This may well be a seminal moment in the history of the Indian aerospace industry. Not only has defence minister Arun Jaitley ended the monopoly of state-run Hindustan Aeronautics, he also announced that the private sector will be the sole player in making 56 transport aircraft to replace the ageing Avros in the IAF fleet. An Indian firm will have to find an international partner to supply the first 16 of these planes, while the other 40 will be built in India. It may take eight years more for the first of the new 100 per cent made-in-India defence aircraft to fly in our skies, but this is a breakthrough that will lead to enormous capacity-building in the private sector.
This could be just the first significant step towards true indigenisation of arms. It is not a matter of pride that India has been the world’s largest arms importer in the past three years — such a passive state was engineered by denying the private for-profit sector any sort of run in the military industrial sphere dominated by state-run firms. The gross inefficiencies of these PSUs have been buried for decades in the name of national security. It is not only in the formal figures by accountants that a big story lies of a powerful lobby having cornered the vital procurement process of arms and ammunition and controlled its indigenisation too.
The defence minister plumping for 49 per cent FDI in defence manufacturing is also logical. As he himself explained, 51 per cent FDI would, in theory, mean that factories situated abroad would merely relocate to India, whereas the 49 per cent restriction would impel the Indian partner to take charge of everything. The larger question, of course, is the replacement of ageing military hardware dating back to the Soviet era. India has been seized of this for a long time, but has been unable to progress for reasons that hardly need to be spelt out. One of the impediments has been the alleged payment of kickbacks because of which several defence deals have been scrapped or put on hold.
India may have changed course just in time to take on the increasingly complex challenges of an environment created by prickly neighbours, which is amply reflected in a defence budget of Rs 2.29 lakh crores. However, as the key to the future lies in modernisation of the armed forces, this is where a change is most needed. The opening up of aerospace to Indian industry serves the important principle that this country’s strategic interests are best served in the long run by Indians themselves.
