Defence and Security Alert Magazine (DSA) July 2017 Edition

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the way ahead

jULY 2017

Volume 8 issue 10

editor’s note

DSA is as much yours,

as it is ours!

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ongevity of a policy, a structure, is no guarantee of its durability or of its utility in an ever challenging environment. Just because a structure has stood the vagaries of time and the various tests that have occurred over decades does’t mean that it is fool proof or irreplaceable. Time doesn’t tell much, in this case, and shouldn’t be taken as evidence of reliability. Since permanence isn’t guaranteed ever, it only makes sense to have an open mind to the certainty of change. Which, in essence, is what the Bhagavad Gita also advises.

So, it is with the structure of Indian defence and it’s antiquated nature given the current challenges and changes underway. Nationally, regionally and also globally. This structure was put in place by imperial authorities to essentially control the native population, as well as provide for expeditionary forces in pursuit of colonial ambitions. Its a purpose the Indian military fulfilled with admirable efficiency. Even the post-independence wars were fought with the same unchanged structure. Success, when it comes,

doesn’t mean there is no scope for improvement and evolution. There are plenty of reasons to undertake both missions, with a cool head and rational thinking.

Technologies now govern the battlefield that were unimaginable when this structure was put in place. And national security challenges occupy the mind that never existed in the past. There are myriad types of emergencies that occur frequently that wouldn’t have appeared before the early decision makers who made this structure. In a democratic environment where financial accountability is paramount, it makes eminent sense to look at ways and means to improve the value of inputs in order to generate better output. The prevailing culture and structure doesn’t stress enough on this correlation between input and output.

The most essential aspect of restructuring the Indian defence is to take a dispassionate look at the field formations of the armed forces.

Isolated tubular cantonments of each of the three services devoid of cross fertilisation of ideas is the single most important aspect of this restructuring. All of them are

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expected to fight together in war.

But at the same time, the three are allowed to function, train, live and think in isolation of each other. That cannot be a formula conducive to efficient war fighting.

Jointness is the prevailing mantra of war the world over. India cannot be an island, isolated and oblivious to this global vision.

Yet this service-centric approach to war is allowed to persist. The arguments against jointness are vociferously propagated every time public or private discussions take place. Naysayers are motivated by parochial service interests, unmindful of the fact that the world has moved in this direction.

Granted it is not an easy journey to undertake and some will fall by the wayside. Appointments that are currently duplicated many times over will have to be rationalised.

But at the same time, new appointments will appear, keeping pace with the current milieu of challenges and opportunities.

Manvendra Singh

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publisher’s view

An ISO 9001:2015 Certified Magazine

Volume 8 | Issue 10 | July 2017 Chairman Shyam Sunder Publisher and ceo Pawan Agrawal President Urvashi J Agrawal Director Shishir Bhushan Editorial Editor-in-Chief Manvendra Singh Associate Editor Supriya Aggarwal Assistant Editor Diana Mehra

Reconstructing

Manager- Sales & Marketing Vishal Kishore Corporate Communications Natasha Creative Senior Graphic Designers Manish Kumar Alka Sharma Representative (J&K) Salil Sharma Correspondent (Europe) Dominika Cosic Production Dilshad and Dabeer Webmaster Sundar Rawat IT Operations Sonia Shaw Abhishek Bhargava Photographer Subhash Circulation and Distribution Prem Kumar 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 Corporate Office Prabhat Prakashan Tower 4/19, Asaf Ali Road New Delhi-110002 (India) +91-011-23243999, 23287999, 9958382999 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, Daryaganj, New Delhi-110002 and published at 4/19, Asaf Ali Road, New Delhi (India).

Editor: Manvendra Singh

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I

A MilitaryIndustrial Complex

t is ironical and somewhat heartbreaking that a nation that set up the Council for Scientific and Industrial Research (CSIR) in 1942 with 37 laboratories and the Defence Research and Development Organisation (DRDO) in 1958 with 52 laboratories is still so heavily dependent on foreign imports of military equipment. We are the largest importer of military equipment in the world and this reflects in the state of preparedness of the Indian Armed Forces (the Indian Air Force Chief Marshal BS Dhanoa has recently described the situation as playing a football match with a sevenmember team when eleven are needed).

An attempt is being made by the present government to attract foreign investments in money and core technologies by tweaking the Defence Procurement Policy to encourage joint ventures between the foreign Original Equipment Manufacturers (OEMs) and the Indian industries both State-owned (like the DRDO and the CSIR) and the private sector through a system of strategic partnerships.Through its multi-dimensional programme the ‘Make in India’, the government has ignited interest among private companies eager to dive into the reservoir of defence production, an access which had long been denied to them. That interest has been generated among many Indian business groups is evident in the activities of several top industries in defence production.

Names like the Reliance, Wipro, Godrej, Punj Lloyd and Tata are enlarging the scope of their commitment to national defence and setting up research and development and integrative units that will facilitate the absorption or assimilation and improvement in acquired technologies in fields ranging from guns to aircraft to ships and submarines.

There are encouraging signs all around that ‘indigenous production’ will soon reduce the high percentage of dependence on foreign imports. Apart from the big business groups and the OEMs, the SMEs and the MSMEs will play a vital role in strengthening the Indian military-industrial complex dedicated to developing and producing whole weapons platforms and systems required by the Armed Forces.

This edition has been compiled with focus on all the deficiencies and possible solutions to counter them by our eminent contributors.

Happy reading!

Jai Hind!

Pawan Agrawal @dsalert

contents

An ISO 9001:2015 Certified Magazine

Countering The Dragon Maj Gen Dhruv C Katoch (Retd)

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Absorb And Improve Imported Technologies Lt Gen Harwant Singh (Retd)

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Develop Comprehensive National Power Lt Gen Vijay Oberoi (Retd)

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Ecosystem For Military Knowhow Acquisition Col KV Kuber (Retd)

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Will ‘Make In India’ Improve Security?

Lt Gen SN Handa (Retd)

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Hash Value Calculation Report And 65B Certificate Rohan Nyayadhish

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A Walk Through Untraversed History Lt Gen Kamal Davar (Retd)

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Will Offsets Happen?

Lt Gen (Dr) Vijay Kumar Saxena (Retd)

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Countering The Dragon

From the Indian viewpoint, the conduct of a successful defensive battle would require negating Chinese actions at each stage. We would require a very high capability in the NCW (Network Centric Warfare), EW (Electronic Warfare) and space warfare. It is also essential that the Indian Air Force (IAF) has dominance over the Tibetan plateau.

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echnology plays a major role in enabling the Armed Forces to carry out their security functions. A peep into history indicates that technology has indeed been a game changer ever since ancient times. The battle between David and Goliath, which is oft quoted from Judeo-Christian mythology, is suggestive of the victory of technology (slingshot used by David) over brute force (the giant Goliath). In more recent times, the development of the AirLand Battle concept by the US forces, which formed the basis of the US Army’s European war fighting doctrine, from 1982 into the late 1990s, was again a product of exploiting the advances made in technology to achieve military objectives. The wars by the US in

Iraq (Iraqi Freedom) and Afghanistan (Enduring Freedom), once again brought to the centre stage, the impact of technology on the battlefield.

India’s threat perceptions for conventional conflict are focussed on both China and Pakistan. However, China’s military modernisation is of great concern to India, especially since India has a border dispute with China, which could potentially lead to a conflict in the future.

Pakistan’s internal problems as of now have dissipated its ability to wage a conventional war against India, though it still poses a credible non-conventional threat, especially in its ability to propagate and support terrorist activities in Jammu and Kashmir and in the other states of India, which it continues to do with

Maj Gen Dhruv C Katoch SM, VSM (Retd) The writer is the former Director of the Centre for Land Warfare Studies (CLAWS).

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impunity. In the event of an IndiaChina war, Pakistan will most likely enter the fray in support of China.

As a long term threat, however, it is China which India must be wary of.

India needs to be prepared to counter any Chinese adventurism on its borders and for that it is necessary to comprehend how such a threat could manifest.

China’s Military Strategy China’s military doctrine posits a defensive military strategy and asserts that China does not initiate wars or fight wars of aggression but engages in war only to defend national sovereignty and territorial integrity and attacks only after being attacked.

Beijing’s definition of an attack against its territory or what constitutes an initial attack, is left vague, however.

In the Indian context, an unresolved border dispute could well result in China using force to reclaim territory which China claims and justify the action as self defence. Once hostilities

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have begun, evidence suggests the characteristics of the Chinese military strategy of ‘Active Defence’ are distinctly offensive. Advances in military technology provide Beijing with an expanded set of limited force options. Chinese operationallevel military doctrine defines these options as “nonwar” uses of force – an extension of political coercion and not an act of war. In the future, as China’s military power grows, China’s leaders may be tempted to resort to force or coercion more quickly to press diplomatic advantage, advance security interests or resolve disputes.

In considering China’s military strategy, it is important to recognise that the Chinese People’s Liberation Army (PLA) has been a careful observer of the Western, and especially American, approaches to what China first termed ‘Local Wars Under Modern, High-Tech Conditions’, and are now calling ‘Local Wars Under Informationalised

@dsalert

As of now, India has the capacity and capability to deal with a Chinese military threat

Conditions’. The PLA theorists and planners believe future campaigns will be conducted simultaneously on land, at sea, in the air, in space, within the electronic sphere and their defence planning has been shaped in no small part, by the lessons that they have derived from observing how the US has been conducting its war fighting over the past two decades.

Preparation for conflict is based on the following premises: • Future wars will be shorter, perhaps lasting only one campaign; • Will almost certainly not entail the occupation of China, although Chinese political, economic and military centres are likely to be attacked; • Will involve joint military operations across land, sea, air, cyberspace and outer space as well as the application of advanced technology, especially information technology.

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Based on known Chinese military doctrine, they would be setting the strategic stage of the conflict, before onset of hostilities, through what the Chinese term as the ‘three warfares’ viz psychological warfare, public opinion warfare and legal warfare. This is an important aspect of information warfare, which China would exploit, months and years prior to the onset of actual hostilities, in the hope of achieving its aims without the need to take recourse to war. This would be followed by a series of sequential actions aimed at conflict resolution on Chinese terms with inbuilt conflict control mechanisms. A possible course of action could be as under: • Cyber attacks to hit at Indian financial and economic institutions.

• Exploiting the full range of space warfare capabilities to achieve space dominance.

• Concentrated short range ballistic missiles (SRBM)

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attack, at key command and communication nodes.

• ‘Integrated Network Electronic Warfare’ along with limited kinetic strikes against key C4 nodes to disrupt Indian battlefield network information systems.

The Chinese would seek conflict termination at each stage of the escalatory ladder. Build up of troops in the Tibetan Plateau would take place simultaneously for ground action if the objectives have not been met by the means employed earlier. Thereafter, we could expect a conventional military conflict.

Indian Response Options From the Indian viewpoint, the conduct of a successful defensive battle would require negating Chinese actions at each stage. We would require very high capability in the NCW (Network Centric Warfare), EW (Electronic Warfare) and space warfare. It is also essential that the Indian Air Force has dominance over the Tibetan plateau if a successful defensive battle is to be fought.

