Tuesday, 6 January 2015

“Made in India” vs “Make in India”



By Ajai Shukla
Business Standard, 6th Jan 2015

In the manner of government and entities dependent upon it, everyone in defence production from the ministries of defence and commerce, the defence industrial estate and even the military has jumped onto the Prime Minister Narendra Modi’s bandwagon of “Make in India”. Defence Minister Manohar Parrikar proclaimed recently that the Bharatiya Janata Party (BJP)-led government had already cleared Rs 75,000 crore worth of acquisitions, of which Rs 65,000 crore is in the “Buy & Make (Indian)” category of the Defence Procurement Policy (DPP). He appeared to suggest that these systems --- which include submarines (Rs 50,000 crore; or $8 billion), artillery guns (Rs 15,750 crore; or $2.5 billion) and anti-tank missiles (Rs 3,200 crore; or $500 million) --- would be indigenous products.

The truth is less encouraging. While nobody has explicitly clarified what exactly “Make in India” would be, it is being interpreted as the licensed manufacture of foreign defence equipment, which the DPP covers under the categories of “Buy & Make” and “Buy & Make (Indian)”. This is very different from a “Made in India” product, which is encapsulated in the “Make” category of the DPP, involving the ground-up development of indigenous defence platforms. It is crucial for policymakers, strategists, economists and the public to explicitly recognize this difference. In “Make in India”, a foreign arms manufacturer is paid for transfer of technology (ToT) and the licence to assemble a platform --- say a submarine, tank or aircraft --- in India. The vendor supplies manufacturing technology and the jigs and tooling needed for assembling components, sub-systems and systems into a full-fledged combat platform. While hard bargaining sometimes obtains the technology to build some of those systems and sub-systems in India, vendors would seldom part with the technology to manufacture complex and high-tech systems, which they developed at enormous cost. A high proportion of the platform, therefore, continues to be supplied from abroad.

How “Make in India” plays out is evident from the Sukhoi-30MKI assembly line in Nashik, where Hindustan Aeronautics Ltd (HAL) builds the air force’s frontline fighter. While negotiating the contract for 180 Su-30MKIs in the year 2000 (which later went up to 272 fighters) India --- the world’s largest operator of this aircraft --- employed all the leverage it had to extract technology from Russia. Even so, just 51 per cent of the fighter (by cost) is made in India. Russia insisted that all raw material --- including 5,800 titanium blocks and forgings, aluminium and steel plates, etc. --- be sourced from that country. Similarly, HAL builds the fighter’s giant AL-31FP engines in Koraput, Odisha, but is bound by the contract to import 47 per cent of the engine (by cost), including high-tech composites and special alloys --- crucial secrets that Russia will not part with.

In defence, “Make in India” never provided Indian manufacturers the capability to upgrade platforms that require fresh technology as time goes by; in fact manufacturing licensing conditions usually stipulate that the buyer can make no alterations. That is why India, which carried out “Make in India” of the MiG-21 for decades, had to go back to Russia when it upgraded the fighter. It is on maintenance, repair, overhaul and upgrade that foreign vendors make their real money, even on equipment that has been license-built in India. It is variously estimated that the MiG-21, over its lifetime, cost India 20-40 times its purchase cost. The Mirage 2000 is another example of costs expanding ten-or-twenty-fold. In contrast, a “Made in India” aircraft like the Tejas could be continually upgraded without licensing issues, altered, and supplied anywhere in the world.

It is disingenuously argued that India’s leverage as the world’s biggest arms importer allows it to dictate terms to foreign vendors, forcing them to part with proprietary high-technology as a condition for winning a contract. The strategic nature of defence technology allows that only up to a point. Companies negotiate contracts based on commercial interests; but the export of technology is controlled by their governments, which mostly regard technology as a strategic asset. Even when capitals like London or Paris, which enjoy close strategic ties with New Delhi, are willing to clear technology export, they are often restrained by the political risk associated with job losses in a field as sensitive and emotive as national defence. This is even more pronounced in the current era of defence budgetary cutbacks in arms exporting countries, where skilled workmen are already being laid off due to reduced procurement.

“Made in India”, on the other hand, involves conceiving, designing and building a defence platform in India, creating intellectual property (IP) in the country. In the DPP, “Make” category projects involve Indian-led consortia developing defence platforms, with the defence ministry funding 80 per cent of the development cost. While foreign components and systems go into these platforms, the basic design is custom-tailored for Indian operational requirements and user preferences. There are not the “end-user” issues that dog foreign platforms. Maintenance, repair, spares and overhaul are not such bugbears and, having designed the basic platform, the Indian integrator can continually upgrade it through its service lifetime, evolving it incrementally into the platform’s next generation.

