Military Industrial Complex and DPSU privatization

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aharam
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Military Industrial Complex and DPSU privatization

Post by aharam »

After spending the last hour reading the debate on DPSUs between several folks, with rather valid points, I felt compelled to get out of lurk mode and participate. The fundamental issue here is whether DPSUs are (a) capable and (b) can or will the private sector eventually take over and to what effect. I am sure HAL is capable and has a core cadre of researchers and technicians who work there because they want to. I once heard this from someone in ISRO, that folks join such organizations because they want to. The same source said that ISRO had almost 80% of its cadre that were actually effective. Before you counter this, note that even in the private sector, there is a set of people that don't actually pull their weight and 80% of an organization pulling its weight at PSU salaries is very good, since it is clear that salary is not their motivation. Whether this is true, I do not know first hand, but the source to put it mildly is very credible.

The reason, I laid out this elaborate theme is to raise the question, what is the equivalent effectiveness rating for a DPSU? HAL's deliveries have been late and they tend to take on more than they can chew. When it comes to offsets, they are the 800 lb gorilla in the room, so getting an offset contract is more a testament to the truth of the above statement rather than any intrinsic capability. Tha said, they are doing a hard job, when the private sector can easily poach their employees on salary. I for one would not want to be a manager in their shoes.

So, is the private sector intrinsically better. The answer is not so cut and dried. Yes, they do have better incentive mechanisms, since they are not tied to a nationwide compensation program. Then again, if they are successful, they are a force unto themselves. If a Boeing or Lockheed Martin can derail a Pentagon budget, imagine the power concentrated in the hands of a Reliance, which on a per capita basis is far more powerful than American defense contractors, that are richer on paper. I strongly urge folks to read Eisenhower's famous MIC speech, there are many links to it, one is at http://coursesa.matrix.msu.edu/~hst306/ ... ndust.html
While Eisenhower was a cautious general, maybe exceedingly so in the European campaign, his premonition on the power of the MIC was bang on target. Will a push to gain efficiencies through privatization in India come with the same risks as in the US, which right now is clearly following a path of defense expenditures that can only lead to economic ruin, since there appears to be no monetary reality to Pentagon's budget.

Privatization may in the long term not be the panacea it appears to be - DPSUs are slow and inefficient, but at least they don't have to respond to shareholders like private sector firms, where the the only path to success is to change the national defense budget allocation over the long term. In some sense, privatization is like a dictatorship - you get efficiency at a rather large cost. Right now the defense private sector in India is small, much like the US in the nineteen thirtees - it will produce excellent material at reasonable cost, since it still has to prove its worth. The question is what will the private sector do in the long term. If the US with its comprehensive checks and balances system is any example, the private sector path is dangerous.

This has been a long rambling email. Your thoughts would be much appreciated.

Cheerio
Aharam
shiv
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Re: Military Industrial Complex and DPSU privatization

Post by shiv »

You have to be bold to start a thread like this. In general, on BRF and outside BRF among educated Indians claiming anything positive about PSUs lays you open to ridicule. One need not praise PSUs but it is a good idea to be informed about what it is that made and makes PSUs useful.

A Google search will show why PSUs have been important to India, even if inefficient and responsible in part for the "Hindu rate of growth". But I want to specifically comment on one sentence of yours
I once heard this from someone in ISRO, that folks join such organizations because they want to.
The emergence of a large number of women workers, scientists and researchers in PSUs in recent years is an interesting indicator. While young Indian men have concentrated engineering, finance and management related jobs in private industry, girls too are getting educated and many of the technically educated girls who live in their husband's (parents) homes after marriage find it useful to have a 9-5 PSU job that offers them facilities like maternity leave and creche for children as well as education subsidies for children, and medical cover for families (parents, spouses and children) in addition to being a second earner in the family. PSUs typically have their own buses conveniently timed to pick up and drop employees, and some have residential colonies and schools. In India today I am not surprised to see more and more girls opting for such jobs. And the men are following. They want to work in these places and want to shine in their work. This goes contrary to the usual dismissal of PSUs as homes for the inefficient and dumb and how offers of humongous American salaries will change everything.
Pranav
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Re: Military Industrial Complex and DPSU privatization

Post by Pranav »

What is the optimal organizational structure that brings together the best aspects of public and private sector.

