The MoD procurement process has been guided by vested interests and thus overloading the inefficient defence production base and keep the defence services handling the obsolete weaponry. The defence industrial base, dominated by Govt sector has retained insipid infrastructure, producing low tech products without any upgrades through own development or any addition to value chain. Most of the platforms claimed as indigenous production are mere integration of imported major subsystems without any value addition or upgrade. Dependence on foreign companies to meet India's requirement of defence equipment, militates against strategic self-reliance and national interest.
The patronage of Govt sector for funding is so rampant with assured orders and advances. CAG in its recent finding has observed that DPSU are given advance payments and the entity have been showing interest on it as profit. The MoD has been liberal with Foreign OEMs for Advances. Last financial year, the ministry realised a sum of Rs. 14000 crores was lying as advance payments made into Indian accounts in the US for purchase of equipment under the foreign military sales. The whole process is kept in wrap on name of national interest thus abundant malpractices/scandals are not isolated business practices but norms as no one ever has been fixed. Rather than restructuring the Defence for efficiency and accountability, a Parliament Panel recently asked Department of Telecommunication to push Defence PSU status for near defunct Indian Telephone Industries.
Private sector has been allowed to enter in the segment with baby steps. Despite lack of technology and funds the private sector journey has started in right earnest. As for partnership, fact of the matter is that foreign OEM may have not much interest to empower the Indian industry and thus creating competitors in the long run, impacting their business interest. Instead they would opt for expanding their business by having their own subsidiaries manufacture equipment in India for supply to the global market.
To open an avenue for funds for MSME, the MoD is considering a proposal to set up a Venture Capital Fund. The aim is to promote Indian aerospace and defence industry and develop a strong domestic manufacturing base, encourage entrepreneurship and promote R&D. A good initiative, however, it remains to be seen whether like previous schemes to create similar funds, this latest initiative will eventually see the light of the day any time soon or get stalled like the earlier schemes.