A Critical Evaluation of India’s Defence Exports
Recently, the Government of India released the Draft Defence Production and Export Promotion Policy (DPEPP 2020) with the aim to develop a robust and competitive indigenous defence industry, reduce the dependence on defence imports, and to promote Indian defence exports to the other nations. The policy is in consonance with the ‘Make in India’ initiative and the recent call for ‘Atma Nirbhar Bharat.’ In the paper released by Ministry of Defence, several focus areas have been laid out, like “Procurement Reforms; Optimizing Resource Allocation; Defence Public Sector Undertakings and Ordnance Factory Boards; Indigenisation & Support to MSMEs; Innovation and R&D; Investment Promotion, FDI & Ease of Doing Business; Export Promotion; Quality Assurance & Testing Infrastructure.”
It seeks to develop India as the hub of cutting-edge defence technologies by creating a nexus between the public and private sector. The policy aims to “achieve a turnover of Rs 1,75,000 Crores (US$ 25Bn) including export of Rs 35,000 Crore (US$ 5 Bn) in Aerospace and Defence goods and services by 2025.”[1]
India’s Defence Industry
As per the paper, the size of the Indian Defence Industry stands at around Rs 80,000 Cr in the fiscal year 2019-20. The size of the Public Sector in defence is estimated to be around Rs 63,000 Cr whereas Private Sector contributes around Rs 17,000 crores.[2] Several Defence Public Sector Undertakings (DPSUs) such as Hindustan Aeronautics Limited (HAL), Hindustan Shipyard Limited (HSL), Mazagon Dock Shipbuilders Limited (MDL), Goa Shipyard Limited (GSL), Garden Reach Shipbuilders & Engineers Limited (GRSE), Mishra Dhatu Nigam (MIDHANI), BEML Ltd, Bharat Dynamics Ltd (BDL), Bharat Electronics Limited (BEL) and Ordnance Factory Board (OFB) are involved in the production of Defence technologies.[3] In the Private Sector, more than 460 licences have been granted to various companies to produce defence equipment. Moreover, around 8000 MSMEs are rigorously involved with the major defence companies to support the supply chain[4]. Around 45-50% of the Indian defence needs are being catered by the domestic players while the rest are being imported[5]. Currently, the Indian Defence Industry, specifically the Public Sector, is able to produce a large range of state-of-the-art weapon systems and defence equipment which can be exported. It is given in the table below:
India’s Defence Exports
Around 50 Indian private companies are involved in the defence exports.[6] Major names in this segment include Tata Advanced Systems Limited (TASL), Tata Power SED, Reliance Naval and Engineering Limited, Mahindra, Mahindra Aerospace, Kalyani Strategic Systems Ltd, Bharat Forge (Kalyani Group), L&T India – Defence and Aerospace, Ashok Leyland Defence (Hinduja Group), Adani Aero Defence Systems & Technologies Ltd, Alpha Design Technologies Pvt Ltd and Punj Lloyd.[7] 84 countries are the recipients of Indian defence products which includes the US, Russia, Israel, Poland, Italy, France, the UAE, Sri Lanka, Bhutan, Nepal, Egypt, Spain, Saudi Arabia, Chile, Ethiopia, Mauritius, Maldives, Australia, Japan, Bangladesh, Brazil, Germany, South Korea, Vietnam, Singapore, Thailand, Indonesia, Myanmar and the Philippines etc.[8]
If SIPRI Arms Transfer Database is analysed for the year 2018-19, India is on the 21st place among the top 50 defence exporters of the world. The data for 2019 by SIPRI states that India is 19th biggest defence exporter of the world. The annual report of the Ministry of Defence states that Indian defence exports attained a growth of more than 100% in 2018-19 (Rs 10,745 Cr) when compared to the exports in 2017-18 (Rs 4,682 Cr). If the data for 2018-19 is compared with the export data of 2016-17 (Rs 1,521 Cr), the growth rate comes out to be more than 700%.[9]
Myanmar, Sri Lanka and Mauritius are the top recipients of Indian defence products respectively[10]. In May 2016, Myanmar commissioned Damage Control Simulator which was developed by Goa Shipyard Limited[11]. On 12th July 2020, India delivered the Advanced Light Torpedo Shyena (TAL) to Myanmar Navy. This deal between Myanmar and India was inked in March 2017 with a value of around $37.9 million.[12] Other than that India exports trainer aircraft, radars, rifles, rocket launchers, gypsies, night-vision devices, mortars, Inmarsat sets, bullet-proof jackets, naval sonars, acoustic domes and bailey bridges communication. India also provides engineering and road construction equipment such as soil compactors, tippers and dozers to Myanmar Army.[13] In September 2020, India transferred to Myanmar its first submarine UMS Min Ye Thein Kha Thu which is an overhauled Russian built Kilo-class vessel which was being used by India by the name INS Sindhuvir[14].
