The Indian Defence Ministry is planning to expand competitive bidding for weapons procurement to create a more level playing field for private firms. Currently, the majority of defence production contracts are secured by Defence Public Sector Undertakings (DPSUs), often without a tendering process.

This shift aims to enhance the role of the private sector in defence production, aligning with the government's broader strategy to promote 'Atmanirbhar' or self-reliance in the defence sector.

Defence Secretary Rajesh Kumar Singh highlighted the ministry's focus on expediting industrial licensing and improving the ease of doing business in defence.

This involves collaboration between various departments, including the Department of Defence Production and the Department for Promotion of Industry and Internal Trade. Key concerns of the private industry, such as nomination in military acquisitions and the 'no-cost, no-commitment' approach to product trials, are being addressed through discussions with stakeholders.

Recently, the Empowered Committee for Capability Enhancement of the Indian Air Force, led by Defence Secretary Rajesh Kumar Singh, emphasized the need for private sector involvement to complement the efforts of DPSUs and the Defence Research and Development Organisation (DRDO) in the aerospace domain. The committee's recommendations are part of medium- and long-term measures to enhance India's defence capabilities.

India's defence production has crossed the ₹1,00,000 crore mark, with defence exports estimated at around ₹16,000 crore for 2023-24.

The defence budget for 2024-25 is allocated at ₹6.21 lakh crore. Looking ahead, Defence Minister Rajnath Singh has projected that India's annual defence production could reach ₹3,00,000 crore and defence exports could reach ₹50,000 crore within the next four years. Additionally, plans are underway to domestically produce high-end systems like aero-engines and gas turbines.

Private firms in India face several challenges when participating in defence procurement:

Private companies often feel that there is no level playing field between them and Defence Public Sector Undertakings (DPSUs). DPSUs enjoy government patronage and easier access to public funds, which can skew competition in pricing and resource allocation.

The defence procurement process is highly complex and bureaucratic, making it difficult for new entrants to navigate. This complexity, combined with the influence of public sector companies within the Ministry of Defence, discourages private sector participation.

Indigenous procurement often involves technological risks due to a lack of infrastructure and resources, while contractual risks arise from dealing with foreign suppliers, leading to delays and additional costs.

There is a historical mistrust of private enterprises in handling sensitive defence technologies, which limits their role in major projects like weapon platforms and advanced systems.

Private firms are often relegated to supplying components and subsystems rather than being lead integrators or manufacturers of complex weapon systems.

The 'Buy/Make' hierarchy imposes indigenous requirements that are costly for private enterprises to meet, making it challenging for them to compete effectively.

In a nutshell, the defence ministry is planning to expand competitive bidding for weapons procurement for the armed forces which could level the playing field for the private sector.

MoneyControl