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Private firms in India play a measly role in arming forces
NEW DELHI: From Boeing to Lockheed Martin, BAE Systems to Airbus, the private sector dominates arms production the world over. The reverse is true in India, with the public sector continuing to huff and puff but still unable to rid the country of the dubious tag of being the world's largest arms importer.
Latest statistics, tabled by defence minister Manohar Parikkar in Parliament on Tuesday, show the share of the Indian private sector in providing equipment to the armed forces was a measly 3-4% over the last three years.
Take the Rs 36,918 crore spent on capital acquisitions for the IAF in 2013-2014. While the imports stood at Rs 20,928 crore (56.69%), the public sector delivered equipment worth Rs 15,447 crore (41.84%) with the private sector contributing just Rs 544 crore (1.47%). Similarly, the private sector's share for the Army, in turn, was just 1.91% in 2013-2014.
Experts say greater participation by Indian private sector companies, either alone or in joint ventures with global armament firms, is urgently required if India wants to build a strong defence-industrial base (DIB) in the years ahead.
The Modi government promises to do just that. With India attracting a paltry Rs 24.36 crore ($4.94 million) as FDI in the defence sector in the last 14 years, the FDI cap has now been hiked to 49% and the "Make in India" policy is being aggressively pursued.
But will it work? "The increase in FDI to 49% is a recent policy...its impact will be felt after a couple of years," said Parrikar. The defence acquisitions council has also approved direct defence procurements worth around Rs 75,000 crore since the Modi government came to power. "Rs 65,000 crore is for 'Make in India' or 'Buy and Make in India', whereas only Rs 10,000 crore is for 'Buy Global'...this is a major shift," he added.
The defence ministry is also working towards streamlining the complicated "Make" procedure for indigenous R&D, development and production of weapon systems. This will include the government funding 80% of the development cost of a weapon prototype, with the industry chipping in with 20%, in "long-gestation and high technological risk projects".
But it will take a lot of doing. On one hand, DRDO and its 50 labs, five defence PSUs, four shipyards and 39 ordnance factories continue to fail to deliver the goods for the armed forces. On the other, the private sector is yet to make any substantial contribution since the defence production sector was opened up in 2001-2002.
"The government's flip-flops and the strong PSU lobby have discouraged the private sector from jumping into defence manufacturing in a big way till now. For instance, the move to accord the Raksha Udyog Ratna status to selected private companies, and treat them at par with defence PSUs, was junked under pressure," said a senior officer.
"The government's flip-flops and the strong PSU lobby have discouraged the private sector from jumping into defence manufacturing in a big way till now. For instance, the move to accord the Raksha Udyog Ratna status to selected private companies, and treat them at par with defence PSUs, was junked under pressure," said a senior officer.
