Shell Factory at Cossipore. Thus were sown the seeds of the Indian defence industry. From these very humble beginnings today, India has 39+1 Ordnance Factories and eight DPSUs which have been the primary source of indigenous procurement for the Indian Armed Forces. Despite substantial investments in capacity building, partnering and license production agreements with foreign OEMs, defence procurements continue to hover around the 70 per cent (imported) and 30 per cent (indigenous) ratio. Matters are further compounded by the large order book position of the OFBs and the DPSUs resulting in very large waiting period for the induction of scarce and highly important acquisition assets. Consequently, the Ministry of Defence (MoD) has initiated various processes to involve the Indian private sector as well as global players into the acquisition process. This article presents an overview of the defence procurement, procedure, process and practice.

Licensing Industrial licenses are granted under Industries (Development and Regulation) Act, 1951 (65 of 1951) (IDR Act). The Industrial Policy Resolution of 1956 divided industry into three parts:

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Schedule 1: Basic industries which are the preserve of the state, including defence and heavy engineering. Schedule 2: Industries in which private industry was allowed to operate. Schedule 3: All other industries. Defence production has been kept under licensing regime to regulate the operation of defence industries including export of defence equipment. Until 1991, defence production was the exclusive preserve of the state and vide Gazette Notification (Part II) No. 412 dated 25.07.1991, the government initiated the liberalisation process and made fundamental changes in the IDR Act. Thus, defence and aerospace industries were kept, both in Schedule 1 (Industries reserved for public sector) and Schedule 2 (Industries requiring compulsory licensing). When the defence industry was opened for private sector participation through Press Note 4 of 2001 and Press Note 2 of 2002, the defence and aerospace industries were removed from Schedule 1 through notification No. S.O. 11(E) dated 03.01.2002. Subsequently, in 2004 the government of India set up a committee under Mr Vijay Kelkar to recommend measures to bring about improvements in defence acquisitions and production. Some of these recommendations were approved and the defence and aerospace industry remained

Defence Procurements, Policy, Procedure, Process and Practice:

An Industry Perspective no more the monopoly of public sector but still needing industrial license. Licenses are granted on the basis of the classification of the product. However, as per the existing practice there is inadequate common understanding of what is a defence product that falls under the ambit of licenses. Presently, defence products classification codes are drawn from the following sources:

ITC (HS) code Applications for industrial license require a clear definition of the defence items to be manufactured, assembled or integrated. The basis for items requiring industrial license is the Indian Trade Classification (Homogeneous Series) (ITC (HS) of DGCIS, Ministry of Commerce. Accordingly, following defence items are included under compulsory licensing regime: Code

Item Description

87.10

Tanks and other armoured fighting vehicles

8801 to 8805

Defence aircraft, spacecraft and parts thereof

890601

Warships of all kinds

9301 to 9307

Arms and ammunitions; parts and accessories thereof

The ITC (HS) classification does not include many defence items.

NIC codes The National Industrial Classification (NIC) is an essential Statistical Standard for developing and maintaining comparable database according to economic activities. Economic units engaged in the same or similar kind of economic activity are classified in the same category of the NIC. Industrial licenses require applicants to furnish the NIC Codes in their applications. Unlike the other sectors where product classification is fairly elaborate the defence industry classification codes are at best vague. It is quite difficult for an applicant to determine the precise code that would best reflect the activity that the applicant wishes to engage in the defence and aerospace sector. The following classification illustrates the vagueness of the definition: • • • • – – –

301: Building of ships and boats 30112: Building of warships and scientific investigation ships etc. 303: Manufacture of air and spacecraft and related machinery 3030: Manufacture of air and spacecraft and related machinery 30301: Manufacture of airplanes 30302: Manufacture of helicopters 30303: Manufacture of gliders, hang-gliders, dirigibles and hot air balloons and other non-powered aircraft – 30304: Manufacture of spacecraft and launch vehicles, satellites, planetary probes, orbital stations, shuttles, intercontinental ballistic (ICBM) and similar missiles • 30305: Manufacture of parts and accessories of the aircraft and spacecraft of this class (major assemblies such as fuselages, wings, doors, control surfaces, landing gear, fuel tanks, nacelles, airscrews, helicopter rotors and propelled rotor blades, motors and engines of a kind typically found on aircraft, parts of turbojets and turbo propellers for aircraft, aircraft seats etc. and other specialised parts of spacecraft) It is evident that definition of defence items requiring industrial license is nebulous and open for interpretation. Industrial Licenses for defence products are granted by Department of Industrial Policy and Promotion (DIPP). So far about 178 licenses have been accorded by DIPP but it is well known that there are many more suppliers of “defence products”. There is also the issue of making a distinction between prototypes and development projects and serial production. The first apparently does not require a license but serial production does.

Domestic sale of defence equipment The sale of defence equipment, which itself is a very subjective definition as has been seen above, either by NIC Codes or following ITC (HS) Codes, is governed by Para 15 of DIPP Press Note 2 of 2002. For domestic sales it has been said that the customer can only be the MoD and only after approval of

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CHALLENGES AND OPPORTUNITIES

the MoD can sale to even other ministries and entities be made.

In Buy and Make Indian categorisations, foreign OEMs will have no choice but to engage with Indian industry, both DPSU and Private, to win projects in India. Since these are competitive no Indian Prime will ever accept loading the commercials with ToT costs as that would be lose-lose for both foreign OEM and Indian Prime. Therefore, the Non-recurring Expenditure burden would have to be mostly borne by the foreign OEM and hence the induction of technology would be cheaper and faster. Forming JVs with Indian partners will build Indian capacity and open the route for India to become part of the global supply chain for the aerospace and defence industry. This would also promote Indian industry to innovate, something it cannot do as a mere offset partner

Exports of defence products The base document governing exports is the Foreign Trade Policy. Export of dual-use items and technologies is either prohibited or is only permitted under a license. In Foreign Trade Policy, dual-use items have been given the nomenclature of Special Chemicals, Organisms, Materials, Equipment and Technologies (SCOMET). Export Policy relating to SCOMET items is given in Appendix 3 of Schedule 2 of ITC (HS) Classification and Paragraph 2.49 of Handbook of Procedures Vol-I, 2009-14. Appendix 3 of Schedule 2 of ITC (HS) Classification contains a list of all dual-use items and technologies export of which is regulated. Category 5 and Category 7 of the SCOMET List refers to the defence electronics and the aerospace sector. It is relevant to note that Export licenses are controlled by DGFT.

Partnerships and collaborations Norms for JVs are issued by DIPP vide Circular 01/2012. The cap on equity participation in the defence sector is 26 per cent and the issue is under debate. Only permission for about 26 JVs (upto March 2012) have been accorded so far with leading industrial houses denied JVs on grounds best known to the government but clearly the public perception is that this denial is to protect the DPSUs from professional competition. That FDI in the defence sector has not succeeded despite the potential of over US$ 100 billion over the next two plan periods indicates something for the wise. As per DIPPs FDI statistics, issued in April 2012, the defence sector has received only US$ 3.8 million since the FDI norms were announced and ranks amongst the bottom three of sectoral FDI.

Licensed production A second model that has been adopted since the beginning of opening up the defence sector has been the licensed production model. In this model, DPSUs were nominated as the licensed production agency for equipment procured from the OEM. From a business point of view of the OEM it is hardly in the interest of the OEM to develop the potential and capacity of the

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Indian DPSU, accorded the license production, lest it compete with the OEM in future projects. Lessons are evident from the fact that much of the aircraft and military vehicles contracts with DPSUs have not really resulted in an indigenous capability. The recent BEML TATRA case is a concrete example where even the drive system could not be replaced from Right to Left after more than 20 years of service life of the vehicle. Therefore, neither the Joint Venture route or the licensed production route has helped in building the Indian defence industry.

Foreign technology collaboration agreement A third provision of partnering exists as per the Foreign Technology Collaboration Agreement. Post reform of the limits on the Lump sum fee and Royalty and payable earlier limited to US$ 2 million and not more than 8 per cent for exports and 5 per cent for domestic sales has since been revoked. This provides an opportunity for OEMs and Indian companies to enter into technology Collaboration Agreements under the automatic route. So far not a single company in the aerospace and defence sector has followed this route for business operations in India.

Sub-contracting

Recent initiatives The National Manufacturing Policy 2012 has identified the defence and aerospace sector as a strategic sector and has sought emphasis on its growth. The 12th Plan objectives also lay focus on the defence and aerospace sector. The Ministry of Defence has promulgated the Defence Production Policy and also the guidelines for formation of Joint Ventures with DPSUs and OFBs. In addition a revised offset policy and new version of the Defence Procurement Procedure is in the offing. So, whilst the past may have been painful the future is promising.

Procedures Background and context The Public Accounts Committee, Lok Sabha, in their 187th Report (1989) recommended that government should draw up comprehensive guidelines with regard to negotiations and implementation of defence contracts. Based on the above recommendation of PAC, (and Expert Committee Report of 1986), the Ministry of Defence issued guidelines for all procurement cases involving an outlay of Rs 10.0 crore or more on 28 February 1992. It is commonly referred to as Defence Procurement Procedure 1992 (DPP-1992). This section traces the evolution of the defence procurement procedures.

DPP-1992 laid

down

The MoD has also taken some brave baby steps in opening up complex projects under the Make category to the private sector. Of particular note are the Tactical Communications System (TCS) and the Future Infantry Combat Vehicle (FICV) projects. For the TCS project two contenders, a consortium of Larsen & Toubro, Tata Power SED and HCL Infosystems Ltd and Bharat Electronics Limited, are in contention for the Indian Army's Tactical Communications Systems (TCS) Project. The project is worth Rs 10,000 crore. This is the first project under the 'Buy Indian, Make Indian' clause introduced in the Defence Procurement Policy (DPP) 2011, The FICV is by far India’s biggest-ever land systems contract for production of 2,600 FICVs to replace ageing BMP-2 vehicles.

DPP-2002 Defence Procurement Procedure 2002 was promulgated in December 2002 subsequently amended in June 2003, included procurement on ‘Buy’ and ‘Buy and Make’ through Transfer of Technology (ToT). These categorisations for acquisitions were defined as follows: Acquisition covered under the Buy Decision Acquisition covered under the Buy and Make Decision Acquisition covered under the Make Decision

The last option of offloading “work packages” to Indian industry is the sub-contracting route under the offset obligations. This seems to be the most popular option but in effect it is a body shopping exercise by the OEM to leverage the labour arbitrage for cutting costs.

DPP-1992

for defence procurements. Though DPP-1992 was a creditable effort as it covered all activities pertaining to procurement, it suffered from several inadequacies which became apparent in its implementation over the years.

the

steps

followed

Acquisition structure (As envisaged by DPP-2002) Defence Acquisition Council (DAC) DAC is the highest body headed by the Raksha Mantri (Defence Minister) which oversees the entire acquisition process for the Armed Forces. It approves the long-term perspective plans, the services capital acquisition plans, accords the acceptance of necessity (AON), approves quantity of procurements (QV), categorises the source of procurement and when required nominates the production agency in each case of capital acquisition. Its members include the service chiefs and departmental heads of the Ministry of Defence. The first Defence Acquisition Council was constituted in August, 2001. Defence Procurement Board (DPB) The Defence Procurement Board is the Tier II authority which approves the Annual Acquisition Plans and recommends the AON, QV and categorisation of acquisitions related to procurement on capital account. The Defence Secretary is the Chairman of this Board. Its Members include representatives from the various Departments in the Ministry of Defence, the three Wings of the Armed Forces and the Chief of Integrated Defence Staff. Defence Production Board Defence Production Board oversees indigenous manufacture and it derives its powers from the direction given by the DAC in respect of the categories of “Make” and “Buy and Make”. It is expected to closely monitor the “make” projects, advise the DAC on policy issues regarding licensed production, ToT and new development projects. Its membership is very similar to the Defence Procurement Board with the exception that the Chairman OFB and some CMDs of the DPSUs are also included. Defence R&D Board The Defence R&D Board has been constituted essentially to monitor and report on indigenous R&D proposals flowing out of the “Buy & Make” and “Make” decisions of the DAC. The Chairman of this Board is the Scientific Advisor to RM and Secretary, R&D. The Acquisition Wing of MoD / DoD The Acquisition Wing is the main secretariat that provides the necessary inputs to the Defence Procurement Board. This wing is headed by the Director General (Acquisitions) and is assisted by Financial Adviser (Acquisition), Acquisition Managers, Technical Managers and Financial Managers. The Acquisition Wing essentially deals with cases, which have been categorised as “Buy” or “Buy & Make”.

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CHALLENGES AND OPPORTUNITIES

Shortfalls of DPP-2002 Though the DPP-2002 was a major step forward in streamlining defence procurements interactive discussions and consultations between the various stakeholders threw up a series of shortcomings. These included a necessity to compress the acquisition time frame, open tendering for non-sensitive equipment, introduce joint qualitative requirements (QRs) for equipment of tri-services nature, identifying the L1 vendor based on the DCF in multi-currency multi-stage payments scenarios and lack of offsets to leverage benefits from defence acquisitions from foreign OEMs.

DPP-2005 The DPP-2002 (version June 2003) required that the procedure be reviewed every two years. Based on experience gained, suggestions received from Central Vigilance Commission and Comptroller and Auditor General and Ministry of Finance and in order to meet the twin objectives of greater transparency and accountability in all acquisition process and reduction in acquisition time cycle, the government brought forward a new Defence Procurement Procedure 2005 which came into effect from 1st July 2005. Under the DPP-2005 the categorisation of cases was further elaborated as Acquisitions covered under the ‘Buy’ decision, the ‘Buy & Make’ decision (purchase followed by licensed production / indigenous development) and the ‘Make’ decision (indigenous production and research and development). The other salient features of DPP-2005 are removal of the essential and desirable features and making the Staff Requirements more broad-based, inclusion of offsets, requirement of Integrity Pact, changes in the RFP response process and prescribing a time frame for procurement activities. It also introduced a shipbuilding procedure.

DPP-2006 In the DPP-2006 a noteworthy addition was a procedure for the development of a system based on indigenous research and design categorised as ‘Make’ which provided the requisite framework for increased participation of Indian Industry in

the defence sector. Accordingly, the categorisation of capital acquisitions was further detailed as follows: Buy Decision: Acquisitions covered under the ‘Buy’ decision. Buy would mean an outright purchase of equipment. Based on the source of procurement, this category would be classified as ‘Buy (Indian)’ and ‘Buy (Global)’. ‘Indian’ would mean Indian vendors only and ‘Global’ would mean foreign as well as Indian vendors. ‘Buy Indian’ must have minimum 30 per cent indigenous content if the systems are being integrated by an Indian vendor. ‘Buy & Make’ decision: Acquisitions covered under the ‘Buy & Make’ decision would mean purchase from a foreign vendor followed by licensed production / indigenous manufacture in country. Make Decision: Acquisitions covered under the ‘Make’ decision would include high technology complex systems to be designed, developed and produced indigenously. Upgrades: All cases involving upgrade to an in-service weapon system The major highlights of DPP-2006 were refinements to compress the acquisition procedure further, increasing transparency by listing proposals on the websites, refinement of the field trials procedure, prescribing the offset procedure and establishing of the defence offset facilitation agency and a new fast track procedure that covers acquisitions under ‘Buy’ category or outright purchase. The underlying principle for formulating a separate procedure for the ‘’Make’’ category of procurements is to enhance the indigenisation component in acquisitions. To genuinely promote indigenous research and development in the defence sector, DPP-2006 provided for cost sharing, normally in the ratio of MoD (80 per cent) and industry (20 per cent).

DPP-2008 The DPP-2008 came into effect

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from September 01, 2008. Some of the salient features of the DPP-2008 were to provide early information to vendors of impending defence procurements, following up verbal communications with written reports of trials, encoring the Integrity pact on DPSUs and their sub-vendors, vetting of the Staff Requirements by all concerned directorates and promulgating the trial methodology in the RFP itself. Particularly Staff requirements were addressed in detail since it was observed that most proposals had to be retracted either because there were no vendors who met the SRs / Trials or a single vendor situation ensued. Various corrections included posting the RFI on the website, preparation of compliance table of SQRs, vis-à-vis technical parameters of available equipment in as much details as feasible, at the stage of formulation / approval of SQRs, review of reasons for single vendor situation etc. The DPP-2008 delegated financial powers to the Services and the Defence Secretary to approve cases upto Rs 50 crore and Rs 75 crore and also included service officers as Chairman of Contract Negotiation Committees to reduce the workload on the Ministry and fast track approvals. Offsets were also reviewed and the criteria for Indian Offset partner revised, offset banking introduced and fast track acquisitions exempted from offsets.

Acquisitions Covered under the ‘Buy’ Decision: Buy would mean an outright purchase of equipment. Based on the source of procurement, this category would be classified as ‘Buy (Indian)’ and ‘Buy (Global)’. ‘Indian’ would mean Indian vendors only and ‘Global’ would mean foreign as well as Indian vendors. Acquisitions Covered under the ‘Buy & Make’ Decision: Acquisitions covered under the ‘Buy & Make’ decision would mean purchase from a foreign vendor followed by licensed production / indigenous manufacture in the country. Acquisitions Covered under the ‘Buy & Make (Indian)’ Decision: Acquisitions covered under the ‘Buy & Make (Indian)’ decision would mean purchase from an Indian vendor including an Indian company forming joint venture / establishing production arrangement with OEM followed by licensed production / indigenous manufacture in the country. ‘Buy & Make (Indian)’ must have minimum 50 per cent indigenous content on cost basis. Acquisitions Covered under the ‘Make’ Decision: Acquisitions covered under the ‘Make’ decision would include high technology complex systems to be designed, developed and produced indigenously. Upgrades were retained as hitherto. Other Salient features of DPP-2011 included a further detailing of the Buy and Make Indian procedures, expansion of the Shipbuilding procedure to include private sector projects, dilution of the offset requirements to include not just product specific direct offsets but also sector related opportunities in the internal security and civil aerospace sector and a list of eligible offset products and services.

DPrP-2011 Another initiative to make the acquisition process smarter and surer the MoD also issued its first ever Defence Production Policy in January 2011. Though it was an implicit admission of public sector inadequacy, the Policy seeks “to build-up a robust indigenous defence industrial base by proactively encouraging larger involvement of the Indian private sector”. The policy aims at achieving “substantive self-reliance in the design, development and production of (equipment) required for defence in as early a time frame as possible” by creating “an ecosystem conducive for the private industry to take an active role, particularly for small and medium enterprises (SMEs).” The new policy pledges to simplify the “Make” category of the DPP, which makes Indian companies / consortiums compete against each other to develop complex defence systems.

Procedures - a work in progress Thus, the Defence Procurement Procedure is still a work in progress and is seeing refinement basis, the lessons learnt and the inputs provided by a variety of stakeholders. The key challenge is that every stakeholder in the acquisition business brings his own perspective and interests to the fore. MoD needs to see through these interests and keep the aim of the procedure and the policy directions of the defence production policy foremost whilst contemplating any further revisions. The figure below summarises the evolution process.

Subsequently, the 2009 Amendment to DPP-2008 introduced a new category called ‘Buy & Make (Indian)’. Under this new category, Indian companies could partner with foreign OEMs for technical and other production arrangement. The key advantage would be that Indian companies would be the prime contractor and the foreign OEMs were bound to provide technology as mentioned in the Capability Development Document. This was a breakthrough concept that had the potential to transform Indian defence industry provided foreign OEM pressure and the penchant of some services for Buy Global acquisitions could be repulsed.

DPP-2011 The DPP-2011 was introduced in September 2011. The categorisation of the acquisitions was refined and elaborated as follows:

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CHALLENGES AND OPPORTUNITIES

Process This section addresses the procedural issues relating to defence procurement. STEA The basis of all force planning decisions is the Strategic Technological and Environment Assessment (STEA) report. This is prepared by the Headquarters Integrated Defence Staff in coordination with the Services and DRDO.

