The Indian defence industrial base and production capacity is now one of the largest in the world. This has painstakingly been built both pre-independence (1947) and also made rapid strides during the decades after independence. India now has 40 Defence Ordnance Factories and 8 Defence Public Sector Undertakings. These produce a large range of armaments, ammunition, vehicles, helicopters, fighter aircrafts, sophisticated electronics equipment, missiles and naval crafts. The defence sector is fully government controlled with the ultimate aim to reduce dependence on imports and become self reliant in this critical sector at the earliest.
Notwithstanding the large industrial base and advancement in various technologies, research and development in defence has not kept pace with the requirement of modern and high technology weapon systems. This has resulted in import of major armaments and other systems involving critical technologies.
Till the 80’s India was largely dependent on Soviet Russia and other East Bloc countries for its defence requirements. As a matter of fact the entire tank fleet, mechanized infantry BMP/ ICV fleet, Air Defence systems, bridges, and a large portion of field Artillery presently in front line service in the army is of Soviet/ Eastern bloc origin. Despite the economic upheaval in India in 1991 coinciding with the end of the cold war, the two countries continued their defence relationship. The Indo-Russian defence programme is currently set to continue until 2010, but the future is not certain. India in the last 6-7 years has bought the SU30 aircrafts, 310 T-90 battle tanks (347 more are on order), the air craft carrier, Smerch rocket launchers etc. The view on further major purchases is divided due to a number of problems being faced on maintenance support of current and past equipment.
The era of liberalization which commenced in 1991, coincided with the enhanced role of the private sector in defence. Up to the late 90’s the private sectors’ role was mainly limited to providing large quantities of raw material, sub assemblies and limited quantities of high technology items to the Ordnance Factories, Defence PSU’s and the Army’s repair agencies.
In May 2001, the government decided to open up defence to private participation up to 100%, with FDI permissible up to 26%. With this change in policy a larger role for the private sector has emerged. Initially, the private sector was slow to absorb this change primarily due to the large requirement of funds, uncertainties of sustained defence requirements and long lead times for trials and eventual introduction of equipment. However, over the last 4-5 years with the active participation of various chambers of commerce a number of large private sector companies have successfully entered the defence sector with tie ups both with large foreign defence conglomerates and defence PSU’s/ Ordnance Factories.
As per SIPRI Book of 2008, US military spent $547 billion in 2007 which corresponds to 4%of its GDP. UK ranked second with a spend of $60 billion, India ranked 10th in global spending with an expenditure of $ 24 billion of which approximately $10 billion was on capital expenditure, 80% of this was towards buying new equipment. ABOUT $11 BILLION ARE FOR CAPITAL PURCHASES during 2008-2009.
It is no tall statement that there is NO shortage of funds for defence, specially for Capital/ New acquisitions. Having said this, the availability of funds for acquisition of new equipment during the last few years is shown below:-
CAPITAL EXPENDITURE 2002-2009
YEAR EXPENDITURE (IN CRS) EXPENDITURE IN (BN $)
2002-03 14953 3.3
2003-04 16861 3.8
2004-05 32147 7.3
2005-06 32326 7.3
2006-07 33791 7.7
2007-08 37705 8.6
2008-09 47976 11
A look at the table above shows that during 2004-05 there was a spurt in capital spending. Since then there has been a steady increase in the funds available for capital acquisition. Over US$11billion are available during the current fiscal for new equipment.
With the entry of the private sector, large resources in terms of latest technologies, management and scientific skills, and its ability to raise large sums of money have brought defence production to center stage. This will not only enhance best practices but will assist in increasing indigenous production, employment and move faster towards the aim of self reliance. It is in this stage of transition that India needs large scale infusion of the latest technologies which is critical to self reliance. This can be best provided by collaboration with foreign companies excelling in a range of diverse equipments. Both the private sector and defence establishments are moving in this direction, albeit a little slow.
India is likely to reach an annual budget of $40 billion by the end of the 11th defence plan (2011-2012). Of this, about $16-17 billion would be available for capital expenditure. An analysis of major purchases during the last 5-6 years shows that major contracts have been signed for the Air Force and Navy. Defence observers feel that this trend is likely to continue. Big ticket contracts like 126 jets to replace the ageing MIG-21 worth about $10 billion, 6-C-130 aircraft, six refuellers, long range maritime patrol air craft for the Navy, utility helicopters for the Army and Air Force are on the anvil.
Indigenous defence industry and foreign manufacturers need to closely observe the Armys requirement. Large induction of four types of 155mm guns, the TCS, BMS, dry and wet bridges, fuzes, bi modular charge systems, specialist vehicles, Air Defence gun and missile system, night vision devices are among a host of requirements the Army wants urgently. Conceptually the Army works on an equipment profile of 30: 40: 30, this implies that 30% of the equipment of a type is approaching obsolescence, 40% is current and 30% is state of the art. The best example to illustrate this is the tank profile, while the T-55 is approaching obsolescence, the T-72 is current and the T-90 is state of art. If this concept is interpolated to others, the requirement of hardware over the next 5 to 10 years can be assessed broadly. Collaboration and transfer of technology will be the mantra in all these requirements.
Defence Procurement Procedure -2008 is in place wef 01 September 08. Very clearly India has entered free market economy in defence requirements. The Indian defence industry is in transition with increased participation from the private sector. In all fairness Indian industry is nascent and catering for the huge demand of defence equipment by themselves is extremely difficult, thus the window of opportunity for foreign manufactures to partner with Indian industry and provide Indian Defence Forces the state of art equipment is for real.
