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• Introduction 1
• TheWassenaarArrangementanditsrelevanceintheIndiancontext 2
• Impactof“Make”procedureonIndiandefenceindustrialcapability 7
• MSMEdevelopment:vitalforaninclusivedefenceindustrialbase 12
• RequestforInformation(RFIs) 15
• RequestforProposals(RFPs) 16
• ListofIndustrialLicenses(ILs)filedforthemonthofSeptember2012-October2012 19
• Newprojects/investments/contracts 20
• Jointventuresandalliances 23
• Country-leveldealsandinitiatives 25
• Industrybuzz 27
• Sources 32
Contents
December2012 Eye on defence
Dearreaders,
IwouldliketotakethisopportunitytowishallofyouaMerryChristmasandaveryhappyNewYear.
Indiaisthelargestimporterofarmsintheworld,whichisduetoourvolatileneighborhood.Therefore,theMinistryofDefence(MoD)andtheGovernmentofIndiahavealwaysstressedupontheneedtobecomeselfrelianttomeetourdefenceneeds.UndertheDefenceProcurementProcedure(DPP),the“MAKE”procedureisoneofthe
importantwaysbywhichthisagendaofindigenizationisbeingpushedforward.InthisissueofEyeonDefence,wehavetriedtothrowsomelightonthistopicandalsotellyouaboutsomeofthe“MAKE”programsthatprovideexcitingopportunitiesforthedomesticdefenceindustrytoplayanimportantroleinnationbuilding.
TheDPPisanevolvingdocumentandthelatesteditionofDPP2013isexpectedinthefirstcoupleofmonthsof2013.Throughoutitsevolution,theDPPhastakenstepstoharmonizewiththeextantregulationsoftheGovernmentofIndia.Oneoftheareaswherethisharmonizationisreallyneededistodefinea“defence”product.Duetomultiplicityoflists,thereisconsiderableambiguityregardingtheproductsonwhichanIndustrialLicense(IL)ismandatoryandproductsonwhichthe26%FDIlimitapplies.ItshouldbenotedthatwhereasDPP2006madeitmandatoryfortheIndianOffsetPartner(IOP)tohaveanIL,thisconditionwasremovedinDPP2008andfurtherrelaxedinDPP2011.The“WassenaarArrangement”anditslistsarelikelytopresentitselfasasuitablesolutiontothisproblemandweanalyzethisaspect.
Theprivatesectorwaspermittedtoenterdefenceproductionin2001andwehaveseensomeremarkableachievementbylargeIndianconglomerates,thereafter.However,thesamecannotbesaidaboutthemicro,smallandmediumenterprises(MSMEs),whichformthemajorityoftheindustrialbaseofthiscountry.TheRevisedDefenceOffsetGuidelines-2012hastakenaboldstepofintroducingmultipliersforprovidingaboosttotheprospectsoftheMSME’s.Inthisissue,wetrytohighlightsomeoftheotherstepsthatcouldfurtherhelptheircause.
Amongtheregularsections,wehaveindustriallicenseapplicants,newprojectsandinvestments,jointventuresandalliances,country-leveldealsandthelatestbuzzintheindustry.
Ihopeyoufindthelastissueofthisyearuseful.Ithasbeenourconstantendeavortomakethispublicationincreasinglyrelevanttoyouandwillappreciateyourcommentsandsuggestionsinthisregard.
K. Ganesh RajPartnerandLeaderAerospaceandDefencePractice
How did it come into being? AftertheendoftheColdWar,membersoftheformerCoordinatingCommitteeforMultilateralExportControls(COCOM)exportcontrolregimerecognizedthatCOCOM’sfocusonrestrictingexportstotheformerSovietUnionandEasternblocwasnolongeranappropriatebasisforexportcontrol.Therewasaneedtoestablishanewarrangementtodealwithrisksposedtoregionalandinternationalsecurityandstabilityduetothespreadofconventionalweaponsanddual-usegoodsandtechnologies.