In 2006 and 2008, Sri Lanka received two Offshore Patrol Vehicle (OPV) from India. In 2014, Colombo finalised its $148 million order of two Advanced Offshore Patrol Vehicle (AOPV) with New Delhi. It was Sri Lanka’s first-ever order of a new AOPV from another country. Goa Shipyard Ltd developed the vessels and they got commissioned in 2017 and 2018. In 2018, Indian Coastguard offered an OPV to Sri Lanka as a gift[15]. India is also planning to give a Line of Credit (LOC) worth of $50 million in defence to Sri Lanka[16].
In June 2014, Government of India offered Line of Credit worth $46 million to the Republic of Mauritius through Export-Import Bank of India.[17] In December 2014, Mauritius procured MCGS Baracuda from India.[18] In December 2016, India gifted two Chetak and one Dhruv helicopters to Mauritius.[19] In December 2016 and August 2017, India delivered two Sarojini Naidu-class Patrol Vessels to the Government of Mauritius.[20] In 2016, Mauritius received its first Dornier Do-228 aircraft from India. India also exported 11 Fast Interceptor Boats to the Government of the Republic of Mauritius.[21]
Several countries including Israel,[22] Maldives[23] and Nepal[24] operates the military variant of Dhruv. Ecuador was operating seven Dhruv helicopters since 2009 but cancelled the deal with HAL unilaterally after four helicopters crashed during operations.[25] Indian defence exports to other countries include the following:
· 2 Dornier DO-228 Maritime Patrol Aircrafts: Seychelles (2013 & 2015)
· 3 Chetak choppers: Suriname (2015)
· 3 Cheetal helicopters: Afghanistan (2015)
· 1 Dhruv helicopter: Maldives (2016)
· Cheetah helicopter: Namibia (2011)
· Avionics for Su-30 MKM: Malaysia
· Insas Rifles: Oman & Nepal
· 4 patrol vessels: Vietnam
· 1 Maritime Patrol Aircraft EL/M-2022: Seychelles (2015)
· Simulation Systems: the US, the UK, South Korea and Japan
· Ambulances & High-powered trucks to Kenya and Thailand respectively
· 1 Mahindra Rapid Intervention Vehicle and 2 Mahindra Rakshak Armoured Vehicles: Guyana
· 12 High-speed patrol vessels: Vietnam (Project started by L&T in August 2019)[26]
· Hard armour plates and protective headgear: Azerbaijan
· Soft armour panels, helmets and bomb suppression blankets: Germany
· Mortar shell covers: Israel
· Bulletproof vests, radar parts and helmets: Singapore
· Sleeping bags: Guinea
· Hard armour plates: the US and the Netherlands
· Night vision binoculars: Thailand
· Detonators: South Africa[27]
· Bofors gun artillery shells: the UAE[28]
· Swathi Weapon Locating Radars (WLR): Armenia[29]
Initiatives taken by the Government to boost defence exports
The defence ministry has asked the Defence Public Sector Undertakings to earn 25% of their annual revenue through exports by the Fiscal Year 2023. This will provide the required impetus to increase exports in the defence sector. Apart from that, the government has also directed the Indian diplomatic missions in various countries to promote Indian Defence products proactively. In October 2015, the Ministry of Defence launched the Scheme for Promotion of Defence Exports to help the private domestic manufacturers to get their product certified as ‘Fit for Indian Military use.’ This certification will improve the reliability of these products among the importing parties. Government has also finalised the Standard Operating Procedures for the test facilities to be used by private manufacturers. After thorough testing and exhaustive trials, the certificate will be issued to the products. The process of granting of NOC for the exports and the End-User Certificate (EUC) has been made online in the wake of digitisation efforts by the government. This has streamlined the processes. Government has also constituted Defence Export Steering Committee (DESC) which is being headed by the Secretary to the Department of Defence Production (DDP). Moreover, the process of obtaining Industrial Licence by private players has been made simple and easy and due to this, a recent surge is seen in the number of private companies getting the licences.[30] Recently, the government has laid out a negative-import list of certain defence equipment. It aims to ban the import of these items and domestically developed equipment will be used instead of the imported products. Government has also increased the limit for automatic route FDI in the defence sector to 74 per cent from the earlier 49 per cent.[31] Government is also offering Line of Credit to several friendly nations to buy Indian defence equipment.
