Speaking about the achievements of the government halfway through its term, Defence Minister Manohar Parrikar said he had set a target of $ 2 billion in defence exports by the time its tenure ends. This would mean a six-fold increase over the current level of India’s defence exports. Defence exports have risen from Rs 1,153 crore in FY 2013-14 to Rs 2,059 crore in FY 2015-16. This happened despite two-thirds of items being removed from the military goods list. Also, the Ministry has significantly diluted the requirement of the No-Objection Certificate (NOC), making its issuance time-bound. No NOC is required for dual-use items. Even then, while only 39 NOCs were issues in FY 2013-14, the number rose to 191 in FY 2015-16.
But the most significant change that has provided an impetus to defence exports has been the issue of end-user certificate for exporting components. Under earlier orders, the exporting Indian company had to give a certificate on the purpose of the component, get it signed by the importing foreign company, and countersigned by that country’s government. The cumbersome requirement of a foreign government’s countersignature on every equipment meant that Indian companies were not preferred by foreign importers.
The original rule was meant to prevent a situation in which an Indian company might supply, say, a rubber gasket to a British helicopter manufacturer, who might export the machine to Pakistan. The government would deny an end-user certificate in such a case, and the foreign manufacturer would get it from another country — with no advantage accruing to India. The Ministry has now changed the rule, so that only certain critical items, which use sensitive Indian technology, need the foreign government’s countersignature in the end-user certificate.
Internally, the defence public sector units (DPSUs), which are burdened with domestic orders, have been given a 10% dispensation for exports. Exports from DPSUs were earlier not permitted unless the domestic demand of the armed forces had been fully met. This is meant to create a foothold in foreign markets, leading to supply of spares and greater market dependencies. Indian private defence manufacturers are an important part of the plan, and they have now been added to official defence delegations to foreign countries. L&T, for instance, has been part of government-to-government defence talks with South Korea and Turkmenistan.
However, senior Defence Ministry officials acknowledge that huge challenges remain in meeting Parrikar’s target of $ 2 billion exports. At current levels, where Indian defence exports mainly consist of personal protective equipment, offshore patrol vessels, and spares for helicopters and radars, it is difficult to establish a pattern about target countries or the type of exports — making it difficult to craft a viable export strategy. The Defence Ministry can, at best, put a policy framework in place and hope for the best.
The other challenges are more fundamental in nature. India is not a reputed defence manufacturer producing a wide variety of military platforms. The proven military platforms that are made in India, such as the Su30 fighter or the T90 tank, are licensed productions with Intellectual Property Rights (IPR) held by foreign defence firms. India cannot export these platforms. Even in the case of joint production platforms such as the Brahmos missile, built by India and Russia, the approval of the Brahmos board is required for export.
That leaves only the indigenous Indian military platforms for export, such as the Aakash missile, in which Vietnam and Thailand have shown interest in the past. But any indigenous military platform will become attractive to a foreign buyer only after it has been tested and inducted into the Indian armed forces, and its operational performance displayed. The artillery guns being produced now, whether the Dhanush howitzer or Advanced Towed Artillery Gun, will thus be available for export only a few years down the line.
Also, the government had decided against exporting military platforms in service with India to countries in the neighbourhood. While software codes for export platforms have to be different from the ones in use by Indian armed forces, this to preclude the possibility of sensitive information about critical equipment being made available to India’s adversaries.
But the biggest challenge for defence exports is the political leadership itself. To sell 36 Rafale fighters to India, the French Defence Minister made more than a dozen visits to India, and the French President himself came as a guest for Republic Day. Every American official visiting New Delhi reminds Indian officials of their interest in selling the F-16 or F-18 fighters, as does every German official about their keenness to build submarines in India. It would appear unlikely that India’s politicians and bureaucrats would be able to provide that kind of impetus to exports any time soon. Without a change in mindset and attitude, Parrikar’s target of defence exports runs the risk of remaining just a target.