Friday, 23 June 2017

Self-reliance mirage

Defence manufacture indigenisation is a long way off

By Ajai Shukla
Business Standard, 23rd June 17

Prime Minister Narendra Modi was more optimistic than accurate in claiming on Tuesday, in a speech in Lucknow, that India is “marching ahead” towards self-reliance in building defence equipment. True, Mr Modi has always committed himself to indigenisation in defence manufacture. His 2014 election manifesto pledged to rewrite defence policy, restructure equipment procurement and make India a defence-manufacturing hub. In early 2015, the prime minister lamented before an international audience in Bengaluru that 60 per cent of India’s weaponry was still imported; declaring that increasing domestic manufacture from 40 per cent to 70 would double our defence output. Yet, today the percentage of weaponry India imports remains above 60 per cent.

On March 17, the defence ministry told parliament that 65.62 per cent of the military’s procurement for 2015-16 was done through indigenous sources. It also said that, over the three preceding financial years, 94 capital procurement contracts involving Rs 82,980 crore were signed with Indian vendors; while 56 such contracts, involving Rs 53,684 crore, were signed with foreign vendors during the same period. This would place the indigenous component at over 60 per cent.

But these answers obscured the large overseas component in so-called “indigenous” platforms. The Sukhoi-30MKI and Tejas fighters, the Hawk trainer, Dhruv helicopter and Dornier-228 aircraft are deemed indigenous, but are actually 40-60 per cent imported, according to Parliament’s Standing Committee for Defence. Similarly, Bharat Electronics Ltd imported 44 per cent of the input materials it used in 2015-16, Bharat Earth Movers Ltd imported 21.68 per cent, and other defence public sector units (DPSUs) and ordnance factories (OFs) have lesser, but significant, shares. Adding these import costs would present the real picture of indigenisation.

Meanwhile, the government has been talking up its policy reforms directed at boosting defence manufacture. On Tuesday, Mr Modi claimed he had allowed 100 per cent foreign direct investment (FDI) in defence manufacture. In fact, 100 per cent FDI requires case-by-case clearance; only 49 per cent FDI is permitted through the automatic route. Other reforms include the whittling down of defence items that require licences to produce. The private sector is getting a more level playing field through mechanisms such as exchange rate variation protection, which was earlier provided only to DPSUs and OFs. Offset guidelines are now more flexible and easier to fulfil. The Defence Procurement Procedure of 2016 accords preference to a new category of procurement, eponymously titled: “Buy (Indian) - Indigenously designed, developed and manufactured”. A more attractive “Make” category of procurement allows the defence ministry to fund 90 per cent of the cost a company incurs in developing new equipment. The ministry will now choose private firms as “strategic partners”, which foreign vendors can partner to manufacture in India.

Yet, despite this liberalisation, defence manufacture lags. While it is true that the goals must be realistic as defence technology is complex and sophisticated, and rapid indigenisation is probably not possible when the country doesn't really have a strong hi-tech manufacturing sector, the fact is the government has been slow in its response. It has taken three years to build the policy framework, after playing musical chairs with defence ministers. Without robust ministerial leadership, bureaucrats shirk decision-making, fearing victimisation in the future by investigative agencies. Instead they push for policies that do away with discretion and judgement, with outcomes determined by unthinking procedure. With nobody ever accountable for overruns or delays, the defence ministry – which, in defence manufacturing, is the regulator, the sole customer and also a big seller – remains moribund.

Tuesday, 20 June 2017

Boeing signs $100 million contract to keep navy’s P-8I aircraft flying

By Ajai Shukla
Business Standard, 20th Jun 17

The Indian Navy’s Boeing P-8I long-range maritime patrol aircraft, reputedly the world’s most fearsome submarine hunters, have proved themselves in joint patrols with the US Navy in the Indian Ocean, tracking Chinese submarines.

Last July, a pleased Indian Navy signed a billion-dollar contract with Boeing for four more P-8Is to augment the eight aircraft it already flies. Delivery will begin in 2020.

But, with Chinese submarine activity growing in the Indian Ocean, the navy wants more P-8Is on station today. Last Monday, the navy signed a $100 million contract; requiring Boeing to maintain spare parts and personnel in India, ready to respond to any defects or failures in the P-8I fleet over the next three years.

The so-called “performance based logistics” contract requires Boeing to continue the warranty services it has so far provided under an initial production contract, which will expire in October.

“This contract will substantially bolster Boeing’s performance-based support to the Indian Navy and should maintain or increase the operational capability of the eight-aircraft fleet,” said Boeing on Monday.

