India Defence Privatization
C all to Arms!
Will the Indian establishment show consistency in nurturing an indigenous arms industry and make Indian defence self-reliant?
Imagine, the hostilities have broken out between India and its primary adversary. The Indian naval warships & airforce combatants deployed in the war zone are all set to launch their missiles onto the enemy vessels & territory. And suddenly, they find their navigation equipment – dependent on feed from the US-based global positioning system (GPS) – giving erroneous output. The war machines go blind because they don’t know where they are and in which direction to turn. The missiles with faulty navigation technology are flying helter-skelter. All plans go haywire. This is a possible scenario, which the defence strategists often discuss to bring out the dangers of over-dependence on foreign defence technology & the importance of indigenisation. One needs to understand that any country, which aspires to be a global power, cannot remain indefinitely dependent on the outside world for too long (during the period 2004-2007, India’s defence import expenditure stood at whopping $10.5 billion. India is the third largest arms importer in the world; among the developing countries, it tops the list of defence hardware). India’s current dependence on foreign arms is quintessentially a stop-gap arrangement before it can attain the expertise to stand on its own feet in terms of arms production. It is this realisation, which has led the government to reform the Indian arms manufacturing industry. Much in consonance with the DRDO objectives of achieving 70% indigenisation in defence production by 2005 (unfortunately, only 30% has been achieved till date); guided by the recommendations of Dr. Vijay L. Kelkar committee (constituted in 2004) and Associated Chambers of Commerce and Industry of India (ASSOCHAM) 2007 paper titled ‘Avenues for Private Sector Participation in Defense’, the government finally decided to undertake revolutionary measures to chaperon the Indian private firms into hallowed precincts of the Indian defence. That the government has finally agreed to grant the status of “Raksha Udyog Ratan” (RUR) status to a selected few Indian companies, to provide products and services support to the Indian armed forces, is indeed an unprecedented step in the history of independent India. According to Brigadier Khutab Hai, CEO, Mahindra Defence Systems, “We should be allowed to develop high-tech weapons platforms by benefitting from R&D funding, sharing knowledge with the DRDO and working with the services headquarters to have a clear idea of their requirements well ahead of time.”
In fact, this understated revolution in armed forces is of far greater significance than the much touted “Revolution in Military Affairs” (resulting from advanced computing and communication technology). By identifying a few companies as RURs and bringing them at par with the Defence Public Sector Units (DPSU), the government has unequivocally asserted that the Indian defence has “nothing to lose, but chains.” The chains which had tied the defence sector to whims and fancies of the DPSU. It is not that the private sector was never involved with the defence production (in the period 2001-07, the private sector had got outsourced jobs worth $700 million from DPSUs and Ordnance Factories). Despite these impressive figures, the private role in defence has been confined to production of ‘nuts & bolts’ only, “the DPSUs with roughly 200,000 employees will continue to dominate this sector for some time to come,” K. Santhanam, an eminent scientist, former Project Director Pokharan II nuclear tests, told B&E. “The current policy envisages to catapult the private firms to play a bigger role now; promoting private participation in key areas like production of sensitive equipment including aircrafts, submarines, missiles, radars, underwater sensors, communication equipment and, last but not the least, a role in developing the strategic nuclear assets too.” Deba Mohanty, senior fellow with the Observer Research Foundation told B&E. A range of companies: TATA Power, Mahindra & Mahindra, Kriloskar, Ashok Leyland, Wipro, & others, are likely to be identified to supply products and services. India’s defence expenditure, which is slated to gallop at 7% annually for the next decade, is certainly an attractive proposition for Indian business community. However, it is equally appealing to the economists, as well the government, who intend to save huge foreign exchange & enhance the manufacturing base by enabling the Indians to produce, what for years we have been importing from Russia, USA, France, UK and Israel. Furthermore, reading the fine print in the MoD “Guidelines for the Selection of Industry ‘Raksha Udyog Ratnas’/ ‘Champions’ In Defence Production”, (No.9(8)/2005/D(S-III), 09 May 2006), it is revealed that the outsourcing being talked about is not confined to equipment and platform production only. The government is not just talking about creating Indian versions of Raytheon & Lockheed Martin. The concept also includes building the Indian Halliburtons’ & L3 (companies engaged in providing security, logistic management, training and other services to the US army, engaged in Iraq and elsewhere). If this was to happen, we would soon find the Indian firms more closely associated with defence logistics and training in India. The training on state-of the art aircraft & ship-handling simulators could be easily provided by Indian computer giants. We could have big retail players, like Reliance Retail, take over major functions, now performed by Army Supply Corps (ASC). This is not an artists dream, it is a global trend widely prevalent in the USA and the UK. The enormity of reforms under way in the defence sector is nothing short of a tectonic shift in the way defence has been perceived for years. The private players will soon begin to shed their corporate attire and begin to adorn the camouflage fatigues, because the dilapidated & decrepit DPSU’s infrastructure is in urgent need of competition. And India surely needs a military industrial complex, which can help it gain dignity in a predominantly Darwinian world.