Accordingly,ataHighLevelMeeting(HLM)on16November1993inTheHague,representativesof17COCOMmemberstatesagreedtoterminateCOCOMandestablishanewmultilateralarrangement,temporarilyknownasthe“NewForum.”ThisdecisionwasconfirmedatanotherHLMinWassenaar,Netherlands,heldon29–30March1994.COCOMceasedtoexiston31March1994.ParticipatingstatesagreedtocontinuetheuseofCOCOMcontrollistsasabasisforglobalexportcontrolsonanationalleveluntilanewarrangementcouldbeestablished.Agreementtoestablishthe“WassenaarArrangement”wasreachedattheHLMheldon19December1995.ThefirstPlenaryMeetingofthenow-operationalWassenaarArrangementwasheldon12–13December1996inVienna.
What is it and what does it hope to achieve?TheWassenaarArrangement(WA)isthefirstmultilateral,voluntaryexportcontrolsregimeforconventionalarmsanddual-usegoodsandtechnologies.Itcategorizesallarmsanddual-useitemsundertwolists—MunitionsListundereightcategories(derivedfromtheUNRegisterofConventionalArms),andSensitiveDualUseGoodsandTechnologieslist.TheWAcountriesmaintaineffectiveexportcontrolsfortheitemsontheagreedlists.ThisisachievedthroughvoluntaryexchangeofinformationatannualconferencesbytheWAmembers.
TheobjectiveofWAistocontributetoregionalandinternationalsecuritybycontrollingthetransferofweaponsandsensitivetechnologiestodestabilizingelements.Itseekstoachievethisthroughthefollowing:
The Wassenaar Arrangement and its relevance in the Indian context
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• Promotingtransparencyandincreasedresponsibilityintransfersofconventionalarmsanddual-usegoodsandtechnologies,andtherefore,preventingdestabilizingaccumulations
• Preventingtheacquisitionofconventionalarmsanddual-usegoodsandtechnologiesbyterroristgroupsandorganizationsaswellasbyindividualterrorists
• Enhancingco-operationtopreventtheacquisitionofarmamentsandsensitivedual-useitemsformilitaryend-usesifthesituationinaregionorthebehaviorofastateis,orbecomes,acauseforseriousconcerntotheparticipatingstates
Member statesMembershipintheWAisuniversalandnon-discriminatoryforcountriesmeetingtheestablishedcriteria:
• Produce/exportarmsorassociateddual-usegoodsandtechnologies
• Implementnationalpoliciesthatdonotpermitthesaleofarmsorsensitivedual-useitemstocountrieswhosebehaviorisacauseforconcern
• Adheretointernationalnon-proliferationnormsandguidelines
• Implementfullyeffectiveexportcontrols
MembersoftheWAareobligatedtomaintainrigorousnationalexportcontrolsystems.Thelatestlistof41countriesthatarepartoftheWAis:
• Argentina• Australia• Austria• Belgium• Bulgaria• Canada• Croatia• CzechRepublic• Denmark• Estonia
• Finland• France• Germany• GreeceHungary• Ireland• Italy• Japan• Latvia• Lithuania• Luxembourg
• Malta• Mexico• Netherlands• NewZealand• Norway• Poland• Portugal• RepublicofKorea• Romania• RussianFederation
• Slovakia• Slovenia• SouthAfrica• Spain• Sweden• Switzerland• Turkey• Ukraine• UnitedKingdom• UnitedStates
Control listsInordertoplaceanitemonthelists,memberstatestakeintoaccountthefollowingcriteria:
• Availabilityoutsideparticipatingstates
• Abilitytoeffectivelycontroltheexportofthegoods
• Abilitytomakeaclearandobjectivespecificationoftheitem
• Controlledbyanotherregime,suchastheAustraliaGroup,NuclearSuppliersGrouporMissileTechnologyControlRegime
ParticipatingstatespracticeexportcontrolonallitemssetforthintheMunitionsListandtheListofDual-UseGoodsandTechnologieswiththeobjectiveofpreventingunauthorizedtransfersorre-transfersofthoseitems.