Since the P-8I is based on a commercial Boeing 737-800/900 airliner, material support will also be sourced from the Boeing Commercial Aviation Services’ Fleet Services division.

This is yet another lucrative triumph for Boeing, which has won more than $10 billion worth of Indian defence contracts since 2009. Besides $3 billion worth of P-8Is, Boeing won a $4.5 billion contract for ten C-17 Globemaster III transport aircraft, and will soon start delivery of $3 billion contracts to supply 22 AH-64E Apache attack helicopters and 15 CH-47F Chinook heavy lift helicopters.

Pratyush Kumar, president of Boeing India and vice president of Boeing International says: “With this contract, the Indian Navy can be assured of achieving exceptional operational capability and readiness of the P-8I fleet.”

Despite the navy’s growing reliance on the P-8I fleet, which has replaced ageing Soviet-era maritime patrol aircraft like the Tupolev-142 and Ilyushin-38, the navy’s P-8Is remain handicapped by New Delhi’s reluctance to sign a cooperation pact called the “Communications and Information Security Memorandum of Agreement” (CISMOA).

India’s refusal prevents Washington from providing “CISMOA-controlled” equipment, which would allow Indian and US submarines and P-8 aircraft to operate together smoothly.

To keep track of hostile submarines in the Bay of Bengal, Arabian Sea and Indian Ocean, naval pilots fly their P-8Is on eight-to-ten hour surveillance missions over these waters. To strike enemy warships and submarines, the P-8I carries seven tonnes of weaponry on board, including advanced Harpoon missiles and heavyweight torpedoes.

Monday, 19 June 2017

Lockheed Martin, Tata, join hands to build F-16 planes in India

Likely to compete in single-engine fighter contract with Gripen E, built by Saab-Adani combine

By Ajai Shukla
Business Standard, 20th June 17

US defence giant, Lockheed Martin, and India’s Tata Group signed an agreement on Monday to jointly build the F-16 Block 70 fighter in India, should New Delhi opt for the American aircraft in the procurement of single-engine fighters for the Indian Air Force (IAF) that was initiated last October.

Highlighting the importance of this contract for the Tata Group’s aerospace and defence aspirations, Chairman Emeritus Ratan Tata personally attended the signing ceremony at the on-going Paris Air Show in France.

The Tata Group has earmarked Tata Advanced Systems Ltd (TASL) to actually build the F-16 in India with technology and manufacturing facilities transferred from Lockheed Martin.

Coming ahead of Prime Minister Narendra Modi’s visit to the United States this month, Lockheed Martin’s inking of this joint venture (JV) – which would have required formal clearance from Washington – indicates that, despite President Donald Trump’s promises to keep skilled jobs in the US, his administration is willing to transfer the ageing F-16 production line from Texas to India.

TASL and Lockheed Martin already have a JV that manufactures airframe components in Hyderabad, including for the C-130J Super Hercules airlifter and the Sikorsky S-92 helicopter.

C-130J production from that JV goes towards fulfilling Lockheed Martin’s offset obligations. However, the manufacture of F-16 Block 70 would be a far more ambitious project. This would first require the ministry of defence (MoD) to select the Tata Group as an Indian “strategic partner” for aircraft production.

Next, the IAF and MoD would have to choose the F-16 Block 70 as the IAF’s single-engine fighter aircraft. That multi-billion dollar procurement has already kicked off with the issue of a global Request for Information (RFI) by the IAF.

MoD and IAF sources confirm aviation market intelligence that the IAF’s chosen fighter is likely to be either the F-16 Block 70, or the Gripen E fighter that Swedish company, Saab, has offered India.

In case the IAF opts for Saab’s Gripen E, the role of Indian partner is likely to fall to the Adani Group, say senior Saab executives. The Adani Group, despite its lack of experience in defence or aerospace, is positioning itself to be chosen as a “strategic partner” for this purpose.

Lockheed Martin expects the IAF will choose the F-16, based on the calculation that transferring the world’s only F-16 production line to India “creates new manufacturing jobs in India, and positions Indian industry at the center of the most extensive fighter aircraft supply ecosystem in the world”, as a company release today stated.

Lockheed Martin points out that over 4,500 F-16s have been built since the 1970s, of which approximately 3,200 fighters remain in operational service in 26 countries. An Indian production line could expect to benefit from their custom, including, ironically, from the Pakistan Air Force.