Self-reliance in today’s context means a mixture of global buy and localised “buy or make” decisions at the component, parts and sub-system level of a complete system. This is how major defence systems are planned and executed globally, which can synergise the competitive advantage of each participating partner for the common benefit of reduced costs, faster deliveries and most importantly, superior quality and system performance. Self-reliance is as much an exercise of global strategic sourcing as it is of localising operational facilities of industry / production The planning system The output of the STEA report is the preparation of the Defence Planning Guidelines (DPG). On the basis of the DPG, the MoD prepares and approves 15-Year Defence Capability Plan. From the above plan flows 15-Year Long Term Integrated Perspective Plan (LTIPP) for the three services. It is prepared by HQ Integrated Defence Staff in consultation with Service HQ and approved by the Defence Acquisition Council (DAC) under the Defence Minister. 5-Year Services Capital Acquisition Plan (SCAP) is extracted from LTIPP and duly approved by DAC. Both LTIPP and Services Capital Acquisition Plan (SCAP) spell out services’ requirement of equipment in medium and long terms. Based on the SCAP the Annual Acquisition Plans covering a period of two years is then prepared. These are approved by the Defence Procurement Board (DPB). The graphic below depicts the planning process for defence acquisitions. flow chart illustrates the process. Essentially the process comprises the following major milestones as illustrated above: Acquisition process - make procedure As per DPP-2011 “the acquisition process for this procedure would commence with the issue of Defence Planning Guidelines.” The process is diagrammatically depicted below.

Foreign Technology Collaboration Agreement provides an opportunity for OEMs and Indian companies to enter into technology Collaboration Agreements under the automatic route

The acquisition process

“Buy” and “Make”

Fast track procedure

The acquisition procedure differs for “Buy”, “Make” and shipbuilding categories. For the Buy Procedure the following

Fast

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Track

Procedure

for

meeting

urgent

operational

requirements

was

first

promulgated

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vide

defence industrial base

CHALLENGES AND OPPORTUNITIES

MoD ID No: 800/SS (A)/2001 dated 28 September 2001. The objective of this procedure is to ensure expeditious procurement for urgent operational requirements foreseen as imminent, or for a situation in which a crisis emerges without prior warning. The acquisition under FTP can be categorised as Procurement of equipment already inducted into Service and Procurement of new equipment.

Practice Self-reliance Self-reliance in Defence is of vital importance for both strategic and economic reasons and has therefore been an important guiding principle for the government since Independence. Accordingly, government have, over the years assiduously built-up capabilities in Defence R&D, Ordnance factories and Defence PSUs to provide our Armed Forces with weapons / ammunition / equipment / platforms and systems that they need for the defence of our country. Self-reliance must be the final objective. However, Self-reliance does not mean that every item of a system is sourced only from indigenous vendors. Self-reliance in today’s context means a mixture of global buy and localised “buy or make” decisions at the component, parts and sub-system level of a complete system. This is how major defence systems are planned and executed globally, which can synergise the competitive advantage of each participating partner for the common benefit of reduced costs, faster deliveries and most importantly, superior quality and system performance. Self-reliance is as much an exercise of global strategic sourcing as it is of localising operational facilities of industry / production.

A second model that has been adopted since the beginning of opening up the defence sector has been the licensed production model. In this model, DPSUs were nominated as the licensed production agency for equipment procured from the OEM. From a business point of view of the OEM it is hardly in the interest of the OEM to develop the potential and capacity of the Indian DPSU, accorded the license production, lest it compete with the OEM in future projects. Lessons are evident from the fact that much of the aircraft and military vehicles contracts with DPSUs have not really resulted in an indigenous capability. The recent BEML TATRA case is a concrete example where even the drive system could not be replaced from Right to Left after more than 20 years of service life of the vehicle. Therefore, neither the Joint Venture route or the licensed production route has helped in building the Indian defence industry Essentially, full systems or platforms are targeted to be delivered by Indian industry. This requires substantial investment in land and equipment, infrastructure and human capital with no guarantee of assured orders by the GoI, which in the case of the DPSU is immaterial. Indigenous design and development for weapons and systems that are sunrise technologies have a substantial lead time and there is no need to shy away from procuring these technologies rather than reinventing the wheel over a period when the technology has moved on and has already matured and newer technologies have arrived. In any event the key differentiator is not technology but basic science and engineering ability. Instead of developing niche capabilities in sunrise technologies at the component, parts and assembly level on one side and seek to establish a leadership position in system integration on the other side is the mantra for success. The Buy and Make Indian categorisation is the best vehicle to implement such a production policy model since it allows both indigenous sourcing and global procurement but final integration and delivery by the Indian prime. For Make projects, a new model for indigenous production with Public and Private industries participation simultaneously needs to be considered. Both sectors of Indian industry should be asked to develop a prototype of a new system based on QRs set by the User but within a time frame with well identified milestones and exit options. The selected prototype could be from a PSU or a Private industry or both. Whichever prototype is finally selected, that would then go into production, with the winning proposal being given a 60-75 per cent share and the other participant company a 25-40 per cent share of production. Modalities of such a process should ensure a level playing field for public and private industry. The defence industrial base is already an MoD responsibility as per Sl 13 and 14 of the Second Schedule of the Allocation of Business Rules for Department of Defence Production. However, based on the complex nature of the subject with multifarious agencies as stakeholders single handedly building a ‘robust indigenous defence industrial base” is a tall order for MoD. The issues and contradictions between the ITC (HS), NIC Codes, SCOMET List, various press notes of DIPP, Formation of JVs and FTCAs, as mentioned above and in addition various issues of indirect taxation such as Customs, Excise and Other taxes and Offset stipulations, requires a larger discussion to truly galvanise the defence industrial base. For instance, on the lines of concessions to SEZs to promote exports the MoD could take up the case for tax and other concessions for defence industries - however very specifically defined and restricted to licensed companies. For determining the license requirements for entering the defence business a negative list may be more suitable. An additional issue that impacts the competitiveness of defence procurements is Offsets. The GoI policy that Offsets

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would be applicable to defence procurements under Buy Global as well as Buy Indian where indigenous content is less than 50 per cent must be supported. However, enabling mechanisms must also be placed in position. Foremost amongst them is the FDI in defence and the FTCA norms, the yardstick for determining indigenous content or value addition by an Indian industry / service partner, whether it is at the parts, components, assembly, services level and how is the content to be measured are metrics that have not been adequately defined. Further, the components of costs that go into a defence product are not elaborated and there is no means of verification whether the claimed 50 per cent contribution by Indian or Foreign vendors is authentic or not.

Immediate opportunities: An industry perspective In recent years the mega missed opportunity for growth of a national helicopter building capacity in India in the private sector has been the orders placed for the (80+76) Mi17 helicopters by the IAF without exploring a Buy and Make Indian induction model. Now, the Indian defence industrial base, particularly the aerospace sector, is at an extremely fortunate moment wherein several aerospace projects are under consideration of the Ministry of Defence. Most notable of them are the IAFs AVRO Replacement Project and the C-130J inductions; and, the Indian Navy’s Medium Range Maritime Reconnaissance project, the amphibian aircraft project and the Multi Role Helicopter (NMRH) Projects. The Indian Air Force (IAF) issued a Global RFI for acquisition of 56 Medium Transport Aircraft in January 2010. This proposal was first shared with Indian Industry on July 1, 2011. During deliberations at MoD, based on the industry presentations prepared by the Industry associations, the MoD it seemed to industry had a sense that the Project would be open to Buy and Make Indian Categorisation, based on the submission of a detailed project report by Indian industries by end October 2011. This would mean Buy 16 aircraft from a Global OEM and Make 40 aircraft by the Indian Partner. Given the SRs there were not more than 3 serious vendors who could offer a fly away aircraft. The total value of the immediate acquisition could be of the order of about US$ 2-3 billion. If we add up the PLM, spares and upgrades over the lifetime of the aircraft - the usual multiplier is 2.5 times - then the programme would be worth about US$ 7-8 billion over about 20 years. The MoD has also indicated that these aircraft may also be considered for the AN-32 replacement programme and can also be exported to other Air Forces. There are additional opportunities for revenues through sales to foreign air forces also. Needless to say maintenance, repair and overhaul would be carried out by Indian industry. Thus a sustainable revenue stream could be generated to make a viable business case for Indian industry to support Buy and Make Indian categorisation. Going by the available data, precedence and the DPP timelines the anticipated schedule of activities would be that if the Buy and Make Indian categorisation were to be adopted the first “Built in India” aircraft would only be due for delivery after about 7 years from date of award of contract. The common refrain is that Indian industry has no capacity to undertake such an assignment. Of course, this is true and Indian industry will continue to have no capacity unless the opportunity is provided to build this capacity. Not all capacity needs to be built through organic and internal accruals only. Once the potential of the opportunity is identified Indian industry will stream out and look towards inorganic growth through acquisitions of companies abroad, hiring of the best talent for the job at hand from across the world and through them mentoring a tier 2 HR base, expanding the local source base for parts, components and assemblies and so on at a pace no DPSU can match. 7 years is a long time in the private sector to ramp up indigenous capability. This is a project of strategic importance for the aerospace sector of our country. This project can lay the foundations for a flourishing and genuine indigenous aerospace industry in India of the future. This one project would determine if India is to remain a screwdriver technology nation under the licensed production route or build genuine capability through Joint Ventures / Consortia under the Buy and Make Indian Route with 50 per cent indigenous content and only 10 per cent proprietary technology with OEM. Going by the discussion and involvement of industry so far the lead players, apart from TATA Group, would be Mahindra & Mahindra and L&T. There are a large number of other players such as GMR, Punj Lloyd, Axis, TAAL etc. who have specific strengths and would partner with the Prime Contractor in some way or the other. In addition, many vendors in the SME segment are already supplying world class products to HAL. Of course, engines would have to be imported but given the numbers creating a final assembly and engine test bed in India, purely as a business proposition is also attractive. Building IAF Capability alone is not enough - national capacity building ranks higher as a strategic requirement. Therefore a holistic view of the aircraft requirements may be taken. Remembering that Engine costs comprise about 20 per cent of aircraft costs, it is core technology and from a perspective of encouraging an engine manufacturer to locate a manufacturing plant in India we need to look at aircraft acquisitions holistically. The facts are that there are already the C-130Js, inducted and more are on order, the AVRO replacement options being the CASA295 and the SPARTAN 27J, the amphibian aircraft programme of the Navy with the US-2, the Navy’s MRMR programme where the SPARTAN 27J is again a contender. All of them use the same engine or a variant thereof. Going by public domain information the engines to be ordered are more than 400. This is adequate to relocate a manufacturing plant in India. Therefore, categorisation of aircraft induction cases need to be seen in a wider perspective of not just acquisitions but through which service capability, lowered life cycle costs and most importantly national capacity are built. If there is an

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CHALLENGES AND OPPORTUNITIES

additional cost or single vendor situations then it must be balanced against the national capacity being built and after due checks and balances the appropriate decision in the overall national interest taken. Single vendor acquisitions are possible under the DPP-2011 and these provisions must be utilised if they build a national capacity. The government must come forward and demand that Indian industry undertake this project and if concessions and incentives are required to make the project see the light of day then those must be made available in the national interest. For no other reason than pure legitimacy of the conflicting positions all that the IAF has to do is to issue a Capability Definition Document to the large industrial houses and seek a written Detailed Project Report. This report once evaluated by an unbiased committee can draw its own conclusion about whether Indian industry can or better has a well defined road map to deliver on the project. In any event the IAF is not the authority to certify the capability or otherwise of the Indian industry and they can well learn some easy lessons from the Indian Navy which has trusted Indian industry to build first class warships and submarines in India. It would be real shames to the IAF were the Navy to categorise the much more sophisticated Multi Role Helicopter (MRH) project for acquisition under the Buy and Make Indian categorisation. Regrettably the Defence Acquisition Council in its meeting of July 24, 2012 categorised the Rs 12,000 crore project as Buy Global with 16 aircraft delivered on “fly away condition” the next 16 to have an indigenous component of 30 per cent and the balance 24 with 60 per cent indigenous content. In other words, by cost the OEM would get a share of (16+70 per cent x 16+40 per cent x 24) 36 aircraft and the Indian partner 20 aircraft. The Global OEM is to identify an Indian partner - a pretty tough task as the business proposition for an Indian company, to be interested, is unattractive. As any aircraft manufacturer can understand, including the HAL, obtaining 60 per cent indigenous content in a transport aircraft is close to impossible, unless a prohibitive cost is paid. The Navy’s MRH project is the second and possibly final opportunity for Indian Private sector defence industry to build an alternative and highly sophisticated helicopter building facility in India. As per the RFI issued for this project almost a 100 helicopters are to be acquired by the Indian Navy for multi-role requirements. The contenders are possibly limited to at the most three vendors. The numbers are attractive for Indian industry and the project itself may be of the order of US$ 10-12 billion and another US$ 15 billion for maintenance, repair and overhaul over the next 25 years. The helicopters also have potential civil and commercial applications. The note that Offsets will build Indian industry is false since by definition offsets utilise only existing capabilities and thus do not nurture growth. Offsets can never build capability since Indian vendors will remain subsidiary to foreign primes. Similarly, licensed production has been a bane to Indian industry and is a luxury business model that only DPSUs can adopt since there is no visibility post the licensed numbers have been delivered. The chart below depicts the deficiencies in following the licensed production route. The key differentiator is that in Buy and Make Indian projects Indian companies dictate the terms whilst in Buy Global and Licensed production cases the foreign OEM is supreme. It does not make any business sense for the OEM to empower his Indian partner with such capability that it may become its own competition in the future. It also does not make any business sense to the foreign OEM to encourage import substitution since every such substitution results in lower revenues for itself. The Su-30 and the AJT are examples of licensed production in India the success or lack of it, in these projects building genuine capability in India, is clearly evident. It is also evident that LP can only be supported by DPSUs where financial feasibility is never a consideration. The private sector would model a business case quite differently. The MoD has also taken some brave baby steps in opening up complex projects under the Make category to the private sector. Of particular note are the Tactical Communications System (TCS) and the Future Infantry Combat Vehicle (FICV) projects. For the TCS project two contenders, a consortium of Larsen & Toubro, Tata Power SED and HCL Infosystems Ltd and Bharat Electronics Limited, are in contention for the Indian Army’s Tactical Communications Systems (TCS) Project. The project is worth Rs 10,000 crore. This is the first project under the ‘Buy Indian, Make Indian’ clause introduced in the Defence Procurement Policy (DPP) 2011. The FICV is by far India’s biggest-ever land systems contract, for production of 2,600 FICVs to replace ageing BMP-2 vehicles. In a four corner contest only two companies would be down selected as “Development Agencies,” who will each design and build a prototype of the futuristic vehicle. The final design would be selected after trials. In both projects bulk of the development cost would be borne by the MoD. These projects will genuinely build Indian defence industry and such projects must find greater encouragement for categorisation as make projects. Finally, we need to understand that in practice the human resource base to genuinely develop the Indian Defence industrial complex is minimal. Not enough interest exists in this strategic sector and the academic institutions are not yet upto speed in having the right infrastructure and tutors / mentors to take the education campaign forward. This is an area where the DRDO has to work with the IITs / NITs to develop the right faculty and the lab and test facilities to bring up the HR base in this country. Secondly, acquisitions are a matter of complex study and expertise. At the moment this is being undertaken by tenure based generalists from the armed forces and the civil services. It needs no emphasis that these sub-optimal and acquisition projects worth US$ 250 billion cannot be left to the good sense of tenure bureaucrats and service officers. We can have the best procedure but ultimately that procedure has to be executed by humans and quite obviously talent and skill can make or break these projects.

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Factor

Licensed Production Model as (Buy and Make with ToT)

JV / Sub-contract Model (Buy and Make Indian)

Prime Contractor

OEM

Indian JV / SPV

Accountability for Product Support

OEM

Indian JV/ SPV

National Vision

Short Term – no capacity building as driven partner

Long Term – genuine capacity building through participation as driving partner

Business Model

Royalty and License Fee

Joint Revenue Generation for Growth and profit sharing through dividends with investments

Termination

One Off and at discretion of OEM

Not possible due contractual and business commitments

Brand Ownership

OEM

Joint with Indian Industry Partner (IIP)

Valuation

As an OEM Product. “Manufactured Under license from OEM”

Branded as a Joint “OEM-IIP” Product.

Sustenance

Short and dependent upon Product life cycle

Longer sustenance and for more products, including Design and Engineering to meet India specific requirements

Relationship

Confined and limited to immediate Business opportunity on pure financial terms

Larger and more comprehensive, stable and sustained relationship

Indigenisation

No scope as LP may be competitor to OEM. Offsets may not go to LP. ToT extremely limited and contractually driven

50 per cent indigenous content and in the interest of both companies to be cost and technologically competitive to do utmost to reduce production cost and increase technical features for second sale to exiting customer or open new markets

Precedence

Su30MK; AJT

LPD: Radars for the Indian Navy

Conclusion These policy guidelines are a novel initiative in capturing the requirements of the services and industry to work together in creating a defence industrial complex that India can be proud of. As the MoD and the Hon’ble Raksha Mantri have stated in several forums transparency together with expeditious procurement is the mantra to equip our armed forces with the best possible equipment. Towards adhering to transparency the DAC / DPB Agenda and minutes should be placed on the MoD website just as is the case with DIPP and FIPB. The Buy and Make Procedure allows the best chances for expeditious procurement since this system alone ensures that only technically qualified vendors are shortlisted even before the RFP is issued. The way forward is to promote the Buy and Make Indian procedure to be the default procedure. Buy Global acquisitions should be the last resort as the MoD and the Indian regulatory framework leak like a sieve in the monitoring of offset contracts and no real capacity is being built through this process. On the other hand, foreign OEMs will have no choice but to engage with Indian industry, both DPSU and Private, to win projects in India. Since these are competitive no Indian Prime will ever accept loading the commercials with ToT costs as that would be lose-lose for both foreign OEM and Indian Prime. Therefore, the Non-recurring Expenditure burden would have to be mostly borne by the foreign OEM and hence the induction of technology would be cheaper and faster. Forming JVs with Indian partners will build Indian capacity and open the route for India to become part of the global supply chain for the aerospace and defence industry. This would also promote Indian industry to innovate, something it cannot do as a mere offset partner.

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PLACES OF VULNERABILITY

Radicalization in Prisons I

n Prisons and Corrections we need out of the box thinking and methodology to capture and hold, analyze and neutralise the process which leads an inmate to Radicalization, to violent extremism. Patrick T Dunleavy’s book The Fertile Soil of Jihad paints a coherent picture of the Radicalization process in the prisons. Prisons are places of vulnerability … highly unsettling environments in which individuals are more likely than elsewhere to explore new beliefs and associations. An understanding is needed to capture the groups and individuals, operations and behaviour within the prison walls. To detect, markers for conversion and construction of prediction maps of capabilities, inside and outside the prison walls. Critical observation of movement needs to be mapped, of cell-to-cell, zone-to-zone.

he time a person is charged for an offense and is incarcerated is the day his / her reintegration process back in the society starts but sometimes that is the day towards Radicalization and recruitment.

Many experts have described that prison is an instrument for “making bad people worse”. (Rehab to Recruitment!) Content (meaning-making) analysis may give some hint of intentions. Context (background of this emerging threat) analysis tells us what the individual or group, thinks, the people want to hear. Thus content and context analysis provides a measure of the “temperature” of the “street.” Complexities of threat matrix are constantly unpredictable now and shape shifting. Threats by intent and by capabilities are not just the two essentials to focus on, threat by adjustment, divergence, assimilators and convergences have also become factors at play (Ref. Fig.1).

Rehab to recruitment? Criminological evidence shows that the greatest danger to security is found in mutating forms of “Prison Islam”. One case in Belmarsh was persuaded to undertake a martyrdom mission within 72 hours of arriving, this inmate was housed 3 cells away from the radical Jamaican-born preacher Abdullah-al Faisal who convinced him to become a suicide bomber within 3 days.

