The ninth edition of biennial Defexpo 2016 (Land, Naval & Internal Homeland and Security Systems Exhibition, organised by Defence Exhibition Organisation, Ministry of Defence, Government of India) commenced with a flying start at Naqueri Quitol in Quepem of South Goa on 28 March 2016. The event, in addition to live demonstrations of Indian made / manufactured tanks (Arjun Mark II, T-72), artillery systems (by DRDO) and combat vehicles (by Tatas), also showcased more than 10,000 types of products, components manufactured and owned by Indian and foreign companies. More than 1,050 companies from 47 countries (including about 600 from India) participated in this gigantic flagship event along with defence delegations from 17 countries. It was inaugurated by the Indian Defence Minister Manohar Parrikar, who addressed the delegates and participants in an open podium adjacent to the main venue, in the presence of his Deputy Rao Inderjit Singh (Minister of State for Defence), Chief Minister of Goa, Member of Parliament from South Goa, Chief of Army Staff, Chief of Naval Staff, Chief of DRDO, Defence Secretary and Defence Production Secretary.
While three major conferences on advances in shipbuilding technology, Make in India for Defence Sector and Defence Offsets are slated to be held on 29 March 2016, a series of Industry-Government interactions, individual and joint press conferences and bilateral discussions are also planned during the four-day event that is slated to close on 31 March 2016. Parrikar also announced that his ministry had released a new Defence Procurement Procedure (DPP-2016), which was now available on the official website. He was candid enough to admit that the DPP-2016 is not yet a full proof procedural arrangement document yet. “I am satisfied with the new DPP, which is more transparent and elaborate. However, it may not be a final version as we need to evaluate its success once it is operational. If needed, we will review it in the next six months and try to make it simplified further”, he said.
A New Venue: Politics Triumphs
In his inaugural address at the Defexpo, Parrikar, blending his political considerations as well as thoughts for his department, thanked the state of Goa and its administration (which he ruled twice as Chief Minister before assuming charge as Defence Minister) for efficiently handling the preparations for the show and thwarting sporadic opposition from local human rights organizations as well as opposition parties. It was reported in the local newspaper Herald that the National Confederation of Human Rights Organisation (NHCRO), which along with Orixtt Porjecho Awaz (another local NGO) had raised voices against Defexpo being held in Goa and demanded that the venue must be shifted elsewhere as it would create serious problems for the state. NHCRO Goa member Savio Fernandes said, ‘from our own study of the situation, we concur with people’s view that the Defexpo event is unfeasible, impractical, against public interest and detrimental to the environment and local populace’.
NHCRO had filed a public interest litigation (PIL) in the local court for cancellation of the event, which is now come up for hearing. In addition, the state police had received intelligence inputs from the Intelligence Bureau that Goa was in the top of the list for Islamic State for possible attacks, including targets such as Defexpo, tourist spots and local festival sites. In fact, Defexpo was a top target for the IS terrorists, as reported in the local media. However, the Chief Minister of Goa Laxmikant Parsekar was dismissive of such threats by saying, ‘we have not received any specific input besides a general alert’. In addition, a local official revealed that at least ten Right to Information (RTI) applications from citizens have thus far been received by the state government. These RTI applications have sought to know the details of preparations, expenses, revenues and possible profits related to Defexpo.
Despite sporadic opposition, fuelled primarily by local politics, and terror threats, Goa has gone ahead and held this exhibition. This is the first time that Defexpo has been shifted outside Delhi and if Parrikar’s inaugural address as well as his interactions with the media later are of any indication, Goa is likely to hold the event again in future. Political considerations triumph over other decisions.
A New Proposition: In Search of a Model for Defence Industrialization
The inaugural session of the event amply denoted the MoD’s intent for a new model of Indian defence industrial eco-system. Parrikar made it clear that Indian defence industry would adopt a new model for Indian defence industries by emphasizing on ‘Make in India’ / indigenous efforts as the core objective, while encouraging foreign companies to take part in this effort through collaborative routes. To a couple of specific queries from the journalists during the press meet, Parrikar said, “We have introduced a new category called Indian Designed and Developed and Manufactured (IDDM) under the purchase section, which will have 40 percent indigenous component proprietarily owned by Indian companies. IDDM will be the first priority, while ‘Make’ and ‘Buy and Make (Indian) would be the second and third procurement preferences for MoD. Foreign companies that are willing to partner Indian companies must comply with existing rules of collaboration and FDI considerations. Last in the Indian choices would be ‘buy global’. This suggests that Parrikar’s choices would most likely to be influenced by indigenous production with a bit of help from foreign OEMs through collaboration.