1. MunitionsList:TheMunitionsListhas22categories,whicharenotlabeled.Conventionalarmsappearinginthislistfallundereightbroadweaponcategories—battletanks,armoredcombatvehicles(ACVs),large-caliberartillery,militaryaircraft/unmannedaerialvehicles,militaryandattackhelicopters,warships,missilesormissilesystems,andsmallarmsandlightweapons.(TheACV,aircraft,andhelicoptercategoriesincludemodelsdesignedtoperformreconnaissanceorconductcommandoftroop’smissions).
2. DualUseList:ListofDualUseGoodsandTechnologieshasaBasicList,whicharefurtherdividedintotwoannexes—1)SensitiveListand2)VerySensitiveList
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• TheBasicListiscomposedoftencategoriesbasedonincreasinglevelsofsophistication.Thecategoriesare—specialmaterialandrelatedequipment;materialsprocessing;electronics;telecommunicationsandinformationsecurity;sensorsandlasers;navigationandavionics;marine;aerospaceandpropulsion.
• SensitiveList:ItemsonAnnex1oftheWA’slistofdual-usegoodsandtechnologiesrepresentcriticalitemsthatarekeysforthedevelopmentofmilitaryapplications.Itincludesmaterialforstealthtechnology,equipmentthatcanbeusedforsubmarinedetection,advancedradar,andjetenginetechnologies.
• VerySensitiveList:ItemsonAnnex2oftheWA’slistofdual-usegoodsandtechnologiesrepresentthemostcriticalitemsforuseinmilitaryapplications.Participatingatatesareexpectedtoexertextremevigilanceforitemsincludedintheverysensitivelist.
AdministrationTheWAPlenaryisthedecision-makingandgoverningbodyoftheWA.Itiscomposedofrepresentativesofallparticipatingstateswhonormallymeetonceayear,usuallyinDecemberatVienna,wheretheWAhasestablisheditsheadquartersandasmallsecretariat.TheChairmanofthePlenaryisappointedannuallyonarotationalbasisamongparticipatingstates.ThePlenaryhasestablishedaGeneralWorkingGroupandanExperts’Group,whichmeetperiodically.OfficiallanguageoftheWAisEnglish.
InformationexchangedintheWAcanincludeanymatterthatindividualparticipatingstateswishtobringtotheattentionofothermembers,suchasemergingtrendsinweaponsprograms,projectsofconcernandtheaccumulationofparticularweaponsystems.
TheWA’sspecificinformationexchangerequirementsinvolve:
• MunitionsList:Semi-annualnotificationsofarmstransfers,licensesissuedanddeniedtoallnon-participatingstates,coveringeightcategoriesofConventionalArms(includingmodelandtypeinformation)
• BasicListofDualUseGoodsandtechnologies:Semi-annualnotificationsoflicensesissued,transferofitemsanddenialsforitemsintheBasicListofdual-usegoodsandtechnologies
• SensitiveandVerySensitiveListofDualUseGoodsandTechnologies:Semi-annualnotificationsoflicensesissuedandtransferofitemsforitemsintheSensitiveorVerySensitiveLists.Membersarerequiredtoreportanydenialsoftransfersorlicensesofitemsintheselistswithin30–60days.
• Anymemberwhoundercutssuchdenials(i.e.,exportthedenieditemtothesameend-user)withinthreeyearsofthedenialissupposedtoreporttheissuanceoftheexportlicensewithin30–60days.
Critical pointsInthecontextofexportcontrolandclearcategorizationofarmsanddual-usegoodsandtechnologies,thefollowingpointsaretobenoted:
• WAisjustabodyforexchangingandcollectinginformation.Itisnotatreaty.Hence,thereisnolegal,bindingaspecttoit.
• AlldecisionsattheWAaremadebyconsensus,evenforinductionofnewmembers.Thus,asinglecountrycanblockanyproposal.Often,thereisnoconsensusregardingthescopeofWA,thecountriesthatare“statesofconcern”ortheconstituentsofa“destabilizing”transfer.