Major issues with India’s defence export sector
Government has put a cap of 10 per cent of total production on the defence exports of the DPSUs. This is done as some PSUs are not able to complete even the already placed orders by Indian Armed Forces in the stipulated time. The government can analyse the performance of the DPSUs and remove the export cap for those firms which are performing satisfactorily and are completing their orders in the contracted time. As per the SIPRI data, India is the second-largest defence importer of the world, just behind Saudi Arabia. Till recently, not many private companies were in defence production. Due to the recent entry of private sector in defence production, economies of scale are absent. This makes the Indian Defence exports less cost-competitive. Moreover, the lack of advanced and cutting-edge technology increases the cost of the products. Several quality issues have also been noticed in the Indian manufactured defence equipment. HAL supplied seven Dhruv Choppers to Ecuador between 2009 and 2012. Ecuador unilaterally cancelled the deal with HAL after four out of the seven helicopters were crashed. It grounded the remaining helicopters and later put them on sale.[32] Several accidents also happened with the artillery gun barrels and other ammunitions during field firing at the firing ranges[33]. The quality control measures should be taken by the government if it wants to upscale the exports in the defence sector. The process of granting industrial licenses and acceptance of the proposal of export is very opaque. Although the government has streamlined the process the lack of transparency still haunts the private players. It is to be noted that India majorly exports only components, assemblies and sub-assemblies of military equipment rather than the complete equipment. This is a major issue in the defence exports of India. The government should focus on this aspect more and should incentivise private firms to invest in R&D[34].
The value of India defence exports in 2017-18 was RS 4,682 crore and it elevated exponentially to Rs 10,745 crore in 2018-19. If this data is analysed critically, one would find that the exports worth Rs 5,000 crore were directed towards only one country i.e. the US. Almost 50 per cent of the Indian defence exports was received by the US. The second and third largest defence export destination of India was Israel and the EU.[35] This clearly shows that India is lacking in exporting its defence products to the neighbouring countries.
Way Forward
The Indian defence industry has a soaring potential to change the defence playfield towards India’s favour. India is currently ready to offer several cutting-edge technologies to the other nations like Brahmos cruise missile, Akash and Prithvi missiles, LCA Tejas etc. An impetus is required from both the Public and Private sector to boost the defence exports.
In the coming years, as the Indian defence exports will rise, India will face several new challenges like ensuring non-proliferation of strategic technologies like the Brahmos missile by the recipient country. The government will also have to ensure that highly sensitive communication and Electronic Warfare technologies are not shared by the importer country with India’s adversaries, as this will make the operation of these systems futile.
It is quite evident from China’s adventures in the Indo-Pacific that soft power alone cannot solve India’s problems in the region. In order to stand to its image of the regional security provider, it not only needs to decrease its dependence of defence imports and move towards the indigenisation of defence equipment but also needs to export defence equipment to the IOR countries in order to bolster its relations with them.
Notes
[1] “Draft Defence Production & Export Promotion Policy - DPEPP 2020 | Department of Defence Production.” n.d. Accessed November 2, 2020. https://www.ddpmod.gov.in/dpepp.
