India's limited arms industry

LONDON: The announcement on Dec. 5, 1996 that India had successfully completed research on a nuclear-capable intermediate-range missile, the Agni, seemed to underline the achievements of a formidable domestic arms industry. In practice, the Agni, which will not be deployed and is part of the Integrated Guided Missile Development Program (IGMDP), is one of the few successful branches of this industry.

Sustained by the third largest scientific and technical workforce in the world, and with one of the world's largest armed forces seemingly a captive customer, India's arms industry could be profitable and self-reliant. Indeed, the capability of the 50 Defense Research and Development Organization (DRDO) laboratories, the 39 ordnance factories and eight public-sector units producing ships, tanks, aircraft and missiles makes India's arms industry one of the more impressive on paper after those of the permanent five members of the UN Security Council and Israel. Nevertheless, it has failed both to be self-sufficient and to satisfy the demands of India's armed forces, which regularly rely on imports to meet their military requirements.

The main reasons for this failure are:

* A lack of resources - for instance, the DRDO is funded by less than 5 percent of the defense budget and a paltry 0.13 percent of gross domestic product (GDP). In real terms this amounts to a mere US$385.2 million;

* The domination of the arms industry by state-owned companies which, until recently, focused on a cost-plus-profit formula rather than on increasing sales and reducing production costs;

* A non-strategic approach to arms production and procurement; and

* A complete failure to develop an export market.

Today, less than one-third of India's annual $8.1 billion defense budget is spent on Indian-made equipment. The indications are that this share of the budget is unlikely to increase dramatically, despite the Defense Ministry's assertion in December 1996 that by 2005 around 70 percent of India's defense requirements would be met by Indian products.

Given the lack of resources, foreign-exchange constraints and the disruption in supplies to India following the disintegration in 1991 of its traditional supplier, the Soviet Union, there was some logic in India trying to boost its indigenous defense production. Yet, it appears that the industry is not able to respond adequately to the demands made upon it.

In the past year alone, India has signed a $1.7 billion deal with Russia to supply 40 Su-30mk multi-role fighter aircraft; entered into a $300m agreement with Russian and Israeli companies to upgrade the Indian Air Force's (IAF) MiG-21 fleet; ordered 100,000 AK-47 assault rifles for an estimated $9.3m; and is considering purchasing Russian self-propelled guns, T-72S tanks and submarines. In addition, it is also shopping around for an Advance Jet Trainer (AJT).

In contrast, only three Indian projects currently have firm financial backing. These are: plans to produce 126 Arjun MBTS at a cost of $282m; production of 12 Advanced Light Helicopters (ALH) at $4.5m each; and the manufacture of 100 Prithvi surface- to-surface missiles at a cost of $52m. The combined cost of producing these weapon systems would be less than $400m.

Behind this disappointing performance are three principal factors. The first is the unrealistic deadlines the DRDO set for designing and developing new weapon systems. For instance, when the Arjun main battle tank (MBT) program was sanctioned in 1974, the DRDO promised to produce a prototype by 1980, claiming that it would be ready for deployment in 1985 - a development-to- service cycle of 11 years. However, the first prototype was only ready for field trials in 1993 and the design was finalized in July 1996. Thus, the first Arjun regiment is only expected to become operational around 2002.

The time schedule for the Light Combat Aircraft (LCA) project was equally ambitious. Work on the new aircraft began in 1983 and was expected to replace the MiG-21 fleet by 1991 - a cycle of eight years. However, the first prototype only appeared in 1995 and the first flight, scheduled for February 1997, has now been postponed until November 1997. The most optimistic date for the LCA's introduction into service is 2002, although 2005 appears more realistic.

Consequently, the services that relied on these weapon systems to replace their old equipment were forced either to seek alternatives or to continue to use their existing equipment, with the inherent risk that it would erode their operational capability, particularly in a rapidly modernizing battlefield. The Indian Army has diverted funds from the Arjun project to establish a production line for the Russian T-72M1 tanks while the IAF embarked on a program to upgrade its MiG-21 fleet. This in turn deprived both the LCA and the Arjun of vital funds at a crucial time and caused further delays to the projects.

