sitemapHome | Registration | Job Portal for CA's | Expert Exchange | Currency Converter | Post Matrimonial Ads | Post Property Ads
News shortcuts: From the Courts | News Headlines | VAT (Value Added Tax) | Placements & Empanelment | Various Acts & Rules | Latest Circulars | New Forms | Forex | Auditing | Direct Tax | Customs and Excise | ICAI | Corporate Law | Markets | Students | General | Mergers and Acquisitions | Continuing Prof. Edu. | Budget Extravaganza | Transfer Pricing | GST - Goods and Services Tax
Latest Expert Exchange
« Auditing »
 Supreme Court puts the spotlight on audit firms
 Auditing to be less of a burden as accountants embrace AI
 CAG's report on GST will be totally paperless
 Time Limit For Completion Of Assessment From The Date Of Special Auditor’s Report Under Income Tax Act, 1961
 Provisioning pertaining to Fraud Accounts
 Tax Audit Report (TAR) Certain exceptions and increased limits according to number of partners and considering nature of activity are desirable
 Cost Auditing Standards [ Cost Audit Documentation (102)] – Part-II
 Conference on Companies Act gets under way
 New bureau to dissolve state-run banks' power to choose auditors
 Foreign Exchange Management (Permissible Capital Account Transactions) (Fourth Amendment) Regulations, 2015
 ICAI forms 'prima facie' view on NSEL auditor

Ajai Shukla: Defining `self-reliance` for defence
June, 03rd 2008

After years of bureaucratic empire building in which the DRDO used the rhetoric of "self-reliance" to accumulate a wealth of funds, manpower and laboratories, now a blizzard of media, military and ministry criticism has forced the abandonment of that autarkic worldview. Phrases like "indigenous capability" are out; "international cooperation" and "integrated management" are in. Much of the transformation is driven by India's changed circumstances. International technology denial regimes have given way to initiatives with global arms majors for joint technology development.

This raises a vital question for defence planners: Is it time to redefine the notion of "self-reliance"? There is self-reliance in design, which the DRDO has historically propagated; and there is self-reliance in manufacture, i.e. the licensed production in India of military equipment that was designed elsewhere.

The DRDO has realised the need to be more discriminating in choosing the technologies it will develop. Strategic technologies that will always be denied nuclear, missile and electronic warfare technology amongst them will remain the responsibility of the DRDO, regardless of how long and painful the development process. But with India now able to leverage its enormous expenditure on defence to buy technologies that were unavailable earlier, it is possible to be far pickier in choosing between technologies that could be bought and those that the DRDO must necessarily develop.

Development time is utterly critical in making this choice. A product is only worth developing if the military can be provided a usable version of it before an equivalent product comes up for sale on the market. Except for the strategic technologies mentioned above, even the most technologically advanced products do eventually become available off the shelf. The AESA aircraft radar, until recently a product that the US sold nobody, is already figuring on the catalogues of many aircraft manufacturers.

If the product seems likely to be "buyable" before it can be developed, the DRDO must resist the temptation to go in for development. One of the fundamentals of defence economy is that developing a military product is usually far more expensive than buying the same product off the shelf. The expenditure of a development programme becomes justifiable if the product is made available to the military before it becomes available on the international market. If the development cycle takes longer than the international laboratory-to-market cycle, the decision to develop that product at least for that generation of equipment was a wasted one.

The DRDO's counter-argument has traditionally been that no development effort is wasted. The technological gains of even a failed development programme like the Trishul missile, or so the DRDO argues, are realised while building the next generation of that (or similar) equipment. The opportunity cost of a failed programme then becomes justifiable. But that argument presumes that, at some stage, a future generation of that equipment enters service with the military, by overtaking its commercially available equivalents on the time-development curve.

Nor is the opportunity cost of a failed product ever scrutinised. Hundreds of crores poured into, say, an abortive missile project are hundreds of crores that could have gone into modernising airfields, or electrifying a border fence, or even building married accommodation for soldiers to improve their morale. But while it's easy to audit money spent, it is far more difficult to critically evaluate the losses caused by an expenditure that wasn't ever made.

Besides design capability, self-reliance stems equally from manufacturing capability. Self-reliance can thus be evaluated also in terms of the percentage of defence production that is done in India. This percentage can be boosted through several policy reforms e.g. mandated transfer of manufacturing technology, licensed production, greater offset requirements all of which are realisable by leveraging India's enormous buying power in the defence industry.

Where India's design capability lags global state-of-the-art by a serious margin, that technology is not up for sale, and development time seems prohibitive, funding partnership and licensed manufacture is an economically prudent option when compared with outright purchase. While India considers which fighter aircraft to buy, several countries that plan their purchases better joined the F-35 Joint Strike Fighter (JSF) programme. This fifth generation aircraft, being developed by US companies, is being partly funded by several other partner countries. The technologies in the JSF are so far ahead of what the partner countries are capable of that they are willing to fund US R&D and bid for a share of the manufacture.

While this cannot compare with the option of designing and building ones own fighter aircraft, it is a better intermediate strategy than an off-the-shelf purchase of the kind that India is embarking upon. A joint programme would give India the option of shaping the design specifications of the equipment in question, while "de-risking" the development process. India's military managers could consider such procurement strategies.

All these themes are provided for in the MoD's forthcoming rulebook, the Defence Procurement Policy of 2008 (DPP-2008); it provides for all these possibilities. It classifies defence procurements as "Make", (items that the DRDO will develop and industry will make); "Buy and Make" (items where the technology and manufacturing capability will be bought, and industry will make); and "Buy" (items which will be bought outright). But good decision-making by the MoD will, like most military decisions, remain a deeply subjective and a risky process.

Home | About Us | Terms and Conditions | Contact Us
Copyright 2018 CAinINDIA All Right Reserved.
Designed and Developed by Binarysoft Technologies Pvt. Ltd.
Binarysoft Technologies - Our Experience

Transfer Pricing | International Taxation | Business Consulting | Corporate Compliance and Consulting | Assurance and Risk Advisory | Indirect Taxes | Direct Taxes | Transaction Advisory | Regular Compliance and Reporting | Tax Assessments | International Taxation Advisory | Capital Structuring | Withholding tax advisory | Expatriate Tax Reporting | Litigation | Badges | Club Badges | Seals | Military Insignias | Emblems | Family Crest | Software Development India | Software Development Company | SEO Company | Web Application Development | MLM Software | MLM Solutions