The structure and growth of the domestic defence industry is driven by the procurement policy of the Government. The reforms are an ongoing process; and the Government and industry will have to work together to create an eco-system, which is required for the growth and sustainability of the defence sector and this would be in the long term interest of national security.
Recently, India's Vice Chief of Army Staff (VCOAS), starkly mentioned that, Pakistan has a better military industrial base and exports more defence equipment than India. The CAG report also highlighted the shortages of ammunition, procedural delay, red-tapism etc. Presently, there is acute shortage of weapons and ammunition in all the tri-services and the government must take initiative to overcome the acute shortages by promoting 'Make in India' rather than just depending on the others to supply the arms. It must involve the private sector in defence manufacturing rather than depending on the DPSU's which always delays the delivery of the product. The statement of VCOAS and CAG reports are the signals, which are the wake-up calls.
The present government did made an attempt to manufacture defence goods domestically under 'Make in India' initiative and to bring the private sectors in defence manufacturing rather than completely depending on DPSU's. To promote indigenous design, development and manufacturing of defence equipment within the country, the Government has undertaken a series of policy and process reforms. These include liberalization of licensing and FDI policy, streamlining Offset guidelines, rationalization of export control processes, and addressing level playing issues between public and private sector. Government has taken some additional measures to address the acute deficiency of arms and ammunition, such as:
- The government is encouraging industry to enter into JV with foreign OEMs involving transfer of technology.
- Parity to the private sector in defence manufacturing will speed up the process will be helpful in addressing the current deficiency of critical equipments.
- The delegation of financial powers to the Armed Forces and permitted Vice Chief of Army Staff (VCOAS) to purchase on emergency basis ammunition, mines and spares that are crucial to fight a war. This delegation of power, will help in emergency purchase of the required arms and ammunition without prior permission of the defence ministry. If this put into practice then it is likely to wipe out the current deficiency upto some extent.
The MoD has sought an urgent additional allocation of Rs 20,000 crore for military modernization in view of recent developments.
Recently the MoD awarded contract to procure ammunition and spares to ensure enough reserves for 10 days of intense fighting. This had led to contracts worth Rs 23,700 crore being inked with countries like Russia, Israel and France so that the Armed Forces could maintain adequate stockpiles and combat readiness for "short and intense wars".Since then, the Army has inked 19 contracts worth Rs 12,000 crore, which includes 11 kinds of ammunition. Of them, 10 contracts are with Russian companies for supply of engines and 125mm APFSDS (Armour-piercing fin-stabilised discarding sabot) ammunition for its T-90S and T-72 tanks to Konkurs anti-tank guided missiles and Smerch rockets.
Defence being a monopsony sector, where Government is the only buyer, the structure and growth of the domestic defence industry is driven by the procurement policy. The Government has, therefore, fine-tuned the procurement policy to give preference to indigenously manufactured equipments. To further promote manufacturing of strategic platforms viz. fighter aircrafts, helicopters, submarines and armoured vehicles, the Government has recently announced a Strategic Partnership Policy, where shortlisted Indian companies can form joint ventures (JVs) or establish other kinds of partnerships with foreign Original Equipment Manufacturers (OEMs) to manufacture such platforms in India with Transfer of Technology.
The policies and initiatives taken in the last 3 years have started showing results. Three years back, in 2013-14, where only 47.2 per cent of the capital procurement was made from Indian vendors, in the year 2016-17, it has gone up to 60.6 per cent. The process of reforms and the Ease of Doing Business is an ongoing process and the Government and industry will have to work together to create an eco-system, which is required for the growth and sustainability of the defence sector and this would be in the long term interest of national security.