Def Ministry’s reliance on public sector smacks of socialist mindset

The Defence Ministry’s decision to exclude the private sector for the upgrade of 693 BMP-2 infantry combat vehicles (ICVs) reeks of socialist mindset. It doesn’t augur well for national security, financial prudence, and the Make in India programme that is aimed at boosting private enterprise-led manufacturing.

According to a report in Business Standard (July 9), “the Ministry ignored its own acquisition rules and policies by awarding the public sector Ordnance Factory Board (OFB) and Bharat Electronics (BEL) a contract for upgrading 693 BMP-2 infantry combat vehicles (ICVs) on a ‘single-vendor basis,’ casting aside competitive tendering.”

The OFB-BEL fire control system has been able to give only a “performance demonstration” of the BMP-2’s gun. Neither user trials have been conducted by the Army, nor its missile-firing ability has been tested. Several other procurement norms have also been flouted.

The BS report mentions that a private company took around Rs 2 crore to upgrade each armored vehicle, whereas OFB-BEL will charge about Rs 3 crore for a BMP-2. In other words, not only the Army’s combat capability may be compromised but the reliance on the public sector will also cost the exchequer dear.

Equally bad is the Defence Ministry’s cavalier attitude towards private enterprise. After all, top industrialists and new entrepreneurs are expected to be drivers of the ambitious Make in India programme; and the participation of private companies in defence production is likely to boost manufacturing, a sector which is not doing very well. It may be mentioned here that manufacturing also has considerable potential to generate jobs.

But the Ministry violated the Defence Procurement Procedure (DPP) and opted for the “single vendor,” the beneficiary being the public sector. This is a throwback to the discredited old practice of preferring public sector undertakings (PSUs) despite the higher cost.

The BS report mentions that the Federation of Indian Chambers of Commerce & Industry (Ficci) on June 12 wrote to Defence Minister Arun Jaitley, pointing out the private sector had made a presentation to the ministry on May 29, highlighting their capabilities and asking for three to six months to present their solutions for trials. They also requested for operational BMPs on which they could develop their integrated fire control systems.

The letter points out that the Army cited “urgency of upgrade.” Yet, since 2006, the Defence Ministry had issued 10 enquiries and two tenders for BMP-2 upgrades, all of them citing “Urgent Operational Requirements,” but none were converted into an opportunity for industry.

The long and the short of it is that step-motherly treatment is meted out to private companies by the those who lord over the defence establishment. This flies in the face of the Narendra Modi government’s commitment to boost private enterprise in the defence sector. It is time the powers that be realized that undue preference to the public sector will hurt defence preparedness as well as the economy.


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