Get out of 'white man' syndrome; give industry visibility of revenues for defence 'Make in India': Ex-DRDO chief Avinash Chander

We should aim for at least 50% indigenisation from the 'Make In India' campaign in defence sector, says Avinash Chander, former DRDO chief. In an interview with Economictimes.com, Chander, also known for being the architect of the Agni series of ballistic missiles, stressed on the need to give private defence industry visibility of revenues for Make in India to be a success. He believes that for the Indian defence sector to expand, there is a need to stop thinking small and aping other countries. Here is his prescription for making India self-reliant in defence equipment. Edited excerpts:

What is your take on government's special focus on the defence sector under 'Make in India'?

First of all, Make in India is an imperative, it is unavoidable. India has become the biggest importer, but at the same time we also have to see what exactly are we looking to achieve from Make in India. One major thing that has happened is that the order is being placed on Indian companies. In the past orders were placed on the foreign company and then some manufacturing was done in India. We have to see how the process evolves. The basic difference that has emerged is the order will be placed on an Indian company instead of a foreign company.

The second thing that we have to make sure is that in the process, it should not become a bypass channel for import.

As an assembly operation...

Make in India was always there. Even when we were buying, there was TOT. The PSU was doing 35-40% of work here, the remaining 60% continued to come from the foreign company. Now, with the orders being placed on the Indian company, even though the specification is just 30% minimum in India, we hope that the Indian company will have a genuine interest and drive to enhance the indigenisation over a period of time. That was lacking in the public sector.

How do you intensify this drive to absorb that technology and incentivise companies?

Incentive will come probably from cost savings. As they reduce dependence on imports (where costs keep rising), industries will try to maximise profit by enhancing the indigenous content. Economic factors will have to drive them. Today, there is no government policy that if you have taken an order, you have to go enhance the indigenous component from 30% to 50% to 70%. Hopefully, that procedure will also come in due course. There must be a progressive enhancement of Indian index.

Don't you think that there would always have been a huge difference between the local cost of manufacturing and the imported cost? Is the scenario very different now?

In principle, incentive was always there but the urge was not there. Public sector undertakings did not have a drive to maximise the revenues and profits. Their hands are full. The basic difference is that earlier the contract was placed on a foreign company, and it was driving the deal. The fundamental difference now is that the contract is being placed on an Indian company, and this company will drive the relationship. We hope that will change the scenario.

In this context, would you advocate 100% FDI in defence? Would it altogether eliminate the indigenisation incentive from Indian companies' perspective?

We have to see whether the country will really gain from 100% FDI. Manufacturing will happen and some people will get employment. But, do you get a long-term gain? That has to be seen.

This process of enforcing Indian involvement will drive skill absorption and product diversification. The way the Indian market is going to be in the next at least 20-25 years, no foreign manufacturer can afford to miss it. Irrespective of whether you ask for FDI or not, they (foreign companies) will come here. We have seen Kamov, Dassault coming. People are already willing because they have seen that there is no other option. Either they will miss the Indian market altogether or they will participate jointly.

Indian industries are entering the aero segment for the first time. Obviously, there will be baby steps and difficulties, but at the same time as a country, we have developed a capability. With the LCA maturing, there is a good amount of industrial base which has been created to give all the inputs for aircraft. Many of the Indian industries, like Tata Sikorsky, are supplying aircraft parts. We are supplying fairly good amount of inputs for the aerospace manufacturers abroad now. What is lacking was the total system delivery, and that is what we will get now.

If there are a couple of things that you would still like the government to build into the Make In India programme, what would those be?

First off all, we should try to aim for at least 50% Indian, from 30%. That will force the Indian companies to develop their expertise and capabilities. The partnerships will become less and less dependent. If there is a mandatory requirement that over a period of time the indigenous content should get enhanced, then companies will be forced to invest in R&D and in developing their own capabilities to make things happen. Industrial R&D is practically zero right now.

That will drive Indian industries to set up their own R&D capability. Next time, instead of a tie up, they will develop their own products.

This arrangement that Hindustan Aeronautics has had with Sukhoi and other companies in the past...some amount of technology transfer has already taken place. But, maybe that has not been absorbed very well into the system...

It has been fairly well absorbed. I would not say that absorption is not there, however there has been no drive to enhance or build on that absorption.