The IAF’s global procurement of single-engine fighters stems from the failure of its high-profile acquisition project for 126 “medium multi-role combat aircraft” (MMRCA), which fizzled out into the procurement of just 36 Rafale fighters from French company, Dassault.

The shortfall of 90 fighters this created, along with the likely retirement of almost 200 MiG-21 and MiG-27 fighters this decade, drives the IAF’s requirement for the early production of single-engine fighters.

Exacerbating the IAF’s fighter shortfalls is Hindustan Aeronautics Ltd’s slippages in building 100 Tejas light fighters, designed and developed in India by the Defence R&D Organisation.

Defence planning guidelines require the IAF to operate 42 fighter squadrons, with 21 aircraft in each. It is 10 squadrons short of that level at present.

Tuesday, 6 June 2017

Armies don’t take hostages

Army must safeguard its ethics and values. As the confrontation in Kashmir grows more vicious, this will require all its focus

By Ajai Shukla 
Business Standard, 6th June 17

It testifies to the resilience of Indian public debate that, four weeks after Major Nitin Leetul Gogoi, an army officer in Kashmir’s Budgam district, tied an innocent civilian to his jeep as a human shield against stone-throwing mobs, criticism continues despite official justifications. This is an important debate. In question here is not just an isolated incident of military misjudgement, which happens in moments of extreme stress in operations. Instead, with the government and army establishments publicly justifying and condoning the actions of the officer, the question is more fundamental: Were Major Gogoi’s actions in line with the ethos and principles that undergird the military?

From the start, government officials and the army chief himself solidly supported Major Gogoi’s contention that he had no option but this extraordinary measure to safely evacuate polling officials from a voting station near Budgam. Their lives, he argued, were threatened by a mob that had gathered to disrupt voting. To obtain clear passage through the stone-pelting mob, Major Gogoi picked up Farooq Ahmed Dar, ironically an innocent shawl-weaver who had just cast his vote in defiance of the separatist diktat. With cellphone cameras rolling and capturing video of Major Gogoi’s rescue convoy, which was also threatening through a loudspeaker that stone pelters would meet the same fate as Dar, the officer successfully extricated the polling officials. Dar was released, physically unhurt, after spending hours being driven around tied to the front of the jeep.

Predictably, videos of this spectacle went quickly viral on social media, painting the military as an army of occupation that cowered behind human shields. For the army, which Kashmiri separatists routinely criticise, but mostly respect as an impartial and restrained force, this was a humiliating blow to its public image.

The most compelling argument made by the diverse cast of characters that sprang to Major Gogoi’s defence was that the officer had saved many lives. These included Attorney General Mukul Rohatgi and army chief, General Bipin Rawat, who cut the ground out from under an army court of inquiry that is investigating Major Gogoi’s conduct by summarily awarding him a commendation. Punjab’s Chief Minister Amarinder Singh argued in an article: “When Major Nitin Gogoi decided (and, mind you, it could not have been anything other than a split-second decision) to use a civilian as a ‘human shield’ to protect his men from a stone-pelting mob, he was simply reacting to a tough situation in a dangerous environment.”

This raises two fundamental issues. Foremost is the worrying reality that the army is being permitted, even encouraged, by its chief to operate like a police force rather than as the military – the last recourse of the state. According to its own sacred regulations and operational procedures, the army shoots for effect when called in, rather than trying to save lives through measures like firing over the heads of a crowd, far less taking hostages. Major Gogoi’s militarily correct course of action would have been to warn the crowd to disperse and, if it refused to obey, to open fire with due restraint. That is what is prescribed in the “Regulations for the Army”, the foundational document that every officer possesses and reads. As it turned out, Major Gogoi might well have saved protesters’ lives by opting for a human shield to force his way through the mob. But he incalculably damaged the army’s reputation, not just in Kashmir, but anywhere that video is seen. The army must introspect what constitutes greater damage: A blow to its institutional credibility and the dilution of its operational culture, or the admittedly tragic consequences of dispersing the mob with fire.

After all, where does the “but he saved lives” argument lead to in a counter-insurgency environment? Would the army chief use the same logic if a military officer who has cornered a Kashmiri militant holds a gun to the head of his two-year-old daughter and orders the militant’s wife to bring her husband out to surrender? That might save lives too.

This mortifying scenario might not be so far-fetched, going by what the army chief said in an interview with PTI last week. General Rawat declared: “This [Kashmir] is a proxy war and proxy war is a dirty war. It is played in a dirty way. The rules of engagements are there when the adversary comes face-to-face and fights with you. It is a dirty war... That is where innovation comes in. You fight a dirty war with innovations.”