Artillery voids need to be made up at the earliest and logistic capability enhanced to defeat any Chinese designs on our northern and eastern borders. The real threat is not from the number of divisions which the Chinese can amass but from enhanced capabilities which we need to match and surpass.

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As of now, India has the capacity and capability to deal with a Chinese military threat on its northern and eastern borders. However, given the rapid pace of China’s military modernisation, and the size of its defence budget which increases year on year, the relative balance of power will shift overwhelmingly in Beijing’s favour within five to ten years, both in quantitative and qualitative terms. India will have to invest heavily in qualitative terms in technology upgrades as well as in organisational structures, to counter any potential future threat.

An additional Corps is under raising to cater to increased military presence of China in the Tibetan plateau.

However, more fundamental changes are required, to negate Chinese war fighting doctrine. In the space realm, the Indian space research effort has no military component as of now.

While much of space technology has dual use potential, a deliberate effort is now required to integrate military requirements into India’s space programme, to better take on Chinese space capability in the military sphere. China’s missile capability too has to be countered, with adequate positioning of resources under the Eastern Army, with strike capability across the Tibetan plateau.

@dsalert

There is a weakness as of now in India’s EW capability vis-a-vis the Chinese. The US Department of Defense, in its 2016 annual report to Congress on China’s military and security developments stated that “It (People’s Liberation Army) sees EW as an important force multiplier and would likely employ it in support of all combat arms and services during a conflict,” adding that “The PLA’s EW units have conducted jamming and anti-jamming operations, testing the military’s understanding of EW weapons, equipment and performance. This helped improve the military’s confidence in conducting force-on-force, real-equipment confrontation operations in simulated EW environments.”

The mountainous terrain with narrow valleys dictate the need for rapid move of mobile reserves, arms, munitions and logistic support equipment, across valley floors, to concentrate at the point of decision or where a threat is visualised. It is incumbent that rotary wing assets, which are critical for such tasks are placed under the overall force commander, for better command, control and coordination. The Army needs to have integral rotary wing support in terms of attack and logistic helicopters, and this must be done at the earliest despite the opposition of the IAF to such a move. Along with integral attack and logistic support helicopters for the Army, there is also a requirement of unmanned armed combat vehicles (UACV), as integral assets with the Army. These assets could be grouped and placed under the Mountain Corps.

At the Divisional level, there is a need to make up all voids in field artillery.

India is importing 145 M777 guns from the US, which is a positive step.

However, as a long term measure, India must field its own guns, designed and manufactured locally, within the country, either by the DRDO or by Indian industry.

The units and formations in combat require enabling technology to enhance situational awareness, the ability to engage with the enemy at long distances, in near real time and the wherewithal to protect personnel and equipment from enemy action.

While great progress has been made in enabling the ground soldier to fight better, much still needs to be done in terms of navigation tools, observation devices, communication equipment and protective gear.

The units and formations in combat require enabling technology to enhance situational awareness

For a successful conduct of operations in the mountains, it is essential to have a certain measure of air superiority or at least air control over the Tibetan plateau. The air war will be a defining feature of land operations, the successful conduct of which would require a technologically superior Air Force, operating over the Tibetan skies.

The recent decision to purchase 36 Rafale aircraft from France was perhaps prompted by this requirement. Here too, as a long term measure, India needs to invest in its own version of fifth generation fighters.

To conclude, future conflict is not so much about number of troops employed in the battle but by the superiority of the technology used.

China’s modernisation effort must be matched with technology upgrades in India’s war fighting capability, if peace is to be ensured over the high Himalayas.

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Absorb And Improve Imported Technologies

There is no way the Indian defence forces can meet the emerging security challenges without completely synergising the full potential of all its three components. Non-adoption of the CDS system with fully integrated theatre commands may prove to be India’s nemesis in the next war, as and when it is thrust on the country.

Mountbatten had the experience of centralised command of large forces during the Second World War

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@dsalert

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he proposal to create the post of Chief of Defence Staff has been around since Independence.

While Lord Mountbatten, the first Governor General of India wanted to bring about the concept of Chief of Defence Staff in the Indian defence forces, it was Jawaharlal Nehru as the first Prime Minister of India who opposed this proposal.

Mountbatten had the experience of centralised command of large forces during the Second World War, whereas Nehru was novice in this field but had a deep seated dislike for the military. It was finally left to Lord Ismay to work out the format for the Indian defence forces, which has lasted to this day where, the three wings of the defence forces have operated almost independent of each other, with bare modicum of jointness. When after the 1971 war, Indira Gandhi wanted to make Sam Manekshaw, the CDS, objection came from the Indian Air Force (IAF).

During the 1962 war against China, the Indian Air Force opted to stay out, while the Army suffered series of reverses. In this war, the IAF could have played decisive role by targeting long enemy columns moving along narrow tracts and engaging with other targets. During the 1965 war with Pakistan, no substantive synergy between the IAF and Army came about toward a common strategic objective. During the 1971 war, while the military was at the highest state of alert, w.e.f 1 September 1971, Pak Air Force on 3 September attacked all the IAF forward airfields, right upto Agra, without meeting any challenge from the IAF. Obviously, the two were operating on different wavelengths.

During the Kargil conflict, it took the IAF over one full week to come on board, all the while, frightening the government of escalation, if IAF took part in the conflict.

CDS: Contentious As Ever Consequent to the Kargil conflict, the need to synergise and integrate the potential of all the three components of the defence forces came into focus. That is when two committees, one under K Subrahmanyam and the other under Arun Singh were constituted to go into the issue of reorganisation of defence forces and higher direction of war. While the former dealt with the creation of the post of the CDS, as single point of advise to the government, integrating the three Services with the MoD and making the three Service chiefs part of the government and not mere commanders of their own Service, the latter dwelt on the CDS issue in its full spectrum.

Lt Gen Harwant Singh PVSM, AVSM (Retd) The writer was commissioned into the Central India Horse in 1955. He has held key staff appointments in field formations. Commanded School of Armoured Warfare and been senior instructor at the War College.

Commanded a mountain brigade and an armoured brigade. Raised the first RAPID division and fielded it in Operation Brass Tacks.

Commanded a Corps in J and K and retired as Deputy Chief of Army Staff.

In my presentation to Arun Singh Committee, the compelling reasons for integrating the three Services to achieve maximum gains from the individual potential of each Service were brought out. Pitch was made for adoption of the CDS system in its full spectrum, with integrated theatre

The CDS system would also be able to evolve a mechanism to acquire the right weapons and equipment commands. It was suggested that to start with India could have two such integrated theatre commands, one for Island territories and second for J&K (Northern integrated theatre

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command) and to allay the fears of the IAF of being overwhelmed by the larger Army, it was recommended that the first theatre commander of Northern Command could be an Air Force officer.

Recommendations of these committees were approved by a group of ministers headed by LK Advani. A few years later, these recommendations were taken up by another committee under Naresh Chandra, former Cabinet Secretary.

More recently, Lt General (retired) DB Shekatkar committee too has delved into this issue. So now some 70 years later, the issue of the CDS and higher direction of war is still at a debatable stage!

Disagreements Recently, the three Service chiefs have come up with a ‘Joint Doctrine’ only to disagree on the essential, nay, core issue of the integrated theatre commands in the CDS concept in its full spectrum. While the Air Force, in continuation of its permanent stance, opposes the creation of integrated theatre commands, the Navy’s view, as of present is more nuanced, perhaps calling for more time – may be another 70 years!

The fact that China has created a single integrated theatre command for Tibet, appears to have edged Shekatkar Committee to have a single Northern Integrated Theatre Command for the China border (presumably the Burma border too will be the responsibility of this command). In addition, a Western Theatre Command against Pakistan and third, Southern Theatre Command for the maritime borders of

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the country. How, just three theatre commands can possibly look after the vast land borders in the North and West (from the Bay of Bengal-BurmaTibet-J&K-Punjab-Rajastan-Gujarat, down to the Arabian sea) and the maritime borders of the country, is anybody’s guess. Though China has created one theatre command to attend to India–Tibet border, at the Indian end the complexity and vastness of the border with Tibet, poor state of communications and the existence of Nepal and Bhutan in the middle, divides the sector into two vastly separated parts. One may add Burma border to add to the complexity of this Command. The maritime borders are spread over two separate and independent sea fronts.

Border against Pakistan in the West is far too large to be left to the care

@dsalert

The maritime borders are spread over two separate and Independent sea fronts

of just one theatre command. Island territories are far too detached from the mainland.

There are two distinct areas that require looking into. One, the vastness of the theatres and complexity of the terrain which bears on the number of commands required to meet the operational demands and two, the objections by the IAF against creating integrated theatre commands.

Eight Not Three

During the 1962 war against China, the Indian Air Force opted to stay out, while the Army suffered series of reverses

Consequently, the least that is required to attend to the Tibet border as well as Burma and part of the border (LoC) in J&K, are three theatre commands. Similarly, on the West, the requirement is for a minimum of two theatre commands.

The maritime border (coastline) divides itself into two separate parts: East coast and West coast. These two will require independent theatre commands. Then there is the need to have a separate theatre command for the island territories. Thus, the very minimum theatre commands required are eight, five to look after land frontiers and two for the sea front and one for Andaman and Nicobar Islands. This will result in the reduction of the commands from seventeen to eight.

The other contentious issue that persists is the integration of the Air Force in a theatre command. It is this integration and ultimately, the unity of command, against which the Air Force has been marshaling all manner of objections and arguments.

The first argument against the integrated theatre commands is that unlike the case of foreign armies (this

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points to the US theatre commands and even China) where assets cannot be too easily shifted from one theatre to another, it is not applicable in the case of India! This argument is totally irrelevant. The point is integration of various components under one command and not the ability of the Air Force to move from one theatre to another. In fact, this argument even if valid runs in favour of creating integrated commands where required resources, can be shifted from one to another theatre by the CDS. The second argument being that China has gone in for single integrated theatre command in Tibet because Xi Jinping wanted to reduce the power of the People’s Liberation Army (PLA), is baseless and specious.

In fact, if that was to be Xi Jinping’s aim, then it would be best to leave the PLA on the same pattern as the Indian defence services are – each separate from the other.

Whatever are the existing resources with the country’s various components of defence forces, they would be distributed amongst integrated theatre commands, depending on the nature of threats, terrain, tasks and within the framework of overall strategic aim.

Thereafter, as and when the situation demands, some reallocations can be made by the CDS. Air force’s dilemma of distributing or allocating three AWACS and six mid-air refuellers is self confusing. These would, obviously be controlled by the CDS and made available to the integrated theatre commands on as required bases.

Navy’s View Now the Navy’s argument that it is not appropriate to move to integrated

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theatre commands anytime soon, because it (Navy) has much wider maritime role across the seas, where lots of co-ordination between various commands, which at present is carried out in the Naval headquarters, will suffer and is self defeating.

First, because the Navy has much wider maritime role, it needs to have two integrated theatre commands instead of one (recommended by the Shekatkar Committee) and the co-ordination between the two and with other commands which is presently being carried out by naval headquarters will, in the CDS system, be carried out by the CDS. So, the Navy too seems to live with some imaginary ghosts.

