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BW Businessworld

Firing Blank Shots

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Defence minister A.K. Antony has fired a blank with the new defence procurement policy (DPP) as far as the private defence industry is concerned. DPP has marked the direction for the private sector, but not created a path for it.

Antony says the new category of procurement, Buy and Make (Indian), will help Indian industry work out technological tie-ups and create in-house capabilities to meet future defence requirements. But that cause is hardly furthered till the FDI (foreign direct investment) in defence remains at the low level of 26 per cent. Foreign original equipment manufacturers (OEMs) have little incentive to share either business or technology with Indian firms.

Even the shot at forcing foreign OEMs to transfer technology to Indian companies by reserving some unspecified kind or size of orders for local firms seems to be missing the mark. The orders under the new reserved category require 50 per cent content to be locally sourced. Given the fledgling nature of the Indian defence industry, this condition could be met only for basic weapons and equipment, unless the sub-vendors' imports are not counted as imports. Moreover, the new DPP expects the local firms to have only production capabilities and source intellectual capability from the foreign OEMs.

The move to share information on potential requirements of the forces with the private sector is infructuous unless the government collaborates with the private sector to develop indigenous warfare systems, as is done in the US. Public sector has simply not delivered the self-reliance it was supposed to.

(This story was published in Businessworld Issue Dated 09-11-2009)