Is this is now government policy? Does the army’s counter-insurgency challenge in Kashmir require it to function less like an army and more like a police or intelligence organisation? Is that what was intended when the government chose General Rawat over two more senior officers from the mechanised forces to become chief? In “off the record” briefings, army spokespersons explained at that time that General Rawat had been made chief because of his longer experience in Kashmir. Does “longer experience” translate into gaining tactical results through unmilitary ruses and devices, even if they incurred strategic, political and public perception costs that far outweighed the benefits obtained?

The army has successfully dealt with insurgencies in Nagaland, Mizoram, Assam and Manipur without sacrificing its fundamental character as a warfighting army that abides by principles of honour and creed. It did this too in the first two decades of combating the Kashmir separatist insurgency, successfully creating a sanitised security environment in which New Delhi could have (but did not) initiated political processes to craft a settlement. Since 2009, however, when the centre of gravity of the Kashmir agitation shifted from armed militancy to intifada-style unarmed public protests, the army has struggled to deal with a new and infinitely more challenging security environment. This was starkly clear from General Rawat’s interview with PTI, where he stated: “I wish these people, instead of throwing stones at us, were firing weapons at us. Then I would have been happy. Then I could do what I (want to do).”

This, however, is wishful thinking from a bygone era. The army will increasingly have to do what it least wants to – confronting unarmed, rock-throwing, violent public protests. Its key challenge will be to do so without diluting its foundational warrior ethos with self-serving, and eventually self-destructive rationales about the need to “fight a dirty war with innovation”. Complicating the army’s task is the pressure it faces to compensate for political failure. As Lieutenant General DS Hooda, one of the army’s most thoughtful commanders in recent times, noted in the context of the Gogoi incident: “There will be political influences, it is in the nature of democracies, and pressure from public opinion. But the military ethic must stand on its principles and values. As the environment in Kashmir grows more vicious, this will require all our focus.

Monday, 5 June 2017

Pak Army calls DGMO to end firing in sector where two Indian jawans beheaded

India responds that Pak infiltration and firing would draw “appropriate retaliation”

By Ajai Shukla
4th June 17

More than a month after the killing and beheading on May 1 of two Indian soldiers on the Line of Control (LoC) in Jammu & Kashmir, near Battal in the Krishna Ghati sector, Indian posts continue their retaliation against Pakistani positions in that area.

On Monday, Pakistan’s Director General of Military Operations (DGMO) made an unscheduled phone call to his Indian counterpart to complain against cross-border firing by Indian troops.

Pakistan Army sources say the Pakistani DGMO, Major General Sahir Shamshad Mirza, complained to his Indian counterpart, Lieutenant General AK Bhatt, that cross-LoC firing by Indian posts had killed and injured civilians in two places across the LoC – Battal and Chakoti.

The allegation of civilians killed is often used as the cover to tamp down on tensions and cross-border firing on the LoC.

As is the invariable practice, the Indian DGMO denied the allegations. An Indian Army press release stated today: “On the issue raised by DGMO Pak[istan] Army regarding civilian killings, DGMO Indian Army conveyed that the Indian Army is a professional army and will not harm civilians in any manner.”

At the same time, in accordance with the Indian Army’s more proactive stance on the LoC, Bhatt warned his Pakistani counterpart that “peace and tranquillity [would be] contingent on Pak Army’s intentions and actions.”

According to the Indian Army release, Bhatt conveyed the warning: “If Pak Army continues to abet infiltrations and cause trans-LC (LoC) firings, Indian Army will take appropriate retaliatory actions”.

The two DGMOs interact regularly every Tuesday in a scheduled phone call in which they discuss issues of mutual concern. The Monday phone call, which was initiated a day early at Rawalpindi’s behest, was an exceptional request that is made on matters that require immediate attention.

On May 2, the day after the killing and mutilation of two Indian soldiers sparked off the current exchanges of fire, the Indian DGMO had conveyed in the scheduled phone call that “such [a] dastardly and inhuman act is beyond any norms of civility and merits unequivocal condemnation and response”, according to an army press release that day.

