Defence Production Policy aims to bring in pvt sector - Broadsword by Ajai Shukla - Strategy. Economics. Defence.

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Thursday 13 January 2011

Defence Production Policy aims to bring in pvt sector

Defence Minister, AK Antony, releases the new Defence Production Policy, flanked by his deputy, MM Pallam Raju and the Secretary for Defence Production, RK Singh.

by Ajai Shukla
Business Standard, 14th Jan 11

Defence Minister A K Antony unveiled a Defence Production Policy that, in an implicit admission of public sector inadequacy, seeks “to build up a robust indigenous defence industrial base by proactively encouraging larger involvement of the Indian private sector”.

The policy aims at achieving “substantive self-reliance in the design, development and production of (equipment) required for defence in as early a time frame as possible” by creating “an ecosystem conducive for the private industry to take an active role, particularly for small and medium enterprises (SMEs).”

The Ministry of Defence (MoD) — which traditionally shelters its public sector units from private sector competition — has long feared labour union protests against any level playing field to the private sector. The tightrope that Antony is now walking was evident from his remarks today: “We will give more space to the private sector (since) the nine PSUs and 50-odd Ordnance Factories cannot meet the needs of the services. We will protect the PSUs, strengthen them, and at the same time bring in the private sector by reducing the space for foreign suppliers.”
But when asked by Business Standard about whether protection for the PSUs meant the private sector would not get a level playing field, Antony avoided a direct answer: “More and more, we are offering a level playing field to the private sector. It is a process. Without creating much imbalance or shakes (sic) in the system, we are trying to go ahead. You know what I am saying.”

The MoD is also challenged in having to balance the Defence Production Policy between its key objectives of indigenisation on the one hand; and on the other, having to keep the forces supplied with high-tech weaponry, little of which is produced in India.

“Preference will be given to indigenous design, development and manufacture of defence equipment,” states the policy. But, “wherever the Indian industry is not in a position to make and deliver the equipment as per the required specifications, within the required timelines, procurement from foreign sources would be resorted to.”

“Self-reliance is still a distant dream,” admitted Antony at the release function. “But this large-scale dependence on foreign sources is unacceptable for a country like India.”

The Defence Production Policy implicitly admits that successive Defence Procurement Policies (DPPs) — there have been seven versions since 2002 — have failed to galvanise domestic defence industry.

The new policy pledges to simplify the “Make” category of the DPP, which makes Indian companies/consortiums compete against each other to develop complex defence systems. So far the ‘Make’ category has seen just one project launched: to indigenously build a Future Infantry Combat Vehicle (FICV) for the army. A second ‘Make’ project, to build a Tactical Communications System, is now on the anvil.

Private industry is cautious about the new policy. Says Khutab Hai, who heads Mahindra Defence Systems, “As a statement of intent, the new policy is a welcome step. But the government must create an effective framework that will clearly facilitate the private sector in developing and manufacturing defence equipment. The first test case that will define the new policy will be the FICV project.”

Industry body, Ficci, while welcoming the new policy, said it was “concerned about the implementation of the policy on the ground, because even the existing policies have not been implemented. Ficci further hopes that MoD will take this initiative forward by also providing a level playing field to the private sector by eliminating any price preference for Defence PSUs and doing away with the practice of nomination.”

Next, the new policy institutes a long-awaited “Defence Technology Fund”, for financing defence R&D by private companies, particularly in the SME sector. So far, however, the details of the Defence Technology Fund are still to be finalised. Said Antony, at the release function, “These are only policy guidelines. We will discuss with the finance ministry… the idea is to have a reasonable corpus.”

The Defence Production Policy mandates an “annual review of self-reliance”, that will be held by the defence minister. There are, however, no empirical targets for self-reliance in the policy.

“Unless an annual target is laid down, what will the defence minister review at this so-called annual review?” asks the CEO of a private defence company. “The MoD has been talking for years about reducing our import dependency for defence equipment from 70 per cent to 30 per cent. Now some firm targets must be set.”


