Rearm while you repay

The direct effect of arms acquisition decisions are felt as soon as viable force is operationally capable. The indirect effects, however, could last much longer because resources get pre-committed and flexibility suffers. A `start-stop’ approach to arms acquisitions is detrimental to efficiency and long-term planning. There has been a virtual drought in major arms acquisition for the last 10 years. There has been a general cash crunch, repayment commitments of a large defence debt and the `Bofors syndrome’. This actually put a lid on modernisation plans. The debt still exists, but it would be useful to examine some issues relating to it.

India’s defence debt largely consists of the rupee debt, which is payable to Russia. Our Western sources supplied arms to us in hard currency with short-term loans. But arms purchased from Russia (then the Soviet Union) were on long-term loans, repayment stretching from 12 to 17 years after delivery, with low interest rates of 2-3 per cent, payable in rupees and exports to the Soviet Union. Coupled with the fact that Russian arms are cheap, these terms allowed India to build a credible defence capability. This, however, also built up a defence debt to Russia, which according to published figures, stood at Rs 17,276 crore in 1990. This figure rose to Rs 30,177 crore in 1993, essentially due to currency rate adjustments, and was Rs 27,603 crore by end-March 1995. During this period, the annual rupee debt service has been in the region of Rs 3,000 crore (these figures do not include loans taken from Western countries which are also being paid, but in hard currency).

One way of looking at the debt situation is to assume that the annual rupee debt service would remain constant around this figure (in fact, it would not), in which case the current debt to Russia would be wiped out around 2004. Another way would be to go by the last major arms purchase from the USSR in 1989. Given a representative figure for repayment over 15 years, loans would end around 2004. These are estimates based on limited information published by the government, since actual future rupee debt service figures are not freely available. The winding down of the rupee defence debt, however, is significant, and means that money is likely to be available for arms acquisitions.

Given the reduced defence expenditure allocation on the capital account over the last few years, it is clear that there was practically no scope for modernisation, upgrading or re-equipment. The expenses charged to this account left little money for actual modernisation. In addition, the capital expenditure did not go up much in dollar terms, which is an important indicator considering that arms deals are now mainly designated in hard currency. From 1993-94 till 1997-98, the allocation for capital expenditure has only gone up from $2,215 million to $2,474 million. In this period, the cost of arms equipment has increased appreciably, resulting in less buying power.

The availability of money for arms purchases will change once the current debt is paid off. We are already, therefore, confronted with two paths. One, to wait till the debt comes down to a negligible figure before re-equipping. The other is to incur further debts in anticipation of the current debt being paid off. The latter option is preferable, as it would reduce excessive fluctuations in force levels and defence preparedness. To an extent, this approach has been followed, and some debt has already been added on with the Sukhoi-30 and MiG-21 Bis contracts. It must be kept in mind, however, that equipment contracted for today will not require substantial payments immediately. The repayment schedule would be spread out, giving defence planners scope for additional procurement, but also reducing the margin of flexibility.

While the financial cushion on re-equipping thickens, the acceptable margin of error in the decisions they take will drop as hitech costs are added. Wise decisions would have to be taken to equip the armed forces for the 21st century. Key areas of future wars are likely to be reconnaissance, surveillance and target acquisition capabilities, command and control systems, and precision weaponry. With the same money buying less equipment, albeit of higher quality, the future lies in lean and mean fighting forces. The demand for `force multipliers’ by the Services is evident, and understandable in this light. What needs to be kept in mind, however, is that force multipliers such as Airborne Warning and Control System aircraft (AWACS) and flight re-fuelling aircraft `enhance’ the capability of a force. They do not multiply the force per se and should not be seen as substitution for a smaller force, since loss or degradation of the force multiplier can have a rapid `force divider’ effect.

Another issue that needs to be considered is that while the effectiveness of individual weapon systems has increased manifold, it does not lead to an inverse relation to reduction in force structure. As an example, if the combat capability of the Sukhoi-30 is thrice that of a MiG-21, the total force cannot be cut by a third if equipped with Sukhoi-30s. Numbers in weapon systems and manpower have a basic minimum for each task, which cannot be substituted fully with better efficiency. The need to maintain a basic ratio vis-a-vis our adversaries, too, should be appreciated, and the Indian armed forces should not fall into a trap of irrational or unplanned cuts merely because of introduction of higher efficiency weapon systems.