New MoD policy to boost Indian arms industry - Broadsword by Ajai Shukla - Strategy. Economics. Defence.

Home Top Ad


Monday 7 June 2010

New MoD policy to boost Indian arms industry

Production of Airbus airliner doors at Hindustan Aeronautics. HAL has not been able to move up the technology chain, even after years of supplying items like doors.

By Ajai Shukla
Business Standard, 8th June 10

Facing sustained criticism for its continuing dependence on foreign weaponry, the Ministry of Defence (MoD) is finalising an ambitious new policy for building up India’s defence industry, both public and private.

The MoD’s Secretary for Defence Production, RK Singh, has told Business Standard that the country’s first-ever Defence Production Policy mandates that weaponry and military systems will be identified several years into the future, to allow Indian companies the time needed to develop and manufacture them. The identified systems will be allocated to specific Indian defence companies as development projects. The MoD will lay down clear time targets and provide 80% of the cost that will be incurred.

“We have consulted the army, navy, air force, the Defence R&D Organisation (DRDO), academia, FICCI, CII and ASSOCHAM… and noted their comments”, says RK Singh. “The new policy will come up before the Defence Procurement Board (DPB) for consideration on 11th June. Then the Defence Acquisition Council (the MoD’s apex body on equipment acquisition) will clear it. Within two to three months, the new policy will be implemented.”

The current rulebook for defence procurement --- the Defence Procurement Policy of 2008 (DPP-2008) --- already lays down a “Make” procedure, which allows the MoD to allocate and fund projects through Indian industry. However, this has not yet led to any domestic orders for defence equipment, partly because equipment requirements have never been identified in advance, to give Indian industry the lead-time to develop them.

Pointed to this fact, the Secretary for Defence Production asserted, “But now it is going to happen. We have to make it happen…. because now our industry has the strength. It is interested. We will ensure that the ‘Make’ procedure becomes very friendly. More and more equipment will now come into the ‘Make’ procedure.”

Explaining the working of the new policy, Secretary RK Singh says that Indian defence companies will be encouraged to register their technological capabilities in a MoD databank. When a need is anticipated for the army, e.g. a futuristic Main Battle Tank, the MoD will survey the industry and identify at least two major companies, to which it will award development contracts. These two prime contractors, working with a tailor-made consortium of companies, will develop a separate tank prototype and the MoD will select one, or even both, for mass production.

A similar system of competitive development contracts is followed by the US defence establishment.

The new Defence Production Policy is rooted in the MoD’s realisation that its longstanding acquisition model of building weaponry in India, through Transfer of Technology (ToT), has failed to generate indigenisation. Real indigenisation, the MoD now believes, comes from designing weaponry, not just manufacturing foreign designs.

“Look at what has happened historically”, says RK Singh. “The (Indian defence) industries which came up, with some exceptions, are manufacturing products that were designed abroad, not here. Our industry has been in the habit of taking transfer of technology and building on license until the product dies a technological death. There is no expenditure on R&D and no technology absorption. And since the most important components come from abroad, the vendor can turn off the switch any time. If India wants to emerge as a world power, we have to start developing our own products. That is what our industry will have to learn in partnership with the MoD.”

It remains unclear how large a foreign component will be allowed in defence systems developed under the new Defence Production Policy. While the current “Make” procedure allows 70% foreign component, Business Standard learns from MoD sources that the current thinking is to bring this down to “less than 50%”, along with the proviso that the Intellectual Property Rights of the foreign component must reside in India.

Indian private companies are treating the new policy with some scepticism. “The MoD has always manipulated policy to favour the defence PSUs, which are the main beneficiaries of the old ToT practice”, points out the CEO of a private Indian company that is active in defence. “Throwing out ToT and demanding real R&D will leave the DPSUs in the cold. Then we’ll see whether the policy stays or goes.”