[2] Ibid.
[3] Ibid.
[4] “Draft Defence Production & Export Promotion Policy - DPEPP 2020 | Department of Defence Production.” n.d. Accessed November 2, 2020. https://www.ddpmod.gov.in/dpepp.
[5] “DRDO Chief Urges for Indigenous Defence Production - The Economic Times.” 2019. September 28, 2019. https://economictimes.indiatimes.com/news/defence/drdo-chief-urges-for-indigenous-defence-production/articleshow/71350864.cms.
[6] “Defence Exports | Department of Defence Production.” n.d. Accessed November 1, 2020. https://www.ddpmod.gov.in/defence-exports.
[7] “Indian Defense Industry -Top Private Sector Players.” n.d. Accessed November 2, 2020. http://defenseindustry.in/top-private-sector-players/.
[8] Ministry of Defence. n.d. “Indian Defence Goes Global.” Accessed November 2, 2020. https://www.defenceexim.gov.in/showfile.php?fname=export_book.
[9] “Modi Govt Made Defence Exports Jump 700%. Now It Must Radically Reform Ordnance Factories.” 2020. March 19, 2020. https://theprint.in/opinion/modi-govt-made-defence-exports-jump-700-now-it-must-radically-reform-ordnance-factories/383476/.
[10] SIPRI. 2019. “TIV of Arms Exports from India.” SIPRI. 2019. https://armstrade.sipri.org/armstrade/html/export_values.php.
[11] “Inauguration Ceremony of Damage Control Simulator Held at Yangon, Myanmar from 09-13 May 16 | Indian Navy.” n.d. Accessed November 2, 2020. https://www.indiannavy.nic.in/content/inauguration-ceremony-damage-control-simulator-held-yangonmyanmar-09-13-may-16.
[12] Panda, Ankit. 2019. “India Delivers Initial Batch of Indigenously Built Torpedoes to Myanmar Navy – The Diplomat.” July 16, 2019. https://thediplomat.com/2019/07/india-delivers-initial-batch-of-indigenously-built-torpedoes-to-myanmar-navy/.
[13] “India Steps up Supply of Military Equipment to Myanmar to Counter China | India News - Times of India.” 2017. March 24, 2017. https://timesofindia.indiatimes.com/india/india-steps-up-supply-of-military-equipment-to-myanmar-to-counter-china/articleshow/57815200.cms.
[14] Herzinger, Blake. 2020. “India Transfers Myanmar’s First Submarine Amid Tensions with China – The Diplomat.” The Diplomat. October 27, 2020. https://thediplomat.com/2020/10/india-transfers-myanmars-first-submarine-amid-tensions-with-china/.
[15] Chaudhary, Shantanu Roy. 2019. “India-China-Sri Lanka Triangle: The Defense Dimension – The Diplomat.” The Diplomat. July 12, 2019. https://thediplomat.com/2019/07/india-china-sri-lanka-triangle-the-defense-dimension/.
[16] Chaudhary, Dipanjan Roy. n.d. “India Working on Plan to Offer $50 Million Line of Credit to Sri Lanka in Defence - The Economic Times.” Accessed November 2, 2020. https://economictimes.indiatimes.com/news/defence/india-working-on-plan-to-offer-50-million-line-of-credit-to-sri-lanka-in-defence/articleshow/78351699.cms?from=mdr.
[17] “Reserve Bank of India - Notifications.” n.d. Accessed November 2, 2020. https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=8917&Mode=0.
[18] “India to Deliver Corvette Class Warship to Mauritius on December 20 - The Economic Times.” n.d. Accessed November 2, 2020. https://economictimes.indiatimes.com/news/politics-and-nation/india-to-deliver-corvette-class-warship-to-mauritius-on-december-20/articleshow/45564033.cms.
[19] Sibbal, Siddhant. 2020. “HAL-Developed Dhruv Helicopter Being Used to Clean Mauritius Oil Spill | India News | Zee News.” August 17, 2020. https://zeenews.india.com/india/hal-developed-dhruv-helicopter-being-used-to-clean-mauritius-oil-spill-2303301.html.
