Look at the pending procurements: some 200 helicopters, 126 advanced fighters, approximately 800″“1000 artillery guns, and half a dozen submarines. Each of these would run into billions of dollars. The conclusion is obvious ““ buy sensibly.
The Left and a few other groups have consistently opposed the opening up of the defence industry to the private sector. They have repeatedly been claiming that the public sector units can produce all that our armed forces need. A brief look at their track record will establish that such confidence in the state owned establishments is quite misplaced. We have 39 Ordnance Factories, 8 Defence PSUs and 50 Defence Research Laboratories, ie. close to 100 establishments, all well equipped, extravagantly staffed, with some excellent scientists and managers, and yet no creditworthy achievements to show.
And what equipment do they produce which is to the satisfaction of our Armed Forces? It would be difficult to list any, other than the ALH from HAL, which has the potential to be a good product. The DRDO might want to take credit for the Agni (1 and 2) and the Prithvi. These are good systems but lose a fair amount of their sheen since they come twenty to thirty years after similar systems were inducted in China.
Our process of reforms in the management of the Government controlled defence research and production establishments, have regrettably floundered. Many studies have been done, yet–to all intent and purposes–the drift continues. Over the last three to four years the Government has been pushing for public private partnership. The idea being that such association would bring about the desired efficiencies in the public sector.
But the problem is that such forced marriages do not really work. Driven by expediency, some private companies, may consider coming to an under-standing with PSUs for the short term, but such arrangements are not likely to be conducive to the real growth of the defence industry.
The policy of opening up of the defence industry to the private sector was successful in attracting quite a few industrial houses–large, medium and small, to enter the fray. Even prior to the formal opening of the defence sector, some had indirectly been in the business by manufacturing components, sub-systems and systems–for integration by the defence PSUs. Besides, our nuclear and space programmes had involved the private industry. Such companies have executed sophisticated design and engineering jobs that include special metals and alloys, and therefore have acquired the confidence to take on the development and manufacture of defence systems.
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L&T, Tatas, Mahindras, Godrej Boyce, Bharat Forge and more recently Punj Lloyd, are some of the major industrial houses that have staked their claim for defence contracts. Following them, are a large number of second and third tier companies covering a wide range of technologies.
The basic handicap of all these companies at the time the policy change was announced in 2001 was their lack of domain knowledge. They did not know weapon systems, or what force multipliers were, or how the procurement procedures worked. They also did not know how the global arms market operated. They were equally unaware of the equipment profile of our armed forces and their future requirement.
The laudable role played by the CII merits recognition. Both the Government and the industry should continue to encourage the CII to step up its activities to accelerate reforms and change.
Even though these companies inducted service officers whose advice was available, lack of personal knowledge of the business inhibited executives from pursuing projects that entailed taking investment decisions. Increased involvement in the defence sector; and interaction with the defence services, the procurement arm of the Ministry of Defence, and the big multi-national defence companies, over the last five to six years; has impacted positively on the confidence levels of company executives.
The role of defence service officers in galvanising the industry merits special attention. Other than these officers, not many in India, have any idea of modern warfare, military organisations, weapon systems, munitions and the support systems. Such domain knowledge within the industry is imperative. All over the world companies engaged in the business of military hardware extensively employ service officers to develop products and promote business.
Not only this, even governments in order to support domestic industries, lend serving officers and men to participate in trials or make presentations. We may recall some of the service-industry seminars held in Delhi in the recent past which had serving officers endorsing products.
Unfortunately, the environment that we have nurtured in India discourages our retired/retiring officers from being employed. If employed they cannot be optimally used because of the establishments’ attitude towards them. Who benefits? Only the foreign companies and maybe our adversaries! This must change. By encouraging the absorption of service officers by the defence industry, the nation will reap multiple benefits.
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Firstly, the users would have access to informed inputs on developments, which would contribute to better decisions on choice of systems and the formulation of specifications. Rather the industry would gain from the expertise of these officers in an area which they have much to learn about. Secondly, to some extent, the problem of rehabilitation of officers who retire at relatively younger ages would get addressed. It is important that the Government revisits this issue.
While charting the strategy for the development of our domestic defence industry we must identify technologies that require special attention; technologies where our capabilities merit quantum upgradation.
The central issue facing the defence industry is access to contemporary technology, its absorption and assimilation, and then the use of domestic research and development to graduate to next generation systems. South Africa, Israel, China, South Korea, Brazil, and even Singapore, have learnt to successfully navigate this cycle. There is no reason why we cannot emulate their example.
In our case, so far, technology transfers have taken place only to the OFB and the defence PSUs. Their experience should not become the only basis for drawing conclusions on this subject. The appetite for growth of the private sector, and its new found confidence, would undoubtedly yield different results.
A survey of the global defence market will reveal that we are currently the biggest importers of defence systems. The US and China do spend more but they mostly buy domestic. The figures of our projected purchases are being regularly quoted in thousands of crores. They do give us sufficient strength to extract terms that could be used to considerable advantage. Look at the pending procurements: some 200 helicopters, 126 advanced fighters, approximately 800–1000 artillery guns, and half a dozen submarines. Each of these would run into billions of dollars. The conclusion is obvious – buy sensibly.
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