Q. How critical is ‘Make in India’ for India’s defence establishment?Q. If ‘Make in India’ is our goal, is it important to stipulate that the company be an Indian entity?
‘Make in India’ is critical for all sectors, but more so for defence as it is related to the security of the country. I believe that unless you have a substantial component of manufacturing and supplies within the country, you cannot really be self sufficient in defence. We spend a huge amount of money on defence purchases and for this spending to be really effective, our reliance on the Indian industry has to increase to 70 to 80 percent. That is our ultimate goal. Currently, we import as much as 60 to 70 percent of our needs.
Q. Does the country have the necessary ecosystem to succeed in defence manufacturing?
If we can send a rocket to the moon and Mars, we can make anything. Capability-wise there is no problem.
Q. Defence procurement has been very inconsistent in the past. Will that come in the way?
In civil procurement, competitiveness means fairness. If there are more than two people, there is transparency. This may not be the case really. There can be a dozen people but the requirements can be tweaked in a manner by which only one or two people will have the real opportunity to participate in the tender. Otherwise corruption will not be there. What is important is that the process has to be justified and equitably available to everyone. A single vendor situation can also result in a good deal if the right process is followed. Defence procurement is a strategic procurement that requires, while being transparent, decisions that are different from what are typically taken in civil applications. Decision-making has to be faster and conclusive. We are ensuring there are no inconsistencies here like in the past.
Q. Will restricting foreign direct investment (FDI) to 49 percent come in the way of ‘Make in India’ in this sector?
I don’t think so. We have said that when it comes to cutting-edge technology, there is always the possibility of allowing higher FDI on a case-to-case basis.
In the defence sector, it is always better if you are governed by Indian laws, and an Indian entity is more likely to be governed by Indian laws. Also, if the company is managed by an Indian entity, we can be sure of a smooth supply without any foreign laws coming in our way.
Q. Are the foreign defence manufacturers worried about India’s IPR regime?
I don’t think so. If you have to copy something, you can buy, say, a helicopter or a fighter [plane] and copy it. You do not have to manufacture them in India for that to happen. Also, many of these technologies are so complex that they cannot be easily copied. Indian IPR is reasonably okay and we can tighten it further if need be. Also, India does not have the reputation of selling technologies by procuring them illegally. We have abided by the agreements we entered into in all these years.Q. Indian startups are making some pathbreaking innovations in the defence space. But they lose out when it comes to procurement because of their size.
I am aware of this problem. There is a package through which startups and SMEs are taken care of. I am trying to ensure they also get a level-playing field. I may not be able to satisfy all of them but I am working on it.Q. Is 100 percent indigenisation of our defence needs a possibility?
A 100 percent indigenisation is possible in certain products. Overall, even if we achieve 70 percent localisation, it is an extremely good target that will require five to six years. If we achieve 60 percent by the end of the first term of this government, it would be a job well done as we would have created a couple of million jobs.Q. What will be the broad theme of the Defence Procurement Policy 2015?
Make in India, strategic partner and the role of MSMEs in defence procurement. The policy will ensure that the trust deficit that exists today is not there. And, most importantly, the policy will decide how the procurement process moves; it will not be the process that will hold the entire procurement hostage. It will be released by the end of November or early December.
(This story appears in the 27 November, 2015 issue of Forbes India. To visit our Archives, click here.)