CHARTING THE TRACK TOWARDS AN ATMANIRBHAR NAVY BY 2047

Atmanirbharta Vision of the Indian Navy

In recent history, the Indian Navy’s indigenisation successes in the field of shipbuilding can be assessed to be significant. Most Indian Navy ships and submarines, including the indigenous aircraft carrier and strategic platforms (SSBNs), have been indigenously built in Indian shipyards. This is the outcome of a consistent and genuine intent for Atmanirbharta in India, specifically within the Indian Navy since independence. The stated goal finds repeated mentions in official reports, policies and news items, ever since. It was further reiterated in the Kargil Review Committee report and subsequently by the governments after 2014.¹ In continuation of the above approach, the Chief of the Naval Staff has set a vision for a fully Atmanirbhar Navy by 2047.² This is an exceptional long-term and ambitious vision which requires well-planned strategies. The first-ever Indian defence plan came into being only as late as 1964, nearly two decades after independence. Subsequently, a 15-year Long Term Integrated Perspective Plan was promulgated in the 2000s.³ This has now been revised to a 10-year Integrated Capability Development Plan in the Defence Acquisition Procedure 2020.⁴ In light of this, how can the reasonableness and possibility of achieving such an advanced target set by the Chief of the Naval Staff be assessed? Is it accompanied by identification of the correct challenges, to address them precisely and professionally to achieve the said target? A holistic review of the Indian Navy’s capital acquisition, indigenisation plans and status would be fundamental to understanding the feasibility of the Atmanirbharta vision.

Evolution of the Policies on Indigenous Content and Its Verification

In examining the issues more deeply, a few questions could be raised and discussed.

• What should ideally constitute indigenous content? An indigenous product ideally should have its entire design, development, manufacturing and assembly within the territory of the country. It should essentially be devoid of any foreign content; no foreign currency whatsoever should have been spent on its realisation. This situation, however, is beau idéal and possibly unrealistic in a globalised world where supply chains are spread across continents. Globalised competitive markets, shortfalls in skill sets and limited manufacturing infrastructure within the country further complicate the indigenisation objective. Thus, there is a critical need to assess what should encompass indigenisation towards Atmanirbharta and strategic autonomy within the confines of globalisation. Should it mean developing a competitive design, manufacturing and production ecosystem for everything needed, or should it be restrictive in scope regarding what should be generated within the territory of the country and what should be accessed from the global market, including design, manufacturing and assembly, all inclusive of intellectual property rights? Understanding these aspects through existing policies is essential to get a correct perspective of indigenisation in the Indian Navy.
• Is indigenous content just a numerical target? The 2005 Kelkar Committee report brought out that the concept of indigenisation needs to include capability development, design, system integration and increasing know-why, well beyond having simple numerical targets.⁵ Between the Defence Procurement Procedure 2006 and 2013, in cases where the products were bought from Indian firms (the ‘Buy Indian’ category), 30 per cent indigenous content was mandated, without defining what exactly constitutes indigenous content. It also did not specify exactly how the 30 per cent would be computed, though it stated a minimum requirement of 30 per cent indigenous content if the system is integrated by an Indian vendor. The Defence Procurement Procedures of 2008 and 2011 simply mentioned indigenous content on a cost basis. Later, the 2013 procedure brought in some more clarity in describing indigenous content, this also on a cost basis, but attempted to lay out parameters of assessment and audit.⁶ It also clarified further that, in addition to the 30 per cent of contract value as the indigenous-content requirement, it mandated similar 30 per cent requirements of indigenous content individually in the basic cost of equipment, the manufacturers’ recommended list of spares, and the cost of special maintenance tools and special test equipment. It even mandated the requirement of 30 per cent indigenous content for basic equipment in all stages of the contract, including the field evaluation trial stage.⁷ The overall spirit, as apparent from the policy description, appears to be geared at merely achieving numerical targets, which is contrary to the spirit of the Kelkar Committee recommendations.
• Refining the concept through later procedures. The Defence Procurement Procedure 2016 brought in some more significant changes in terms of indigenous-content requirements in capital acquisition. The ‘Buy Indian’ acquisition category required a minimum 40 per cent of the total contract value in the form of indigenous content on a cost basis. In case the equipment was not designed and developed indigenously, the requirement went up to 60 per cent. As in 2013, the 2016 procedure also mandated indigenous-content compliance in the cost of basic equipment, the cost of the manufacturers’ recommended list of spares, and the cost of special maintenance tools and special test equipment. However, these had to be assessed together at all stages, including field evaluation trials, unlike the 2013 procedure, where only basic equipment cost was to be considered for indigenous-content verification till the field evaluation trial stage. The concept of proving indigenous design was also introduced in 2016, with its responsibility resting on the vendor. The indigenous-content verification, based on documentary proof issued by authorised agencies to the vendor, was to be carried out by a committee composed of scientists from the Defence Research and Development Organisation and representatives from Service Headquarters. The requirement of verifying the indigenous design and development had to be completed before fielding the statement of case for categorisation.⁸ Many of these aspects of the 2016 procedure have continued in the Defence Acquisition Procedure 2020, while much has changed as well. The final verification of indigenous design has been shifted to the Technical Evaluation Committee stage, while verification of indigenous content could be done within one year of last delivery in the case of the 2020 procedure. It could be deduced that there has been an attempt through the 2013 and 2016 procedures to get indigenous design and manufacture through some policies, which did not work as anticipated. Accordingly, the provisions were relaxed in 2020, whereby the mandatory precondition of indigenous design verification by DRDO scientists for Indigenously Designed, Developed and Manufactured cases was removed. This gives the vendor sufficient bandwidth to argue his case for what comprises indigenous design after it has been accepted by the user. Hence, indigenous-content verification also needs major changes to promote real Atmanirbharta.
• Indigenous content: an undefined and ambiguous entity. Though the Defence Acquisition Procedure 2020 has brought in greater clarity on the computation of indigenous content, it has nonetheless failed to clearly define what indigenous content is all about. The ensuing complexity ends up providing the vendors the manoeuvring room to orchestrate the indigenous content. The conjectured definition that could be drawn from the procedure is simply the difference between the base contract price in rupees and the rupee equivalent of the purchases in foreign currency by the supplier.