What do you have to say about CAG's recent criticism of Tejas? You just said that LCA has helped establish an industrial base. The project has been criticised for being delayed and CAG says that the LCA does not meet IAF's requirements...

Delay is a relative word. In India, we have a tendency to take up very ambitious time frames. No aircraft can be made in less than 15 years, anywhere in the world. We have to see whether we have built sufficient capability in the system for the next product to be made faster. If you see a product development cycle it is asymptotic. The first product will always take a long gestation time because you are building capability, knowledge and an industrial base. For example, if I have to take LCA Mark II and start today, I am sure within the next eight years we can get the Mark II.

The first nuclear submarine might have taken 20 years, but I am sure the next one will be much faster. We have seen that to be true in the case of missiles. The new missiles have a time frame of five to seven years. We are now competing with the world time cycles. The pilots who are flying LCA are very happy with its performance. Expectations are always going to be more than what we achieve, and it should be so.

Today, if we have a good mature industrial base in the country, LCA should be going on a fast track. We should be producing at the rate of 20-25 per year, to meet the immediate demands and go full blast on delivering the Mark II, which will cover all the gaps. The way LCA is today, it meets all the essential needs of Air Force.

Are there any lessons that we can learn from let the American industry? You spoke of a good industrial base in India, if you look at the American armaments industry, Lockheed Martin, Boeing and lots of private companies drive it. How do we create that ecosystem?

In US about 70% of defence R&D comes from the private sector, 30% from the government. In India, 80% comes from the government, and 20% from the industry. Also, industrial R&D in India is primarily on the process and maintenance. There is no true R&D into the products and systems. That scenario has to change. And for it to change, the industries must be assured of sustained orders because finally investment will be driven by the demand.

You are talking of visibility of revenues...

Yes, visibility of revenues. The industry has not been investing because it is not sure of getting orders from the Indian government. The tendency has always been to go out. If nobody is selling, then only we look at Indian development. If there is an option available abroad, we want to buy from abroad. That has been the mentality of the Indian system. Obviously, in such a system no R&D will develop and no industry will invest. Now, with industries getting orders, they will invest in R&D. That is where the transformation will happen. We will start having Lockheed Martin and Raytheon.

A huge capability exists in the country and you have access to a huge technology base. A lot of Indians who are working in global corporations will be happy to come back and contribute if the opportunity comes in Indian industry.

Secondly, we have to stop thinking small. For too long, we have been thinking at a very low level. Americans have not done this, so how can we do it? We have to come out of this White Man Syndrome. Today, many foreign companies are setting up their R&D centres in India. I read that Daimler is planning to take on 1,000 engineers every year. They have 4,000 as on date, for their R&D centre in India. DRDO has 7,000 engineers. With 7,000 engineers, we want to do missiles, aircraft, tanks, submarines, ships, everything. Where is the ratio? Obviously, government cannot keep on expanding. This has to multiply at the industry and the academic institutions. Once that happens, Indian industries and Indian scenario will change.

You just pointed out that DRDO is doing a lot of things. How do you propose that DRDO now focus itself better?

We have created seven clusters so that there will be a very clear focus of each. Certain things have been evolving over a period of time. Some things become by-product of other processes. One of the clusters is Life Sciences which accounts for hardly 2% or 3% of the total manpower of DRDO. In the process, some labs have come up in remote areas. They are trying to develop, harvest the local technologies, local expertise to aid some products.

We have already changed the work plan of DRDE Gwalior labs. They are working with NBC Detection Systems. Yes there are one or two labs which have not developed other expertise. We have to see what to do with them. But at the same time, there are labs like Leh which have helped the local army units.

We have to think about what we want to achieve with an investment of $2 billion and how best the manpower can be used. Which are our core strength areas and which core strengths do we want to build? Our problem has been that we have been trying to do everything. If we do not do something, we are blamed. Why has DRDO not done this? Why does India have to import ammunition? Why should ammunition not have been made by anybody else in the country, why not an industry, because OFBs have been there for a long time. Why does only DRDO have to make bulletproof jackets? Why cannot any industry do it? Optimal focus utilisation of limited resources is the key to success.

Missiles have been our success story because we have been investing very carefully and in a very focused way in that area. A good amount of DRDO budget goes into the missile segment. It is not possible to do everything. That is where the new system, as it evolves, will have to act. Our services have to sit together. We had initiated an exercise to check the needs of services. We need to know what can be done by the industry to cater to the services' needs and what should be taken up by the DRDO. Our investments will then become more meaningful.

