People's Democracy

TU Leaders Meet Defence Minister And Demand

‘Review Kelkar Committee Recommendations’

Leaders of ‘Trade Union Forum for Self-Reliance in Defence’ met the union defence minister A K Antony on May 17, 2007 and presented a memorandum seeking a halt on implementation of Kelkar Committee recommendations on defence procurement. The delegation comprised among others Dipankar Mukherjee, secretary, CITU, H Mahadevan, deputy general secretary, AITUC, S N Pathak, president, AIDEF, Srikumar, general secretary, AIDEF, D Anantha Padmanabha, coordinator, JAF, Bangalore, B N Sudarshan, Coordination Committee of Hyderabad PSUs.

The following is the text of the memorandum:

IN a convention of different organisations of workers and employees in public sector defence industries held in Bangalore on April 21-22, 2007, ‘Trade Union Forum for Self-Reliance in Defence’ was formed to pursue the objective of self-reliance in defence production. The convention noted with deep concern that the Kelkar Committee report, instead of concentrating on self-reliance in defence, is basically aimed at facilitating the entry of private sector – both domestic and foreign – in a big way, at the cost of public sector defence industries, the pioneer of self-reliance in defence sector. Based on the deliberations in the convention, we submit the following for your consideration:

• The composition of Kelkar Committee itself is questionable as it did not include the major stake holder i.e. the employees. The report is totally flawed in its approach when instead of reducing imports through strengthening of the existing public sector defence industry, it has embarked upon a policy of giving maximum space to private sector in defence sector. It has given undue stress on export of arms, which is not a sphere where a country like India would try to project itself like USA or Israel.

• Security perception, so vital for nature of preparedness of armed forces vis-à-vis long term production/ acquisition of programme and defence system is totally missing in the report. No evaluation has been made to assess strength, weakness, opportunity and threat to the existing defence industries, infrastructure, expertise and R&D. No exercise has been undertaken in the report either at macro level or at micro level for achieving self-reliance with technological upgradation and R&D input to achieve optimal capacity utilisation in public sector defence industry to address India’s security needs.

• Kelkar Committee report unabashedly pleads for entry of private sector at every level, not as a supplementary player, but as a major player, creating ‘Raksha Utpadan Ratna’ (RUR) in private sector, with public funds assured to private sector in the name of R&D for earning profit through defence exports that too with tax concession.

• It deprives DPSUs and OFB of a level playing field with private industries. OFB and DPSUs are captive industries of defence services. Unless they reach optimal capacity utilisation, technological upgradation and necessary autonomy, the question of so called competition with private sector does not arise.

• Private sector, would be mostly in collaboration with foreign firms under the cover of Indian private sector. Defence MNCs would be given a straight forward entry in the most strategic area of the country. This will jeopardise country’s security. With spectre of terrorism looming large, a free access to private sector both Indian and foreign in arms and ammunition manufacturing would be a serious security hazard for the country.

• Private industries have been allowed to develop and produce defence products as long back as in May 2001 and a number of captains of industry were given industrial license. However, till date response from these industries is not encouraging. Private industries do not want to undertake development and production of defence goods which is capital intensive where there is no assurance for getting sustained order for the products developed. Private industries therefore want the government to fund development expenditure and ensure quantity sufficient to keep their business interests alive. Such government funding of private entities under any nomenclature RUR etc is unprecedented and totally uncalled for. This will encourage some ‘fly-by-night’ operators in the defence industry to earn quick money through trading.

• Private sector industries, who do not have the expertise in manufacture of defence goods, will collaborate with overseas firms for participating in the tender process and demonstrate their capabilities. Even today for procurement of items categorised as “Make”, they are fielding equipment mostly taken from overseas defence industries. Once private industry bags such an order against RFP, it may continue to import the complete product or major assemblies from the collaborators for supply to defence forces and in the process earn profit through trading. This method neither generates employment nor promotes self-reliance. The threat of disruption in supply will certainly loom large if the overseas country decides to hold back product support. This phenomenon of stoppage of supply by overseas industries has been experienced a number of times in the past, especially at the time of crisis. This goes totally against the concept of self-reliance as it would erode indigenous sustainability of our defence sector. With spectre of terrorism looming large, a free access to private sector, both Indian and foreign, in arms and ammunition manufacturing would be a serious security hazard for the country.

• Serious lack of investment in fundamental R&D has been main reason to achieve the envisaged vision of reaching self-reliance index of 70 - 75 per cent through DRDO which is at present hovering around 30 – 35 per cent. Kelkar Committee has not reviewed this aspect at all.

• In the case of defence public sector units (DPSUs), the main issue is availability of the state-of-the-art technology, which matters in such a sophisticated sector. To achieve the same DPSUs need sufficient resources/funds to take up modernisation. If only a part of amount spent on imports is utilised for upgradation of technology of these well established PSUs with their expertise and infrastructure, the same can boost the self-reliance index.

• Kelkar Committee talks about Mini Ratna and Navaratna status with an eye on joint ventures and independent directors. The idea is only to give entry to private sector in the Boards of DPSUs. For strategic sector like defence PSUs, when given status of Mini Ratna or Navaratna, they should not follow the present criteria of independent directors. It has to be ensured that in the name of independent directors, private competitors are not allowed in the Boards through FICCI or CII. DPSUs should not be forced to go for joint venture as a part of creeping privatisation, which is actually aimed in Kelkar report.

It is in the above perspective that your predecessor, Pranab Mukherjee, in his meeting with all defence federations on September 18, 2006, assured that the Kelkar Committee’s recommendation to corporatise ordnance factories will not be implemented. He also informed that the government and the armed forces are satisfied with the performance of ordnance factories and DPSUs and the government does not want to dilute their role in defence production. This was in fact a repudiation of the Kelkar Committee report, which has highlighted only the weaknesses of the public sector defence industry.

As a matter of fact there is a strong campaign by corporate media against these defence organisations based on the report. The government, it seems under the corporate pressure, is trying to implement the Kelkar Committee recommendations. For example, OFB is being asked to sign MoU with the government, private sector competitors are being given entry in DPSUs Board as independent directors, guidelines for RUR are being sought to be diluted, etc etc. This appears to be the reason for not taking any follow up action after the aforesaid meeting with the federations, ostensibly to avoid further review of Kelkar Committee report.

We, therefore, appeal to you to review the Kelkar Committee report in totality in consultation with federations/trade unions and put a stop to implementation of this report. We further offer our active participation in an internal assessment of public sector defence organisations to make them real centres for self-reliant defence production in India.