(Sitharaman and Jaitley)
When Nirmala Sitharaman, ex-JNU, ex-Price Waterhouse Cooper, ex-BBC, was appointed Defence Minister by Prime Minister Narendra Modi, some believed it to be an inspired choice. Others were more skeptical, aware that as a junior minister with not much to show as commerce minister, Sitharaman’s leapfrogging over senior BJP honchos to occupy the important ministerial slot was more symbolic than a substantive move and, so, alas, it has proved. She simply lacks the self-confidence and/or understanding and/or instinct/insight to do the right thing. But she’s up in sensing the extant political balance of power within the Modi cabinet where Arun Jaitley — the most powerful person in cabinet outside of Modi — rules the roost. For Modi, Jaitley is a sort of a talisman — the man who first broke up the consensus forming in the ruling BJP around Sushma Swaraj — LK Advani’s choice — by siding with Modi formally at the Goa session of the party that met to announce the party’s PM-candidate for the 2014 elections. Jaitley has had a particularly deleterious effect on defence of the country in his two stints in MOD in the last nearly four years.
It has recently come to my notice that the reason Manohar Parrikar was eager to return to Goa, other than to be a bigger fish in a smaller pond — or, contrarily to get away from Delhi was, because of his frustration with not being able to do the things that’d have progressed Modi’s ‘Make in India’ programme to achieve arms self-sufficiency by carrying out procedural innovations. As he reportedly told a friend of his something to the effect that “If I can’t do what needs to be done what’s the point in my being defence minister?” The grit in the machine that Parrikar was most upset about was Modi’s decree, at Jaitley’s suggestion, that any defence programme involving expenditure beyond Rs 1,000 crores had to be cleared with the Finance Minister. Under the cover of fiscal control, it provided Jaitley with a veto over almost all defence and national security decisions because very few MOD programmes come in under that low ceiling for the defence spend.
It is this veto Jaitley has used to push his own — but more likely — the PM’s agenda to do with the politically sensitive matter of providing the Modi funders/friendlies, ahem,… favourite “crony capitalists” (whose names are well known) with zero defence industrial experience and near zero manufacturing wherewithal and workforce, the opportunity to get in on the lucrative “defence industry” business. The government may argue that this move creates many more defence industrial-capable entities in the economy. But it puts a spoke in the wheel of companies — Tata, Mahindra, L&T, etc, that had the commercial foresight to invest in, and be part of some of the most sensitive and advanced military projects, without any expectation of raking in the moolah by riding on the coattails of a friendly political dispensation in Delhi.
It is the strategic partnership model articulated in the Defence Procurement Policy 2016 that Parrikar had sought to tweak to allow established companies that had proved their druthers in various strategic programmes with direct involvement, or on the basis of Defence Public Sector Units (DPSUs) outsourcing the most advanced parts of their projects to private companies because they themselves know they are incapable and too inefficient to bring these projects in on time and within cost as the established companies have routinely proved they can do. NSA Doval is in-charge of the strategic systems development programmes and in the know of all this, but is doing nothing. Or, is not in a position to do anything.
Just a month short of the formal decision that would have institutionalized a more economically sensible strategic partnership model for defence production, Parrikar was sent back to Goa, Jaitley was reappointed to also collaterally handle defence, in which capacity he went ahead and junked Parrikar’s innovation and completely reversed course, reverting the procurement process to the lowest bidder (L1) scheme that has been the bane of the defence industry and absolute disaster — the single source of despair for the country seeking a modicum of arms independence. It reinforced the old creaky system in which MOD/Department of defence production bureaucrats go back to relying on DPSUs, because doing so is the safe, fallback option, and favours the buccaneering buckaroos who because they have nothing more than passing acquaintance with specialized defence production, are free to underbid, win contracts, and leave the military treading water because, sure as hell, they can’t produce the advanced hardware in the designated time frame and for the price they quoted to win them the contracts. Further, these newly founded ventures in the business to suck at MOD’s procurement teats, could be L1 winners without any financial basis. Thus, a certain newish corporation set up by a crony capitalist had a turnover of Rs 1,000 cr last year but would be allowed to bid for a contract worth Rs 50,000-60,000 crores! How’s this possible. Well, here the recommendation by the Committee headed by former DRDO chief VK Atre has come in handy. It pegged the minimum turnover of Indian strategic partner at Rs 4,000 crores. This last figure plucked out of thin air? No, because that was the turnover of the DPSU — Mazgaon Dockyard Ltd of the previous year! In the event, with a little bit of imaginative accounting the turnover of Rs 1,000 crores can be stretched to the Rs 4,000 crore level enabling this new crony company to bid. So what will accrue is that these new firms without a clue will flounder for ages just to get going even as the established defence majors in the country are left without contracts and custom, and their facilities lie fallow. Talk of the scale of national waste and the sheer disincentive to Indian companies contemplating investment in the defence industrial sector who have to contend with a system slanted to deliver the goodies to DPSUs and the cronies!! Whereupon there’ll be interminable delays and the familiar armed services rants about unmet urgent requirements will inevitably follow and thereafter the pleas to the government to meet them with, you guessed it, arms imports — of the one-shot Rafale kind that the country pays an arm and a leg for without a trace of technology transfer or any other permanent benefit to the country!!
