Vol. XLI No. 38 September 17, 2017

Using the Indian Armed Forces to Bailout Cronies

B Arjun

DEFENCE reforms is the new mantra of the Modi government. Internal restructuring of armed forces organisation and changing the procurement and production procedures of defence products are the twin objectives of the reforms. How the reforms will eventually impact the Indian armed forces is not what the government seems to be concerned with. Its sole purpose of pushing the reforms is to chaperone a few big Indian business houses into the defence game and provide them the opportunities to make big buck. 

On the organisational front, the government wants to lower the “teeth to tail ratio” – the number of soldiers in active combat role in relation to support units that provide services to the frontline. It intends to prune the non-combatant ‘flab’ and enhance army’s core competence – war fighting capabilities. The armed forces roles and missions are being redefined to rebalance defence expenditure by December 2019 and make more money available for modernisation. As a first step, the government recently announced redeployment of 57,000 army personnel from non-core duties like military farms to operational roles. The restructuring is moving in accordance with the recommendations put forth by a committee of experts under Lt Gen D B Shekatkar, constituted by the defence ministry for enhancing “Combat Capability and Rebalancing Defence Expenditure of the Armed Forces”. Besides emphasizing on the role of combatants and non-combatants, the Shekatkar Committee focuses on the distinctions between operational area and peace station. Duties of drivers and clerks in peace station are being pruned. The reform agenda targets the Army Supply Corps, Ordinance Corps, the Corps of Electronics and Mechanical Engineers (EME), National Cadet Corps, Army Postal Services. The rationale is that the support functions performed by these support arms do not require uniformed personnel (who have to be paid pensions), their roles can easily be performed by civilians, especially in peace stations.  Basically, this is a step towards handing over the functions of these arms to private players and share with them the army’s revenue budget. The government’s logic is flawed because the support arm of the army cannot be bifurcated. A clear-cut distinction cannot be made between field and peace areas as there are many functions of the operational areas that are performed in peace stations. 

Perhaps, the government is aware of these difficulties, the introduction of reforms is only a prelude to greater privatisation of military. The neo-liberal ideological leanings of the Modi government eventually envisage top Indian corporations managing not just defence factories but also the war-front in collaboration with their partners in the West. Much like US and UK, India too is moving towards corporatisation of defence.

Unfortunately, this is being done under the garb of improving efficiencies and saving tax payer’s money. The government is naïve in thinking that by outsourcing the defence functions money will be saved. The private players will suck the state dry. The money demanded by contractors or the market forces will be much more than what the state-army spends on these functions. The experience of abolishing petrol subsidies and leaving them to the vagaries of markets is well known to the Indian public. The companies respect market dynamics only when their profits are not affected. During lean period, they demand governments to bail them out by putting additional burden on the people. For example, despite the import price of oil being low, the people in India are continuing to pay high price for petrol and diesel.

The issue is that while the Modi administration is busy blowing its own trumpet for ushering in path breaking reforms, the non-combatant units are extremely unhappy with the way they are being treated.  According to the New Indian Express the “Simmering discontent in the Army is now turning into a legal battle. Over 100 serving officers have moved the Supreme Court against the Army Headquarters deploying them in operations but denying them benefits. These officers have been named ‘non-combatants’ in the Army’s order. Army Headquarters in its submission before the apex court last year had called the services cadre – which comprises over 20 per cent of the Army – ‘non-operational’.”


The second set of defence reforms pertains to defence production. The reality is that India is world’s biggest importer of arms. India spent Rs 82,496 crores between 2013 and 2016 on arms procurement from abroad. It accounts for 13 per cent of global import. India’s defence market is huge, over the next decade, it is estimated that the Indian defence requirements will be to the tune of $250 billion.

Such heavy defence import bill is sustained by media commentaries, which constantly harp that defence preparedness in India is in a perpetual state of "critical hollowness" due to low productivity in defence public sector units and lack of private participation in armament production. Whenever a foreign equipment is to be bought, the stories about the dismal state of our ammunition stocks and lack of fighter jets and air defence capabilities are floated. The Indian public is always made to feel guilty for neglecting Indian defence needs. All this is a part of the global arms purchase drama where war scenarios are built by the media and legitimised by strategic think-tanks.

Making adequate noises about indigenisation of defence production and problems related to dependence on foreign arms manufacturers is also another dimension of the same game. This is exactly what the new defence procurement policy and “Make in India” scheme hopes to achieve. The government has launched the "Strategic Partnership" model under which it is bringing in the Indian business houses into the defence game with orders and capital. The government is helping the local players to establish joint ventures with foreign firms that are willing to share technology and set up production units in India for the manufacture of fighter jets, helicopters and drones.  Take for example, the joint venture between the US giant, Lockheed Martin and Tata Advanced Systems (TASL) for the manufacture of F-16 fighter aircraft and the tie up between the Swedish company SAAB and the Adani group to build GripenE single engine fighter jet. Similarly, the Anil Ambani owned Reliance Industries has partnered with the Russian firm for the manufacture the Kamov Ka-226 helicopters, 200 of which are likely to be purchased by the Indian army.  The Pune based Kalyani group has tied up with Israel company Rafael Advanced Systems for producing a Rs 70 crore anti-tank guided missile in India. 

Here again, one of the major pillars of defence sector reforms, the foreign equipment manufacturers, are unhappy with government moves. It is reported that they are reluctant to establish joint partnerships with Indian companies that have no past experience of working in the defence sector.  Some of the foreign companies that have worked with the public-sector units are keen to operate with them because of the expertise they have developed over the years.

Another reason that the foreign firms have reservations about their Indian partners is that most of them are debt ridden and owe Indian banks huge sums of money.  With the Non-Performing Assets (NPA) crisis brewing in India, no one is sure as to how the likes of Ambani, Adani and Kalyanis’ will emerge from the NPA resolution process currently underway. The foreign companies are also not sure about the survival of some companies that may suffer if the present government fails to come back to power after the 2019 elections.

Perhaps, the defence sector reforms are designed to bail-out the most favoured corporate houses by giving them lucrative defence contracts and foreign partners on a platter. The army is unhappy with the reforms, the foreign manufacturers have reservations about the efficacy of reforms, the only people sanguine about recalibration of Indian defence is Modi government and a few crony capitalists who are drooling over the prospects of earning big money from sale of Indian defence.