The CDS system would also be able to evolve a mechanism to acquire the right weapons and equipment for integrated and complimentary deployment and operating parameters of all the three Services.

Given the Indian setting of turf wars, the induced fear of a military take over and the bureaucratic machinations, the adoption of the CDS system will continue to elude us. It is only by a well informed and national security conscious political

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class that national security issues, of which the CDS system is an essential component, can be resolved.

In the case of America, it was the senate which forced the passing of Goldwater-Nichols Act of 1986, in the face of much opposition from the defence services.

Even during the Second World War, integration of various components of defence forces had come about. ‘Operation Overlord’ (invasion of Europe by Allied forces) was being commanded by Dwight D Eisenhower and it was discovered that the Strategic Air Command was being kept independent of Eisenhower’s command. The General informed the President that in which case let someone else command Operation Overlord! The President had to relent and place Stategic Air Command under Eisenhower.

@dsalert

Navy too seems to live with some imaginary ghosts

Finally, there is no way the Indian defence forces can meet the emerging security challenges without completely synergising the full potential of all its three components. Non-adoption of the CDS system with fully integrated theatre commands may prove to be India’s nemesis in the next war, as and when it is thrust on the country.

R&D Base India has been purchasing military equipment from foreign countries with transfer of technology as an essential clause. Yet the Defence Research and Development Organisation (DRDO), the recipient of such technologies, has singularly failed to absorb these and consequently could not carry these forward to develop the next generation equipment. Be it tanks, artillery guns, fighter planes or even lesser weapons and equipment. There are over fifty DRDO establishments with the latest equipment and yet many of them have nothing to show while some are still busy inventing the wheel. Some of the laboratories need to be closed down and the remainder of the DRDO placed under command of the CDS.

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It is only in the case of the Navy, where some gains in the field of indigenous development of equipment has made some headway, essentially because one of the two naval wings of the DRDO is controlled and managed exclusively by a serving naval officer.

More recently, the government appears to be closing in on the concept of ‘strategic partnership model’, wherein Indian private firms would be roped in to build military platforms such as submarines, fighter jets, artillery guns, tanks, high tech equipment, etc in partnership with foreign entities.

The Defence Acquisition Council is presently working out the broad contours of this new approach to the ‘Make in India’ theme.

Such an arrangement will have to be competitive and a transparent process evolved, wherein Indian firms would tie up with global OEMs to seek technology transfer to set up domestic manufacturing infrastructure and supply chain. So, it will have to be a joint effort by the research and development facilities to be created by the concerned industrial houses and the DRDO.

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Develop Comprehensive National Power

The major infirmity of our current higher defence structure lies in keeping the military outside the government, resulting in the receiving of secondhand advices by the political leadership. Inevitably, it is filtered or altered to suit the perspectives of the bureaucrats. This is a fundamental issue, which needs to be changed immediately. This would improve politicomilitary responses to challenges and threats, enhance cost-effectiveness and assist in the best employment of the armed forces.

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@dsalert

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ince the Independence in 1947, our defence forces have been engaged in active operations on a sustained basis, with only short periods of peace. These challenges have helped them to earn a formidable reputation of a force that delivers, usually against heavy odds.

Despite the above, our higher defence structure is archaic; no formalised strategies at the national level exist and our decision-making is excessively slow. There are both organisational and attitudinal reasons for this. In organisational terms, we have a costly defence research department, whose output has been much below expectations. In addition, we have a huge but flabby conglomerate of the Defence Public Sector Undertakings and a large number of Ordnance Factories set up decades back, with wasteful manpower and exorbitant costs, resulting in grossly inadequate output.

Comprehensive National Power The phrase ‘Higher Defence Management’ usually conjures up images of only the military but this is not at all correct, as the ‘Defence Management’ encompasses bringing together all instruments of the nation.

All agencies and departments of the government, as well as many others have to be involved in some manner in ensuring that the national aims, as related to defence, are achieved.

Waging war and meeting warlike challenges today is a complex phenomenon and such complexities are likely to increase in future.

Consequently, integrated and holistic

structures are not just desirable but an imperative.

India is classified as a regional power today but it has the potential to play an even bigger role. We need to wield influence in the extended Southern Asian Region and over time also influence events at the global level.

The creation and sustenance of an environment that nurtures these aspirations necessitates development of what is now known as the Comprehensive National Power (CNP). There are many ingredients that make up the CNP, but perhaps the most important is a structure for the Higher Defence that is able to take smart, well-reasoned and quick decisions, especially when the country is in a crisis mode. This cannot be done if each instrument in the country works independently.

Lt Gen Vijay Oberoi PVSM, AVSM, VSM (Retd) The writer is a former Vice Chief of Army Staff (VCOAS) and Founder Director of the Centre for Land Warfare Studies (CLAWS).

Ministries of Defence, External Affairs and Home must be manned by integrated staff from each other Higher Defence Structures Since the Independence, we have been stuck with a system based on the British legacy of planning and decision-making, which has failed to achieve any substantive gains. This must change as the status quo will take us nowhere.

Lord Ismay, a senior staff officer to the then Viceroy, had evolved our higher defence structure after the Independence. This consists of inter-locking committees, at three levels, which are meant to give ‘full political control and yet ensure functional integration between the three Services, without bureaucratic

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control’. The structure still continues but dilutions have taken place.

At the apex of this structure is the Cabinet Committee of Security (CCS).

It consists of the Prime Minister, Defence Minister and some selected Ministers, with the Service Chiefs and Defence Secretary in attendance at all meetings.

The second level is the Defence Minister’s Committee (DMC), chaired by the Defence Minister, with Service Chiefs, Defence Secretary and Financial Adviser (Defence Services), as members. It serves as the top policy formulation organ in the Ministry of Defence (MoD). It was later converted as the Morning Meeting of the Defence Minister, thus further reducing its efficacy.

The third level is the Chiefs of Staff Committee (COSC). It is a forum for the three Service Chiefs to discuss matters having a bearing on the activities of the Services and also to advise the Ministry. In theory, the COSC is the highest authority on military matters in the country.

However, a major shortcoming of this body is that it exercises no real power, as its rotational Chairman exercises command only over his own Service, while the three Service Chiefs are individually responsible to the Defence Minister. Hence, no worthwhile decisions can be taken.

There are other committees too but like all committees, their output is just marginal. Over the years, many have become defunct.

Ministry Of Defence It is manned exclusively by civil

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generalists, having little or no knowledge of ‘matters military’.

Yet, it frames policy directions on defence and security related matters and communicates them for implementation to the Services Headquarters.

In 1955, the Commanders-in-Chief were re-designated as Chiefs of Staff, resulting in the MoD acquiring a status exclusive of the Chiefs and their headquarters. This resulted in the armed forces headquarters functioning as subordinate offices

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Left to right: Former Japanese Foreign Minister, Koichiro Gemba, delivering a statement; former SecretaryGeneral of the United Nations, Ban Ki-moon; former Australian Foreign Minister, Bob Carr, co-chair of the meeting at the Sixth Ministerial Meeting on the Comprehensive Nuclear-TestBan Treaty (CTBT)

outside the framework of the central government. This was changed to the ‘associate headquarters’ in 2001, but it was only a change of phrase, devoid of anything substantive.

After over a decade, as a sop to the directions issued after the Kargil war by the Group of Ministers (GoM) in 2001, the designation was changed to the Integrated Headquarters of the MoD. It is a meaningless exercise in semantics, as there is hardly any integration of the three Services, let alone with the MoD.

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The MoD wields all powers and being an integral part of the government, it is part of the policy formulation process but the Service Headquarters have been deliberately kept out.

This led an analyst to comment: “In no other major democracy are the armed forces given so insignificant a role in policy making as in India”.

He had also added “In no other country, do accept it with the docility do in India!”A great pity in counts indeed.

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that they they both

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restructuring Indian defence AIR SUPERIORITY OVER HIMALAYAS

Security Strategies National security strategies must be framed for the extension of vital interests of the nation, against existing and potential adversaries. These are the fountainhead from which defence policies, military strategy and ultimately, the tools to implement defence policies are evolved.

It is unfortunate that even after four full-fledged wars consisting of one border war and a plethora of counterinsurgency operations where the armed forces have distinguished themselves with their valour and sacrifices, the nation has been unable to evolve comprehensive strategies for optimally using the military and other components of national power.

We continue to depend on ad-hoc and bureaucratic structures for the higher management of defence.

including military personnel. This must not be token representation. As a corollary, civil officials should also be posted in Service Headquarters.

Over the years, the armed forces have become isolated from such

The second infirmity is no integration of the MoD and Service Headquarters important subjects as formulation of nuclear policy, the Comprehensive Test Ban Treaty (CTBT), Nuclear NonProliferation Treaty (NPT), military use of Space, disarmament initiatives, chemical weapons policies or treaties and missile technologies.

Current Infirmities The major infirmity of our current higher defence structure lies in keeping the military outside the government, resulting in the receiving of second-hand advices by the political leadership. Inevitably, it is filtered or altered to suit the perspectives of the bureaucrats. This is a fundamental issue, which needs to be changed immediately. This would improve politico-military responses to challenges and threats, enhance costeffectiveness and assist in the best employment of the armed forces.

The second infirmity is no integration of the MoD and Service Headquarters.

Unless this is done, no major structural changes are possible. In addition, ministries that deal with security issues like Defence, External Affairs, Finance and Home must be manned by integrated staff from each other,

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National Security Council An NSC (National Security Council), headed by a National Security Advisor (NSA) was created in 1999.

So far, five incumbents have headed this appointment; three were retired diplomats and two, including the present incumbent, were retired intelligence officers. Unfortunately, all incumbents have been unable to discard their comfort zone of the diplomatic or bureaucratic approach and have contributed little to the enhancement of security strategies of the nation.

Modern wars and conflicts cannot be fought with outdated structures

Successive governments have not thought it fit to appoint a military person as the NSA; reasons can only

be conjectured. Even in the NSC Secretariat, the obvious security specialists viz military officers have only a nominal presence.

In totality, the NSC has produced neither policies nor any worthwhile security strategies!

Hard, Soft And Smart Power Hard power refers to coercive tactics, not necessarily only military, while the phrase ‘soft power’ is the ability of nations to obtain what it wants through co-option and attraction.

India’s soft power is based on its social and cultural values, the Indian diaspora abroad and its knowledge base. Wise and judicious employment of both ‘hard’ and ‘soft’ powers is ‘smart’ power. It is used to advance national aims efficiently. Advancing smart power is now a national security imperative. By blending brains and brawn in judicious proportions we create smart power.

Recommended Transformation Our slow decision-making systems and processes must change. The transformation should begin with the development of realistic strategic directions. In its absence, a comprehensive national military strategy cannot be evolved. Once this is done, the military will be able to decide on the details of restructuring.

A major recommendation of the Kargil Review Committee (2001) was the need to set up joint structures. While an integrated defence headquarters and two joint commands were formed, a key recommendation ie the establishment of the post of Chief of Defence Staff (CDS), remains unimplemented even after 16 years. Resultantly, the integrated headquarters get

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its directions from the ineffective Chiefs of Staff Committee or works without directions! We must seriously address joint warfare.

