Any
discussion on the development of the Indian Weapons Industry tends to focus on
the technical problems. This distracts from discussing the fundamental problem.
India has an inefficient weapons Industry. We import 70% of our weapons needs.
This unacceptable state has been caused by our continued espousal of a Socialist
pattern of Society for the defence industries. The process of weapons development
are choked by the legacies of colonialism, the overrunning of our education
systems by the politicians and by the sustained refusal to organize our defence
industries as a highly specialized and competitive industry that should be self
financing. The combat is in the shadows.
The exorbitant costs
Countries with large forces “afford” them by
developing weapons and exporting them at very high profit. We have for long not
exported any weapons, ostensibly on “moral” grounds of “non violence”. Our
abstinence has not stopped violence; We have merely ignored the economics of
successful weapons Industries. The HAL produced LCA Mk 1 A will cost Rs.483
crores apiece. This makes it weight for weight, the most expensive single
engine aircraft in the world beating the Lockheed-Martin F 35. Clearly
something is amiss.
The production
cost of any imported weapon is a
closed book to us. We only know the quoted
cost. No authorized study exists about how much it costs the vendor to make
the product. The inefficiencies of the PSUs mean that their prices are not a reliable index. The development of a database
by which we can estimate the cost of
production of any imported equipment is an immediate requirement.
A modeling of the comparative cost
The basic of calculating comparative
costs vs production quantitites however is very simple as the following model
will explain. The cost of an aircraft depends on four inputs viz:
i)
Raw
materials (RM) costs – sheet metals and rolled stocks, Composites, forgings,
etc.
ii)
Bought
out Completes (BOC) such as engines, radars, accessories, cabling etc.
iii)
Labour
to process and assemble. The cost of labour is the largest single item of cost
of an aircraft in western countries.
iv)
Overheads
which is all other costs required to run this programme.
If we now
make a simplifying assumption that the four components RM, BOC, Labour and
overheads are all equal with the overheads assumed at a production rate of 50
aircraft per annum and an order size of 500 aircraft then we get the unit cost
of an aircraft comes as 4x which we take as the comparator cost of 1 unit. Table
1. Sl. No. 1
The
production rate of fifty aircraft per annum and a minimum order size of 500 is
the minimum numbers for a competitive
commercially successful weapon such as combat aircraft and AFVs. Beyond these
numbers are massive profits. This minimum number is essential and explains the
cut throat competition for export markets and our need to export.
If we now
produce with the above set up only 12 p.a. aircraft as is being done for the
LCA and the order size is about 100 the costs go up 1.8 times. See table 1. Sl. No 2
If the
production is cranked up to Chinese standards of say 100 aircraft per annum and
an order size of 1000, we see a remarkable drop in the unit cost to 0.675 or
about one third of Indian costs. Table 1. Sl no. 3
The above is
assuming that only the aircraft assembly line utilization has been optimized.
If we assume that the same process has been applied by the Chinese to the
production of Raw Materials and BOC items we get a figure of 0.4854 or one fourth of our costs! Despite much
larger size the Chinese equipment
budget for their massive armies may not
be much larger than our equipment budgets.
We have
willingly allowed ourselves to be fettered with is the continued use of
“bonded” or “Aerospace” quality materials which means “de facto” a reliance on
materials imported from the West. “Bonded” items were an useful concept a
century ago when QA processes were uncertain. Metallurgical quality control
systems have been sufficiently improved and automated over the last hundred
years to allow our designers to specify materials from selected Indian vendors
but not confined to the PSUs. This is an area where the politician must enforce
because the Bureaucracy will not because they have nothing to lose by doing
nothing.
The extremely
long development times makes the interest cost of the capital untenable. That
cost alone will make our weapons unaffordable to us, let alone for exports!
The impact of production volumes has been
discussed. Unless we re-examine and increase both procurement and batch sizes
we can never have acompetitive weapons industry. It will be as it is now a
“naam ka wastey” –( eyewash) effort nowhere near its true potential of being a
niche world leader.
Table 1.
Sl. No.
|
Model
|
Raw. Material.
|
BOC
|
Labour
|
Overheads
|
Total
|
Unitized
|
1.
|
Standard 50/500
|
X
|
X
|
X
|
X
|
4X
|
1
|
2.
|
Indian 12/100
|
X
|
X
|
0.2 X
|
5X
|
7.2X
|
1.8
|
3
|
Chinese 100/1000
|
X
|
X
|
0.2X
|
0.5X
|
2.7X
|
0.68
|
4
|
Chinese optimized
|
0.68X
|
0.68X
|
0.2X
|
0.5X
|
2.06X
|
0.48
|
XX/XXXX
Annual Batch Size/ Total order size.