1. It does not specify the requirements of design, manufacture, or assembly of the product(s) within the territory of India which should ideally be the essence of indigenisation.

2. IC could be adjusted through price manipulations, simply adding to the cost in Indian Rupees adds to the IC percentage.

3. The exchange rate variations lead to change in value of IC without any change to it in the real world.

4. IC could be manipulated through procurement of foreign goods and services in Indian Rupees through local intermediaries.

5. Undeclared foreign currency payments by the vendor could simply mean added IC content. Though verification is a feasibility, the absence of a dedicated, independent, credible, and competent organization for the purpose makes it unrealistic and ineffective.

6. The concept of IC does not necessarily boost either in-country manufacturing or domestic absorption of foreign technology. On the contrary, it certainly adds to the cost being paid in Indian Rupees.

7. DRDO products, consequently, face minimal formal external scrutiny on the quality and quantity of imported contents.

• The complex task of verification. In essence, indigenisation can only be accurately assessed through a robust verification process. Fundamental requirements of such verification should be to trace the location of design, development, manufacture, production and assembly within the geographical and legal boundaries of the country. This is on the presumption that the ultimate aim of indigenous content is to have critical capabilities within the country and in-country investments that contribute to growth and employment. However, indigenous content is neither defined nor explicitly described beyond its financial aspects in the procurement and acquisition procedures. This is a major shortcoming. Though verification is the responsibility of the Ministry of Defence, and could be done through a nominated agency or institution, the absence of a specialised standing agency for this important aspect is a major impediment to indigenisation and its objective assessment.¹⁰ Verification could be a massive exercise requiring significant resources and could be beyond the Ministry’s expertise. Hence, without resources accretion, credible verification could be a distant reality. Even the policy relaxation in design verification of Indigenously Designed, Developed and Manufactured products between the 2016 and 2020 procedures, brought out in this paper, could also possibly be attributable to this very reason.

