Road Under Construction

Systemic glitches continue to dog Make in India dream

Ghazala Wahab

Despite several revisions and expert committees’ recommendations for over two decades, the ‘Make in India’ road to indigenisation in defence continues to be under construction. Worse, the doubts, recriminations and insecurities remain where they were at the commencement of the journey, which eponymously began in 2015 when Prime Minister Modi coined the slogan, but was actually in practice from the time India bought its first defence platform, nearly 50 years ago and Indian entities started license-production.

Road Under Construction

The private sector maintains that assurances of equal participation notwithstanding, the government continues to protect defence public sector undertakings (DPSUs), basically its own, by nominating programmes to them, instead of challenging them through open competition with the private sector. At a recently held seminar, appropriately titled Nation-building Through Shipbuilding, president Shipyards Association of India and chairman Tebma Shipyards Ltd, Vijay Kumar lamented, “Sure, the government must support the DPSUs, but are we not Indians?”

Speaking of the Indian shipyards, he pointed out that the private shipyards, all 20 of them, have the total government orders worth Rs 8,000 crore between them, whereas the nine DPSU yards have the combined order worth Rs 1,95,000 crore.

“There is a huge anomaly here,” he said to the audience comprising fellow industry people and naval officers, both serving and retired. The government of India was represented by a couple of middle level bureaucrats. They were there to read out the official position; not listen to the concerns of the industry.

“This anomaly is the reason that there is a huge backlog with the DPSU yards and they are unable to meet the deadlines. Given the pace at which technology is evolving, what good are ships that are delivered well past their deadlines?”

Earlier in the same seminar, chief of naval staff Admiral Karambir Singh had mentioned in his keynote address that 51 naval ships are currently on order, of which 49 are in the Indian yards. In the same seminar, whole time director and member of the board, Larsen & Toubro J.D. Patil pointed out that, with few exceptions, orders for all major naval platforms are placed on the DPSUs by nomination. “The private sector only gets to build auxiliary vessels.”

The reason for this is simple. The government continues to infantilise the private sector as far as defence industry is concerned. A sector that propels the economy is considered not sophisticated enough, neither to absorb technology nor manufacture defence platforms using that technology.

“One has to first learn to walk before attempting to run,” chairman and managing director of one of the DPSUs told FORCE during one of the recent international defence shows. “We have been working with several private sector companies for many years. In fact, a large number of MSMEs and SMEs have been part of our supply chain. This model of public-private partnership is the way forward. The problem is that the private sector companies want to compete for contracts with DPSUs who have been manufacturing high technology defence equipment for years. How can the government allow this? There is a learning curve that they must go through.”

For all their sanctimonious advice, the fact is that all orders that are placed with the DPSUs are through nomination alone. There hasn’t been a single programme since the opening of the defence industry to the private sector in the late-1990s where DPSUs had to compete for any contract. Despite the fact that the government has frequently spoken about competition being essential to prevent entrenchment of monopolies, it has shied away from pitching the public and private sector against one another, for the fear that the most DPSUs will not be able to compete.

Yet, ironically, for systems/ platforms earmarked for the private sector, the government has always chosen competition over nomination, as is largely the norm worldwide. In fact, to appear fair and avoid single vendor situation, the government has even lowered the base parameters for competition enabling more companies to participate. According to managing director of a leading private sector defence company, there have instances where in a particular hi-technology programme, let’s say, submarines, the government has lowered the participatory condition to Crisil rating of B because only one company fulfilled the criteria of Crisil rating A.

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