Organizing
Academia’s contribution
Exporting
Defence equipment will require not just technical research to produce fault
free weapons but also historical and economic research to manage and market and
service them and trained workers to produce them to high quality. The word
“Unemployability” indicates how badly equipped our Academia is equipped at
present for the task.
We have 819 Universities and in term of
numbers we are not at a disadvantage. Research funds are also not a problem
because well directed research is rapidly self regenerating. The problem is in
the quality of our Academia and its lack of orientation and training to engage
in applied research specially in hardware. The 1969 thrust towards publications
“publish or perish” has to be reviewed as the faculty finds it career wise
safer to publish theoretical papers in numbers.
It was not always thus. Derided as being designed to produce
clerks for the Empire the British set up in India an education system that was
once rightly vaunted to be second only to Oxford and Cambridge. Almost from the
start the Indian
Universities produced an unbroken stream of exceptional leaders in every field.
Though the study of the Sciences was not encouraged Radio Telephony, the Raman
effect, the Crescograph, semiconductor junctions, the Bosons were right at the
forefront of Technology and Science and indicated the highest levels of
originality and these were done with modest, if any, grants. Such brilliant
work required an intellectual uprightness and boldness coupled with
originality. Unfortunately the cradle of such minds- the schooling system- has
also been thoroughly vandalized.
It is well
known that our top universities do not rank anywhere in the list of top 200 Universities. Various suggestions to
improve rating have been made. They are unlikely to work. An example will
clarify. The number of foreign students is one of the inputs in the ranking
process and hence “efforts will be made to enroll more foreign students”. The
cart is truly before the horse. The foreign students do not come to Indian
Universities because they see no value addition. That has to be corrected. Enticement
will not work.
The problem
lies in that it is inconvenient for those who can rectify the situation- the
politicians and political-academicians- to admit that it was their collaboration for partisan aims
that has ruined our universities. In their “suggestions”- academic freedom and
more funds- they therefore studiously “fail” to see that the top two hundred
Universities in the world do not see the rampant, disturbing, perennial publicity seeking academic
activism that our Universities and campuses have unendingly seen on various non
academic issues.
The lowering of every long established academic standards-
entry, recruitment, qualifying- post independence is unique and not done by any
nation anywhere. The
solution lies here. The original, impartial, exacting standards of education
and the intellectual and fiscal honesty in Academics has to be restored. A
return to status quo ante has to be aimed for. Academic freedom is not a
license.
The origins of the concept of “Academic
Freedom” lay in the fact that it was the Church that funded the Universities
and so the Church made the rules. For example the Professors were not allowed
to marry. The State did not fund and was not allowed to enter the gates. He who
paid the piper called the tune. Our political academics claim for the “leave
the money on the table and go” variety of freedom from the state has no
historical or moral basis.
As with other welfare
schemes since independence the increased funding for education has “leaked”. The resistance and organized outrage
to what should be routine administrative
matters such as introduction of biometric attendance or audits of funds are
noteworthy. It could be an indication of the scale of leakage. Audits which
would ensure funds are used as intended may have the side effect of a reduction
in the kind of demonstrative academic agitation that is seen.
Post Independence economic policies
The history of the economic policies of the Government, post
Independence has to be re-examined for its lessons. Why was an inefficient
disempowering centrally controlled economy put and kept in place for so long.
It is unarguable that there was significant improvement in standards of living
after the previous crippling license permit policy collapsed due to its own
inherent weaknesses why was this not applied more vigorously and more
transparently to the strategic Industries? Were we under superpower pressures
or pawns in the continuing great game? “The strategic Industries, being
knowledge and passion Industries were particular sufferers.
The espousal of a
“socialist pattern of society” in the garb of welfare had several “anti Indian
Industry” measures:
i)
In the early fifties a Parsee gentleman
had designed and built two prototypes of a glider, the Baroda 001 & Baroda
002 which was significantly in advance over the Government department’s glider
which was a copy of the German “Zogling” of the 1930s.The Baroda design was not
produced. In all probability the Industrial Policy resolution and the stifling
License and permit procedures killed off the effort. By 2006 the Baroda 002 was
slowly “reducing to produce” in a workshop shed, an incredible-and unique-symbol
of state sponsored Industrial
repression. It was not the only example. A Calcutta firm had worked towards a
collaboration with France to make the Djinn light helicopter which had a particularly
good high altitude performance. This too got nowhere.
