Time to fly high

Monday, 6 February 2006 - 11:50pm IST
We need to urgently establish a national strategy on acquisition of technology and manufacturing capability especially in aerospace systems.

For decades the arms expos were held in Europe as the transatlantic hub of new weaponry put on display for marketing; and the rest of the world used to dutifully go there to witness the showcasing of the latest in military and especially aviation technology and systems. Europe remains the main destination still, but from Moscow to Dubai, Karachi and Singapore, new places have been emerging over the past decade or so. But if the Aero India 2005 and the recently concluded Defence Expo in New Delhi are any indications, it is India that has been increasingly overshadowing the others—all because India is seen as a major market and potential producer.


Take the estimated aerospace market, which deals in high-technology high-cost systems that are now the core of a nation’s techno-economic strength and military power.


Civil airliners under procurement are estimated to be worth around $20 billion over the next 5-10 years while ground infrastructure would amount to another $10-12 billion. With the defence budget on capital account hovering around Rs 34,000 crores, defence procurement of major systems is likely to be around $7 billion annually over the next 10 years most of which will be air power related. To this must be added as much as around $3-5 billion annual expenditure on procurement for spares, product support, overhaul and other maintenance needs.


These are huge sums for a developing country; but unbelievably modest for a country with one of the highest economic growth levels, and a rising power with increasing commitments but which has ignored modernisation for nearly two decades. For example, public sector airlines have suffered due to lack of re-equipment; and the force level of the Indian Air Force has been dropping and will stay on the downhill path in the immediate future because we did not procure new aircraft in time. And this is happening when China and Pakistan both are placing the highest priority on aerospace power.


Any country, even the United States, would obviously spend a great deal of care in taking decisions regarding procurement at these levels of costs and capabilities; and we should do even more so. Unfortunately we have allowed our thinking and procurement decision-making to be conditioned by (i) the “Bofors Syndrome,” (ii) lack of integrated approach (iii) narrow cost-audit approach to the exclusion of the broader implications for national economic growth and industry, and so on.


It is the aspect of our procurement strategy (especially in aerospace sector) for economic-industrial growth that needs greatest attention for the future. Aerospace procurement process must ensure moving beyond licence assembly/manufacture. Trans-national off-sets and outsourcing are increasingly accepted as one of the key methods of doing so. Boeing Co., the largest aerospace company in the world which outsources major work to its only rival Airbus Industries, would reportedly outsource work to India worth around 10-percent of the sale value of aircraft and product support to Air India.


As against this, the average off-sets/outsourcing that US industry provides in foreign countries with its arms sales are in the order of 80-percent.


We will have difficulties moving towards energising our defence /aerospace industry without a holistic approach to the issues, and a scientific techno-economically (as distinct from current audit-accounts) approach to arms acquisitions. For example, we have predictably laid down a rather rigid procurement policy last year with regard to off-sets and counter-trade. And yet flexibility is a key element in obtaining the best deal because each acquisition has to be dealt as per its uniqueness.


Similarly, we need to look seriously into the reasons why there has been such a dismal record of FDI in defence industry more than three years after it was instituted. Used to control and dominance, the Americans feel this level is inadequate. On the other side Indians hesitate to encourage Americans because of apprehensions of reliability. And because of the past buyer-seller relationship, the Europeans also hesitate too much; and the Russians lack capital for FDI.


What we need urgently is the establishment of a national strategy, rather than only a departmental policy, on acquisition of technology and manufacturing capability especially in aerospace systems.


Secondly, with the level of investments in aerospace technology and systems in the coming years and the fact that aviation requires an integrated approach involving a number of technologies and capabilities, today it has now become a critical necessity to establish a national commission on aeronautics. This should provide an overall integrated national approach to strategy for acquisition of technologies and capabilities besides providing oversight on lines similar to what we have for space.


The writer is director, Centre for Air Power Studies.


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