“The new DProP augurs well for private defence companies, encouraging them to identify global partners who can provide cutting-edge technology. The policy strengthens the Indian private defence industry and will boost indigenisation of technology.”
(Puneet Kaura, Executive Director, Samtel Display Systems)

“Given the technological maturity of Indian private companies, we must target indigenous development of defence equipment that is required 5-6 years from now, not 10 years. Defence equipment becomes obsolescent in 5-8 years, even quicker in the case of electronics/ICT sub-systems.”
(Rajiv Kumar, Director General, FICCI)

“As a statement of intent, the new policy is a welcome step. But the government must create an effective framework that will clearly facilitate the private sector in developing and manufacturing defence equipment. The first test case that will define the new policy will be the FICV project.”
(Khutab Hai, Mahindra Defence Systems)

“We appreciate MOD’s initiative to formulate the first ever Defence Production Policy, which acknowledges that private sector would have to play a larger role in defence production. We anticipate that an implementation road map with benchmarks would be announced soon.”
(Gurpal Singh, DDG, CII)

“We need to wait and see how effectively the government works with the private sector to develop indigenous platforms and systems, given the limitations of time and technology that may be available in the country.”
(Nidhi Goyal, Director, Deloitte)


  1. Stealth or no-stealth, 5th generation or 4th generation, fighter aircraft are as obsolete for India's defence as bows and arrows. They can be used against neighbors such as Pakistan and China but the United States is EVERYBODY'S neighbor. It has already invaded and occupied Afghanistan, a part of traditional India and will expand its occupation to the rest of the subcontinent. I am India's expert in strategic defence and the father of India's strategic program including the Integrated Guided Missile Development Program. The U.S. invasion of Afghanistan means the coast-to--coast destruction of the U.S. by India; see my blog titled 'Nuclear Supremacy for India Over U.S.', which can be found by a Yahoo search with the title, for what India needs to do. Russia and other white countries are U.S. allies. These are the enemies to destroy. All other enemies will be taken care of automatically. Conventional arms are worthless for destroying the United States. Nuclear arms to destroy the United States with a FIRST STRIKE -- this is the key -- are cheap and easy to produce with technology India already has. All the money earmarked for fighter aircraft etc., and more, must be pumped into research, development and production of missiles able to deliver India's nuclear warheads -- in the thousands -- to the continental United States. India's missile scientists & engineers should have tested such missiles to their full range decades ago -- everything else, including short and intermediate range missiles and missile defence, is secondary and tertiary -- but have not done that because of prohibitions by India's C.I.A.-controlled governments. This must be done on a war footing; the first step is to destroy RAW through which the C.I.A. rules India; see my blog. Producing such weapons in the thousands and very quickly is important. This means that the vast majority of them must be land-based, including road and rail-mobile, missiles rather than submarine-based which take a long time to produce.
    Satish Chandra

  2. It is a positive qualitative shift in the policy.

  3. Kitab thodi patli hai....andar kya hoga kya pata...

    Khali panne to nahi hai...

  4. Ajai sir,
    Why do you publish the comments of nutcases like satish chandra ? "I am India's expert in strategic defence and the father of India's strategic program including the Integrated Guided Missile Development Program".. blah blah ...!

    Could you bring out an article on lca mk-1 & mk-2?

    Do you think that India will develop a longer range [ say 1000 - 2000 km] brahmos-2 since restrictions are being reduced by U.S?

  5. @ Satish Chandra -

    Dude, you are so funny!

    You sound very like a Talibani ISI disinformation agent attempting a disinformation campaign, but thankfully its obvious you are a "wannabe" agent provocateur.

    I'd be extremely surprised and totally ashamed if you are really Indian.

  6. @ Satish Chandra
    What a joker ! I am glad he is not in India, probably not even an Indian.

    Keep up the informative work Col Shukla.

  7. Ajai,
    The comment with author Satish Chandra is a spam and I have seen the same post in many of the news related to defence.

  8. Sometimes your comments page makes for humorous reading.
    Satish Chandra's comments and assertions that he is India's ""expert---" made me smile

  9. Hi Ajai,
    Sorry for posting a question not related to topic. But was curious.

    There are news reports of Arjun Tank MK-II going for trials. Can you please look into that.

    Is this a new version over and above the 248 already ordered? OR the next batch of 124 will have the MK-II capability? Kindly elaborate.

  10. Mr. Satish Chandra
    wow wat a name d spammer choose!...
    i'm guessing Ajai sir din't mind a comic post like of this spammer!...its adding lil spice!!..hehe...funny....

  11. Col. Shukla- sir could you please comment on this:

    in the light of our enlightened offset policy and such?

  12. Chinese media recently ran stories about battery powered Winter uniforms for the army.

    links with photos

    you may write article on it.

  13. PV Naiks in uniform will feel the pinch... Less and lesser chances of setting up of adarsh socities... Jai Hind!!!

  14. Several very good suggestions. Very well considered

  15. a well elaborated article encompassing viewpoints of all stakeholders, especially the future repercussions.
    Can you-Mr Ajay or anyone else- please give some information on the categories in DPP- like what is MAKE or BUY& MAKE, etc.


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