So, this is the PERMANENT UNDERWAY DEFENCE PROCUREMENT situation and scandalous. But no govt to-date has addressed it. It drains off hundreds of thousands of crores of rupees annually that PMO, Finance Ministry, MOD are complicit in, which the media, the Parliament, the Indian people are completely unaware of. Pity that the correctives sought to be introduced into this system by Parrikar were cut off .
So, where does Ms Sitharaman fit into this circus? Well, you heard of the “mukhota” (mask). In the previous BJP govt. Vajpayee was supposedly the mukhota and, depending on who was speaking, Advani or NSA Brajesh Mishra, was the arch manipulator. Where Sitharaman is concerned it is Jaitley at the MOD controls — she runs frequently across to the North Block, quite literally and, when this is inconvenient, telephonically, clearing virtually every defence decision with him.
In other words, Jaitley is the real Defence Minister who, in turn, defers to the great Wizard residing at 7, Race Course Road, and at the master control with the political override button. Except Modi — the ultimate “political animal” is mostly preoccupied with Amit Shah with winning the next slate of elections (state, 2019 general) and doesn’t do too much micro-managing, trusting that the guidelines verbally issued to Jaitley will be strictly followed.
Security Wise 
What Modi wants is a corruption free procurement process for imported defense kit and seemingly the mediocre Jaitly is incorruptible,thats why his considered faith in him.
Crony capitalism is old hat,otherwise where do you think all these politicans get the moolah to fight elections?In municipal elections Rs,1000 per vote is the going rate ,where to get such money if not from pliant industrialists?Its a case of you scratch my back I will scratch yours.But money for fighting elections and unbridled corruption for personal gain are two different kettle of fish.
Modis family lives in obscurity without any seeming economic benefit from his rise, can the same be said about the Gandhi family?The last Gandhi I heard of who worked for a living was Rajiv as a commercial pilot,what job has Rahul ever held? Hes just indulging himself with his foreign jaunts without any qualms,paid for by God knows who?
So flagging crony capitalism is just a lot of bull everyone knows it exists and theres no escape, unless some much needed political reforms are carried out.
And why not stick to writing about your core competence rather than being a political commentator?as a rule I never discuss politics and religion with my people ,its a sure invitation for discord.Surely political commentary from you us is not what all your followers want to see you write about,including me and special characters.
Crony capitalism exists everywhere but the problem is the scale . In a country where 100 odd oligarchs run the show, such cronyism will lead to inefficiency. Why are most of the top companies run by the cronies debt-ridden and are functioning worse than PSUs despite getting incentives unheard of anywhere in Asia (for almost 15 years)? Why are most of them functioning in core sector or running public utilities and not in hi-tech manufacturing (electronics, machinery, defence equipments)? L&T , Bharat Forge, Mahindra and a few others ,of course, are noble exceptions.
@Aban
I dont respond to incoherent and abusive individuals so will ignore the other comment.
What you say seems to be true but when you realise the fact that most of these cronies got their loans,which have now turned bad,during UPA rule you will realise why I oppose singling out the current GOI for crony capitalism.Whose cronies are they anyways?Whoever is in power thats all,this point is basic to the menace.So no point in trying to single out Modi on this factor.
And if you think that the TATAS,L&T,Bharat forge etc,etc have reached where they are,inspite of the license permit Raj imposed on India by a nincompoop called nehru,without greasing a lot of palms in the process,then you are living in a fools paradise.
So dont try to put a Halo around the TATAS,L &T,etc,its only that they have a big headstart in crony capitalism and are past masters at manipulating the grossly corrupted Indian system,without which they would never have reached where they are at the current point of time.
