Deepening Defence Reforms

Sanjay Mitra - Former Defence Secretary of India

The appointment of the CDS and the creation of the Department of Military Affairs (DMA) in 2019 followed by the corporatization of the ordnance factories and the explicit emphasis on the use of indigenous defence equipment by the armed forces in 2021, have been truly transformative reforms. Is there a scope to deepen them? We explore.

The DMA is specifically charged with “promoting use of indigenous equipment by the services”. This emphasis on indigenous capabilities makes it imperative to consider defence procurement as one major area where further reforms could be considered.

Over the years, the main reason for the general dissatisfaction in the armed forces over the role of civilians in the MOD has largely emanated from delayed procurement. Questions relating to pensions and other entitlements also figured in the discourse from time to time, but the narrative has been largely built around tardy procurement and its deleterious impact on capabilities and preparedness. That situation will continue in the post DMA era since procurement continues to remain with the DOD. The DMA’s charter requires it to promote self-reliance and the use of indigenous equipment. Absent direct procurement powers, this aspect may then become dependent on inter-departmental coordination between the DMA, the departments of defence, defence research and defence production.

Further, indigenous products are likely to be more expensive than imports. In fact, they may even be more expensive than similar items bought earlier from foreign vendors. The rules have to explicitly provide for an “domestic premium”, which could be set to decline to zero over the next four or five years. Several processes – leasing, stockpiling of special alloys and materials, advance payments for prototypes and spiral development, life cycle costing and performance-based logistics, have few parallels in non-defence sectors and will have to be formally recognized to avoid problems with audit and vigilance. The possibility of failure of government-funded prototypes also needs to be articulated with greater clarity. Concerns remain.

"Over the years, the main reason for the general dissatisfaction in the Armed Forces over the role of civilians in the MOD has largely emanated from delayed procurement."

In our system, the devil is in the details. Changes in the acquisition procedures need to be matched with special dispensations in the financial rules. If required, the General Financial Rules that govern all financial decisions in the government should include a separate section on defence procurement or at the very least recognize the unique features of defence procurement. The parallel existence of two, quite different modes of operation within government finance has been problematic. Better harmonization will prevent confusion and forestall repeated objections and requests for clarifications to the Finance Ministry that are said to cause delays.

Leasing needs to be thought through. Dual use and support equipment, like tankers, tugs, transport and heavy machinery, already have well-developed leasing mechanisms and will pose no problems. Exclusively military items may pose a different set of problems, including the issue of prior authorizations or the likelihood of” remote switch offs” in the event of hostilities. It might be a good idea to test the “leasing waters” on the G2G route for high-end equipment at the earliest.

"The quest for India-specific, customised capability enhancements over standard products and insistence on specifications equal to or in some cases even beyond those of the NATO or the US, albeit in the interest of cutting-edge preparedness, could impact the entire indigenisation effort."

In the coming days, we are likely to see several OEMs open shop in India. Skilled manpower will be at a premium. Irrespective of  everything else, we need to be careful about our existing lines of production, be it submarines, aircraft or armoured vehicles. Such lines grow slowly, and specialised expertise needs careful nurture. Very few countries can afford more than a single production line for major platforms. We would do well to recall that post the cancellation of additional units of HDW submarines in the 1980s, there was manpower leakage to foreign shipyards. This could happen again with the fighter aircraft line at Nashik, or the submarine line at Mazagaon, the helicopter unit at Koraput, the heavy vehicles unit or even at the strategic facilities for that matter. Experience from other success stories of Indian forays into globally competitive manufacturing, such as pharma, auto and LEDs, shows the significance of strong domestic manufacturing capabilities. More importantly, the experiences demonstrate the ease with which domestic systems and expertise can be re-engineered to suit new requirements without having to dismantle them altogether.

The Armed Forces will have to drive the entire process. They will have to balance operational preparedness and domestic capabilities. They will have to nurture gradual development through achievable specifications. This issue has been highlighted several times by the CDS. The quest for India-specific, customised capability enhancements over standard products and insistence on specifications equal to or in some cases even beyond those of the NATO or the US, albeit in the interest of cutting-edge preparedness, could impact the entire indigenisation effort. But this call has to be that of the armed forces.

Now that the vexed issue of civil-military relations has been firmly settled by the political executive and the military accorded primacy in matters of national defence, we can now put those issues behind us and move ahead with meaningful reforms to ensure that our military capabilities match with our global aspirations. Long-pending matters like fresh operational directives from the defence minister need to be finalized. The earlier version is now more than a decade old. The onus will be on the CDS and the DMA to provide appropriate templates spelling  out the impact, if any, of the indigenization drive on our military capabilities. This could enable a more realistic set of directives and prevent surprises.

Strategic buying has been an important part of our diplomacy. Till very recently, procurement constituted a significant proportion of the tangible output from diplomatic engagements at the highest level. Whether the Atmanirbhar focus will change the game and to what extent is not yet clear. It is also a fact that we will continue to be dependent on external players for critical items. Aero-engines is a ready example. Sensors, militarized drones and high -end ammunition are others. Targeted procurements needs arising out of specific capability requirements will have to be suitably dovetailed with both our diplomatic endeavours and indigenization initiatives.

"Long-pending matters like fresh Operational Directives from the Defence Minister need to be finalized."

The corporatization of the Ordnance Factories Board was long overdue. Now that it is a fact, we need to fully see it through. Defence PSUs need to be agile and responsive to instantaneous market demands. The usual financial and administrative delegations are unlikely to suffice, even at the “Maharatna” level. They will have to be quite different, in particular for cases involving the transfer of technology or foreign expertise or even acquisition of foreign firms with niche capabilities. Otherwise, these new DPSUs are unlikely to break through and contribute to the sector as envisaged.

It has been a while since the “ foundational” agreements with the US were signed. These were  expected to provide an impetus to the technology development. Now that the NSCS is to steer the process from our side, we could hope for faster progress. The commencement of production by the Indo-Russian JV in rifle (AK 203) seems to be an encouraging sign in the field of technology transfer.

Worldwide, offsets have been effective drivers of technology acquisition and indigenous capability development. Offset accounting needs to be opened up and OEMs given stiffer, non-negotiable targets for offset liquidation.

(Exclusive to NatStrat)