Contrary to what is believed, defence exhibitions are vital for the industry
Lt Gen. Mukesh Sabharwal
By the end of March 2016, another edition of DefExpo will become a reality. Ninth in the series of defence exhibitions that are held every two years in the country, the upcoming event may be different in several ways but is unlikely to produce any earth shattering results overnight. Yet, there is a ring of excitement in the defence industry, an air of expectation among vendors at large. DefExpo India 2016, the Land, Naval and Internal Homeland Security Systems Exhibition, was held at Naqueri Quitol in Quepem Taluka of South Goa, India from 28 to 31 March 2016.
Defence exhibitions are major highlights in the calendar of the ministry of defence (MoD). Each edition endeavours to outdo the previous one in scale and scope. Compared to about 425 exhibitors in the 2010 exhibition, almost 600 exhibitors, including 200 foreign exhibitors participated in 2012 in New Delhi, India, a country known to be one of the biggest arms and equipment buyers in the world. The 2014 event was attended by the largest number of officials with 63 delegations from 58 countries gracing the occasion. According to the official report of the MoD, the eighth edition of DefExpo India, held in February 2014, recorded an unprecedented growth in foreign as well as domestic companies’ participation over its previous editions. An impressive 232 foreign companies from 32 countries participated in the show along with 15 country pavilions that provided a platform to all the exhibitors to display their latest technologies and products and an opportunity to explore the market and business potential for mutual benefits. It is believed that 54 nations have already confirmed their participation at the 2016 event, making it the biggest edition of DefExpo. Almost all top global defence manufacturers, besides Indian players, are taking part in the event.
For global defence vendors, DefExpo is an excellent opportunity for entering the Indian market, estimated in excess of USD100 billion in the next 10 years. According to defence analysts, this figure would possibly be supplemented by another USD20 billion on homeland security. The Indian capital budget is already USD18 billion and rises at about 15 per cent annually. Exhibitors mostly from France, Germany, Israel, Russia, the UK and the US accompanied by about 50 official delegations have been participating in every DefExpo. The Indian display is normally represented by the Defence and Research Organisation (DRDO) and other public sector undertakings (PSUs) like the Bharat Electricals Ltd (BEL), Garden Reach Shipping and Engineering (GRSE), Hindustan Aeronautics Ltd (HAL), and Mazagon Dock Ltd (MDL). BrahMos was conspicuous by its huge presence at the last event.
During the UPA government, the MoD had stated that a policy framework had been put in place to develop indigenous capabilities through harnessing the potential and unitising resources available, both in the public and private sector. The country’s defence industry was open to 100 per cent Indian private sector participation while FDI was permitted till 26 per cent. According to the then defence minister, A.K. Antony, “The Indian defence industry is open to entry into mutually beneficial agreements with ‘friendly countries’ in the field of critical and state-of-the-art futuristic defence technologies”. Come the NDA government in mid-2014, there has been a change in policy altogether. India now allows up to 49 per cent foreign direct investment in the defence sector and up to 100 per cent FDI is permitted in projects involving state-of-the-art technology, to be approved by the Cabinet Committee on Security (CCS) on a case to case basis.
The other significant development since the last edition of the DefExpo has been the launch of the ‘Make in India’ programme, a special project of the Prime Minister Narendra Modi. The mindset, not only in India but around the world among India’s supplier countries, has become upbeat. Both domestic and foreign companies see an opportunity in light of the Modi government’s liberal attitude and assurance for providing an easier business environment. Arms suppliers, needless to emphasise, see immense gains for themselves in the coming years. But is everything as rosy and hunky dory as is being claimed to be? Perhaps time will tell.
The highlight of Airbus Group’s participation in DefExpo 2016, for instance will be the ‘Make in India’ programmes that it is pursuing, said the company in an official press release. These programmes include the Indian Air Force’s Avro replacement programme where Airbus Group is collaborating in India with Tata Advanced Systems (TAS) and is likely to partner with Mahindra defence to produce military helicopters locally. “We are at the forefront of the ‘Make in India’ initiative,” said Pierre de Bausset, President & Managing Director, Airbus Group India. “We will use DefExpo to present our plans to produce defence platforms in India and basically build an industrial eco-system supporting it in collaboration with local partners. This would involve creation of thousands of local jobs, skilling people, and technology absorption”.
The question is how useful are these defence exhibitions? Well, the fact of the matter is that it provides an excellent platform for all stakeholders to interact with each other, exchange ideas, views and take forward their business and allied interests. For the buyer, there is the opportunity to see, understand, and assess the product that he wishes to purchase. The massive advantage is the availability of a large range of similar products and close alternatives to compare and choose from. It provides a stage for meaningful networking, not only by the clients with the defence services but between various segments of industry, service providers, and also among representatives of governments.
On the face of it, it is a significant event for the defence forces but it is worth analysing how much it assists in the procurement process. Basically it helps foreign vendors and defence agencies to sell their wares to India. Big ticket buys are done by the Indian government with the major arms exporters like the US, the UK, Russia, France or Israel. It is a well-known fact that many of these are political deals negotiated and finalised by the government of the day. Yet, many of these have not fructified due to several extraneous reasons, involvement by middlemen and complaints by losing competitors being the most prominent among them.