Modern wars and conflicts cannot be fought with outdated structures, wherein the Services conduct operations independently, with coordination only being achieved with organisations as old as nearly seven-eight decades back. This must change, so that we are able to generate the necessary synergy, so essential for winning conflicts, battles and wars.

The appointing of a CDS and gradual addition of new joint commands must be carried out with urgency.

Besides the joint geographical commands, there are other areas like Special Forces, Space, Training, Communications and Logistics, which lend themselves for restructuring into joint commands.

Complete integration of the MoD and the Service Headquarters needs to be carried out immediately. There is also a need to integrate those ministries and agencies which deal with similar subjects. Ministries of Defence, External Affairs and Home must be manned by integrated staff from each other. This must not be a token representation but substantial numbers must be posted across these ministries. The same is applicable to representation between the Ministry of Finance, MoD and the Services.

Merger of Services Headquarters with the MoD and their re-designation as Departments of the Army, Navy and Air Force under their CDS would achieve multiple gains. Aside from creating an integrated approach, the politico-military considerations would be objective and comprehensive, through military representation in

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the decision-making loop. The need is for a multi-disciplinary International Security Affairs (ISA) division in the Integrated MoD, which would proactively deal with nuclear issues like the Comprehensive Test Ban Treaty (CTBT), Non-Proliferation Treaty (NPT) and Fissile Material Cutoff Treaty (FMCT) negotiations and policies.

Military As Bulwark Peace is vital for India but it cannot be achieved by neglecting and downgrading the military.

No country has achieved its aims with a weak military machine or by appeasement. The nation has to defend its vital interests by all means.

This cannot be done by structures that work in compartments like we have today. We also need the political will, without which nothing can happen.

We have to think and act jointly and all instruments of the nation must act as one. Simply talking of the CNP is lip service, which fools no one.

The world over, mature democracies have integrated ministries and

departments of defence but India continues to be a singular exception. The present structure leads to avoidable communication gaps, delays and dysfunctions in decision-making. It must change.

Management of higher defence needs to be proactive, efficient and long-term oriented, amalgamating foreign and internal security policies and incorporating all relevant instruments of the nation.

An integrated MoD would not only eliminate the current infirmities but also result in higher levels of synergy, efficiency and decisionmaking ability. Military officers with domain knowledge must be inducted in senior appointments in the MoD, so that military viewpoints are considered from the very inception of all issues.

Ossified structures tend to curb initiative, risktaking and integrity

Today’s reality is that India is facing the strategic environment of the 21st century with its higher defence structures largely as they were in the 1940’s. This is a recipe for disaster.

Ossified structures tend to curb initiative, risk-taking and integrity, which have traditionally been the hallmark of the Indian military.

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Ecosystem For Military Knowhow Acquisition The SPs need handholding support when they showcase their products and systems to a foreign geography. Our personnel in uniform must accompany the SPs or any other industry that exports with pride to reinforce the reliability of the product and its effectiveness as a proud user. Kudos to the Ministry of Defence and the Indian Defence Industry.

We have bright times ahead, while we still live on!

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S

ay “Yes” or “No” was the thought that was engaging the minds of many corporates both domestic and foreign.

Delayed decision making in many programmes was attributed to the lack of decision making on ‘Strategic Partnerships’. While the industry was confused and apprehensive on the decision-making ability of the government, well, the corridors of power were busy sifting the various reports from different committees and trying to build a consensus. As it is normal in such policy formulation, there were differences in opinion from the stake holders and it was important for the government to take them all together.

Government of India, Ministry of Defence, under the leadership of Arun Jaitley, who also doubles up as the Defence Minister, besides his other

important portfolio of Finance and Corporate Affairs, devoted more than three hours of his time to dwell on the finer aspects of Strategic Partnerships (SPs). The Ministry called for a meeting of the top industry chambers to deliberate on the proposed draft.

What stands out is the ability of the government to have perused the reports from the two committees and having grasped the essentials, have formulated a draft that is even more reassuring to the industry.

It had been two years since the Dhirendra Singh committee placed its report to the government basically on the formulation of the Defence Procurement Procedures 2016. For the first time, concept of the SPs was suggested in Defence Procurement.

The DPP 2016 was formulated with the chapter on the SPs left blank, with that the Government of India (GoI) displayed its intention to bring about the formulation on the SPs soon.

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Col KV Kuber (retd) The writer is an alumnus of the prestigious National Defence Academy and the Technical Staff College. He specialised in Electronic Warfare. Commanded an Electronic Warfare Regiment in operations and has conducted EW operations. He has founded and established the DOFA and was the chief architect of the offset policy since its inception in 2005. He has been an Adviser with the National Small Industries Corporation and played a key role in bringing MSMEs into the mainstream defence business, through NSIC. Presently, he is an Adviser with the DRDO for Technology Acquisitions.

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Policy On Strategic Partnerships Two years, two different ministers, a path changing policy, harmonising the policy with the extant policies and regulations such as, ‘Make in India’ initiative, path breaking reforms in industrial policies and the FDI policies, it was welcoming, refreshing and motivating to have heard the draft policy, emerging out of the confines of the South Block. While I was writing this article, the apex body of the Defence Ministry is huddled in a meeting to discuss and probably approve the much-awaited policy on Strategic Partnerships.

The concept and fundamentals were laid down by the Dhirendra Singh Committee. To quote, “There are cases however where certain platforms are of strategic importance. For these, we are recommending the ‘Strategic Partnership model’ for creating capacity in the private sector on a long term basis. Such a capacity will be created over and above the capacity and infrastructure that exists in Public Sector units. This is expected to spur the sectors towards a more efficient and effective mode of operation. Likewise, there are cases where quality is critical and vendor base is very narrow. For these, we are recommending a model of ‘development partnership’. The committee further recommended few segments like aircraft, warships, the AFV, complex weapons networks,

materials, and suggested a well defined protocol for the selection of the SPs. The follow-on task force further delved into the details to lay down parameters for selection of the SPs followed by industry-led, discipline-oriented sub-committees.

Issues concerning requirement of industrial Licence, minimum revenue of `4,000 crore, three years of growth, weightages on segmentspecific criteria and more were deliberated in an industry interaction on 11 June 2016. In less than one year, here is the government coming forward to place the draft policy for discussion once again before taking

A Sindhughoshclass submarine underway

it to the Defence Acquisition Council for ratification.

The fundamentals of the policy are pretty strong. For any strategic procurement, the nation needs to have a say in the choice of the platform and the supplier. For ‘Make in India’ to be effective the nation must drive the initiative through reforms and choose their partners in progress. The Ministry of Defence has just done that. It is one thing to consider a report prepared by the

To build a formidable indigenous defence industry, it is imperative that the ecosystem is developed appointed committee and another to go beyond that and make value addition. Here we have a great model. The MoD will have control over the short-listing of the Original Equipment Manufacturer (OEM) on the one hand and the SP on the other, thus having a say in both the platform under procurement and the SP. However, the GoI has given due importance to market forces.

Basics Of Business Volumes While the Aatre Task Force had recommended an ab-initio choice of two groups and six SPs in the first and two in the second, it had a few drawbacks as highlighted in the discussions pursuant to the report, the GoI has been able to come out with a more industry-friendly model.

Everyone in the industry asked one question, where is the business? So, what if we are nominated as the SP, if we cannot get business and no Expression Of Interest or Request For Proposal is made available? Why

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would a private sector company invest in infrastructure without an idea of business volumes?

The Government of India has now come out with a business oriented policy, so commendable and so welcoming. The MoD has defined the business first. This is a programme based policy, addressing in the first phase four programmes viz (i) Single Engine Fighter Airctaft (ii) Helicopters (iii) Submarines and; (iv) Armoured Fighting Vehicles and Main Battle Tanks.

The corresponding programmes are easily interpolated, the SAAB Gripen and the Lockheed for the single engine, the Airbus Helicopters and others for the Naval Utility Helicopter programme and other multi utility helicopters like the DCNS, HDW and other probable OEMs for the P75 I and, the FICV and FRCV programme with multiple choices including the RADS, BAE and others.

With a clear business visibility, the MoD has proceeded to pick their OEMS and SPs. Initial shortlisting of the SPs will be based on the model recommended by the Task Force with two gates, first being the minimum qualification criteria to include financial, technical and other general criteria and the second stage would be a site verification with an evaluation of financial and technical capabilities.

Thus, the MoD intends to create a pool of six SPs from the private sector. At this stage, no appropriate allocation of disciplines or segments is being made and therefore none of the SPs in the pool can lay a claim on a particular discipline or segment. This is indeed a very smart move, providing a level playing field to the prospective SPs to

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compete for their rightful place in the choice of discipline.

No Single Vendor Situation In order that there is no loss of time, as a part of parallel processing technique, the MoD would send out an EOI or Request For Information to the prospective foreign OEMs for these particular programmes seeking requisite technology in range and depth. From a purely technological perspective, based on an assessment of the responses received, two OEMs per programme or discipline would be shortlisted. Thus, the MoD would have made a choice on both the platform or OEM and the desirous prospective SP.

evaluation, stage one based on the minimum qualification criteria and the second stage comprising financial and technical parameters. Subject to compliance to certain aspects such as wilful default to the banking system or being black listed by the RBI or any joint lenders forum, debt restructuring and not classified by any bank as the NPAs, all participant companies that qualify the first stage evaluation, will be considered for the second stage evaluation. In the second stage, financial and technical parameters have been given equal weightage of 50 per cent each. This also includes a site verification.

Reminder of evaluation criteria is a matter of detail and has been dealt with in the Task Force report.

Now, it is time for the market forces to come into play. For the programmes short-selected in the first phase, as above, the MoD will now issue an EOI or RFP to the prospective SPs, indicating in the RFP the short-selected OEMs for the programme. Prospective SPs are expected to indicate their preferences for segments concerned.

Prospective SPs in turn are expected to find their comfort zone with the OEMs and submit a bid. Only one bid per SP is being allowed, which is fair. The lowest bidder is the SP for the segment or discipline or programme. In this final selection stage the GoI has left room for assessment or evaluation of segment specific capabilities within the SPs so contending, thus indicating an L-1 or T-1 concept.

Evaluation criteria has not been tampered with by the government thus reposing confidence in the recommendations of the task force, which included two stages of

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An Indian Army battle tank Arjun demolis

Some Clarifications Few questions emerge, such as, if the consolidated turnover of `4,000 crore for each of the last three financial years was too high, whether a reduction was possible, since many of them could be excluded. Also, the consolidated capital assets pegged at `2,000 crore was finding discomfort with those that were not making the cut. Of the six short-selected companies, it was not clear if this was applicable as one per business house or is it applicable to individual companies. The tone and tenor of the presentation indicated that it was one per business house. While considering the single engine aircraft, is it now wise to also consider the power pack and hence call for an

SP for engine manufacturing? In any case, our DRDO has not been impressive with the progress on the Kaveri engine. Should the percentage of research and development spent be the only criteria or there also be an absolute number to it? Do we have enough number of private companies competent enough to be called as system of system integrators or is the number of six too less? Could the third and fourth segment experience a single vendor situation with only six in the pool? In any case, this number of six prospective SPs is for the four programmes indicated above. This process will continue for any future programmes, thus adding to the pool of six.

