By Amit Cowshish
The unmistakable pride with which the Ministry of Defence (MoD) publicised its achievement in indigenisation of defence production late last month leaves one utterly dumbfounded.
A list of 2,500 items already indigenised by the 16 Defence Public Sector Undertakings, including the magnificent seven created last year by corporatizing 41 ordnance factories, was notified on 27th of December 2021 by MoD’s Department of Defence Production (DDP).
The Press Release circulated by the Press Information Bureau claimed that the list had been notified ‘as (a) part of the efforts to achieve self-reliance in defence manufacturing and minimise imports’ by the DPSUs.
It sounded very impressive but browsing through the list made the heart sink, for it includes several types of nuts, bolts, screws, bushes, washers, gaskets, pins, hoses, sealing rings, rivets, clamps, plugs, elbows, and jets. In some cases, different sizes of the same item have been listed separately to expand the list.
Some items are mysteriously described as ‘3.10855.471150.0’, ‘3.10855.470330.0’, ‘S-357 PAINT PRO62077 1096’ ‘H8K-006+-U-3.3-105G Sealing ring’, and ‘H8K-006-U-3.8-1.5G Sealing ring, in what seems to be a vain attempt to create an aura of technological prowess of the public sector defence enterprises.
The flagship enterprise, Hindustan Aeronautics Limited (HAL) accounts for three fourths of the list, having indigenised around 1,850 items. The other notable DPSUs to figure in the list are Bharat Electronics Limited (BEL), Bharat Dynamics Limited (BDL) and Bharat earth Movers Limited (BEML). While HAL and BEL are Navratna enterprises, BDL and BEML are Miniratna Category I enterprises.
The public enterprises with ‘excellent’ or ‘very good’ MoU rating in three of the previous five years and composite score of 60 or above on six selected performance indicators are eligible to be considered for grant of Navratna status.
These indicators are net profit relative to net worth, manpower cost to total cost of production or services, profit before deduction of income tax the capital employed, and profit before interest and tax to turnover. The other two indicators are earning per share and inter-sectoral performance.
For Miniratna Category-I status, the enterprises must show continuous profit in the last three years, pre-tax profit of at least Rs 30 crores or in at least one of the previous three years, and a positive net worth.
The MoD notification of December 27 also includes a separate list of 351 items which the DPSUs will progressively indigenise by 2024, obviating the need for importing them. Of these 172 items will be indigenised by this year-end, another 89 by next December and the remaining 90 by the December of 2024.
This is the third list of its kind. While the first list of 101 items was issued in August 2020, the second list of another 108 items was issued in May 2021. What these lists have achieved remains unknown. The chances of the third list issued last month producing spectacular results seem remote as this list also includes mostly run-of-the mill items like plugs, fuses, resistors, chokes, screws, nuts, washers, pins, gaskets, PCBs, and more items of the same ilk.
Indigenisation of nuts and bolts reflects poorly on the capability and potential of these DPSUs, which are routinely criticised -quite often unfairly- for being masters of the ‘screwdriver’ technology. The fact that they had been importing these mostly low-technology commonplace items all these years till now makes for bad publicity.
India’s performance on the indigenisation front is a paradox. Great strides have been made in indigenisation of missile systems, naval platforms, and aircraft, even if much more needs to be done. But, on the other hand, it appears that till recently the defence industry – the DPSUs at that- had been struggling to indigenise nuts and bolts. The December 2021 list seems to suggest that their indigenisation comes as a big relief.
Some serious introspection is required about the way the goal of indigenisation is being pursued by the South Block. Broadly, three aspects need attention.
First, as of now there is no comprehensive indigenisation policy in place. Instead, what is in place is a policy for indigenisation of components and spares used in defence platforms by the DPSUs. This policy was issued by the Department of Defence Production in 2019. Apart from setting its sight quite low on indigenisation of run-of-the-mill items, the policy contains many restrictive features.
For example, it directs the DPSUs that the indigenised products should invariably be cheaper than the cost of importing them. This is not always possible, especially in relation to critical items for which the demand may be quite low. The DPSUs are commercial organisations which would anyway indigenise any item if it made commercial sense to do so. If, however, they are expected to go in for indigenisation on strategic considerations, the indigenised product is unlikely to be invariably cheaper.
Second, presently several agencies are involved in the effort, ranging from the Indigenisation Directorates of the Services to the Defence Research and Development Organisation (DRDO). Apart from schemes like the iDEX (Innovation for Defence Excellence) managed by the Defence Innovation Organisation formed as a ‘not for profit’ company under the aegis of the Department of Defence Production, and funding mechanisms like the DRDO-managed Technology Fund, the MoD is also leveraging capital acquisitions towards the same end.
This disjointedness in the indigenisation efforts is not conducive to good results, particularly in the absence of an overarching organisation which could channelise the activities of these disparate agencies towards the higher objective of becoming truly self-reliant in defence production to the extent it is practical.
Lastly, the MoD needs to promulgate a comprehensive policy for the entire defence industry -both public and private, including the Micro, Small and Medium Enterprises and the Start-ups- that focuses on indigenisation of major platforms, leaving indigenisation of nuts, bolts, screws, bushes, washers, gaskets, pins, hoses, sealing rings, rivets, clamps, plugs, elbows, jets, and the like, to the production agencies who will indigenise them anyway if there is a business case for doing so.
By focusing on indigenisation of low technology commonplace items, the MoD is only missing the woods for the trees.
(The author is former Financial Advisor (Acquisition), Ministry of Defence. Views expressed are personal and do not reflect the official position or policy of Financial Express Online. Reproducing this content without permission is prohibited).