Giving Aero India 2015 a Make-in-India Touch

The biennial Aero India 2015 gets underway at Bengaluru (18 to 22 February) amidst media speculation about the fate of the MMRCA programme, hailed for long as the mother of all deals. Adding to the discomfiture, questions seem to have been raised within the ministry of defence (MoD) about the life cycle costing of the Basic Trainer Aircraft. The Avro-replacement programme is already in limbo, and the Fifth Generation Fighter Aircraft (FGFA) has been chugging along for far too long without even reaching the runway for a take-off.

Meanwhile, the squadron strength of the Indian Air Force seems to be in a state of free fall. The Standing Committee on Defence (16th Lok Sabha) has observed that the squadron strength could possibly plummet to 24 – half of what the air force wants – by 2024, unless the Light Combat Aircraft (LCA) programme gets going by that time.

Following some unfortunate accidents involving the HAL-built Advanced Light Helicopter Dhruv, concerns are naturally being expressed about this platform, which has been exported to several countries including Peru, Myanmar, Turkey, Maldives, Mauritius and Nepal. The current contract with Ecuador is also reportedly in trouble, with that country mulling cancellation of the order for the last two choppers on account of issues related to cost, maintenance problems and poor after sale service. It will be a quite a setback if that happens.

One does not have to go any farther than this to drive home the point that there is no dearth of developments that could cast a shadow over the air show. Fortunately, that has not happened. Thanks to the Prime Minister’s presence at the inauguration and, by implication, continued focus on ‘Make-in-India’, the response of the industry has been overwhelmingly enthusiastic. More than 300 companies from nearly 70 countries are participating in the show, displaying more than 100 civilian and military aircraft.

Although heartening, all this razzmatazz hides the lack of clarity on what ‘Make-in-India’ means in relation to defence production and how is it different from systems and procedures currently being followed by the MoD. The enthusiasm of the Indian industry and the foreign original equipment manufacturers (OEMs) – not to speak of the governments – needs to be channelled to show results on ground. Undoubtedly, it will take a while before the results start showing. But the question is whether the right course has been set for that to happen and for the companies to move towards making India a manufacturing hub. Not to put too fine a point on it, behind the hullabaloo everyone seems to be asking one question: what does Make-in-India in defence mean and how does one enter the Indian defence production market?

The Defence Production Policy of January 2011, the Technology Perspective and Capability Roadmap (TPCR) of April 2013 and the Defence Procurement Procedure (DPP) of 2013 are the main documents which drive, or are supposed to drive, defence procurement and manufacture. But these documents, which pre-date Prime Minister Modi’s Make-in-India call, do not provide clear answers to that fundamental question since their focus is on meeting the requirement of the armed forces through outright purchase, ‘buy and make’ or ‘make’.

Outright purchase, whether from Indian companies or foreign original equipment manufacturers, is not what Make-in-India is all about, notwithstanding the fact that Buy (India) – now the most favoured category under DPP 2013 – also involves an element of indigenous production.

Buy and Make (Indian) involves manufacturing in India but it is only through transfer of technology and, in any case, the main players in this category of cases are Indian companies. Foreign companies play the lead role in Buy and Make cases but this is now the last but one category in the hierarchical ordering of the procurement categories, followed only by Buy (Global) which involves no manufacturing in India.

In ‘Make’ projects also, which come closest to what Make-in-India seems to be all about as it involves indigenous design and development of prototypes of complex high technology systems, the lead role has to be played by Indian companies, although, of necessity, they will have to tie up with foreign manufacturers. It needs recalling that in the past nine years or so since this category was introduced no project has taken off the ground so far.

There is, therefore, an urgent need to conceptualise a policy framework to let it be known to the foreign OEMs, as indeed to the Indian industry, what Make-in-India implies so far as defence production is concerned and how is the new concept different from the existing policy framework.

Considering that unlike other sectors that are consumer-driven, the defence sector is a monopsony, prospective manufacturers and sellers have to build their business strategies around the demand from the armed forces. The TPCR has not quite succeeded in galvanising the industry into undertaking manufacture of equipment and systems which they are not sure of being purchased by the ministry.

Companies, therefore, continue to enter the fray only when the request for proposal (RFP) is issued, although the more enterprising ones perhaps do take some advance action when request for information is issued as a prelude to the RFP.

This is surely not what Make-in-India is all about. The concept will have to be customised for the defence sector and procedures evolved to give effect to that concept. It is unlikely that foreign companies will find it irresistible to relocate their production units to India, even if there is drastic improvement in the eco-system, in the hope that at some point in the future the MoD will buy what they are making and that, in the meantime, they could sustain themselves through exports.

Most importantly, there has to be a drastic change in the way the MoD engages with the industry – both Indian and foreign. An institutional mechanism is required for ensuring continuous dialogue and finding solutions to the issues that will inevitably get thrown up when the new Make-in-India policy framework is put in place along with a customised set of procedures. The time seems to be running out.

Views expressed are of the author and do not necessarily reflect the views of the IDSA or of the Government of India