‘MAKE IN INDIA’ IN DEFENCE REAL OR RHETORIC?
THE FDI LIMIT IN DEFENCE SHOULD BE RAISED TO 100% AND ‘MODERN TECHNOLOGY’ SHOULD BE DROPPED
The defence minister's bandwidth is severely constrained with strategic, operational and personnel matters; ceremonial functions and political meetings. Defence procurement should be handled by an independent Defence Commission, headed by a technical person of cabinet rank, reporting directly to the Prime Minister, akin to India's highly successful Space and Atomic Energy Commissions. MoD being the end-user can provide its requirements, inputs and/or criticism but not interfere.
The Defence Commission should connect with private sector, academia, military veterans and talented individuals and identify critical technologies that India should be completely self-reliant in. These could be stealth systems, avionics, propulsion systems, precision munitions, UAVs and advanced materials etc. The rest can be imported. Trying to do everything is impractical.
DRDO and the DPSUs needs to be privatised. Their scientists, engineers and technical staff would be more productive under private owners. They should compete with other private entities for business. The bogey of 'Is private sector trustworthy?' has hurt India enough and needs to be buried. The private sector does not need a certificate of patriotism. There are enough checks and balances to handle dirty fish that can exist in any entity — public or private. There are no major DPSUs in the western world and they are doing just fine.
India's infamously long-drawn procurement process leads to technology obsolescence, higher cost and frustrated investors. It needs to be shortened drastically from 8-10 years to 4 years or less. MoD needs to undertake a Procurement Maturity Assessment (PMA) by external experts. Large procurement programs in the west are handled by duly-qualified private consulting firms under the overall supervision of MoD. MoD should try this out for a few medium-value contracts. The FDI limit in defence should be raised to 100% and subjective conditions like 'modern technology' should be dropped. MoD should select 'strategic partners' for at least three large-scale procurement programs by the end of 2017, to facilitate long-term investments. 'Make in India' in defence has unfortunately not taken off, despite the talk. Changing the status-quo requires a radical shift in procurement strategy, approach and funding. Time's running out.
The author is partner and India head of Aerospace and Defence at KPMG. Assisted by Capt Vinod Narasimhamurthy (ex-Para SF), associate director, Aerospace and Defence, KPMG in India