Defence Production Sector Is Open To Everyone, Or Is It? L&T Says There Is No Level Playing Field

In a revelation about the defence production sector in India, Jayant Patil, a member of the executive committee of management of L&T said, “there is no level playing field in defence production”.

In a interview with the Hindu Businessline, Patil said that although “theoretically the defence production sector is open to both the public and private sectors, in practical terms, there is no level playing field”.

He says, "the government loads its own enterprises with orders on a nomination basis, leaving very little for the private sector”.

While comparing L&T shipyard's capabilities with the public-sector shipyards, he says that the company has an excellent operational track record.

He points out that “L&T-owned ‘Kattupalli shipyard’ is the biggest shipyard in the country with an area spread over 970 acres while the government-owned shipyard Mazagaon Docks Limited (MDL) is spread over only 40 acres.

“L&T has delivered more than 77 warships ahead of time, yet most of the orders are given to public sector companies on nomination basis,” he laments.

Patil further says that “L&T has invested Rs 8,000 crore in seven facilities for defence production years ago, but the factories’ capacity utilisation is far from full”.

Patil further adds that about 85 per cent of the orders by value for warship programmes go to public-sector shipyards on a nomination basis. Only the remaining 15 per cent goes up for competition, between public and private shipyards.

According to the Businessline report, Patil describes this as a mindset gap.

“The government should realise that any asset public or private is created only with public money”.

“They say, ‘you compete’. How can I compete when there is no level playing field?” he asks.

He further explains the situation in the communication, radar and electronic warfare sector, saying that the private sector is more mature ‘than anybody else’ in communications, and despite that the orders go to the public sector.

Explaining the space sector, he says that the situation is the same in ‘space’ too. The sector is almost reserved for Indian Space Research Organisation (ISRO) and there is no end-to-end product capability, though private companies have the ability to manufacture some components.

He also explains about the TATA-Airbus C-295 production plant in Vadodara. The final assembly portion of TATA is just about 12 per cent, Patil says.

He further adds that the “entire upstream is not available to the private sector”.