ii)
Whilst Tata and Ashok Leyland were already
making trucks for the Army public money was spent- to acquire a new line to
make the Shaktiman Trucks at Jubbalpore. The result was the economies of scale
were frittered away. This is precisely the kind of wastage of resources that
the centralized planning was supposed to avoid. This was at a time when the HF
24’s engine was refused a grant of GBP1million for its critical engine -due to
“shortage of resources” which crippled the HF 24 programme. We have to ask why this
was done. The technical differences between the three trucks were marginal and
within the development capabilities of the local Industry even at that time.
iii)
One
side effect of the “license permit” Raj was the total lack of design &
development jobs for the engineers the IIT were producing. Those who did not
migrate to the US spent their careers selling soap and toothpaste for the
multinationals in India.
iv)
The Defence sector PSUs jobs were
significantly less paying with the worst working terms as compared to other
state enterprise jobs such as EIL or STC or the Bureaucracy.
These are either random errors of policy or indicate a
crafted plan that protects monopolies. We have the irony that in defending the
socialist pattern of society, in the PSU unions de facto right to be inefficient and in espousing an Academic “freedom”
of the above sort we are collaborating for the continued crippling of India’s
strategic Industries.
Funding
Defence Research
Successful Research is always
and everywhere viewed as a business. Research funding must pay back by a return on the investment within a reasonable
time because only then will a corpus of fund build up. Complaints of inadequate
funding for research go hand in hand with misdirected research project without
any plan for commercialization.
American funds availability for research is large because they
are controlled to be self generating. It is run like a venture capital funding agency-closely
monitored for returns. In India the stress on “return on investments” is
completely missing. Because of our leftist oriented doctrine and controls the
private sector cannot be funded but though regularly scam ridden it is “safe”
for the bureaucrat to fund the PSUs even after several scams. The result is
influential people obtain public money for what becomes, de facto, a life time sinecure. Such wastages lead to non
performance and the consequent lack of regeneration
of funds creates a”drought” which hampers further research funding.
The example of DARPA which funds defence research in America
should be a model.
DARPA fundings are ALWAYS for short limited objective
projects –the first usually being measured in months.. This is enough to show
progress and results. The advantages of this approach are:
i)
Initial
funds are for very small amounts even for big projects.
This allows funding of many concurrent and even competing proposals.
ii)
The
private sector has an equal right to public funds
iii)
The
initial project duration is often as short as six months. Like the bankruptcy
laws ,the “imagination wise “bankrupt groups” were quickly identified and
weeded out leaving the funds free to flow back and be re-invested elsewhere.
iv)
The “residue” of the above
project, if successful, is funded to the next step or level until a saleable
product is results. The F 117 stealth fighter was developed into service in a
period of eight years (1974-1982) on a funding level at PPP (purchasing power
parity) of 3.5 lakhs/ 3.56 crores/117 crores.
Interested readers may see “Developing the Stealth Technology” earlier in the blog
profprodyutda@blogspot.com.. By comparison we funded Rs. 565 crores in 1983 on
a ten year plan to a yet to exist entity to develop the critical fighter
programme- The LCA. Illogically a 1978 request for Rs. 64 crores funding to
develop the HF 24 with RB 199 engines which had a higher chance of success was
turned down. These illogical decisions must be re-examined for their thought
processes and the appropriate lessons absorbed. Given our experience with the
LCA programme, the minimum now expected is that any future project AMCA or New
MBT should be a 3 step programme and with private sector proposals also equally funded.
We
cannot afford to continue to ignore the private sector and there is no
justification! The PSUs have seen as many scams
as we can wish!
Counter Intelligence
Knowledge leaders are especially precious
because they are rare and they take a lifetime of dedication to produce. India
has an history of being remarkably careless of its HR assets. Homi Bhaba,
Vikram Sarabhai, the scientists associated with the nuclear submarine projects
and the Arjun tank’s engine, the test pilot who was an enthusiastic proponent
of the HF 24 “reheat” project died under doubtful circumstances yet the
investigations to their deaths were significantly cursory. The failure of ISRO
to stand by its expert in Liquid propulsion engines when he was falsely charged with espionage wrecked
his career. The expert was later exonerated but the desired damage- delay of
our ability to compete commercially in
the satellite launch market by fifteen years- was achieved. The common courtesy-
given unstintingly to felons and politicians – that a man is not guilty until
legally proved so- was denied to this scientist. Surprisingly, in the Soviet
Union where sometimes failure meant facing the firing squad, the key scientists
were “imprisoned” in their work places.