Patrick T Dunleavy’s book The Fertile Soil of Jihad paints a coherent picture of the

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The columnist is an Intelligence and Terrorism Analyst, Clinical Psychologist and Clinical Hypnotherapist based in South-East Asia. She has also received training in specialsed areas including counter-terrorism, intelligence and tactical operations. She specialises in cognitive learning processes and neural pathway response and how these factors apply to specialised trainings. She is an expert in the field of non-verbal micro and macro expression for deception and detection and also using non-verbal assets for psychological self-assessment in conjunction with Emotional Intelligence to enhance the human mind, personality, image and spirit. She is a member of ICPA (International Corrections & Prisons Association), IACSP (International Association for Counter-Terrorism and Security Professionals) and a member of APA (American Psychological Association), APP (Association of Professional Psychologists), UK Certified Hypnotherapist and General Hypnotherapy Register.

Radicalization process in the prisons. The case demonstrates that under certain conditions correctional institutions are indeed vulnerable to prisoner Radicalization and terrorist groups that infiltrate, recruit and operate inside the walls. A study done in the UK on Radicalization and de-radicalization in the prisons found that “prisons are

places of vulnerability … highly unsettling environments in which individuals are more likely than elsewhere to explore new beliefs and associations.”

House of Commons, Home Affairs Committee stated in their 19th report “Roots of Radicalization” (Session 2010-2012) - a nine month inquiry found, that in some cases, inmates were being persuaded to carry out suicide missions within days of entering prison. Extremist ideologies are widely disseminated in prisons and the staff while note and record the association and movement of terrorist prisoners, often it is the unchallenging behaviour which needs scrutiny and observation rather than the obvious challenging behaviour. In Prisons and Corrections we need out of the box thinking and methodology to capture and hold, analyse and neutralise the process which leads an inmate to Radicalization, to violent extremism. An understanding is needed to capture the groups and individuals, operations and behaviour within the prison walls. To detect, markers for conversion and construction of prediction maps of capabilities, inside and outside the prison walls. Critical observation of movement needs to be mapped, of cell-to-cell, zone-to-zone, egress-ingress of population movement and visitors. The emerging security challenges are taking place in a globalised environment where geographical distance is converted to increasing interconnectedness and interdependence and within the walls of the prison is no different. Combating Radicalization in prison begins by first recognising that there is a threat and also identifying Radicalization in the society more broadly. There is a

vast difference between religious faith and radical beliefs. Prison staff must be trained appropriately and specifically of this issue to identify pockets of Radicalization in their

Dr Rupali Jeswal

prisons. To generate awareness through specific trainings of “identification markers” the difference between religious conversion and convictions that take place within the framework of a prison, the social dynamics of

joining gangs, differentiating between political preachers, radical extremist and just pure religious converts.

Cases Terrorist, shoe-bomber Richard Reid and Jose Padilla, who were held as an enemy combatant for attempting to detonate a “dirty bomb” were both radicalized during their stints in the prison. The case of Toronto-18, Ali Dirie also an example of a terrorist actively promoting terrorism behind bars. He pleaded guilty in October 2005 to importing and simple possession of firearms and ammunition and was sentenced to two years. From prison, he continued to conspire with Ahmad on how to obtain firearms. Kevin James who formed and dubbed the terrorist group Jam’iyyat Ul-Islam is-Saheeh (JIS) designed the plot while serving time in a California State Prison. An example of Mohammed Chowdhury, 21, Shah Rahman, 28, Abdul Miah, 25 and Gurukanth Desai, 30 were sentenced for constructing a Mumbai-style terror plot and it is believed that Abdul Miah was radicalized in prison after being sentenced for drugs and weapon offences. Gone a petty criminal and came out as an extremist.

Martyrs of Morocco terrorist cell Spain - October 2004: Members of this network were recruited inside the Topas prison in Salamanca. The persons involved called themselves ‘Martyrs of Morocco.’ The network planned a suicide attack against the high court in Madrid, using a truck filled with explosives. In 2001 the largest prison-riot in Brazil’s history, was orchestrated through a network of cell phones and spread to 28 other prisons. The outcome, 10,000 inmates took guards hostage and held 8,000 visitors inside. These few examples do tell us that new methods for collection and utilisation are needed. Intelligence is an important tool for management. Findings of a study done in southern Philippines

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PLACES OF VULNERABILITY

suggested that the integration of terrorist inmates with prison gangs might temporarily encourage disengagement and set the foundations for de-radicalization. However, without a specifically designed intervention strategy, the terrorist inmates may revert to militancy once they have returned to their original social settings. Terrorism is not a new phenomenon; over the years it has changed from being primarily a national topic to a global issue. To combat this unrestricted warfare with diffusion of powers, countries need correct interpretations of today’s security scenario keeping in view, aspects of culture, geography, soft and hard targets. We are not only confronting terrorism but effects of their relationship with organised transnational crime rings. Terrorism has had many definitions, for many it no longer describes a tactic but implies moral censure. Most significantly, terrorist networks are increasingly becoming able to study the operational behaviour of security forces and frequently engage in counter-intelligence practices. At the same time, the increased embeddings of these terrorist networks within society makes it easier and more likely to recruit and radicalize through propaganda civilians of various social classes and professions. Consequently, valuable intelligence that could be fed to ongoing investigations is very likely to emerge from unconventional locations and sources, which the security apparatuses underestimate or cannot monitor effectively. Moreover, the criminal networks that are established in prisons offer significant financial and logistical resources, which can facilitate large-scale terrorist attacks [Shelley et al., 2005]. In 2001 Jose Emilio Suarez Trashorras was jailed in a Spanish prison for drug related offences. Whilst imprisoned, Trashorras established regular contact with Jamal Ahmidan who was serving time for a petty crime. Both individuals embraced radical Islamic fundamentalist ideas within the prison and were recruited in the Takfir wa al-Hijra group, a Moroccan terrorist group linked with al-Qaida [Cuthbertson, 2004]. Following their release, Ahmidan became the leader of the terrorist cell that conducted the Madrid bombing. In a drugs-for-bombs exchange with a third party, Trashorras provided the cell with explosives for the 13-backpack bombs that killed 191 people and injured hundreds. Equally troubling, al-Qaeda terrorists have found ways to continue recruiting efforts in the outside world. Abdel Abdel Bary has smuggled a series of fatwas out of prison, calling for attacks by al-Qaeda and the murder of moderate Muslims (Leppard, 2009). In 2006, a Libyan detainee wanted in Italy on terrorism charges used a public telephone at Long Lartin prison to speak live on an Islamic television programme, comparing British prisons with Guantanamo and Abu Ghraib (Leppard, 2009). In 2007, guards confiscated a laptop computer from terrorist inmate Tariq al-Dour who used a smuggled cell-phone to connect to the Internet. From his cell in maximum security, al-Dour operated a website sympathetic to al-Qaeda (Pantucci, 2008). The first study of Islam in prison was done by Butler (1978). He studied reforms at prisons in Washington DC, New York (Attica), Pennsylvania (Graterford) and New Jersey (Trenton State) and he found that nation of Islam contributed positively to inmate morale, discipline and rehabilitation. His study was not on conversion to Islam.

However in a study of prisoners who adopted the Muslim faith while incarcerated in an Illinois prison, it was found that conversion to Islam was a condition necessary for inmate prison adjustment, reduced stress and the sense that one has control over one’s life and ability to change the self and environment. Despite being sent to maximum-security prisons, extremists are preaching hate to new inmates, breeding a fresh generation of radicals willing to launch terror attack. Conversion to radical Islam also acts as a facilitator for anti-Semitic views due to “Attitude polarisation”, this is a phenomenon where people’s attitudes or beliefs strengthen and become more extreme as they engage in intensive thought about the recognised attitude object.” While Prison and Correction staff might indulge unknowingly in base rate fallacy the inmates might be adopting the control phenomenon. Base rate fallacy can occur in belief reasoning when a typical task is analysed to assess and compare based on the collected evidence, but errors can be made due to the limited view of evidence collected leading to a susceptibility to deception unknowingly by the analyst. We use two forms of reasoning - causal and derivative, causal is “focus on cause” derivative is “situation (cause / effect)”. Most people have a tendency to reason in a causal manner even in situations where derivative reasoning is required. In other words, derivative situations are often confused with causal situations, which provides an explanation for the tendency of the base rate fallacy in certain professional practices, such as - medical diagnostics, legal reasoning and intelligence analysis.

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KAPO: Knowledge, awareness, probability, outcome One commits a base rate fallacy when they do not engage in KAPO process but concentrate on information that isn’t relevant, in other words, evaluating the outcome of today on yesterday’s information is irrelevant. Control phenomena is an interdisciplinary branch that deals with the behaviour of any dynamical systems, the objective is to calculate solutions for the proper corrective action by the controller that result in system stability, that is, the system will hold the set point and not oscillate around it. This phenomenon is witnessed through the cases in the prisons where one facilitator is enough to guide another towards the path of Radicalization. The convert (effect) then holds the set points induced by the controller, in this case the facilitator and transformation occurs, grows, takes roots and branches out to affect and convert other potential systems (candidates). Each “effect” can have multiple affects and consequences in any direction (Ref. Fig. 2).

A facility can aid its internal mechanics by installing prediction maps based on their SOP (Standard operating procedure) and creating close feedback loop to constantly review, evaluate, analyse and restructure SOP to fill gaps and holes including assessment of base rate fallacy and incorporating it in the input to reinvent systems to detect and deter seeds of Radicalization. This process is important as they define the behaviour of the interactions among the control elements (SOP in the facility) and adaptation of the immediate environment for maintenance of the running system, performance evaluation and evolution. When this system functions well - typology provides recognition and we learn how to perceive the environment in ways that are shared with other typical people. This system eventually becomes an unconscious support of our natural competencies in and relatedness to the world around us (Ref. Fig. 3). Within the Prison walls Learning occurs as a ‘response’ to certain definite and identifiable stimuli in one’s environment. Detection trainings are a topic to consider.

Intelligence as a management tool The fight against terrorism requires an inter-agency, interdisciplinary approach to improve the intelligence base. An active, goal-oriented intelligence gathering has to become an integral part of day-to-day analysis in order to sustain the value of analytical results and promote the setting of appropriate priorities. Criminologists generally agree that religion offers prisoners a way to adjust to institutional life by providing natural means to cope with unnatural surroundings (Clear et al., 1992; Dammer, 2000; Johnson, 2004; Thomas and Zaitzow, 2006).

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PLACES OF VULNERABILITY

Membership in a group provides mutual protection from theft and physical assault, the basis of wheeling and dealing activities and a source of cultural identity (Irwin, 1980). The inmate sub-culture helps inmates cope with the deprivations of prison-life by providing shared ways of thinking, feeling and acting. Those who know the most about the religious lives of prisoners prison chaplains - agree that inmate conversions take place through friendship and kinship networks. This is especially so for non-traditional groups. Research shows that social networks are very important in explaining how people are recruited into new religious movements and organisations (Lofland and Stark, 1965). This (conversion) in itself is no issue of threat but to decipher if the recruitment to new religious movement is geared towards Radicalization, a facility must be prepared to predict, probe and pose provided the facility knows what signs are they looking for.

but a methodology must be constructed to transform the information into actionable intelligence, which becomes a management tool. Line staff are perfect intelligence gatherers. And this is not limited to the ranks of custody. Non-custody staff may observe atypical behaviours in different settings. Their inclusion in the equation gives a more complete picture. So, all line staff, custody, non-custody and treatment-practitioners, contribute to the larger pool of information. Intelligence is not just a “source” but also a “tool” to identify the personal and social motivations for prisoners’ conversions to these faith groups; and to assess the prisoners’ potential for terrorist recruitment. Due to effective communication systems, exchange among terrorist groups is increasing rather than decreasing. Cooperation is observed among groups with common ideologies and goals, as well as across ideological and tactical divisions. Groups exchange members, weapons and explosives. Terrorists train together and share intelligence data, they collectively arrange secure staging locations and provide support for one another and participate in joint operations. Although terrorist groups still factionalise, splinter and follow separate tactical paths, cooperation, coordination of effort and imitation now appears to be the rule.

Evidence through various published and unpublished research suggests that detention facilities have been and are increasingly becoming congregations where terrorists and organised criminals establish References: channels of communication and co-operation and more Butler, K. (1978), “Muslims Are importantly recruit new No Longer an Unknown Quantity.” members. Here a systematic Corrections Magazine, 4: 55-63.

capturing and analysis of the social processes within detention facilities can enhance intelligence and law enforcement agencies’ understanding of the groups’ operation and behaviour. It will mean not only additional information but also new ways and methods of testing the integrity and veracity of this information. Inmates are gathering information at all times and sharing with each other. The inmates use simple observations of body language, verbal habits and communications amongst staff - the daily routine, to assess the temperature of the prison system and they use the system to serve their own goals. Staff members also collect information

D. K. Freedheim (Ed.), History of psychology. Vol. 1 of I. Weiner (Ed.) Comprehensive Handbook of Psychology. New York: Wiley. Harry R. Dammer, (with Todd R. Clear, et. al). The Value of Religion in Prison: An Inmate Perspective. Journal of Contemporary Criminal Justice. Vol. 16, Number 1. February 2000. Home Affairs Committee, Nineteenth report of Session 2010-2012, Roots of violent radicalization, HC 1446, 6 February 2012. I.

Cuthbertson,

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Prisons

and

the

Education of Terrorists, World Policy Journal, 21 (2004), 15-22. Irwin, J. (1980), Prisons in turmoil. Integration versus Segregation: A Preliminary Examination of Philippine Correctional Facilities for De-radicalization - Studies in Conflict and Terrorism Volume 35, Issue 3, 2012. J. Thomas and B. H Zaitzow, Conning or Conversion? The Role of Religion in Prison Coping, The Prison Journal. Volume 86 Number 2 June 2006 242-259. Jonathan Koehler, The Base Rate Fallacy Reconsidered: Descriptive, Normative and Methodological Challenges. Behavioural and Brain Sciences, 19, 1996. Johnson, B. (2004), Religious Programs and Recidivism Among Former Inmates in Prison Fellowship Programs: A Long-Term Follow-up Study. Justice Quarterly, Vol. 2, No. 2. June 2004. L. Shelley, J. T. Picarelli, A. Irby, D. M. Hart, P.A. Craig-Hart, P. Williams, S. Simon, N. Abdullaev, B. Stanislawski and L. Covill, Methods not Motives: Exploring links between transnational organised crime and International terrorism, National Criminal Justice Reference Service, NJC211207 (2005). Lofland, John and Rodney Stark, 1965. “Becoming a World-Saver: A Theory of Conversion to a Deviant Perspective.” American Sociological Review 30 (6): 862-7 5. Leppard D. (2009), “Terrorists Smuggle Fatwas Out of Secure Prisons.” The Sunday Times, November 15. Pantucci, R. (2008), “Britain’s Prison Dilemma: Issues and Concerns in Islamic Radicalization.” Terrorism Monitor, March 24. Spalek, B. and D. Wilson (2002), “Racism and Religious Discrimination in Prison: The Marginalization of Imams in their Work with Prisoners.” In Islam, Crime and Criminal Justice, B. Spalek (ed.), Portland, OR: Willan Publishing, Pp. 96-112. Zoll, R. (2005), “American Prisons Become Political, Religious Battleground over Islam.” Associated Press, June 4.

defence industrial base

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T Rear Adm (Dr) S Kulshrestha (retd) The writer has held the post of Director General Naval Armament Inspection at the NHQ prior to his superannuation. He is an ardent exponent of indigenisation and self-reliance in the field of military weapons. While the Navy is proud to be a ‘builder’s navy’ the fact remains that the shipyards still import gas turbines, engines, gear boxes, hydraulic systems, sensor and weapon packages etc. which take away between 75 per cent to 55 per cent of the cost of the ship to foreign vendors. What we have today is the capability of defence shipyards with support from indigenous industry, to manufacture low to mid level technological products and integration of complex systems. The production of high-end technology systems still eludes us. As Admiral Nirmal Verma says “However, we still require to bridge certain technological gaps and therefore the intention is to adopt leapfrogging technologies.”

he Indian Navy's efforts at indigenisation of naval technologies, over the past five decades have resulted in building of nearly 80 per cent of warships within the country, in its four Defence Public Sector Undertaking (DPSU) shipyards. At present, Indian Navy has placed orders for 47 warships with shipyards, 44 of which are being built in Indian shipyards and is planning to induct at the rate of five to seven ships a year over the next five years. The Navy has also been encouraging the entry of private sector into arms development. The Arihant project is a good example of public–private cooperation in defence production. While the Navy is proud to be a ‘builder’s navy’ the fact remains that the shipyards still import gas turbines, engines, gear boxes, hydraulic systems, sensor and weapon packages etc. which take away between 75 per cent to 55 per cent of the cost of the ship to foreign vendors. The writer makes a strong case for developing and fielding Disruptive technologies and questions the value of Offsets in creating a DIB.

A Vibrant ‘DIB’ Tomorrow

NS Sahyadri joined the Indian Navy on 21 July 2012. The warship employs advanced features such as CODOG propulsion, Total Atmosphere Control System, Enhanced Combat Management System, Automated Power Management System and an ATM based integrated Ship-wide Data Network etc. The ship has been built at Mazagon Dock Limited (MDL), Mumbai. The Indian Navy has been nurturing indigenous shipbuilding since its inception. The first major warship to join the IN was the INS Nilgiri in 1972. Since then the Indian shipyards have come a long way on the road to self-reliance and indigenisation. Today they are building not only sophisticated warships but also a very complex strategic submarine Arihant and the indigenous aircraft carrier (to be christened as Vikrant). MDL is one of the four defence shipyards of the country, apart from the Goa Shipyard, Kolkata-based Garden Reach Shipbuilders and Engineers and Visakhapatnam-based Hindustan Shipyard. It is a key warship builder of the nation. At present, MDL has orders for building Shivalik class stealth frigates and six Scorpene diesel-electric submarines. The Indian Navy’s efforts at indigenisation of naval technologies, over the past five decades have resulted in building of nearly 80 per cent of warships within the country, in its four Defence Public Sector Undertaking (DPSU) shipyards. At present, Indian Navy has placed orders for 47 warships with shipyards, 44 of which are being built in Indian shipyards and is planning to induct at the rate of five to seven ships a year over the next five years.

The Navy has also been encouraging the entry of private sector into arms development. Out of the several projects undertaken with involvement of domestic private companies, the Arihant project is a good example of public-private cooperation in defence production1. The Arihant class submarines are nuclear-powered ballistic missile submarines, they are being designed and constructed as a part of the Indian Navy’s Advanced Technology Vessel (ATV) Project. The ATV project started with the intent to design nuclear-powered fast attack submarines, though over time the project was re-aligned towards the design of a ballistic missile submarine in order to complete India’s nuclear triad2. Amongst the many challenges faced by the project a major one pertained to design and miniaturisation of the nuclear reactor. The initial design of the miniaturised naval-version of the reactor developed by the Bhabha Atomic Research Centre (BARC) had technical difficulties which were resolved with the help of the Russians3. The submarine design centre of L&T carried out detailed engineering, using 3D modelling and product data management software. BARC built the final production version of the reactor at the Indira Gandhi Centre for Atomic Research (IGCAR) at Kalpakkam. The hulls for this class are built by L&T’s Hazira shipbuilding facility. The control systems for the submarine have been built by Tata Power SED. Walchandnagar Industries have supplied systems for the steam turbine integrated with the PWR. In the words of Admiral Nirmal Verma “Today, we pride ourselves to be a ‘builder’s navy’; this is a phrase that reflects the enormous investment that our navy has made in conceptualising ship and 1. ‘Creating a Vibrant Domestic Defence Manufacturing Sector’ A CII-Boston Consulting Group report 2012. 2. ibid 3. Ibid.

