The Hindu Business Line : Priming the private sector

Though late in coming, the Government nevertheless deserves to be complimented for taking a step forward the process of private sector participation in Defence research and production. It now proposes to share on 80:20 basis the expenditure on Defence related research, with an empanelled list of private players. Clearly, this was inevitable, as the Government's earlier initiative in permitting domestic players to rope in overseas players to form joint ventures for local manufacture had proved a non-starter.

As far back as in 2001, the Government had permitted foreign direct investment in Defence production, but with a 24 per cent cap on ownership for the overseas technology provider. Its hopes of enticing foreign enterprises to set up shop in India and thereby enhance local Defence research capability were clearly belied as the former preferred to do business from their home locations. This was not altogether unexpected. Governments have traditionally had a say in the choice of locations from where domestic Defence industry units would operate. Considering the proprietary nature of much of the technology used in Defence manufacture, the minority-stake-rule stipulated by India would be a dampener. Topping it all is the consistent Indian refusal to toe the US-led nuclear non-proliferation line, which has meant even the most innocuous of technologies being refused on grounds of dual use.

The public sector units and Defence research laboratories have ploughed a lonely furrow in improving the nation's Defence research capability but with mixed results. While there have been some notable successes, such as in missile and rocket technology, many key programmes elsewhere have suffered enormous time delays and consequent cost over-runs. An inevitable consequence of such delays has been that the Services have revised their specifications in the light of emerging threat perceptions leading to further rounds of delays in development. The Government must be hoping that a combination of public sector expertise in handling Defence-related R&D work can be synthesised with proven private sector managerial skills technical expertise gathered in related fields of technology.

The Government has put together a comprehensive list of eligibility conditions that are by and large quite unexceptionable although the insistence that the empanelled companies cannot have foreign portfolio investments beyond 26 per cent does seem somewhat regressive. After all, if its earlier norms were willing to allow joint ventures supplying Defence hardwarea 26 per cent stake for the foreign partner, there is a case for a higher percentage of foreign portfolio investments in domestic enterprises wanting to undertake Defence research involving public funds. Collaboration between the public and the private sector may or may not help the country develop successfully the latest generation of fighter aircraft, battle tanks or nuclear submarines. But a whole lot of lesser devices seem eminently within its reach.

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