The Defence Procurement Procedure (DPP), unveiled on Monday, has laid out the process for acquisition of equipment for the Indian Army, Navy and Air Force. An attempt has been to make the system more transparent and cut out delays But the centerpiece of the new policy is to boost home grown defence industry and give a fillip to Prime Minister Narendra Modi’s 'Make in India' initiative.
At the heart of the DPP is a new category for indigenously designed, developed and manufactured equipment. Simply put, it allows India’s fledging private sector a much bigger role in production of military hardware. Equipment manufactured in this homegrown category will get preference or to put it in officialese, will be the "preferred category" to supply the defence forces.
But the DPP remains a work-in-progress with defence minister Manohar Parrikar saying that a review will be undertaken after six months.
“I do not say the document is foolproof. Let us take a review after six months. Nothing is perfect, but we are taking it to perfection,” he said. Also, a key element in the DPP, the part dealing with the 'strategic partnership' has not yet been finalised. This is because opinion remains divided within the government on this sensitive issue.
The new policy gives India’s private sector both the support and freedom to design, develop and manufacture defence components with the help of foreign partners of its choosing. This can be done by a joint venture with a foreign collaborator without having to get the signature of a joint secretary sitting in the defence ministry. For years the armament industry had been the exclusive preserve of public sector utilities (PSU). The state-run giants have been pampered and crores have been sunk into locally-made equipment that has taken decades to develop. Since Independence, India has sought to be self-reliant in manufacturing defence equipment.
But the effort was to have state-run units take on the responsibility.
Naresh Chandra, former Indian ambassador to Washington, believes that successive governments have protected the defence PSUs."Money was sunk into these industries with no hope of returns. There are huge vested interests,'' said Chandra.
The new policy will help the private sector to set the base for the development of India’s defence industrial complex, which has so long been under the strangehold of the defence ministry babus. Importantly this will also create jobs for India’s teeming workforce. Not that the situation will change immediately, these are at best baby steps towards building a self reliant defence manufacturing base for the future. The new DPP would help India reduce its dependency on foreign countries and source defence equipment within the country.
If the government's ambitious plans for indigenous manufacturing take off properly, India can save as much as $50 billion from its likely spend of over $260 billion on defence equipment in the next 12 years, says an Ernst and Young report. This is a distinct advantage. India’s private sector has welcomed the new policy. "By introducing and according the highest priority to 'Indigenously Designed, Developed and Manufactured procurement', DPP 2016 will definitely spur more design development activities within the country and contribute towards much higher indigenous content and will finally create a vibrant domestic defence industrial base,’’ Chandrajit Banerjee, director-general, Confederation of Indian Industry.
The private sector is already in the field, but in a small way. FDI in defence was raised from 26 percent to 49 percent soon after the Modi government came to power. The latest announcement will give them the much needed impetus to go ahead without looking over their shoulders. Significant players like the Tatas, L&T, Reliance, Punj Loyd, Fokker Elmo and India Forge, Mahindra and Mahindra, are already in the field. Lars Olof Lindgren of SAAB, the Swedish aerospace and defence corporation, believes India has the potential to do well in the high-tech sector.
L&T had already tied up with a South Korean company to manufacture ammunition for K9-self propelled rifles. The joint venture private companies are also hoping to make assault rifles. Tata is in the field with collaboration for the C-130 Hercules aircraft with Lockheed Martin and C-17 aircraft with Boeing. More such joint ventures are expected to gather momentum.
Among the three services, the Indian Navy has been the best in sourcing equipment from the country. In fact, it has done well. The Navy had a design bureau in its ranks since the 1950s. This is why the Navy is able to build the platform for its warships and patrol boats. In fact, India sold its first offshore patrol vessel (the Barracuda) to Mauritus for a cool $58.5 million in December 2014.
The sale was commissioned when Modi visited the island state.
India is also building a nuclear-powered submarine (the Arihant) with Russian help. It has already had its sea trial and was supposed to be part of the International Fleet Review, but did not make it. Most of the warships and patrol boats used by the Navy are homegrown, though of course, the engine and much of the equipment is imported. But that is common all across the world. So if the Navy can do it, so can the Army and Air Force.
But that will take time. However, India is on its way to building an industrial defence base in the coming years.