Defence reforms: Beyond the clarion call

Sub Title : A critical analysis some of the recent reforms in defence

Issues Details : Vol 16 Issue 1 Mar – Apr 2022

Author : Lt Gen Sanjay Verma, PVSM, AVSM, VSM** (Retd)

Page No. : 44

Category : Military Affairs

: March 31, 2022

The Government has shown its intent by ushering in much needed defence reforms. It is now time for the stakeholders to show sincerity of purpose and start functioning with  a collaborative mindset rather than in silos, so that the Clarion Call  for Atmanirbhar Bharat in Defence becomes a reality

There has been a slow and steady onset towards a new dawn in the landscape of the Indian Defence, without which the journey ahead is not feasible and intriguingly it was nowhere on  the horizon a few years back. This  not  only lends credibility to the Clarion Call for Make in India and Atmanirbhar Bharat but reinforces the resolve and intent behind all reforms initiated in the Defence sector. It is oft said that if the intent is not clearly spelt out it becomes well nigh  impossible to achieve the desired results. The unambiguous articulation of intentions by the Government in this regard is something which is out of the box and perhaps the driving force. The recent unfolding of events on the global scenario in wake of the Russo-Ukraine conflict is a timely wakeup call on two counts. First, that there is no alternative to Self-Reliance and our credible deterrence capability should not be dependent on any external agency or country and second that the traditional and conventional war fighting machinery cannot be compromised when seen from our threat perspective.

Coming on the heels of two significant bold announcements in Defence Budget 2022-23, the conduct of a Nation-Wide Webinar “Atmanirbharta in Defence – Call to Action” on 25 Feb 22, which was addressed by the Hon’ble Prime Minister himself reinforces the intent and resolve. The announcements in the budget pertain to a higher spending for procurement from domestic industry, up from the current 58% to 68% in the coming Financial Year as also earmarking 25% of the Defence R&D budget for industry, academia and start-ups – a long outstanding demand of private sector for Government Funding in defence R&D. While a lot of defence reforms and announcements have been made generating enthusiasm and a ray of hope amongst all stakeholders, reaching out to these very stakeholders by way of this webinar wherein specific themes were put on the mat to carve a way ahead for implementation is reassuring and indicates a collaborative approach as partners. This also brings in synergy and a “Whole of Nation Approach” so very critical for success.

Before the themes in specific are analysed, a look at the present-day state  and the reforms announced so far. Today the domestic 85000 Cr Defence Industry is skewed towards the Public Sector with a share of 68000 Cr as against the Private Sector with 17000 Cr. Significantly two of the Government PSUs namely HAL and BEL figure in the top 100 SIPRI’s list too. The calibrated and incremental reforms are part of a well- coordinated plan and are all encompassing, be it Tweaking Organisations, Government Investment, Emphasis on Indigenisation as also Enhanced Private Industry Participation. The visible steps include corporatisation of the Ordnance Factory Board, setting up of two dedicated defence industrial corridors in UP and TN, notification of two Positive lists of Indigenisation of Weapons & Platforms, Enhancement of FDI limit from 49 to 74% under automatic route and 100% under Government route and enhancing and earmarking budget allocation for the domestic industry. A new DAP 2020 was also unveiled based on the tenets of Atmanirbhar Bharat.

As a result of some of the initiatives the share of domestic procurement is on an  upswing with a very liberalised industrial license regime in place and promotion of defence exports too showing incremental increase. The industry has been more than upbeat in participation in Make II cases where around 62 projects worth almost 24000 Cr have been accorded approval in Principle with a fair share for the MSMEs. The start-ups interaction too through iDEX has shown promise with an involvement of individuals, academia and MSMEs. The support in funding and reach has been significant.

But this is just the beginning and does indicate ushering in of an era of self- reliance and building up formidable and credible indigenous capability. A lot has yet to translate into action and results. The order books of the  private industry are still waiting for some substantial projects coming their  way, be it by way of the much-touted Strategic Partnership Model or Make 1 proposals. This can only happen if a reality check is carried out as to what have been the hold ups towards realisation of these. The themes curated  for the webinar captured the essence of the problems, bottlenecks and roadblocks and looked for way ahead.