Why would a private sector company invest in infrastructure without an idea of business volumes?

SP Or DP Outsourcing What are then the outsourcing norms? From the concept outlined by the Dhirendra Singh committee report, one aspect stands out loud and clear, the SPs and Development Partnerships go together. What are the DPs and how do they affect the defence industrial ecosystem? The DPs are Development Partners, what the SPs are to the GoI, the DPs are to the SPs. If the GoI is reposing trust on the SPs, the SPs are in-turn expected to repose their trust on the DPs, else this system will collapse.

If India lives in villages, industry lives in the MSMEs. The policy on the SP must mandate a minimum specified amount of outsourcing, say 50 per cent of which another 50 per cent must find favour with the DPs. It is expected that invariably the DPs are from the small and medium industry segment. Fortunately, this has been enshrined in the vision as also highlighted by the RM that the objective is to bring about a production base in India. The catch

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is the base. At the base lie the small industry segment. Larger the base, taller is the pyramid. It is perceived that the major beneficiaries of the SP model would be the small-scale industries, well only then will the ecosystem develop.

Other Questions Is previous experience required to be nominated as an SP? Well, a counter question would be can an inexperienced and ill trained soldier be sent to the front to defend the nation? We are in the strategic defence domain and every nut and bolt counts, not one can slip away at the time of reckoning. Some of the major players in this industry have existing relationships such as the Tatas with Lockheed Martin and Sikorsky, the M&M with Airbus Helicopters and SAAB, the Reliance Industries with Dassault Aviation and so on; how can these be leveraged or does it matter at all?

What the draft policy did not contain is the long-term covenant proposed by the Task Force. The question that comes up is what next? One of the highlights of the draft policy is that aspects like Performance based logistics for ten years, spares, MRO, life cycle support, upgrades, setting up of testing and proving laboratories, all of which are by themselves huge follow-on contracts during the life of the system. Therefore, the MoD has kept it open for market forces to determine an SP for a future requirement in the same segment.

While the initially nominated SP may

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have the first-mover advantage, room is provided for a new entrant and hence room for innovation and noroom for complacency. This is clearly a win-win situation for the Armed Forces as well as for the industry.

For future acquisitions, the MoD has provided incentives such as investments made to improve segment specific infrastructure, nature of the R&D investments made which is

From a purely technological perspective, two OEMs per programme or discipline would be shortlisted

qualitative, development and acquisition of relevant technologies and extent of ecosystem created.

Ecosystem No country can win wars with other’s arms. It is time we introspect and develop a formidable indigenous defence industry to support our Armed Forces that are forever in combat, without any respite. To build a formidable indigenous defence industry, it is imperative that the ecosystem is developed, and once the ecosystem is developed, only system of system integrators remain, sourcing can be done at will. New industry champions will emerge, new

trends will be set, knowledge will grow and the nation will emerge stronger.

Is there a price the nation has to pay?

Unfortunately, our finance experts in the confines of the government buildings understand only L-1, the lowest bidder ie the lowest cost quoted by a bidder for a particular system or equipment. Has anyone spoken about the cost to the country? In the path to progress with great emphasis laid on ‘Make in India’, it is possible that the cost of design, development, supply chain management and production may be costlier than a foreign made fancy toy. Well, since the complete development, ecosystem and production is taking place within the geography of this country, the entire tax-payers money so billed against the Indian manufactured system under consideration, is circulated within the same geography many times. Thus, the cost to the country would be far less than the L-1 cost, if seen in this perspective.

This is a perspective that needs to be dovetailed with the SP policy.

Exports Will you now continue to support me? The SPs need handholding support when they showcase their products and systems to a foreign geography. Our personnel in uniform must accompany the SPs or any other industry that exports with pride to reinforce the reliability of the product and its effectiveness as a proud user. Kudos to the Ministry of Defence and the Indian Defence Industry.

The Saab JAS 39 Gripen

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Will ‘Make In India’ Improve Security?

Notwithstanding the current politically conducive environment for ushering in the long-delayed and much-needed change in defence production, there are serious challenges along the way – most of them stemming from our own defence procurement and production structures and processes, the existing state of public and private sector defence industry, including the R&D, and a tepid bureaucracy conditioned by old mind sets.

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D

efence has been identified as one of the 25 sectors for Make in India keeping in view the vast scope and potential it offers. India has been the largest importer of arms accounting for 9.7 per cent of sales globally between 2007 and 2011, and 13 per cent for the period 2012-16 according to the SIPRI. On the contrary, imports of China have seen a drop from 5.5 per cent to 4.5 per cent for the same period.

India is at the fifth place with an expenditure of US$ 55.9 billion at 2.5 per cent of the GDP. With a twoand-a-half front threat perception, and one of its adversaries relatively far ahead of it in terms of selfreliance in defence, India can ill-afford to neglect urgent remedying of this strategic deficiency in its defence preparedness.

Prime Minister Modi has pledged $250 billion to modernise the country’s aging military. Against the foregoing backdrop, defence offsets offer a potentially lucrative option for technological upgradation, capability building and capacity development of India’s indigenous defence industry leading to progressive increase in self-reliance, job generation, savings in foreign exchange outgo, development of strategically significant technological capabilities and moving gradually to being an arms exporter. However, notwithstanding the current politically conducive environment for ushering in the long-delayed and much-needed change in defence production, there are serious challenges along the way – most of them stemming from our own defence procurement and production structures and processes, the existing state of public and private sector defence industry including R&D, and a tepid bureaucratic will conditioned by old mind sets.

Lt Gen SN Handa PVSM, AVSM, VSM (Retd) The writer was commissioned into the 5th Battalion of the 3rd Gorkha Rifles on the eve of 1971 Indo-Pak War and saw action in Kargil. In a career spanning, 39 years, he has served in various terrain configurations along all borders of the country and in all operational environments.

He has been Instructor at Military Intelligence Training School, Squadron Commander (Operations) in the NSG and Deputy Director General Perspective Planning (Plans). He commanded his battalion at Dera Baba Nanak through the final phase of Op Rakshak, which witnessed the breaking of the backbone of terrorism in Punjab. After commanding a division along the Rajasthan-Gujarat border, he was Chief of Staff of the Chinar Corps in the Kashmir valley. He retired as DG Infantry in April 2011 after commanding the Desert Corps and being Chief of Staff of the South Western Command.

With the change in government in 2014 and ushering in of ‘Make in India’, the Offset Policy witnessed the latest changes as part of a completely overhauled and far more pragmatic and easier to comprehend DPP 2016 with the policy on Strategic Partnerships in Defence being spelt out recently in May 2017.

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The Dialectics of DPP The fundamental objective of the various changes ushered in as noted above is to leverage capital acquisitions along with other complimentary policy initiatives to develop Indian defence industry and achieve self-reliance in defence manufacturing with an eye on developing an export capability. This is sought to be achieved through the development of indigenous defence research, design, development and production capabilities; progressive increase in indigenous content of equipment; encouraging ‘Make in India’ through enhanced and more active participation of the private sector, and encouraging development of synergistic sectors like civil aerospace and internal security.

The DPP 2016 with its primary focus on ‘Make in India’ and hastening the pace of achieving self-reliance in defence includes provisions to optimally leverage capital acquisitions for long overdue growth and development of the indigenous defence sector capabilities. Some of these with a direct or indirect impact on offsets are: • Introduction of a new procurement category, Buy (Indian–Indigenously Designed, Developed and Manufactured), or ‘Buy (Indian – IDDM)’ with revamped ‘Make’ procedures with a view to promote indigenous design and production capabilities especially among private sector players. This category has been accorded the highest priority for acquisitions above the other categories of ‘Buy (Indian)’, ‘Buy and Make (Indian)’, ‘Buy and Make’ and

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‘Buy (Global)’, in that order; • Dividing the ‘Make’ projects into two categories – Make-I (Government Funded) and Make-II (Industry Funded) with only Indian vendors (majority equity holding in case of a joint venture) being eligible and the MSMEs having a decisive say. Make I projects will have a Government funding commitment of up to 90 per cent for prototype development with 20 per cent of it being paid as advance; • Greater accountability of individual Service HQ which will now be responsible for identifying potential ‘Make’ projects, undertaking feasibility studies for each identified project in consultation with other stakeholders and to set up a permanent ‘Make’ Project Management Unit headed by a two star rank officer to instill a sense of ownership among the Armed Forces.

• Introduction of L1-T1 Methodology for Award of Contracts; • Prescribing procedure for dealing with the ‘Single OEM, Multiple Bids’, ‘Multiple Bids by Single Indian Vendor’ and single vendor contingencies; • To speed up indigenisation the indigenous content requirement has been enhanced from 30 per cent to 40 per cent on cost basis in case of Buy-Indian, and from the earlier 30 per cent to 50 per cent in case of Buy & Make Indian with flexibility to modify the same on case to case basis; • Sharing of the Services 15 year technology and perspective plan with the industry to enable them

Strategic Partnerships will be critically dependent on appropriately manned structures

to plan ahead for capability and capacity development; • Announcement of a Strategic Partnership model in the segments of Fighter Aircraft, Helicopters, Submarines and Armoured Fighting Vehicles (AFV) or Main Battle Tanks (MBT). A few Indian private companies will be identified as the ‘Strategic Partners’ (only one per segment) which would initially tie up with a few shortlisted foreign Original Equipment Manufacturers (OEMs).

India has been importing weapons to meet its defence requirement also mainly due to its hostile neighbours

Technology Management Challenges to managing offsets and related transfers of technology are rooted in legacy issues of India’s vast public sector military industrial complex (PSMIC) comprising nine DPSUs and forty plus OFs under the DDP and DRDO. Post-independence, based on the vision of the then Prime Minister Jawaharlal Nehru, the Industrial Policy Resolutions of 1948 and 1956 focussed on the public sector to herald industrialisation in the country. Accordingly, all strategic defence production was entrusted to the military industrial complex comprising the DPSUs and OFs. The DRDO came into existence in 1958. While the military industrial complex was engaged in licensed production of arms and ammunition, and indigenously produced basic necessities for the Services, it remained far from attaining the ‘commanding heights of economy’ in defence as envisioned in the Industrial Policy Resolution of 1956. The private sector was denied any meaningful entry into defence production till 2001 and continued to be given step-motherly treatment even thereafter by being subjected

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to inhibiting licensing requirements along with continued patronage of the defence public sector undertakings by the Department of Defence Production or the MoD. The experience of the Services in general and the Army in particular, has been none too pleasant, forced as they have been to accept low technology, substandard, fault or accident prone products churned out by the DPSUs and the OFs after interminable delays over the years.

The PSMIC has displayed a singular lack of concern and accountability towards operational preparedness of the Services. Similar bureaucratic apathy coupled with complete lack of sincerity, commitment and concern characterised the entire procurement process. A very weak political will to carry forward the reforms agendas contained in the recommendations of the Group of Ministers post Op Vijay as well as the Kelkar Committee Report (2005) on the privatisation of defence sector and self-reliance in defence coupled with a misplaced and highly detrimental approach to ensuring probity in defence deals stipulating blacklisting of foreign vendors for violations or infringements of integrity clause of the RFP, and the Services’ inadequacies in drawing up the SQRs, some officers related with procurement coming under a cloud, complete the picture of the dismal state of affairs in the defence sector leading to questionable levels of operational preparedness of the Services as highlighted by a former COAS.

