The committee on public procurement has criticised defence sector PSUs and ordnance factories for their role in inefficient defence purchases that leads to high costs and outdated technologies. The committee also advocated lifting the 26 per cent cap on foreign direct investment (FDI) in private companies meeting the requirements of the defence sector because it acts as a barrier to set up hi-tech production. The panel’s observations were, however, strongly opposed by the defence ministry.
The ministry argued that raising the FDI cap on defence production is not the panacea for all ills because issues like export-control laws and political and strategic considerations would still govern transfer of high-end technologies. The panel, headed by former bureaucrat Vinod Dhall, said defence public sector enterprises (DPSEs) and ordnance factories (OFs) produce low-technology components and are operating primarily as aggregators and assembly plants, sourcing most of their components from private producers.
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