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Grand Plans Need Proper Implementation

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For the Narendra Modi government, the new year has begun on a superlative note. A highly successful visit of US President Barack Obama, was just the start the Modi government was looking for in its diplomatic engagements. For the Prime Minister, it was a personal triumph. In fact his 15-minute ‘chai pe charcha’ with Obama on the lawns of Hyderabad House is believed to have removed the last vestiges of a potential blockade in operationalising the six year old civil nuclear deal, taking the Indo-US relations to a more fruitful stage.

Two major obstacles – the American demand to allow tracking of nuclearmaterial sourced by India and the American concern on the Indian liability law – were finally removed after the two leaders put their personal stamp on the solutions suggested by their respective officials.

Apparently, based on three detailed negotiations between the contact groups set up after Obama and Modi met in September, both sides hammered out a solution. The American side was firmly told that the liability law is in conformity with the text of the civil nuclear agreement signed earlier. New Delhi also pointed out that it will not allow any other arrangement outside the IAEA inspection regime that India has been practicing. Once it was clear that the Indians were not budging from their position, President Obama told his team to drop the unreasonable demand.

Prime Minister Modi referred to this development in his remarks at the joint press conference: “In the course of the past four months, we have worked with a sense of purpose to move it (civil nuclear deal) forward. I am pleased that six years after we signed our bilateral agreement, we are moving towards commercial cooperation, consistent with our law, our international legal obligations and technical and commercial viability,” Modi said.

On the insurance liability clause, India has been telling the US that it will build a pool that will indemnify American reactor builders against liability in case of an accident.Four government insurance entities led by General Insurance Company will create a pool of INR 750 crore to cover liabilities for both operators and suppliers of nuclear plants, MEA officials said at a briefing. President Obama too referred to to the breakthrough in his opening remarks. “Today, we achieved a breakthrough on two issues that were holding up our ability to advance our civil nuclear cooperation and we are committed to moving towards full implementation,” Obama said.

The devil however lies in the detail. It is now up to officials to operationalise the stalled nuclear deal as soon as possible so that the new found momentum in the Indo-US relations is sustained.

That Obama became the first US President to attend India’s Republic Day and smaller breakthroughs were also achieved in defence cooperation, was the icing on the cake. But initiating co-development and co-production of four small defence projects is only a beginning. If India hopes to become an effective military power, it needs a stronger military-industrial base within the country.

According to a ministry of Defence (MoD) estimate, India is likely to spend nearly US$ 130 billion in buying arms and equipment over the next five to seven years. That makes on an average US$ 20 to 25 billion a year to be spent on capital acquisition alone, a mammoth figure by any standard.

The distressing fact however is this: Almost 90 per cent of this money is likely to be pocketed by foreign defence manufacturers since India’s defence industrial base has remained anaemic thanks to a mix of faulty procurement policies of the government and the tendency to protect defence public sector units (DPSUs), relics from India’s socialist past, from competition.

But how does one change the current trend? Does India have the defence industrial base to make the paradigm shift? Can India ever become self-reliant in its defence needs? These questions have no clear or easy answers but perhaps India’s defence sector can both become self-reliant and self-sufficient if it can align with the Narendra Modi government’s new initiative, ‘Make in India’ in the coming decade.

A fairly robust, but relatively simpler technological defence production capability was inherited by the Indian state post-independence, with nearly half of the British India revenues being spent on defence production pre-independence. However, post-independence, the threat perceptions dramatically altered the defence preparedness and suddenly the country saw itself inadequate in meeting the defence needs indigenously. The sophistication of weapons increased exponentially due to advent of mushrooming industrialisation post WW2.

Having understood the mismatch including the need for capital, FDI upto 26 per cent was allowed in the year 2001 and a broader defence procurement policy announced in 2002. A defence offsetting policy in 2006, a Long Term Integrated Perspective Plan (LTIPP) announced in 2009 and a defence production policy in 2011. With the announcements of several committees being set up since 2000, it has made little headway on the ground in the actualisation of defence needs.

A term approach is of course needed because it means equipping the armed forces with a whole range of arms and platforms which may come from foreign or domestic sources. But if the objective is more than just minimising imports, then it is a positive concept of promoting and enabling the national research, development and manufacturing sectors to fulfil their strategic mandate which states that the nation of India’s size, resources and potential does not have to look elsewhere for major weapons and defence systems for want of technical capabilities.

Since May 2014, the Modi government has taken at least three measures that have a direct bearing on defence manufacturing in the country. A list of defence items requiring industrial license was notified in June 2014; a security manual for licensed defence industries was also notified the same month and two months later the Foreign Direct Investment (FDI) limit for the defence sector was increased to 49 per cent with a provision that even higher FDI could be permitted if it provided access to state-of-the-art technology.

Six months on, it is not clear if these steps have helped attract any proposals. While the ‘Make in India’ concept is an echo of MoD’s long-cherished aspiration for self-reliance in defence production, the defence ministry has failed to follow its own guidelines articulated in the Defence Production Policy (DPP) of January 2011. One of the provisions in that policy says the Raksha Mantri will hold an annual review of the progress made during the year in self-reliance. We do not however know in public domain if such a review was ever carried out.

A review of the needs of the armed forces, categorising them into urgent, immediate and necessary could be a start. The next step should be to begin consultations far and wide. In fact the ‘Make in India’ mantra also seeks attitudinal change to India’s policy making processes – namely, fostering a culture of trust between government and industry / business stakeholders. It may therefore be a good idea to dovetail the DPP into ‘Make in India’ by initiating a culture of dialogue and consultations into the defence acquisition process itself. If handled properly, this dialogue could go a long way in building enhanced confidence and trust in MoD’s procurement systems.

The DPP needs to reflect the political thrust towards enhancing domestic procurement and boosting purchase of equipment from indigenously designed and developed sources. A sound defence industrial base still seems to be a distant reality. A few large defence industrial houses may have been benefitted from the efforts many suggestions need further clarification.

Against this backdrop, Aero India 2015 starting on 18 February is being watched with keen interest. Prime Minister Modi is likely to open what has become Asia’s largest Defence and Aerospace exhibition, raising the profile of the event that is held every two years. Defence and Security Alert (DSA) will bring a comprehensive report in its next edition on what transpires at the Aero India 2015. Till then, please suggest practical ways to turn this golden opportunity for the country into an implementable plan. eMail us at



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