Public sector is certainly not all bad ... For example, although the Soviet economy was inefficient, we cannot ignore the fact that the USSR produced some very world class scientists and mathematicians.

What organizational structure can bring the best out of the various labs - DRDO, CSIR, ISRO, BARC, IITs, IISc, TIFR etc? What is the best way to organize technical higher education, especially with the great potential of e-learning? (*)

Can the best cultural practices of Silicon Valley be combined with those of the Sukhoi Design Bureau and say of companies like Samsung, Sony and Toyota?

(*) Re emerging best education practices see this talk of Sebastian Thrun -

Austin
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Re: Military Industrial Complex and DPSU privatization

Post by Austin »

shiv wrote:have a 9-5 PSU job that offers them facilities like maternity leave and creche for children as well as education subsidies for children, and medical cover for families (parents, spouses and children) in addition to being a second earner in the family.
Very True , PSU job does help women to maintain a balance between work and family life ( same goes for men too ) , some of the benefits they get would truly not be possible to rival by even the most richest Private Sector in India and in some case these private companies would show the employee the door.

The Medical benefits are truly worth in age and time where you would have to sell every thing you have to get decent medical treatment specially in case of serious illness in an age where Hospitalisation and Medication cost would rival with ever rising housing cost and any private medical insurance would just show you their middle finger by showing you this and that clause.

The kind of infrastructure and experience like HAL or other PSU have right now would even make Reliance $5 billion a drop in the ocean , these infra cost have been sunk over many decades and experience gained would be similar time period.

The way to make PSU more efficient without necessarily parroting that Pvt Sector is the medicine for all illness ailing PSU.

1> To gradually divest their shares and sell 10-15 -30% to Private Sec which would get in revenue and management skills from Private Sector and let Govt retain major shares in it , sort of Public Private Tie up without rocking the boat either ways.

2> To merge PSU under one supra entity depending on domain and make them more efficient by closing the inefficient sector and merging with other more vibrant one, make efficient use of resources under its control and stop duplication , so PSU in Aerospace could be merged under Aerospace domain with HAL , ADA ,NAL under one body . similarly for other entity , this would also stop the rivilarly we see say between HAL and ADA or HAL and NAL , that is what they did in Russia with creation of UAC under will all aerospace development civil or defence come under and this one entity can efficiently manage or cross use resources without creating duplication
UAC --> http://www.uacrussia.ru/en/corporation/
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Re: Military Industrial Complex and DPSU privatization

Post by Anand K »

Aharam = Raja Ram? :)

IMHO the MIC/National Security State grew into this American Parabrahman because of *unique* experiences...... this need not be true for other countries trying to ramp up defense capabilities.
The Indian wars, the Revolution, the war funding crisis of 1777-1781, the land and naval engagements in the early 19th century and the wars with Mexico made war/conflict mobilization a *big* thingie much before WW1. America expanded following economic (and social) demands of pioneers/pilgrims/missionaries/business/ityadi..... the nation we know today was brought together by application of varying levels of force to secure economic objectives. Such a state's (and it's peoples') psyche set the ground for the MIC growth after WW2. The specific instances like Marshall Plan, the Hind, Sputnik etc or economic benefits that war yielded to the entities involved in such mobilization is secondary.
Perhaps most importantly, the Presidential System of Government reduced the need for larger consensus on such matters. Get the Prez and a few powerful party bosses onboard and everything goes swimmingly. Wasn't LBJ and Reagan greatly responsible for the explosive expansion of the MIC...... and Wall Street as well?

Fat chance trying that in Coalition India with Didi asking for all of W.B. to be converted to a railway terminus and Akhilesh Ji asking for 10,000 Crore for memorial maintenance and protection and the RPI demanding OBC reservation in the National Security Council....

