Can an External Consultant Help Fast Track India’s Military Modernisation?

The Ministry of Defence (MoD) is presently reviewing its complex capital acquisition procedures, known for rarely delivering equipment and other capabilities to the armed forces on time. There has been little improvement in this regard, despite successive iterations of its Defence Procurement/Acquisition Procedures (DPP/DAP) having undergone at least eight reviews after they were first codified in 2002.

In the latest attempt at fast-tracking military modernisation via acquisitions and upgrades, recent media reports indicate that the MoD has engaged an external consultant with experience in cost and data analysis to assist it with discovering new ways to secure this goal.

While this is a promising bold move, the consultant has their task cut out on multiple fronts. While it is comparatively easier to expose the shortcomings of existing procedures, ideating viable alternatives is an uphill, and often impossible, task in the MoD’s complex bureaucratic maze.

One major issue which the MoD wants reviewed to undoubtedly push the government’s Atmanirbharta objectives concerns the incorporation of indigenous content, or IC, in all locally manufactured platforms and equipment.

In its Defence Procurement Procedure (DPP) 2006, the MoD had stipulated that materiel sourced by it from domestic outlets under the Buy (Indian) category, needed a minimum IC of 30%. Since then, the average minimum IC requirement has progressively increased to 50% and in some instances even gone as high as 60%. Complicating matters further, the DPP 2020 requires half of the overall IC in the form of domestically developed or manufactured material, components and software.

The IC percentage is tied to the base price of the contract, which excludes payments for importing any material, obtaining overseas services or by way of remittances abroad as fee or royalty. What is left after subtracting all such payments constitutes IC in the final product.

This implies that the IC comprises the sum of the cost of locally sourced material and services, labour, overheads and profits which cannot, by any logical accounting stretch be a true indicator of the extent of indigenisation, much less self-reliance, in defence production.

Such a statistical approach to measuring IC in defence equipment shifts the focus away from indigenisation of critical technologies that go into manufacturing of complex systems. One such example is the Airbus Defence’s C295 medium transport aircraft. While 16 of these transports are being acquired by the Indian Air Force (IAF) in a fly-away condition, the remaining 40 are being built by Airbus Defence at a facility in Vadodara in Gujarat, in collaboration with Tata Advanced Systems Limited via transfer of technology.

The IC in the locally manufactured platforms is expected to be as high as 75%, but critical components like the aircraft’s Pratt & Whitney PW 127G turboprop engines and assorted avionics would be imported, underlining complete dependency on the original equipment manufacturer (OEM) for critical components.

The C-295 is not a solitary example.

Imported components, assemblies, sub-assembles and the like, are critical to a variety of indigenous military platforms and sundry equipment, registering Indian defence industry’s engineering and manufacturing competence, but not its indigenous design nor developmental talents.

Other import-dependent platforms include the Tejas Light Combat Aircraft, the Advanced Light Helicopter, Light Combat Helicopter, Arjun main battle tank, the K-9 self-propelled howitzer, to name a few. Even the much-touted BrahMos cruise missile’s ramjet engine and radar seekers continue to be imported from Russia.

And, more recently, the proposed fifth-generation advanced medium combat aircraft (AMCA), under development by the Aeronautical Development Agency, too will be powered by an imported engine, as there has been little or no progress to build one locally, despite decades of effort and investment.

The insistence on a high percentage of IC in the locally manufactured products may have given a leg up to the Indian industry’s engineering and manufacturing competence to some extent, but not so much to its indigenous design or developmental talents as it continues to be dependant on imported components, sub-assembles and much more, for producing the final operation-worthy product.

In conclusion, the ultimate purpose of indigenisation should be self-reliance and not just promotion of local manufacturing. Self-reliance implies being able to design, develop and produce critical technologies which are unlikely to be transferred by OEMs to India under all and any circumstances, as these remain the crown jewels of any defence conglomerate.

This includes the ability to design and develop critical components, assemblies and sub-assemblies whose continued supply from abroad is susceptible to geopolitical developments, which may disrupt existing production arrangements locally. One such recent instance is the over-13-month delay in the supply of General Electric GE-404IN after-burner engines from the US to power the Tejas Mk1A variant, which has adversely impacted the IAFs operational efficiency.

Ultimately, the extent of IC in a product manufactured in India is of lesser consequence, as long as its defence industry has the capability to design, develop and produce critical technologies, which comprise state-of-the-art equipment, weapon systems and platforms.

Dependence on easily available components and technologies should not be a cause for concern to the MoD, as India’s defence industrial base is mature enough to indigenise all such components and technologies on its own, if there is commercial justification for doing so.

The MoD should not waste its efforts or resources on pyrrhic issues which may offer symbolic comfort but ultimately distract from pressing strategic imperatives like capability building. In a rapidly evolving security landscape, frittering away bureaucratic energy on such hollow pursuits only delays substantive reform. The external consultant could consider if there is a case for reorienting the current indigenisation policy along these lines.

Amit Cowshish is a former financial advisor (acquisitions), Ministry of Defence.

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