The question is why this was not arranged? The final gall of the ISRO episode it
appears is that the police officer who caused such damage to the nation was
“pardoned” scot free when the charges against the officer were dropped by a Chief
Minister. Chairmen of HAL who supported strongly local development were
removed, sometimes unceremoniously. A particularly active Chief Designer was
retired promptly whilst non performers have been given sinecures. Again the US
is a model for the way they attract, develop and retain human resources.
Knowledge is a precious resource; it takes a life time to
develop. Suitable security protocols must be developed along with discreet surveillance
of all personnel. It is remarkable how effective how even routine and non intrusive surveillance of a few key parameters
can be.
Defence as a Business
A weapons Industry is a high risk high profit “full time” business.
. It requires all the time, dedication, energy attention, knowledge and
efficiency such a business needs. In the
Totalitarian states it was possible for “the man in charge”- e.g. Admiral
Gorshkov- the father of the Soviet Navy’s renaissance to stay at the helm for
thirty years and was retired only at his own request. As a senior “cabinet
minister” and political leader he combined job knowledge, national policy and
clout in one person. The result was that the Soviet Navy became a challenge to
the mightiest Navy, the USN. This is not possible in Western Democracies so
they, recognizing reality, hand over the knowledge, passion, and day to day
dedication required to run the business to the private sector with the state as
an Investment Banker and Salesman- to wit the number of state visits to sell
this or that equipment. An example of how western democracies work would be to
study the operations of the firm of Marcel Bloch which is better known as GA
Marcel Dassault the new surname being the nom
de guerre of his elder brother.
Marcel Dassault (1892-1986) started as a propeller
manufacturer during the First World War and went on to manufacture of aircraft
during the 1920s. Renaming himself after the Second World War( and after a
stint in a Nazi death camp for Jewish people) he went on to lead General
Aeronautique Marcel Dassault, one of the most innovative of aviation firms
which achieved brilliant results using fairly basic technology with great elan
to create fighters which became household names and considerable profits for
the shareholders. Marcel Dassaults passion was so great that as long as he was
alive apparently he did not allow his worthy successor and son, Serge, to run
the company! Between the two we are seeing acentury of continuity, job
knowledge and passion. A Bureaucrat, no matter how astute, on three year tenure
from the Ministry of Animal Husbandry or Mines, just cannot do it. The odds are
entirely against him.
The story is of passion, dedication, and continuity. I could
have cited Sir T.O.M. Sopwith, Chairman of Hawker or Donald Douglas but I have
deliberately chosen Dassault and France because France was the European country
most affected by leftist ideals and communism and yet the French communists
were knowledgeable enough and pragmatic and patriotic enough to realize that
certain areas were beyond their skills. When they nationalized the French
Aviation Industry they were pragamatic enough to leave Marcel Dassault in
charge of the Bloch plant. The time to continue with unworkable political
theories is long past. The industry is too dynamic and knowledge based to be
effectively managed by the present set up- and the results show repeatedly.
Conclusions
The continuity of Socialist policies in the strategic
Industries –Aerospace, Defence- have to be re-examined because we have a crisis
because of the past policies. Programmes have missed every deadline ever set.
The strategic Industries do not respect political theories. These are knowledge
Industries and are amongst the most dynamic and creative of all Industries. Countries
on both sides of the political divide despite general posturing have recognized
this and organized themselves accordingly. Only we ,for reasons unknown and
suspect persist with a failed and increasingly decrepit system.
For India the best course will be, was elsewhere, to give the
private sector the leadershipin te strategic sector with the Government in the
role of a venture capital source and in Marketing which is the universal model
everywhere.
The West’s monopoly over all Industrial goods of a hundred
years ago has been taken over by the Far Eastern countries who, significantly,
offered a better product at breathtakingly lower prices. Weaponry is the last
bastion for the West and they will defend it by all means, not necessarily
fair.
In our liberalization in the 1990s the areas “liberalized” were
only those which were already lost to the West. Weapons production and
development was retained for the PSUs despite the presence of many scams and
evidence of inefficiencies.
A functioning world class education system has been vandalized
to “unemployability”.
The vilification of the Private sector-even from before
Independence- as being unworthy and untrustworthy to receive Public funds for
weapons development has proved unjustifiable. Despite a continuing list of PSU
scam these are indulgently patronized despite shocking irregularities.
India’s democratic government is the only one in the world
which treats its weapons Industry as another Government department no different
in its style of running from say the Ministry of Labour.
License restrictions, muzzling of effective research, non
funding of promising projects, sustained funding of projects that are not
producing the desired results are the rule.
We can treat all of the above as random unconnected events or
we can see it as a carefully planned scheme to protect weapons import
monopolies. Whatever may be the truth it has hurt our Defence industries and
our preparedness. The combat is also in the shadows.