I am not defending TATAs or mahindras. That TATAs were involved in 2G scam and other shady deals is very well known. All i am saying is Bharat Forge, L&Ts are better than Adanis or Reliance or Jindals on the basis of their ‘manufacturing’ capabilities. L&T can make LCAs, Brahmos etc. Mukesh/Anil / Adani/ Essar cannot. Just like Japanese Keiretsus are certainly better than oil/steel firms run by a Russian oligarch (both beneficiaries of crony capitalism). In former case they have given Japan a competitive edge in manufacturing. In Russia they r mostly running privatized soviet-era firms and mines/ oil&gas fields.(very little hi-tech manufacturing capability).
State of the art Manufacturing capabilities can be purchased as also the people to run them.Reliance has shown itself to be the most nimble and disruprive in telecom as evidenced by its jio which has left Tatas and other players eating dust in its wake.Reliance runs Indias biggest green field private sector oil refinery are you insinuating that its less capable than Tatas or any other players?You need to rethink.
Re: “L&T can make LCAs, Brahmos etc. Mukesh/Anil / Adani/ Essar cannot.”
What makes you so sure?
“State of the art Manufacturing capabilities can be purchased as also the people to run them.”
@andy,
Being economically competitive is about more than just merely signing cheques to purchase foreign technology, like Saudi Arabia does. Neither is India wealthy enough to endlessly purchase the older technologies/assets which others choose to cast off to us, nor are we likely to generate mass employment from some limited purchases made by a few coddled oligarchs receiving special loans from the govt on concessionary terms. Successful economies see private enterprise as a grassroots activity open to all, and not as the preserve of a special trusted few. Our system is riddled with special interests, and the way to contain or limit their influence is through political reforms. Reforms such as synchronizing elections at all levels, from state and local bodies all the way up to national elections.Ironically, since such reforms would mainly inconvenience only politicians and not the common man, these can be done with very little political cost – and therefore should be done ASAP.
@Sanman
“Neither is India wealthy enough to endlessly purchase the older technologies/assets which others choose to cast off to us, ”
True ..but why not spend more on R and D?..Plus whats the point in reinventing the wheel again?If technologies are available for a price why not buy?If GOI cant do so why stop the private enterprise from doing it?
As for the rest of your comment regarding ‘special oligarchs’ its very much in line with what I wrote about crony capitalists in India.
Political reform would be good but the maximum impact would be made by reforming the bureaucracy,for its the bureaucracy that really rules India.
Visit any Government office and see the clerk behave as its his birthright to demand compensation for just putting a file on sahibs table.Imagine how the so called sahib behaves!!!
So the most urgent and desperately needed reforms are not political they are bureaucratic,education,police and health(in no particular order)
@andy, fair enough – my comments about coddled oligarchs should have been directed @ Aban. Regarding growing industry through purchases vs homegrown R&D – certainly, Indians are good at low-cost R&D, but that takes time and converting it into profitable business takes capital. Developed countries seeking to stimulate activities in this direction usually lower their interest rates to provide cheaper access to capital, and then let nature take its course. India has notoriously high interest rates, because of our disproportionately large number of poor people, who are notoriously sensitive to inflation, which is a by-product of easier availability of capital. Emphasis on growing exports would be a better way for India to generate more domestic employment without relying on domestic consumption, which is constrained due to lack of capital. We need Supply Side Economics, and Export-Oriented Growth. We need to direct capital first to companies that export. That fool Raghuram Rajan was blind to that, saying that there’s no more room in the global economy to accommodate a new exporter like India. He kept emphasizing ‘Make for India’ over ‘Make in India’ while not seeing that poor Indians don’t have the money to buy stuff made for them. We need a Virtuous Cycle of job-creation and upward wage spiral to raise standards of living – that can only be fueled by exports.
So in order ti justify Jaitley (no, he is not incorruptible) you are justifying crony capitalism as ” chalta hai ” and then blaming Gandhi family. Well many people with family inheritance much less than Rahul Gandhi live lavishly on theur own rental income.
Talk is about why should a man like jaitley who can not command respect among the electorate be made even a cabinet minister?
when did i ‘justify’ crony capitalism?
Cabinet should be composed of technically capable people, and not vote-getters. Jaitley’s lack of vote-getting power should not reflect on his suitability dor cabinet. I would have preferred Jaitley as Foreign Minister instead of Sushma, who is merely a vote-getter. Jaitley’s excellent oratory skills would have served India well on the international stage, even while allowing Modi to spend more time at home and avoid criticism that he spends too much time traveling abroad.