JMTC
partha
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Re: Military Industrial Complex and DPSU privatization

Post by partha »

I once heard this from someone in ISRO, that folks join such organizations because they want to.
Folks who join such organizations join because they love that technology. There is no reason to believe that they would not join Indian private companies working on same stuff. Right now ISRO is the only organization in India working on high end space technology. Same case with DRDO and its affiliated orgs. So folks who want to work on cutting edge military and space tech have no option but to join these PSUs.

My question is if privatization has worked for US defence sector and if privatization has worked for Indian telecom and various other sectors, why should we assume privatization will be bad for the defence sector?
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Re: Military Industrial Complex and DPSU privatization

Post by Cosmo_R »

http://articles.timesofindia.indiatimes ... trike-work

Absolute gems and now I understand the PSU mentality:

"As against the vehicle mounted variety, our produce is what is technically classified as a toed gun.

“Posturing by the workers union did not help matters, he said. In fact, the union leaders went to the extent of imputing a conspiracy to shut down GCF- one of the oldest defense installations in the country- and prepared to strike work.

Guess ‘Toed gun’ --is for shooting oneself in the foot :)

And we thought that no 155MM arty gun for 20+ years was a CBM at unkil's insistence
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Re: Military Industrial Complex and DPSU privatization

Post by manish.rastogi »

I was thinking about this issue and thought of an idea, which could probably be used and keep the companies in check as well:

1. Allow big companies only for production, designing and major work and make a condition that they can't have more than a 15-20% of their net worth in defense sector.
2. Small companies can be allowed to only make sub components on order or contract by these big companies or PSUs. (They can be completely allowed to be in defense sector.)
3.All these companies can be benefited by defense offsets, if a certain PSU has a more important need of a particular offset, priority will be given considering who does better research and products!
4.The production lines could be transferred to them, HAL could be the supervisor and all the drawings and stuff through which they will make the assembly lines has to be kept with HAL, for future concern!
5. Also, HAL when made the supervisor will have to lay off people, private companies having significant no of HAL people with experience could be given an advantage or some mechanism could be carried out to initially get the ball rolling of production in Private companies.


In my opinion, this will prevent the companies to be solely based on Defense sector and will prevent them from lobbying as done by american companies!
Feel free to point out irregularities or loopholes in the idea!
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Re: Military Industrial Complex and DPSU privatization

Post by Cosmo_R »

@Shiv ^^

Granted it's a jobs scheme that benefits the neediest and particularly women. The problem is that the jobs become the endgame not the product or service.

For example, in Bangalore, the Handicrafts Emporium which ostensibly sells stuff made by women and men in villages seems to be in the business of offering employees a place to hang out during the day. Go there at lunchtime and you'll be told to leave and forget about any service at break time(s). It does nothing for the consumer or ultimately the producer in the village.

It would be simply be better to pay the employees not to turn up. Which, BTW, might happen on the heels of the food security cash payment scheme. Ahluwalia's strategy has been to let both PSUs and private sector companies operate in parallel --something like what they did with telecoms. One area they can't touch is the defence sector because it also involves patronage.

Carried too far or too long, you end up like Greece—a lot of phantom jobs that eat borrowed cash but add zilch to the GDP.
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Re: Military Industrial Complex and DPSU privatization

Post by Harshad »

Austin wrote: 1> To gradually divest their shares and sell 10-15 -30% to Private Sec which would get in revenue and management skills from Private Sector and let Govt retain major shares in it , sort of Public Private Tie up without rocking the boat either ways.
Why would I want to put my money in a company where I have no controlling interest? Why do I want to manage a company whose decisions are to be made by New Delhi?

Why would I want to take a ride in a cab where the cab driver decides my destination and destiny?
shiv
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Re: Military Industrial Complex and DPSU privatization

Post by shiv »

I think that a military-industrial complex (MIC) cannot survive unless you are constantly fighting war, or making weapons (and exporting them) for someone else's war.

If you apply an Indian mindset to US geopolitics (ie let the Indian people vote for Indians to run the government in the US) , the US MIC will die quickly. The US makes war regularly and exports a lot more. Indians don't have the mindset to do that. Russia exports and nowadays makes less war. China is not making much war and is attempting to export.