Further shift in emphases on indigenization efforts by the MoD received cautious reactions during the event. MT spoke to a cross section of company executives and government officials during the day. Interestingly, all of them did not want to be quoted with names. This obviously pointed toward unwillingness on the part of respondents to not to be overtly critical of the developments in Indian defence sector. A senior two star general from the Indian Army said that the MoD’s attempt to rationalize resources allocations would have a negative impact on Army’s military modernization plans. “You can do whatever you want to. We also want our weapons and systems must be indigenously designed and developed. However, at the moment there is no clarity on how to achieve this objective and it is getting further complicated in procedural terms. We also are likely to get less funds, which is perplexing. At a time when security considerations are paramount, Indian Army is short of equipment. Defence Minister said that artillery guns will be manufactured by Indians. It will be years away. We have no choice but to be helpless and hope war does not occur”. In fact, Parrikar had very categorically stated that systems like artillery must be made in India and had proudly declared that along with Ordnance Factory Board, two more Indian private companies were now at a final stage to offer three different types of artillery guns. Another two star general said that Army was not dissatisfied by the new artillery guns offered by OFB and private sector companies (Tatas and Bharat Forge). However, he cautioned that such projects must be fast tracked so that Army could get these guns in a definitive time span of three years from now.
A senior executive from Tata Power was more circumspect. He said, “we are witnessing yet another round of chaos in Indian defence sector. The new DPP has been unveiled. While fine prints and nuances of regulatory procedures are yet to be examined by us, which will take time, at the very outset, it does not appear much different from the previous DPP. It is incomplete as new chapter on strategic partnerships are yet to be incorporated. We actually are at a loss to how to interpret new signals from the MoD. We have to wait and watch and devise our strategies for future projects”. A senior executive from a large American OEM was, however, critical. He said, “We have no clues as to how to interpret the new DPP. We are a frontline technology leader in land based systems and we have tried our best to convince the Indian MoD and even are willing to offer our latest technologies. We have received very lukewarm response thus far. We now realize that we will be given the last preferences as sellers and third preference as technology partner as stated by Defence Minister. We will have to devise a suitable strategy in order to stay alive in Indian conditions”.
While reactions from officials and big companies were both muted as well as apprehensive, smaller companies were equally critical of the new developments in Indian defence sector. A senior executive from a mid-sized Indian IT company lamented that all the announcements made by the Minister and the MoD were primarily aimed at big companies, who were eager to grab lucrative projects. “What is there for us? The MoD says that small and medium companies will be given all support for defence manufacturing. What have we got thus far? Nothing, I would say. We will continue to run from pillar to post and will remain sub-suppliers to large companies throughout our lives. Nothing on ground has changed yet, and if the new DPP’s emphases on small and medium companies does not change, we will be left in lurch and eventually may seek other diversification in our business strategies. The MoD must give us a definitive direction, else ‘Make in India’ will remain a slogan”. A senior manager from a mid-sized foreign company, offering critical components in shipbuilding, was equally critical. He said, “we along with many other foreign companies, which are not large, offer very interesting and critical components to our clients. We, like our smaller Indian counterparts, face the same problem. We do not have an automatic entry into the Indian market as we are not systems integrators. We want to forge ties with Indian companies, but we only get some response from large Indian companies as component suppliers. We do not want that. We want a collaboration on equal terms as we own proprietorship rights of our products, which we do not want to give these big guys on a platter. Tell me what kind of a role do Indians envisage for us?” Another executive from a small company from Europe echoed the same sentiment.
Despite mixed reactions coming from different quarters, Defexpo 2016 promises to be an ideal platform for all stakeholders to gather, show products, exchange notes and explore business opportunities. The MoD has unveiled its new DPP, fine prints of which will be closely examined in coming times. Participation of more than a thousand companies signifies the importance of the event. New policy announcements like indigenization, Make in India, etc. will slowly be accommodated by the stakeholders. In addition to various announcements and developments, what is interesting is the participation of a large number of Indian small and medium enterprises, which constitute about 50 percent of company participation. This appears to be a major fallout of the Indian government’s new emphases on indigenization efforts in defence production. As the event progresses, different stakeholders will accumulate different impressions, which will translate into their business strategies. Big companies would most likely to wait and watch out for further clarity on DPP and participate in appropriate tender categories. Medium and small companies would press for more clarity about their role in Indian defence industrial eco-system in time to come. MoD mandarins are likely to get all kinds of feedback from the stakeholders, which will be deliberated by them for refinement of DPP further. Indian armed forces, despite resources rationalization, would like to see newer products and options for their equipment modernization. As senior Indian bureaucrat said, “This event will have a composite effect on armed forces, companies, government and other stakeholders. Every one will interpret the event from different perspectives and that’s what the government wants for a larger cause.”
Deba R Mohanty