* dor = for
I agree most of the loans which turned NPA were given by UPA 2 (for infra. projects that did not receive govt clearances) post anna-ramdev agitation as a part of scorched earth policy to destabilize economy post 2014. But what stopped BJP from catching Mallyas of the world and putting them in jail?
And Reliance will never invest in a Manufacturing ecosystem, they will mostly do the assembling. (screwdriver technology) just like DPSUs. Remember around 2000 India made a disastrous policy of liberalising cell phone imports (instead of setting up local manufacturing facilities in India). Reliance was a major beneficiary as they didnot want to manufacture their CDMA handsets and wanted to import straightaway.
KG basin scam . i am sure u have heard it.
Anyway as far as Im concerned the argument is not about who is better at doing what,its about all the players being crony capitalists or otherwise.In this theres certainly no room for any second thoughts,all of them are cronies,presently or in the past, so who is to say which one is better than the other?
Best thing is to break the large companies like reliance essar tatas into smaller entities like it was done in US in early 20th century. And let these companies be like L&T with diverse shareholding. So that no single fat-cat billionaire promoter-family remains a major shareholder in these companies. Even if there is cronyism, there will be no concentration of wealth in the hands of few individuals. But then that is wishful thinking.
He may be hoping to be next President/ Vice President or PM after Modi g.Bad for defence and nation.Def Minister must not be Mukhota.In fact Retd Chiefs, should fit the seat.Ministeries must be held by those who are preferably from that field.
trust me, he will not be he has never tested waters,even after Amritsar defeat in 2014 ,he can never win a single vote,he has no oratory skills,the only qualification for this chap is that he is a “Spin Manster” who can deflect any questions
Ideally, Defense Minister should not be a Mukhota, but in non-ideal circumstances where there are more domestic enemies than foreign ones, then compromises will be made.
Why so much against the BJP government. I didn’t read you previously but wonder did you say anything during UPA regime, after all they were the cause for current defence situation. What is wrong in the country’s PM making defence decisions? How can you there is a scam here? Scams were a daily thing during Congress regime. Cry over that if you are true to yourself.
sankarsarma@ — the scam here is in the sheer and regular waste of financial resources — not in terms of corruption. Perhaps, I should have made that clear. Also as far as UPA govt was concerned, look up my posts from 2011 onwards when this blog was founded and you’ll see just how critical I was.
yes sir, we know your integrity stands for this motherland, not for any party, even the people dislike jaitley as a Status-Quo lover
Thanks for the reply. I do not mean or intend to question your integrity (assuring ‘Security Analyst’ below). All I wanted to say is, please don’t be so critical to someone who is trying to do something good for the country. Probably they are doing it wrong way, probably they are not doing it in the most efficient way. But please understand they are doing it that way to stay out of the “scam” cries from opposition. That way, the worst they would get is on their efficiency, atleast not on their integrity unlike the predecessor government. But that’s the worst expected from opposition, not from a neutral intellectual like you. Hence my dissent above. Hope you understand.
sir, Dr. Bharat Karnad is a man of integrity & you might also agree that if there are certain insufficiencies in the Modi govt, it needs to be sorted out,afterall we voted this govt for a change right ? So the point which Mr. Karnad is making is that he (Narendra Modi) needs to sort out the mess of Jaitley, Modi is not at fault here, BUT JAITLEY IS & he needs to be ousted from the cabinet
Do you really think Modi will sidetrack Jaitley?Have second thoughts.The problem seemingly is Modi is too much in awe of Jaitly as a lutyens Delhi insider and also a supreme court lawer to boot.This is very much in consonance with his diffidence towards IAS bureaucracy and the consequental Empowering of the same .
Now tell me is anything more dangerous to a PM than relying on the supposedly learned but utterly corrupt bureaucrats.This is the same thing he did as CM after 2002 in Gujarat ,but that was easy because those guys were scared of what the CM might do to their lucrative personal corruption due to the smallness of the state it was easy to keep most bureaucrats in check.
But India with its federal structure,that almost empowers the states as sovereign entities is not the same as Gujarat and here is where this model fails at the center.The problem is PM is all at sea in the swamp of Delhi thats why his reliance on mediocre people like Jaitley.And such mediocre people like the FM hold such sweeping powers in the current GOI.
Jaitley was an early backer of Modi, helping Modi to transition from local Gujarat state politics to national-level politics and serving as a mentor on how to deal with the Lutyens Delhi political establishment and bureaucracy. It’s then no surprise that he’s been accorded a high status in return. But I feel the well-spoken and stately Mr Jaitley would have been more suited to be Foreign Minister, while a bolder and more agile technocrat could have been appointed Finance Minister, to pursue reforms more aggressively. Lifting India’s economy is like Raising the Titanic, and Jaitley is just too old for such an herculean task.
