November 12, 2002


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Admiral (retired) J G Nadkarni

Hollow promises

2020 was a good year for India's defence exports. The last of the three frigates ordered by Oman had been launched and the other two delivered. The Saudi order for 100 Arjun tanks had been completed well ahead of time and negotiations were in an advanced stage for the delivery of 50 light combat aircraft to Malaysia.

Defence exports had crossed the Rs 15,000 crore target set for it and India had truly established itself in the leading ranks of arms exporters.

A dream? Obviously. But a similar dream has been nurtured by successive defence ministers and their ministries for the past twenty years. In the eighties, when K C Pant was the defence minister, he set a target of Rs 200 crore for our annual defence exports. This was revised upwards to Rs 500 crore by Sharad Pawar during his tenure. Recently George Fernandes announced his aim to seek a tenfold increase in our arms exports.

Ironically, as the targets get revised upwards, actual defence exports shrink. In the eighties we exported about Rs 120 crore worth of small arms, mostly to Arab countries. This came down to Rs 100 crore in the nineties and now stands at Rs 80 crore. In a typical case of sour grapes the ministry always contends that we actually don't want to export arms. The reality, unfortunately, lies elsewhere.

In the gigantic arms bazaar India stands nowhere. The fiercely competitive arms market is dominated by four giants --- the United States, Russia, France, and Britain. But some of the other countries like China, Brazil, Israel, South Africa, Poland, and Singapore are also eating into the pie. They have succeeded in carving out small niches for themselves. Not only has India not been able to export much, it has been one of the top importers of arms for many years.

There are many reasons why India has not been able to make any inroads into the lucrative arms market. Any shopkeeper knows that if you want to sell, you must have a good product to sell, it must be priced competitively, and you must advertise it effectively. India fails on all three counts.

Despite having a huge Defence Research and Development Organisation with over 45,000 employees and many laboratories, our scientists have over 50 years failed to come up with a single world-class product. Brazil developed the Embraer trainer aircraft and Israel the Uzi submachine-gun, both world-beaters. The best that can be said about the DRDO's Arjun tank is that it has not been very successful. The LCA is still many years from full development and induction into the air force.

Even when we are able to offer a saleable product, the time and cost overruns associated with our manufacturing units renders the product non-competitive. Consider the following. Some years ago the Ministry of Defence set up an export organisation. Saudi Arabia floated a tender for the supply of uniforms for their armed forces. Now if anyone should have been able to walk away with the tender it should have been our country. We have an ordnance factory that specifically makes uniforms. Yet our bid was $20 per uniform set, while the Chinese walked away with the order at a quotation of $9.

India has three shipyards under the MoD. They have built some fine ships in the past for the Indian Navy. Unfortunately, assured orders from the Indian Navy, their esoteric relationship with the MoD, and a reputation for time and cost overruns have made them non-competitive in the warship-building market. Not a single shipyard has secured a single order from abroad for many years.

A few years ago Malaysia was in the market for 26 offshore patrol vessels. Goa Shipyard made a bid with an Indian-designed OPV. Despite much canvassing at the political level, India did not make it even to the shortlist.

Advertising is another area where we have to improve standards. Go to any defence exhibition in the world. The Indian pavilion, if there is one, will be the drabbest and most poorly presented among the exhibitors. It is the equivalent of one of those ads by the income tax or other government agencies you see in the newspapers, made by the government's Department of Audio Visual Publicity.

Whatever the pronouncements made by any defence minister, India stands little chance of improving on its arms export performance until all our present shortcomings are removed. Our chronic ills, which prevent us from exporting, call for drastic remedies. The defence ministry needs to undertake a form of divestment on its assets.

To start with, a major shake-up is required. Forget about exports, we have failed to stop imports. The DRDO developed an MBT, but we still import tanks. The DRDO developed guns, but we still imported Bofors. Why not disband the organisation and auction off all its labs to the private sector? They may be able to put them to better use.

Of course there will be howls of protests about the strategic importance of having them under defence. It would be well to remember, however, that the entire US defence industry and a large part of research and development is in private hands.

Privatisation of all defence PSUs and ordnance factories should be the second objective. For years the MoD has been talking about involving the private sector in defence, but the progress, like divestment, has been extremely slow. In the name of strategic security the government is reluctant to hand over the production of lethal equipment to the private corporate sector. But increasingly in the world, close relationships are growing between governments and major multinational corporations, to the advantage of the former. Boeing, Lockheed, Philips, Marconi and Thomson-CSF today produce some of the most sophisticated, and thus the most exportable, defence items.

Given a chance Indian companies will be able to deliver what the DRDO and the PSUs of the defence ministry have failed to produce so far. The government must disband its defence empire or at least relax its monopoly and stranglehold on this vital sector. The argument that this is necessary to ensure strategic security will not wash anymore. Not if we want to increase our pathetic defence exports in the future.

The dream that has been kept alive by the defence ministry is still very much achievable, but not if we keep making empty statements and prescribing the same old medicine. Is the defence minister willing to take the drastic steps that are required if he wants a tenfold increase in defence exports?

Admiral (retired) J G Nadkarni

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