Imagine, the hostilities have broken out between India and its primary adversary. The Indian naval warships & airforce combatants deployed in the war zone are all set to launch their missiles onto the enemy vessels & territory. And suddenly, they find their navigation equipment – dependent on feed from the US-based global positioning system (GPS) – giving erroneous output. The war machines go blind because they don’t know where they are and in which direction to turn. The missiles with faulty navigation technology are flying helter-skelter. All plans go haywire. This is a possible scenario, which the defence strategists often discuss to bring out the dangers of over-dependence on foreign defence technology & the importance of indigenisation. One needs to understand that any country, which aspires to be a global power, cannot remain indefinitely dependent on the outside world for too long (during the period 2004-2007, India’s defence import expenditure stood at whopping $10.5 billion. India is the third largest arms importer in the world; among the developing countries, it tops the list of defence hardware). India’s current dependence on foreign arms is quintessentially a stop-gap arrangement before it can attain the expertise to stand on its own feet in terms of arms production. It is this realisation, which has led the government to reform the Indian arms manufacturing industry. Much in consonance with the DRDO objectives of achieving 70% indigenisation in defence production by 2005 (unfortunately, only 30% has been achieved till date); guided by the recommendations of Dr. Vijay L. Kelkar committee (constituted in 2004) and Associated Chambers of Commerce and Industry of India (ASSOCHAM) 2007 paper titled ‘Avenues for Private Sector Participation in Defense’, the government finally decided to undertake revolutionary measures to chaperon the Indian private firms into hallowed precincts of the Indian defence. That the government has finally agreed to grant the status of “Raksha Udyog Ratan” (RUR) status to a selected few Indian companies, to provide products and services support to the Indian armed forces, is indeed an unprecedented step in the history of independent India. According to Brigadier Khutab Hai, CEO, Mahindra Defence Systems, “We should be allowed to develop high-tech weapons platforms by benefitting from R&D funding, sharing knowledge with the DRDO and working with the services headquarters to have a clear idea of their requirements well ahead of time.”
In fact, this understated revolution in armed forces is of far greater significance than the much touted “Revolution in Military Affairs” (resulting from advanced computing and communication technology). By identifying a few companies as RURs and bringing them at par with the Defence Public Sector Units (DPSU), the government has unequivocally asserted that the Indian defence has “nothing to lose, but chains.” The chains which had tied the defence sector to whims and fancies of the DPSU. It is not that the private sector was never involved with the defence production (in the period 2001-07, the private sector had got outsourced jobs worth $700 million from DPSUs and Ordnance Factories). Despite these impressive figures, the private role in defence has been confined to production of ‘nuts & bolts’ only, “the DPSUs with roughly 200,000 employees will continue to dominate this sector for some time to come,” K. Santhanam, an eminent scientist, former Project Director Pokharan II nuclear tests, told B&E. “The current policy envisages to catapult the private firms to play a bigger role now; promoting private participation in key areas like production of sensitive equipment including aircrafts, submarines, missiles, radars, underwater sensors, communication equipment and, last but not the least, a role in developing the strategic nuclear assets too.” Deba Mohanty, senior fellow with the Observer Research Foundation told B&E. A range of companies: TATA Power, Mahindra & Mahindra, Kriloskar, Ashok Leyland, Wipro, & others, are likely to be identified to supply products and services. India’s defence expenditure, which is slated to gallop at 7% annually for the next decade, is certainly an attractive proposition for Indian business community. However, it is equally appealing to the economists, as well the government, who intend to save huge foreign exchange & enhance the manufacturing base by enabling the Indians to produce, what for years we have been importing from Russia, USA, France, UK and Israel. Furthermore, reading the fine print in the MoD “Guidelines for the Selection of Industry ‘Raksha Udyog Ratnas’/ ‘Champions’ In Defence Production”, (No.9(8)/2005/D(S-III), 09 May 2006), it is revealed that the outsourcing being talked about is not confined to equipment and platform production only. The government is not just talking about creating Indian versions of Raytheon & Lockheed Martin. The concept also includes building the Indian Halliburtons’ & L3 (companies engaged in providing security, logistic management, training and other services to the US army, engaged in Iraq and elsewhere). If this was to happen, we would soon find the Indian firms more closely associated with defence logistics and training in India. The training on state-of the art aircraft & ship-handling simulators could be easily provided by Indian computer giants. We could have big retail players, like Reliance Retail, take over major functions, now performed by Army Supply Corps (ASC). This is not an artists dream, it is a global trend widely prevalent in the USA and the UK. The enormity of reforms under way in the defence sector is nothing short of a tectonic shift in the way defence has been perceived for years. The private players will soon begin to shed their corporate attire and begin to adorn the camouflage fatigues, because the dilapidated & decrepit DPSU’s infrastructure is in urgent need of competition. And India surely needs a military industrial complex, which can help it gain dignity in a predominantly Darwinian world.
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