India Now Ranks 19 As Defence Exporter Jump 700% Since 2016 Next Must Radically Reform Ordnance Factories
All major countries maintain their own military and police forces. Even relatively poor countries in Africa and the Middle East, without any manufacturing base, import military equipment from Western countries, China and Russia at rates that they can ill afford. India needs to enter this market and try and garner some of the non-lethal military equipment and some lethal market. we can then easily cross the $15 billion mark in five years.
No wonder the NDA government has been strengthening this area and the country has seen a quantum jump in India’s arms exports. As per the data published by the Stockholm International Peace Research Institute, SIPRI, in March 2020, India has been ranked at 19 position as a defence exporter, where as it was ranked 23rd in the list of major arms exporters for 2015-2019. The defence exports in 2018-19 were worth Rs 10,745 crore, a growth of more than 100 per cent from 2017-18 (Rs 4,682 crore) and over 700 per cent since 2016-17 (Rs 1,521 crore).
This has been possible due to the government reviewing its arms export policy and streamlining the procedure for granting permission to both public and private companies.
At the inauguration of DefExpo, Lucknow, on 5 February, Prime Minister Modi said, “In 2014, the export of defence equipment from India was about Rs 2,000 crore. In the last two years, it has gone up to Rs 17,000 crore. In the next five years, our target is to increase exports to $5 billion, which is about Rs 35,000 crore.” Modi added that the world’s largest democracy cannot remain dependent on imports for its security.
At the time of independence India had a well-established defence production base of 18 ordnance factories that made a major contribution to the British war effort in World War 2. Four more were established between 1947 and 1962 and 19 more units came up thereafter, taking the total to 41 as of today. Hindustan Aeronautics Limited was formed through amalgamation in 1964, along with the Naval Dockyard. In addition, a number of defence public sector undertakings (DPSUs) have been established over the years. However the modernisation and expansion of these facilities have been painfully slow and have not kept pace with the times.
In spite of all the above, India is still the second largest importer of Arms and this reflects poorly on our administrative and technological ability.
Our defence industry cannot sustain itself with just supplying our own forces, it needs to export. However our earlier poor quality, uncoordinated foreign policy and governments pacifism did not allow us to become a major arms exporter. Complex procedures to obtain necessary License and permits, particularly by the private industry, further compounded the problem.
Though India has been exporting arms since 1959 to a select few, friendly countries. The exports were sporadic and technology available was ageing. By 2013-14, our exports were a meagre $113 million (at then exchange rates). The following episodes from the earlier era best illustrate all that was wrong with India’s export policy.
A specific export strategy for defence did not exist at all until August 2014. Exports were carried out under the Foreign Trade Policy after obtaining a no-objection certificate (NOC) from the MoD. The Modi government hit the ground running and a strategy for facilitating defence exports was formulated and promulgated in September 2014, focussing on export promotion/facilitation and export regulation.
It was decided that India will set up an Export Promotion Body with participation from public and private industry to advise the government, coordinate all export facilitation schemes of the government, and promote exports through specific marketing in target countries. A Defence Export Steering Committee headed by the Secretary, Department of Defence Production — with representatives from the armed forces, DRDO, Planning and International Cooperation Wing, and Acquisition Wings of the MoD, MEA and Director General Foreign Trade — was set up. The functions include taking decisions on export of sensitive equipment, monitoring the progress of defence exports, and suggesting specific steps/strategies to boost exports.
It was decided to include delegations from the public, private and joint venture sectors in bilateral meetings/discussions with friendly countries to inspire confidence in India’s defence products. Indian embassies would also promote defence exports.
Specific incentives were introduced under the Foreign Trade Policy. The Ministry of External Affairs was directed to facilitate a line of credit for foreign countries to import defence products, where feasible defence exports could also be financed through Exim Bank. The offset policy was reviewed and aligned towards integration of weapons/systems in India to enable exports.
The entire procedure for granting NOCs for exports was overhauled and streamlined to make it time bound and user friendly.
This strategy has paid rich dividends with a 700 per cent jump in defence exports. The actual exports could be much higher because since 2014, a large number of products have been removed from the defence products list. Interestingly, the private industry has 60 per cent share in the total exports.
While India has made significant progress over the last five years, its share of global arms exports is only 0.17 per cent. This indicates both our below-par performance and the big opportunity that beckons us. The question that arises then is: considering the fact that we are one of the world’s leading importers of medium- and high-end military technology products, can we really seize this opportunity? The answer is an emphatic yes.
Our interim strategy should be to focus on low-end technology weapons and equipment, non-lethal military equipment, and selective medium/high technology equipment like Brahmos missile, Pinaka multi-barrel rocket launcher, Advanced Light Helicopter, naval craft/ships, Akash air defence system and Astra air-to-air missile.
Once ‘Make in India’ reaches its full potential, then we can also focus on full range of medium/high military technology weapons and equipment. If we maintain course, $10-15 billion target is achievable in a decade.
The prerequisite for this is a radical revamp of our ordnance factories and other DPSUs in terms of modernisation, work culture and quality control. A Government Owned Contractor Operated, or GOCO, model should be put in place for inefficient establishments. There is also a need to create an environment for greater participation of private industry.
All this also requires a total revamp of Department of Defence Production in the Ministry of Defence.
