New defence reforms to help make the Indian Defence Sector `Atmanirbhar’

Updated: May 18, 2020 12:25 PM

In the fourth tranche that Sitharaman outlined, the focus was on defence production, aerospace including MRO, space, atomic energy, coal and minerals.

defence reforms, Indian Defence Sector, Atmanirbhar, industry sectors, Defence production area, Ordnance Factory Board,FDI in defence, latest news on defenceThe size of the Indian market, and should we be able to sustain our modernisation plans, also offer a huge domestic market.

By Brig SK Chatterji (Retd)

Finance Minister (FM) Nirmala Sitharaman’s briefing on measures to be executed by the government to power the nation out of a descent into an economic whirlpool that could suck the country into the quicksand of a hard depression was a shade different from the three previous tranches announced. In that, it had its prime focus more on structural reforms in a few industry sectors that have the potential to generate wealth, employment and strategic benefits in the long run.

In the fourth tranche that Sitharaman outlined, the focus was on defence production, aerospace including MRO, space, atomic energy, coal and minerals. In the Defence production area, long pending issues have been addressed by the government. Hopefully, the execution of these proposals will be fast-tracked.

Two major defence-related issues that the FM addressed deserve greater analysis. These are the aspects of FDI in the defence sector and the functioning of the behemoth Ordnance Factory Board (OFB). Both issues have been periodically addressed by governments from time to time, however, political compulsions have not permitted taking the bull by the horn and getting it to plough profits into the system.

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As far as FDI is concerned, the underlying argument that needs to be perceived is most of the critical technologies that we require for making weapon platforms that build our military capability is not there with us. Yes, there have been quantum jumps in space technology, manufacturing world-class guns, a few enviable helicopter models, some varieties of ammunition, missiles and so on, however, we still do not have the technology for most decisive warfighting capabilities. As far as new technologies that could prove decisive tomorrow, we are nowhere there in AI, robotics for military use, cyber warfare, and communications. In fact, we are importing rifles, have failed to produce a world-class tank, do not have technologies for modern drones or swarms, haven’t produced precision ammunition; the list being endless.

So far, only 49% of FDI was allowed through the automatic way. 100 per cent FDI is allowed after due government approvals. Sitharaman announced an increase in the automatic route to 74 %. 49 % had failed to garner the advantage that we had expected. 74 % may trigger some of the top global companies in the defence and aerospace sector to set up shop in India. However, it would be prudent to count the chickens after they hatch.

Keeping in view the exit strategies that global majors may ultimately resort to in China, the combination of a 74 % FDI policy, availability of a large population of technically qualified manpower and lower wages could make India an attractive destination. The size of the Indian market, and should we be able to sustain our modernisation plans, also offer a huge domestic market.

Sitharaman also announced corporatisation of the Ordnance Factory Board (OFB). The OFB is over 200 years old. It has 41 ordnance factories functioning under it. The attempt is to undertake corporatisation and usher inefficiency in these establishments by converting into one or more corporate establishments. These establishments will remain fully owned by the government like the other public sector units.

The corporatisation of the OFB has been one of the transformative ideas that the current government was to execute in the first 100 days of its being in power. Notwithstanding so high a priority, the response from union leaders of these establishments to the FM’s announcement yesterday, have been cryptic. Three major unions who claim to represent a vast majority of the 82,000 strong workforces, are scheduled to announce their action plans today. A pitched battle is easily visualised. However, such a battle will be faced anytime that we attempt to modernise legacy systems in most sectors. Hopefully, all parties will be objective, and as long as workers’ interests are not trampled upon, measures that promise efficiencies in areas of production, quality and costs will be firmly steered through.

Atmanirbharta is a welcome philosophy and needs to be put in practice. Should the measures proposed by the FM actually progress, `atmanirbharta’ will be enhanced. However, critical requirements and operational capabilities required to meet external threats will need to remain at the top of the priorities, especially keeping in view the fragile global strategic environment created by Coronavirus induced challenges.

(The author is Indian Army Veteran. Views expressed are personal.)

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