A Visionary Leader Gives a Clarion Call
Sub Title :
Issues Details : Vol 14 Issue 2 May – Jun 2020
Author : Lt Gen VK Saxena, PVSM, AVSM, VSM (Retd)
Page No. : 73
Category : Military Affairs
: June 11, 2020
On 30 Apr 2020, the PM held a detailed meeting with the stakeholders with an aim to discuss ways and means to boost the defence and aerospace sector in India. Gen Saxena writes that the PM is a visionary, who has not lost sight of national priorities even during the trying Corona times.
Post Covid – China- Pakistan-India.
Divorced of the Covidrhetoric, what is likely to be the scenario in our immediate neighbourhood with specific reference to the threat from our northern and western neighbour? Some salient points are briefly stated:-
1. Lately, there have been some voices in the open source domain, challenging why so much ado on conventional tools of waging war when a virus can do it all? There is a need to relook at the ‘germ war’ and put our resources in developing this muscle.
2. In this context, it is stated that world didn’t require a Covid to recognise the grim face of germ warfare, is was there for Centuries as a recognised pillar of the quad; ‘nuclear, biological, chemical and radiological’ warfare.
3. While the widespread kill potential of the biological weapons is well known, these are unlikely to become the first option of prosecution of conflict in the China-India-Pak matrix for a number of reasons.Some of these are:-
- The adverse effects of the germ war are likely to be felt on either side more or less equally, keeping in mind the type of proximity and contiguity of the common landmass over which our borders are drawn.
- The longish cycle for the germ war to take a decisive effect is not the kind of time frame which the protagonists on both sides of the border are used to. Such a time frame is not in conformity with the short and intense format of wars as would be the probable scenario.
- It is incidental to state that all the threecountries are signatories to the Biologicaland Toxins Weapons Convention (BTWC) which prohibits the development, production and stockpiling of bacteriological and toxins weapons and destruction of any stockpilesheld. All the three countries have already ratified the treaty (stockpiles if any –destroyed!).
4. So what will be the ‘threat state’ in the China-India-Pak equation beyond the Covidshadow?Probably the following:-
- Bruised by the Covid blow in varying degrees, the threat scenario will limp back to pre-Covid days in as much as it implies to the conventional threat of warfighting and the non-conventionalthreat of deterrence through weapons of mass destruction; period.
- The signature of the threat as heretofore, would remain that of a hybrid war in which the adversaries will continue to combine the regular means of warfare with irregular ones to include economic war, tradewar, social media and fake news war, cyber war, insurgencies through proxies etc.
- While much of the above sounds to be a ‘not much change’ there will big changes in the post Covid situation. These are discussed.
Big Changes post Covid.
5. It will not be wrong to state that post Covid, except for the threat perception in generic terms as stated above, all elsewould go through paradigm change. Some of these could be:-
- The defence budgets would take drastic cuts as the Governments (Govts) will divert national resources to saving lives, feeding thehungry millions, doling out relief and sustenancepackages to various sectors of economy and more. How much hit? Some facts to arrive at a decision:-
- India’s eight core industries have shrunk 6.5%in Mar 2020. India’s overall GDP is likely to shrink by 1%this fiscal. The GDP growth is likely to fall to 1.9-2.0 % in FY 2020-21.
- With currency reserves less than US 8 billion, enough to cover just 1.7 months of imports, IMF in Apr 2020 has approved a financial aid of USD 1.386 Billion to cash-strapped Pakistan to tide over the immediate balance of payment problem.
- In the first ever recorded contraction in the Chinese economy ever since the Mao era, Times has reported that the Chinese economy contracted by 6.8% in first quarter of 2020, some 460,000 Chinese firms closed, new registrations fell 29% year-on-year.
- Keeping in mind all such inputs which are flowing in by the hour, though no definite figures can be quoted, it is the sense of the author that the overall defence budgets may be in for a flat cut of 50% or thereabout in India ( with similar adverse impacts in the other two countries; figures not attempted).