India is not exporting, but not making war either. We merely arm ourselves against wars of a type that we think will be imposed on us, or react to wars that are actually imposed on us. India will be a great arms importing country as long as people are willing to export arms to us.

If you read "expert" commentaries on nations who arms themselves, it is always described as "alarming" or a "threat" to someone or other. heavily armed nations are always expected either to make war for territorial or resource related reasons, or simply make war because leader and military become trigger happy and may "want to keep their people looking away from internal problems while fighting cooked up external threats"

It is normal for us to say that Pakistan and NoKo do this. But the USSR was accused of it, as is India. In fact even the US and Europe do exactly he same thing. They keep their armed forces busy in war. That helps the Military Industrial Complex. But India has always found one side or the other to supply us with arms. We have rarely been in a situation where no one gives us stuff and everyone is against us. But such a situation is most likely to arise when India actually goes to war - at which time we will be denied exactly the stuff that we cannot make in house.

Unfortunately we can't make a lot of high tech stuff in house, so we have the choice of:
1. Making all out efforts to ensure that everything can be done indigenuously
or
2. Negotiate and try and solve by diplomacy any problems that may lead to war, even it it means being cowed down and pressurized.

I see more of latter than former. Of course this is an interesting policy. It ensures that we don't develop an MIC and ensures that other nations MICs are kept busy with our orders. But those who supply us with weapons in general are the least likely to make war with us at least while they are making money from us. This would be great if arms exporters were not supplying arms to those who want to make war with India. Our ability to influence those who supply arms to our enemies is limited by a whole lot of constraints.

If we make war with those who sell us arms because they are selling to enemies also, we stand to suffer because we cannot fight the people we are importing from. We can merely stop importing - so they lose export earnings, but that leaves us weaker too. India is caught in a trap of "import or nothing".

China got past this phase in the 60s and 70s by
1. Making large numbers of nukes so everyone would be afraid to attack them
2. Making large numbers of obsolete rust buckets at home to compensate for lack of imports

As a nation India lacks the guts (or philosophical means of justification) to threaten attackers with nukes while we stop imports and manage with our feeble LCAs till such time that we have built up a reliable industry and supply chain. We can catch up if we stop importing. We are afraid to lose wars if we don't import so we are addicted to imports. The "losing war" business can be cured by using nukes. That will screw us royally on the international stage and make us the sort of paraiah that China used to be. But China got where it is by becoming a pariah and staying a pariah. Post WWI Germany had done something similar, although it was not the same.

I predict that India will never do this. India is trying to play the "clever Chankian game" on the international stage where Indian leaders believe that we have a unique way of handling the world and that the world will learn from us. We may have a unique way but others may not learn and may kick our asses instead. It is time we actually arm ourselves with INSAS, Arjun LCA, Kavery whatever and got ready to impose war on someone nearby. Indians are the first and foremost people to be critical of Indian equipment as being inferior to everyone else's stuff. Little wonder that others also laugh with us at Indian made arms. But no one will give us superior equipment if we are going to oppose them or their munnas. We have to learn to accept and use the bullshit we produce employing the bums who are our compatriots and be ready to hit with whatever we have got.
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Re: Military Industrial Complex and DPSU privatization

Post by KrishnaK »

Shiv,
Our fractured polity means we don't have the single minded approach that others have. We choose to make virtue of that weakness and talk about a unique way of handling things instead. Surely the same people that brought Bangalore to a halt after some movie star was kidnapped by Verappan aren't exactly peace loving chanakians. That said it's a better approach to blaming the west for conspiring against us :).
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Re: Military Industrial Complex and DPSU privatization

Post by shiv »

Krishna whether we blame things on fractured polity or something else, the fact of the matter is India the nation does not have the appetite for external campaigns and has shown no great urgency in developing the will to export arms to those who desperately wants to kill someone. Many nations belong in the latter category. The fractured polity only reflects national will and I think it is wrong to believe that people want war and external campaigns and the leaders wimp out. No. The leaders wimp out because the people want it so. Of all things yesterday's paper had a photo of women celebrating after Kasab was given his 72 and an article asked that we should not celebrate death. This is the way too many Indians think. Unfortunately, for all the blah blah about dharma we hear here, Indians do not believe in imposing violence readily.