Second, even when the new equipment is finally operational, it will be neither indigenous nor state-of-the-art. For instance, according to one estimate, 70 percent of the LCA's components are foreign, including the engine, electronics and composite parts. Besides, the LCA incorporates very limited stealth technology, even though this has become standard for modern aircraft. Similarly, nearly 50 percent of the Arjun MBT components come from abroad. And yet the Arjun is burdened with outdated technology, particularly the engine which reportedly derives from the first-generation MTU 838 engine, designed 40 years ago, instead of the third-generation engine. This does not necessarily mean that the DRDO is unable to develop the necessary technology. Rather, it reflects its inability to translate its innovations into production models. Although some attempts have been made in the LCA and MBT projects to involve the production agencies right from the start, they have not been entirely successful.

A third critical factor affecting India's military-industrial productivity is the lack of emphasis placed on economies of scale and exports. Often, India will set up a production line, even with a limited order in hand. This leads to the facilities being under-used, and makes it difficult to recoup the costs. The situation could be partly remedied through exports. But India's track record in this area has been dismal, with claimed exports of around $50m in 1995 - less than half those of Brazil. In 1994- 95, India's defense exports brought in a mere $155.6m, less than 2 percent of the total defense expenditure. By contrast, other developing countries such as Brazil, South Africa and Israel, have developed substantial export markets.

The one indigenous program which appears to have surmounted these difficulties and has achieved some element of success is the IGMDP. The IGMDP was launched in 1983 to manufacture four tactical missiles and to develop an intermediate-range technology demonstrator. Today, one of these - the Prithvi - has entered the planned production stage, while two other surface-to-air-missiles (SAMS) - the Akash and Trishul - are undergoing user trials. In fact, the Akash is expected to enter production during 1997. The fourth, the Nag, an anti-tank missile, is the only program that appears to have slipped. Similarly, the Agni technology demonstrator has been successfully completed after three flights.

The IGMDP is one example of good strategic planning in the sphere of weapons procurement. One indication of its success has been that despite restricted resources, funding was not only continued, but enhanced. In fact, of all the DRDO projects started in the 1980s, the Prithvi is the only one which has reached production and has been brought into service. Another achievement is that the missiles have the fewest imported components of all the DRDO's projects. This is partly because importing missile components is restricted by the Missile Technology Control Regime (MTCR) and partly because the DRDO can design and procure the critical technologies within India itself.

The decision to use existing technologies rather than seek new, untested ones may also have contributed to the success of the IGMDP missiles. For instance, the Prithvi uses an engine from an earlier missile program (Project Devil) and the Agni technology demonstrator uses an engine developed on the civilian Satellite Launch Vehicle (SLV) program. However, some new technologies have also been incorporated to a limited extent. The Akash and Trishul are essentially intended to replace the existing vintage Russian-made SAMS - the Pechora and Osa-AK - which are now prone to jamming, while the Nag will have a guidance system based on millimetric wave technology.

With the success of the current IGMDP, the DRDO has now embarked on a new series of missiles which, if successful, would catapult India into the major league. Among the more ambitious missiles are:

* A 600km cruise missile based on the Lakshya target-drone technology;

* The Koral, reported to be the Indian version of the Russian SS-N-22 Sunburn missile; and

* The Sagarika, a 300km submarine or ship-launched cruise missile. Here, once again, the DRDO may use the existing Lakshya technology to derive a cruise missile, rather than build one from scratch.

The Indian arms industry has only had limited success in developing and manufacturing most weapons systems, especially armor, artillery and aircraft. The one real success is the Integrated Guided Missile Development Program. Without radical restructuring of the industry, India is unlikely to develop a meaningful defense-industry capability.

Window A: Often, India will set up a production line, even with a limited order in hand. This leads to the facilities being under- used, and makes it difficult to recoup the costs.

Window B: The Indian arms industry has only had limited success in developing and manufacturing most weapons systems, especially armor, artillery and aircraft.