Saturday, 3 June 2017

Scouts’ honour: The Ladakh Scouts, the army's newest infantry regiment, will get the President's colours this month

The Ladakh Scouts, victorious at Dog Hill, during the Kargil conflict in 1999

By Ajai Shukla
Leh, Ladakh
Business Standard, 3rd June 17

The dramatic air landing of two Indian infantry battalions in Srinagar in October 1947, which drove back Pakistani tribal raiders from the outskirts of the capital of Jammu & Kashmir, is the stuff legends are made of. As the Indian Army built up troops in Kashmir, the raiders were driven back and Baramula, Uri and Tithwal liberated. But a similar, less known, crisis occurred in May 1948, when the capture of Kargil by tribal lashkars left the routes to Leh open.

Defending Ladakh against the tribal hordes were just 33 men of the J&K State Forces. Reinforcing the tiny Leh garrison were 20 volunteers, led by Lt Col Prithi Singh – the legendary “X Force” that dragged itself heroically over the wind-swept Zoji La pass. But, with the snows melting and passes opening, hundreds of Pakistani tribal fighters converged on Leh, driven by the promise of monasteries groaning with wealth, salacious dreams of unprotected women, and the belief that Ladakh’s Buddhist men knew little of fighting.

“Cometh the hour, cometh the man”, it is said. On May 13, 1948, as Lt Col Prithi Singh raised the tricolour in Leh and called for volunteers to fight the tribals, the first hand to go up was that of Chewang Rinchen, a 17-year-old schoolboy from Nubra. For the next two months, until the first Indian Army troops were airlifted to Leh and built up into a viable force, Rinchen and a band of youngsters that he formed into the Nubra Guards, confronted and thwarted the battle-hardened tribals. For his heroic defence of Ladakh and the leadership he displayed, Rinchen was appointed a junior commissioned officer in the Indian Army and awarded the Mahavir Chakra, the army’s second-highest gallantry award. 

Not content with being the youngest-ever winner of that award, Rinchen went on to win a Sena Medal in the 1962 war with China; and then a second Mahavir Chakra in 1971 for capturing over 800 square kilometres of territory from Pakistan, including the strategically vital village of Turtok. Eventually retiring as colonel, Rinchen is one of the army’s greatest legends.

      (Above: Sheikh Abdullah pins the MVC onto Rinchen)

Rinchen and the Nubra Guards are also the progenitors of today’s Ladakh Scouts – a regiment so distinguished in war and peace that President Pranab Mukherjee will travel to Leh this month to present it the coveted President’s Colours. These are normally presented to units that distinguish themselves consistently over decades.

The Ladakh Scouts, in contrast, became a regular army regiment only in June 2001, after their stunning performance in the Kargil conflict. No sooner than the Pakistani intrusions across the Line of Control were detected in May 1999, the Ladakh Scouts swung into action, reconnoitring routes, fixing ropes and enabling the initial successes of regular Indian battalions. The Ladakh Scouts were also instrumental in exposing the role of regular Pakistani soldiers in the intrusions, which Islamabad was flatly denying.

Embroiled in the fighting at Kargil, the Ladakh Scouts lost 31 men and were awarded 55 gallantry awards, more than any other army unit in per capita terms. Major Sonam Wangchuk, who led his Ladakh Scouts men to the capture of Chorbat La, was awarded a Mahavir Chakra. In recognition of their valour, the chief of army staff (COAS) awarded the Ladakh Scouts the COAS Banner – the only such award ever given. They were also conferred with a Battle Honour for Batalik and Theatre Honour for Kargil.

The army quickly saw the benefit of converting the Ladakh Scouts into a full-fledged infantry group, on the lines of the Gurkhas, Dogras, Sikhs, etcetera. Unlike other infantry groups, which alternated between peacetime and field deployments, the Ladakh Scouts would remain in high-altitude field postings in the vicinity of their homes – the Kargil and Leh districts of Ladakh.

For an army that has so many soldiers committed on its Himalayan frontier, mountain men like the Ladakh Scouts are a godsend. Genetically conditioned for high altitudes, with physiological advantages like larger lungs, Ladakhis seldom suffer from mountain sickness. Regular army units, manned by plainsmen or mountain folk from lower altitudes, require up to a week of acclimatization before they can survive at altitudes of 15,000 feet. Ladakhis, however, can be deployed above 15,000 feet without acclimatization.

Ladakh Scouts are also adept at operating “self sustained” for up to ten days in extreme altitudes – that is only on supplies in their backpacks.

A display of this unique ability came in February 2016, when an army post called Sonam, almost 20,000 feet high on the Siachen Glacier, was buried by a collapsed ice wall along with ten soldiers from the Madras regiment who manned it. With sensors indicating signs of life, survivors needed to be dug out quickly. Ordinary soldiers were breathless at those heights, so Ladakh Scouts were brought in, without acclimatization, from an altitude of 12,000 feet – something that would kill most soldiers. But the Ladakh Scouts, working non-stop at Sonam, extricated Lance Naik Hanumanthappa Koppad alive. He did not survive for long, but the Ladakh Scouts had again proved their unique worth.