- Another big change will be from the foreign Original Equipment Manufacturers (OEMs). Struck by the crippling impact of Covid, following may happen:-
- Delays in committed delivery datelines due to break in the flow of production , adverse impact on supply chains and fund support issues.
- In a bid to clear inventory to create liquidity, there is likely to be a desperate bid to attract new buyers with offers of heavy cost reductions.
- Apart from own budget blues, OEMS would face a new world of nations each with impacted budgets and will operate in a new suffocating atmosphere of reduced travel, minimal business promotion events/shows /expos, sales and marketing activities and more.
6. Continuing with the thread ‘what will change’, it is stated that the Indian Defence Industry will be hit on several fronts such as the following:-
- With the kind of expected budget cuts, the focus will shift to ‘sustenance’ rather than ‘new procurement’ especially the big ticket items.
- With whatever is left out after paying out the contractual liabilities, the effort will be to retain war-fighting capability for the immediate (critical small arms, tank, artillery and air defence munition, war-fighting engineer stores, critical deficiencies in arms and services as recently noticed in the war-gaming ofthe Integrated Battle Group (IBG) concept, immediate war fighting deficiencies of Navy and Airforce etc.).
- Private defence industry would be badly hit. Already struggling for orders in the pre-Covid scenario, the crises for many will become existential.
- Most of the candidates in the existential category are likely to be Micro Small and Medium Enterprises (MSMEs) . Financial express reported on 21 Apr that 19-24% of the 75 million MEMEs in India (some 9000 in defence sector) are facing the risk of insolvency and extinction. These will require special hand-holding by way of sustenance packages from the Govt.
- The public sector output will be impacted in timelines due to huge loss of man hours.
The Clarion Call.
7. It is in this scenario that the PM has given a call to boost the Defence and Aerospace Sector with a focus on Make-in-India. PM realises fully well, the criticality of the situation, which briefly runs like this:-
- The threat scenario from our potential adversaries will bounce back to pre-Covid stance, sooner than later.
- Despite all the budget blues India cannot let its guard down.
- It is this time, more than any other time when the country needs to look inwards and to hold the hand of our defence industry. This hand-holding has different connotations for the private and public sector:-
- For the private sector the hand-holding means pulling the smaller players out of the existential crises and maintain ‘order flow’ to let bigger industries continue to do business. It also means giving adequate support and business to thoseenterprises that have shifted verticals for remaining alive. Most importantly, it is the time to nudge the industry to push the indigenous capabilities to their peaks.
- For the public sector it means to shake them up from their ‘public sector’ stanceand push them to the top of their performance making every buck givea bang.
The PM’s call is analysed along these lines.
The 30th Apr Meeting.
8. PM realises that this is the time to strengthen our indigenous potential to boost our defence and aerospace sector, reduce dependence on imports and place our country among top countries in the world in the defence and aerospace sector.
9. The meeting aimed to discuss a way forward for achieving the following:-
- Potential reforms to make Indian Defence industry robust and self-reliant.
- Taking forward ‘Make in India’ initiative to build domestic capabilities for indigenous design, development and manufacture of niche defence equipment.
- Enhance exports of defence related products.
Thrust Areas Identified by PM.
The PM identified six thrust areas to achieve the aim set out as above. These are discussed.
Revamping the functioning of Ordnance Factories (OFs).
- The idea of revamping of 41 OFs which are controlled by the Ordnance Factory Board (OFB) is age old. Having been seen by many a Committees of experts- TKA Nair Committee 2000, Kelkar Committee 2005,Raman Puri Committee 2015, Standing Committee on Defence 2018, High Level Official Committee of the Govt2019, to name a few.
- Basically the OFs produce ammunition and explosives, weapons, vehicles and ordnance equipment, armoured fighting vehicles and a range of materials and components for the defence services.