Military campaigns and the MIC to go with that are never going to arise out of this nation.I think India is going to be an arms importer and licence producer for a long long time to come while our international relations are built on making peace and accommodation with friends and foes alike so long as they verbally promise not to attack us. I don't see India starting any military campaigns to take over some land or other.

I think that a few of us who are gung ho need to gradually accept the fact that everyone's opinion counts and a huge number do not desire war - not just the politicians. I really should not say this - but constant punishment and military challenges from someone are the only things that allow India to maintain any armed forces. or even that would be wound up, given the desire for peace among Indians. In a trice I suspect half this country would vote for peace as if voting will bring peace. We are not a nation that goes out and makes war on our own. We will export Sandal soap, coconuts and medicines, but will not develop the industrial capability to arm some nation halfway across the world. That is what needs to be done with an MIC unless we need the arms to make war ourselves.
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Re: Military Industrial Complex and DPSU privatization

Post by member_22539 »

^^This is why I say that china was the best thing that happened to India militarily. I believe that nothing is static and everything changes with time. This puerile pacifism will change too. The only question is how fast.
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Re: Military Industrial Complex and DPSU privatization

Post by KrishnaK »

Shiv,
I'm not blaming our politicians when I talk of our fractured polity. I agree with you that our political leaders just reflect the state of our society. The point I'm trying to figure out is: where do Indians perceive their interests as being threatened. What are those interests even ? Our immediate interests seems to be what our neighbours (caste, religion, state) based threaten or seem to do so. On those issues we're very willing to inflict violence. Even terrorist attacks emanating from Pakistan is a distant second. It's only we've not begun to think of our interests being threatened in any large part by not having an inherent capability to project power, say in the Persian Gulf. The envelope of our thoughts are still very restricted to close proximity to ourselves. I think that will gradually expand. Then everybody gets to see the real India. However it might well turn out to not be the case and Indians will stay inward looking.

P.S. This is just me thinking out loud, not an authoritative statement.
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Re: Military Industrial Complex and DPSU privatization

Post by shiv »

KrishnaK wrote:The envelope of our thoughts are still very restricted to close proximity to ourselves.
I think this is a valid observation. A few months of reading ancient Indian history in the other forum made me realise that the people of this land have been, by and large, a happy and self satisfied bunch. Once in, no one wants out - like a USA from 5000 BC. It is others who are trying to get in. Funnily enough, there are Greek historians from 400-500 BC who have classified Indians as not desiring to go out and conquer, being just and the women being chaste. I recall having read this same thing many years ago but the significance did not strike me till recently - after the OIT discussions.

There is such a thing as a national, civilizational culture. Indians do not export war. They export mainly culture and things that are traditionally associated with peace. This used to be praiseworthy until a series of conquerors, raiders and associated religions made it praiseworthy to be aggressive and kill to subjugate The world has now changed to believe that aggression and conquest is to be admired. As a civilization Indian have still not bought this idea. We have only moved one step forward where people are beginning to understand what actually was understood more than 5-6000 years ago at the time of the battle of ten kings in the Rig Veda. One needs to wage war to protect what is right.

I foresee India as being a mainly defensive nation that will inflict war far from India only in response to attacks. I do not see India doing what the UK, USA and Japan have done in the past - that is to sail out of home territory for the purpose of conquest/control of lands far away.