Hopeful Signs Coming to the present, while no Government policy should be expected to fully meet the aspirations

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of all stakeholders, however, a completely overhauled, far more pragmatic and easy to comprehend the DPP 2016 coupled with sincerity and commitment on the part of the present Government towards the goals of ‘Make in India’ and selfreliance in defence, hold out hope for a brighter future for the defence sector. Technological superiority over an adversary is a crucial battle winning factor. Parting with critical defence technologies can more often than not be a political decision.

Towards that end, a personalised style of conducting foreign policy as being done by Prime Minister Modi goes a long way in instilling confidence among the leadership of countries exporting arms to India, primarily, Russia, the USA, UK, France and Israel, to protect the technologies being transferred by them. This has led to renegotiation afresh of the Rafael deal with the French government and the clearance of the long-stuck howitzer deal by the US government.

Imperatives For ToT The decisions of Transfer of Technology (TOT) must be guided by a thorough deliberation of the following imperatives: • Even if the level of technology offered is not the latest, it must be state-of-the-art to offer a distinct edge over our adversaries.

• A holistic cost-benefit analysis.

• Must preferably enable economies of scale.

• Must be within the existing capabilities and capacities to absorb.

• Preferably without any strings attached.

• Based on a fair evaluation of the technology and its cost.

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Overhaul of DPSUs The well-known and commonly talked about deficiencies and inefficiencies of the DPSUs, OFs and the DRDO must no longer be tolerated and urgent action must be initiated to remedy the same.

These entities need to be subjected to performance and productivity audit by professional organisations

In the absence of (offsets), the country was not only losing billions of dollars but also potential opportunities for technological upgradation in the field. India’s DRDO and the US equivalent Defence Advanced Research Projects Agency (DARPA) were established in the same year, 1958. The DARPA has a scientist to support staff ratio of 1.4:1 while the figure for the DRDO is 1:5.

The DRDO has been completely bureaucratised and there is no visible accountability.1 As regards, shipbuilding, the productivity of the DPSU shipyards is much below international standards. Whereas the capacity of first tier shipyards like the MDL and the CSL is 1.44 and 0.48 respectively, the comparable international standard is 5.7. The build times for India are four times more than international standards.

There is also a huge shipbuilding capacity gap in warship building.

Against annual requirement of 107 Standard Ship Units (SSUs) over the next 10 years, the availability is 44 SSUs at the DPSUs.2 It is indeed shameful that these worthies have been unable to provide the Indian soldier with any

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1 Air Marshal Narayan Menon, ‘Growing Strength of the PLAAF Implications for IAF, Indian Defence Review, Oct-Dec 2011.

2 Extracted from ‘India’s Offset Policy’, Page 93, Indian Defence Review, Oct-Dec 2011.

Vijaypath, the Kargil War memorial at Drass, Jammu and Kashmir

indigenously designed and developed state-of-the-art personal weapons and combat gear leave aside any high end technology products. No wonder than that a Pakistani Army Chief is known to have referred to the DRDO as ‘his secret weapon’.

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Similar lack of accountability and inefficiencies are evident in the OFs as already highlighted.

There is a strong case for looking at merger of some of the OFs with the DPSUs and of the DRDO facilities

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restructuring Indian defence OFFSETS AND TOT

with the OFs and the DPSUs to cut on flab and duplication.

The real estate assets of the PSMIC need to be optimised for setting up new production facilities as needed for ‘Make in India’ in defence.

Oiling Defence Preparedness Indigenisation and self-reliance are long-term goals with a long gestation period. There is a need to guard against setting over-ambitious targets and abruptly curtailing imports. From all available inputs in the open media, it is evident that capability development in all the three Services is lagging far behind the desired capabilities based on threat perception as envisioned in the perspective plans.

To compound matters, there is a high degree of ‘hollowness’. Under the circumstances, indigenisation plans need to be harmonised with capital acquisition plans to ensure that the present state of defence preparedness does not get eroded further.

Making a cautious and humble beginning in 2005, the Offset Policy in defence has matured sufficiently.

However, audits by the CAG in 2012 of offsets under implementation

point to serious lacunae in implementation of the same. There is a definite need to focus on optimising our present leverage as the ‘largest importer of defence equipment in the world’ to negotiate offsets which are technologically sound, value for money and contribute handsomely to nation’s quest for self-reliance in defence.

The time has come for specially qualified professionals to replace the ‘generalist’ bureaucrats to man these structures. The time has also come to subject the public sector military industry complex (PSMIC) to a performance and productivity audit by professionals in the field and to restructure the same for better synergy and cutting flab by removing duplication and overlaps. It’s time also to come down heavily on the culture of ‘diffused accountability’ permeating across the PSMIC and to evolve stringent mechanisms to enforce accountability. The success of various ‘Make in India’ initiatives in defence sector and of DPP 2016 including Strategic Partnerships will be critically dependent on appropriately manned structures and well thought out processes for effective implementation.

Improved planning catapulted India into becoming the largest importer of arms

A launch at Satish Dhawan Space Centre, Andhra Pradesh

cyber security mitigating cyber crime

hash value calculation Report and 65B Certificate The legal fraternity and the Judiciary must interpret the Section 65B properly. Any interpretation saying that only a ‘Server Administrator’ can provide a certificate under Section 65B is considered incorrect.

The server administrator can however provide the certificate but it is not mandatory. The Section 65B certifier is like a photographer who captures a photograph of an event and confirms the process of taking the photograph.

The Section 14 of IT Act, 2000, aims at providing the definition of secure electronic record

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W

ith rapid rise in cyber crimes and vulnerability of data to tampering, integrity of the whole investigation can be questioned in courts through procedural limitations and related aspects. Thus, it becomes essential to have an unquestionable method of authentication at the disposal of law enforcement and calculation of hash function serves the purpose, efficiently.

This article aims at analysing the feasibility and multi-faceted utility of hash value calculation with regards to data integrity and admissibility in courts through the application of Information Technology Act, 2000 and Indian Evidence Act, 1872.

As per section 85B of Indian Evidence Act, 1872, lack of alteration as well as authenticity and integrity of a secure electronic record can be presumed by law unless proven otherwise. The Section 14 of IT Act, 2000, provides the definition of such secure electronic record while section 16 empowers the government to prescribe security procedures for securing an electronic record. Since no procedure has been prescribed in pursuance of the said section, and on account of alternatives thereto, the existing best practice ie using asymmetric crypto system and the calculation of the hash function under section 3 of IT Act, 2000 can be said to be a reasonable security procedure.

The presence of Section 65B enables the Judge to avoid being a witness himself by introducing a role to the Section 65B Certifier who brings

the binary electronic document to an ‘Admissible’ form by creating a ‘Computer Output’ as envisaged in the Section. Even after this, if there is a dispute, then it is open to the Court to call a Section 79A recognised ‘Digital Evidence Examiner’ to assist it in resolving the disputed electronic document.

The purpose of Section 65B is to enable ‘any Contractually Capable person who knows how to view (or hear) an electronic document to present a copy (printed or on an electronic media) which can be admitted in the Court as also a “document” without further proof or production of the original’. It is that person who prepares the Section 65 statement in which he says, “I viewed this document and converted it into a computer output and I certify …..”.

Rohan Nyayadhish The writer is the founder and managing director of Digital Task Force Pvt Ltd, Cyber Crime Helpline, Digital Status Solutions LLP, Digital Business Registrations Pvt Ltd and Saya Welfare Foundations the NGO-Trust. For more than ten years, he has been working in association with Maharashtra Police, CID, Anti-Terrorist Squad and other law enforcement agencies as a Cyber Forensic Expert and Information Security Advisor.

Hence, a ‘Third Party’ can provide a ‘Section 65B Certified Copy’ for admission.

a ‘Third Party’ can provide a ‘Section 65B Certified Copy’ for admission Section 65 B (Indian Evidence Act, 1872): Admissibility of Electronic Records For the purposes of this section, the law entitles: (a) Information shall be taken to be supplied to a computer if it is supplied thereto in any appropriate form and whether it is so supplied directly or (with or without human intervention) by means of any appropriate equipment; (b) A computer output shall be

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cyber security mitigating cyber crime

taken to have been produced by a computer whether it was produced by it directly or (with or without any human intervention) by other means of any appropriate equipment.

The main points that the Digital Task Force makes here are: a) Section 65B of the Indian Evidence Act refers to the special provisions of the Act in respect of Electronic Documents. Though Section 65 is referring to ‘Secondary’ documents in paper form, there is no such distinction made as to the electronic document.

The focus of Section 65B is the activity of conversion of the electronic document residing inside a system b) There is no need to distinguish between the ‘Primary and Secondary’ and all documents need to be interpreted by a human being which takes the form of a Section 65B certificate. c) A ‘Hard disk’ which may contain an electronic document also cannot be considered the ‘Primary Document’ since it is only a ‘Container’ and the real Electronic document is an expression in binary language which cannot be read by a human being and needs to be interpreted with the assistance of a binary reading device. d) The Section 65B explains the conditions under which an electronic document can be considered as ‘Admissible’ in a Court as a ‘Document’ and it needs to be suitably confirmed for the Court to accept the document, which is often termed as ‘Section 65B certificate’.

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e) Section 65B refers to a process of producing a “Computer Output” of the electronic document which is the evidence to be admitted and such computer output can be either in the form of a “Print Out” or a “Copy”. f) There is a “Process” by which the electronic document becomes the “Computer output” and Section 65B identifies this as the subject activity which needs to be conducted by a person having lawful control over the computer producing such output and that during the period of such production, the Computer should be working properly etc. g) The focus of Section 65B is the activity of conversion of the electronic document residing inside a system which can be seen by an observer into a ‘Computer Output’. h) The other clarifications contained in the Section 65B such as that the Computer Output could be produced by a combination of computers, acting in succession, etc as relating to dynamic creation of an electronic document from a data base and routing it through multiple devices onto a final visible form in the computer of the observer and thereafter its porting into a Printer.

It is very important that the legal fraternity and the Judiciary interpret the section properly. Any interpretation that only a ‘Server Administrator’ can provide a certificate under Section 65B is considered incorrect.

The server administrator can however provide the certificate but it is not mandatory. The Section 65B certifier is like a photographer who captures a photograph of an event and confirms the process of taking the photograph though he may not be aware of who is there in the picture and what they are doing.

book review

A WALK THROUGH

UNTRAVERSED HISTORY

Lt Gen Kamal Davar PVSM, AVSM (Retd)

In India’s War, historian Srinath Raghavan paints a compelling picture of battles abroad and the vivid life at home terrain, arguing that wars were crucial in explaining how and why colonial rule ended in South Asia. especially of India’s participation in wars and military campaigns of the last hundred years or so. However, this trend is fast changing and dozens of books on recent military exploits of the Indian Armed Forces have been hitting the bookshelves with rapid regularity especially as regards to military conflicts in post independence India.