Incubating Technologies Today For

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submarine designs. We have very vibrant indigenous construction programmes …”

The way ahead for the Indian Navy is therefore to put in place a grid of pure and applied research programmes at academic institutions, in collaboration with industry or otherwise, which generate fundamental innovation in areas of future interests to the Navy. The Indian Navy should also consider dealing directly with ‘Matters Naval Research’ at the grass roots level of research institutes and engineering colleges by adopting a long term, broad-based approach to incubate military disruptive technologies in addition to result-oriented solutions which may be required in short / mid term While the Navy is proud to be a ‘builder’s navy’ the fact remains that the shipyards still import gas turbines, engines, gear boxes,

hydraulic systems, sensor and weapon packages etc. which take away between 75 per cent to 55 per cent of the cost of the ship to foreign vendors. What we have today is the capability of defence shipyards with support from indigenous industry, to manufacture low to mid-level technological products and integration of complex systems. The production of high-end technology systems still eludes us. As Admiral Nirmal Verma says “However, we still require to bridge certain technological gaps and therefore the intention is to adopt leapfrogging technologies.”

Offsets One of the crucial strategies to acquire technologies which arms importing developing countries adopt is by demanding offsets. It is perceived that by doing so their domestic arms industry would develop advance capabilities. Through this route of technology

infusion they hope that they would be able to eventually produce sophisticated weapons in much less time frame than they would have if they had commenced design and development from scratch. They dream of running on the technological bridge connecting their country with a developed country. In a study done by Brauer and Dunne revealed “virtually no case where offset arrangements have yielded unambiguous net benefits for a country’s economic development’4. Further they found that offsets, with “very few exceptions do not result in significant technology transfers, not even in military sector.”5 These countries in a way got entangled in a technology warp, thus when a ToT was successful, the local defence industry could not achieve its aim of attaining any sort of technological equity with the OEM or, even if they acquired the capability, they found that the technologies have advanced to the next level! The Brauer and Dunne findings have indicated that

4. Brauer Jurgen and Paul Dunne. “Arms Trade Offsets and Developments” June 2005. 5. ibid

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DISRUPTIVE TECHNOLOGIES

offset route did not result in bridging the technological gap and was an expensive option in terms of time and cost.

The Indian Navy has been nurturing indigenous shipbuilding since its inception. The first major warship to join the IN was the INS Nilgiri in 1972. Since then the Indian shipyards have come a long way on the road to self-reliance and indigenisation. Today they are building not only sophisticated warships but also a very complex strategic submarine Arihant and the indigenous aircraft carrier In case of India, studies by Baskaran6 reveal that offsets have not achieved the aims with which they were sought. In fact they have resulted in spectacular failures in case of aircraft, naval vessels and tanks. The Indian defence industry7 “failed to acquire capabilities sufficient to close the technological gap with developed countries and keep pace with technological change”. In fact the OEMs have been hesitant to transfer core technologies to India, thus leading to a deficient defence industrial base. Generally it is observed that ToT and offset routes lead countries to acquire technologies at higher costs and of limited long term value as the transfer is of an established older technology. The establishment of a successful and robust, state-of-the-art, defence industrial base through ToT/ offset route depends upon various factors like willingness of both the OEM and the parent government to release core technologies for transfer; acquiring country’s ability to absorb the technology, which has been transferred, in terms of its human resources and competence; and lastly even after the technology transfer the country should have the capacity to forge ahead and develop the changes and / or new technologies in the relevant area on the strength of its own R&D and technological base. Failure to do so,

in effect, results in one of a kind ToT, advantages of which wither out on its own. As a matter of interest, Japan is the only country that has benefited remarkably as a result of its offset policy in post WWII era, mainly because of its tremendously motivated, educated and highly skilled workforce and the fact that the US permitted practically unrestricted flow of technology to Japan to further its own interests in the region.

In a study done by Brauer and Dunne revealed “virtually no case where offset arrangements have yielded unambiguous net benefits for a country’s economic development’. Further they found that offsets, with “very few exceptions do not result in significant technology transfers, not even in military sector.” These countries in a way got entangled in a technology warp, thus when a ToT was successful, the local defence industry could not achieve its aim of attaining any sort of technological equity with the OEM or, even if they acquired the capability, they found that the technologies have advanced to the next level! The Brauer and Dunne findings have indicated that offset route did not result in bridging the technological gap and was an expensive option in terms of time and cost In the long term, the only option that remains with a country like India, is to incubate technologies in-house, preferably such that they also have commercial viability in the non-military arena. This is so because in foreseeable future India would not take the route of exporting explosives and weapons and it is unlikely therefore that any weapon manufacturer would be permitted to set up a shop here for feeding the markets abroad. Thus the defence industrial base would be catering to only India’s need of defence equipment, upgrades, maintenance

and repair. The economic viability of such ventures can only be supported by government, especially since the average life of large platforms and weapon systems easily spans over three decades.

Disruptive technologies This brings us to the question ‘what type of technologies should India incubate for the future? The answer in my view lies in developing ‘disruptive technologies’. In 1995 Joseph L Bower and Clayton M Christensen coined a term ‘Disruptive Technology’ to describe the phenomena of entrenched commercial technology being replaced by a new technology. The term describes how entrenched technologies or innovations became obsolete in only a few years by new technologies or innovations. However, for a new disruptive technology to be viable for an entrenched business, the disruptive technology must become sustaining. Thus the need for incubating dual use technologies which feed the commercial as well as defence needs. The term disruptive technology when used in reference to military use, must be modified to ‘military disruptive technology’ because of the differences based on the strategic, operational and tactical impact that the disruptive technology will have, when employed against an adversary. It is also imperative for a rising power like India to find a way to evaluate new disruptive technologies that can be converted to military disruptive technologies when applied in tactical situations. John C Keefe in his article8, ‘Disruptive Technologies for Weapon Systems: Achieving the Asymmetric Edge on the Battlefield’ provides definitions for what disruptive technology is with respect to military applications. He defines disruptive technology as ‘an innovation that forces the advancement in security or degrades current security as related to changes in geopolitical, military, economic or social factors’. He asserts that it is of extreme importance that the newest emerging technologies must be advanced as soon as possible

6. Baskaran A. The Role of Offsets in Indian Defence Procurement Policy in Arms Trade and Economic Development: Theory, Policy and cases in Arms Trade Offsets. Jurgen Brauer. New York. NY: Routledge 2004. 7. ibid 8. Keefe, John C. “Disruptive Technologies for Weapon Systems: Achieving the Asymmetric Edge on the Battlefield.” The WSTIAC Quarterly 7. No 4: 1-5.

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because it will reward those who get it to the field quickly. Further, specific technologies must be identified early to continue a nation’s asymmetrical advantage. Keefe also names biotechnology, nano-technology and information technology as areas of disruptive technology.

In the long term, the only option that remains with a country like India, is to incubate technologies in-house, preferably such that they also have commercial viability in the non-military arena Two types of disruptive technologies have been identified, the first type is a technology that is used in a new way to create disruptive results and the second type of disruptive technology is a completely new technology with new effects. Several technologies have been identified by developed countries which are likely to impact national security and most can be broken down into the following four areas of potential disruptive technologies: Computer Programming or Software. Efficient software development, image understanding anddistributed - grid - based processing Systems.

Aerospace. Next-Generation space shuttle system and hypersonic/ supersonic aircraft. Medicine. Cloned or tailored organisms, gene therapy and regenerative medicine. Energy. Alternative energy, micro electro-mechanical systems, fuel cells, distributed energy and new-generation nuclear power plants.

Building block technologies that will fuel new military disruptive technologies include Robotics, Nanoand bio-technology advances, fuel cell and distributed energy technology, materials development and advances in sports medicine The building block technologies that will fuel new military disruptive technologies include Robotics, Nano- and bio-technology advances, fuel cell and distributed energy technology, materials development and advances in sports medicine. It is estimated that all of the above building block technologies would lead to military disruptive technologies either individually or in collaboration with other technologies in the coming decades.

In the long term, the only option that remains with a country like India, is to incubate technologies in-house, preferably such that they also have commercial viability in the non-military arena The way ahead for the Indian Navy is therefore to put in place a grid of pure and applied research programmes at academic institutions, in collaboration with industry or otherwise, which generate fundamental innovation in areas of future interests to the Navy. The Indian Navy should also consider dealing directly with ‘Matters Naval Research’ at the grass roots level of research institutes and engineering colleges by adopting a long term, broad-based approach to incubate military disruptive technologies in addition to result-oriented solutions which may be required in short / mid term. The fruits of this concerted effort would feed the defence industry of tomorrow with knowledge experts who in turn would complete the mosaic of the IN’s requirement of military technologies. The DIB of tomorrow would have ‘knowledge’ at its base and thus, let the IN lay the keel of a thousand ‘Knowledge Ships’ today and transform the future of Naval Warfare tomorrow.

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Brig Rahul Bhonsle (retd) The writer is an army veteran presently Director of Sasia Security-Risks.com Pvt Ltd, a South Asian security risk and knowledge management consultancy. His most recent book is, "Securing India: Assessment of Security and Defence Capabilities".

Ministry of Commerce and Industry (MOCI), Ministry of Micro, Small and Medium Enterprises (MSME), Departments of Atomic Energy and Space or industry along with a host of other agencies including media will have to be integrated in the existing defence industrial base. Before envisaging synergy at the national level, inter-agency coordination in Ministry of Defence is a sine qua non. A common perception is of poor integration and interaction between the services, Army, Navy and Indian Air Force, Ministry of Defence and Defence Production, Ordnance Factories and DRDO. The only way out is creating a true, “integrated,” structure as opposed to the cosmetic one existing at present which can come about through cross hierarchical appointments

ndia had a head start vis a vis China as far as indigenous defence production is concerned with a vast base of Ordnance Factories which kept Commonwealth forces going during the Second World War. Today, despite pious protestations to the contrary, we are the biggest importer of arms while China has made impressive strides in indigenisation. There is unlikely to be any change in status of indigenisation at least till the end of 14th Five Year Plan (2022-2027) unless effective remedial measures are undertaken now. This would also imply that strategic autonomy will remain elusive for India till 2030 or so. This cannot be and should not be accepted. The writer advocates the clear enunciation of a strategy for indigenisation and synergisation of the efforts of various ministries, the Armed Forces, the academic institutions and the DRDO.

ndia’s Defence indigenisation determines how nations can holistically pursue national interest and importantly face up to an existential threat with greater equanimity. The quest for strategic autonomy is constrained by amongst other factors dependence on arms imports. Much as we would like to believe economy as the key vector of global power, indigenous defence capability which includes professional armed forces, research and development and industrial base are an equally important determinant. The United States’ numero uno status is a combination of economy and military standing in the world, with a vast defence industrial base. China which is fast catching up as an economy even though its nominal GDP is less than half that of the United States has very well understood the importance of matching indigenous military capability. Thus a sprawling defence industrial complex has been established which in due course will provide Beijing far greater degree of autonomy in strategic decision-making.

India had a head start vis a vis China as far as indigenous defence production is concerned with a vast base of Ordnance Factories which kept Commonwealth forces going during the Second World War. For instance the Indian army fielded 2 million plus men in varied theatres in Europe, Africa and Asia. Today while the same basic infrastructure exists and is supplemented by the Defence Public Sector Undertakings (DPSUs), a small private sector and Defence Research and Development Organisation (DRDO), New Delhi has become the hub of global defence majors as well as fly-by-night operators alike representing India’s dependence on items ranging from assault rifles, walkie talkies to combat fighters and submarines. While articulating an intent to develop an indigenous defence industrial base, governments across the board have singularly failed in creating one due to lack of vision, commitment and a strategy to achieve this essential goal.

Structural synergy will be achieved by partnerships, consortiums, joint ventures and outsourcing between government, public and private sectors, foreign and indigenous players, heavy and small scale industry Given the current state of affairs, based on contracts inked or in the pipeline, there is unlikely to be any change in status of indigenisation at least till the end of 14th Five Year Plan (2022-2027) unless effective remedial measures are undertaken. This would also imply that strategic autonomy will remain elusive for India till 2030 or so. This cannot be and should not be accepted and a broad framework for rapid indigenisation of defence industrial base by 2022, the end of 13th Five Year Plan is proposed as per succeeding paragraphs.

Strategy not policy India’s policy planners are generally wary of the term, “strategy,” preferring,“policy,” or even lower down the scale,“procedure”. Thus there is a Defence Production Policy and a Defence Procurement Procedure. How can there be a procedure without a strategy, has escaped notice. The present procurement procedure (2011) is not contributing to indigenisation even though outlines this as the aim primarily as it is not a product of a strategy or even a policy.

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Fast Track Indigenisation

Strategy for India

Semantically speaking strategy denotes a plan of action, while policy outlines the principles or rules for action. Thus a strategy for defence indigenisation is the preferred option as it would clearly indicate goals and objectives, plan to achieve the same and identify time lines and milestones for reviewing achievement. This is a far more rigorous approach than a policy.

Defence industry indigenisation Contrary to the exclusivist approach at present where Ministry of Defence is the sole controlling authority for defence industrialisation, indigenisation will demand this be an inclusive national goal. Many components that contribute to defence industry including science and technology base, research, design and development capability and manufacturing and production are outside the reach of the Ministry of Defence. There is thus a need for creating synergy with a number of ministries and agencies who are presently out of the loop. Establishing defence industry indigenisation as a national goal will facilitate integration and be an enabler for the Ministry of Defence to obtain higher degree of collaboration with the large number of agencies involved in this sphere varying

from universities, industrial bodies and ministries driving towards a common goal.

Synergy Led by a common objective, synergy will remain a key component of the defence indigenisation strategy. The cooperative collaboration required for success of large industrial enterprises as defence will have to be amongst varied silos which today seem to be functioning in more or less stove piped structures. Ministry of Commerce and Industry (MOCI), Ministry of Micro, Small and Medium Enterprises (MSME), Departments of Atomic Energy and Space or industry along with a host of other agencies including media will have to be integrated in the existing defence industrial base. The defence industrial matrix that may emerge will be a hydra-headed structure which would have to be coordinated by the Ministry of Defence, Department of Production acting as a catalyst. Even today much of indigenous defence production is based on support of MSME’s to the Ordnance Factory Board, involves MOCI particularly Department of Industrial Policy and Promotion (DIPP) and is served

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STRATEGIC AUTONOMY

by industry bodies as the Confederation of Indian Industry (CII). Lack of effective coordination is however a bane as this has not resulted in substantial accretion in indigenisation.

DPP 2011 has diluted offsets to non-core sectors presumably under the impression that adequate capacity for absorption did not exist in Indian defence industry. The present policy is a major setback as there are no incentives for foreign suppliers to contribute to Indian defence industry as they can get away with provision of training or even low grade equipment for internal security and civil aviation However before envisaging synergy at the national level, inter-agency coordination in Ministry of Defence is a sine qua non. A common perception is of poor integration and interaction between the services, Army, Navy and Indian Air Force, Ministry of Defence and Defence Production, Ordnance Factories and DRDO. The only way out is creating a true, “integrated,” structure as opposed to the cosmetic one existing at present which can come about through cross hierarchical appointments.

The quest for strategic autonomy is constrained by amongst other factors dependence on arms imports. Much as we would like to believe economy as the key vector of global power, indigenous defence capability which includes professional armed forces, research and development and industrial base are an equally important determinant Synergy with foreign governments, R&D agencies and defence industry is also unavoidable and ironically will be part of the indigenisation strategy. Structuring cooperation to ensure controlling influence by establishing core production facilities in India, drafting clear Intellectual Property sharing agreements and Memorandum of Understanding to prevent risks of a breakdown in times of crisis is necessary. Foreign industry partners have to be deep selected with sound infrastructure and parent government support as well as financial background through a process of internationally recognised due diligence. Structural synergy will be achieved by partnerships, consortiums, joint ventures and outsourcing between government, public and private sectors, foreign and indigenous players, heavy and small scale industry.

Creating a deep RFI base The start point for procurement based on the technology perspective plan is a strong and transparent RFI or Request for Information base. This has to be in the form of a progressive matrix of matured and future technologies translated into suitable GSQRs which are continuously updated. A national data bank which is available as open source is an essential feature of the defence RFI base. This will enable developing suitable science and technology, R&D and industrial programmes tuned to future needs of the armed forces. Security is not relevant at this stage

August 2012 Defence AND security alert

as even amateurs with a reasonable degree of interest in the field can rattle off the QRs of say top of the line fifth generation combat fighters.

Services dilemma Services are naturally driven by the need to have the best weapon system in their armoury. Rationalising this with the quest for indigenisation to benchmark weapons and equipment based on generation needs to be considered. This may involve accepting the second best and devising tactics and techniques to exploit the same if it can be manufactured indigenously. History is replete with examples where not the best weapon system but the best combatant, yodha, won battles be it the IAF’s Gnat pilots in 1965 or the adaptation of Blitzkrieg by Guderian and Rommel in Second World War.

Focus critical technologies Of the vast technologies incumbent in weapons and systems used for war fighting there are niche ones which are not likely to be shared by any country. The aim of indigenisation has to focus on these. Some examples that readily come to mind are aero engines, AESA radars and various types of sensors the IPR for which is likely to be jealously guarded by any supplier. Focus of R&D on these critical issues while importing less sensitive technologies is a route that is well accepted but has not been put into practice so far. This would have to be operationalised through the indigenisation strategy.

Restricting offsets to core sectors DPP 2011 has diluted offsets to non-core sectors presumably under the impression that adequate capacity for absorption did not exist in Indian defence industry. The present policy is a major setback as there are no incentives for foreign suppliers to contribute to Indian defence industry as they can get away with provision of training or even low grade equipment for internal security and civil aviation. While a technology transfer indexing is proposed with alternatives available in low technology areas there is no reason now for foreign suppliers to go in for this option given that there is adequate scope for banking offsets in non-core areas. This premise has to be revisited and gradually gaps identified and capacities created over a period to draw maximum benefit from indigenisation through offsets.

The nation and not just the services or various arms of the Ministry of Defence will have to be involved in this venture for holistic build-up of an indigenous defence industry base. How soon the country is able to achieve this through a collaborative process would denote India’s global and regional strength. Without a strategy this will remain only a wish list if not wishful thinking

Prioritising human resources A critical component of a defence indigenisation

strategy is acquiring top of the line human resources from local as well as global sources. Present approach is retention of talent in organisations such as the DRDO this has to be supplemented by acquiring “Ramans” from India and abroad. Israel defence industry is based to an extent on the talent brought in by migrants, defence scientists and designers who came in after breakup of the Soviet Union. India has to attract the best and the brightest both from home and abroad by providing incentives be these monetary in the government, public and private sectors. This may entail lateral induction in R&D labs or DPSUs and Ordnance Factories which has to be carried out as a national priority.

than blacklisting this ill will not go away. Blacklisting is a mechanism which deprives modernisation and contributes to the cycle of corruption as artillery procurement for the army demonstrates. Heavy penalty through bank guarantee at the time of submitting of bids may be a better option.

Intimidation and corruption

Follow up of implementation and mid course correction is an essential facet of any strategy. Suitable indigenisation benchmarks would have to be laid down. These will be overall in terms of the indigenisation index translated into specific technologies and systems. For instance a 70 per cent indigenisation benchmark for 2022 will have to be converted into say 50 per cent by 2017 and the remainder later. This will have to be translated into what would be achieved in major technologies such as radars with synthetic aperture and should represent a sum total of the same rather than being a vague figure which the Ministry of Defence seems to be eternally justifying with little credibility today.

Intimidation and corruption in defence acquisitions is the proverbial monkey that refuses to get off the government’s back. Intimidation was seen immediately after results of 126 Medium Multi Role Combat Aircraft (MMRCA) or the Basic Trainer competition for the IAF was declared. Lobbying, letters by Members of Parliament, lengthy opinion pieces and such like tools to denigrate the selection were evident by partisan interests, foreign thinks tanks, governments and defence majors. The Ministry of Defence has to create a firewall to ensure that such activities do not delay acquisitions.

