Defence PSUs Spoil PM's 'Make in India' Dream

Despite policies to ensure otherwise, India’s dependence on defence imports has only shot up with the country topping list of global arms buyers.

Published: 05th April 2015 06:00 AM  |   Last Updated: 05th April 2015 09:32 AM   |  A+A-

NEW DELHI: The Ministry of Defence, according to official estimates, is expected to spend around $130 billion on defence modernisation under Prime Minister Narendra Modi’s Make in India initiative in the next seven to eight years. But despite being given a major push towards self-reliance, indigenization in the defence sector is far from reality.

Defence PSUs.JPG

The defence ministry’s annual review on the progress of self-reliance (accessed by The Sunday Standard) shows that the indigenous share in military hardware has been static for the past four years, and rather poised for a speedy nose-dive.

 The objectives of the Defence Production Policy (2011) were to achieve substantive self-reliance in design, development and production of weapon systems, to create conditions conducive for private industry to take an active role in this endeavour, to enhance potential of small and medium enterprises in indigenization, and to broaden defence research and development. An increase in home-made content for production of defence equipment by the Defence Public Sector Units (PSUs) and Ordnance Factory Boards (OFBs) was another goal.

 But even three years later, a review of this policy at the review committee meeting, held a few months ago, has exposed the dismal performance of defence PSUs. The meeting was attended by top officials of the defence ministry, including the defence minister, defence secretary, DRDO chief and other key officials responsible for acquisitions for the three forces.

“As far as total defence capital procurement for armed forces is concerned, the indigenous content is almost static at about 40 per cent. And this may further go down,” the review committee observed.

 While referring to the performance of defence PSUs, the committee observed that majority of them were under-performing. “Though there is slight improvement in the indigenous content, but in most of the DPSUs, it is static in the last 3-4 years. In fact, in case of BEL, HAL, MDL, it is going down. This is a serious concern, which needs to be addressed,” it said.

The committee also pointed out that stand-alone initiatives for research and development and technology development undertaken by the Defence PSUs are “not sufficient to reach the desired level of indigenization”.

With regard to total defence capital procurement and import content provided by the Controller General of Defence Accounts, an analysis by the committee says that the total indigenous content in defence capital procurement was only 40 per cent.

 The detailed analysis states that total import content, including direct and import content in procurement from Indian vendors, was 60.42 per cent from 59 per cent in 2012. Even the indigenous content in military hardware provided by our defence PSUs and OFBs was also nearly 60 per cent.

“The indigenous content in most of the projects has been static for the last two to three years. This indicates that the technology received under the transfer of technology projects is not being absorbed, enhanced and upgraded indigenously by the defence PSUs, OFBs and DRDO, as required,” the committee further observed.

 The working results (value of production) of these defence PSUs, also disappoint. Up to December 2014, total value of production of ten PSUs and OFBs was only Rs 27,889 crore while it was Rs 41,502 crore in 2011. And most of these defence units are under-performing. The profit has gone down from Rs 4,328 crore in 2011 to Rs 1,946 crore in December 2014.

 Surprisingly, the Annual Report of 1980-1 of the defence ministry had stated that complete self-reliance in defence production and eliminations of technology imports within the next 10 to 15 years would be achieved. But even after 35 years, it is still a distant dream. In fact, our dependence on imports has gone up tremendously and India tops the list of global arms importers.

Defence experts believe defence PSUs are major providers of advanced systems to defence forces and largely responsible for India’s poor achievements in defence self-reliance.

 According to the latest report of Stockholm International Peace Research Institute (SIPRI), released on March 15, India is the world’s largest arms importer and accounts for 15 per cent of the volume of global arms imports in the last five years—more than three times as much as China.

Among India’s big-ticket defence purchases listed by SIPRI were a $4-billion deal for six Scorpene submarines from France, a $1.1-billion deal with Israel and Russia for the Phalcon airborne warning-and-control system aircraft, and a host of deals with different countries for engines, sensors, and missiles.


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