Major Aspects of Current Levels of Indigenisation in the Indian Navy

Current levels of indigenous content. The current indigenisation level in the Indian Navy is claimed to be 90 per cent in the ‘float,’ 60 per cent in the ‘move,’ and 50 per cent in the ‘fight’ segment.¹¹ While this paper does not intend to contest these claims, a critical analysis could reveal a different narrative. There is much ‘undefined’ indigenous content, to be discussed subsequently in more detail, in these numbers. Since the present processes and rules are inadequate to identify or verify them, significant parts of these content percentages could belong to the imported category. Further, this specific reference does not include the entire aviation segment, which is outside the Materiel branch of the Indian Navy.¹² As per open-source information, naval aviation is procuring a major part of its assets, costing over Rs 1.5 lakh crore, from global sources: P-8I aircraft ($4.7 billion),¹³ MH-60R helicopters ($2.6 billion),¹⁴ MH-60R weapons,¹⁵ MQ-9B high-altitude long-endurance remotely piloted aircraft ($3.5 billion),¹⁶ and the Rafale multi-role carrier-borne fighter ($8 billion).¹⁷ Some of their deliveries are likely to happen in the next decade. With a minimum of 20 years’ life, and in most cases 30 years, these equipment will serve till the decade of the 2050s. If the ambitious target of an Atmanirbhar Navy by 2047 set by the Chief of the Naval Staff needs to be achieved, the minimum essential condition would be to ensure that all the aforementioned issues are comprehensively addressed.

Current levels: a Ministry of Defence perspective. As per the 36th Report of the Parliamentary Standing Committee on Defence, the Indian Navy’s surface and subsurface assets of the present and near future constitute 130 ships and submarines. Another 43 are under construction and 57 have been accorded Acceptance of Necessity. The current air assets include 273 aircraft: 143 fixed-wing and 130 helicopters.¹⁸ The Long Term Integrated Perspective Plan is the broad basis under which these assets are procured. To man and support these assets, the Indian Navy comprises more than 10,500 officers and 65,000 sailors. Both cadres have vacancies of 13 to 15 per cent, potentially affecting manning and planning, including indigenisation.¹⁹ As per this report, the budget earmarked for 2023 for defence capital procurement from indigenous and foreign sources is in a ratio of 70:30. While on the face of it this looks attractive, the figure would be misleading regarding indigenisation and indigenous procurements. This 70 per cent order on indigenous sources, as per the extant policies, permits up to 50 per cent of foreign content. A similar situation could exist even in systems designed and developed by the DRDO. Thus, the overall foreign content, even in this case or in the worst-case scenario, could be more than 60 per cent. This is twice as much as the presented figure of 30 per cent. Further, the report also indicates that only three schemes, costing around Rs 4,400 crore, are planned from foreign sources in the years 2023–25. However, the planned procurement of MQ-9B, MH-60R weapons and the Rafale multi-role carrier-borne fighter could significantly alter the figures, since they have a cost implication of nearly Rs 1 lakh crore.^{20, 21} In essence, there is a huge gap in the indigenous-content perception and reality.

As per data submitted to the Standing Committee on Defence by the Ministry of Defence, in the decade spanning 2012 to 2022, the Indian Navy has acquired nearly 40 per cent by value of its entire capital procurements from foreign sources. The comparison between imported and indigenous equipment procured, in percentages of value, remains almost unchanged year on year in these ten years, with a few exceptions. The specific value of import in the decade commencing 2012 was Rs 1.04 lakh crore. A similar amount is likely to be spent in the coming decade for importing the earlier-mentioned aviation assets alone, thereby substantiating the irrecoverable adverse impact these recent foreign acquisitions have on the overall indigenisation plan in the near future.²² There is a need to limit as well as leverage these acquisitions to ensure that they support the cause of indigenisation in more ways than one. A critical outcome from such purchasing power ought to be transfer of technology and integration of indigenous equipment on these platforms.

Major foreign dependencies. The earlier analysis posits that the present system of indigenous procurement inherently permits 40 to 50 per cent of foreign content. In the case of high-value projects, this could cater for major systems and components to be sourced from abroad even while the procurement of the larger equipment or system falls under the ‘Buy (Indian-IDDM)’ category. Though there are restrictions in procuring buyer-nominated equipment from abroad, the same is not true for other system parts. As a result, the items brought through ‘Buy (Indian-IDDM)’ and ‘Buy (Indian)’ categories could possess considerable critical foreign contents, the value of which ranges up to 50 per cent. Equipment designed and developed by the DRDO too is no exception. This aspect of inherently high and critical foreign content in equipment procured even through ‘Buy,’ ‘Make,’ innovation and DRDO acquisition models needs to be seen in conjunction with the earlier-mentioned acquisitions of MH-60R helicopters, P-8I aircraft, MQ-9B remotely piloted aircraft and the Rafale multi-role carrier-borne fighter in a short span of five to ten years. Delving further into the technicalities of the foreign content would indicate that, in addition to these critical systems coming from abroad, the country’s dependence for these systems on foreign sources could be prolonged. As the indigenous-content assessment is undertaken purely on a cost basis, progress on indigenisation and real indigenous content in reality is still too little to achieve strategic autonomy in any foreseeable future. Therefore, there is a serious need to identify the amenability of technologies, equipment and components to indigenisation and the time frames needed to achieve them.

