Most of the statement are just in general and vague without going into details.
just to explain in simple language
"when you are getting paid to do nothing then who would want to work"
You state lack of "modern manufacturing facility" but it's not the main reason .
The production performance of indian ordance factories has been the concern of stakeholders including the government of india.In april 2004 the government of india appointed the kelkar committee to look into the varied aspects of strengthening self reliance in defence preparedness the committee,amongst others,diagonsed the organisation to be suffering from weak strategic management,lack of operational freedom,narrow captive customer base,weak in house r&d and overstaffing.
To add to this the ofb came down to "dharna pradharshan" so that government does not comply to kelkar report why?Well because they had made the recommendation of "outsourcing work and privatization" to which government scummed to ofb/psu pressure and the report was scraped because they threatened to agitate.Have you ever heard them agitating for modernization?
Livefist: PSU/OFB: If they're so good, why are they so scared?
"The mandarins of the defence ministry and the state-owned arms companies that keeps private Indian firms at arm's length. As defence ministry officials privately admit, institutions like the Defence Research and Development Organisation and Hindustan Aeronautics prefer to import foreign-made weapons rather than allow the Tatas and Mahindras to get a real share of the contracts. Their fear: the competence of the private sector will marginalise them."
"I don't think there's another country in the world that has tried as hard as India to make weapons and failed as thoroughly," said Pieter D. Wezeman, a senior researcher at the Stockholm International Peace Research Institute, which studies global security.
Mr. Wezeman said he was skeptical that India's new products would change that history, saying that its fighters, tanks and guns were "of questionable quality."
"India's main problem as an arms manufacturer is a corrupt and inefficient government sector that has neither the expertise to develop top-notch weapons nor the wherewithal to make them in abundance, said Manoj Joshi, a fellow at the Observer Research Foundation, a policy group based in New Delhi. "
*************************In one telling example, India could buy fully assembled Russian Sukhoi fighters for about $55 million each, but instead mostly relies on kits that are sent to the government-owned Hindustan Aeronautics Limited, which assembles them at a cost of about $68 million each — nearly a quarter more. In another example, government labs spent billions trying to develop an aircraft engine, only to abandon the effort and buy engines from General Electric for the recently introduced fighter, the Tejas.****************
"While it's more complicated assembling Sukhois than putting together an Ikea flat-pack, it's not that hard," said Samuel Perlo-Freeman, a program director at the Stockholm institute. "And it's far from an independent and autonomous development of a new weapons system."
Regarding the need of tailor made need of our defence forces even private companies can do it and they do it for your information cz bren 807 was only developed to meet the tailor made requirement of indian army and even the tata and mahindra develop tailor made for army.
Further you fail to realize the harsh reailty:
Much of India's military, in any case, does not want Indian-made equipment. So many Russian fighters assembled by Hindustan Aeronautics have crashed in recent years that the Indian Air Force calls them flying coffins. India's Russian-made submarines and naval equipment have experienced deadly mishaps in the past year as well, leading the country's naval chief to resign last week. The distrust between the civilian builders and military users has turned the made-in-India effort into an even tougher sell. eg INS kolkata.
I just recommend one thing open up the defence sector for private industry with level playing field .Bring in the competition let them fight for their money just as Bsnl and doordarshan still exist government psu can exist simultaneously along with Indian private industry ."let the better man win"
And if private defense sector can be managed and regulated in America and Israeil i do not see any reason why not in India?
"privatization and outsourcing work is the way to resolve this issue" as per kelkar committee on lack lesture performance of government psu/ofb