Since Kargil, the Ladakh Scouts have been built up to five battalions, each one with some 850 soldiers. At any time, two battalions are operationally deployed in extreme high altitudes, including one in the Siachen Glacier. Two more are stationed in Ladakh, with just one battalion in a peace location in Chandimandir. Seeing the value of these soldiers, there are plans to raise another two battalions.

With only a limited populace to recruit from, soldiers may also be drawn from Lahaul and Spiti, in Himachal Pradesh, which are also reputed for tough mountain soldiers.

At a recruiting rally at the Ladakh Scouts Regimental Centre, however, it does not seem as if the regiment wants for recruits. Defying the cold that has us wrapped in parkas, a crowd of youngsters stand in their underwear, readying for a medical examination followed by a two-mile run. The candidates are well-built, but short, which is not a deterrent since the army has relaxed height requirements for Ladakhis.

Mohammed Abdullah, a recruit from Phyang, near Leh, tells us frankly that young men in Ladakh have only two career choices: joining the Ladakh Scouts or driving a taxi for tourists. Another recruit, Thinless Norbu, from Chuchot village tells us that soldiers are held in high esteem by local people, and most educated girls would choose to marry a Ladakh Scout.

Even so, the changing values of Ladakhi society are evident from the controversy over the memorial to Colonel Rinchen. After he died in 1997, the spot in Leh where he was cremated was transformed into a public park. On his death anniversary, the army, administration officials and prominent citizens would lay wreathes in his memory.

Now, however, the local administration is moving to transform most of Colonel Rinchen Park into a memorial for the local police. Rinchen’s family is protesting this initiative but, with powerful administration officials backing the police, one of India’s most captivating war heroes might soon find his memory slighted.

Says one of the local officials, responding to a query on how local police in an entirely peaceful and crime-free district can be compared with a national hero like Rinchen: “Why should there be any comparison? After all, whenever anyone salutes the police memorial, they will also be saluting Colonel Rinchen.”

Friday, 26 May 2017

The defence ministry’s "strategic partner" policy is suboptimal

By Ajai Shukla
Business Standard, 26th May 17

The cabinet’s nod to the defence ministry’s strategic partner (SP) policy sets the stage for selecting six Indian firms to partner foreign original equipment manufacturers (OEMs) in building single-engine aircraft, helicopters, submarines and armoured vehicles in India. While the details of the SP policy are still to be made public and incorporated into the Defence Procurement Policy of 2016, the defence ministry had indicated its contours to private industry executives earlier this month. Broadly, the ministry intends to follow most of the recommendations of the Dhirendra Singh Committee (2015) and the VK Aatre Task Force (2016) in choosing Indian SPs. These will form joint ventures (JVs) with selected global OEMs and respond to defence ministry tenders for building defence equipment in the four chosen categories. With Manohar Parrikar having done the spadework, an optimistic Defence Minister Arun Jaitley has declared his intention to implement the SP policy at the earliest. This will please the air force, which has already approached global OEMs for building single-engine fighters in India; the navy, whose building of six conventional submarines can now proceed; and the army, which is in dire need of armoured vehicles and helicopters.

Yet, there is uncertainty whether the policy, pushed through hurriedly by Mr Jaitley, will indeed transfer defence manufacture to India. A key problem for Indian SPs, as well as for overseas OEMs, is the 49 per cent foreign direct investment (FDI) cap imposed on the JVs that must manufacture defence kit in India. The OEMs complain the cap leaves them with insufficient control over the technology they provide to the JV. This would lead to the manufacture of relatively low-tech equipment in India, with OEMs preferring to supply the high-technology components, sub-systems and systems from abroad. The Indian SPs are aggrieved for a different reason: they complain their minimum stake of 51 per cent leaves them with all the risk even though their foreign OEM partners hold all the big cards --- the technology knowhow.

