Ministry of Defence strikes blow for private sector in defence - Broadsword by Ajai Shukla - Strategy. Economics. Defence.

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Friday 8 July 2011

Ministry of Defence strikes blow for private sector in defence

A vehicle-based Electronic Warfare (EW) system, developed by the DRDO. Now, the private sector will compete on level terms with DPSUs like Bharat Electronics Ltd to develop an EW system for the strike corps

Ajai Shukla
Business Standard
8th July 2011

In a victory for India's private sector defence manufacturers, the Ministry of Defence's (MoD's) apex decision making body, the Defence Acquisition Council (DAC), will today issue a ruling that recognises the right of our private companies to compete against the public sector in bidding for top-secret defence projects.

At the DAC meeting here today, a vital Electronic Warfare (EW) system for the army's mechanised corps will be categorised as ‘Buy Indian', instead of being handed over on a platter to government-owned Bharat Electronics Ltd (BEL, also termed a defence public sector unit), as the MoD had earlier planned.

The ‘Buy Indan' category (described in the currently valid Defence Procurement Policy of 2011, or DPP-2011) implies a range of Indian companies would be invited to bid for the estimated Rs 1,800-crore contract to develop a ‘Track and wheel-based EW system' (TWBEWS).

EW is modern warfare's increasingly crucial fourth dimension, fought over the electromagnetic spectrum using sophisticated detection and jamming equipment. The winner of the physical battle on land, sea and air is being increasingly decided through this unseen battle, where both sides scan each other's radio, radar and data emissions. This helps them gather intelligence and, at a key moment in battle, cripple the enemy's electronics with powerful electromagnetic surges, leaving him directionless and blind.

With electronics now ubiquitous in military systems — fighter aircraft, tanks, guns and missiles — a potent EW system degrades the enemy's capability, breaking his force into isolated, incoherent units. For obvious reasons of security, the military wants EW systems to be designed and built entirely in India.

Initially, several Indian companies were offered the opportunity to develop a TWBEWS (MoD letter No B/50529/TWBEWS/ SURAJ dated June 12, 2008). Then, as Business Standard reported on February 12, 2010, (‘MoD breaks its own rules to favour its PSU'), the MoD discarded competitive bidding and handed the contract to BEL, categorising the procurement as ‘BUY INDIAN, BEL' No such category exists in the MoD's Defence Procurement Procedures of 2006 and 2008 (DPP-2006; and DPP-2008).

‘PSUs are special'

At that time, the minister of state for defence production, M M Pallam Raju, had justified BEL's preferential treatment, saying, "I think that we have a responsibility to the DPSUs, since [their] ownership rests with the Government of India.&"

The MoD has been forced to abandon that paternalistic approach under pressure from the Indian Army. After BEL made little headway in integrating EW systems into armoured vehicles, senior generals began to worry if their mechanised formations — which have the crucial wartime task of striking deep into Pakistan — might be left without EW support. The army then demanded the TWBEWS be awarded by competitive tender.

BEL and other companies that now hope to compete in the massive Rs 1,800-crore tender for the TWBEWS see it as a cash cow that would cross-subsidise several other EW projects being tendered. These include the Integrated EW system for cross-country and desert terrain; the Heliborne EW system; and the ‘Integrated electronic warfare system (IEWS) for mountain terrain&".

This reverse for BEL has not seriously dented MoD's support to it. Though the giant DPSU was eliminated from the global tender for the IEWS for mountain terrain (BEL's product was judged technically unsuitable, leaving Tata Power and Israeli company ELTA in the fray), the MoD has awarded a follow-on tranche of the project (called Him Shakti) to BEL without competitive bidding. MoD had also awarded BEL earlier contracts for low power jammers and a low intensity conflict EW system.

Each corps of the Indian Army will be allocated an EW system. While the basic electronic components in each remain the same, the packaging and inbuilt mobility caters for the operational role of the corps. For instance, the IEWS for mountain terrain is mounted on smaller, lighter vehicles and has a manpack component. In contrast, TWBEWS is mounted on armoured, tracked vehicles and will be allocated to each of the three strike corps.


  1. Saheb Ji,

    Very good article. How long can MoD remain in the aftermath of 62?

    Mod deciding, Mod adjudicating, MoD ruling and then MoD awarding a contract to itself !!

    That Joke must be over now. I am sure such a decision can not come about without the ground realities that greasing once palm through Tats is much better than getting trapped into an inquiry of BHEL or BEL??

    Tatas are not under RTI and all that muck but BEL is !!

    Adopting safer routes are better than than getting caught a la Raju. Hence Pallam is wiser than Raju.

    That is not to decry the impact of this good decision.

    Good work colonel..