  1. It is good news is that the MoD control freaks are letting go. But it bad news is that they are letting go only as far as the tip of their nails. Having a Defence Production Policy gives RK Singh and his cohorts a fig leaf, but just that. Going by what this blog says, little is going to change. Sure, the private defence industry may get some advance information on future orders, but the trouble is with trust, not preparation. It is unimaginable that MoD will fund a private company, say Mahindra-BAE to develop a tank to compete with Avadi, particularly with St. Antony and Mr Singh at the helm. Besides the preference for inhouse sourcing, the penchant of St Antony for self-aggrandisement as Mr Clean will be a big factor. He cannot even close a deal through competitive bidding and is opting for FMS route repeatedly. It is hard to conceive that he would not fear facing accusations of scam if he puts even a rupee in the hands of a private Indian developer. The only thing that can develop a domestic private defence industry is an assurance of fair competition – if a private Indian company and its foreign technology partner are sure that they will get the orders for meeting the firm battle requirements and not the flaccid political requirements, they will invest in new weapons on their own. Still, just as with most things in our great culture, having something is better than not having it at all. So, a defence production policy is welcome 

  2. In addition to airbus door covers, the Indian industry also produces all the man hole covers in the city of washington DC, and a lot of the dressed chicken in the US supermarkets.

  3. This looks like a good move on the part of MoD. Hopefully, it will not be a paper exercise. We will have to wait few months to see if MoD has the balls to overcome the massive inertia that DPSUs will generate. Trade unions in each DPSUs will most likely keep the job of importing SKDs alive well into future. Good luck Shri Antony.

  4. Theoretically the policy seems to be excellent, for in case India has to grow as a world power, some day or later they have to develop their own defense products. For some time this policy may remain under the strains due to the stresses created by various affected or interested groups. Soon the industry will learn to grow with it or the policy itself may undergo some requisite modifications.

  5. @ Ajai sir

    We dont promote our own defense industry and go for foreign systems that gives huge kickbacks and commissions to military officials and politicians.

    Untill we put our country first we cant expect to promote defense industry in India.

    Take the case of

    1. Artillery fuse made by DRDO for Bofors which was rejected by IA at the last moment, when just final trails were needed.

    2. The HJT 39 or the LIFT (Lead in Fighter Trainer) version of Tejas
    which were rejected by IAF in favor of Hawks at initial stages itself.

    By the way do HJT 39 or the LIFT (Lead in Fighter Trainer) version of Tejas really exist

    Reportedly IAF has asked DRDO and ADA to comeup with definate plans for these aircrafts to replace the Hawks

  6. @ Ajai sir

    Even though Indian Navy has enjoyed considerable private sector participation now with L&T making hulls for our submarines and now Pipav shipyard has won a deal to build 5 Offshore Patrol Vessels (OPV).

    What is really needed is enhanced private sector participation in IA and IAF projects.

    Even PK Barbora has said we need to enhance our reverse engineering capabilities.

    In this context employing retired technical experts from Russia, former Soviet republics and east European countries just like China to enhance our R&D and defense production capability will help.

  7. "New MoD policy to boost Indian arms industry"its all bunkum!!! Govt inspection agencies with their WWII operating procedures and Indian lethargic and dadaism mindset, will make any enterprising Indian run miles away!! Follow IAI and other defence company new product development strategy and qualification procedures.

  8. One would have to really wait and watch to see the real term benefits it could spell on our defence industry by these new policies now being framed up by the MoD.

    While the policies are good to be in place, I feel that until and unless these are implemented in letter and spirit it could well remain on paper with minimal advantage garnered as in case of insignificantly comprehended ‘ToT’ or for that matter the ‘Offset accruals’!!.

    ‘Political will’ and ‘Administrative inclination’ by means of some bold decisions and ease of procedural hiccups could be the need of the hour for our defence industry to grow and reverse the defence import from the existing 70% to envisaged wish list of 30%.

  9. Its good to see that at last our MOD is slowly getting into the
    desperate search for developing an Indian Lockheed martin or Boeing
    or Northrop-gruman type consortium.

    But this will work when, as the news correctly pointed out "if and only if" the MOD overcomes their decades old mindset of making liberal procedures on paper and favoring defense PSUs over private sector, we have seen those PSUs have developed nothing but
    outdated "technology demonstratrs" after decades of research and revised payscales.

  10. I guess there will be restrictions on how knowledge gained by Mod funded r&d will be used, or sold.

  11. I have heard that Arjun has some elevation problem with the gun. It cannot elevate the gun beyond a certain degree and so it suffers in range compared to T90.

    Is this information correct. Please correct me if this is wrong.

  12. Re Anonymous :8 June 2010 22:30.

    Nice. I think you should open a high school physics text book and read up on basic stuff like kinematic projectile motion.

    As for "Arjun Gun cannot elevate beyond a certain angle, and hence has less range than T-90", why that simply betrays your total ignorance.

