SUNS  4316 Wednesday 4 November 1998


INDIA: MILITARY PLANS BUSINESS WITH PRIVATE SECTOR

New Delhi, Nov 3 (IPS/Rahul Bedi) -- Faced with shrinking research budgets and technological sanctions for conducting nuclear tests, India is inching towards privatising its state-owned military industry to meet its target of indigenising defence equipment by 2005.

Military officials say closer links with private industry are essential since the 39 inefficiently managed ordnance factories - running to half their capacity - and eight defence public sector units could not do it alone.

The Confederation of Indian Industries (CII) that is coordinating the military-private industry partnership says there has been "hectic activity" - six task forces had been established for greater private sector involvement in design, development and manufacture of defence equipment, CII deputy director-general S. Sen said.

"The military has for long been looking for a second, competitive source for equipment and spares other than state-run establishments," he said. But it wants a consortium approach to developing military technology involving the designer/developer, end user and manufacturer, a proposal which armament industry officials now feel might fructify.

The two-day Air Force-Industry Rendezvous-98 organised jointly by the Indian Air Force (IAF) and the CII at Chandigarh, northern India this week is the biggest ever vendor-development meeting involving over 200 industrialists. I.S. Paul of CII said this interaction would definitely lead to the IAF locally sourcing a large quantity of spares.

IAF officers admitted that spares for the predominantly Soviet Union-equipped IAF had become a serious problem after the break up of the Soviet Union in the early 1990s. Several aircraft factories spread across the Commonwealth of Independent States were either closing down or changing their product lines and the few that still had spares were charging exorbitant prices for them.

Indian industrialists, however, remained circumspect about involvement with the defence sector because of the Economic Order Quantity (EOQ) factor by which insufficient orders would make their participation commercially untenable as making defence equipment entailed heavy investments. They were also wary of dealing with the rule-bound Defence Ministry.

"Merely stating its intentions to indigenising through privatisation is not enough," admitted industry officials, also critical of the Defence Research and Development Organisation (DRDO) that insists on designing most weapon systems the defence services require but has produced little of any worth.

CII officials said nearly 300 companies wanted involvement in the defence sector but for more joint ventures the Defence Ministry and the DRDO needed to clearly indicate their qualitative requirements.

The DRDO has a manpower of around 30,000 and a network of 52 laboratories and establishments and 15 air-worthiness certification centres. Of the DRDOs 6,800 scientific and technological personnel, around 800 are involved in basic research, but it recently admitted that many computer science and electronics experts were leaving for better paid private sector jobs. A recent government report admitted that the DRDO had taken on far too many "wasteful" and "time consuming" projects.

"The key is to evolve a strategy that takes an integrated approach for closer interaction between private industry, ordnance factories and public sector units," said a CII official. As a first step eight
hitherto classified DRDO laboratories are to work with the private sector to research, produce and market military equipment. Private industry, however, would be barred from access to "strategic" areas.

"We have to find an adequate response to the challenges posed by sanctions," said Indian Defence Minister George Fernandes recently. Privatisation, he said, would not only lead to upgrading obsolete machinery in DRDO establishments but also help market Indian defence products and push up exports that totalled 25 million rupees (595,240 dollars) last year. The Defence Ministry is also financially empowering senior military officers and streamlining procedures for quicker decisions in implementing projects.

But CII officials admitted there were "procedural problems" in privatising the defence sector like amending the 43-year old Industrial Policy Resolution that regulated Indian industry and which can easily be invoked by the DPSU's to prevent private involvement.

Attempts at privatisation also received a setback recently when the Defence Ministry opposed moves by the Dis-investment Commission to privatise three large state-owned conglomerates including Hindustan Aeronautics Limited (HAL) and Bharat Electrical Limited (BEL) in south India.

"Though the military wants greater privatisation the ministry favours a more conservative approach," said a senior army officer. He said the ministry wanted to "protect" its economic and employment stakes in the over-staffed ordnance factories and DPSU's and was afraid of social chaos if it laid off people.

The Indian Navy, meanwhile, has taken the lead in establishing a Council on Information Technology in conjunction with private industry with the aim of making all its personnel computer-literate by 2005.

Along with the Indian Institute of Technology it has developed the Trinetra (Third Eye) system to secretly transmit secret data that officials claim matches the technology used by the United States. The Navy also proposes to harness private expertise and resources to locally build ships claiming that duplicating existing resources is wasteful.

The army too has launched an information technology (IT) programme under which communications, logistics, intelligence and management will be through computers based on protected local and wide area networks. General Ved Prakash Malik, the chief of army staff said the army would be wired up by 2008 with fully automated operational and management systems, capable of winning a hi-tech war.