Also, at one stage DRDO was focusing more and more on design because there was no design capability in the country. Twenty years back, there was nobody who had even basic design tools. Today the industry has developed a huge capability in designing. Slowly DRDO has to come out of design and move towards the high-end products and high-end research. DRDO should not complete with industry. It cannot. New equations have to be formed where DRDO and the industry start working together, so that the technical strength of DRDO gets utilised by the industry. DRDO should feed technology to them, augmented by their own R&D. Why should Indian industry look abroad only for technology alliances? That should be the next goal of DRDO, to become the technology provider, technology feeder for the Indian industry, instead of designer of products and systems.

You joined DRDO after passing from IIT in 1972 and you have been there for the entire span of your career. How do you get people like you to join DRDO and stick around for as long as that?

That is not a major problem right now. For the last three-four years we have been going to IITs for entry level recruitment. We even started a new process of online test for IITs and NITs and almost 3400 appeared for the test.

Last time this question came from the parliamentary committee that we are not getting proper manpower and even we are getting people IIT, we are getting all the left outs. We did an analysis. Out of the total number of people that we hired, some were 9 plus pointers and all of them were above average.

Also, you have to realise that DRDO is offering an entry level salary of Rs 40,000-50,000 per month. An IITian takes a typical salary of about Rs 80,000 to Rs 1 lakh a month from the private industry. Inspite of that, DRDO is attracting people due to the challenge which it entails.

In this process, one issue which plays a very vital role is the organisation image. Among the three major scientific organisations, ISRO, DRDO and DAE, DRDO is the most maligned.

DRDO's achievements are no mean ones. We have our own nuclear submarine, jet aircraft, ballistic missiles, intercontinental ballistic missiles, radars. In fact, the indigenous radars are comparable with the best in the world today. We are replacing imports of radars because the indigenous ones are better than the imported ones. DRDO has created a mark in practically every area.

The requirements of the armed forces are dynamic and will keep on increasing. There will always be a gap. With these limited resources, if we are able to meet even 10%-20% of that gap, it is a commendable achievement.

Also, we are working in a system where it takes 10 years to buy a Rafale aircraft. Mind you, just buy and not make. If we take 10 years to buy an aircraft, everywhere else the same process is followed and delays happen.

What is the problem with the defence procurement policy? Are there any fundamental issues that cause delays?

The fundamental process is based on distrust. We always start with the premise of distrust. We keep checking, counter checking and re-checking and at the slightest objection from somewhere, the whole process restarts. Somewhere, the processes should become totally transparent. If somebody is doing a mistake, make an example of him, instead of slowing down the growth system. Processes should allow fast decision making and a fellow should not be held guilty for having taken a decision as long as the decision is taken in good faith.

If the decision has been taken with malafide intent, then you can put the person in jail and make an example of him. That it will deter people. But if somebody has bought something by paying more price, the solution normally is to not buy. That is where the processes in India get bogged down. In an Indian department, it takes six months to one year to buy a component. If a private sector person is buying the same component, he is able to do it in a day. He uses a debit card or credit card and goes online, checks the details and records and he buys the component.

Organisationally, can the DRDO be made more autonomous? Can the pay scales be different?

We have to make the processes faster and people should feel accountability and responsibility. One of the suggestions we made was scientists should be given an organisational debit card. He can then buy the items that he needs on the net. All the delays will be cut off. At the same time there will be total transparency.

There will be an audit record. These are the types of procedure that we have to start bringing in the system to make it fast.

Would that be possible? Can DRDO be taken out of the government system? DRDO's decisions should not depend on the political leadership of the time...

There is nothing like going out of the government. As long as DRDO is being funded by government, whether it becomes a PSU or not, it will still have to come back to the same ministry for every sanction.

As a supplier of technology, is it possible for DRDO to independently raise revenues and become less dependent?

In due course it will have to happen. DRDO will have to start earning to its collaborations with the private sector or otherwise. Some processes will happen as the industry becomes more mature and starts developing its own capabilities.

You will have to compete for fund, but are we ready for it today? No. But, at the same time, if DRDO is not ready today, does not mean it should not plan to be ready. We have to plan for the next 10 years. DRDO will have to come out with a plan by which a lot it becomes self sustaining research.