India’s push for self-reliance brings public-private rift to a head

NEW DELHI — India’s push to achieve industrial self-reliance has resulted in the government approving $51.71 billion worth of new defense projects and twice implementing arms embargoes.

The new defense projects falls under the country’s Make in India economic scheme, according to the Ministry of Defence, which has also passed two “positive indigenisation” lists totaling 209 items (the first list had 101, and the second had 108).

The first list of 101 defense items was released by the MoD in August 2020. It included several types of armaments such as artillery guns, assault rifles, corvettes, sonar systems, transport aircraft, ammunition, sonars, radars, conventional diesel-electric submarines, communication satellites and shipborne cruise missiles.

This second list is to be progressively implemented from December 2021 to December 2025. It calls for a number of weapons and platforms to be manufactured in India, including next-generation corvettes; single-engine light helicopters; airborne early warning and control systems; medium-power radars for mountainous terrain; land-based, medium-range surface-to-air missile systems; fixed-wing mini-UAVs; helicopter-launched, anti-tank guided missiles; battlefield surveillance radars; anti-materiel rifles; and mine-protected combat vehicles for infantry units.

The majority of items in the second list are subsystems or accessories for weapons and platforms already manufactured in India, and are not big-ticket defense products. They include instant fire detection and suppression systems; individual underwater breathing apparatuses; main switchboard and power distribution systems for ships; steering gear for destroyers and frigates; high-altitude water purification systems; and drop tanks for Jaguar and Mirage 2000 fighters.

Also among the several domestic defense industry-boosting initiatives are the Strategic Partnership model as well as the corporatization of the Ordnance Factory Board and its 41 ordnance factories. The move saw the group split into seven corporate entities.

“Development in silos and innovation in isolation are outdated ideas,” said Baba Kalyani, chairman of Indian firm Bharat Forge Limited. An alternative path involves public-private partnerships, wherein private industry, public sector enterprises, and the government’s Defence Research and Development Organisation work together to complement each other’s capabilities, Kalyani added.

However, other industry leaders and defense analysts don’t believe India’s defense industry is mature enough to benefit from that approach; public sector enterprises are thriving, but the private sector is struggling. And there has been little structural change in regard to the Indian defense industry in the last few years, despite the “self-reliance” rhetoric.

Indian workers set up the venue for the
Indian workers set up the venue for the “Make in India” showcase week in Mumbai on Feb. 11, 2016. (Indranil Mukherjee/AFP via Getty Images)

The public sector secures most defense contracts, and India is the top arms importer in the world, according to the Stockholm International Peace Research Institute.

“These are the two key objective parameters against which performance of the Indian defense ecosystem needs to be measured,” said Vivek Rae, the former chief of defense procurement for the MoD.

But since the government opened defense business to private companies in 2002, there has been steady progress toward self-reliance, especially in the past seven to eight years, according to the Society of Indian Defence Manufacturers, a local industry association.

Private companies that matured and grew by participating in developmental programs of indigenous systems and weapons have built successful track records in IDDM (Indigenously Designed and Developed and Manufactured) products, said SIDM chief Jayant Damodar Patil.

Patil, who is also the senior executive vice president for Larsen & Toubro’s defense unit, said private defense firms are also creating success stories in the indigenous production of complex systems in partnership with foreign original equipment manufacturers.

Kalyani said the private sector adapts itself better to rapidly changing technology, and that with continued government support, India will realize its dream of becoming self-reliant and a competent exporter of defense and aerospace products.

“It will take some time, but we will surely be there as a net exporter of defense in the next 10 years,” Kalyani predicted.

India plans to spend about $150 billion on defense modernization to accomplish a target of 70 percent self-reliance in armament production by 2027. Additionally, the MoD has set out a domestic defense production target of $25 billion by 2025, including $5 billion of defense exports.

The ministry also reserved $10 billion from the capital procurement budget for the purchase of weapons and platforms solely from domestic companies. This effort falls under the current 2021-2022 defense budget. Last year, the ministry spent $7.28 billion on the purchase of weapons from domestic companies, out of which nearly 80 percent of the contracts were given to public sector enterprises.

The Indian defense industry is currently made up of nine public sector enterprises and 41 government-controlled ordnance factories; the private sector is made up of two dozen large firms, more than 100 medium-size companies, and about 6,000 small and micro enterprises. However, average annual domestic defense production amounts to $10 billion in business. Out of this, about $4.5 billion is spent on sourcing defense technologies from overseas in the form of subassemblies and subsystems.

Essentially, the private sector finds itself relegated to the role of subcontractor to the public sector — a mind set that must change before India can realize a self-sustainable defense and aerospace manufacturing industry, said Rajiv Chib, CEO of Insighteon Consulting.

Patil added that the MoD needs to create a level playing field, partly by funding private sector research and development programs.

For Rae, the former ministry official, the government should create the position of an acquisition czar, with a similar mandate and authority to that of the undersecretary for acquisition and sustainment at the U.S. Defense Department. This would improve the coordination and management of all aspects of defense acquisition, he added.

Chib noted that India’s heavy use of government-managed laboratories for defense and its preference for public sector manufacturing are based on an old Soviet model — something it must discard if it’s to keep with with the large Western defense firms.

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