Specific Challenges in Meeting the Indigenisation Goal

Lessons from history. In the present context of Atmanirbhar Bharat, reviewing the legacy of indigenous shipbuilding in India, and how it has influenced the present and carries many lessons for the future, is crucial. The country had an unparalleled shipbuilding tradition till the late 19th century, which has been internationally acknowledged time and again since the 5th century BC.²³ For over 150 years, up to the late 19th century, the Wadias built more than 170 war vessels for the East India Company and 34 warships for the Royal Navy, as well as 87 other merchantmen.²⁴ Wadia ships were known to be faster, stronger and cheaper than what the best of the West had to offer. The English observed that an “India teak” ship lasted 30 years against their more expensive oak ships, which lasted only 11 years. The Indian construction was nearly 25 per cent cheaper.²⁵ The country, which had such a pioneering and robust shipbuilding legacy till the 19th century, lost all of it when steam propulsion, first introduced in 1786, replaced sail; and later iron ships, first introduced in 1840, replaced wooden hulls. Even the screw propeller, invented in 1830, came into Indian construction only in 1883, and that too only for some small craft. Significant political and scientific upheavals in the 50-year span commencing the 1857 uprising severely affected the Indian shipbuilding industry. None of the subsequent inventions — the steel hull in 1880, the diesel engine in 1895, the turbine in 1900 and electric-motor vessels in 1903 — were introduced in the country due to non-existent industrial capability. These hastened the erosion of indigenous shipbuilding capability.²⁶ Though much of this erosion was by deliberate British design, it highlights how a set of evolved and acquired skills and capabilities could be lost in quick time in an environment of successive failure to absorb technology and to create adequate scientific and industrial capabilities. There is much to learn from this while Atmanirbharta is pursued in its current form, which also hinges greatly on possession of scientific and industrial capabilities as well as absorption of technology.

Is the Indian Navy equipped to undertake its own indigenisation? Presently, the Services have major ownership in indigenisation. This is seen clearly from the role played by Service Headquarters in each of the procurements, including Make and innovation, as per the procurement and acquisition procedures. The in-house indigenisation organisations and directorates further add to this role. This is not an optimal scenario, since the armed forces neither have the requisite technical wherewithal nor the bandwidth for undertaking any major indigenisation. They ought not be distracted from the primary role of warfighting and of training continuously for it. Indigenisation is the responsibility of the DRDO and has to be industry-driven, except in exceptional cases where the Services could contribute towards meeting some urgent and non-institutionalised field requirements. A dedicated neutral agency, possibly ‘Services-driven but not Services-centred,’ with representation from all stakeholders, is also a viable option to comprehensively drive indigenisation. The Weapons and Electronics Systems Engineering Establishment, set up in July 1978 as the Weapons and Systems Organisation to support integration of Western and Russian systems onboard Godavari-class ships, is an independent naval organisation that has made significant contributions to Atmanirbharta.^{27, 28} Such institutional models could be one of the possible ways forward.Various lists of equipment and spares indigenised through in-house efforts, available at the Indian Navy portal from the aviation side and the Materiel branch, present a less than encouraging story about the breadth and depth of in-house indigenisation attempts and successes thus far, despite investing a lot of its scarce and valuable resources.²⁹ Hence, it is imperative that indigenisation, which involves considerable design and development, be left to full-time professionals in industry and the DRDO, and not the Indian Navy. The Navy’s responsibility should be limited to generating prioritised lists of items requiring import substitution.