New Delhi has become the hub of global defence majors as well as fly-by-night operators alike representing India’s dependence on items ranging from assault rifles, walkie talkies to combat fighters and submarines. While articulating an intent to develop an indigenous defence industrial base, governments across the board have singularly failed in creating one due to lack of vision, commitment and a strategy to achieve this essential goal Corruption is a cross that the entire defence hierarchy bears today including the armed forces who are no longer holy cows of yesteryears. Unless transparency at multiple levels is established along with harsh penalties rather

A critical component of a defence indigenisation strategy is acquiring top of the line human resources from local as well as global sources

Setting benchmarks and milestones

Conclusion Defence indigenisation is the need of the hour, elements of a strategy for which are proposed herein. Given the importance of this facet in the interest of greater independence in the global power matrix into which India is moving in the years ahead, focus and application is essential. The nation and not just the services or various arms of the Ministry of Defence will have to be involved in this venture for holistic build-up of an indigenous defence industry base. How soon the country is able to achieve this through a collaborative process would denote India’s global and regional strength. Without a strategy this will remain only a wish list if not wishful thinking.

August 2012 Defence AND security alert

defence industrial base

PRIORITISATION

T Cmde Ranjit Bhawnani Rai (retd) The writer is a former Director Naval Intelligence and Director Naval Operations. Presently he is Vice President of Indian Maritime Foundation, New Delhi.

Shipbuilding includes shipyards, marine equipment manufacturers and a large number of service providers and it is also a strategic military industry, which has grown in India but major warship orders are with the large four public sector yards, which are protected from competition and struggle to contain costs and time lines and hog technology. MDL has orders for 6 Scorpene submarines worth US$ 5.2 billion, three Type 15A BrahMos firing destroyers worth Rs 16,000 crore, and 6 Type 17A frigates as a follow on of the Shivalik class frigates at MDL and GRSE with French DCNS help for modular construction which could cost Rs 5,000 crore each. GSL has orders for 4 Naval and two Coast Guard OPVs for some Rs 5,000 crore and is slated to build 6 South Korean Kangnam designed mine hunters and 7 more OPVs for the Coast Guard as nominated

he Navy has claimed it is becoming a ‘Builder’s Navy’ but only on the back of PSUs and the nation needs to be a shipbuilding nation as in the past. All shipyards have recently received licenses to build warships and have inadequate civil orders but for shipbuilding to survive and thrive in this economic downturn the Ministry of Defence will have to open the competition and not nominate orders to its PSU yards if India is to gain as a shipbuilding nation. Indigenous shipbuilding which boosts the nation’s industrial base and provides widespread employment is an imperative. Regrettably, after Independence shipbuilding along with aviation were classified as ‘Strategic Industries’ and private sector was denied inroads into this sector which policy lasted till the 1980s and is still subject to licensing. Historically, maritime nations have risen with shipbuilding and industrialisation at the core of their economies to become exporters of ships and ancillary equipment. The Indian Navy even issued a publication to revitalise Indian shipbuilding in 2005 and proposed a ‘Maritime Commission’ to co-ordinate efforts, but only progress has been made to encourage warship building and FDI in private shipbuilding is awaited and even joint ventures have been delayed. The Public Sector defence shipyards have cornered 36 of the current 42 warship and Coast Guard OPV orders, worth Rs 42,000 crore at costs higher than normal. Indigenous shipbuilding which boosts the nation’s industrial base and provides widespread employment is an imperative.

ndia is the second most populous country in the world with many poor. Shipbuilding and ship manning is a vehicle for prosperity for a maritime nation and more so for a rising power. Shano Varuna is the Indian Navy’s motto invoking Lord Varuna, ‘The Lord of the Oceans’ to bless the nation in its maritime endeavours. For this mission, indigenous shipbuilding which boosts the nation’s industrial base and provides widespread employment is an imperative. Regrettably, after Independence shipbuilding along with aviation were classified as ‘Strategic Industries’ and private sector was denied inroads in to this sector which policy lasted till the 1980s and is still subject to licensing. In 1964 the visionary houses of Tata and Chowgule acquired sea fronts off the coast of Jamnagar and at Nhava Sheva (where JNPT is situated) respectively, to build jetties for shipbuilding and repair but licenses were denied to them despite support by Defence Minister Y B Chavan. Both these projects were spearheaded by Rear Admiral S G Karmarkar MBE on his retirement. S G was a visionary who had joined the Royal Indian Navy during the war as a Reserve Officer after he had commanded merchant ships. He was the first Indian in the rank of Commander to have British officers under him in command of HMIS Cauvery. Indian Navy and shipping companies as is well known imported expensive vessels and India’s merchant ships were repaired in Colombo, Singapore and Dubai and drained India’s foreign exchange and this was also a loss of employment for a populated nation like India. Historically, maritime nations have risen with shipbuilding and industrialisation at the core of their economies to become exporters of ships and ancillary equipment and this is the thrust of the article. Shipbuilding is an imperative for India’s planners and the Indian Navy even issued a publication to revitalise Indian shipbuilding in 2005 and proposed a ‘Maritime Commission’ to co-ordinate efforts, but only progress has been made to encourage warship building and FDI in private shipbuilding is awaited and even joint ventures have been delayed. The Public Sector defence shipyards have cornered 36 of the current 42 warship and Coast Guard OPV orders, worth Rs 42,000 crore at costs higher than normal, which is discussed later in the article.

August 2012 Defence AND security alert

NAVAL AND MERCHANT SHIPBUILDING:

AN IMPERATIVE FOR A RISING POWER LIKE INDIA TO ADD CLOUT TO INDIA'S INDUSTRIAL RISE India’s historical shipbuilding perspective

Right from the days of tribal civilisation the coastal waters of India have been exploited for fishing and trading with oared vessels and later sails that spread Buddhism to Sri Lanka and Far East. Boat building was a traditional trade in India along rivers and along the coast, as teak wood was available in plenty. It must be appreciated that from late 1600s to the mid 1800s India was recognised as ‘wooden shipbuilding nation’ and the famous Wadia family of Surat was brought to Bombay by the British to build ships for Britain.

It must be recognised that once the merchant shipbuilding industry is built-up warship building follows. India, followed an opposite path and warship building was given a boost in 1970 with the Leander frigate class building at PSU Mazagon Dock Ltd (MDL) and the same design was passed on to Garden Reach Shipbuilders and Engineers Ltd (GRSE). Merchant shipping which is highly competitive and cyclic industry in unison with the world economy got neglected The Wadias built quality sail ships displacing 800 to 1,000 tons well into the 18th century for the Royal Navy, like the HMS Hindoostan in 1795, a frigate HMS Cornwallis in 1800, HMS Camel in 1806 and HMS Ceylon in 1808. The HMS Asia flew the flag of Admiral Codrington at the

Battle of Navarino in 1827, the last major sea battle to be fought entirely under sail. HMS Trincomalee, which was launched on 19 October 1817, carried 46 guns and displaced 1,065 tons. This ship was later renamed Foudroyant, the oldest ship afloat, but wooden and sail ships except dhows, became obsolete. It was the advent of steam power produced by coal fired boilers on steel hulls and the use of water wheels from machinery of textile manufacturing plants abroad that underpinned the dramatic changes in shipbuilding and ship production capacity of nations.

The rise of western shipbuilding nations The new propulsion systems and metallurgy for ships flourished throughout Europe during the 18th century and was part of the ‘Industrial Revolution’, which was denied to India. The impact of this loss on India’s economy and industry was enormous and shipbuilding decayed. USA, Germany, Britain, Russia, France and Japan became shipbuilders whose ships took part in the Second World War. In USA the emergency Merchant Marine Act, was passed by the US Congress in 1936, which established the US Maritime Commission that supervised the construction of the US Merchant fleet that served in a civilian capacity during peace and could convert to military use in times of war. The 7,300 ton simply designed Liberty class of ships were built almost one every 10 days. Around 3,779 ships with a total of 21.1 million tons of shipping were sunk in the Second World War.

August 2012 Defence AND security alert

defence industrial base

PRIORITISATION

Post the war, UK possessed over 20 shipyards to rebuild their merchant fleet and by late 1950s the revival of Europe saw the re-emergence of new shipyards in Germany, Netherlands and Scandinavian countries led by production technology and their economies rose. USA’s economy witnessed strong growth and rising labour wages by late 1960s. This forced USA to transfer ship designs to Japan which became a leading merchant shipbuilder. The world began ordering ships in Japan, India’s Shipping Corporation included and this boosted Japan’s economy. Shipbuilding was studied by South Korea and by mid 70s and early 80s four large yards flourished in South Korea to compete with Japan where labour costs rose. Since 1990s China has entered the scene and built new shipyards all along its coast and today leads the world in shipbuilding orders for general purpose ships like bulkers, tankers, passenger ships and offshore platforms, leaving specialised gas and chemical tankers and high quality shipbuilding to Japan, South Korea and Europe.

USA’s economy witnessed strong growth and rising labour wages by late 1960s. This forced USA to transfer ship designs to Japan which became a leading merchant shipbuilder. The world began ordering ships in Japan, India’s Shipping Corporation included and this boosted Japan’s economy. Shipbuilding was studied by South Korea and by mid 70s and early 80s four large yards flourished in South Korea to compete with Japan where labour costs rose. Since 1990s China has entered the scene and built new shipyards all along its coast and today leads the world in shipbuilding orders for general purpose ships like bulkers, tankers, passenger ships and offshore platforms, leaving specialised gas and chemical tankers and high quality shipbuilding to Japan, South Korea and Europe At Independence in 1947 only four ship repair yards, Mazagon Dock Ltd (MDL), Scindia’s Hindustan Shipyard Ltd (HSL) and Garden Reach Shipbuilders and Engineers (GRSE) at Kolkata and a Portugese repair yard at Goa were available and taken over by the government. This article must mention that when this very subject of ‘rise of nations through shipbuilding’ was presented to PM Atal Behari Vajpayee in 2002 by a US based consulting firm he stoically commented, ”Ye sab to hum jante the; Ye batao ye ho ga kaise”(We knew all this, but how do we replicate this in India). In 2010 PM Dr Manmohan Singh tasked Mr V Krishnamurthy a veteran technocrat who heads India’s National Manufacturing Competitiveness Council (NMCC) to study shipbuilding in India and submit a report to assist MoD in the final decision for the second line of

August 2012 Defence AND security alert

six P-75I submarines, sanctioned in 2000 during PM Vajpayee’s tenure of the NDA. Krishnamurthy’s report has not been made public and P-75I order is awaited. It must be recognised that once the merchant shipbuilding industry is built-up warship building follows. India, followed an opposite path and warship building was given a boost in 1970 with the Leander frigate class building at PSU Mazagon Dock Ltd (MDL) and the same design was passed on to Garden Reach Shipbuilders and Engineers Ltd (GRSE). Merchant shipping which is highly competitive and cyclic industry in unison with the world economy got neglected.

Current naval and merchant shipbuilding scene It is evident that shipbuilding includes shipyards, marine equipment manufacturers and a large number of service providers and it is also a strategic military industry, which has grown in India but major warship orders are with the large four public sector yards, which are protected from competition and struggle to contain costs and time lines and hog technology. MDL has orders for 6 Scorpene submarines worth US$ 5.2 billion, three type 15A BrahMos firing destroyers worth Rs 16,000 crore and 6 Type 17A frigates as a follow on of the Shivalik class frigates at MDL and GRSE with French DCNS help for modular construction which could cost Rs 5,000 crore each. GSL has orders for 4 Naval and two Coast Guard OPVs for some Rs 5,000 crore and is slated to build 6 South Korean Kangnam designed mine hunters and 7 more OPVs for the Coast Guard as nominated.

Boat building was a traditional trade in India along rivers and along the coast, as teak wood was available in plenty. It must be appreciated that from late 1600s to the mid 1800s India was recognised as ‘wooden shipbuilding nation’ and the famous Wadia family of Surat was brought to Bombay by the British to build ships for Britain Cochin Shipyard Ltd under Ministry of Shipping has the large order for Indian Navy’s 37,500 tonne aircraft carrier which could cost over Rs 10,000 crore as the former Chief of Naval Staff Admiral Sureesh Mehta an aviator had defended

the price paid for INS Vikramaditya four years ago stating to media, “I can’t comment on the CAG. But you all are defence analysts, can you get me an aircraft carrier for less than US$ two billion? If you can, I am going to sign a cheque right now”. GRSE has orders for 4 Type 28 ASW corvettes worth around Rs 6,000 crore and the Alcock Ashdown yard at Bhavnagar has orders for 7 more catamaran survey vessels. The classified DRDO’s Ship Building Centre (SBC) at Visakhapatnam has orders to complete the nuclear submarine INS Arihant and is constructing two larger nuclear submarines. As per world prices a small nuclear submarine costs over US$ 15 billion. The costs of warships include imported and indigenous equipment and weapon fits. HSL India’s largest shipyard is without naval orders but has been nominated for the Mistral class of LPDs. On the assurances of warship orders advances in private shipbuilding have taken place and five large Indian private shipbuilders with multiple yards have arrived on the scene. These include Aggarwal owned private ABG Shipyard Ltd at Surat which has a 4,500 ton ship lift and has delivered small craft and has struggled with the orders for the three 4,000 ton pollution control vessels which have Rolls Royce propulsion and collaboration and

11 Interceptor boats with Hamilton or Kameva water jets for the Coast Guard and smaller vessels and has the order for two naval training ships. The yard has delivered CCC Pioneer a diving support vessel with DP2 dynamic positioning Alstom systems and helicopter deck deployed to Abu Dhabi in February 2005. The yard plans to set up a shipyard at Dahej and build 1,20,000 DWT 300 ft long tankers with foreign collaboration and compete for warships. Bharati Shipyard Ltd with a yard at Ratnagiri south of Mumbai has delivered small ships and 250 man ferries to the Navy. Chowgule Shipyard at Goa is progressing orders for twelve 4,450 DWT highly automated dry cargo vessels for Germany and Netherlands, executed a dredger for Chennai Port Trust and orders for mini bulk carriers for its home owned shipping company. Larsen & Toubro (L&T) with a new modern Greenfield yard at Tuttapuli near Ennore has invested heavily and has orders for small Coast Guard FPBs with water jet engines and builds Ro-Ro vessels and merchant ships at Hazira for foreign customers. L&T has capacity to build submarines as it builds the nuclear submarine hulls for DRDO at SBC in a leased building. Pipavav Shipyard Ltd (PPL) is a modern yard with a large dry dock building merchant ships and has capacity to take on

modules for MDL but at present has the order for 5 Naval OPVs for around Rs 1,900 crore.

Conclusion Shipping Corporation of India (SCI) which owns 77 ships of 3.37 million DWT out of India’s 7.5 million SCI has an order book of 26 ships from abroad and plans to order more vessels, but none announced from India. Merchant shipbuilding has been neglected and on 4th January, 2011 Defence Minister A K Antony, laid the foundation stone of the National Institute for Research and Development in Defence Shipbuilding (NIRDESH) at Chaliyam, near Beypore in Kozhikode, Kerala to promote self-reliance in production capabilities of warships, submarines and related platforms required by the Indian Navy and Coast Guard to protect maritime interests of India. The Navy has claimed it is a becoming a ‘Builder’s Navy’ but only on the back of PSUs and the nation needs to be a shipbuilding nation as in the past. All shipyards have recently received licenses to build warships and have inadequate civil orders but for shipbuilding to survive and thrive in this economic downturn the Ministry of Defence will have to open the competition and not nominate orders to its PSU yards if India is to gain as a shipbuilding nation.

August 2012 Defence AND security alert

defence industrial base

PERFORMANCE-BASED LOGISTICS

Making Smart Procurement Decisions L

ife Cycle Costing (LCC) is a tool which empowers the acquisition / procurement managers to make more informed decisions by enabling them to incorporate costs and benefits that occur over the lifetime of a product into their procurement decisions. To mitigate LCC evaluation challenges, the next step would be to move towards a Performance-Based Logistics (PBL) approach. The significance of PBL is that the OEM / supplier is compensated not on promise of performance nor on its cost: compensation is based on the actual performance of the product. PBL was introduced by the US Department of Defence (DoD) in 2001 for weapon system acquisition and logistics management. PBL was made mandatory the same year - its initial guidance was promulgated by the office of Secretary of Defence. The potential annual savings to the US DoD just from reduced inventory holding and transportation is estimated to range from US$ 2.8 - 3.7 billion annually.

apital acquisition programmes of advanced aircraft / weapons platforms run into billions of dollars. It is well understood that in the case of major platforms, sustenance costs work out much higher than acquisition costs. Equipment purchased on the basis of initial cost, often, eventually turn out to be more expensive.

Life cycle costing

The columnist is President and Chief Executive Officer, New Ventures, Reliance Industries Limited and Distinguished Fellow, Observer Research Foundation. Earlier he was Vice President and Country Head, Boeing Defence Space and Security and had also served as Managing Director of Boeing Commercial Airplanes in India. Prior to Boeing he worked for Raytheon and with NASA Ames Research Center in various multidisciplinary engineering fields. He has his PhD in Aerospace Engineering from Wichita State University in Kansas and his MBA from City University in Washington. He served as Chairman of the Defence Committee of the Association of Chambers of Commerce and Industry of India (ASSOCHAM). He also served as the Chairman, Defence Equipment Committee, AMCHAM and is on the panel of the FICCI Defence Task Force. He had the distinct honour of representing 2,500 companies as Regional President of the Indo-American Chamber of Commerce, the only US-India bilateral chamber. In April 2012, he has been appointed as Chairman of the Indo-US Strategic Dialogue by the Indo-American Chamber of Commerce. The columnist has recently been appointed Co-Chair of the FICCI Homeland Security Committee along with Mr Gopal Pillai, Former Home Secretary, Government of India.

Dr Vivek Lall

While the upfront acquisition costs are relatively easier to estimate, getting a reliable and accurate estimate on how much the user shall have to spend in operating, maintaining and upgrading the equipment till its final disposal, involve complicated projections and calculations. Further, determining the useful life of a platform is generally difficult. If wear out is the determinant of life-length, then making estimates for a new, untried platform is a formidable challenge. Accurate and dependable data essential for this purpose is difficult to come by for new equipment and technologies. However a combination of data from manufacturers, data from other operators and extrapolation from experience from other similar equipment can help in reasonable assessment. Since India has a major acquisition programme, it would be prudent to develop databases and analytical models to ensure cost effective long term ownership. This would also ensure economic asset management during the life cycle of the equipment. A recent UK government report also cautions of the risk of obsolescence and says that the buyer should consider how to â&#x20AC;&#x153;oblige contractors to manage the risk of obsolescence throughout the life of a project, which might include in-built flexibility for aircraft and other equipment to accommodate upgradesâ&#x20AC;?.

Capital acquisition programmes of advanced aircraft / weapons platforms run into billions of dollars. It is well understood that in the case of major platforms, sustenance costs work out much higher than acquisition costs. Equipment purchased on the basis of initial cost, often, eventually turn out to be more expensive

Costs such as fuel / energy consumption, maintenance and replacement of equipment or parts, consumables and disposal, all affect the ultimate price, yet have traditionally not been considered when selecting a product. Operations and support cost added to acquisition cost is the true measure of the cost of a platform. Life Cycle Costing (LCC) is a tool which empowers the acquisition / procurement managers to make more informed decisions by enabling them to incorporate costs and benefits that occur over the lifetime of a product into their procurement decisions - rather than considering the initial capital cost of a product only. LCC is a comprehensive assessment of the total financial commitment associated with the platform, is an international best practice and is increasingly being used by governments (acquisition managers) across the world to make more informed procurement decisions.

