shiv wrote:
Allow a foreign investor to set up a plant that will supply to any country including India. Once the plants/tooling/machinery/manpower (also land) are set up in private hands they will be capable of taking on anything the DRDO can hand to them. That is why foreign involvement is needed now to set up the plants to make their stuff now and which will later serve as the seed for private defence manufacture in future.
People do not seen to understand this IMO
Shiv, GOI has not put any restrictions on setting up facilities in India. In fact a 100% foreign owned defense related subsidiary can be set up directly. Even for relatively low tech facilities, GOI can allow 100% owned subsidiary on case-to-case basis, going around that 49% FDI limit. The problem is that the pre-conditions GOI set for interested parties and the preconditions foreign OEMs set for GOI are not compatible. While GOI wants to extract technology in return of favorable terms and orders it would give to such facilities, the OEMs want everything from GOI with no strings attached. One example is setting up of any half-decent RnD facility (GE center is BLR doesn't count, its just a glorified cheap engineering off-shore center) which will actually generate technological break-through and IPs. A foreign OEM would want GOI to fund the facility (at least 50% setting up and operational cost along with other soft terms such as tax breaks, cheaper lands and all), but would not want to keep the IP in India. The IP would belong to their native country (whereas any such venture in US or Europe will never let the IP go outside the country, government of which is funding the research). Obviously, why would GOI fund any such venture when we do not retain the IP..? We can rather give the money to Indian companies and perhaps generate the same IP and have full control of it. Another issue is with Export control laws of dual use technology. These is some of the main reasons why we do not see anyone up for setting up 100% owned facilities in India even though that path is open.
For manufacturing of even not so high tech stuff, the problem is economical viability of such facility in India, when GOI is the only and a very unreliable customer. The procurement process is terrible, orders when come are in bits and pieces and there is no guarantee of future. GOI first have to ensure that there is business case to establish such facilities in India. High tech manufacturing has smaller component of manpower cost so India doesn't really hold any significant benefit as low-cost country to set up plants, that someone would take manufacturing from Europe and bring in India and import out from here for cost benefit. In fact its might prove more costly because India doesn't have the infrastructure and kind of matured basic industry that is needed to sustain top level high tech industry (for example if a special machine breaks down its often have to be sent abroad for repairs). So it might actually prove to be costly to set up similar plant in India compared to Europe or US. That's why we have not seen any real investment in defense manufacturing despite recent hike in FDI limits. Thing is no one (or very few at best) is gonna come here to set up manufacturing for import. It has to be with GOI assurances. There are other factors as well, such as political considerations on jobs, government funding for RnD etc.
So what is essential is overhaul of procurement processes, stable outlook on Future in terms of orders and massive government funding in the sector. But if we can do this for foreigners, why can't we do this for Desi industrialists..? After all their main issue is also this. There are many SMEs who would be willing to invest own money and come up with excellent quality high-tech IP across the spectrum, if only they have a stable business environment. We do not even try our best, give up and say only gora can save us now. Then we go on to spread red carpet for goras (which we never did for our own people to help them succeed) and beg for things. In such situation our own private sector will never get a fair chance and will always laggard the other countries. Today HAL is trying to build an MIC in true sense through outsourcing of LCA work. But where is the government support for that..? Did the GOI offer soft loans, cheaper lands or tax breaks to those suppliers who are willing to take up work..? Did GOI ensured them business viability through sustained order book in long term..? Did GOI give free hand and autonomy to HAL to go beyond bureaucracy to expedite the work with the suppliers..? While the desi greenfield ventures gets orphan-like treatment, the precondition for relocating of a fully depreciated F-16 assembly line is minimum 100+ order. We set-up our own people for failure and then cry aloud that we can't do this only. Only goras can help us in this.
Golden words. I am sure he is not alone. Most people cant make sense of the SE policy.