  2. Finally the private sector is being invited. While aware they may have to tie up at some level with foriegn vendors [just like DPSU's did in most cases], but at least knowledge will be spread over a larger space locally increasing the knowledge pool for a particular system.

    This should also hopefully make prices competitive in the future and ensure the private sector has a huge stake in national security.

  3. What use is is protection to a PSU if the PSU too sub-contracts to a foreign supplier and uses its PSU status as a stamp.And worse ,the final product be supplied at a higher cost than if the equipment was procured from that supplier.We still have ridiculous practices of even domestic manufacturers of trucks giving CKD kits to OFB factories for final assembly.Its time for competition tempered with synergy.Here the role of the ministry is crucial to ensure that PSUs,pvt sector and DRDO ultimately work for the country and capability is built up and maintained.With pvt competition the PSUs too must be given full autonomy to face up to competition.

  4. AA BEL mujhe maar.

  5. Is it just me or is the title of this article completely misleading?


  6. Ajai, I don't seem to understand the title , while the article feels the opposite to subject in Title.
    Probably it's me would like to stand corrected.

  7. The title and content of the article are sort of at loggerheads....Shuklaji you might want to reconsider the title of this article

  8. Once upon a time, BEL delivered 2600 night vision goggles. And half of them found useless. Remaining had some small issues. I have a friend who works in BEL and he told me that he once in a while works, rest of the time they just enjoy without working, because they get order to do so from top management
    I asked him, don't you feel bad about it. And he said when he was young and passionate he was bit unhappy, but after a while he liked it. As he told me the biggest reason is to get paid without doing anything. Also he told me that no one is ever fired from BEL for anything.

    I think DRDO should be re-wamped and customers(Indian Army) should be involved in every project. And sit on head of DRDO.

    Also that friend of mine made fun of me saying "We are better than you stupid software engineers, who are always working"

  9. That is the need of the hour.

    BTW, the word "Blow" can be a double edged sword of the Broadsword. Lol...

  10. Yep, title of the Article got me too!

  11. You guys probably have a valid point about the title being a bit out of sync with the article!

    But look at it this way: since the MoD seems to be veering around (albeit reluctantly) to bringing in the private sector, isn't it time for a bit of positive reinforcement for the MoD?

  12. Hello Ajai,
    Please change the title of the article. Its misleading. And somebody like me who is educated from Hindi medium, its too heavy. Please write simple English. I do not want to put pressure on my mind while reading your articles.
    Who knows once my kids will read this article too.

  13. can these companies contract this to a foreign company..i.e buy foreign stuff rebrand it as their own (after paying the foreign company) and sell it as their own??are there any safeguards against that
    if they do we get all the encryption codes etc or do we get only final product where we can send info in at one end and out the other...

    coz if it so..we really shoudnt call it development

    but i suppose i cant expect all of whatever i want to know will be in public domain

  14. A country of India's size (people/economy/geography) must have a strong private sector defence/industrial complex. Its a shame that big names like Tata's L&T, Godrej etc are only playing a complementary role as an engineering vendor to the MOD,s BEL, DRDO. There were problems in the tactical communication program, where private participation was initially shunned by MOD after BELs arm twisting. Do we have any idea where that program is heading as of today. why are indian companies like wipro, hcl tech,infosys etc content providing engineering services to the boeings and lockheeds. it would be great if you could cover what the private sectors strengths and weaknesses are...and what they must be doing to be a force to reckon with. Thanks for your great efforts! it makes subjects of national importance interesting and though provoking to a lay man like me.



  15. @0049
    they would love to have their customers on board i think....but with stuff like this... it doesnt inspire much confidence

  16. title should be ""Ministry of Defence strikes blow for PUBLIC sector in defence"

  17. Col. Shukla,

    At what level does the Samyukta system fit in?

    Will it be held as a Command level formation?

  18. Article is well written for anti-DPSU campaign and favouring Private/Foreign

    investors in crucial defence area like Electronic Warfare. It is to be noted that DPSUs

    like BEL is serving Indian Defence since last fifty years and served the country at the

    critical time eg Kargil War. DPSUs like intelligence agencies kept the nations

    technical security information always secret and far from wrong doers. As our

    defence budget is expanding, the private players are jumped to eat the sweet chunk

    of defence cake. Just have glance at recent past, how private players made India

    shame...2G,CWG,DEVAS-ANTRIX... do you think, they will be loyal to our country...

    cant they sell our country to wrong hands... yes it is possible... it seems.... it will be

    bigger and bigger than 2G and Devas-ISRO scam. Why this article writers does not

    probe into JEWB (Joint Electronic Warfare Board) policies, which indicate how EW is

    very crucial to nation's security... and it should not go to wrong hands? Do you

    think... privatization of such a crucial defence area like EW... be promoted....

    definitely not.... if it happens.... bet me... country is in militant hand.........


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