Enhanced Domestic Expenditure

Addressing this issue, the first theme focused on the Government commitment to reduce imports and enhance domestic expenditure but how does it happen? What are the problems and challenges and is the Indian Industry capable of delivering? Are there still any policy voids coming in way for this to happen. Industry readiness cannot be doubted since their full potential has not been tested and as stated major projects have yet to be sanctioned. The government signal of a total ban on all imports including relook at some of the old and near finalisation ongoing schemes such as Very Short-Range Air Defence System, Quick Reaction Surface to Air Missile, Air Defence Gun Missile System, Towed Artillery Guns amongst few others opens up options for Indian Industry. While this implies that Services will have to bear the capability voids for some more time, fortunately some of the cases had  concurrent approvals for Indigenous Design & Development and with no other option these home-grown solutions will gain momentum. DRDO’s aggressive development of Guns and Quick Reaction Surface to Air Missiles, in specific amongst other projects, and their Transfer of Technology to private sector for bulk production will be a welcome step.

However, the private industry concerns will have to be addressed by clear and firm supply orders with no mid-way changes in the parameters or the rule books. Procedural delays, close monitoring and robust testing and certification are other issues which need to be sorted out for private industry to deliver in the true sense. Long term engagements for sustenance and spares support have to be thought of as an integrated logistics concept. If there are homegrown solutions this close support should be taken as granted to shorten supply chains and reduce inventory buildup in successive tiers in depots. But this can happen only if the user and the industry sit together and plan the life cycle concept. Performance based logistics can also be well planned where suitable. Another area where clarity will help the private industry is to provide a visibility into future projects. The positive indigenisation list should further be refined with proposed routes of acquisition so that all stakeholders start their due diligence instead of spells of speculation whether Strategic Partnership, Make or Design & Development and so on, which should best be avoided.

Developing all round Defence Eco-system

The thrust towards developing an all-round Defence R&D Eco system breaking the monopoly of the Government and projected as a pathbreaking initiative is more in articulation since there are existing provisions to do so. However, perhaps to give the same a fillip the earmarking of an amount 25% of Defence R&D budget is significant. Make 1 which is an existing frontrunner provision to involve private industry does not come up for any flaunting. Rightly therefore avenues, structure and mechanisms to implement this was another theme. If it is fundamental technology research with an end product as a goal, then a clear acceptance of the user has to come out but given extended R&D timelines and grey areas how will the user commit something is an issue which comes up in Design & Development cases even today? The translation of applied research to prototypes and mass production is a long journey with uncertainties. This being a grey zone issue like the funding cover, risk mitigation strategies need to be evolved.

However, what clearly stands out is that DRDO has to play a defining role in this implementation given the robust existing infrastructure including nurturing of Centres of Excellence in various academic institutes in various IITs/NIITs and funding of multiple projects. The DRDO initiative of nominating Development cum Production Partners (DcPP) or Production Agencies (PA) upfront at the beginning of a project is already implemented  with the private industries. This model has to be refined now for a collaborative approach with higher stakes for the private industry. However, any industry capable and proposing to undertake this R&D on their own should most definitely be promoted and funded. Clearly avenues for more Make 1, iDEX, TDF schemes and so on need to defined and incentivised.

Special Purpose Vehicles in Defence

The proposal of a Special Purpose Vehicle (SPV) by Industries with DRDO and other organisations is a logical and rational extension of involving the private industry. This throws up issues of nature of SPV, processes, scope of research – fundamental or incremental, IPR, funding methodology, oversight mechanisms, accountability, instruments, risk mitigation, governance norms and translation of this technology into an acceptable weapon system or platform by the user. This will need elaborate convergence between all stakeholders. Therefore, it would be prudent to start with low hanging fruits by identifying projects where strengths of DRDO and private industry are known and measurement of success criterion is visible without complications in processes and rules. An incremental refinement or attempt to make it robust can then be thought of based on experience gained in first few cases. Seeking perfect solutions and coming up with a volume of rulebook will be counterproductive. The benefits of the model stand out by way of synergy, collaboration, compressed timelines, concurrent design and engineering, spiral prototype development and a possible life cycle support built-in besides of course enhancing the technical thresholds.