[20] “The Second Water Jet Fast Patrol Vessel Supplied by India to Mauritius | Indian Navy.” n.d. Accessed November 2, 2020. https://www.indiannavy.nic.in/content/second-water-jet-fast-patrol-vessel-supplied-india-mauritius.
[21] Chander, Sushil. 2019. “India’s Defence Exports Status, Strategy and Solution.” Manekshaw Paper, no. 83. https://www.claws.in/publication/indias-defence-exports-status-strategy-and-solution/.
[22] “Israeli MOD Inducts Dhruv | India News - Times of India.” n.d. Accessed November 2, 2020. https://timesofindia.indiatimes.com/india/Israeli-MOD-Inducts-Dhruv/articleshow/2333038.cms.
[23] Chander, Sushil. 2019. “India’s Defence Exports Status, Strategy and Solution.” Manekshaw Paper, no. 83. https://www.claws.in/publication/indias-defence-exports-status-strategy-and-solution/.
[24] Ibid.
[25] “Ecuador Grounds Fleet of Dhruv Choppers after Mishaps, Cancels Contract with HAL | Deccan Herald.” n.d. Accessed November 2, 2020. https://www.deccanherald.com/content/506736/ecuador-grounds-fleet-dhruv-choppers.html.
[26] Chander, Sushil. 2019. “India’s Defence Exports Status, Strategy and Solution.” Manekshaw Paper, no. 83. https://www.claws.in/publication/indias-defence-exports-status-strategy-and-solution/.
[27] “India Now Exports Defence Products to 42 Countries.” 2020. February 10, 2020. https://www.livemint.com/industry/manufacturing/india-now-exports-defence-products-to-42-countries-11581332398457.html.
[28] “In Its Largest Ever Export Order, OFB to Supply 50,000 Bofors Shells to UAE - The Economic Times.” 2019. 2019. https://economictimes.indiatimes.com/news/defence/in-its-largest-ever-export-order-ofb-to-supply-50000-bofors-shells-to-uae/articleshow/70501461.cms.
[29] Negi, Manjeet Singh. 2020. “India Outshines Russia, Poland to Bag USD 40 Million Defence Deal in Armenia - India News.” March 2, 2020. https://www.indiatoday.in/india/story/india-outshines-russia-poland-to-bag-usd-40-million-defence-deal-in-armenia-1651419-2020-03-02.
[30] Chander, Sushil. 2019. “India’s Defence Exports Status, Strategy and Solution.” Manekshaw Paper, no. 83. https://www.claws.in/publication/indias-defence-exports-status-strategy-and-solution/.
[31] “Draft Policy Seeks Self-Reliance for India in Defence Production | India News - Times of India.” 2020. TOI. August 4, 2020. https://timesofindia.indiatimes.com/india/govt-comes-out-with-draft-defence-production-policy-to-boost-indigenous-weapons-exports/articleshow/77336027.cms.
[32] Som, Vishnu. 2015. “After 4 Crashes, Ecuador Grounds Fleet of Indian Dhruv Choppers, Cancels Contract.” October 15, 2015. https://www.ndtv.com/india-news/after-4-crashes-ecuador-grounds-fleet-of-indian-dhruv-choppers-cancels-contract-1232715.
[33] Peri, Dinakar. 2020. “Indigenous Heavy Artillery Gun Accident Report in 10 Days - The Hindu.” September 28, 2020. https://www.thehindu.com/news/national/indigenous-heavy-artillery-gun-accident-report-in-10-days/article32716208.ece.
[34] Chander, Sushil. 2019. “India’s Defence Exports Status, Strategy and Solution.” Manekshaw Paper, no. 83. https://www.claws.in/publication/indias-defence-exports-status-strategy-and-solution/.
[35] Pubby, Manu. 2019. “India’s Defence Exports More than Double.” June 18, 2019. https://economictimes.indiatimes.com/news/defence/indias-defence-exports-more-than-double/articleshow/69835284.cms?from=mdr.
Pic Courtesy - spokespersonnavy@indiannavy (Indian Navy twitter handle)
(The views expressed are personal.)
