For all the talk about indigenisation of defence equipment for self-reliance in the long run, the Union budget has cold-shouldered the private sector, which has been seeking a larger role in defence production.
The budget has earmarked a token Rs. 1 crore for facilitating the Indian industry to fashion high-end defence systems. While Rs. 89.22 crore was apportioned last year to assist the industry in developing prototypes under the ‘Make’ category of defence procurement, the allocation was cancelled by the Finance Ministry when it cut back Rs. 14,904 crore from the defence outlay.
The Defence Procurement Procedure (DPP) stipulates that the Ministry of Defence (MoD) bear 80 per cent of the development cost of such prototypes. But projects under way in this category, like the future infantry combat vehicle (FICV) and the tactical communication system (TCS) are on a slow track thanks to the MoD’s historic mistrust of the domestic industry, rue industry insiders.
Without a level-playing field, projects undertaken to give a fillip to indigenisation have all been stalled for a long time, laments Geethanjali Nataraj, Federation of Indian Chambers of Commerce and Industry (Ficci) director in-charge of defence.
Ms. Nataraj terms ‘cosmetic’ the (8 per cent) hike in capital expenditure in the sector, saying the Defence Ministry has got a raw deal.
“Given the rate of inflation and the depreciation of rupee, there’s hardly anything for enhancing indigenisation with the participation of private sector,” she says.
The industry does have the capability to execute projects like FICV and the TCS, besides those in the pipeline like the battlefield management system (BMS), operational data link (ODL) and the net-centric operations system (NCOS), but the government looks the other way, she says.
In contrast, Gurpal Singh, Confederation of Indian Industry’s principal adviser (Defence), welcomes the defence outlay of Rs. 2,03,672 crore, an increase of nearly 14 per cent over the revised estimates last year in the backdrop of the “slow economic growth and the pressing needs of military modernisation”.
Mr. Singh is optimistic about Finance Minister P. Chidambaram’s assurance that more funds would be ploughed in for enhancing security preparedness in case of need.
He feels that benefits such as zero customs duty for plant and machinery extended to the industry under the National Electronics Policy should also include the defence sector.
Chief Executive Officer of Tata Power Strategic Electronics Division Rahul Chaudhry feels ‘disheartened’ at the cut in the allocation for prototype development expenditure.
“For decades, the Defence Ministry has been talking about building a defence industrial base in the country and advocating domestic research ad development. The budget has once again ignored the issue of extending 80-IA benefits for investments in defence manufacturing infrastructure and has not announced any schemes to give impetus to indigenous R&D. I sincerely hope that this is not an indication of the government’s true priority on indigenisation and a correction will be effected before the budget is approved,” he told The Hindu.
The former Vice-Chief of the Navy, Vice-Admiral (retd.), Raman P. Suthan, however, thinks that money has never been a constraint on hardware acquisition for the forces.
“The problem lies with the procurement process which takes several years for completion. The DPP is a failsafe mechanism offering little scope for departure, but people are scared to take decisions. While everyone gets wiser post-facto, you can’t wait for all the 100 factors to be in place to take decisions on such key issues,” he says.
He is confident that the government would make available funds for big ticket purchases, but likens the process to a game of snake and ladder, with the government getting into a scrap-all mode at a faint hint of corruption.
“You must delink corruption from capability- building. The purchase of the Barak missile defence system, for instance, was mired in controversies, but its induction has made the forces more confident as it is a pretty good weapon,” he says.