Thanks mate, this article really lit a fire under my a$$ and Shiv has been asking me to contribute for a while:
View: https://x.com/acorn/status/1878644379822461279?s=46
First of all let me congratulate you for an excellent article. It's only today I've learnt the identity of handle on Twitter.
I wouldn’t go as far as to say that private involvement in production is sub-optimal, I think there’s plenty of examples to show they are ideal at building to scale and time, the question of R&D with private players is still open as as of now it is basically nonexistent.
Optimal in cases like Kalyani where the tech is medium tech or below but not in high tech like developing SSK / SSN or development of > 4th Gen FA , once again with plenty of synergies with existing civilian business thanks to common capacities.
The alternative is to have robust R&D whether state owned or subsidised by the state in the Pvt Sector wherein commercial exploitation of those patents subsidise defence products. The US tried this model in the 1950s & 60s in their hey day of industrialisation . I don't see how we can tap into this Modus Operandi in these times or even in cases other than Kalyani .
L&T shipyard in Kattupalli is a case in point. They could've tapped into the Civilian Shipping sector but we didn't have a sound policy to encourage ship building here . Now we do & we're reaching out to RoK & Japan . Let's see how things work out for L&T.
But it’s all a question of incentive structures- why are Indian private companies only really motivated in MOUs with foreign OEMs to licence assembly? The answer is because it gives certainty, fixed costs, fixed revenue and hence low risk. This is entirely consistent with companies answerable to a board and shareholders ultimately.
Agreed. But that's what you'd get in the present scenario . GoI is just not willing to commit huge sums for CAPEX. It's going to be drip feed for as far as you'd care to see in the future.
This isn't a bug , it's a feature & a great part of it is due to the Great Indian Political Tamasha which includes corruption , wastage , freebies etc. Throw in capacity building in infrastructure or some other pet project GoI wants to pursue & defence will always be 10tb on the priority list with one mega purchase every alternate year.
In such a scenario only the DPSUs can survive or the Pvt Sector in low & medium tech products like , Small Arms ( they aren't but that's a different story altogether ) Artillery , various iterations of Tanks like Light Tanks , MBTs , FRCV , FICV , etc
Or you can have C-295 kind of deals or the MTA equivalent the IAF is pursuing now . I won't even touch the LCH , LUH , IMRH etc with a barge pole if I was in the Pvt Sector except to be a vendor.
I can’t think of a single instance where the MoD/Indian services have created a low risk and high reward case for R&D, i believe that’s what MAKE-1/2 has attempted to do whereby private companies will be reimbursed for prototypes and FICV was meant to be a halo project for this but we have all seen where that’s gone. I wonder how many private sector players that has burned, we know L&T have FICV prototypes and designs- unlike PSUs this has to be accounted for and written off on some balance sheet.
I've a solution for this which you've advocated in a different manner a long time ago on PDF or DFI if I'm not mistaken . Upgrade all the OFBs with latest machines & automation & either make these organisations autonomous or privatise them . The only way you can incentivise the Pvt Sector is by vacating state capacities in some sectors.
I don't see the need for a Pvt Sector in Defence Shipbuilding leave aside Submarine building with the kind of capacities we have & yet here we are with L&T. Ideally we form 2 or 3 cos of the all the DPSUs in this sector viz - East Coast Shipyards & West Coast Shipyards & let them compete for tenders.
Where is the bandwidth for 2 submarine cos that we're planning to divide Project 75 I between 2 shipyards ? It's not as if we're planning a 30-40 SSK fleet neither is that the case with the SSNs & SSBNs nor do we have plans to be an export hub ?
And they mooted that idea of SPVs for AMCA and IMRH with multi party agreements between HAL/private sector and even proposed the idea that the private sector players could lease HAL production facilities and run them which I thought was a good idea but this too went nowhere.
Thank God it didn't go anywhere . It's like expecting a school boy playing in local school cricket tournaments to play in the cricket World Cup. No clue which idiot came up with the idea ?
HAL itself will be facing a mammoth task mfg the AMCA Mk-1 & Mk-2 in spite of the bandwidth & experience of nearly 8+ decades now , how on earth do we a newbie on the block to directly get into 5th Gen FA mfg then complicate matters by asking for a JV with HAL ?
ATAGS will be worth watching as it’ll be the first big (dollar terms) defence deal whereby the L1 and L2 players are both private. Of course this suffers from exactly the same problem all IDDM faces- low scale. They’ll give a contract for 1000+ towed guns but ATAGS has to make do with 307 so not really showing what the private sector can do
The rest would be the in development TGS if I'm not mistaken but I agree with your PoV. I've elaborated on the issue earlier in my post .
this could be the way to split orders between HAL and private sector for LCA MK2 and AMCA/IMRH but I can already see the private sector sitting this out as they’ll perhaps rightly claim they can’t compete with HAL’s sunk costs and capacity.
Answered this one above.
But the solution to all this cannot be ring fencing import licence assembly deals purely for the private sector as the IAF keeps trying to do, that isn’t creating capacity, that is a one off deal and once the orders are fulfilled the capacity will die with it- as we saw with K9 Vajra.
Unfortunately this is how things will proceed. IAF & other armed forces are literally so fed up with DPSUs they're willing to try anybody & anything once. I blame the GoI / MoD for this mess. They haven't bothered to address the issue viz - bifurcation of HAL into separate constitutents for Hptrs , FA , Civilian Airliners / Military Transporters by merging with NAL & the last one for TF , TS , TP etc .
They're content to see two arms of the state slug it out in public washing dirty linen while playing peace maker. They have no long term perspective , hence no long term plans & no focus . They'd do the right thing after exhausting all other moves - mostly half baked like the MII initiative & its various versions or hare brained ones like reserving the AMCA for the Pvt Sector.
The good news is as LCH, LCA, LUH etc orders go up the private sector will grow organically as HAL does outsource a lot of LRUs to them.
Good news if it's true.
In an ideal world private sector players would emerge to compete with HAL at the top end lead integrator role but this would require massive upfront orders for IDDM projects and as we’ve seen this isn’t happening
I don't see this happening in the normal course of things for the rest of my lifetime unless we've another 1962 or something approaching it which btw is on the horizon .
giri for imports since R&D for finicky (((customers))) is too risky.
the original owner became Kangal and Chota Ambani brought it,
