July 3, 2014

Allow private sector

The government’s waiver of licensing norms for manufacture of components and subsystems for use in military hardware is a welcome step forward but it is not enough to give the country’s defence manufacturing the needed boost.

 The private sector was for long barred from defence production on flimsy and unsustainable grounds of national security. Even after the sector was partially opened up in 2001, the progress has been slow. The domination and monopoly of defence manufacturing by the public sector has affected the country’s military preparedness and made India the world’s largest arms importer. Several sound proposals, including one made by a committee headed by former President APJ Abul Kalam to increase the indigenous content of weaponry from 30 to 70 per cent, have not been implemented. Even after decades, the public sector’s record is poor, as seen by the status of development of the light combat aircraft Tejas, the main battle tank Arjun and the failure of the DRDO on many projects.

The permission given to the private sector to manufacture spare parts and components is not even a half-step. It allows, for example, a private company to cast the hull of a submarine or the barrel of an artillery gun but shuts the door on big projects like the building of a warship, a fighter plane or any advanced complex weaponry. There is no justifiable reason for this ban. The private sector has a major, and sometimes more important, role in defence production in many countries. They produce everything from fighter planes to missiles and guns. The security of no country has been compromised by this. In fact, the military prowess of the world’s mightiest nation, the US, owes much to the private sector.

India has a good industrial base and a strong private sector which has proved its ability and competence even at the world level. Public sector monopoly in defence production has denied the opportunity to the private sector to grow from competition which will spur technological advancement too. Use of the latest technology is important in defence equipment. Collaboration with foreign companies might be required for the high technology and the large investment that is needed for defence modernisation. This should lead to technology transfer. The government has expressed its readiness to adopt a more liberal FDI policy for this. It is important and necessary to allow private enterprise grow and flourish in the sector to benefit the nation.


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