There are also worries that the new SP policy is too narrowly focused. Its aim cannot be just to create “systems integrators” that assemble foreign-built sub-systems and systems into a military platform in India. Rather, the policy must ensure India develops the entire eco-system for manufacturing the defence platforms in question, including Tier-1, Tier-2 and Tier-3 suppliers, the component and materials manufacturers – not to forget the capability to subsequently maintain, repair, overhaul and upgrade the platform through its service life. The SP policy, as communicated to industry so far, does not cater for this. Nor does it acknowledge the complex manufacturing chains of global OEMs, which involve multiple tiers of independent vendors that feed into a complex weapons platform. Many Indian defence firm executives believe there is a strong case for giving the lead to the OEM, rather than the Indian SP, along with a majority stake and the responsibility to negotiate with its sub-vendors to ensure a specified percentage of manufacture is transferred to India. The ministry can ensure strategic control over the JV, even one where the foreign partner has a majority stake, by mandating that it be located on Indian soil, have only Indian employees and be run by Indian executives. The SP policy must be in touch with the realities of the global defence industry. 

India runs against the tide on Belt and Road

By Ajai Shukla
Business Standard, 22nd May 17

President Xi Jinping was a satisfied leader last weekend as he beamed at officials from over 70 countries, including 28 heads of state, gathered in Beijing for the coming-out party of his signature project – formerly called One Belt, One Road; and now dubbed the Belt and Road Initiative (BRI).

“In the autumn of 2013, respectively in Kazakhstan and Indonesia, I proposed the building of the Silk Road Economic Belt and the 21st Century Maritime Silk Road, which I call the Belt and Road Initiative… Four years on, over 100 countries and international organizations have supported and got involved in this initiative. Important resolutions passed by the UN General Assembly and Security Council contain reference to it. Thanks to our efforts, the vision of the Belt and Road Initiative is becoming a reality and bearing rich fruit”, declared the Chinese strongman.

The belt in this awkward label is the “Silk Road Economic Belt” – a network of road, rail and telecommunication links and energy pipelines that are planned to seamlessly connect China, through Central Asia, with Europe. It also includes the China-Pakistan Economic Corridor (CPEC), running from China’s north-western Xinjiang province to Pakistan’s Gwadar port, on the Arabian Sea. Meanwhile, the road, in “Belt and Road”, refers to a sea route connecting southern China with east Africa and the Mediterranean Sea.

With an estimated investment of $900 billion going over several years into BRI infrastructure, The Guardian cites a McKinsey report to conclude: “The plan has the potential to massively overshadow the US’ post-war Marshall reconstruction plan, involving about 65% of the world’s population, one-third of its GDP and helping to move about a quarter of all its goods and services. Some describe Xi’s scheme as the biggest development push in history.”

That is why it was a Great Power moment for China last weekend as friends, allies and even adversaries like the United States, Japan, South Korea and Vietnam sent senior representatives to Beijing. India boycotted the forum to protest China’s routing of the CPEC, without adequate consultation with India, through Gilgit-Baltistan, in Jammu & Kashmir (J&K), which India claims, but Pakistan occupies.

“We are of [the] firm belief that connectivity initiatives must be based on universally recognized international norms, good governance, rule of law, openness, transparency and equality… Connectivity projects must be pursued in a manner that respects sovereignty and territorial integrity”, said India’s ministry of external affairs in an official statement on Saturday.

In an unusual frontal assault, New Delhi assailed the BRI as a giant Ponzi scheme that would – like China’s disastrous development of Hambantota in Sri Lanka – leave infrastructural white elephants and indebtedness in its wake. In the foreign ministry’s words: “Connectivity initiatives must follow principles of financial responsibility to avoid projects that would create unsustainable debt burden for communities; balanced ecological and environmental protection and preservation standards; transparent assessment of project costs; and skill and technology transfer to help long term running and maintenance of the assets created by local communities.”

Opinion is divided on whether India is making a foreign policy blunder, and is now the bad fairy left out of the party. Global Times, a shrill English-language newspaper controlled by the Chinese Communist Party, gloated: “When the participants have no problem, why does the onlooker?”

What is the Belt and Road?

China describes Belt and Road Initiative as a “win-win” economic strategy that will galvanize global trade, just like the series of Silk Roads that made China an economic powerhouse until the industrial revolution, backed by western naval power, muscled China and India out of their pre-eminence in global trade.

According to Xi, trade between China and OBOR countries has exceeded $3 trillion over the period 2014-16. Chinese companies have established 56 economic cooperation zones in more than 20 countries, creating 180,000 jobs and over a billion dollars in tax revenues. Chinese investment in those countries has surpassed $50 billion, and will be scaled up sharply as projects are implemented. The CPEC alone will require an estimated $56 billion of investment. To do so, Chinese companies are working on railway lines that connect Jakarta-Bandung, China-Laos, Addis Ababa-Djibouti and Hungary-Serbia railway. China has upgraded Piraeus port in Greece and Gwadar in Pakistan.

