Saturday, 31 May 2014

Higher FDI In Defense a master stroke or a lame duck initiative?

Unfortunately, unless new investments are made in R&D, modern factories, personnel Indian defense industry is going to stagnate.
Till now India has not been able to attract any FDI in our defense sector as told by Anthony to the Parliament.
We do not have the modern technology to make everything in India.
Lets take the case of Arihant, we could not have built the nuclear reactor in the next 50 years, it was the Russians who stepped in and gave us the technology to do so.
Next are the destroyers we are building, actually the word should be assembling, none of the high end components being put in those destroyer are Indian.
Then comes the case of Arjun, again we have bought 50 equipments from 50 different sources and assembled it thus the quality is so "ify".
Now why is no money flowing into FDI or the private sector not bothering to  come in a big way.
PROFIT........ As civilians we look at the finished product but the case is drastically different for the three services, after we buy a Mirage2000, every time it fly's a small part inside that huge body either finishes its life term or is about to, where do we get these parts from????
1) Cannibalize our own Mirage200 to have at least one in the air.
2) Ask France to give it, If france has stopped the assembly line it will just say sorry.
3) Look for other countries who have spare parts, if we find some, they will try to cheat us by selling old spare parts or asking 100rs for 1rs product.
4) Build our own!!!!!!!
4th point is where privates sector comes in.
So IAF needs 10000 of these small parts for the next 5 years.
Fine, a private player with the help from the french sets up a factory to build these parts, it supplies 10,000 parts to the IAF within one or two years, now what??????
What happens to the factory????The equipments??? The workers???? The Investment????

This is the huge bottleneck in our Private/FDI policy.

Just imagine if the French move their production of some high end lethal weapon to India and after 500-1000 unit we say ok now stop production because we will not allow you to sell these items to anybody else. You can imagine the four letter word French will throw at us.

Thus no FDI or privatization policy will work unless we can assure profits to the private sector.

These views have been formulated after talking to a Gen(retd), Air Marshal(retd) so this is the situation on the ground.
Given below is an excellent article written by Maj Gen Mrinal Suman
fdi in defence dispelling the myths

Government wants to raise FDI in defense
NEW DELHI: The department of industrial policy & promotion (DIPP) has prepared a draft Cabinet note that proposes to allow up to 100 per cent foreign direct investment in defence as part of its plan to boost domestic manufacturing. The move comes two days after Nirmala Sitharaman took charge as the new commerce & industry minister. Defence Minister Arun Jaitley had indicated on Tuesday after taking charge of the ministry that he would consider the issue of FDI in the sector.

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