OFF THE CUFF / Guns of the licence raj

Chandra Shekhar

Should the government be congratulated for opening defence production to the private sector? Yes! Because the government of independent India, after pondering for over half a century, discovered that there is a private sector at home which can also play a useful role like the foreign private sector in increasing the fire power of our defence forces.

The government has already been profusely congratulated by industry associations, dominated by decaying barons of a monopolistic regime, for reposing faith in the capability of Indian entrepreneurs to set up defence equipment manufacturing units and make available critical goods to the armed forces. But unfortunately not many entrepreneurs can dream of setting up units to make quality guns, bullets, bombs, etc, because the guidelines framed by politicians, at the behest of dour bureaucrats, require that an entrepreneur should obtain a licence before producing such goods.

Procuring a licence is a craft that has to be perfected before thinking of entering defence production. A host of underemployed master craftsmen, who became redundant in the aftermath of economic liberalisation, will now come out of their forced exile to play the old game of cornering licences. A genuine entrepreneur will need to learn to compete with the veterans in the game of lobbying, which involves influencing persons in public life privately through extensive use of time-tested tools.

Licences ensure windfall gains for both benefactor and beneficiary. The person distributing licences can satisfy himself in whatever way he wants — temporal goods, fudged balance sheets or maybe just a beautiful smile. The person receiving the licence also gets a quota with the tacit freedom to produce shoddy goods and sell them to a monopoly buyer at an absurd price, to be fixed privately. In the process an individual who may have the skills and entrepreneurship to produce quality goods but not the acumen and connections to procure a licence will suffer.

Why should there be licence? Why can’t 10, 20 or any number of companies, with or without a foreign partner, be allowed to produce and sell defence equipment at a market-determined price to the Indian army, the British army, the US army or any other army? Ironically, armies the world over buy the bulk of their armaments from the five permanent members of the UN Security Council and the sellers do not question which way the guns would fire. Why shouldn’t an Indian entrepreneur be permitted to participate in the global arms trade?

The system of licensing defence production will help neither genuine industrialists nor the defence forces. Only the chosen few and politicians and bureaucrats will flourish at the cost of tax payers who will pay for the success of the lopsided policy and of soldiers who will shoulder the burden the licence raj.