In order to reduce its overall cost of ownership while increasing serviceability of equipment, PBL is an important tool with the Ministry of Defence, which must be made an established practice. In conjunction with the Defence Offset Policy, the OEM / supplier may be required to invest in setting up of facilities in India, thereby increasing both the service level assurance as also a developing a trained indigenous workforce. This tool incentivises the OEM to improve equipment uptime while lowering the logistic costs and results in savings to the purchaser. It is a win-win scenario for both the supplier and the purchaser 64

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defence industrial base

PERFORMANCE-BASED LOGISTICS

defence industrial base

EVOLUTION and the way forward

Performance-based logistics To mitigate LCC evaluation challenges, the next step would be to move towards a Performance-Based Logistics (PBL) approach. As an alternative to the traditional system of owning both the equipment and the logistic chain, PBL brings in a new dimension to asset management and operations. The significance of PBL is that the OEM / supplier is compensated not on promise of performance nor on its cost: compensation is based on the actual performance of the product. To draw a simple analogy, the concept would be similar to a comprehensive service contract for an automobile, where the car is operated by the owner, while the complete maintenance is taken over by the car manufacturer.

Dr Rajiv Nayan

PBL was introduced by the US Department of Defence (DoD) in 2001 for weapon system acquisition and logistics management. The potential annual savings to the US DoD just from reduced inventory holding and transportation is estimated to range from US$ 2.8 - 3.7 billion annually Modern day platforms require a large inventory of sophisticated spares and commodities that are used to perform maintenance and upgrades to weapons and equipment. PBL improves the efficiency of the supply network by insuring the rapid delivery of the needed commodities and reducing storage and inventory costs. PBL was introduced by the US Department of Defence (DoD) in 2001 for weapon system acquisition and logistics management. PBL was made mandatory the same year - its initial guidance was promulgated by the office of Secretary of Defence. The potential annual savings to the US DoD just from reduced inventory holding and transportation is estimated to range from US$ 2.8 - 3.7 billion annually.

While the upfront acquisition costs are relatively easier to estimate, getting a reliable and accurate estimate on how much the user shall have to spend in operating, maintaining and upgrading the equipment till its final disposal, involve complicated projections and calculations Win-win scenario It is estimated that savings to the US DoD in 18 programmes would range between US$ 16 billion and US$ 21 billion annually if performance-based logistics was applied across all applicable DoD weapons and equipment in the support area. In order to reduce its overall cost of ownership while increasing serviceability of equipment, PBL is an important tool with the Ministry of Defence, which must be made an established practice. In conjunction with the Defence Offset Policy, the OEM / supplier may be required to invest in setting up of facilities in India, thereby increasing both the service level assurance as also developing a trained indigenous workforce.

August 2012 Defence AND security alert

India’s Defence Industry Base

uring the British period, ordnance factories were established to do some military related work. To manufacture guns and ammunition, the first ordnance factory was set up at Cossipore in 1801. In 1942, the Council of Scientific and Industrial Research was set as an autonomous body. In 1947, some technical development establishments came up. Some of these technical development establishments became laboratories of Defence Research and Development Organisation (DRDO) later. Before 1950, India had only 19 ordnance factories. At present, the Indian DIB refers to 39 Ordnance Factories geographically spread in 24 different Indian locations, eight public sector defence undertakings and increasing number of large, medium, small and micro undertakings from the private sector. Also, more than 50 defence laboratories are considered part of the DIB. The Indian government adopted a policy of permitting 100 per cent Indian private sector participation and 26 per cent Foreign Direct Investment. As of May 7, 2012, 181 Industrial Licenses / Letters of Intent were given to the private sector companies to manufacture defence items. An in-depth analysis of the evolution and the way forward for India’s DIB.

The writer is a Senior Research Associate at the Institute for Defence Studies and Analyses (IDSA), New Delhi since 1993, where he specialises in export control, non-proliferation and arms control. He was a Visiting Research Fellow at Japan Institute of International Affairs, Tokyo, where he published his monograph Non-Proliferation Issues in South Asia.

The Indian government adopted a policy of permitting 100 per cent Indian private sector participation and 26 per cent Foreign Direct Investment. As of May 7, 2012, 181 Industrial Licenses / Letters of Intent were given to the private sector companies to manufacture defence items. The Indian government has been proclaiming: “The Indian Defence Industry in the private sector is now gradually assuming the role of system integrator and manufacturer of complete defence equipment and systems. This is a major shift in the role of private sector in India from its earlier supporting role to the public sector supplying raw materials and components, sub-systems etc”. The government is encouraging the private sector to enter into the joint ventures to get technology and directly get into making of weapons

an a nation aspiring to be a great power ignore its defence industrial base? Definitely not. Defence Industrial Base (DIB) is necessary for long-term strategic planning of a country. All the super powers or great powers developed DIBs for strategic reasons. Though all the aspects of power constitute a great power, the military power is the key to a nation’s rise to great or super power status. Of all the military powers, the US has the most robust and vibrant DIB. In the US, DIB often is negatively referred to as Military-Industrial Complex. This situation arises when DIB replaces threat perception for the demand of arms. For sure, any aspiring great power will have to escape this trap.

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defence industrial base

EVOLUTION and the way forward

What is the situation in India? For the country’s defence, the need for a DIB was felt by the strategic leaders of the country for a long period. In 1946, K M Panikar wrote, “No argument is required to prove that for many decades to come India will not be in a position to defend herself against a military Power organised on modern lines. Her national military strength has to be built-up slowly and with infinite patience, by careful organisation and long-sighted policy. It must derive from the latest scientific industry; and it must develop in harmony with the defence programmes of other Powers concerned in the security of the whole area of the Indian Ocean.” One of the defence ministers of the country claimed that the Indian defence industry has a history of more than 200 years. Actually, during the British period, ordnance factories were established to do some military related work. To manufacture guns and ammunition, the first Ordnance factory was set up at Cossipore in 1801. Directorate of Technical Development also played an active role in technological activities of the British Raj. Some telecommunication related activities were also undertaken. However, all the defencerelated technological activities were very rudimentary in nature. The task of the post-independent India was to salvage the situation created by the British colonial masters.

Nehru too realised the need for developing a DIB. His emphasis on industrial development, especially in heavy industry and self-sufficiency in defence may be seen as a move towards that direction. The first industrial policy of the country set the parameters for defence industry. As India was a developing country, obviously, it had to face many obstacles toward its indigenous DIB. The leading strategic analyst of India, Late Mr K Subrahmanyam explained the delay when he noted, “To develop a weapons system and deploy it is an eight-to-ten-year operation, even for an advanced industrial country. For developing countries such as ours, the time frame is even longer. Further, the weapons systems to be developed have to be effective against the systems which the potential adversaries can develop or procure.” The DRDO played an important role in helping DIB develop in India. The Planning Commission of India became an important tool towards building the DIB.

Role of the public sector

At present, the India DIB refers to 39 Ordnance Factories geographically spread in 24 different Indian locations, eight public sector defence undertakings and increasing number of large, medium, small and micro undertakings from the private sector. Also, more than 50 defence laboratories are considered part of the DIB. In the future, a few more ordnance factories would join the Indian DIB.

Before independence efforts to begin the scientific industrial base and engineering and industrial infrastructure were actively discouraged by Britishers, though somehow the idea of Bureau of Scientific and Industrial Research came up. In 1942, the Council of Scientific and Industrial Research was set up as an autonomous body. Even this body had hardly any mandate to work on advanced defence science. In the post-Second World War period, in 1947, some technical development establishments came up. Some of these technical development establishments became laboratories of Defence Research and Development Organisation (DRDO) later. Before 1950, India had only 19 ordnance factories.

The most important need for the Indian DIB is in strategic weapons. Nuclear weapons, ballistic missiles, cruise missiles and some specified categories of unmanned vehicles fall under the prohibition or control category. Even if some countries have liberalised their export control policy for defence cooperation, curbs continue on ballistic missiles technology transfers. The same control is also operational for the supply of any equipment and technology which may contribute to Indian nuclear weapons. The Indian DIB has demonstrated the trust reposed in it. Not only nuclear weapons but also Prithvis and Agnis have been produced by the Indian DIB to demonstrate its capability. The latest test of Agni-5 further

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established the significance and credibility of Indian DIB in the strategic weapons.

Mr A K Antony, the current Defence Minister, stated: "Our aim is to have a strong defence industrial base in India, because a country like India cannot indefinitely depend on foreign suppliers for majority of our equipment. At the moment around 60 per cent of the equipment are imported, we have to reverse this trend. So we will continue to support the PSUs, but at the same time PSUs alone will not be able to meet the requirements of the Armed Forces." The increasing role of the private sector in defence production is a major issue of the India defence policy India is on the way to modernise its armed forces. For the modernisation, it is looking for modern arms and equipment. Currently, India imports about 60 per cent of its arms and other equipment. This heavy reliance on outside has been disturbing both the policy making and the strategic communities. The vulnerability on outside suppliers has been an issue of security studies for a longer period. At the time of crisis, the suppliers may tend to add conditions to the original contract. The issue may be settled later, but the country will be adversely affected at the critical period. If it is war, it may fear losing it. Besides, on many occasions, a supplier country creates problems for a recipient country when it refuses to supply spare parts. This refusal may come from the company and the government. In a country like the US, a number of forces determine a policy outcome. At times, these forces representing multiple interests may scuttle a particular country’s supply line. The opposition could be on many grounds such as human rights and regional stability. Of course, some elements, funded by an adversary country, may also lobby against the supply of crucial spare parts. Admittedly, some trusted countries may not create such problems. Even these countries have been found raising the price tag in a monopolistic situation. Related is the issue of the foreign exchange drain. If a country like India

spends so much money to buy foreign equipment and weapons, it may affect its modernisation plan. Should it mean that the country should solely rely on indigenous DIB? Though India has a policy of self-reliance and selfsufficiency in defence production, it may have to make a judicious mix of indigenous production and outside procurement. Certainly, the maximum indigenisation is the real answer. In fact, Mr A K Antony, the current Defence Minister, stated: “Our aim is to have a strong defence industrial base in India, because a country like India cannot indefinitely depend on foreign suppliers for majority of our equipment. At the moment around 60 per cent of the equipment are imported, we have to reverse this trend. So we will continue to support the PSUs, but at the same time PSUs alone will not be able to meet the requirements of the Armed Forces. So now we are formulating a new policy.”

Private sector participation In fact, the increasing role of the private sector in defence production is a major issue of the India defence policy. The Indian DIB will have public sector and private sector players both. Pranab Mukherjee as the defence minister remarked: “Going by the ethos of that era, the Government had placed production of Defence items in the Reserve List making it mandatory for production to be taken up only by the public sector. There has been a very significant expansion of public sector in Defence Production since the 1960s.” Immediately after he assured, “In the expansion of facilities for Defence Production under the public sector, ample opportunities have also been provided to the private sector in supply of various raw materials, components and sub-assemblies as input material for production in the Ordnance Factories and Defence PSUs. Behind this effort of expanding Defence Production was the need to attain high degree of self-reliance in defence preparedness.” The Indian government adopted a policy of permitting 100 per cent Indian private sector participation and 26 per cent Foreign Direct Investment. As of May 7, 2012, 181 Industrial Licenses / Letters of

Intent were given to the private sector companies to manufacture defence items. The Indian government has been proclaiming: “The Indian Defence Industry in the private sector is now gradually assuming the role of system integrator and manufacturer of complete defence equipment and systems. This is a major shift in the role of private sector in India from its earlier supporting role to the public sector by supplying raw materials and components, sub-systems etc.” The government is encouraging the private sector to enter into the joint ventures to get technology and directly get into making of weapons. One question that emerges: Is government encouraging competition between the private sector and the public sector? In certain sectors, competition between two sectors is inevitable; however, the government seems to push the complementarity between two. Both are encouraged to develop their areas of specialisation. Mr A K Antony remarked: “Earlier we took a decision (that) hereafter no more nominations to the shipyards, on nomination basis. Both public sector shipyards will have to compete with the Indian private shipyards to get projects for the Indian Navy. So all the Indian Navy’s procurements in future will be from ‘Buy Indian, Make Indian.’ … So they will have to compete … So ‘Buy Indian and Make Indian’ is going to be the major component of our procurement policy. That will help us to have a strong defence industrial base in India”. Technically skilled people are required for advanced technology intensive industry. The need of this workforce is felt more in the Research and Development (R&D). The DRDO, the main institution for the task has been complaining of human resources crunch for long. As research in critical areas is going to remain with the government organisation and its low pay structure, the country will continue to face this problem. Actually, a public-private partnership in this area would significantly enrich Indian DIB. Reliability of the supply of major systems is yet another issue. This fact has been highlighted not only by armed forces but also by the Indian

defence minister. The moment the Indian industry does not deliver on time, the government will have to look towards outside suppliers to meet country’s security requirements in the fast technologically induced security environment. This may defeat the entire plan to rely 70 per cent of defence items on indigenous defence industry by 2015. India is expected to spend US$ 80 billion on Capital expenditure by 2015. The Indian government is also encouraging other measures such as export and technology spin-off to boost DIB of the country. In 1998, the DefExpo was conceptualised to advance defence exports from India and display the capabilities of Indian Defence R&D and production. In recent years, though the government has been encouraging the private sector, yet, it has been giving financial support for the modernisation plans of Defence PSUs and Ordnance Factories. Offsets are expected to bring technology to Indian defence industry. Over the years, DIB boasts of product design, configuration and customisation with creativity, assured quality and value addition etc. It is expected to emerge as ‘fast developing into a manufacturing hub.’ Indian DIB has certainly done commendable work in armaments and munitions, state-of-the-art equipment and support systems in telecommunications and surveillance. In other areas, too, it has contributed immensely. These are the Light Combat Aircraft, transport aircraft, helicopters, including Advanced Light Helicopter, submarines, frigates, destroyers, small arms and ammunition, armoured and transport vehicles, troop comfort items, opto-electronics and special aluminium alloys, engines, avionics and system equipment etc. The Present Scientifc Advisor to the Defence Minister said that the future “goals would focus on Space and Cyber Security, Hypersonic Vehicles, Directed Energy Weapons and Smart Materials, Composites and MEMS (Micro-Electromechanical Systems)based Sensors.” For a robust DIB, the country will have to develop economically as it is doing now. It may have to overcome obstacles which are many today.

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PRIVATE SECTOR AS PANACEA?

Pathikrit Payne The writer is an alumnus of S Rajaratnam School of International Studies at Nanyang Technological University, Singapore. He was previously associated with The Sunday Indian magazine and is presently a Senior Researcher with a New Delhi based think tank.

There is no reason as to why a nation which is so successful in launching its own satellites, developing its own supercomputer and ballistic missiles would not be able to make quality assault rifles, howitzers, tanks, defence grade communication systems on its own. But for that to happen, in addition to a much larger playing field for the private sector, it is imperative for the government to bring about structural changes in its defence production set-ups. BrahMos Aerospace which was conceived and managed as a professionally run Private sector company and has performed exceedingly well and has vindicated why such a set-up is far better than the OFB type set-up. Likewise ISRO as an organisation is way ahead of its defence counterparts in India, thanks to its leadership by technocrats

he symbiotic relationship between defence industrial innovation and its positive impact on overall industrialisation and economic development remains pertinent to this day. In spite of much lip service for greater self-sufficiency in the indigenous production of defence equipment, reality is that India’s defence establishments are still very reluctant to allow the Indian private sector to play a bigger role in the manufacturing of defence equipment in India. Yet it is thanks to India’s Private sector that in less than seventeen years, from the verge of bankruptcy India broke into the trillion dollar club. It is surprising that for a country of India’s size and industrialisation, its ordnance factories manufacture a mere 1,00,000 INSAS 5.56 mm assault rifles and another 6,000 7.62 mm SLRs per year. Given the fact that India has an estimated 1.3 million personnel in its armed forces in addition to a near 2 million state police personnel and another near 8,00,000 Central Armed Police Forces, modernising India’s entire force engaged in defence and maintenance of law and order with at least a modern assault rifle would thus take decades. The void in most cases is filled by ad hoc purchase of mostly AK series of rifles from countries like Bulgaria. It is shocking that a country which manufactures 4.7 million cars per year (almost entirely in the private sector) cannot produce more than a hundred thousand rifles a year. There is no reason to believe that L&T or Tatas or Mahindras or even Reliance, which are known all over for their project management skills and their ability to execute critical turnkey projects in record time would not be able to make a quality rifle for India.

Finding Nemo - Can India ever come up with its own defence industrial base?

American makers of plowshares could, with time and as required, make swords as well. But now we can no longer risk emergency improvisation of national defence; we have been compelled to create a permanent armaments industry of vast proportions.

he famous US strategic stealth bomber namely the B-2 or what is more commonly known as batwing is an incredibly powerful machine with a range of 11,000 km and the capacity to carry 23,000 kg of bombs. This powerful and secretive aircraft known for its design which defies conventional aerodynamic wisdom is a reflection of not just America’s military superiority but also its industrial prowess. Yet what many might not know is that this aircraft which had its first flight in 1989 and which did play a significant role to alter the course of wars in Iraq and Afghanistan, itself has a striking similarity to Ho-229 developed in 1944 by Nazi Germany. Forty five years before the first flight of B-2, the Germans had developed the stealth technology that they highlighted in the Ho-229. Fortunately, as the war was nearing its logical conclusion and with Hitler racing against time to save his sagging empire, Ho-229 could not

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– Dwight D Eisenhower, 1961 be finished on time to be deployed for the war. But the German ingenuity and industrial dexterity vindicates why a nation which was physically and psychologically reduced to rubble by 1945, could in less than forty years’ time become one of the most advanced economies of the world and one which is only getting stronger by the day even when the rest of Europe is on an economic deathbed. Germany’s iconic economic resurgence against all odds since the end of Second World War resonates the spirit of industrial innovation that was incubated, inculcated and passed on by the defence industrial base developed by Germany during the Second World War era. It was for the same reason of industrial innovation and huge industrial base of US that made it possible to easily improvise and step into the war to contain the menacing advance of Nazi Germany. After the end of the war, it was this defence industrial base

which played a key role in sustaining both the economic and military superiority of USA. The symbiotic relationship between defence industrial innovation and its positive impact on overall industrialisation and economic development remains pertinent to this day.

India is far from the day when Indian private sector companies would be treated with the kind of respect with which a Boeing or Lockheed Martin are treated as shared partners of American security and not as competitors who are trying to put their feet on an exclusive fiefdom of bureaucrats Sixty five years since the end of the Second World War and forty

one years since Eisenhower said those golden words, as the world’s largest democracy continues with its aspiration to become one of the legitimate members of the United Nations Security Council and play a far bigger role in global geopolitics, one wonders if that is at all possible when an almost seventy per cent of its weapon systems are still being imported. Even as India continues with its power projection in terms of induction of modern stealth frigates, strategic airlifters and modern combat fighters, its sheer dependence on foreign vendors as also its apprehension and lack of trust on its own home grown private enterprises to plug the gap remain causes of concern. While the issue of having a strong defence industrial base is beyond debate, what is more

important to understand is the very paradigm of all that comprises the defence industrial base of a state. Conventional approach towards the definition of defence industrial base always presumes it to be the sum total of all manufacturing facilities of a nation which are churning up defence products. By that standard India’s defence industrial base is just about the forty-one odd Ordnance Factory Board facilities in addition to some fifty odd DRDO laboratories and a few Defence PSUs like BEML, BEL and HAL. Yet the concept of defence industrial base is much more than this. It encompasses in it the ability of a nation’s industrial base to produce not just weapon systems but also the critical components and sub-components and having the ability to improvise, adapt and

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PRIVATE SECTOR AS PANACEA?

innovate to conceive and produce all kinds of combat and other support systems for the country’s armed forces for the present and future. Defence industrial base, by that respect is not just about license production of foreign hardware (something that India’s defence PSUs have mastered and found a safe way to survive) but building new hardware from the scratch. Therefore the moot question that needs to be asked is whether India has the ability to create such a defence industrial base or not. The answer to this question is both yes and no. To get into the details of the same, it would be important to trace the root of India’s industrialisation process since independence.

