VAIBHAV CHADHA
On July 27, 2016 the Union Cabinet chaired by Prime Minister Narendra Modi approved the abolition of Guidelines for establishing Joint Venture Companies by Defence Public Sector Undertakings (DPSUs). The Guidelines for establishing Joint Venture Companies by DPSUs were approved by the previous Government in February, 2012. As per the Government note, the abolition of the existing JV Guidelines will provide a level playing field between DPSUs and the private sector. It will allow DPSUs to forge partnerships in an innovative manner enhancing self-reliance in defence and provide for enhanced accountability / autonomy of DPSUs in ensuring that the process of JV formation is effectively managed by them, so as to secure best outcomes in the interest of national security.
The prime responsibility of DPSUs is to provide state-of-the-art equipments to the Armed Forces and at the same time augment India’s self-reliance in defence production. With this decision of the Union Cabinet, all nine DPSUs, namely, Mazgaon Dock Limited, Bharat Electronics Limited, Goa Shipyard Limited, Hindustan Aeronautics Limited, Garden Reach Shipbuilders & Engineers Limited, Hindustan Shipyard Limited, Bharat Earth Movers Limited, Bharat Dynamics Limited and Mishra Dhatu Nigam Limited, stand to benefit.
In January 2015 Defence Minister Manohar Parrikar, at a meeting of Consultative Committee, had announced major reforms in the Defence Procurement Procedure and the Defence Production Policy. The motive of such reforms was to provide greater autonomy to the DPSUs and Ordnance Factory Board (OFB) units for their enhancement. The Minister had stated, “Defence industry in India is a unique industry where the only customer is the Services. We need to delegate powers to DPSUs to enable them to take decisions so that they improve the service of the platforms available to the Armed Forces…Every machine in operation is like adding an additional equipment. DPSUs will be provided support but they must think like a commercial organisation.”
Prime Minister Modi, while inaugurating the 10th edition of Aero India held in Bangalore at the Yelahanka Air Force Station in February 2015 had said, “The country should work towards increasing domestic procurement from 40 per cent to 70 per cent in five years. And that is why defence is at the heart of our Make in India programme. We are reforming our defence procurement policies and procedures. There will be a clear preference for equipment manufactured in India. Our procurement procedures will ensure simplicity, accountability and speedy decision-making.”
With the increase in participation by private players in the defence sector, the requirement of having separate JV guidelines for DPSUs was no longer considered necessary by the Government. Multifarious guidelines for DPSUs were likely to create obstruction in the growth of this industry, but now by doing away with such guidelines the Government has tried to bolster the indigenous defence manufacturing industry. The recent cabinet decision is in consonance with the visions laid down by Prime Minister and Defence Minister for the defence sector. The decision will also help in paving way for the defence public sector undertakings in becoming self-reliant.
In a report released in March 2016, a Sweden based think-tank, Stockholm International Peace Research Institute (SIPRI), mentioned that India had emerged as the world’s largest buyer of weapons and military equipment, accounting for around 15 per cent of all such international imports. “A major reason for the high level of imports is that India’s arms industry has so far largely failed to produce competitive indigenously-designed weapons,“ the report said.
Since long the performance of these DPSUs has not remained up to the mark, leading to a rise in India’s defence imports worth billions of dollars each year. The abolition of restrictive guidelines and more reforms likely to be infused in this industry, can be a major game-changer for the Indian defence set-up.
The Government is working to make advancements in the Defence Public Sector Undertakings. Only by transforming the DPSUs, can India cut short its defence imports and reach a phase where it shall see an escalation in the export of indigenous arms and equipment to the World.
(The writer is a Research Associate at Dr Syama Prasad Mookerjee Research Foundation, New Delhi)