This is not to say that “Make in India” serves no purpose. First, it creates jobs, a key government goal. Second, building even low-tech defence equipment creates high-quality manufacturing capability, which goes into creating the broad-based manufacturing eco-system that is essential for “Made in India” projects. Weapon system designers and integrators can then focus on high-level design, assured that components --- from the lowest level of nuts, bolts, washers and fuze boxes to higher levels of pumps, actuators and sensors --- are available without needing to import or establish manufacturing units to supply them.

That is why the statement on Monday by Secretary (Defence Production) G Mohan Kumar, that at least 8-10 “Make” projects would be kicked off every year, holds the promises of galvanising the defence industry. While purchasing foreign defence equipment recklessly all these years, only a handful of “Make” projects have been conceived so far and none has been shepherded to fruition. The MoD needs to focus keenly on “Made in India” projects without being distracted by “Make in India” slogans.

13 comments:

Anonymous said...

NSR says ---

Extremely informative article on aerospace and defense technology transfer issues I have seen thus far...

I once wrote a comment in The Hindu on MMRCA / Rafale by a reporter named Manmohan Reddy and I got a whopping 49 up votes...

I repeat here again...

India is in difficult position w.r.t. dwindling fighters due to old and improperly maintainence...

Dassault/France attitude towards technology transfer and excessive cost of $25 to 30 billions makes it a good candidate to scuttle immediately...

India already has SU-30MKI and Mig-29 manufacturing and upgrade facilities so it must build some more of same fighters at SUper Sukhoi avionics level by creating additional production lines, prefereably in private or public/private partnership...

Before India does that, it must bargain hard with Russia for additional TOT and MOTs transfer...

To entice Russia, India may dangle a carrot of 2 squadrons of SU-35S and some batteries of S-400 to neutralize Chinese threat...

Most importantly, India must go on war footing to produce LCA/Tejas I and II on war footing and then upgrading them in Blocks to gain the vital aerospace engineering technology...

Trust me Tejas I and II will become fine fighters playing various important roles when they are equipped with BVRAAM missiles and precision guided munitions..

India must buy and work on joint design and development projects to develop systems and subsystems...

Trying to develop Kaveri engine technology without some kind of tie up is a horrible mistake and it must not be repeated..

These steps will bring up the numbers to respectable levels very quickly...

India must strap its boots and get back to work...that is the only way as no one gives away technology for free...

Narotham S. Reddy, Ph. D. E. E.

Parthasarathi said...

Sir,
When Chittranjan Locomotive works (CLW.) first started making electric-loco, it was imported in semi-knockdown condition. (from Switzerland) Now they are making world class electric locomotive.
Same is true for Varanasi Diesel works. (DLW.) Only it was imported from then Czechoslovakia.
When TATA make their first truck it was also imported from Germany.
You can take examples of Ashoke Leyland or Maruti.

Only one thing common among them. They all started with "Make in India " way but later after absorbing technology, they have started making their own product. This is the fundamental difference between the these achiever group (CLW, DLW, BHEL, (all PSUs) TATA, Ashok Layland, Maruti, Etc) and non-achiever group like most defense PSU. HAL. is one of those non-achiever.
The problem is with HAL. They are not willing to absorb technology. They are not willing to learn. What you and me can do.
Regards,

anshumanmainkar said...

If we really cared about security and valued our image, we could do what China has done, to an extent. Not only have they patiently but furtively and persistently pursued indigenisation since the late 1950s, they have the gall also to 'ape' - 'reverse engineer' Russian Fighters, give it their own designation (J-11) and ultimately aim to export it as their own. Today, they need to import engines from Russia and these have re-export conditions, but they are developing their own engines openly and brazenly.
The right components - make/made will fall in place, provided the will exists to leverage our power, provided we know what the game is all about.

raw13 said...

The pictures say's a lot. If this is the quality of IAF/HAL, is it a wonder that Mig 21 and now Su30 are dropping out of the sky. You can understand why the French do not wish to be responsible for what HAL will produce. Love it!

Anonymous said...

PLEASE CLARIFY:-

I couldn't understand why till date we don't have a single silicon chip manufacturing plant, a foundry etc., whereas there are 6 or 7 in China also there are conflicting reports on net dating back to 2004 that a silicon plant will be established at hyderabad or gujarat but none came into existense.

