Defence Procurement Woes: How Apathy Of Successive Governments Hurt India’s Interests – Part 1

The strength of a nation is measured primarily economically, and to defend that economy, a strong military is needed. Fundamental economics teaches you that the pillars of any transaction are land, labour and capital and consequently, nations fight over land and deem it essential to protect their land.

The “business of military” is hence tightly linked to the sovereign powers and limitations. One of the essential requirements of developing this business is capital.

For the business of military, capital must be patient and sticky, not chasing immediate and supernormal returns. This is where the governments come in – their intervention in the form of fiscal and monetary policies and other policy interventions can be critical to develop this business.

Technology is now central to everything, including defence. Development of technology needs time, effort and huge capital, especially in the context of defence.

It needs research and development (R&D) investments. Not all R&D has a clear problem to solve; many situations deal with speculative or ambitious objectives, especially in the area of defence.

Some of the defence related R&D also produces useful second-order benefits for the society at large. The defence and aerospace industries can never operate based on R&D allocations, and are purely based on demand and supply in the conventional sense.

As these industries cater to the country and its security, globally governments have close relationships, control and involvement in the R&D processes concerning these industries.

Often, the defence and aerospace R&D leads to spin-off benefits, the commercial value of which manifests in various ways like developing new industries, creating jobs and saving human lives.

Many of these benefits are neither known nor can be outlined ab initio, let alone measured. Several of these spin-off benefits are commonly used but not recognised as an outcome of defence and aerospace R&D.

The American Space Shuttle programme alone had more than 100 technology spin- offs across medical, transportation, public safety and agriculture.

For example:

• The sanitiser we use ensured that the food the astronauts consumed was free of bacteria.
• A device to grow cells in microgravity mimicked the way tissues form the body by creating healthier cell cultures.
• The air purifier was used to keep areas clean and infection-free.
• Cardiopulmonary resuscitation was developed to help save lives during a cardiac arrest.
• Eyeglasses that did not have screws on them were developed for the astronauts.
• Streamlined design of truck and bus cabs to improve aerodynamic efficiency and increased mileage comes from this programme.
• Composite material that are super lightweight but stronger than even metal were developed and later found many industrial uses.

None of this would have been possible without the government’s involvement in aerospace and defence R&D. The main reason is, these were developed not as individual profit motives, but as part of a larger national dream.

This is why in most countries, you have the major defence manufacturing investments done only by the government or in those cases where the private sector is involved, these are close trusting partnerships with substantial indirect investment by the government in terms of funding and committed purchases.

This, in turn, leads to a situation where the selling company is always guided by the policies and strategies of their host country even in terms of what they can offer a purchasing country.

Lack Of An R&D Culture In India

This is where the lack of an active defence and aerospace R&D culture has hurt India. Unlike in the United States of America (USA), India has not invested in a government-led R&D programme for defence, except tactically.

A lot of our commentary in this area has been emotional – arguments peppered with either nationalistic ideals or peacenik ambitions – rather than appreciation of global geopolitics, economics and maintaining the patience of a monument because rarely are the outcomes measurable, logical, immediate and clear.

If today, USA is considered a technology leader across multiple fields, the main reason is that for very dream-like decision, like going to the moon, they ask – why not? In India we ask – why?

Indian defence manufacturing decisions have often been embroiled in trivialities. Bulk of the focus has been to cover all risks involved in any defence purchase or manufacturing. This is a very costly proposition.

Also, any design decision will have a downside and hence, a cost is associated with making that decision. Where imports of defence items are involved, the situation becomes even more complicated with the diplomatic relations with different countries playing a role.

Consequently, any defence acquisition/decision can be shown as biased, imperfect, incorrect or even a monumental mistake.

India’s defence acquisition and focus has been to avoid such situations rather than nudging ahead based on known risks and intelligent mitigation. Defence purchases are not like soap, shampoo or even civilian aircraft.

The spider’s web is wide, unknown and every product quite different from the other. Unfortunately, Indian systems have not been historically geared up for untangling these webs.

On the contrary, it is much easier to write specifications which are almost impossible to fulfil. Take a few examples.

