SOURCE: AFI
The “Make in India” initiative, while aiming to bolster domestic defense production, might be driving up the cost of certain weapons by a hefty 30-40% compared to direct procurement from foreign vendors.
A key aspect of Make in India’s defense program is collaboration with foreign Original Equipment Manufacturers (OEMs). This technology transfer comes at a price. Indian companies, often new to complex defense manufacturing, require significant technical assistance and training from OEMs. This expertise translates into licensing fees, technology transfer costs, and potentially, profit margins for the foreign companies.
Direct procurement from established foreign vendors often benefits from economies of scale. These companies produce large quantities of specific weapon systems, driving down the per-unit cost. Conversely, Make in India might involve smaller production runs, especially for niche weapons. Spreading the fixed costs of setting up production lines over a smaller number of units inevitably leads to a higher price tag.
When dealing with a single foreign vendor, India has more leverage to negotiate a competitive price. However, Make in India projects often involve a domestic partner alongside the OEM. This introduces an additional layer in the negotiation process, potentially weakening India’s bargaining position and impacting the final price.
The high costs associated with Make in India might not be sustainable for weapons with limited purchase quantities by the Indian Armed Forces. For these niche systems, the additional costs of setting up production infrastructure and technology transfer might outweigh the long-term benefits of domestic production.
The Make in India program offers strategic advantages in terms of self-reliance and long-term technological expertise. However, for certain weapons with limited procurement needs, direct purchase from foreign vendors might be a more cost-effective option in the short term. A nuanced approach, considering both strategic and economic factors, is crucial to optimize India’s defense procurement strategy.