    If you open the books and read as I told you, you will discover that the maximum range of a gun is when it fires at 45deg!. Now the Arjun definitely can elevate to 45degs, there are pictures of it firing and otherwise of the gun at that position!.

    If you read more deeply, you will see that beyond 45 deg, the range starts falling and in fact the range at xdeg and 95 - x deg is the same. So a gun firing at 30 deg will have the same range as one firing at 60deg (all else being the same and it being same gun, projectile etc).

  13. @Joydeep
    "In this context employing retired technical experts from Russia, former Soviet republics and east European countries just like China to enhance our R&D and defense production capability will help. "

    Buddy I wish this can happen. I live in Europe and believe me what you said, if considered by Indian "Gober In Mint" (Government) will be true. This is how China built what they have.
    But brother if they will do this, how they will eat up money ?
    Answer is this, be a Arms producer instead of consumer (then Army will not get anything, forget them )and go to otherside of corruption and be a seller. See what Russians are doing

  14. If Arjun had really some elevation problem with the gun wrt to T90, then it would have been reported all over by the critics since long.

  15. This business of the gun firing at 45 deg for max range ignores air resistance. This, in fact, has a huge impact, and the shell fired at 60 deg, going higher and through thinner air, will travel further than the one fired at 30 deg, which stays low in denser air.

    The question still stands re any elevation limitations, whether or not this results in range limitation.

  16. To Anon 10:59

    I accept that you are much knowledgable than me but that doesn't mean you thrash that person because of his ignorance in that field. And I have also accepted my ignorace and asked to correct me if I am wrong.

    One of my friend's father is in field testing of Tanks and he had mentioned that tanks may in some cases hide behind hills and fire at the enemy tank. And in this case Arjun's gun lacks elevation and so it doesn't acheive the objective.

    Anyways thank you anon 10:59 for all the information provided.

    Have a nice day.

  17. Ultimately the only way for India to develop a defence industry comparable to the West, Russia, China or even South Africa is to fully embrace private sector participation in defence.

    The main reason the MoD, for all its rhetoric, is so reluctant on this count is because of corruption and votebank politics. Most of the DRDO labs, DPSUs and Ordinance Factories have heavily politicized labour unions who see the private sector as their mortal enemy. For all their claims of inadequate pay and armed forces bias, the fact is their management practices and their monopoly on defence production are the main reason India is not independent in defence production.

    They realise it too; whenever there is any move to involve the private sector more closely in defence they immediately protest and make backdoor deals with the MoD to stifle any competition. Thus the armed forces are either forced to endure their chronically delayed programs or procure weapon systems from abroad. Ironically our defence netas and babus have no problems with us importing billions of dollars in equipment from foreign private companies like Boeing, DCN International, Elbit Systems etc. but they have no trust in our own private sector.

  18. Sudip Das ( June 2010 at 13:04

    @Joydeep Ghosh

    I completely agree with you .

    The spec of the Korean aircraft being evaluated by IAF is exactly same as LCA , IN FACT LCA is better in many aspects .
    WHY DOES the Air Force brass likes phoren stuff will always remain a mystery .

    The country requires more people like you for a paradigm shift in defense related issues .

  19. There is no such thing as a Government policy on Defence manufacturing in the country.
    HAL,BEL,the Shipyards simply manufactured under licence whatever the armed forces had already chosen whether it was the Jaguar,Sukhoi 30 or any other product under licence.
    None of the Services can afford to wait for indigenous development (LCA, nuclear submarine or radar).They go ahead and choose a product which the PSU willy nilly has to manufacture.So how can we expect Technology Development.
    As far as the Min of Defence production is concerned the average life expectancy of a Secy (Def Prodn) is about 12 months and he might have arrived fresh from the Sports ministry,or Ayurvedic Wing of health ministry. But overnight he is the boss of 40 Ordanance Factories and eight PSUs.
    He is now an expert on ships,guns aircraft technology visits the Paris Air show, Farnborough, Russia and soon wings his way to more greener pastures.
    The result is that there is no coherent policy but the Ministry view is nothing but a reflection of the peccadilloes of the current incumbent of the chair.
    Otherwise how do you explain the piecemeal DPP and other mods which sends our foreign and Indian suppliers tearing their hair in frustration.
    Good luck to the smart operators like the Israelis who now control a 3billion dollar slice of the Indian Defence market.


Recent Posts

Page 1 of 10412345...104Next >>Last