Manu Pubby
September 11, 2014
Text by Sandeep Unnithan. Graphic by Saurabh Singh
At a national security meeting in Delhi on April 16, 2010, then-defence minister A.K. Antony assured top military commanders that budget constraints were a thing of the past. "There will never be a paucity of funds," the minister said confidently, "as far as it concerns the modernisation of the armed forces."
It was music to the ears of the officers.
The economy was on an upswing and military purchases were on track.
Barely a month before the meeting, India had signed a $760 million deal for 12 VVIP helicopters for the Indian Air Force (IAF).
Other big-ticket acquisitions were being processed.
Among them was a $4.1 billion contract for 10 strategic lift aircraft from the US-unheard of for the IAF, which had till then bought entire fleets of Russian fighter aircraft for lower.
Military planners of all three services in the room, therefore, had no reason to disbelieve their minister.
A few days later, a serving armed forces chief would remark that money was no longer a concern:
"It's a blank cheque. Funds are not an issue any longer, what matters is what we need and when we need it."
But the heady days the four-star officer was looking forward to-the creation of a modern force with enough firepower to blunt any conventional misadventure in the region-would never come.
Defence scandals surfaced in the following months, starting with the Sukna land case, and combined with a sliding economy, paralysed policy and decision-making.
With Antony willing to err on the side of caution and stall rather than risk a scandal, his ministry all but shut down for business.
The result: India's defence modernisation plans have crumbled into a mess.
The lost years
The policy paralysis has hit the armed forces the hardest, with little progress made in most of their ambitious projects and plans to modernise.
The irony is that the Indian military is the only one of its kind that is swimming against the global trend of being "lean and mean" by raising the number of troops.
Key suppliers such as Rheinmetall, Rolls-Royce and Finmeccanica were blocked from dealing with India under the 'put on hold' principle for firms suspected of corruption.
The only major defence deals sealed by the UPA government in its last years in power was a contract to equip the IAF with basic trainers and another to upgrade the Mirage 2000 fighter fleet.
As decision-making came to a standstill, thorny issues were kept pending for months before being quietly taken off the agenda, say members of the Defence Acquisition Council (DAC), the apex body of the ministry on purchases.
Though in some cases, the laborious process of floating tenders, and evaluating and shortlisting suppliers is on, the process seems tailored to delay or stall final agreements.
The lack of drive in the defence ministry has led international companies to scale down operations in India.
Major firms such as BAE Systems are cautious about expanding in India while the likes of Textron (Bell) and Sikorsky have shifted focus to the civilian market.
Even European giant EADS, now being renamed Airbus, has downsized.
Rheinmetall has shut shop.
Months after the new Government came to power, many modernisation plans remain in disarray and funds for emergency purchases are hard to find.
The chronic 'Antony delay' in decision-making, as some in the forces call it, together with a falling rupee and rising inflation has meant that India's pending military modernisation projects are today worth more than $35 billion.
Many of these projects are stuck in their final stages, and several are not expected to make it due to the severe funds crunch the NDA Government cannot overcome in a hurry.
These range from critical artillery for the mountain strike corps coming up on the China border to aerial equipment crucial to maintain a conventional edge and undersea capabilities.
At the heart of the problem, officers and analysts say, has been the UPA government's tendency to not only stall modernisation attempts but also shrink the slice of national resources allotted to the forces.
Indian defence spending has come down to an all-time low over the past four years.
In terms of the most acknowledged global measure of spending, the amount of money India allots to defence as a percentage of GDP is at its lowest in more than four decades at 1.74 per cent.
This has steadily declined from an average 3 per cent in the 1980s.
The global average is 2.5 per cent even though there are wide variations.
NATO guidelines for its members stipulate 2 per cent of GDP for defence while China has never spent below 2 per cent of its vastly higher GDP on security.
"It is clear that current allocation is insufficient to undertake military modernisation which is necessary to meet emerging threats and challenges. Defence spending has been stagnating over the years," says defence analyst Brigadier Gurmeet Kanwal (retd).
Arming without aiming
Not only has India's defence spending fallen but another unhealthy trend that is crippling modernisation of the forces has emerged-the steady jump in revenue expenses such as paying salaries, maintaining infrastructure and filling of diesel tanks.
This head will account for more than 60 per cent of the defence budget for 2014-15.
Although the defence budget has grown by an average 12 per cent annually in the last few years, much of the increase has been gobbled by the increasing salary bill, rising fuel costs and exchange rate spikes.
Last year, the government had to transfer Rs.7,800 crore earmarked for modernisation to meet rising fuel costs. "There is a crunch that no one can deny," laments a three-star IAF officer.
"The money we have this year for new contracts is just around Rs.2,500 crore. The rest of the capital budget is committed to tranches of payments for previous long-term acquisitions."
Those past deals include the Sukhoi Su-30MKI fighters, Boeing C-17 planes and C-130 transporters.
A brigadier told INDIA TODAY that the Army's budget for signing new deals is limited to just around Rs.500 crore this year, a pittance for the million-plus force.
In February this year, at a gathering of the world's top defence suppliers who had come to Delhi to showcase their products at the Defence Expo, Antony dropped a bombshell many expected.
Commenting on what has been called the biggest ever global tender- the acquisition of 126 fighter aircraft for the air force-Antony said "there is no money left for this now".
By confessing that "almost all money has been spent", he dealt a mortal blow to the Defence Expo on its first day, leaving top global defence executives wondering about the point of participating in the event.