I

ndians lacking a strategic culture is an oft quoted and universally expressed truism. An aspect exemplifying this not-soflattering a reality was the nonavailability of military history books

Across the globe both the World Wars (1914-1918 and 1939-1945 respectively) have been covered extensively in most languages, yet the story of Indian arms in both these world wars has not received adequate attention of either foreign or even Indian writers. This aspect gets more poignant considering the fact of India’s massive contribution and the valour of Indian soldiers was second to none in both these wars. Though World War II would easily have the maximum number of books written upon across the world, yet there hardly exists any book exclusively documenting India’s story in this momentous conflict. To

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The writer is a distinguished soldier having served in all theatres of operations in his 41 years of service. He has been GOC of the entire Ladakh sector, Chief of Staff of a Corps HQs in Jammu and Kashmir and then served 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, he 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 DGDIA, many Intelligence initiatives including abroad were taken by him.

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book review

Srinath Raghavan also dwells upon the turbulent “domestic politics” of that period

fill this vacuum, well known author, Srinath Raghavan’s magnum opus ‘India’s War’ is indeed a welcome and a long awaited addition. That the author served as an Army officer for a few years, subsequently shedding his uniform for the scholarly embrace of the academic world, helps the narrative of this book to be both holistic and balanced.

In the author’s own words, he has endeavoured to chronicle “a rounded narrative and an integrated account” of that tumultuous period which in his view shaped the last years of India’s freedom struggle underscored

by India’s participation in the Second World War. He has elucidated in his book five “intertwined strands” that collectively race through his wellprosed narrative. He lucidly expounds the “strategic dimensions of the war” with the” international dimensions of India’s participation” in this war.

Srinath Raghavan also dwells upon the turbulent “domestic politics” of that period, most of it fanned by the wily British rulers of that time while also explaining the “economic and social dimensions” of the war.

‘India’s War’ is indeed a must read not only for lovers of the military art but, importantly, for those aspiring to comprehend the intricacies and undercurrents in the tumultuous last decade of our freedom struggle before India attained independence on 15 August 1947. This well researched book vividly brings out, many yet unknown truths of the motivations and machinations of the various stake-holders governing India as well as those aspiring and working zealously for India’s freedom in those heady times preceding the end of the Raj.

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The book commences with the overly arrogant British Viceroy, Lord Linlithgow’s unilateral announcement of India being launched into the Second World War. That by mid-1939, the national freedom struggle, under Mahatma Gandhi and the Indian National Congress to rid India of the British yoke, had fully fructified all across India, still did not pressurise the self-opinionated Viceroy to consult Indian political leaders on India’s participation in the world war or otherwise. The differing views on India’s participation in the war of Congress leadership whose leading lights, apart from the Mahatma at that time, were Jawaharlal Nehru, Maulana Azad, Subhash Chandra Bose, C Rajagopalachari, Sardar Vallabhbhai Patel and Bhimrao Ambedkar are succinctly highlighted and are of historical value.

The British rulers machinations and the policy of “Divide and Rule” comes clearly into play as Lord Linlithgow eminently succeeded in keeping other prominent Indian political parties like the Jinnah-led Muslim League or the Unionist Party led by Sikandar Hayat Khan not cooperating with the Indian National Congress. The latter had strongly desired that India cooperating with the British during the war must be fully reciprocated by the Britishers giving a solemn assurance of hastening the Indian independence immediately at the end of the war. The British, as expected, were hardly keen to hasten their own departure and thus kept indulging in subterfuge by prolonging negotiations with Mahatma Gandhi and other leaders of the Indian National Congress. The author’s views on Nehru and Rajagopalchari’s differing views on India’s participation in the war is of historical value,

especially these days, when Nehru’s immense and distinct contribution to India’s freedom struggle, is being needlessly underplayed and mutilated by those in power in India today. As narrated by the author, Nehru was not keen for the nation’s participation in somebody else’s war without a firm assurance from the unyielding British to quit India swiftly at the end of the war but Rajagopalchari had a more malleable view !

The book highlights how India deployed the largest volunteer force in human history, by fielding in the Second World War, over 2.5 million men. In addition, this huge force was administratively supported at home by over a million men, directly and indirectly. Over 90,000 Indian troops were killed or maimed fighting for the British rulers while the support to these troops also inflicted terrible privations on the Indian population which suffered grave food shortages besides labouring for the British, day and night to logistically support the war effort. All these sacrifices by the Indian people during this period and the unique and sterling contribution of Indian soldiers remains, regrettably, not fully recognised by all and sundry.

Importantly too, this war saw a major transformation of the Indian Army from a backward constabulary to an effective modern fighting force which was to come handy with India’s independence just a few years away.

Another historically valuable narrative in this book traces the origins and growth of the Indian National Army (INA). For most Indians, the legendary Netaji Subhash Bose remains an iconic figure. This book traces the birth and growth of the INA, preceded by its original avatar, the Free Indian

Legion which was set up by the Axis powers with Indian prisoners of war (POWs). The undercurrents which had originally the Italians, the Germans and subsequently, the major role of the Japanese in shaping the INA are well documented which had these powers wanting to employ Indian POWs for their own ends. The stellar role of Capt Mohan Singh (later addressed as ‘Gen’) in the INA is also noteworthy. An unknown historical fact is that the first division of the INA, comprising of 16,000 men, had three brigades, each named after Gandhi, Nehru and Azad and had its first formal parade on 2 October 1942 (Gandhiji’s birthday) reflecting some unspeakable bond between the INA and the Indian National Congress!

Netaji Bose subsequently announced that his troops were by then ready to march, alongwith the Japanese into India. As clearly opined by the author, the INA was a reflection primarily of Netaji’s profound charisma and fiery patriotism for his nation.

India was dragged into this war by the imperial power governing it

In my opinion, this highly readable, vastly educative and beautifully articulated book perhaps could have had another title than “India’s War” for it was, in reality, not India’s war.

India was dragged into this war by the imperial power governing it during that period. The book ends on an optimistic note with its Epilogue aptly captioned in military fashion as the “Last Post”, quoting Jawaharlal Nehru that “whatever the present position of India might be, she is potentially a Great Power”. The book’s publishers Penguin Books too need appreciation for their excellent presentation.

Indeed, Srinath Raghavan’s “India’s Wars” will be an eminently useful and popular buy for libraries and private bookshelves.

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restructuring Indian defence Bottlenecks Removed

Will Offsets Happen?

Open sources inform us that the MoD is also working on a new Defence Procurement Organisation (DPO). It is to be hoped that the most prominent lacuna in the offset regime, that is of split responsibility between the DG Acquisition and Department of Defence Production (DDP) wherein the former finalises the contract and the later manages its implementation will be corrected and the entire process will be vested in one body.

T http://economictimes.indiatimes. com/articleshow/56359688

1

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his article opens with a question as stated in the title. The trigger for this question has been the statement by the Minister of State for Defence Subash Bhamre who announced in 17 January this year, that nearly US$ 14 billion worth of defence offset obligations would be discharged in India by the foreign

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Original Equipment Manufacturers (OEMs) by 20281. This is a huge inflow of funds which hopefully will ride its way in on the workhorse of the New Offset Policy of the Ministry of Defence (MoD) which forms a part of the Defence Procurement Procedure (DPP ) 2016 announced by the MoD on 16 March. Is our Offset Policy strong enough to realise the

Group, recalls the following as his first-hand experience:

kind of magnitude of inflows which the Minister has announced? This is the question that this article addresses. It does so by tracing the entire offset story as it has evolved over time since 2005 till date, examines the current provisions in force and conveys the sense of the author on the question stated above.

First Tangible Milestone Though the defence offset provisions formed a part of the DPP 2005, for many years following this, offsets essentially remained a non-starter.

There were several reasons for this; lack of clarity on various provisions, general reluctance of the foreign OEMs to bite, and above all, the near incapability of the Indian defence industry (especially the private sector) to absorb the kind of offsets in quantum and technology terms, as would become available in time. This incapability made it very difficult for the foreign OEMs to find some suitable Indian Offset Partners (IOPs) to discharge their offset obligations.

Spurred by the above inertia, the MoD in 2012, constituted a Study Group under Director General Acquisition (DG Acqn) for carrying out a comprehensive revision of the Offset Guidelines The Report of the Study Group, duly approved by the MoD, found a place in the DPP 2013. The author, being a Service representative on the said Study

The Study Group not only read up the offset provisions of all the leading players of the world viz the USA, UK, France, Israel, Korea and others, but also, invited representatives from several friendly foreign countries to tell their story of offsets so that the best practices worldwide could be adopted. Also, the members debated at great length, the introduction of new fields for offset discharge.

The difference in opinion between the Acquisition Wing and the Department of Defence Production (DDP) regarding the primacy position in the offset milieu came to the forefront. Ultimately, a position of duality between these two in negotiation of offsets and discharge thereof respectively, found its place in the Guidelines. Also discussed at great length was the very many contours related to the complex issues of the Transfer of Technology (ToT), multipliers, offset banking credits and more. After months of debate, the guidelines emerged.

Non-Performance Story In spite of the above Guidelines forming a part of DPP 2013, the years that followed, showed that the offsets did not happen the way it was perceived to flow. As of March 2016, when the new DPP was announced, some 28 offsets contracts stood signed worth US$ 6 billion and another 43 contracts worth US$ 6-7 billion were in the pipeline.2 While the statistics may put up any claims and the figures may tell any story, as the DG Army AD, handling several big ticket procurement cases first hand, the

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Lt Gen (Dr) Vijay Kumar Saxena PVSM, AVSM, VSM (Retd) The writer is an alumnus of Defence Services Staff College, College of Defence Management and the coveted, National Defence College. He has served as the Additional Director General Army Air Defence at Army HQ and as the Commandant of the prestigious Army Air Defence College. He is the only Army Air Defence Officer to have had the privilege to Command the Army Air Defence College for the second time. Decorated thrice by the President of India, the General Officer took over as the Director General Army Air Defence on 1 July 2013, from where he superannuated on 31 May 2015. Post superannuation, he has been re-employed as Advisor in Bharat Electronics Limited, where he is facilitating many an ongoing project towards their completion and rendering other knowledgebased services.

2 RitikaBehal, “Revising Defence Offset Policy” Defence ProAc Biz News Vol IV issue 2 Mar-Apr 2016.

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experience of the author has been, that the offsets in the currency of the DPP 2013 were quite a hindrance and these definitely retarded the already sluggish and inert cycle of the procurement monolith, owing to protracted discussions with the OEMs. On the OEM’s front, there were multiple problems in the choice of the Indian Offsets Partners (IOPs) and changes thereto coupled with our net capability (read incapability) to absorb the types of technologies being offered. Actually, the figures indicating offsets in the pipeline have remained in the pipeline for years on end.

And as is well known, that there are no free lunches whatsoever be the costs of offsets, the same came loaded on the main product cost.

As per an expert estimate, this load is about 12-18 per cent of the contract cost.

First Change Happens The first welcome change in the status quo came on

15Â August, when the MoD came out with two amendments to the Offset Guidelines (MoD ID No 1(6)D/ (Acq)13-Vol ii dt 05 /08/15).

