The Hindu Business Line : Defence PSUs urged to improve competitiveness

The Finance Minister, Mr P. Chidambaram, on Monday urged defence public sector undertakings to improve their competitiveness by reducing cost and enhancing productivity.

He also made it clear that the argument that Government, in all circumstances, must support loss-making undertakings or inefficient ordinance factories because of their strategic importance was difficult to sustain, especially when there are many efficient alternatives.

Speaking at an international seminar on `Defence Finance and Economics' here on Monday, Mr Chidambaram also advised the defence sector to establish a framework of cooperation to harness the private sector's technical and managerial capabilities.

He highlighted that the private sector in India was proving to be quite competitive and that its role was changing from that of a supplier of inputs, raw materials, parts and components to a manufacturer and systems integrator of complete systems and platforms for the defence services.

"This partnership has to be strengthened and taken to a higher level with greater outsourcing by the Armed Services, the Public Sector Enterprises , ordinance factories and research and development labs. The spin-offs could see defence emerging as one of the key growth drivers in the economy," he said.

Mr Chidambaram said that efficiency, productivity and true competitiveness have to be the underpinning of a strong and vibrant defence industrial base.

On defence accounts, the Finance Minister said that there was no reason why defence accounts should not conform to international accounting standards. "As the Government accounts move to accrual basis, defence accounts too should be appropriately modified to capture and reflect the full cost of operations. All commitments and contingent liabilities must be explicitly recognised and monitored", he said.

Mr Chidambaram also urged the Defence Ministry to implement a cash management system so as to reduce bunching of expenditures towards the end of the financial year and eliminate wastage and inefficiency.

The Finance Minister said that the defence services own large physical assets and they must be appropriately evaluated and monitored through updated asset registers. He also wanted the defence finance and accounts to provide real time online information on the status of claims and entitlements of services men and women.

On fiscal consolidation in the economy, Mr Chidambaram said that the country would have to take "hard decisions" to restructure certain expenditure, choose between important but competing priorities for allocation of scarce resources and maximise available public resources by enlisting private resources wherever feasible.

He said that a "major re-balancing" on the expenditure side was required to improve the quality of public expenditure and the composition of public expenditure portfolio.

"As we make further progress in fiscal consolidation, the softer options for scaling back committed expenditures or increasing revenues are getting diminished," Mr Chidambaram said.