Opinion Building capacities

In ending public sector monopoly, defence ministry has laid the foundation for a defence-industrial base.

July 21, 2014 12:30 AM IST First published on: Jul 21, 2014 at 12:27 AM IST

In ending public sector monopoly, defence ministry has laid the foundation for a defence-industrial base.

In ending the public sector’s monopoly over aircraft production, the first meeting of the Defence Acquisition Council (DAC) under the new Union government turned out to be highly significant. On Saturday, the DAC, chaired by Defence Minister Arun Jaitley, cleared procurement proposals worth Rs 21,000 crore in one stroke, which included critical necessities such as the replacement of the air force’s five-decade-old Avro transport aircraft fleet, auxiliary support ships and offshore patrol vessels for the navy, advanced light helicopters for the navy and the coast guard, as well as fast and offshore patrol vessels for the coast guard.

While these decisions signal the government’s intention to accelerate the process of defence procurement, the two biggest takeaways are the programmes for military transport aircraft and naval fleet support vessels. These invite Indian private-sector firms to defence production and, in the longer term, should help develop a domestic military-industrial complex.

The Avro replacement project will see 16 aircraft procured from a foreign vendor, who in turn will choose an Indian partner for the manufacture of the remaining 40 of the 56 planes needed. Since this is a non-lethal platform, the foreign manufacturer and its Indian partner can sell the aircraft for commercial use too, expanding their market to the civil aviation sector. Although this programme had been approved by the erstwhile UPA government, it was frozen by then Defence Minister A.K. Antony following his colleague Praful Patel’s objections to the exclusion of public-sector companies like HAL from the bidding process. With legal opinion upholding that bidding process, this move will now be an important step towards capacity-building of the Indian private sector in defence manufacture and in the aerospace industry.

The decision on auxiliary ships is tied up with the navy operating three carrier battle-groups outside the Indian Ocean Region, signalling that the transformation of the Indian navy into a genuine blue-water force is on the MoD agenda again. Auxiliary ships feed carrier battle-groups. The invitation of the Indian private sector to this programme could see manufacturing move beyond Cochin, at present the only Indian yard capable of building large vessels like the under-construction INS Vikrant carrier.

The UPA’s culture of instinctive banning and blacklisting of foreign suppliers at the hint of a scandal had led to a complete stalling of India’s military modernisation. After raising the FDI cap in defence from 26 to 49 per cent in the budget, the NDA government has a chance now to fulfil its promise of providing the armed forces with the most advanced defence technologies. Inviting domestic private firms full-time for defence manufacture and making PSUs like HAL and BEML compete and collaborate with them, while making the process of foreign procurement transparent and accountable, can address the defence challenges that the new government has inherited.