NEW DELHI — Claims by the Indian government that it has cleared huge sums of money over the last year for defense production by domestic companies are misleading, analysts said.
The Indian government said that since coming to power on May 26, 2014, it has approved defense proposals worth over $20 billion, 90 percent of which has gone to the domestic sector under its "Make in India" policy.
However, defense analysts say the defense projects have only begun the procurement process and these could still take five to seven years to be finalized.
A Ministry of Defense (MoD) official claimed that the more than over $20 billion figure mainly consists of include procurement of six conventional submarines with air independent propulsion technology plus another six nuclear submarines, costing over $15 billion. In addition, light utility helicopters worth more than $2 billion will be made by the domestic sector.
But defense analysts said the bulk of these proposals were canceled global tenders.
"The rush to clear projects through the Defence Acquisition Council [DAC] can be highly misleading. It may be a decade before any major 'make' project materializes. A few solid Make in India projects in the private sector, undertaken with proper homework, would be a better option than clearing dozens of projects on paper," said Vivek Rae. (cq), former director-general (acquisition), for the MoD.
In fact, there is even confusion over the expression "Make in India," said claimed by the MoD official.
"I do not know whether it is a call to the foreign companies to 'come, make in India,' or to the Indian companies to make in India," said Amit Cowshish, (cq) former additional financial adviser to the MoD.
"Defense procurement procedures [DPP] lay down clear procedures for both categories. Feasibility studies have to be done and capacity of Indian companies to undertake these projects assessed. These are complex and detailed exercises. Categorization under these categories without proper homework will lead nowhere. I don't know whether this homework has been done. The rush of 'Make in India' projects suggests otherwise," Rae said.
India is projected to buy weaponry worth over $150 billion in the next 10 years, and more than $100 billion of those purchases will be made under a policy to give the first priority to domestic companies.
However, analysts have a mixed missed view on whether the domestic industry would be able to execute such big orders.
"The private sector is weak but the public and government sector are meeting approximately $10 billion worth each year of service orders as per figures provided by the government in the parliament for domestic procurement," said Rahul Bhonsle, (cq), retired Indian Army brigadier general and defense analyst.
Cowshish is positive about hopeful of the domestic industry. and says ,"What is important is whether the Indian companies have the will and the capability. And I think they have. Of course, they are not going to be the exclusive source of supply of equipment and weapon systems to the Indian MoD. Therefore, I do not see any reason why one should be unduly skeptical of the Indian industry."
A private sector industry executive said, "Other than orders and repeat orders on state-owned defense companies, the government has hardly shown any noteworthy interest in the private sector, which can deliver these numbers [$100 billion in defense contracts in the next 10 years]."
Currently, the state-owned defense companies and shipyards win the bag bulk of the orders, mostly on a nomination basis. The private sector has shown interest but has yet to get big time orders.
For "Make in India" to succeed, the private sector needs major has to receive big orders to set up the necessary infrastructure.
Rae, however, said, "We need to restructure MoD. There should be a full fledged secretary for acquisition, as in the US.
"Acquisition generates orders for Make in India and is best placed to lead the Make in India initiative. Defense production should not be leading this initiative. All policy matters relating to Make in India should be handled by the new secretary of acquisition, not by the secretary of defense production or by the defense secretary. These are radical ideas and need to be debated. I am clear that this is the best way forward, though radical," Rae said.
Email: vraghuvanshi@defensenews.com
Vivek Raghuvanshi is the India correspondent for Defense News.
