We need a road map for self -reliance. This road map must also identify critical and important defence technologies and the path to the acquisition of such technologies.
But before examining the concept of public private partnership a few observations on the performance of the defence PSUs and the OFB: Their products have generally been poor on quality and as expensive as its imported equivalent. On delivery schedules their track record has again not been good and instances of product improvement are difficult to find. There may be some exceptions to what has just been recounted but by and large the views expressed- hold.
Reverting to the idea of public-private partnership. As stated earlier there is considerable merit in the proposal. Just look at the infrastructure to include plant and machinery, manpower, experience and domain knowledge of the range of products that each of these establishments possess. These are enormous assets and in some instances can compare with the biggest and the best in the world. What they lack is efficient management practices.
On the other hand, the private sector is now rapidly improving performance in order to survive and face the challenge of global competition. In recent times its pace of assimilation of technology has been praiseworthy. It is displaying considerable dynamism and sufficient hunger for growth. However, it lacks the infrastructure and also the domain knowledge. It is yet to make sufficient investments in acquiring the desired levels of understanding of modern warfare and the technologies that drive military doctrine. Since the top management of the private sector has little or no knowledge of the defence industry it is somewhat risk averse and naturally slow in decision- making. It wants to drive change but yet remains reluctant to put its money where its mouth is. Opportunities are allowed to slip because of the absence of the certainty of orders.
Looking at the strengths and weaknesses of both there is strong argument for synergy cooperation and partnership. The private sector would have to needlessly duplicate infrastructure and also invest in learning the business. The public sector could benefit from the management systems of the private sector its work culture and its relative freedom and flexibility of decision- making.
While the idea of public-private partnership is sound it is unlikely to happen unless the public sector companies see it as their route to survival. Forcing such tie- ups may turn out to be counterproductive
For technology, both would currently remain dependent on foreign companies. But then why has the government’s proposal for private-public partnership not got off the ground? Firstly because the marriage is being imposed instead of the partners choosing to wed on their own. Market forces are not yet driving it.
From the public sectors point of view they gain little by partneering the private sector. Better management is a notional issue and not easy for the public sector to accept. There is nothing else that the private sector can bring to the table. Therefore the public sector has virtually no interest in the proposed reforms and would prefer to let the system of protection continue. Moves and initiatives taken by the private sector have so far generally been spurned by the PSUs. There might be some exceptions but these are hardly indicative of any serious desire for partnership.
To support their position, they point out that adequate public-private partnership is already in place. They quote figures of the orders that they place on Small and Medium Enterprises ( SMEs ) for raw materials and components. However the nature of this relationship needs some delving into. The SMEs have certainly benefited from the point of view of making money. But have they imbibed efficiencies or better technologies or improved on quality? Unlikely!
Also read: Doing business with the Indian Defence Regime
On the other hand the private sector finds it expedient to partner the public sector. There are many reasons for such an approach. The primary being their assessment that in the short term the easy way to penetrate the defence business is by joining hands with the public sector. They suspect that despite the pronouncements of the government in practical terms the government is unlikely to afford them a level playing field. Then there is the question of risk mitigation. Other issues like investments in infrastructure etc need no reiteration.
Beyond the debate of private versus public there are some genuine issues of government control over technologies and processes considered critical. We also have legitimate macro-economic management concerns of duplication of capacities and labour management. These issues cannot be glossed over and require considerable deliberation for sound policy formulation.
Together with the policy changes that are being implemented, the way ahead is to concurrently push for reforms in the management of the OFB and the PSUs. On this subject it is understandable that political considerations would finally determine decisions and therefore some fine balancing would be unavoidable besides regulating the pace of change in order to make the process as acceptable as possible.
In pushing for public-private partnership the government must be wary of sending good money after bad money. It would be advisable to just let the market forces dictate the formation of joint ventures and consortiums.
For accelerated economic growth a countrys ability to absorb and develop technologies is a key factor. A dynamic and thriving defence industry helps to create and sustain this capability.
What is being done about our strength in software development? Not enough! With the world’s best software companies like Infosys, TCS and WIPRO and a large number of smaller software companies that are highly cost competitive we should by now have been developing software for most of the major global defence companies. The same software could concurrently be adapted to meet our specific needs. For most military applications firms have developed generic software capable of adaptation. Currently most systems are operating on the third or fourth generation of such software. That is the level at which we must enter so make up for lost time. For this idea to take concrete shape the government should create an appropriate forum that can give direction and monitor progress. Software we must note is going to be the main component of future defence systems.
To summarise: –
- We need a road map for self -reliance. This road map must also identify critical and important defence technologies and the path to the acquisition of such technologies. Strategic long- term tie ups with a few leading global defence industries may be part of the solution.
- The OFB and the defence PSUs must be subjected to reforms in order to make them more competitive. This must be accorded priority.
- While the idea of public-private partnership is sound it is unlikely to happen unless the public sector companies see it as their route to survival. Forcing such tie- ups may turn out to be counterproductive.
- An independent audit of the business conducted between SMEs and the OFB/ PSUs may point to more efficient ways of managing these partnerships.
- Harnessing and exploiting our software skills for enhancing our defence capabilities and increasing our revenues merits greater deliberation. An appropriate forum should be constituted for the purpose.
For accelerated economic growth a country’s ability to absorb and develop technologies is a key factor. A dynamic and thriving defence industry helps to create and sustain this capability. Besides it can also contribute significantly to the country’s wealth. We have in recent years set in motion the process of reforming the defence industry. What we need to do now is to build up on the momentum gathered.
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