Sir, it is not about affordability. We need to have strong players in the private sector to support the defence industries, as we know the way PSUs has contributed so far. GOI got to support private players for new technology development, speedy production & induction of defence weapons & equipments.
I'm not talking about whether we can afford to have L&T away from the military industrial complex (we can't, and can certainly make use of its talent), but L&T as a conglomerate can afford to stick to civilian products and services.
GoI is obviously not making the right decisions about our MIC, but the people inside are not dumb. The babus would rather see money flowing in from foreign vendors, or make their cut out of indigenous hardware made by PSUs, than see a level playing field.
"Indian PSUs > Indian Private Sector > Foreign Vendors" is the way you can rate the three in terms of conduciveness to our national interests. Since Indian PSUs are a joke, the next best thing to do is hand things over to the local private sector. Market forces will make sure they innovate or perish.