PRIVATISATION OF DEFENCE INDUSTRIAL BASE IN INDIA

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“Our endeavour must be to meet the twin imperatives of technological relevance and cost effective delivery. Given the expansion of our private sector, both in technical and financial terms, we are at the threshold of a future in which the private sector contributes to the national cause of high technology defence. There is need for a new institutional framework to involve the private sector, to ensure continuous dialogue as well as to provide incentives for risk taking. We should encourage substantial investment in production capabilities and also in defence related R&Ds.” [1] Manmohan Singh, PM of India

Introduction

50. The history of involvement of private industry in defence production in India goes back to 1991 [2] which was followed by government initiatives in 1998 to establish close interaction of MoD and services with the Confederation of Indian Industries (CII). The constitution of ‘Group of Ministers [3] ‘ committee tasked to examine the Kargil debacle, the policy reforms implemented by the government since 2001 [4] and the constitution of Kelkar committee in 2004 [5] , were primarily aimed at overhauling the acquisition process and promoting indigenous development to achieve 70% defence requirements from indigenous sources by 2010. The major fall out of these was the Defence Procurement Procedures, DPP 2002, DPP 2004, DPP 2006 and DPP 2008 [6] . 51. The dramatic differences between technologies used in commercial and military systems in the past have narrowed down with the changing pace of the scientific innovation in the commercial sector especially in the fields of nano-technology, robotics, computer simulation, and stealth technology. As a result, military organizations in developed countries have turned to commercial sector for dual-use technologies and new breakthrough scientific discoveries especially with the decline in the defence spending in post Cold-War era for reasons economic as well as political.

Emerging Private Sector

52. In the last two decades, the Private Sector has expanded immensely [7] with the DPSUs outsourcing more than 30% and OFs outsourcing 80%. The private sector can produce much more efficiently in a much less time frame and hence their role in Indian defence industry cannot be underestimated despite their constraints. Various private sector companies have ventured into the defence sector and have been issued license by the government. These companies have already taken up production of defence equipment by entering into joint venture (JV) with many foreign companies. Some of these are [8] :- Mahindra & Mahindra Ltd, New Delhi. Larsen & Toubro Ltd, Mumbai. Max Aerospace & Aviation Ltd, Mumbai. HBL Power Systems Ltd, Hyderabad. Ramoss India, New Delhi. Tata Motors Ltd, Mumbai. Alpha Phazotron Radar Equipment & Systems Pvt Ltd, Bangalore 53. EADS’s helicopter subsidiary Eurocopter is associated with HAL since 1962, manufacturing more than 600 Alouette 3 and Lama (known as Cheetah and Chetak locally) helicopters.

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