On the policy front, the most notable initiative taken during 2014-18 was the introduction of a strategic partnership scheme in 2017, says Amit Cowshish

by Amit Cowshish

According to the latest report on arms transfer, released by the Stockholm International Peace Research Institute (SIPRI) earlier this month, India ceased to be the world’s largest importer of arms during 2014-18, sliding to the second position behind Saudi Arabia with a 24 per cent decrease in imports compared with the imports during the preceding five-year period (2009-13) as compared with a 192 per cent increase in imports by Saudi Arabia.

This sounds good, but it may not be something to rejoice about as this decline in the dubious status does not seem to be the result of any slow-down in the demand for military equipment or the policy initiatives taken by the government to bring down imports. If anything, the need for military equipment has only grown over the years. It is no secret that the armed forces are in dire need of a wide range of equipment and other platforms. The rapidly falling strength of the fighter squadrons of the Indian Air Force is enough to drive home the point.

On the policy front, the most notable initiative taken during 2014-18 was the introduction of a strategic partnership scheme in 2017. This was intended to boost domestic defence manufacturing with the help of transfer of technology from the foreign manufacturers, which can bring about a genuine slow-down in imports.

No contract has, however, been awarded under this scheme so far, if for no other reason than the fact that no proposal initiated under the new scheme after its adoption by the ministry in 2017 could possibly be concluded within such a short time.

The impact of this initiative will be known in the years to come, if and when contracts get awarded to the Indian companies under the strategic partnership model and they start making the equipment in India. It will truly be something to rejoice about if the imports come down because of the spurt in domestic production as a consequence of this scheme.

Meanwhile, this policy measure seems to have caused a fortuitous impact on imports as right from 2016 onward the ministry of defence has been avoiding awarding major acquisition contracts to the foreign manufacturers under the ‘buy and make’ category in anticipation of the roll-out of the strategic partnership scheme, notwithstanding the fact that a few contracts, mostly for outright purchase, have been signed with foreign manufacturers during this period.

Major programs like the medium multi-role fighter aircraft, utility and multirole helicopters, and submarines are expected to follow the strategic partnership route, which otherwise might have gone to the foreign manufacturers keeping India at the top of the table of arms importers. The second, and arguably the more proximate reason for decline in India’s defence import, seems to be the modest and almost flat growth in the budget outlays during 2014-18 as compared with the growth during 2008-13. (See the chart)

(Rupees in thousand crore)       

(Note: These figures are for the financial years and exclude the allocation in respect of the Ordnance Factories, Defence Research & Development Organisation, Inspection Organisation, Ex-servicemen Health Scheme, and National Cadet Corps)

The huge gap between the requirements of funds projected by the ministry of defence for buying equipment and the actual allocation made in the union budget also points to the financial constraints in awarding new contracts. As per the data given in various reports of the standing committee on defence this gap is quite substantial. (See the Table below)

(Note: The figures for 2016-17 include National Cadet Corps, Military Farms and Ex-servicemen Health Scheme)

That the gap came down from Rs 43,759.75 crore in 2013-14 to Rs 35,726.38 crore in 2017-18 does not imply slow-down of demand if one considers the fact that in 2018-19 it again rose to Rs 51,925.48 crore. This persistent gap indicates under-funding of the capital acquisition plans of the armed forces. It would not be wrong to infer that had the funding been adequate, some of it would have been used for importing badly needed equipment and other platforms off-the-shelf.

Thirdly, a variety of assorted factors also seem to have contributed to the slow-down in imports. The biggest culprit would be the flip-flop in decision-making which has been the bane of all capital acquisition programmes. Cancellation of negotiations for the acquisition of 126 medium multi-role combat aircraft after negotiating the deal for more than two years, procrastination on the issue of finalising the contract for 56 transport aircraft to replace the ageing fleet of the Avro aircraft, and frequent retraction of requests for proposal involving foreign manufacturers exemplify indecisiveness on the part of the ministry, apart from indirectly dislodging India from the dubious distinction of being the largest importer of arms.

The slide from the top slot should not induce a false sense of satisfaction. Being the largest importer is not a matter of pride and being dislodged from that position is nothing to be ashamed of, but it would be a matter of satisfaction and pride if the slide down this ladder is on account of corresponding increase in domestic production of military equipment and other platforms to meet the requirement of the armed forces. This has to be the primary focus of the ministry of defence in the coming years.

The author is former Financial Adviser (Acquisition), Ministry of Defence. Views Expressed are his personal