- There are hundreds of issues with OFB. The salient ones are stated briefly:-
- The most critical issue with OFB is ammunition. Besides huge shortfalls and recurrent delays between the targets and the supplies as a routine, there are serious quality issues which have led to a large number of accidents in the field.
- Other issue relates to low productivity. Any number of studies have shown that the overall production value from 41 OFs employing a work force of some 82,000 compares unfavourably even with the DefencePublic Sector Undertakings (DPSUs) leavealone the private sector.
- With the services as captive customers, from whom huge orders are secured on nomination basis , there is hardly any competition, urge to improve quality, ensure timed deliveries, even the urge to make profits is not there as that willall go back to the Govt. Reports also mention about the archaic procedures and age-old production methods that remain shy of anyinnovation, modernisation or technology infusion.
- Overcharging is another issue. According to a Report by Additional Controller Generalof Defence Accounts in 2016, OFB has been overcharging the Army by several hundred crores from items ranging from tanks to clothing to general stores.
- Following up the recommendations of its High Level Committee, the Govt is determined to corporatize the OFB (despite opposition from employee quarters fearing lay-offs and wage cuts). This was not the idea born in the 30th Apr meeting , it was listed as one of the 167 transformativeideas which the current Gove planned to implement in the first 100 days in the office. Following changes are likely to come about:-
- The entire OFB monolith is planned to be restructured into two or three 100% Govt-owned corporate entities.
- There will be far greater degree of functional autonomy in areas like policy decisions, periodic upgradation through transfer-of-technology, expanding the market base, finding new businesses through competitive routes, choosing partners, signing of MoUs, forging Joint Ventures ( JVs) with Indian or overseas companies and more.
- The current era of Services as captive customers and Govt approval for everything from what to produce? what quantity? plant modernisation; when , how? JVs , MoUs with whom?… even an investment of Rs 10 Cr or more only with Govt nod?… will become history sooner than later.
- Virtues like incentive to improvequality, innovation and more will be by-products when it comes to survival in a competitive world.
Streamlining Procurement Procedures
Notwithstanding, hundreds of recommendations and hundreds of provisions aimed to eliminate many a voids in the procurement procedures. Much of the procurement blues continue. A sample:-
- The end-to-end run cycle from Qualitative Requirements (QRs) to deliveries still averages a good 5-6years against the stipulated 36-48 months.
- Despite efforts to cut down stages of approval, the hierarchical ladder of Services Capital Acquisition Planning and Higher Committees (SCAPCC and SCAP HC)still remain un-merged.
- The Field trials instead of their envisaged run time of 12-24 months do stretch for years on end. Worse, still is the recurrent practice of re-trials, re-re trials, confirmatory re-trials and more.
- Despite provisions in DPP 2016 to the contrary, the ‘singlevendor phobia’ still persists. Also, the enabling provisionslike Essential Parameters A and Essential Parameters B, and granting additional weightages to the higher quality products by through Enhanced Performance Parameters has hardly been exploited by the users.
- Though the MoD has taken several pro-active steps in clearing much of the doubts by giving a series of clarifications and overcoming the teething trouble indecision stage in the Strategic Partnership Model (SPM) , Public Private Partnership (PPP) model and Make 2 Procedures, still the bottom line reality as on date is, that there are hardly any orders on the table for the private sector while the public sector order books continue to swell.
There is actually a need for an ATTITUDINAL CHANGE and the intention to walk the talk as regards Make in India when it comes to the private sector.
As this thrust area is taken on, much of the above shortcomings will come in the sharp focusand meet the eyes of the decision makers.
Focussed Resource Allocation.
- When the Budgets are coming in for deep cuts,highly prioritised resource allocation will become inevitable. To start with, a ‘Negative List’ may be useful in eliminating those serials where in the post-Covid scenario, the resources cannot be allotted.
- As stated earlier, shifting focus from new procurements to sustenance will be the key to keep the powder dry for facing immediate threats. A glimpse of the same is already visible on our western border where there has been a deliberate attempt to heat up the tempo in the proxy war.
