India’s Defence Exports Require A More Nuanced Strategy

India will have to embark on a long term strategy focussed on export of indigenous and major defence equipment if it is to achieve its aim of realising its export target of Rs 35,000 crore by 2025

By Amit Cowshish

Opinion

In what may possibly be among the first major defence export contract in recent times, BrahMos Aerospace Private Ltd signed an agreement for $374 million on December 31, 2021, for the sale of eponymous supersonic cruise missile to Philippines.

noval

Alongside, there are reports of India being in talks with Sri Lanka for supplying two Dornier military aircraft and making efforts to secure a deal worth about $900 million from Malaysia for the sale of Light Combat Aircraft (LCA) Tejas. These developments are heartening, coming, as they do, in the wake of a remarkable, albeit somewhat erratic, upswing in India’s defence exports.

In 2014-15, the value of export authorisations issued by the Department of Defence Production (DDP) stood at Rs 1,940.64 crore but declined to Rs 1,520.91 crores in 2016-17 before climbing up dramatically to Rs 10,745.77 crores in 2018-19. According to the latest tally, the figure for 2020-21 stood at Rs 8,434.84 crore. It is not known, though, if the actual value of exports coincides with the value of export authorisations.

Be that as it may, considering this inconsistent growth trajectory, it will take a lot of doing to achieve the export target of Rs 35,000 crore by 2025 as envisioned in the Draft Defence Production and Export Promotion Policy (DPEPP) issued by the DDP in 2020. This policy also lays down a 10-point strategy MoD intends to adopt to promote defence export. While it is too early to assess the efficacy of this strategy, it would be instructive to have a look at the steps taken so far to implement it.

The 23rd report of the Standing Committee on Defence (SCoD), submitted to the parliament last December, lists out nine specific steps by the DDP—some of them before promulgation of DPEPP 2020—to boost exports.

These steps include online issuance of export authorisation to prospective exporters and introduction of Open General Export Licence (OGEL) System for intra company transfer of technology and export of parts and components. The OGEL will enable the Indian companies to export specified items to specified destinations without seeking export authorization from DDP during the two-year validity of the license.

There are reports of India being in talks with Sri Lanka for supplying two Dornier military aircraft and making efforts to secure a deal worth about $900 million from Malaysia for the sale of Light Combat Aircraft (LCA) Tejas

A Standard Operating Procedure (SOP) has also been issued to ensure expeditious authorisation for export of munitions covered by the Special Chemicals, Organisms, Materials, Equipment and Technologies (SCOMET) list.

An export Promotion Cell has also been set up to coordinate export-related activities including enquiries received from various countries, and a scheme has been introduced to fund marketing activities by the Defence Attaches posted in India’s foreign missions.

Other steps include setting up of a fully automated export portal and electronic sharing of export leads with the industry, webinars with friendly foreign countries and establishment of offices by Defence Public Sector Undertakings (DPSUs) in various countries to promote export of indigenous defence equipment, parts, assemblies, and components, Above all, a High-Level Committee (HLC) comprising the Defence Minister, External Affairs Minister and the National Security Advisor has been constituted to facilitate faster clearance for export of major indigenous defence platforms. These measures are significant, but the formidable challenges India faces in becoming a major exporter of arms requires a much more nuanced approach.

According to the March 2021 report of the Swedish Think Tank, Stockholm International Peace Research Institute (SIPRI), 95.2% of the global arms export market was controlled by 15 countries at the end of 2020. More than half of this trade was in the hands of USA (37%) and Russia (20%), with each of the last three countries in this list—Turkey, Switzerland and Sweden—accounting for 0.7% of the market share.

With a share of 0.2%, India is 24th in the list. The competition to garner a slice of the shrinking defence budget across the globe is so intense that 13 of the 25 largest exporters witnessed a decline in their share of global arms trade between 2011-15 and 2016-20.

In some cases, countries with established military industrial complex saw a sharp decline in their share. The share of Russia, for example, declined by 22% and that of the United Kingdom by 27% during the aforesaid period. Ukraine’s share dropped by a whopping 68% and that of Sweden by 54%. Even China—the newest global manufacturing powerhouse—saw its share drop by 7.8%.

The opportunity offered by the decline in the share of some of these countries with large manufacturing base, however, was not seized by India, whose share went up only by 0.1% during the aforesaid period.

The defence establishment will have to develop the ability to foresee such opportunities and formulate suitable strategies to exploit them if it is to increase its share in the global arms trade

The defence establishment will have to develop the ability to foresee such opportunities and formulate suitable strategies to exploit them if it is to increase its share in the global arms trade. This is not going to be easy.

It is equally important for India to have indigenously designed and developed equipment and platforms that can compete with the best in the world if serious inroads are to be made into global market.

Presently, there are only a few platforms that would fit that bill. One such platform is the Light Combat Aircraft (LCA) Tejas, but it too uses engines made by USA’s GE Aviation. Similarly, Brahmos supersonic cruise missile is developed jointly with Russia and the indigenous content therein continues to be quite high. The fact is that many items are manufactured in India using technologies transferred by foreign original equipment manufacturers.

Replying to a parliament question in the Lok Sabha on the August 4, 2021, Minister of State for Defence Ajay Bhatt stated that ‘major defence items’ exported by India to 75 odd countries included weapon simulators, tear gas launchers, torpedo loading mechanisms, alarm monitoring & control systems, night vision monocular & binoculars, light weight torpedo & fire control systems, armoured protection vehicles, weapons locating radars, HF radio, and coastal radar systems.

These items cannot be classified as ‘major defence items’. In fact, the minister himself mentioned in his reply that the majority of defence exports included parts and components. This is not going to take the Indian industry too far.

What is required for a sustained growth in India’s share in the global defence market is a long term strategy that focuses on export of ‘major defence items’ in the real sense of the term that are indigenously designed and developed. Winning the trust of the potential buyers in the Indian products is an associated challenge.

In 2015, Ecuador had terminated its contract with the Hindustan Aeronautics Limited after four of the seven Dhruv Advanced Landing Helicopters it has acquired from the latter crashed. Such incidents, coupled with the reservation openly, or covertly, expressed by the Indian armed forces themselves about some of the indigenously developed defence items, can damage India’s pitch for defence exports. While it is important to have indigenously designed products that could be pitched in the global market, in the end, geopolitics plays an important role in international arms trade. Presently, the ten largest importers of arms are: Saudi Arabia, India, Egypt, Australia, China, Algeria, South Korea, Qatar, UAE, and Pakistan. This list comprises two sets of countries: one set comprising the countries that India will not sell arms to, even if they are willing to buy, and the other comprising countries which are unlikely to abandon the influential allies from which they buy the equipment. With the spheres of influence thus already carved out among the major arms exporting countries, India will have to look for potential buyers outside those spheres.

– The author is Ex-Financial Advisor (Acquisition), Ministry of Defence. Views expressed are personal and do not necessarily reflect the views of Raksha Anirveda

Leave a Reply