Myths about positive indigenisation lists. Promulgation of various lists of equipment and technologies placed under import ban, called positive indigenisation lists, by the Government of India is a step in the right direction to decide what should not be purchased from the global market.³⁰ This indicates a future timeline to generate substitutes within the country. Additional indigenised and positive indigenisation lists for subsystems and line-replaceable units published by defence public-sector units, which currently include another four lists and more than 4,500 components, contribute further to these indigenisation-supporting initiatives.³¹ Though positive indigenisation lists, in principle, promote indigenisation, a detailed analysis of their contents indicates that they may not necessarily serve the intended purpose. A majority of the first three lists published so far comprises major equipment and systems which are already developed or under development within the country. However, the freedom for these systems to have 50 per cent foreign content by cost, without restrictions on the technology aspects, invariably results in continued foreign dependence even for these products. Many of these dependencies will also be tied to intellectual property rights, resulting in foreign dependence in perpetuity.³²

Absence of positive import lists. While there are multiple positive indigenisation lists indicating what should not be imported, there are no similar lists which provide information regarding what equipment, subsystems or parts are not worth attempting for indigenisation due to their financial or technical unviability. Hence, there is a simultaneous need to identify and promulgate a progressively diminishing list of equipment and technologies which are better to import than to indigenise in the reasonable future. These could include technologies and products which are easily and widely available globally, but financially unviable to develop and manufacture ab initio within the country. The absence of such a list leads to infructuous investments to produce financially and technically unsustainable technologies and products. Further, such a list would unburden the armed forces by reducing considerable time and effort invested in identifying and recommending indigenisation plans for systems and equipment which are unviable for indigenisation. One preferred example in this case could be integrated circuits and chips. The country presently does not have sufficient infrastructure to manufacture chips and integrated circuits. Unless basic infrastructure for the same is built within the country, it is better to presume that these parts of any equipment would continue to be imported. Hence the cost aspect of these could be removed from the base used for calculating the indigenous content for any defence procurements till such facilities are established.

Conclusion and Recommendations

From the above discussion, it can be concluded that the Chief of the Naval Staff’s vision of an Atmanirbhar Navy by 2047 is in line with India’s post-independence aspirations. However, much needs to be understood and corrected at various levels to realise this dream. While there are lessons to be assimilated from the pre-independence legacy of acclaimed shipbuilding and its sudden fall, there are also multiple issues, both at higher policy level and within the Navy, which stand in the way. These issues include an ambiguous understanding of indigenous content and the lack of a definition to accompany it; the limitations of positive indigenisation lists; steering of indigenisation by the Indian Navy, which is ill-equipped for it; continued import of large-value equipment; and ‘undetected’ inherent foreign content and technology in indigenous products of all kinds. The following guide-map would be necessary to achieve the challenging dream of an Atmanirbhar Navy by 2047:

• Define Atmanirbharta and indigenous content with greater clarity, to ensure that the primary focus is on developing and attracting technologies which are unavailable in the open market. The definition needs to cater for identifying the location of design, development, assembly and manufacture, so as to ascertain and achieve the real sense of value addition within the country in terms of design, development, manufacture, assembly and technology adoption on a scale other than money terms — say technology, function, criticality and so on.
• Generate positive-import or negative-indigenisation lists, to avoid wasting precious efforts in developing and manufacturing financially unviable products which are otherwise available for import without restrictions from multiple sources.
• One of the models for absorbing technology should be developing financially viable products of the required technology before shifting to the required products, the real aim being to fully absorb technology prior to arriving at a military product. Developing dual-use technology would be the most optimal solution.
• Every sinew needs to be strained to drastically reduce and then stop imports in the field of naval aviation, with a calculated plan to accept the voids and also promote indigenisation. The Indian Navy’s real Atmanirbharta would depend significantly on its Atmanirbharta in aviation.
• The DRDO needs to disclose full details of import dependence and content in its products. There is also a need to define what is permissible for import for the DRDO as well, both directly and indirectly, to ensure that its products are fully Atmanirbhar, or at least to understand what it would take to make them fully Atmanirbhar.
• There is a need for a technically competent external agency to scrutinise and evaluate the DRDO’s Atmanirbharta performance. It could be constituted under the Ministry of Defence, composed of technocrats from industry and former DRDO and ISRO personnel.
• The import of all ammunition should be discontinued, and indigenous weapons — and sensors where viable — should be integrated on all foreign platforms. All foreign procurements should be leveraged with this conditional clause.
• The Indian Navy should almost completely disengage itself from indigenisation and innovation, except for generating lists of items required to be innovated or indigenised. Indigenisation and innovation need to be steered by professionals in the DRDO or industry, and not the armed forces. WESEE, which has independently achieved significant and credible indigenisation through its unique model, could remain an exception.