If USA is today one of the most powerful nations in the world and is in certain league way ahead than most others, the credit has to go to both USA’s industrial ingenuity and the government’s ability to harness it in the right manner. USA’s military prowess emanates from the strength provided to it by its powerful defence companies almost all of which are in the private sector domain. Surprisingly there are hardly any federal defence manufacturing companies and the Department of Defence works primarily for ensuring security to the nation while letting the private defence companies take the lead in terms of spearheading defence product innovations. The likes of Boeing, Lockheed Martin, Northrop Grumman, General Dynamics, Raytheon, L-3 Communications, United Technologies, SAIC, General Electric and Honeywell to name a few, each have their area of niche and specialisation cut out

From bankruptcy to trillion dollar club India was born as a nation which didn’t even have the capacity to manufacture something as basic as a needle on its own. Add to that, the stepmotherly attitude of India’s successive left of centre leaning governments who presumed anything that was in private sector was unreliable. India’s private sector thus meandered through the treacherous route imbued with impediments created not by any foreign agency but by its own government. And yet it survived against all odds. Almost forty five years of failed experimentation with socialism and camaraderie with some Jurassic age ideologies eventually ended up creating a bankrupt Indian economy by beginning of the nineties of last century. India’s traditionalist and snobbish government, was eventually forced to open up the economy and allow a little more breathing space to India’s private sector. That was what India Inc needed. In less than seventeen years, from the verge of bankruptcy India broke into the trillion dollar club and had it not been for the sudden devaluation of the Indian currency in the recent past, it would have breached the two trillion dollar mark by now. And most of the credit for the same has to go to the iconic rise of India’s private sector and unleashing of entrepreneurial adrenalin, something that was on leash for decades under the garb of socialism. For more than forty years since India’s independence from British rule, India’s left leaning and bureaucratic governments always preached that India’s private sector was not capable enough be it in terms of finance or

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technical prowess to invest large sums of money in sectors like oil refining, integrated steel plants and complex engineering. On the sixty fifth year of independence, the picture as it stands today is not what the government have always tried to preach. Boston Consulting Group’s list of 100 Global Challengers for the year 2011 has 20 Indian companies in the coveted list which includes the likes of Bajaj Auto, Bharat Forge, Bharti Airtel, Crompton Greaves, Dr Reddy Laboratories, Hindalco Industries, L&T, Lupin Pharmaceuticals, Mahindra & Mahindra, Reliance Industries, Suzlon Energy, Tata Chemicals, Tata Communications, Tata Consultancy Services, Tata Motors, Tata Steel, Vedanta and Wipro. Each of them is not just a leader in its segment in India but is a potential challenger to the established giants of the world in the Fortune 500 list. And needless to say most have global scale and belong to India’s private sector. Likewise, Forbes list of Global 2000 for the year 2010 has 56 Indian companies in the list, out which 28 are from the private sector many of which not only have global scalability but are respected worldwide for their ingenuity and product development skills. Today Bharti Telecom with its operations spanning across the contours of continental Africa and South Asia, with revenues of more than US$ 10 billion and assets in excess of US$ 18 billion has left state owned BSNL far behind. The Tatas with an estimated US$ 100 billion in revenue and a target of US$ 500 billion in group revenues by 2021 are a global force to reckon with and not just a national one. Group companies like TATA Steel have simply catapulted themselves to a different league and left the likes of SAIL much behind. Likewise the US$ 76 billion Reliance Industries is just a shade behind Indian Oil Corporation in terms of revenue but is not just much more profitable, it has also incubated and given shape to several group companies like Reliance Communications in the past and the Reliance Retail at present. In the same league, India’s IT-BPO sector which emerged on its own has risen from nowhere to an estimated US$ 100 billion sector, one which is not just one of the highest generators of employment for the skilled manpower of India, but is also respected worldwide for its systems management and software customisation prowess. This does not mean that there are no good PSUs either. For every BEML which literally cheated the nation by simply reselling expensive imported TATRA trucks at an even higher and inflated price, there are certain excellent PSUs which have not only survived in a globalised competitive environment but have really excelled. While DMRC vindicated what a public sector organisation can do in terms of project execution and when taken out of the ambit of the rut of Indian Railways, organisations like BHEL have made a real name with their engineering expertise especially in the arena of making boilers, turbines and more recently naval guns. Therefore coming back to the moot question of whether India has the wherewithal to create a viable and sustainable defence industrial base, the answer is an unequivocal yes. India does have all that it takes starting from a diverse and multitude of research institutions to globally renowned companies of Indian origin who have over the years developed the requisite skill sets needed for the same. But then one can always ask as to why then

India continues to import nearly 70 per cent of its defence equipment from abroad? In spite of much lip service for greater self-sufficiency in the indigenous production of defence equipment, reality is that India’s defence establishments are still very reluctant to allow the Indian private sector to play a bigger role in the manufacturing of defence equipment in India. The Indian government apparently wants the private sector to be a supplier of components or at best tradesman but would not let them take the lead as systems designer and integrator even when many have it in them to gradually rise up the value chain and become serious competitors to global defence contractors as they have become competitors in other sectors. For years the same excuse of the inability of the private sector to manage such gigantic projects of national importance has been parroted.

The symbiotic relationship between defence industrial innovation and its positive impact on overall industrialisation and economic development remains pertinent to this day It is surprising that for a country of India’s size and industrialisation, its ordnance factories manufacture a mere 1,00,000 INSAS 5.56 mm assault rifles and another 6,000 7.62 mm SLRs per year. Given the fact that India has an estimated 1.3 million personnel in its armed forces in addition to a near 2 million state police personnel and another near 8,00,000 Central Armed Police Forces, modernising India’s entire force engaged in defence and maintenance of law and order with

at least a modern assault rifle would thus take decades. The void in most cases is filled by ad hoc purchase of mostly AK series of rifles from countries like Bulgaria. It is shocking that a country which manufactures 4.7 million cars per year (almost entirely in the private sector) cannot produce more than a hundred thousand rifles a year. The rifles, which again, are not of the best of quality, are produced by India’s Ordnance Factory Board’s facilities at Kanpur and Ishapore. And yet the private sector is not allowed to step in in spite of the dire need of modernisation of India’s police forces especially in the aftermath of 26/11. There is no reason to believe that TATAs who now build some of the finest cars and manage critical software systems of vital global installations, who are known world over for their impeccable manufacturing prowess and who are pioneers in fundamental scientific research in India through Tata Institute of Fundamental Research or Indian Institute of Science would not be able to build a good, cost effective assault rifle in large scale for India. There is no reason to believe that L&T which is known all over for its project management skills and its ability to execute critical turnkey projects in record time would not be able to make a quality rifle for India. Sadly they don’t make it because the government doesn’t allow them for the rather weird excuses of keeping proliferation under control even when it is a known fact that when a prestigious company would manufacture it under license, it would only sell it to government agencies. On the contrary, in spite

of all the caps on private sector with respect to production of small arms, India has not been able to prevent the proliferation of illegal small arms. The Maoists are armed to the teeth and every organised and unorganised criminal in India has access to an automatic pistol or at least a revolver. Finding them from among the 40 million of illegal small arms floating in the country is not difficult enough, especially if one has the means to buy them. In 2001 the government of India had issued licenses to Punj Lloyd, L&T, Bharat Forge and Max Aerospace for manufacturing of small arms but in the absence of any commitment from the government in terms of assured purchases and possible restrictions on exports as also resistance from the OFBs simply made sure that the licenses would lapse with time and would not be renewed for most. The moot point that needs to be understood here is that in spite of the clear and present danger to India from all kinds of external and internal elements, the government of India still doesn’t consider India Inc a trusted partner which can play a critical role in India’s defence self-sufficiency. Take the case of Larsen & Toubro and its aspiration to become a serious player in making warships and submarines for India. It’s an open secret now that L&T played a critical role in terms of manufacturing the hull and doing detailed engineering for India’s first indigenous nuclear SSBN submarine namely INS Arihant for which it did. And yet when it came to permitting L&T

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to manufacture submarines under Project 75I, they were time and again turned down. The government instead chose to build two of the six submarines abroad while producing the remaining four at MDL. Renowned defence journalist Ajai Shukla wrote in Business Standard on September 1, 2010, ‘L&T sources stress that the company’s experience of building the INS Arihant - at 5,000 tonnes, thrice as large as the average conventional submarine and significantly more complex - has given the company the expertise, the facilities and the confidence to build conventional submarines faster and more cheaply than any MoD yard.’ He further states, ‘The MoD, allege these sources, is giving the Project 75I submarine contract to its own shipyards to keep them in business.’

import TATRA trucks worth US$ 80,000 a piece in the international market and sell to the Indian Army for US$ 2,20,000 a piece rather than allow L&T make cost effective submarines here. It would rather allow Ordnance Factories to make vintage looking pistols and revolvers than allow private sector to tie-up with global corporations and make modern weapon systems here. Worse, more often than not, one never knows which foreign company ends up being blacklisted. Punj Lloyd had in 2008 entered into collaboration with ST Kinetics which is a division of Singapore Technologies, for manufacturing defence equipment in India. Later with the blacklisting of Singapore Technologies by MoD, the fate of the joint venture was sealed.

The symbiotic relationship between defence industrial innovation and its positive impact on overall industrialisation and economic development remains pertinent to this day. In spite of much lip service for greater self-sufficiency in the indigenous production of defence equipment, reality is that India’s defence establishments are still very reluctant to allow the Indian private sector to play a bigger role in the manufacturing of defence equipment in India

The contrasting picture in US

It is this kind of attitude that is at the very core of India’s inability to come up with a strong defence industrial base. Yet, as fate would have it, the irony is that MDL, which is already overburdened and behind schedule with respect to the delivery of Scorpene Submarines under Project 75I and destroyers under Project 15A it is indigenously manufacturing in India, was eventually forced to create a couple of joint ventures with two of India’s leading naval engineering companies namely Pipavav and L&T, that very L&T who was initially denied an individual role in Project 75I, for manufacturing warships and submarines that have been ordered to MDL. While it is a welcome move, what is really unfortunate is that the Indian private sector companies are being given a second fiddle role and that too when the government realised that its state owned shipbuilding companies have bitten more than they can chew. Yet India is far from the day when Indian private sector companies would be treated with the kind of respect with which a Boeing or Lockheed Martin are treated as shared partners of American security and not as competitors who are trying to put their feet on an exclusive fiefdom of bureaucrats.

Boston Consulting Group’s list of 100 Global Challengers for the year 2011 has 20 Indian companies in the coveted list which includes the likes of Bajaj Auto, Bharat Forge, Bharti Airtel, Crompton Greaves, Dr Reddy Laboratories, Hindalco Industries, Larsen & Toubro, Lupin Pharmaceuticals, Mahindra & Mahindra, Reliance Industries, Suzlon Energy, Tata Chemicals, Tata Communications, Tata Consultancy Services, Tata Motors, Tata Steel, Vedanta and Wipro. Each of them is not just a leader in its segment in India but is a potential challenger to the established giants of the world in the Fortune 500 list Shockingly, Ministry of Defence would rather under its nose allow a PSU like Bharat Earth Movers Limited

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It is difficult to fathom a United States with its entire military prowess but without its defence contractors. If USA is today one of the most powerful nations in the world and is in certain league way ahead than most others, the credit has to go to both USA’s industrial ingenuity and the government’s ability to harness it in the right manner. USA’s military prowess emanates from the strength provided to it by its powerful defence companies almost all of which are in the private sector domain. Surprisingly there are hardly any federal defence manufacturing companies and the Department of Defence works primarily for ensuring security to the nation while letting the private defence companies take the lead in terms of spearheading defence product innovations. The likes of Boeing, Lockheed Martin, Northrop Grumman, General Dynamics, Raytheon, L-3 Communications, United Technologies, SAIC, General Electric and Honeywell to name a few, each have their area of niche and specialisation cut out. And even though they do compete with each other in certain arenas, on the whole each had to find a niche to make itself indispensable thereby giving the overall industry the cutting edge that it always needed. Thus while Boeing and Lockheed Martin have primarily found their niche in the arena of development of combat jets and strategic airlifters, Northrop Grumman found its niche in the arena of aerial surveillance (with products like ED-2C Hawkeye) as also CBRN detection systems. Likewise while General Dynamics developed its niche in production of tanks and military communication systems while Raytheon developed its niche in the arena of missile systems. Similarly General Atomics found its niche in the arena of drones thanks to its success with Predator and Reaper. This kind of specialisation has not happened with US government nominating defence companies for each segment as has been the norm in India for decades (where PSUs were nominated by MoD for supplying defence equipment instead of competitive product testing route) but through intense competition between contenders of deals. It is through such competition and cut-throat scrutiny that dynamic and path breaking products, be it like the versatile F-16 or the C-17 or Predator Drones are developed. But most importantly, the development of the American defence industry is because the American government trusted and considered its thriving private sector as a shared partner and because there is no turf of any shoddy American state owned defence company to be protected at the cost of quality equipment, innovation,

competition and national security. That is what India has to learn and go ahead with. In the last few years as the concept of network centric warfare became more and more a reality, Indian IT companies have played a crucial role in India’s defence and law enforcement agencies with the development of critical systems. It is time to replicate the same in other arenas of defence industry.

In less than seventeen years, from the verge of bankruptcy India broke into the trillion dollar club. It is surprising that for a country of India’s size and industrialisation, its ordnance factories manufacture a mere 1,00,000 INSAS 5.56 mm assault rifles and another 6,000 7.62 mm SLRs per years. Given the fact that India has an estimated 1.3 million personnel in its armed forces in addition to a near 2 million state police personnel and another near 8,00,000 Central Armed Police Forces, modernising India’s entire force engaged in defence and maintenance of law and order with at least a modern assault rifle would thus take decades. The void in most cases is filled by ad hoc purchase of mostly AK series of rifles from countries like Bulgaria. It is shocking that a country which manufactures 4.7 million cars per year (almost entirely in the private sector) cannot produce more than a hundred thousand rifles a year. There is no reason to believe that L&T or Tatas or Mahindras or even Reliance, which are known all over for their project management skills and their ability to execute critical turnkey projects in record time would not be able to make a quality rifle for India Of late there have been though some positive developments in India with the government doing away with the nomination of defence PSUs for supplying of equipment and then opening the door to Indian private sector for manufacturing of 56 transport aircraft for Indian Air Force to replace its ageing fleet of HS-748 AVRO transport planes. It has also been witnessed that as India would be purchasing weapon systems worth US$ 200 billion in the next half a decade and

as part of the offset clauses, a minimum of US$ 60 billion worth of investments can be expected here. To leverage the opportunities that would come through offsets, several Indian companies including the likes of Tatas, Reliance, M&M have all gone in for collaborations with global defence counterparts. It is expected that gradually government’s attitude would change and the Indian private sector would be considered an equal partner with a shared responsibility in national security. It is only then that India’s defence industrial base would truly reach its potential. If tomorrow Mahindra BAE comes up with a Howitzer, it should not be made subservient to an OFB which had been sitting on a Bofors blueprint for decades without realising it possesses the same even as India grappled with its shortage of 155 mm howitzers. It should not be that OFB by virtue of being a state owned organisation would be a perennial ‘holy cow’ who cannot be touched or disturbed. The iconic contribution of India Inc in the last two decades in terms of catapulting India from an impoverished economy to an economic powerhouse wherein it is expected to be among the top three economies of the world in the next two decades can be successfully replicated in defence arena. There is no reason as to why a nation which is so successful in launching its own satellites, developing its own supercomputer and ballistic missiles would not be able to make quality assault rifles, howitzers, tanks, defence grade communication systems on its own. But for that to happen, in addition to a much larger playing field for the private sector, it is imperative for the government to bring about structural changes in its defence production set-ups. BrahMos Aerospace which was

conceived and managed as a professionally ran Private sector company and has performed exceedingly well and has vindicated why such a set-up is far better than the OFB type set-up. Likewise ISRO as an organisation is way ahead of its defence counterparts in India, thanks to its leadership by technocrats. Many of the products of DRDO including even the INSAS 5.56 mm are quality products but badly manufactured. It is thus of prime importance for India to bring about more accountability in its OFB facilities through corporatisation. It is also important for India to develop defence hubs or clusters so that companies, primary defence contractors, research institutions and vendors can collaborate and cooperate on a far better platform and learn from each other. It is time that India as a nation revives its streak of ingenuity even more and alter the course of its defence industry. In today’s arena, given the kind of threats it is being besieged with from all sides, it is perhaps no more a matter of indulgence but a question of civilisational survival.

August 2012 Defence AND security alert

defence industrial base

DEPENDENCE CONUNDRUM

T Cecil Victor The writer has covered all wars with Pakistan as War Correspondent and reported from the conflict zones in Vietnam, Laos and Cambodia in South East Asia as well as from Afghanistan. He is author of “India: The Security Dilemma”. The 1962 debacle at the hands of the Chinese woke India to the need for a viable indigenous military-industrial complex that would cater to the conventional requirements of the Armed Forces. The road to that objective was chosen to be licensed production of foreign weaponry in indigenous factories to make for “self-reliance” in that the nation would depend for its conventional military wherewithal on weaponry designed and developed in foreign laboratories but manufactured at home. This was intended to ensure that supplies were always on tap unthreatened by the constant possibility of imposition of embargoes and sanctions if the nation did not toe a particular line of the supplier nation

hat the Ministry of Defence should go into a tailspin by the leak of former Chief of Army Staff General V K Singh’s letter to the Prime Minister listing deficiencies in the war reserves of weapons and munitions is a measure of how far we have travelled since the Chinese aggression of 1962 when the nation was confronted with the harsh realities of the meaning and content of self-reliance in military wherewithal. That we haven’t learned very much from that lesson would only be half the truth. Our foray into “self-reliance” and our flirtation with that even better state of military preparedness known as “self-sufficiency” is like the Curate’s egg, good in parts.

The 1962 debacle at the hands of the Chinese woke India to the need for a viable indigenous military industrial complex that would cater to the conventional requirements of the Armed Forces. The road to that objective was chosen to be licensed production of foreign weaponry in indigenous factories to make for “self-reliance” in that the nation would depend for its conventional military wherewithal on weaponry designed and developed in foreign laboratories but manufactured at home. This was intended to ensure that supplies were always on tap unthreatened by the constant possibility of imposition of embargoes and sanctions if the nation did not toe a particular line of the supplier nation.

Competence-building This kind of “license produced” self-reliance was supposed to be a temporary phenomenon to help Indian defence scientists to acquire hands-on competence. “Self-reliance” was clearly intended to be a stepping stone to that more desirable goal of “self-sufficiency” in major weapons platforms like aircraft, tanks, artillery, ships, submarines etc. which normally arrived in Indian arsenals dripping with obsolescence even if they were bought straight off the foreign drawing boards because gestation periods for the creation of industrial infrastructure within the country would take as much as ten years to fructify and production begun. Often heard was the promise that the nation would “leapfrog” technology hurdles after a period of competence-building. Thus “self-reliance” and “self-sufficiency” were desirable touchstones by which a nation could guide itself to its military objective. This, basically, was the protection of its territorial integrity on land, sea and air. It has, in fact, so far failed to even secure the liberation of territory captured by neighbours by deceit and deception. That it has managed to protect its remaining territorial integrity in the face of determined attempts to Balkanise it on religious and ethnic lines is a miracle in

August 2012 Defence AND security alert

geopolitics. However, the size of its military forces (the world’s largest standing volunteer army) has not been a deterrent against the use of sub-conventional methods coupled with a two-front war situation and the threat of use of nuclear weapons.