One thing which goes without saying is that the exhibition is an arena for immense knowledge enhancement. Talking to some middle rung officers who are involved with the technical evaluation, it is evident that information available in brochures and product specifications is often inadequate. Although websites are frequently updated, they too are not exhaustive enough. The officers find experts accompanying the product developers to be very forthcoming in addressing their queries. It certainly helps in filling in the gaps and parameters required for building an accurate General Staff Qualitative Requirement (GSQR). The other benefit that accrues is that one can physically witness product demonstrations, which are qualitatively better than any two dimensional or even three dimensional displays on the computer.
For procurement of aircraft, ships, guns, tanks and such major arms and equipment, a separate project is set up right from initiation through various stages till final introduction into service. However, for smaller ticket items that may be lower in value or lesser in scale, but important nonetheless, such events are a definite boon. Ancillary support, IT, and especially the sphere of security are some such areas that are extremely innovative and recent technological development in these fields can catch the imagination of buyers not only in the defence sector but also in the corporate world.
Another aspect that emerges from such shows is the integration which is possible among the three services and the entire security sector as a whole. The army, navy, air force, Central Armed Police Forces (CAPF) and other state security forces have so much in common as regards personal weapons, equipment, communication, and clothing especially for Special Forces and high altitude warfare that this kind of exposition provides a perfect opportunity for an integrated approach. Unfortunately, individual service interests, procedural differences between departments and ministries, personality based decision making and several multifarious reasons appear as obstacles to a combined pitch which would otherwise have greater bargaining and negotiating value. Whereas the Aero Show held every alternate year has a clearly spelt out agenda and has a specific rationale to be organised next to an airfield, there are reports of the navy planning separate naval shows periodically, based on ports like Cochin. Apparently, there is nothing inappropriate for the navy to hold such an event in any port to derive maximum mileage by deploying equipment on board a ship to test its efficacy. This had led many to believe that the DefExpo will be limited to a land centric exhibition and perhaps even worse, the paramilitary forces may organise an exclusive internal security exhibition under the aegis of the home ministry. This fear has been laid to rest as India marches in its quest towards greater integration in defence and security. The event in Goa was an attempt by the defence ministry to showcase such an integrated approach. With a larger open area available and the advantage of the ocean and skies at hand, live demonstrations of every conceivable platform and equipment are possible. Besides homeland security, disaster management is likely to be added as a new feature in the ensuing event. DefExpo 2016 may become a welcome opportunity to build ‘Brand Goa’.
There has been a constant demand for reforms in the procurement process as many of them have not been fulfilled. Foremost among these is the need for greater voice to the defence forces and other stakeholders for which a more meaningful multi-disciplinary representation is essential in the acquisition structure in the MoD. The second measure is providing added incentive to the private industry in every sphere and giving them an equal chance to compete with the public sector. Yet, another failing is that there is no agency nominated to facilitate vendors in the procurement cycle. As a result, prospective aspirants have to directly approach all procurement agencies to find out about impending tender enquiries. It is, therefore, necessary that a nodal authority should clarify procedures, answer tender inquiries to new players in the field to make the process transparent. Although there has been an encouraging forward movement in welcoming the international and domestic private players, the general feeling among the industry is that the government facilitates only the PSUs and leaves the corporate sector, especially the small and medium enterprises to fend for themselves.
Self-reliance is the core of indigenisation. India has over the years followed licenced production in defence, which is the complete antithesis of the indigenisation process. Domestic procurement in defence production should be a priority. The Indian industry must be encouraged to design and build rather than just build on the basis of transfer of technology (ToT). Self-reliance can be achieved with control over core design and as such joint development with foreign original equipment manufacturers (OEMs) should be facilitated. A framework for partnership between the public and private sector needs to be forged with prudence and patience. One should remember that achieving self-reliance is a long-term objective and needs to be balanced with procurements that are in the pipe-line. Hopefully, our scientific community and establishments like the DRDO and Ordnance Factory Board (OFB) will take notice and not block genuine acquisition in the garb of sanctifying indigenous production.
The dichotomy between making up shortages and waiting for technology to catch up through a process of indigenisation is bound to continue. Indigenisation is critical for the country to become self-reliant so that the defence forces do not have to depend on imports as they faced during the Kargil conflict. The ideal equipment holdings should be a balance of 30 per cent state-of-the-art; 40 per cent matured; and 30 per cent obsolescent. However, the stark reality is that the modern equipment is nowhere near the desired holdings. Ammunition reserves are so low that not much is available for training on specialist weapons. The need of the hour is to consolidate and be prepared for the primary task, even as we continue in our quest for modernisation.
Undoubtedly, DefExpos have a significant role to play not only for the defence services but for the entire defence and security sector. There is much to gain from such exhibitions as they are an important cog in the acquisition chain of arms and equipment. However, the bigger question that continues to seek an answer is – when will the aircraft and helicopter deals fructify for the air force? When will the guns and ultra-light howitzers be introduced into service in the army? When will the Special Forces receive the long pending special arms and security equipment to enhance their capability? Meanwhile, the defence forces continue to march steadily with optimism and hope!