Apparently it seems to be the truth. I hope some wisdom dawns on PM to sort out the rut.
What happened to Gen VK Singh? why he has not been made defence minister? Or is he too honest and knowledgeable ?
Everyday one to four Indian soldiers are being killed by the terrorists on the Kashmir front and we Indians have delusion to take on China just because Americans are prodding us to provoke China? What is the defence minister doing? Jaitley can’t even manage the finance ministry -what with the debacle of demonetisation , And Jaitley could not even win his own seat in the Modi wave and is given two most important portfolios? Is this what democracy is? Installing in finance ministry a Jaitley thorougly rejected by the people of India in elections? Such people do not deserve even junior minister post.
Reblogged this on securityanalystblog.
sir, your story on Russia developing Quantum radars was right, see this http://nationalinterest.org/blog/the-buzz/russias-f-22-f-35-killer-6th-generation-plane-armed-23619
sir, can you explain this in simple terms ?? Please in your next article ??
I think this idea of photonic entanglement could be used to improve a whole host of electromagnetic-transmission technologies, whether RADAR or even LIDAR. I’m thinking even medical diagnostics could possibly be made to benefit.
well is there any scope for Diversification ONLY in the Defence Sector alone, because with AI & Laser Weapons making an emergence i think that ,what we used to see in Star Wars movies might come true, upto some extent
@ Security Analyst,
These quantum technologies – quantum computing, quantum communication/encryption/decryption, quantum radar/imaging, etc – they seem to be the next big technological wave. Just as India gained a leap forward through Param supercomputers and parallel computing, likewise we need to gain a foothold in quantum technologies to avoid being left behind. Given our ability to do low-cost R&D even in sophisticated fields, we should look at these quantum technologies for establishing our presence in these future markets. ISRO’s powerful new Multi-Object Tracking Radar could be a good candidate to upgrade into a Quantum Radar system. Eventually, we could put such radar aboard a RISAT or even on naval ships. I’ve always wondered why India can’t make its own AEGIS system – we have plenty of software and electrical engineers for that.
Fertile Imagination.
http://tass.com/world/983673
US helicopters evacuate IS commanders from Syria’s Deir ez-Zor — media
World December 29, 15:02 UTC+3
Earlier in the week, the Syrian government sent a message to the United Nations, accusing the US-led coalition of making deals with the Islamic State
Share
More:
http://tass.com/world/983673
You yourself have been seen propounding private partnership as a way towards indigenisation. So we have it , that private investment is indeed good, necessary and inevitable for defence . Ok. So you would agree that to facilitate this, a benchmark turnover has to be set, and you say that it has been pegged at 4000 crore. Ok. Your premise that a crony capitalist having a meagre 1000 crore turnover can easily via “imaginative accounting” fudge and bloat it to 4000 crore figure, has a lot of gaps. You have merely jumped to an arbitrary conclusion, without substantiation. In effect you have equated 4000 crore to seem like 1000 crore. But even if we take your argument at face value, what as per you should be the turnover figure, if not 4000 crore ?
Also you dont like the L1 , the lowest bidder route. You seem to suggest that dpsu’s will hold the sway, thereby scuttling, and defeating the entire purpose. But realistically speaking, can L1 route be totally done away with; would it be realpolitik, won’t it inevitably lead to a lot of political mudslinging, and certainly arbitrary discretion if not actual corruption ! Won’t that eventually lead to delays.
Your another premise is that it’s actually Arun shourie, if not Modi himself, who is the scuttler, and the saboteur. Via unsubstantiated heresay, You insinuate, that Parrikar was hassled and then removed. We all know the circumstances in which Parrikar had to go to Goa, as a Consensus cm candidate. You make Parrikar seem as a fall guy.
Lastly It would have helped, had you given your views, or taken an unambiguous stand about whether or not the Ambanis Adanis, too are Modi’ s crony capitalists, if at all, because we have a consensus, that Tatas, Mahindras and L&t are not; I.e they have a cleanchit.
So your article though seems to be ostensibly, well intentioned, is found upon a lot of premises, heresay, popular perceptions, and I dare say conspiracy theories, rather than cold dispassionate logic and undiluted objectivity. Sir, we are interested in, not a Narrative, but Truth based strategic analysis. And i hope that you too are have the same motive. Have a good day.