The issue of defence reforms has been a high stakes political game given the financial outlays running into billions of dollars. Delays in decision-making and red tape have costed India its military preparedness. The decision to simplify the processes and open defence manufacturing to private companies is expected to promote competition, create jobs and save precious foreign reserves.
India has released Strategic Partnership policy recently to promote a credible military industrial complex in the country. The rationale compelling India to frame this policy must be evaluated in order to arrive at a nuanced understanding of the policy.
India has become the biggest arms importer in the world sourcing products from the United States, Russia, Israel and Europe. India faces a complex two-front threat from China and Pakistan over the land while China’s increasing naval deployments in the Indian Ocean is upsetting regional balance of power.
Pakistan has turned to supporting terrorism against India given its weakness in conventional arms even as its military is supported with training and weapons from China. On the other hand, China is deploying sophisticated weaponry in Tibet and is further challenging India’s territorial integrity by claiming Arunachal Pradesh. Pakistan has already occupied India’s territory in Jammu and Kashmir while China occupied Aksai Chin.
China’s confrontation with India has moved into the maritime domain lately. China’s naval ships and particularly its submarines have been showing flag in the Indian Ocean disrupting India’s responsibility to safeguard sea routes from increasing non-traditional threats. China’s navy has been acting unilaterally even as India collaborated with multiple navies to ward off threats such as piracy.
India has already fought wars with both China and Pakistan even as global powers tried leveraging their relations for defence contracts during these times. These wars demonstrated that India could not depend on external powers for weapon platforms and their maintenance. Spare parts and ammunition have been found lacking forcing India to reduce its operational tempo during these wars.
India was therefore forced to acknowledge the need to establish domestic military industrial complex if it were to survive and win future military aggressions by its adversaries. But various policies drafted for this purpose so far failed to consolidate all available national resources for this purpose. No reforms were undertaken to hold public sector units responsible for conceiving, manufacture and maintenance of weapons accountable. These factors obviously affected India’s war readiness negatively.
As China-Pakistan alliance deepens amidst global political uncertainty, India began importing defence equipment to plug-in certain critical gaps. It acquired strategic airlift and maritime surveillance aircraft from the United States with helicopters and artillery pieces in the pipeline.
Israel has emerged a major defence supplier of missile defence systems, airborne early warning radars and unmanned aerial vehicles. India has concluded an agreement with France for importing 36 Rafale fighter jets. The Indian Navy has acquired frigates and an aircraft carrier from Russia even as India’s submarine arm is impoverished.
However, the defence equipment needs, particularly of the Indian Air Force, are still extensive running into billions of dollars. The current government that made Make in India its top priority insist that local defence manufacturing could be the single largest contributor to this initiative.
Local manufacturing will save foreign reserves and reduces acquisition costs even as the policies stipulated international defence companies to invest 30 percent of a contract in India as offset. The Foreign Direct Investment rules were also relaxed allowing up to 49 percent and even up to 100 percent investment on case-by-case basis.
Still, India did not witness the level of activity and output expected on local defence manufacturing. This situation is expected to change with the introduction of Strategic Partnership policy that will be part of Defence Procurement Procedure released in 2016. This policy identified four defence sectors viz., single engine aircraft, helicopters, submarines and land vehicles (battle tanks and armored personnel carriers) that are open to bidding by domestic defence industry majors.
One domestic company will be selected from a pool of six as the strategic partner in each of the four sectors based on cost and technical competence. A pool of eight foreign original equipment manufacturers (OEM) will be created with two selected for each of the four sectors. Cost, technical competence and guarantees on transfer of technology will be assessed for selecting the OEMs.
The domestic companies will then tie up with foreign OEMs to submit bids for platforms. Price competitiveness will be given 80 percent weightage and technical competence 20 percent for selecting the winner of contract. About $30 billion worth of defence equipment is expected to be offered over the next few years via this route enabling India’s armed forces retain their fighting edge.
The issue of defence reforms has been a high stakes political game given the financial outlays running into billions of dollars. Delays in decision-making and red tape have costed India its military preparedness. The decision to simplify the processes and open defence manufacturing to private companies is expected to promote competition, create jobs and save precious foreign reserves. The success of this policy can only be awaited.