Feeding a monster called monopoly - Broadsword by Ajai Shukla - Strategy. Economics. Defence.

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Thursday 28 September 2006

Feeding a monster called monopoly

by Ajai Shukla
Business Standard: 29th Aug 2006

It happened at 2 a.m. on Independence Day, just as the source had said it would. Through the inky darkness on the Line of Control at Machhil, near Kupwara, nine infiltrating Lashkar-e-Toiba militants crept towards the border fence, barely a hundred metres from the waiting army ambush. Through the eyepiece of his night vision device, Havaldar Sant Kumar (name changed) scanned a ghostly greenish landscape; the shadowy figures came into view as they crossed a small nallah into Indian territory. Sant silently tapped the man next to him and the tap was passed along, man to man, bringing the ambush to full readiness. Suddenly a shout rang out, followed by a burst of firing, first from the militants, then from the soldiers. Chaos reigned for a full minute until a mortar flare fired from an Indian post lit up the area. Five of the infiltrators lay slumped on the ground. But Sant Kumar, too, had died in that burst of Lashkar fire.

As the Lashkar weaponry was piled up and tabulated, it quickly became clear how the militants had managed to fire first: the night vision devices (NVDs) they carried were far more effective than the army's.

That's a situation the army brass has openly deplored. For years, Bharat Electronics Limited (BEL) has manufactured outdated NVDs in apparent slow motion, the gap between demand and supply leaving the army increasingly night blind. In the incident at Machhil, yet another jawan paid with his life for the way in which the military's equipment needs have been compromised to feed the monster of public sector monopoly.

More soldiers could die from PSU pampering. At a secret meeting in the Defence Secretary's office on June 29, top defence officials considered the army's plea for new, higher-technology NVDs. BEL faces pressure from a clutch of Indian private companies, including Alpha Design Technologies and HBL-Nife, bidding to build high-performance NVDs which replace the old BEL Second Generation Image Intensifier (II) tubes at the heart of the device with imported SuperGen or HyperGen II tubes. They pose a serious threat to the BEL monopoly, but they were dealt with in classic MoD style. The high-level panel simply appointed BEL the nodal agency for importing new SuperGen tubes for all indigenous manufacturers. This largesse was awarded by the Defence Secretary and Secretary (Defence Production), both directly accountable for BEL, and also, astonishingly, by a representative from BEL itself. The private sector was nowhere on the scene, and nobody pointed out BEL's dismal track record.

A private company CEO, speaking on condition of anonymity, says, "The government is not prepared to allow the private sector to compete with PSUs on a level playing field. The PSUs are part of their organisations and they have to ensure that they succeed."

That means that the army is not just blind, thanks to inferior NVDs, but deaf and dumb too, because of BEL's inability to produce radio sets essential to military communication. While the army cried bloody murder, BEL held up the import of radio sets for over a decade, promising that it would produce a family of radios (Combat Net Radio, or CNR) for the army. In 2002 the MoD finally tired of waiting and imported TADIRAN radio sets from Israel. When half the army was equipped with TADIRAN, BEL suddenly declared that its CNR was ready. The MoD quickly equipped the other half of the army with BEL radios. BEL was to ensure that the two different radios were compatible, but failed to do so. To this day, TADIRAN-equipped units cannot communicate securely with the other half of the army.

US President Eisenhower, a former general, warned America in his outgoing speech in 1961: "We must guard against the acquisition of unwarranted influence, whether sought or unsought, by the military-industrial complex." That injunction is particularly relevant in India, where defence expenditure is shrouded in secrecy and an opaque screen of procurement regulations hides a scandalous regime of patronage and mismanagement. Since the media remains obsessed with politics and the generals with career enhancement, the public never learns that our high rates of military casualties flow directly from vested MoD interests.

The web of PSU patronage catches the flies that it needs. There are examples of military officers "jumping across the desk", becoming senior executives at defence PSUs after retiring from an office where they took procurement decisions in favour of that company. Senior defence PSU executives have snagged lucrative jobs with foreign defence companies soon after awarding them business. While the government does not ask questions of these people, it mistrusts the private sector deeply. No military officer can join a private company, not even a bona-fide registered, Indian concern, for two years after leaving the service.

The Kelkar Committee recommendations clearly suggest that India's 39 Ordnance Factories and 9 PSUs have proved unequal to the task of defence production. Kelkar strongly advocates trusting the Indian private sector with that responsibility, but the MoD is unenthusiastic.

Tonight on the LoC, it will be business as usual. Several hundred Indian patrols will creep into their ambush positions, peering into the darkness through dodgy NVDs and receiving instructions on dodgy radio sets.

The connection is not always seen, but it is there all the same.


  1. Whisper something nice

    I'll make you scream twice


    If you hear me !

  2. wish I had read it earlier

  3. I believe Eisenhower (in the quote you picked) was referring to the nexus of *private* armaments industry (not public sector) and the military - something which has become a nightmare for the American establishment - viz. defense contractors like Halliburton and their milking of the American taxpayer with gross overbilling and underperformance. The truth is, if you let any ideology blind you - public sector is all bad, or private sector is all bad - you're going to land in trouble. One needs a flexible mix, but with the government in charge overall, especially in the field of defence.


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