How did India, in a short span of four years, slip from "no paucity of funds" to "all the money has been spent" without giving an exponential edge to the combat abilities of its armed forces?
Some part of the answer lies in the argument central to the book, 'Arming Without Aiming: India's Military Modernisation', by defence experts of the Brookings Institution, Stephen P. Cohen and Sunil Dasgupta.
The book argues that India lacks a security strategy and hence also a rudder for military modernisation.
[ COMMENT : read Book Review at :
http://ajaishukla.blogspot.in/2010/12/b ... iming.html ]
But beyond that simple formulation, defence modernisation programmes ended up getting muddled under the UPA even when there were clear, present and immediate needs.
Indecision within the ministry, open squabbling with the finance ministry and political considerations have resulted in a 'procurement of convenience' where projects deemed to be easy to process have gone through while other, more critical requirements have been ignored.
For instance, IAF's $4.1 billion deal to buy 10 transport aircraft from the US was an easy-to-process government-togovernment deal.
The US pushed it strongly and India was willing as it was seen as uncontroversial and clean.
The only problem was that the IAF's hard-bargained funds were spent on a logistic capability instead of on acquiring firepower and bolstering the fighter squadron strength.
"Airpower is inherently an offensive force. We need to invest in firepower delivery to take the war to the enemy instead of focusing largely on what are logistic elements. The problem is that each of the three forces are deciding acquisitions on their own. There is no national defence policy and hence no coherence as to what is our intent when arming the military," says Air Marshal P.S. Ahluwalia (retd), former chief of the Western Air Command.
"Also, 80,000 new troops on the China border is strange. The revenue budget will hit the ceiling. Do the Chinese intend to capture territory here? I don't think so," Ahluwalia says, referring to the proposed mountain strike corps.
No quick fix
In one of his few media interactions after taking charge as finance and defence minister in May, a visibly exasperated Arun Jaitley remarked that it remained to be seen "how many bills are pending and how much we can do" before any action could be taken.
He, however, ruled out a quick-fix solution in the form of a jump in budgetary support.
"As the base of the economy expands, even a lesser percentage (of GDP) may increase the amount. Whatever amounts are necessary, our endeavour in due course is to make them available," Jaitley said.
The new Government is obviously being cautious as it tries to figure out the mess and move forward.
Over the last three months, new policy decisions on manufacturing, export and procurement have been notified with a view to give some direction to defence modernisation.
The central theme, officials say, is to encourage private sector participation in defence production, promote joint ventures in India with foreign collaboration, give incentives to Indian firms to lead all major procurements and reduce foreign exchange outflow.
And this is already beginning to translate into action on the ground.
At a meeting in late August, a three star air force officer met senior representatives of four top Indian defence manufacturers in his office in Vayu Bhawan.
The agenda was to push three cutting edge projects the air force has identified for private sector participation :
- the LCA MK II project to create a new version of the fighter with more thrust;
- the planned Advanced Medium Combat Aircraft (AMCA) project to develop a new indigenous fighter aircraft;
- and the futuristic unmanned combat aerial vehicle (UCAV).
The message was clear: identify foreign technology partners, form collaborations and come back with a viable plan and these projects could be yours, ending the tradition of involving PSU Hindustan Aeronautics Limited (HAL) in every military aviation programme.
The Army is preparing to go the Navy way-fully indigenous manufacturing with foreign assistance if needed-when it comes to purchasing new guns.
About 4,000 artillery guns are expected to be bought in the next decade.
The plan now is to ensure that all future procurements will be made only from Indian companies, many of whom have acquired technology from across the world by buying out patents and even entire production plants.
Besides policy decisions, the new regime is taking tough calls on projects stuck in the pipeline.
Last month, it cancelled the deal for 197 light choppers for the Army.
The deal was hanging for almost four years as the UPA had put it on hold following allegations of irregularities.
The cancellation has delayed the modernisation of the Army Aviation Corps, but some in the army are relieved that a decision has been taken and a new process to buy the choppers can be initiated.
The defence ministry has also approved the contract for 15 Chinook heavy lift choppers and the deal for 22 Apache attack helicopters.
As part of its focus on promoting modernisation projects that entail production and development in India, the Government has approved procurement of 118 Indian-built Arjun tanks at a cost of Rs.6,700 crore.
The Army is also set to get its first artillery systems in three decades with Jaitley clearing a Rs.900 crore project to purchase 40 Arjun 130-mm Catapult systems, mobile artillery that the Army needs badly.
Besides, the ministry has agreed to upgrade and refit six submarines at a cost of nearly Rs.5,000 crore, a move that will partly address concerns over the health of the underwater fleet.
Another major decision has been to eliminate HAL from an air force project to replace its Avro transport aircraft fleet.
The contract, likely to cost close to Rs.30,000 crore, will be handled by Indian private companies in collaboration with a foreign partner.
Although some defence analysts feel the policy of the new Government is driven largely by a consortium of Indian private sector players, the forces won't complain as long as these moves fulfil their demands.
The private sector, for one, is excited and this can create thousands of high technology jobs even though the process of shifting manufacturing to India is expected to be slow.
Fixing the Indian defence mess is not expected to be easy and the new Government will be faced with several tough calls in the months and years to come.
And until a full-time defence minister is named, the task will sit heavy on the shoulders of Jaitley, who is already burdened with the enormous responsibility of fixing the Indian economy.
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Even the US is lucky because it too relies on these primitive..err.. FLIR/TV/LRF gimbals for its systems for its tanks etc. 
