Defence policy needs more firepower

Updated on: Feb 15, 2011




The latest policy paper provides few insights into how the role of the private sector in Defence production can be enhanced and the functioning of ordnance factories improved.

In a recent op-ed article, in another daily, Mr M. Pratap Bhanu Mehta, President, Centre for Policy Research, had characterised the functioning of the Ministry of Defence (MoD) as one where the dictum, “No decision, No corruption”, prevails.

Even if MoD is not taking major decisions for fear of corruption, it is busy setting up several decision-making boards with alliterative acronyms, and churning out policy after policy. In addition to the annual ritual of Defence Procurement Policy, this year there is a bonus issue of Defence Production Policy ( http://mod.nic.in/dpm/DPP-POL.pdf ) released by the Defence Minister in January 2011.


It is a fine display of drafting skills. But no sincere executive can expect to learn very much about various hard choices and questions such as self reliance vs dependence; indigenous vs import; private sector vs public sector. The policy document leaves it all vague.

One recalls, in this context, the earlier vision statement of Mr A. P. J Abdul Kalam in resolving to achieve a Self Reliance Index of 0.7 by 2005 from 0.3 in 1995. Even in the Aero 2009, the Defence Minister expressed his disappointment over Defence imports hovering above 70 per cent.

If one were to read the policy statement in right earnest, one realises the policy has been always with us: “to achieve substantive self-reliance in the design, development and production of systems required for defence forces”; “ to create conditions conducive for the private industry to play an active role in defence production”; “give importance to harnessing the untapped potential of the small and medium enterprises in the indigenisation process”; “to encourage involvement of academia, research and development institutions, technical and scientific organisations and formation of consortia, joint ventures and public-private partnerships to synergise and enhance national competence in Defence production”.

R&D fund

The only departure is the statement of intent to “set up a separate fund to provide necessary resources to production stakeholders like the public and private industry, SMEs and academic/scientific institutions for research and development efforts”. Here, however, how the fund will be created and grants disbursed are not spelt out.

The larger objective as stated in the policy is to create a capability which puts India ahead of its potential adversaries. That is where the concerns are growing as the MoD seems to be a ministry of caution, rather than precaution.

A recent New York Times report says that Pakistan has built a substantially high number of nuclear bombs than is necessary for being a deterrent against India. In conventional weapons, too, delays in decision making have whittled India's advantage vis-à-vis Pakistan (see Table).

Attempts in India to create a larger and more versatile base of capability comprising renowned foreign companies, private and public sector, DRDO, academic institutions and SMEs have not succeeded in any tangible measure. Opening the door to foreign direct investment to the extent of a meagre content of 26 per cent has not helped at all.

The Indian private sector, as well as notable international defence manufacturers, are afraid not only of flip-flops in policy, but also of the clout of trade unions of ordnance factories and nine PSUs, and, more importantly, weak decision-making by the political establishment.

Several years of prodding and pushing the private sector have not enthused it to venture into development and production of big ticket defence equipment.


The report on defence production by Mr Vijay Kelkar, on providing level playing field to select private sector units on par with ordnance factories and PSUs has also been scrapped.

Strangely, the Government has refused to table the report in Parliament, although it addresses critical issues of defence production. SMEs, on their part, have suffered all along, as they were treated by the Department Of Defence Supplies and Technical Committees more like street-corner garages than technology partners.

Yet, this new policy avows to enhance the participation of private sector even as it aims to protect and strengthen the public sector.

Backdoor imports

When public sector units were nominated in the past for specific products, the move ended up as a method for backdoor imports. It was easier for the PSUs to import knocked down kits, do some integration, mostly cosmetic, and supply to the armed forces.

The problem was and still is the inability of these units to get high skilled personnel, for instance Ph.Ds in materials or engineering with solid background in design, prototype making and testing.

Today, the more nimble and agile L&T and Mahindra are pitted against the hapless Ordnance Factory Board (OFB) which is constrained by the tardy ways of the UPSC to recruit its engineers, for submitting detailed designs for future infantry combat vehicles.

High attrition

Similarly, despite several attempts to create synergy between DRDO and the production units or between DRDO, academia and private sector, the success is at best patchy. DRDO is reporting large-scale attrition, as young engineers are migrating to the ICT sector.

If the MoD is serious about creating a modern conventional weapons-based fighting force, incorporating the latest electronic hardware and software in the weapon systems, it needs to take very bold steps.

The mechanics of operating a technology fund to assist production stakeholders should be spelt out soon, adopting the infrastructure bond route for garnering funds.

The cap on FDI should be raised and renowned firms invited to partner Indian ventures. Offset policies should be more pragmatic than calibrated. OFB should be restructured on the lines of BAE of the UK, a public limited company, to concentrate on weapons, ammunition and armoured vehicles.

The rest should be hived off without the fetters of a government department in accessing resources internationally, be it technology, rare material or specialists. HR policies for hiring in PSUs, DRDO and OFB should match the best practices in private sector.

The Rama Rao Committee's recommendations on Defence Research and Development should be implemented with observable speed.

If this policy has to be more than a mere paper for academic discussion in the National Defence College, then MoD has to work harder to produce an actionable document.

(The author is a former Member, Ordnance Factories Board.)

Published on February 16, 2011

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