- Critical ammunition built up to Minimum Acceptable Risk Level (MARL), filling up immediate voids in warfighting equipment, completing the operationalisation of IBGs, addressing the critical voids of Navy and Airforce will receive attention in the focussed resource allocation. It is hoped that with CDS in place, Service priorities will prevail over inter Service turfs.
Encouraging R&D and Innovation.
- MoD has taken pro-active steps in this direction by launching the initiative called the Innovation for Defence Excellence (iDEX) in Apr2018. This initiative of the Govt has a laudable aim of achieving self-reliance and promote innovation and technology development in the Defence and Aerospace
The Defence Innovation fund (DIF) set upunder the iDEX aims to facilitate rapid development of new technologies, engage with creative start-ups to encourage innovative ideas. Defence India Start-Up Challenge is an initiative under this scheme to support start-ups and MSMEs to create functional prototypes/commercialised products.
- All the above is laudable indeed but the challenge as on date is to remove such malice as bottlenecks, over-centralisation of power in few functionaries and removal of red-tape.
Hand-Holding- The biggest Need of the Hour,
- Any number of initiatives notwithstanding, the biggest challenge of the Govt is to do hand-holding of the private sector especially the MSMEs many of whom are facing, and will face, existential crises.
- In a welcome development in May 2020, the Govt is trying to fast-track the new definition of MSMEs reducing the turnover limit criteria to 100 Cr from 250 Crs. This will sharp focus the MSMEs list and will prohibit bigger playersto usurp the stimulus being planned for MSMEs.
- While announcing stimulus packages, reducing GST liabilities, providing minimalinterest loans and more are all expected as a part of Govtbail out packages, the challenge with the MoD will beensure that orders flow to the private sector and not lip service, slogans, empty assurances alone (sic).
- This was another thrust area identified by the PM. Nothing new in that, as the same is in sync with his earlier call of achieving the laudable target of 5 Bn in defence exports by 2025. What are likely to be the impediments in the way of achieving this target? A viewpoint is attempted:-
- The first requirement will be an attitudinal change in the minds of the decision makers in the MoD that there are hardly any ‘exportables’.
- This myth needs to go. India has tremendous defence export potential. This is not an empty claim.The same is backed up with the export worthiness of many indigenous platforms- Astra 2A Beyond Visual Range Air-to-air Missile,BrahMos supersonic cruise missile,Akash Missile system,sea-going platforms designed and built indigenously such as fast track crafts, Outshore Patrol Vessels (OPVs),Tejas, artillery guns and howitzers, indigenous SAMs, Battle management and control systems…. The list can go on.
- It is not for nothing that the Indian public sector recently won an international contract worth 40 MnUSD to supply 12 SWATI Battlefield Surveillance radars to Armenia beating giants like Russia and Israel.
- The requirement is of aggressive marketing and maintaining a proactive stance by the decision makers.
- Another requirement will be to realise the potential of the private sector in boosting defence exports. If the figures are any indication, out of the total exports for the FY 2018-19 which amounted to Rs 10,500 Crs, the share of 8 DPSUs and 41 Ordnance Factories was a mere 800 Cr,i.e 7.6%. The rest was private sector.
- The target to be achieved is huge. We are still at baby steps stage. In 2018-19, the total exports amounted to USD 1.47Bn only which is only 0.2 percent of the global arms exports.
- The MoD needs to think big on exports to realise the dream target of 5 Bn by 2025.
That was a brief peep into the PM’s meeting. While the world is embroiled in the figures of tested/infected/dead some visionary leaders are clearly ahead of them in leading their nations. One such event took place on 30 Apr 2020.
It is hoped that the 20 Lakh crore special economic package announced by the PM on 12 May 2020, will be a shot in the arm in progressing the thrust areas identified in the meeting on 30 Apr 2020.