Civil-military fusion, reorganisation of some DPSUs needed: Defence Secy

Defence Secretary urges credible private firms and DPSUs to join hands to compete for projects and developing platforms

Defence public sector undertakings (DPSUs) and private firms must be brought together into a unified dual-production pipeline, Defence Secretary Rajesh Kumar Singh said on Thursday at the third edition of the Chanakya Defence Dialogue in the capital, as he highlighted how China has used civil–military fusion to develop complex military systems and produce them at scale and at an accelerated pace.

 

“China has built a hybrid defence and industrial machine, which is able to blend central direction with market discipline using enforceable key performance indicators and dual use of research and development,” said Singh, adding, “As a result, they are able to scale up complex systems extremely quickly.”

 

Citing Prime Minister Narendra Modi’s emphasis on breaking down silos and adopting a whole-of-nation approach, the secretary noted that progress was already evident, with public and private companies partnering to compete for the indigenous Advanced Medium Combat Aircraft (AMCA) programme. Urging credible public and private firms to work together, he also pointed to the Defence Research and Development Organisation’s (DRDO’s) development-cum-production partnership programme as another example of the direction the ongoing defence sector reforms should take.

 

The secretary also said that some DPSUs may need to be reorganised into more focused subsidiary-level companies with clear-cut targets and delivery-linked pay to ensure they meet development and production milestones. He added that the DRDO may also need similar reforms. He stressed that hard targets must be enforced to reduce costs, accelerate production and enable the spin-off of technologies for civilian use.

 

“We need to move from an overwhelming reliance on the public sector to a full acceptance of the role of the private sector as an equal partner, with a focus on creating a level playing field, so that any company that manufactures in India, preferably holding its intellectual property in India as well, is given equal treatment,” said the secretary.

 

He stressed that the era of disruptive technologies such as artificial intelligence (AI) also means that the era of incumbency — and the advantages of nomination-based, cost-plus procurement and limited competition — will have to end. “This will have to be replaced by tearing down entry barriers, ensuring higher levels of competition and fostering openness towards our start-up and new deep-tech firms,” he added.

 

The secretary also called for greater assistance for prototype development and for adopting a spiral development model with strong and assured procurement support — at least for a few years — from the government. He emphasised the need to eliminate monopolies, enhance the ease of doing business, reduce onerous licensing requirements for both production and for exports and imports, and leverage the government’s purchasing power to expand and diversify India’s fast-growing domestic defence industrial base.

 

Emphasising that India’s national security — whether in short conflicts or prolonged ones — is best ensured by the country becoming a technological and industrial powerhouse, the secretary said, “That is the single most important priority area for the Ministry of Defence as we move towards a new era of defence industrial reform.”

 

Underscoring that studies suggest defence expenditure can have a multiplier effect of up to 2.45 on GDP when it is spent within the country, the secretary noted that the defence budget is an area where India has traditionally lagged. “The pace of economic growth has been such that our defence expenditure as a share of GDP has declined considerably. It is now below 2 per cent of GDP,” he said, adding, “It is a sobering thought that we are spending as little as 3 per cent of global defence expenditure while protecting 17 per cent of the world’s population.” In comparison, he noted, China accounts for about 12 per cent of global defence expenditure and the United States for around 37 per cent.

 

Citing the past inability to either sign contracts quickly enough or deliver on them in time as one of the reasons for the decline in the defence budget, the secretary nonetheless stressed that the situation was changing. “Contracts have been at their highest levels in the last couple of years. Every year we are setting new records.”

 

The Chanakya Defence Dialogue 2025, being held on Thursday and Friday, is centred on the theme “Reform to Transform: Sashakt, Surakshit aur Viksit Bharat.”