Thursday, 7 June 2007

Selecting India's Lockheed Martins

by Ajai Shukla
Business Standard, 7th June 07

In a low-key meeting in the Ministry of Defence (MoD) today, the Prabir Sengupta Committee presented its recommendations before Defence Minister AK Antony on which private companies should be granted the title of Raksha Utpadan Ratnas (RuRs) or Champions of Industry.

Set up in May 2006, the Committee examined the applications of 41 Indian companies that applied for RuR status. Some 15 of them, including Mahindra & Mahindra, Tata, and L&T, were called between Dec 2006 and Feb 2007, to make presentations before the Committee. The MoD has kept a lid on how many have been finally recommended for RuR status; sources say the figure is 5-7 companies.

The report will now be considered by the Defence Acquisition Council (DAC), after which the selected companies shall be recognized as RuRs. The status shall continue for a period of five years, after which the Selection Committee and the DAC will have the discretion to give further three-year extensions. Defence Minister AK Antony says DAC approval will be accorded at the earliest. Mr Antony announced, “I hope it will happen by the end of this year.”

Companies selected as RuRs shall be treated equally, for the purpose of defence production, with Defence Public Sector Undertakings (DPSUs) and Ordnance Factories (OFs). The benefits that are linked to RuR status are:

• Eligibility to design, develop and produce major weapons platforms and defence systems.
• They will also be eligible to manufacture weapons and equipment developed by the Defence R&D Organisation (DRDO). Currently all such production is awarded to DPSUs and OFs.
• Eligible to receive technology from foreign defence corporations, and to undertake licensed production of foreign-origin systems.
• Eligible to undertake defence R&D, funded by the MoD, which has already announced that it will fund 80% of the cost of R&D by RuRs into specified defence systems.
• Eligible for duty-free import of equipment for defence R&D and for preparing prototypes of weapons and equipment.

Mahindra & Mahindra’s fully owned defence subsidiary, Mahindra Defence Systems, set up in 2000, is one of the companies that could be nominated an RuR. Brigadier Khutab Hai, Chief Executive, Mahindra Defence Systems says, “This is a very important day for us, provided the MoD actually equates the RuRs with DPSUs. We should be allowed to develop high-tech weapons platforms by benefiting from R&D funding, sharing knowledge with the DRDO, and working with the services headquarters to have a clear idea of their requirements well ahead of time, so that we are clear about what systems we need to develop for them.”

The backlash from the public sector has already begun. Trade unions from OFs and DPSUs have challenged the entry of the private sector into defence production on the grounds that this will take away their jobs. After accepting the Committee report on RuRs, the Defence Minister allayed trade union fears. Mr Antony stated, “we’ll clarify our positions to the trade unions. We want to make it clear that there is no intention to weaken the DPSUs. Even the combined public and private sector does not have the capacity to meet all the defence business that will be generated as a result of the 30% offset on defence imports. So we are bringing in reputed, credible private sector companies to increase our ability. But we will make sure that we do not weaken the DPSUs.”


Abhiman said...

Sir, I am aware that you are against complete indegenization. But it was forced upon India.

The following comment by a member named h.jay.s on bharat-rakshak forum is very apt (the context of the discussion was another member's complaint that India should have asked for foreign ToT for the Tejas project in the 1980s itself, instead of developing it mostly in-house) :-

Lastly all the talk of (foreign) collaboration is non-sense. Who would transfer know-how to a partner with no experience and no money? Even now the R&D budget is peanuts and not to compare it with early 80s.

Sir, arm-chair economists and "activists" like Mr. Praful Bidwai etc. keep critisizing the "Swadeshi streak". It may be unclear why it is so (one reason is definitely that they have a natural revulsion from the accented-speaking, traditional and religious scientists of ISRO and DRDO as opposed to their agnostic and "secular" and globalized selves).

One should realize that technology is NOT a commodity that is sold to anyone "who comes asking". It is not like rationed rice. Only those nations that are on the verge of making obsolete technology indigenously are sold the same (that too when they can pay for it). This in my view, is the crux of the "art" of ToT.

Thank you.

Abhiman said...

reference for the comment by h.ajay.s is :-

Zero said...

Why can't Ajai settle down in US?

Ajai said...

Dear Abhiman,

You've got me entirely wrong. I'm all for indigenisation. What I'm not for is paying lip-service to indigenisation and pretending (like the DRDO is often prone to doing) that they're doing a great job of indigenisation, when actually they are creating a deep rift between themselves and the users (the armed forces) by consistently failing to deliver usable products... in an acceptable timeframe.

I have no problem giving the DRDO a few thousand crores to go into their sandboxes and pretend they are making great military equipment. What I object to is their endless promises that the product is just around the corner, when in fact it is nowhere near there.

Ask anyone... ANYONE... wearing a uniform on the border or Line of Control. They'll tell you ten different stories about how they've been shafted by the DRDO. And about how equipment might have reached them except for the DRDO's insistence that it shouldn't be bought, it would be developed indigenously.

And while Zeros like Zero might like to believe that the military has been bought up by foreign arms corporations -- sweetie, those are the guys you are going to have to convince.



Abhiman said...

Sir, though out of the topic of the debate, it has infact been the services which keep shifting "goalposts". The latest project to be affected by this is the indigenous AEW&C project.

Thank you.

Broadsword said...

Abhiman, There is no doubt about the services (actually it's the army that's most culpable) shifting goalposts.

But that, in no way, absolves the DRDO from what they are doing wrong: which is to make unrealistic promises that they can't deliver on. That lies at the root of the relationship breakdown that has taken place between the DRDO and the users.