Neither here nor there

Ready for all contingencies? After the Chinese aggression of 1962 India undertook the creation of a military industrial complex of dozens of research and development laboratories, defence public sector undertakings and ordnance factories. But every time a military crisis occurs it has had to run abroad to buy ammunition and equipment so as to be able to successfully conclude a military campaign. It happened when Pakistan attacked us in 1965. The world’s most resoundingly successful military campaign in 1971 could happen only after the Chief of Army Staff General (later Field Marshal) Sam Manekshaw could acquire all that was on his shopping list. We had to run around again as if our tails had been chopped off when Kargil happened and the huge amount of equipment and munitions for which orders were placed in 1999-2000 arrived well after it took us more than two months to clear the Kargil heights of Pakistani military personnel. Operation Parakram launched after the terrorist attack on Parliament in December, 2001, was a dismal failure from the word ‘go’ because the convoy carrying ammunition blew itself up en route to the border and our mine laying operations took more victims than did the Pakistani shelling.

There is no gainsaying the fact that the vast investment in the Indian military industrial complex has brought dividends in the form of successful fruition of several of its mission projects. In the nuclear field in particular the arrival of the Arihant on the commissioned list will complete the nuclear triad Now, fifty years after the Chinese aggression we find ourselves in what is called a “two-and-a-half front war” - Pakistan on the west, China in the north and north-east and the melange of terrorist organisations creating an internal security problem and we are buying everything most Indians thought we already had because of our huge investment on an indigenous military industrial complex. We are the biggest market in the world for weaponry and we are not making enough to defend ourselves out of our own resources.

Death in the cradle There are several reasons for stocks of ammunition to run low ranging from

icense produced self-reliance was supposed to be a temporary phenomenon to help Indian defence scientists to acquire hands-on competence. “Self-reliance” was clearly intended to be a stepping stone to that more desirable goal of “self-sufficiency” in major weapons platforms. It has now become the norm that perpetuates dependency on Foreign suppliers. India’s attempt at creating a viable military industrial complex has been chequered. Scientific manpower became trapped in the “license produced” syndrome which prevented the application of innovation, upgradation and finally reproducing new varieties of products obtained from foreign source. It was only in shipbuilding that the Naval Design Bureau covered itself with glory. The Bofors scam generated a stasis that has lasted a quarter of a century. contingencies not catered for at the time of purchasing life-time stocks in bulk; problems at production centres if indigenous production is established; destruction by fire at storage sites. However, there are invidious reasons as well. Sample this: Bharat Dynamics Ltd, the Defence Public Sector Undertaking under the Defence Research and Development Organisation is the manufacturer of the indigenous Nag anti-tank missile which was created as part of the national mission called Integrated Guided Missile Development Programme under which the Prithvi and Agni surface-to-surface, the Akash medium range surface-to-air, Trishul short-range quick reaction surface-to-air and Nag third generation top-attack anti-tank missiles were to be created and produced within the country.

Bharat Dynamics Ltd was specially created to productionise the missiles. Now it turns out that the Indian army, after much prevarication, placed orders for about 450 Nag missiles to be mounted on 13 Nag missile carriers called Namica. Almost simultaneously it has placed orders for 8,346 Israeli anti-tank missiles to be mounted on 321 tripod launchers. BDL has said that it will make 100 Nag missiles per year. This means that it will take four years to fulfil the contract for 450 missiles. If there is an outbreak of war within these four years there will, of course, be the Israeli Spike missile to take care of the enemy tanks but this is what is going to happen to the indigenous Nag anti-tank missile - each Namica carries 12 missiles, four each on two ready-to-fire pylons and four as refils inside the vehicle. The Nag missiles will be accommodated on

the 13 Namicas. This means that each Namica will be required to fire three salvos at the enemy and then retreat to the rear and end up on the scrap heap because there will be no replenishment from BDL which has orders for only 450 Nag missiles from the army. This is one way of killing an indigenous weapons programme. The other is what was tried on the Arjun tank. After every trial reports would filter out to selected members of the Press that the tank cannot fire straight either in static or mobile mode; that its engine overheats at a rapid rate; that its ability to travel cross-country was inadequate etc. No newsman is ever present at such trials but such reports would find their way into the media. After one such trial the DRDO officials suspected foul play and alleged sabotage of the tank. There was talk of installing

August 2012 Defence AND security alert

defence industrial base

DEPENDENCE CONUNDRUM

black boxes to monitor standard operating procedures by the tank crew. Thereafter reports of malfunctioning stopped. The army conducted comparative trials between the Arjun and the Russian T-90s in which the Arjun’s performance was said to be good. A repeat order was placed for induction into the Armoured Corps. And it is promised that more orders will be placed for the Mark II version of the improved Arjun tank.

The Bofors scam generated a stasis that has lasted a quarter of a century and had stalled the acquisition of more 155 mm howitzers either from foreign sources or from internal resources given that we had received and paid for drawing and designs from the original manufacturers. This year it was finally decided that the scam-tainted Ordnance Factories Board will develop two prototypes of the 155 mm Bofors howitzers within one year India’s attempt at creating a viable military industrial complex has been chequered. What began as the Defence Science Organisation post Independence morphed into the Defence Research and Development Organisation which now has 52 specialised laboratories under its wing. It is complemented by an autonomous Ordnance Factories Board that controls 41 factories with in-house R&D cells. The investment is in thousands of crores of rupees. But are we “self-reliant” in military hardware? At best we have reduced imports from 80 per cent to 70 per cent and as the current military wish list shows we are buying even small arms which should have crossed the bounds of indigenisation and moved from the first generation Indian National Small Arms System to an improved Mark II version instead of dumping the whole project in the dustbin.

Victim of geopolitics The Indian military industrial complex is the product of the cold war and a victim of it. After the Chinese aggression India travelled the world to acquire technology and set up industries to manufacture foreign products under license to cut the gestation period. In only a few cases - Britain and the former

Soviet Union now the Russian Federation - was there willingness to part with military technology. Britain gave us the Folland Gnat fighter aircraft, the Vickers tank Vijayanta and the Leander class frigate (the production lines of which were about to be shut down) and the Soviet Union nearly everything else at rupee rates. The US refused to part with technology, insisting that only weapons would be transferred in fully ready state on payment in dollars. However, given the dynamics of the cold war and Pakistan’s role as a member of the US-sponsored Baghdad Pact which was later converted into the Central Treaty Organisation, brought it the state-of-the-art US military equipment like the Patton tank and the Sabre jets. India found it difficult to keep up with that kind of technological sophistication. However, better manpower and technical skills prevailed on the battlefield in 1965 as well as in 1971. This deprivation of western technology had several consequences. For one, the private sector which, ironically, had the commanding heights in that the aircraft and the shipbuilding establishments in private hands had fulfilled Allied requirements of repair and maintenance in the South East Asia sector during World War II showed no interest in making the high capital-intensive investment in producing weaponry for the military. The aircraft and shipbuilding factories (Hindustan Aeronautics Ltd and Hindustan Shipbuilders Ltd) were nationalised. The other effect was that the scientific manpower became trapped in the “license produced” syndrome which prevented the application of innovation, upgradation and finally reproducing new varieties of products obtained from foreign sources. India, therefore, depended entirely on what the the DRDO could envisage and implement. Thus, several contracted facilities for joint upgradation of foreign weapons platforms went abegging as in the case of the Aerospatial contract for Allouette helicopters Chetak and Cheetah. It was only in shipbuilding that the Naval Design Bureau covered itself with glory by first creating in-house a stretched

August 2012 Defence AND security alert

version of the original Leander class frigate (the Godavari class) and India went on to gain confidence enough to take up the project for a nuclear propelled and armed submarine known as the “Advanced Technology Vessel”. Almost simultaneously similar indigenous projects for the creation of tanks, aircraft and missiles (the Integrated Guided Missile Development Programme) were undertaken. Nearly all of them suffered delays as insurmountable problems confronted the defence scientists who were denied the avenues for acquisition of technology or systems required to fill the gaps in indigenously-developed technologies by such restrictive international regimes as the Nuclear Non-Proliferation Treaty, the Comprehensive Test Ban Treaty, the Missile Technology Control Regime and the most recent Waasanaar Arrangement. The realisation of the complexities of the problems gave rise to awareness that the basic building blocks like special materials and alloys need to be manufactured within the country if it is to be able to shift from the license produced stage of self-reliance to indigenous design and development of weapons platforms that would truly represent a coming of age and self-sufficiency in the form of a tank, aircraft, ship or submarine (all capital intensive investments).

International environment There were many events and episodes that obtruded on India’s attempt to attain self-reliance in military equipment. India’s first nuclear experiment in the Rajasthan desert in 1974 was cause for the imposition of embargoes and ban on military supplies. Her failure to sign the NPT and later the CTBT both of which it defined as discriminatory and then the second series of nuclear tests in 1998 took their toll. Ironically, India’s Non-Alignment policy was the yeast to acquire top of the line Soviet military equipment largely because the Soviets had convinced themselves that the Non-Aligned Movement was its natural ally notwithstanding its strenuous efforts to appear evenhanded in relations with the western bloc led by the US. The collapse of the Soviet Union in 1990 severely

affected India and added to delay in completing the Advanced Technology Vessel christened the Arihant nuclear submarine. Nonetheless the Soviet / Russian Federation contribution to the successful completion of the third leg of the nuclear triad cannot be ignored.

After the Chinese aggression India travelled the world to acquire technology and set up industries to manufacture foreign products under license to cut the gestation period. In only a few cases – Britain and the former Soviet Union now the Russian Federation – was there willingness to part with military technology. Britain gave us the Folland Gnat fighter aircraft, the Vickers tank Vijayanta and the Leander class frigate (the production lines of which were about to be shut down) and the Soviet Union nearly everything else at rupee rates The Bofors scam generated a stasis that has lasted a quarter of a century and had stalled the acquisition of more 155 mm howitzers either from foreign sources or from internal resources given that we had received and paid for drawing and designs from the original manufacturers. This year it was finally decided that the scam-tainted Ordnance Factories Board will develop two prototypes of the 155 mm Bofors howitzers within one year. Hopefully after that the shortage of both guns and ammunition will end.

Climate change The advent of the 21st century has seen a sea-change in the attitude of the US and its allies towards India. The Indo-US nuclear deal has cleared the way for the acquisition of many weapons platforms and systems that would earlier have been kept out of India’s reach. The private sector sees in the loosening of sanctions an opportunity to present their industrial capabilities to attract defence contracts and benefit from the system of offsets that the government of India has included in the frequently upgraded Defence Acquisition Policy, particularly the “made in India” category whereby foreign original manufacturers can use facilities available with the so-designated “mini-ratnas” within

a foreign direct investment of 26 per cent. The concept of private-public participation has received a fillip.

with the Russian Federation) to create a fifth generation fighter.

Even as it is dismaying to see the nation rush abroad for such a long list of military requirements thereby rendering the very concept of “self-reliance” irrelevant there is no gainsaying the fact that the vast investment in the Indian military industrial complex has brought dividends in the form of successful fruition of several of its mission projects. In the nuclear field in particular the arrival of the Arihant on the commissioned list will complete the nuclear triad that will ensure the implementation of government’s policy of minimum nuclear deterrence and assured second strike. It needs to be remembered that all the delivery systems for nuclear warheads are indigenous products and only recently the DRDO has brought the whole of China within range with the 5,000 km plus Agni V. The indigenous Tejas is flying (finally many would groan); the Arjun main battle tank has been inducted into service; the mistakes made in the creation of the tank engine and the aircraft engine are being rectified with foreign collaboration. We have created through a joint venture with the Russian Federation the supersonic cruise missile BrahMos which has been inducted in all the three Services giving due credence to the concept of commonality of equipment. It is largely because a great deal of competence has been created over the past sixty years in the aviation industry that India can actively participate in the joint venture (also

In the final analysis it needs to be remembered that crafting a defence industrial base for a nation that has as many security-related problems as does India is no mean task but we have created a springboard over the years. It is even more important to protect that investment and build upon it. The tendency of scuttling an indigenous project because a foreign product is better in some respects needs to be shunned. If the Indian product is not up to the mark beg, borrow or steal the technology that will improve it. Don’t designate it for the graveyard as has happened to the Trishul and appears intended for the Nag and the Akash and the INSAS family of small arms. The Services cannot be asked to wait indefinitely for a project to fructify but they can wait for the next generation product to move out of the factory. The concept of generational improvement of an initial product must be inculcated in the new emerging private-public partnership in defence related industry. There can be Mark I, Block 2 etc. designations for every improvement in a proven weapons platform.

Self-sustaining

Let us not replicate the mistake that Pakistan made by acquiring ultramodern equipment which it could not use effectively. We could well do without the latest if our men are capable of handling the old equipment to full advantage. Remember it is the man behind the machine who matters. We have done it before. We can do it again.

August 2012 Defence AND security alert

homeland security

Book review

Jihadi Tentacles The Fertile Soil of Jihad

Patrick T Dunleavy

The Fertile Soil of Jihad Terrorism's Prison Connection

Reviewed By Dr Rupali Jeswal

160 pages; 6" x 9";

atrick T Dunleavy is the former Deputy Inspector General for New York State Department of Corrections and author of The Fertile Soil of Jihad - a book about terrorism recruitment inside the prison, where it starts, how it develops and the belief where one cell ends another begins. The book is a portrayal of a prisoner’s capabilities and using the inside environment to work for their own agenda outside the prison walls.

Notes; Bibliography; Index Clothbound Published: September 2011 ISBN: 978-1-59797-548-3

http://www.amazon.com/Fertile-Soil-Jihad-Terrorisms-Connection/dp/1597975486 The author is a highly accomplished Law Enforcement Professional; he worked as part of an elite team of investigators for more than 26 years, infiltrating criminal enterprise, contract murder conspiracies and negotiating for the release of hostages.

Published by:

He was a key figure in Operation Hades, a four year joint investigation conducted by United States law enforcement and intelligence agencies that probed the radical Islamic recruitment movement for jihad from both inside and outside the prison walls.

22841 Quicksilver Drive, Dulles, VA 20166

He is not only a prolific writer but his first hand experience with radicalization in American prisons and the vivid details of his investigations is an eye-opener for all Law Enforcement Agencies. His exploration in how the prison subculture fosters radicalization is food for thought, not just restricted to America but globally as the issue of radicalization in prison, transcends all borders. Since the publishing of his book, September 2011, Mr Dunleavy continues to write and speak out on current events and issues related to radicalization and terrorism, which can be viewed at his website www.patrickdunleavy.com

In The Fertile Soil of Jihad, the reader’s sensation is further amplified, brilliantly, by Patrick Dunleavy’s use of analogy to Dante’s first canto Inferno (Hell), of his 14th century epic poem The Divine Comedy.

In the past weeks, I have been in touch with the author regularly and found him to be most gracious in his attitude and very approachable. He is not only well armed with wits and expertise but with humility and with a great sense of commitment, in his personal and professional life. While reading The Fertile soil of Jihad and further diving into his published written materials, I have enhanced and enriched my own understandings tremendously and know that all who read his book would feel the same as I did. The Fertile Soil of Jihad - starts with the Abdel Nasser Zaben, a young Palestinian, arrested for kidnapping and robbery in 1993 and in the consecutive years America witnesses the call and attacks of jihad and war on terrorism begins. Aftermath of 9/11 irked the law enforcement and intelligence agencies to take upon the information from 1999 of how Middle Eastern inmates in the American prison system were recruiting to produce jihadist who would progress to use acts of terrorism in America. The combing through, leads the investigating team to the same man Abdel Nasser Zaben arrested in 1993 and Dunleavy’s fast paced recount of events starts.

The insulated yet permeable environment of prison leads this same young man, Abdel Zaben, seemingly a common criminal, to swear his allegiance to Osama bin Laden and he embarks on his path to recruit and convert selectively other young minds to the cause of jihad. 80

August 2012 Defence AND security alert

Potomac Books, Inc

The pace of the book is fast, ever developing and magnetic by virtue of its author’s consummate power of analysis and narrative. Meticulously arranged for any reader to grasp the unfolding of events within the primed walls of prisons, it is a book with a case to learn from, for all those who are in Police, Intelligence and Prison and Correctional Services. This effort of Patrick Dunleavy’s will assist us in understanding not “why?” things happen but most importantly “HOW?” things happen. The author’s keen observational, analytical and rhetorical skills will lead the reader to microscopic details, showing the holes in our system and what must be anticipated and what can be used as a counter-measure to prevent radicalization in prison taking place. In the end, the book leaves us with a foresight with our own thinking pattern changed to “Expect the Unexpected” and work towards anticipating and reinventing counter-measures for prevention, leaving aside basic assumption and false positives.

“In prison, time often works to the great advantage of the convict. Mainstream society often forgets the most heinous of criminals once they are locked away. But the terrorist never forgets and knows how to manipulate the system.” In Dunleavy’s words

In his testimony before the United States House of Representatives Committee on Homeland Security on “The Threat of Muslim American Radicalization In US Prisons” June 15, 2011, he stated:

August 2012 Defence AND security alert

homeland security

Book review

"The task force investigation also found that although the initial exposure / conversion / indoctrination to extremist jihadi Islam may begin in prison, it often matures and deepens after release through the contacts on the outside that the inmates made while they were serving their sentences in prison." He also noted: “Despite appearances, prison walls are porous. It is easy for outside influences to access those on the inside and for inmates to reach from the inside out.” “The problem of prison radicalization often begins at the county jail level and continues on through the state prison system and the post release period.” Law enforcement agencies should cast aside the notion that there is such a term as “Self-radicalization”. Radicalization by definition means to change fundamentally and a “change” takes place due to an insertion. This insertion can be in any form and as Mr Dunleavy, author of The Fertile soil of Jihad eloquently conveys: “The constant interaction that occurs within a prison negates that (Self-radicalization). There is always a facilitator, an influence, or a catalyst. Be that literature, another cellmate or a clergy.”

Prison radicalization, unfortunately, is not unique to the United States, this is an issue plaguing many countries and many are conducting research, building case studies and reinventing countermeasures. India lacks literature on Prison Culture and subcultures and the “knowing” of holes in its fabric, it may have. This book will give us a picture of real-life events that took place in the American prisons and how the negative ripple effect was followed outside the prison walls. Even our best practices are on foundations of other professionals’ trials and errors and the findings of it, so to read this book and understand the mechanics of human capabilities within prison confinement is a lesson to learn from and utilise it in formulating effective counter-measures. Evidence suggests that Prison and Correctional facilities have been and are increasingly becoming congregations where terrorists and organised criminals establish channels of communication and co-operation and more importantly recruit new members. Here a systematic capturing and analysis of the social processes within detention facilities can enhance intelligence and law enforcement agencies’ understanding of the groups’ operation and behaviour. Terrorists and organised crime-related inmates are very sophisticated in using the correction environment to their advantage. Incarceration is part of the game for these inmates: it is a time to rest, recoup and recruit. They are model inmates. They are careful to deflect any attention to their schemes and communication strategies.

Police and correction professionals need immersion in the intelligence operations and strategies of their respective agencies. This linkage will result in the production of mutually beneficial intelligence tools and operations. To prevent “cognitive-sabotage” officials must use their own interpretative lens in their own facilities using this book as a tool of knowledge because what assumptions were appropriate yesterday can easily be null today, misleading us.

Dr Rupali Jeswal The reviewer is an Intelligence and Terrorism Analyst, Clinical Psychologist and Clinical Hypnotherapist based in South-East Asia. She has also received training in specialsed areas including counter-terrorism, intelligence and tactical operations. She specialises in cognitive learning processes and neural pathway response and how these factors apply to specialised trainings. She is an expert in the field of non-verbal micro and macro expression for deception and detection and also using non-verbal assets for psychological self-assessment in conjunction with Emotional Intelligence to enhance the human mind, personality, image and spirit. She is a member of ICPA (International Corrections & Prisons Association), IACSP (International Association for Counter-Terrorism and Security Professionals) and a member of APA (American Psychological Association), APP (Association of Professional Psychologists), UK Certified Hypnotherapist and General Hypnotherapy Register.

August 2012 Defence AND security alert

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