• TheArrangementdoesnothaveanobservercategory.InformationexchangedintheArrangementremainsconfidentialtotheparticipatingnationsandistreatedasprivilegeddiplomaticcommunication.
• Thedecisiontotransferordenyanitemisthesoleresponsibilityofeachparticipatingstate,andtheArrangementdoesnotimpedebona-fideciviltransactions.
• AllmeasuresundertakenwithrespecttotheArrangementareaccordingtonationaldiscretion.
• TheArrangementconsidersexportstonon-membersonly,andisnotdirectedagainstanystateorgroupofstates.
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• TheArrangementdoesnotinterferewiththerightsofstatestoacquirelegitimatemeanswithwhichtodefendthemselvespursuanttoArticle51oftheCharteroftheUnitedNations.
• Thereisaperiodicreviewofinformationandcontrolliststoaccountfortechnologicaladvancement.
• Apartfromtheabove,WAregularlyendorsesvoluntary”bestpractices”todisposeoffsurplusmilitaryequipmentandapprovesnon-bindingcriteriatoguideexportsofsmallarmsandlightweapons.Italsoeffectsagreementstoexerciseincreasedcontrolonarmsbrokersandcommitmentstobetterregulateexportsofdual-usegoodspurchasedbyrecipientssubjecttoarmsembargosiftheitemisintendedforamilitaryenduse.
The Indian contextAspartofitsexportcontrolregimeforsensitiveitems,IndiaenactsTheForeignTradeDevelopmentandRegulationAct(FTDR)of1992;theAtomicEnergyActof1962;theCustomsActof1962;andtheWeaponsofMassDestruction(WMD)Actof2005.
Besidestheselaws,Indiahadnotified,undertheForeignTradeActin1995,adetailedlistof“dual-use”itemscalledSMET(SpecialMaterial,EquipmentandTechnology).Thislistwasrevisedin1999,2005and2007,andisnowcalledtheSCOMET(SpecialChemicals,Organisms,Material,EquipmentandTechnology)list.In2008,India’sSCOMETcontrolswereharmonizedwiththeNSG(NuclearSuppliersGroup)andMTCR(MissileTechnologyControlRegime).
ExportscontrolforitemsrelatedtoaerospaceanddefenceisgovernedbytheSCOMETlistinIndia,whichoutlinestheprocedure,processandfactorsrelatingtothelicensingofcontrolleditems.
Increasing cooperationIndiahasbeenpushingforamembershipintheworlds’fourmajorexportcontrolregimes—theNuclearSuppliersGroup(NSG),AustraliaGroup(AG),WAandtheMissileTechnologyControlRegime(MTCR).India’sclaimtotheseregimesisbasedonthestringentexportcontrolsafeguardsthatithasinstitutedinrecentyears.OpeningupofIndia’scivilnuclearcooperationprogramwithothernuclearregimesalsosignalsIndia’sjoiningofaneliteclub
ofnations.ThisplacesincreasedonusonIndiatocommittoaglobalregimeofdefenceandnuclearcooperation,promotingtransparencyandresponsibilityinexportsofsensitiveitems.
TheWAhas41participatingcountries—andaccountsformorethan90%ofglobalproductionofdefencegoods.Therefore,becomingapartoftheseregimeswillhelpIndiafullyandeffectivelyintegrateitselfintotheglobaldefenceindustry,increaseitsabilitytobypassstrictlicensingrequirementsthathavepreventeditfromprocuringsophisticateddefenceequipmentandtechnologiesinthepast.ItwillalsoenableIndiatogainfullbenefitsoffreecommerceinthegoodscoveredbytheseregimes.
Defining “defence”Globally,defencegoodsandservicesaredefinedclearlyaspartofcomprehensivelistsand,thus,whatconstitutes“defence”iseasilyidentifiable—enablingacleardefinitionofthedefenceindustry.However,inIndia,thereisnosuchlistthatspecifieswhatconstitutesadefenceproduct.ThematterofdefiningthedefencenatureoftheirproducthasintriguedbothforeignandOEMs.