But the problem is that unless someone is imposing war on us we are happy to let our military industry operate in first gear alone. We need a re definition of national goals. Someone (you?) mentioned ISRO and how Indians "can do" if we wish. But some of our spectacular successes are again in peaceful uses and in anti-ballistic missile defence. Amazing what a 6000 year old culture does to the way people think and act. i would not have believed this 20 years ago.
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Re: Military Industrial Complex and DPSU privatization

Post by KrishnaK »

shiv wrote:A few months of reading ancient Indian history in the other forum made me realise that the people of this land have been, by and large, a happy and self satisfied bunch. Once in, no one wants out - like a USA from 5000 BC. It is others who are trying to get in. Funnily enough, there are Greek historians from 400-500 BC who have classified Indians as not desiring to go out and conquer, being just and the women being chaste.
This is the part that makes me suspect we will be like this onleeee. One can't constantly fight a defensive battle, on his own borders/lands and not fail at the basic dharma of self protection at some point. Our own history attests to the fact. To that end I hope our predictions/analysis are wrong.
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Re: Military Industrial Complex and DPSU privatization

Post by KrishnaK »

National cultures/philosophies seem shaped by external circumstances, much like the sparsely populated steppes of central asia made the mongols the worlds most feared cavalry force at one point in time. What is it that makes Indian culture the way it is ? Can/has something change(d) leading us to become a more outward looking power projecting nation ?
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Re: Military Industrial Complex and DPSU privatization

Post by shiv »

It appears to me that there has been a fundamental "change of thinking" with regard to Indian defence industries and that "change of thinking" occurred along with the end of the USSR and the rise of the Indian economy/liberalization.

The cold war mantra seemed to be that we try and get what we can by import and try and build what we can in house. Once the cold war ended and liberalization/growth occurred we saw (I go OT here) the appearance of a large number of imported luxury products in India of the type that were called "waste of foreign exchange" when I was a young man. (Perfumes/liquor/luxury card). The same thinking is now applied to defence.

It appears that in some sectors of defence production there is an emphasis on indigenization. These include missiles, nuclear related tech and some naval tech etc. In another group we find close cooperation with our old friend Russia, who needs money and jobs and we need tech that the west is not willing to supply easily. But when it comes to stuff that most countries will readily sell to any other country, enemy, friend or neutral, India is ready to buy outright as long as the price is competitive. We have desired some of that stuff for decades (such as C-130s) but have never had access because of the cold war. We have access now and are buying.
This is not a judgmental post. I am not saying "This is good" or "this is bad". I don't know. Yet. I am just making an observation.
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Re: Military Industrial Complex and DPSU privatization

Post by Will »

All this talk of giving PSU's a chance is all very well. But come on, the world is moving on . It has been 60 odd years since independence. The PSU's played their part, but instead of going on to be efficent orginisations, most of them have turned into bottomless pits. No one is questioning the dedication and verve of some of the employees who make things happen inspite of the system. But dont u think that it is these very employees that need a better environment to display their skills instead of letting the PSU culture drag them down and break their morale?. Privatization may not be the answer to all ills but the PSU's have had their day in the sun. Why should the tax payer foot the cost for organisations that dont pull their weight when and where it is most needed?

It is now time to give the Private sector an opportunity to prove itself. Only time will tell whether they succeed or not. But waiting another 25-30 years for the PSU's to get their act together is not going to help India one bit.Specially in the defence sector where innovation is the name of the game , where equipment that enters service is almost already on the verge of obselence. We need agile organisations to meet these challenges rather than lumbering elephants. My only point being that PSUs have had around 60 years to prove themselves and most of them have failed . It is now time to give others the opportunity. Remember that all the delays caused by the ineffeciencies of the PSU's are exactly what makes the taxpayer foot the bill for imports.

I am sure it pisses of a lot of people in here to see their hard earned tax paying money being poured to support inefficent organisations, most of whose employees think its their God given right to be supported while they continue being inefficent and and lazy with no accountability.
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Re: Military Industrial Complex and DPSU privatization

Post by shiv »

http://livefist.blogspot.in/2012/12/dea ... igned.html
Deal For 42 More Su-30MKIs Signed
One hundred fifty seven Indian vendors are involved in providing 13,350 components of the aircraft while another 19,450 components are manufactured at HAL's Nasik and Koraput Divisions, adds Dr. Tyagi.
Hmm - more parts than my Maruti 800.
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