Supporting Framework-Testing and Certification

To give shape to any research or technology into an end product for exploitation by the Services the process of trials involving testing and certification is one of the most critical and also most adversely commented upon which may not be entirely justified. However, what is undeniable and of essence is that there is a need for these facilities to be made available to the private industry with full access, affordability  and transparency. This was therefore rightly identified as another theme wherein the scope centred around Setting up Independent nodal Umbrella body to meet these wide-ranging testing and certification requirements. The resources and facilities being finite and limited will need efficient regulation besides increasing the footprint. These resources are capital intensive with no established utilisation pattern and  hence issues of funding, governance, ownership, recognition and  geographical locations stand out. While an aggregator model to start with  having Government oversight as well as industry participation seems the  most obvious, the real challenge is mapping the available national resources and bringing them under one umbrella. This is a viable option and an autonomous body such as “Defence Testing and Certification Board” can be set up. Innovatively this board can be entrusted with additional responsibilities cutting down various trials and evaluation  timelines.

In Summation

National Capability Building in the present day context of a rapidly emerging and disruptive technology realm cannot be the sole preserve of a single agency. The fusion of technologies and options available in both civil and military applications cannot be overlooked. It is actually heartening to see these issues being discussed because only  then will solutions emerge. The fact that all issues are thrown up for brainstorming under the same umbrella with all stakeholders also brings  out the intrinsic linkages these have whether it is testing and certification, enhancing domestic procurement, developing an all round Defence R&D ecosystem or setting up of SPVs. There is however a need for the Industry, DRDO and all others to be upfront and candid in identifying our strengths and technology voids and focus on core and niche areas. This is a reality that there are certain areas where we still have a long way to go. Issues related to Quality and Cost are equally critical, be it for domestic procurement and rather more so if we are looking at enhanced exports.

If one was to encapsulate the focus and sphere of activities in the Indian Defence landscape, it is just beyond imagination. Critically examined there  were certain existing enablers which for reasons have remained in the closet leading to a sense of frustration and cynicism. Even despite the DAP 2020 being the latest version which is yet to be fully exploited, questions  are raised on inadequate provisions to conduct business amongst some stakeholders. This does not augur well and let bygones be bygone. To quote the father of Nation, Mahatma Gandhi, “Find Purpose, the means will follow” and these reforms are a true embodiment of what is our purpose and goal and the path to achieve the same. It is time to show sincerity of purpose and start functioning with  a collaborative mindset rather than in silos be it the Ministry, Services, DRDO, Industry, Quality Assurance and all those who are part of the ecosystem to make this Clarion Call for Atmanirbhar Bharat in defence a reality. The total ban on imports  is a clear spelling of the intent towards this.

There are reasons to be optimistic as the Hon’ble Raksha Mantri announced four clear initiatives which will steer this ahead. Five projects in Make 1 in the FY 2022-23, a robust monitoring mechanism to oversee the effective utilisation of budget earmarked for domestic industry, reforms in QA processes and expanding the iDEX scope to support proposals requiring investment of almost 10 Cr up from existing 1.5 Cr will definitely set the ball rolling. A clarity on visibility in future projects will further reassure the industry besides supporting framework for testing and certification infrastructure. The stakeholders on their part now need to take early advantage be it setting up of SPVs, investments in infrastructure, boosting of skill sets, setting up joint ventures back end for major components and critical assemblies/sub-assemblies. Time is ripe now to get out of being a Slave to the Processes and make things happen and usher in a decade where the tide will turn!!!!