It’s time to bring in the private sector to make our submarines and fighters

Defence minister Arun Jaitley seems to have hit the ground running in his second stint in South Block. Within weeks of his taking over, he approved the D B Shekatkar Committee report, which lays out, among other things, a blueprint for scrapping up to 20,000 posts in the armed forces.

A full implementation of this report involves closing down manpowerintensive entities like military farms, shrinking and streamlining the Army Postal Service, getting the forces out of non-military activities as much as possible, and reorganising them into joint commands.

The ministry has also moved on, opening up ammunition manufacturing to the Indian private sector, which, besides unshackling opportunities for other players in the defence sector, is also a statement of confidence in private enterprise and its abilities to measure up.

But the big picture capability transformation really lies in building highend lethal weapon platforms. Put simply, India must be able to build its fighters, submarines and tanks rather than be dependent on off-the-shelf imports. While an entire range of defence public sector units (PSUs) have been nurtured over a long period, the results have been below par.

While keeping up the label of indigenisation, defence PSUs constantly depended on foreign vendors to fill in vital gaps. The Kaveri fighter engine project is a good example of how highend international technology collaboration was the only way to revive an already delayed programme.

This kind of indigenisation may have kept defence PSUs afloat. But they have fallen short of creating an effective manufacturing base. While it would be incorrect to generalise, the truth is India hasn’t been able to develop any cutting-edge military systems despite well-funded PSUs.


Call to Arms ::

This ‘white elephant’ predicament has bogged down previous governments too. But the political consequences of throwing the door open to private players in this sector has often deterred decision-makers. What if the private companies turn into new PSUs of the future?

Despite such doubts, the Strategic Partnership (SP) model was drawn up to bring in the private sector in a meaningful way. GoI, however, has still not taken a call on this. It’s not an easy decision to make, given the merits and demerits on either side. But the fact is that status quo isn’t really taking the military complex anywhere.

Before entering into the specifics of the SP debate, let’s understand the strategic backdrop driving this call. For long, war-making has determined the nature of capabilities. The Cold War, for instance, was built around executing military attack plans.

This has been true of India and Pakistan as well, where the Indian side often gamed the possibility of engaging in a two-front war where China would come in support of Pakistan. In fact, many proposals for the Cabinet Committee on Security begin with this strategic preamble to strengthen justification for any big purchase.

Now, none of that is completely irrelevant. But it’s also true that conventional war-making isn’t a viable strategic option for any country. However, the prowess to execute any plan is of immense strategic value. A sound military industry base allows a country to make that strategic projection.

If networked effectively into the economy, these industries can spawn an ecosystem of high-technology production that can impact other sectors.

That’s why a call on the SP model has become important. The basic concept here is that GoI will identify one or two private players for each category of lethal equipment. This should incentivise and ensure future orders.

Essentially, a private company will be confident enough to make long-term investments in R&D, set up joint ventures with overseas equipment manufacturers, negotiate technology transfers and, in due course, find new export markets.

The condition, however, is that if a company has been identified to make an aircraft, then it cannot bid for building any other strategic platform like submarines, and vice versa. This has attracted legal questions on whether it encourages monopolistic practices. But solutions have been worked by way competitive pricing mechanisms.

There are counter-arguments from within the government that creating SPs would lead to ceding of authority and control to market forces, which may be detrimental in an emergency situation. But such inertia ignores the humiliating problem of running from vendor to vendor for spares and ammunition almost routinely with war reserves constantly running low.
Take the Private Call

While there can be no firm assurance of success, opening up has largely had a positive impact across critical sectors like transport, telecom and energy. So, at one level, this reform has been delayed for far too long due to unseen fears.

As a result, an economy of dealmakers, agents and commission fixers has flourished in an import-driven environment. It’s time this skewed system is altered and a robust public-private manufacturing environment is created to exploit the benefits arising from India’s growing acceptance in technology control regimes, which allows Indian manufacturers access of the nature they never had before. The time has never been more apt to make the switch.

 blogs.economictimes