Private sector in defence

It is seven years since the government permitted private sector companies to manufacture defence equipment, but only now is there enthusiasm amongst private Indian engineering giants. With India continuing to pay staggering prices for cutting-edge weaponry, several private sector giants now believe that they can develop those systems cheaper than the global majors. Many of these giants are not newcomers to defence production. But the self-defeating pattern of recent decades had created a hierarchy, broadly structured as follows: putting together an overall weapons system "" whether a radar, an aircraft, a tank, or a communications network "" was the preserve of the defence public sector undertakings (DPSUs); the sub-systems and parts were frequently sourced from private companies. The technology for all this came from a global vendor. Despite the rhetoric of "technology transfer", the proprietary technologies were never given to India. Instead, detailed manufacturing drawings were handed over; the Indian partners merely constructed and assembled according to those blueprints.

This process has been hallmarked by a profound intellectual apathy amongst the "technology recipients", the Indian DPSUs, to absorb the technology in meaningful ways. Private companies claim that even if they had been handed over nothing other than blueprints, their scientists and engineers would have extracted and absorbed expertise that could have been canalised into new products. Hindustan Aeronautics has built MiG series, Jaguar and Sukhoi-30 aircraft for decades, but still struggles to complete the light combat aircraft.

The challenge before the private sector is to move beyond in-country manufacture for dominant global corporations. Groups like Tata, L&T and Godrej, with proven engineering excellence, must actively participate in the entire cycle of weapons development, including visualisation, technology development, engineering, manufacture and integration. Small and medium industries must be developed as sub-component suppliers, a role in which they have already displayed their capability.

The greatest hurdle to private sector participation in defence is the high cost of R&D for a product that might never be accepted into service. That can be overcome by providing government funding for specified defence projects, as recommended by the Vijay Kelkar Committee in 2005. The ministry took the bold step of laying down a procedure for subsidising R&D by nominated Raksha Udyog Ratnas (RuRs) from the private sector, in cases where the government decided to indigenously develop a weapons system, but trade union pressure from the DPSUs has prevented the ministry from nominating the RuRs. The ideal structure would be to have fundamental research from the DRDO, subsidised research on systems technologies by the private sector, and DPSUs and private sector companies competing to manufacture and integrate the final product.