Todefineadefenceproduct,theyhavetorefertoatleastfourdifferentlists,dependingonthepurposeofdefiningtheirproduct:
1. IndianTradeClassificationHarmonizedSystem(ITCHS)Code:ItismaintainedbytheMinistryofCommerce’sDirectorGeneralofForeignTrade(DGFT)forthepurposeofIndia’sexternaltrade.Thelistisnotdefence-specific.Itcaterstoitemsofdefence,dual-useandevenproductsthatcanbeconsideredtobecommerciallyoff-the-shelfinnature.Forinstance,undertheHSCode88(aircraft,spacecraftandpartsthereof)therearesub-categoriessuchas“gliders,”“balloons”and“under-carriagesandpartsthereof,”whicharecommerciallyavailableproductsor,atbest,dual-useitems.
2. NationalIndustrialClassification(NIC)CodesoftheMinistryofStatisticsandProgrammeImplementation:AccordingtotherequirementsoftheDepartmentofIndustrialParticipationandProduction,companieswantingtoapplyforanindustriallicensearerequiredtoprovidethe“itemcode”fromtheNationalIndustrialClassification(NIC)Codelistof1987,whichhasonlytwocodes—359.4(manufactureofarmsandarmaments)and308.2for(ammunition)—forthe
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entiredefencemanufacturingsector.Itdoesnotspecifywhatconstitutesarms,armaments,dual-useitemsorcomponentsthatgointoarmsandammunition.
3. ProductList:ThislistisasarticulatedintheMoD’sDefenceProcurementProcedure(DPP)forthedischargeofoffsetobligationsbyforeignvendors.Althoughthislistprovidessomedetailsofitemsin27categoriesunderthreebroadheadings—defenceproducts,productsforinternalsecurityandcivilaerospaceproducts,itdoesnotdefinedual-useproductsordealwithcomponent-levelproductsandrawmaterialfordefenceproduction.Todischargeoffsetobligation,anIndiancompanyneedstobecomeanIndianOffsetPartner(IOP).TobecomeanIOP,thedefencemanufacturerneedstoprovideanitemcodefromtheNIC(1987)intheapplication.Ideally,the“productlist”shouldbeinlinewiththeNICCodetoenabletheIOPandOEMtofinalizeproductsforoffsetdischargewithease.However,thisisnotwhatactuallyhappens.
4. SpecialChemicals,Organisms,Material,EquipmentandTechnology(SCOMET)List:TheSCOMETlistismaintainedbytheMinistryofCommerce’s,DGFT.AlthoughdefencegoodsandtechnologiesarecoveredinCategory3(material,material-processingequipmentincludingtechnologies);Category5(aerospacesystems,equipmentincludingproductionandtestequipment,relatedtechnologyandspeciallydesignedcomponentsandaccessoriesthereof);andCategory7(electronics,computersandinformationtechnologyincludinginformationsecurity).Itdoesnothaveaseparatededicatedsectionforthem.Italsodoesnotdoesnotcoincidewithanyofthelistsmentionedabove.
Thislackofclarityonwhatconstitutesdefencegoodsandservicescanleadtosomeveryseriousdifficulties.
ForforeignOEMs,thelackofacleardefinitionhasledtomanyofthemoffering,aspartofoffsets,goodsandservices,whicharenotpartofanyoftheinternationaldefinitionofsuchgoods.Asaresult,therewasapossibilityofIndiaendingupwithgoodsandservicesthatcannotbeseriouslyconsideredasadvancingtheIndiandefenceindustrialbase.AccordingtotheCAGreportof2012–13ondefenceoffsets,since2005Indiahassigned16offsetcontractswithvariousvendorsforINR184.45billion.
ConclusionItisthereforeessentialforIndiatoadoptastrictdefinitionofthedefenceindustry,goods,servicesandtechnologies—preferablyalongthelinesofWA.Thisislikelytobedoneinoneofthefollowingways:
• AdoptingtheWAMunitionsList,BasicList,SensitiveandVerySensitiveListasstandardlistsofreferenceforthedefenceindustryinIndia.
