Private sector role in defence

IN a progressive step, the government has decided to allow private shipbuilders to construct warships. The measure comes as a sequel to a series of measures taken by the government during the last decade to involve the private sector to bolster India’s self-reliance in defence hardware. Until the 1980s, private sector participation had been non-existent in India’s state-owned military industrial complex. At best, the private sector played an ancillary role. It was after the disintegration of India’s main weapon supplier, the Soviet Union, that the Indian defence establishment, further induced by its economic liberalisation policies, began to reach out to the private sector. In 2001, the government took the unprecedented step of permitting 100 per cent Indian private sector participation (and even foreign direct investment up to 26 per cent) in the defence industry. Since then there has been a steady involvement of the private sector in the defence industry.

But India is still far behind advanced democracies such as the United States where the military-industrial complex has a huge private sector involvement. The Indian private sector’s success in the civil sector is only too well known. And so, there is no reason why India’s private sector cannot deliver in the defence sector. Obviously, the issue is not that simple. Many private companies do not find the defence sector lucrative enough because not only is their client likely to only be the Indian armed forces, but they are unlikely to be able to compete in the highly competitive world armament market dominated by both big and well established players. Also, despite the government continuously revising the defence procurement procedures, many in the private sector are still finding it difficult to do business with a defence ministry dominated by civilian bureaucrats and steeped in bureaucratic mindset.
All said and done, however, there is no doubt that private sector participation in the defence sector is imperative for India’s quest for self-reliance, especially in core weapon technologies, which foreign countries are either usually reluctant to export or sell only with a high price tag.