Silicon chips are the basis on which high-end defense products are made then why nothing is being done in this area ?

Mudblood said...

Allah ke naam me waterbottle dedo, give me a decent boot instead of the DMS..my kingdom for a rfile whose magazine doesnt crack...a few terrain specific combat dresses so that I dont stick out like a Figure 11 target wearing forest combats in the deserts...Allah ek waterbottle dedo ICK ke liye

Wonder if this would get published...

Anonymous said...

China completely reverse engineered and improved the Su-27/Su-30 line into the J-11/J-15. The Russians made some noise but are still doing business with China and even allowed them to supply engines for the JF-17 to Pakistan. Why is India so hung up on IPR issues with Russia while being their single largest customer? Why can't the success of ISRO and the Strategic Missile Programme be replicated in defence manufacturing? Or is the Def top brass-Babu/Neta-Ordnance factory-Arms Contractor nexus sabotaging our strategic requirements? I can only sympathize with my brother Mudblood and cry with him. "Allah ke naam pe de do". :(

Abhiman said...

A brilliantly written article, Col. Shukla.

I hope this article resonates in the Ministry. I'm sure Mr. Parikar already distinguishes between "make in India" and "Made in India".

I have another example: Pick any iPhhone, iPad, iPod etc. It always says, "Assembled in China. Designed by Apple in California".

Similarly, we must NOT give in to the temptation of merely copy-pasting foreign goods in India, under an Indian sticker (even if its private sector).

India must only procure weapons that have been DESIGNED in India. The only agency in India that can do that is DRDO and its associates.

The mass-manufacturing (copy-pasting) can be thrown open to the Indian private sector.

Anonymous said...

The problem in India is that everyone wants new things,and dont look at best bang for buck.Upgrading cheeta and chetak using latest avionics and composites from ALH, reverse engineering techs like that of pilatus and hawk to produce own may prove to be less expensive,giving more impetus to modernisation.

captainjohann said...

A brilliant article and also patriotic comments by concerned Indians. I was a witness to the HF 24 Maruts taking off during 1962 republic day flypast and felt so proud though I dinot know anything about aviation then. It was killed by HAL vested interests.Same as the chip plant in Chandigarh was killed as also the Heavy water plant.

Anonymous said...

Very well written article..We have to accept that for making defence eqpts, raw materials are being imported and hence achieving more than 70% indigenous Indian build equipment is and will remain a pipedream..After working in Defence forces and now with MNCs I have realised that the MNCs make moolllaah more during operational phase of eqpt, the spares and repairs are exorbitantly priced and revenue to company is assured for next 25-30 years. Thanks for lovely article...

Anonymous said...


NSR says --- I think India has not learnt anything even after 100s of Migs and others became flying coffins... Pretty soon SU-30MKI, Mig-29, Jaguar, Mirage-2000, etc will start falling off the skies...guaranteed unless...

India stops chasing $25 to 30 billion dollar Rafale contract and sits with Russia for a hard bargain of whole gamut of relationship, especially TOTs and MOTs of promised orders and future orders...

India must dangle a carrot of additional SU-30MKI and Mig-29K orders with latest avionics to get full or close to full TOT and MOT from Russia...

It must pay some money for hard to develop intellectual property to Russia...

It must get the manufacturing technology to manufacture from raw materials so we can build, test, integrate, etc... So if some thing does not work, it can be replaced immediately and get the fighter ready to meet at least 80 to 90% availability...

By chasing a mirage of Rafale, India will lose its whole plot and end up in a miserable shape...

India can order three squadrons of SU-35S and some batteries of S-400 to checkmate China immediately and to please Russia to give up its grip on TOTs and MOTs..

Whatever happens, India must realize that it must build its aerospace manufacturing and build and upgrade home grown LCA/Tejas I & II, IJT, and BAT on a war footing...no one will give away this technology for free...

Even Iran suffering through debilitating sanctions has been able to build a fighter and now serial producing...

It is shameful that India is still stuck on basic things....It can't even produce an aero engine of its own, even for a BAT plane...what else can I say...

Some drastic steps in every facet of decision making is of highest necessity....

It is time for DM Parrikar to show India who is boss and clean up things...

Manoj Kumar Sahu said...

Sir made in India, especially in defence, will never succeed unless...Govt. Wills to have no foreign systems purchase, come what may. And PSUs be given freedom like Pvt. Sector to operate. And pvt sector invests its money and brings out a ab initio product. Why could not great Pvt sector design a simple Basic Trainer....if they are so willing n capable...