Battle Tank: A battle tank must be light, travel on deserts, marshy lands, rivers. It must fire missiles and then quickly relocate to a new place very fast. It must withstand every possible attack from 1 to 10 on a scale of 1 to 10. It must be prepared for biological and nuclear situations. It can fire into the air at aircraft. It must move at top speeds.

Fighter Plane: The fighter plane must carry multiple missiles. It should be capable of carrying nuclear weapons. It should travel at speeds greater than sound. It must be undetectable by the enemy. It should be able to fly in all directions including reversing very quickly. It must be able to deflect or avoid missile attacks. It must be able to fly at low altitudes with great manoeuvrability, undetected. The pilot should be able to see enemy planes beyond the visual range and target/shoot them down without being detected.

It is quite possible to create such wish lists, which may only have been seen in Arnold Schwarzenegger movies like Commando. A nation cannot walk into a mall and pick up such items off the shelf.

Also given that the demand for such products would be limited, no company would invest unless someone is paying for it. While USA has over 14,000 aircraft of all kinds, Russia has just 4,800 and between all the arms of the Indian forces, India has just over 2,000 aircraft. Consequently, when any country goes shopping, they are not comparing apples to apples just because it is called an apple. To stretch the argument, an apple in defence parlance can be the sour Granny Smith, or the sweet Simla, or the crispy Fuji or even an iPhone 11.

A purchasing country would broadly look for a few things while writing the specifications for acquisition: performance, protection, precision, payload, reliability, and price.

Given the broad challenges for each of these factors, every purchasing country has to ask this question – where and on what basis do you “compromise”? In the case of a country like India, the whole situation becomes more complicated politically and economically.

India’ Political And Economic Battlefields

The political impediments are in the form of balancing the capabilities of central public sector enterprises (CPSEs) against those of private firms on the above specifications for any acquisition.

It is not that Indian CPSEs were set up without thought or a mandate. In fact, right after Independence, India took solid steps in promotion of defence CPSEs. Some of these firms and their founding years are listed below.

However, due to the usual Indian bureaucracy and the socialist instincts of successive governments, this initiative was lost over a period of time. Through lethargy on the R&D front, and an inherent distrust of our own scientists and experts, India lost a brilliant opportunity to become a global manufacturing leader in the defence sector.

With a dedicated talent pool, this was an opportunity for the government and private enterprise to come together and create like in the American mould, a brilliant engineering ecosystem, and organisations like Hindustan Aeronautics Limited (HAL), Bharat Electronics Limited (BEL) and Indian Space Research Organisation (ISRO) could have become global corporations.

Somewhere along the way, the socialistic attitudes converted into a patronage system and once that happened, the slide downwards has been swift and unrelenting.

Except ISRO, every other organisation has been allowed to become moribund and inefficient and very often, their occasional successes are despite the politics, not because of it.

However, these CPSEs do exert great control on defence acquisition decisions. Frequently, they become tools in the hands of the political class. In the name of national pride, any political outfit can delay defence acquisition decisions.

Part of the reason is that the Indian political class has traditionally been aloof from the understanding of defence technology and the role of R&D in the sector.

Often, the political class has idealistic notions of armed forces, modelled around battle jingoism, rather than pragmatic understanding of the sector and its strategic importance towards creating a technology industry.

The CPSE unions often exploit this lacuna.

Economically, the limitation in India is the socialist mindset prevalent not just in the government, but also in the country as a whole. The government has always been overbearing in India, so in the defence and aerospace sector, it could never strike a balance between standing backstop to acquisitions and leveraging private sector strengths.

Socialism, by its very nature, tries to straddle two contradictions. The basic human need to progress, possess material wealth, earn money and obtain recognition against a state policy where profit is a bad word and materialistic ambitions looked down upon.

Consequently, what India has got is unbridled corruption, because human needs always prevail, and they find ways and means to circumvent the system.

The fundamental reason for this sad state of affairs is that Indian systems start with the assumption – there is corruption involved, don’t trust anyone, guilty until proven innocent. So, between the systems that the government follows, the socialistic DNA of the past and the complete lack of understanding of issues related to defence, any acquisition becomes a minefield for the government.

Historically, this situation has led to complete inaction on part of the governments.

In Part 2 of this article, we will see how politics has impacted the defence procurement decisions in India.