Beijing rarely mentions that the network of roads and railway lines that undergird BRI generate badly needed work for Chinese infrastructure building companies that have built the new China, but are now running out of work projects in their home country. Chinese banks will provide loans to countries to pay for this infrastructure building, but those loans would require servicing and repayment, potentially creating the debt trap that India has warned about.

Beijing allays these fears, pointing out that enhanced trade flows would provide the income needed to service the loans, while also creating employment for millions along the trade highways. Yet, this is not what transpired in Sri Lanka, where the Hambantota infrastructure development project generated far less income than had been anticipated, while piling up crushing debt for Colombo. Currently, the Sri Lankan government is dealing with the political fallout of restructuring unmanageable debt into equity holding for Chinese firms, which locals object to as a violation of sovereignty.

However, countries like the Central Asian Republics that are already benefiting from Chinese-built infrastructure, including roads, railway lines and power generation, strongly back the Belt and Road Initiative. With little domestic industry to protect, they welcome cheap Chinese manufactured goods, and are happily providing new homes for Chinese steel and cement factories that Beijing is shifting out of the saturated Chinese market. Meanwhile, vast tracts of empty Central Asia steppe has been leased to Chinese farming companies, which supply agricultural produce back to farmland-stressed China and, after adding value in Chinese agri-business factories, re-exporting it to the countries where it was grown.

Besides providing China with employment, income and markets, this additionally provides Beijing with geopolitical clout. With a bumbling President Donald Trump looking to Make America Great Again by withdrawing from a leadership role in China’s vicinity, Beijing has a god-sent opportunity to posture as a responsible leader and driver of global trade for the benefit of all. So Beijing also paints the Belt and Road Initiative as a boost to regional development strategies like Russia’s Eurasian Economic Union, the Master Plan on ASEAN connectivity, Turkey’s Middle Corridor initiative, China-Mongolia-Russia Economic Corridor, the New Eurasian Continental Bridge and others.

Is India missing out?

Interestingly, there are more critics inside India of New Delhi’s scorning of the BRI than there are abroad. Mani Shankar Aiyar, in a scathing op-ed for NDTV, suggested that India was isolated since 29 heads of state/government and 130 national delegations attended the Forum in Beijing. These included all India’s neighbours, except for Bhutan. Even Washington sent a Trump “top aide”.

The reality, of course, is that sending a delegate to Beijing does not necessarily mean support to BRI. Washington certainly does not support it; nor does the Group of Seven, of which only Italy fielded a head of government. Many countries in China’s geographical vicinity sent delegates despite serious concerns about what Belt and Road might mean for them. They attended, nevertheless, so as not to attract the Dragon’s ire. In the circumstances, India’s very public boycott could be interpreted as an unusual display of spine.

By going along with the crowd, India has seriously damaged its own interests in the past. After the People’s Liberation Army invaded Tibet in October 1950, India’s reluctance to criticise China in the United Nations led to practically the entire international community following suit, thus permitting Beijing to annex Tibet – for which we paid the price in 1962 and continue to do so today.

Prem Shankar Jha argues that India is unjustified in citing sovereignty violation by routing the CPEC through Gilgit-Baltistan, since China and Pakistan had been using the Karakoram Highway, which has the same alignment, since the 1960s, a period in which India-China trade increased twenty-fold.

Others have argued that India should support the CPEC as it could itself benefit from branch corridors to India. That argument overlooks the fact that far greater benefits and trade volumes could flow between China and India through direct corridors – such as a China-Nepal-India corridor linking Lhasa with Kolkata, via Kathmandu; another one linking them via Sikkim; and a third via Lohit and Guwahati. It is political differences, especially China’s hardening stance on the border dispute and its insistence that India cede Tawang to China, that stands in the way of India’s support to corridors with China.

None of these arguments recognise that India’s hard stance against the CPEC also stems from New Delhi’s anger at China making common cause with Pakistan in blocking India’s membership of the Nuclear Suppliers Group and the blocking in the UN of Jaish-e-Mohammed chief Azhar Masood’s designation as a terrorist entity. Current Sino-India dynamics are also shaped by China’s overblown reaction to the Dalai Lama’s visit to Tawang (accompanied by a Union minister), and his reception by President Pranab Mukherjee in the presidential palace in New Delhi. Given the fraught nature of the overall relationship India could hardly be expected to ignore Beijing’s blithe disregard for India’s sovereignty concerns.