The driver for these amendments has been the need felt by the OEMs over the years. In that, due to the lag of time between submission of technical offset offers, finalisation and subsequent implementation of the offset contracts, many suppliers faced difficulties in providing upfront specific description of products, work share, yearly discharge schedule and supporting documents to establish the eligibility of the IOPs. The said amendments address this issue both at pre-contract and post-contract stage.

Vide the first amendment, the vendors can now have the option, to submit detailed offset proposals at a later stage, thereby allowing them to finalise a more realistic offset offer. A vendor can finalise its IOPs and offset product details either at the time of seeking offset credits or one year prior to the intended offset discharge.

Some experts have opined that absorbing offsets of this magnitude will effectively put the MSMEs out

The amendment also provides adequate flexibility in the postcontract stage. In that, the amended provisions provide for a change in the IOP or offset component and re-phasing within the performance period. Also a standard operating procedure (for processing offset contract amendment proposals) has been introduced allowing addressing of supplier’s requests to change the IOP or their offset component as per requirement during the period of the contract. The overall value of the offset obligation is however to remain the same. This amendment will apply not only to the DPP 2013, but earlier the DPPs as well.

The second amendment relates to reducing the offset trigger for Indian companies participating in the ‘Buy (Global)’ tenders. Earlier, the Indian vendors participating in the ‘Buy (Global)’ category procurements, were required to discharge offset obligation on the foreign exchange component of the contract if the indigenous content (by value) in the product was less than 50 per cent. This threshold has now been reduced to 30 per cent ie the offset obligations will not be attracted if the indigenous content in the product is 30 per cent or more. If it is less than 30 per cent, then the offset obligations are to be fulfilled to the tune of 30 per cent less the indigenous content percentage.

With the Indian vendors now at par with the foreign Original Equipment Manufacturers (OEMs) in terms of fulfilling offset obligations, this is likely to pave the way for greater participation of the Indian companies in the ‘Buy (Global)’ tenders.

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Retrospective Effect Both the above amendments are a step in the positive direction. The first one brings the earlier DPPs at par with the DPP 2013 and is likely to add transparency and speed in the process of finalisation and implementation of Offset Contracts. This will especially give a move on to the cases stuck in the offset quagmire during the period 2005-13. The amendment is also in keeping with the evolution process of the Indian defence industry and their changing capability to absorb or execute offsets.

It may be recalled that in the beginning of the offset process, the foreign OEMs chose the IOPs as available in the field mostly based on anticipation of capabilities, as existed then. As the years unrolled and while many an IOP grew in muscle and stature and lived up to their commitment on offsets, moving steadily upwards on their individual growth ladder, several others did not grow as was visualised and showed their inability to execute and deliver what they had promised to do in the timeframe required. Change of the IOP or rephrasing the offset schedule was thus the fait accompli thrust upon the OEMs. In the past, both these processes used to be Herculean tasks; time consuming and procedure ridden. The amendment has removed the hurdles in this path providing a way for the OEMs to come out from the above logjam and get a move on.

The second amendment also relates to another ground reality ie the capability of the Indian defence industry in realising the indigenous content in the Buy Global cases.

Experience had shown, that for the Buy Global procurements, the

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capability of the supplier to put out a 50 per cent indigenous content in the offset package was a major problem area. The effect of this always translated in endless delay in the main procurement projects owing to protracted negotiations with the IOPs. This percentage stands reduced from 50 to 30 per cent. The same will hopefully make some stalled projects get out of their impossible positions and proceed forward.

Essentially speaking, the net effect of the above two amendments will be to correct the two bottlenecks that have been felt over time. This is especially true for procurement projects that were under the currency of the earlier DPPs. Also, since the above

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amendment brings the previous DPPs at par with the DPP 2013, hopefully, the stalled projects under previous DPPs will also get a momentum.

Further New Changes Moving boldly ahead of the above two small amendments, the DPP 2016 has made some fundamental changes in the applicability norms of the offsets. Most important among these is the significant enhancement in the threshold of the cost at which the offsets become applicable. As per the current norm, the offset clause will only be attracted where the indicative cost of acquisition is `2,000 crore or more, as on the date of accord of the Acceptance of Necessity (AoN). This is

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Viraat departs Mumbai under her own power for the last time in July 2016 en route to Kochi

a sea change from the earlier limit of applicability pegged at `300 crore.

Second, several other fields for discharge of offsets have been identified. These include; a) Direct purchase of or executing purchase orders for eligible products manufactured by, or services provided by Indian enterprises; b) Foreign Direct Investment (FDI) in joint ventures with Indian enterprises; c) Investment in kind in terms of the Transfer of Technology (ToT) to Indian enterprises; d) Investment in kind in the Indian enterprises in terms of provision of equipment through the non-equity route; e) Provision of equipment and

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the ToT to government institutions and establishments; f) Technology acquisition by the Defence Research and Development Organisation (DRDO) in areas of high technology.

Another very important provision built in the new Defence Offset Guidelines is the waiver clause.

As per this provision (Clause 2.3) the Defence Acqn Council (DAC) may consider partial or full waiver of the offset clause (for any reason whatsoever).

This optionally adaptable route will provide an institutionalised exit route from the offset regime if conditions of operational expediency may so demand. In any case, offset is

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restructuring Indian defence Bottlenecks Removed

not attracted in cases of the Fast Track Procedure (FTP) and while exercising Option Clause of a previously signed contract if the original contract was not having any offset stipulation (Clause 2.5).3

(presumably) large number of other contracts (implying the ones with indicative cost between `300-2,000 crore). Such cases should come out of the offset bind due to unfinished offset obligations.

Analysing New Guidelines Sudden increase, that too by seven times, in the applicability threshold of the offset have put many a Subject Matter Experts (SMEs) looking for the rationale. Opinions on its being ‘right’ or ‘wrong’ are divided. As per my knowledge, the basic premise of marking up the applicability threshold has been the following:

Besides the above, a large number of contracts should not get loaded with offset mark up (likely 12-18 per cent) which vendors indulge in, by escalating the product cost to recover offset amounts.

These cost mark ups could well be used to buy technology or be ploughed in the main procurement.

The earlier limit of `300 crore was set up in 2006. Since then, the general cost of acquisition has gone up manifold, requiring an upward revision of the applicability threshold. In that, it has been the general consensus that while offsets should apply to the real high value acquisitions (with indicative costs of `2000 crore or more), these need not decelerate or bog down a

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An analysis of the basic premise, as stated above reveals that the first basic presumption about raising the offset threshold so as to be free from the offset shackles, a large number of procurement cases in lower cost brackets (`300-2,000 crore), seems to have a factual contradiction.

As per the open source data of the time when the DPP 16 got promulgated, ie 16 March or April, out of the total

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https://www.ddp.gov.in>defenceoffset-guidelines 3

71 contracts in the offset pipeline (amounting to `48,3443.93 crore) as much as 45 (`46,1848.70 crore) belonged to the bracket of above `2,000 crore while the `300-2,000 crore bracket had balance 26 cases (`21,595.27 crore). In terms of percentages, the above translated to some 63 per cent cases above `2,000 crore and the balance 37 in `300-2,000 crore bracket.

Given the above figures, the purpose of freeing a ‘large number’ of procurement cases does not come good simply because, a much larger number belongs to the above `2,000 crore bracket.

In 26 contracts, there are a large number of Army related procurements, that are of critical operational importance Critical Bottleneck

4 https://www.m.economictimes. com>defence-procurement-policy

Notwithstanding the statistics above, it is the sense of the author borne by his first-hand experience, that while the quantum of 26 contracts may look dwarfed as compared to 45, in these 26, reside a large number of Army related procurements, which though they may not be as high-value as the aircrafts and ships (save the fewer high ticket cases of Army Air Defence, Artillery and Mechanised forces) but these are of critical operational importance.

Many such cases are badly stuck owing to the offset shackles. These will hopefully get a move on spurred by the new guidelines. This is of great importance to the Army since in many of its procurement cases, while the individual cost of each unit or piece may be less but the same is required in such large numbers by

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the bulk of field army at the cutting edge, that the case becomes huge in its own standing and importance.

Another point relates to the capability of absorbing the offsets as evaluated from the cost perspective. The 30 per cent offsets of `2,000 crore will amount to a minimum of `600 crore.

Some experts have opined that absorbing offsets of this magnitude will effectively put the MSMEs out of the ring. The author’s opinion is to the contrary.

While, it is agreed that `600 crore is an issue but so is the fact that the face of the MSMEs itself is fast evolving, duly propelled by the opening of the overall ecosystem, as well as, the push effect of opportunities emerging from the big players, both domestic and foreign, who are currently bathing in the sunshine of the Make-in-India wave. This has recently got a shot in the arm with the announcement of new policy of the MoD for boosting Private Sector defence manufacturing through the route of strategic partnership.4 If one MSME unit falls short of absorbing the offset in range and depth, what about joining of hands of a few MSMEs under a common banner for a product specific vertical?

What about multiple subsidiaries of one big banner? I feel that while `600 crore will be a tough call, it is not impossible, since there are options to make that happen.

To facilitate the above, it is the sense of the author that there is a need to build adequate remedies or tools to let the MSMEs partake fully in the offset theory. Many new initiatives are already a reality. For instance,

Defence AND security alert

53

restructuring Indian defence Bottlenecks Removed

in the Make Procedure, projects with an estimated cost of prototype development not exceeding `10 crore for Make I and `3 crore for Make II categories already stand earmarked for the MSMEs. In addition to the above, very many issues relating to offsets like, multipliers, banking of credits, multiple offset field including new additions, formats for vendor identification through internet, format for case specific advertisement on internet and above all, the detailed and clear procedure for implementing the offset provisions now stand stated in the new Offset Guidelines.

It is to be hoped that the executors on ground will walk the talk when it comes to implementing the guidelines in a spirit of ‘passing’ and not ‘failing’

New DPO Open sources inform us that the MoD is also working on a new Defence Procurement Organisation (DPO)[5]. It is to be hoped that the most prominent lacuna in the Offset regime, that is of split responsibility between the DG Acquisition and Department of Defence Production (DDP) wherein the former finalises the contract and the later manages its implementation

will be corrected and the entire process will be vested in one body.

5 http://www.timesofindia.indiatimes. com

It can thus be stated as a bottomline that with the coming in of the New Defence Offset Guidelines while there has been considerable move forward in the policy domain, it is now the take of the executors of this policy to actually make it happen.

In the light of the foregoing process what can be taken from the title question – will the offsets happen as envisaged? The answer has two parts to it. The first part is the Policy while the second is the attitude and the mindset of the stakeholders who will operate or implement the Policy.

Going by the foregoing Offset Guidelines as have evolved over the years and tweaked two times by the MoD, the author is of the view that the Policy per se, WON’T FAIL US. The big question is the second part where intangibles rule the roost. The bottom line is, that if the players (Users, the OEMs, IOPs, MoD and more) operate the new Offset Guidelines with an attitude of ‘positivity’ and ‘making offsets happen’, THEY WILL. Otherwise, the story line is old and familiar.

India joined the MTCR on 27 June 2016 adhering to its Guidelines unilaterally

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