• Defininganindigenouslistthatclearlylaysoutdefencegoods,services,technologies,dual-useitemsandrawmaterialforthedefenceindustry.
ThisisexpectedtohelpIndiatogetmaximumbenefitsfromtheoffsetpolicy.ItisalsoexpectedtosimplifytheprocessoflicensingforIndianmanufacturers,andclearlyhelpdefinetheIndianoffsetpartnersforoffsetprojectswithOEMs,resultinginbettergovernanceofsuchprojects.
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Impact of “Make” procedure on Indian defence industrial capabilityThedefenceindustryinIndiahasbeendominatedbythegovernment-ownedandmanagedDefencePublicSectorUndertakings(DPSUs),OrdnanceFactoryBoard(OFB)andDefenceResearchandDevelopmentOrganization(DRDO)labs.Privatesectorunits,whichcomprisearound5,200smallandmediumenterprises(SMEs),aresupplyingaround20%–25%ofrawmaterial,components,andsub-assembliestothedefencesector.ThechartandtablegivenbelowdepictsthetotalimportsdonebythecountryandthetotaloutputgeneratedbytheDPSUsandOFBsince2004–2011.ItispertinenttomentionherethatOFBandDPSUssourcearound30%oftheirinputsfromtheprivatesector.
Years Imports (US$ billion)
OFB Turnover (US$ billion)
DPSU Turnover (US$ billion)
2004-05 2.14 1.24 2.25
2005-06 1.05 1.38 2.61
2006-07 1.33 1.24 3.17
2007-08 2.21 1.39 3.35
2008-09 1.80 1.45 4.08
2009-10 2.20 1.74 5.18
2010-11 2.85 2.24 5.20
Notes:
1. TheimportonlyincludethecompleteequipmentdirectlyprocuredbyMODanddoesnotincludethesubsystemsimportedbyDPSU/OFB.
2. ThefiguresindicatetheturnoverofOFB/DPSUandnotnecessarilysuppliedtoDefence.
Emergence of private sector in Indian defence industryWiththeaimtoachieveself-relianceindefenceproduction,certainprojectcategorieswerepromulgatedunderdefenceprocurementprocedures(DPP)toencourageindigenousdevelopment.
• “Buy&Make”:Thisinvolvespurchasefromaforeignvendorfollowedbylicensedproduction/indigenousmanufactureinthecountry.Privatesector/publicsectorcanalsoparticipateinlicensedproductioninthiscategory.
• “Buy&Make(Indian)”:TheRFPwillbeissuedonlytoIndianvendors,whoareassessedtohaverequisitetechnicalandfinancialcapabilitiestoundertakesuchprojects.
• “Buy”(Indian):Thisimpliesout-rightpurchaseofexistingproductsfromanIndianvendor.
• “Make”:Thiswillmeanindigenousdesignandproductionofahightechandcomplexsystem.
0
1
2
3
4
5
6
2004
-05
2005
-06
2006
-07
2007
-08
2008
-09
2009
-10
2010
-11
Am
ount
in $
bill
ion
Source:CompiledbyQ-TechSynergy
Imports vs. domestic turnover
Imports OFBTurnover DPSUTurnover
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Make indianprojects($17bn)
BattleFieldManagement System-
$2.5bn
TacticalCommunicationSystem- $2 bn
FICV- $12.5 bn
The“Make”category,intheacquisitionprocess,isakintotheacquisitionprocedurefollowedinmajorweapon-producingcountriesandformulatedtoensuredesign,research,developmentandproductionofindigenousdefenceequipmentthroughoptimalutilizationofthepotentialoftheIndianindustry.Theunderlyingprincipletoformulateaseparateprocedureforthe‘’Make’’categoryofprocurementsistoenhancetheindigenizationcomponentinacquisitions.Togenuinelypromoteindigenousresearchanddevelopmentinthedefencesector,DPPprovidedforcostsharing,intheratioofMoD(80%)andindustry(20%).Projectscoveredunderthe“Make”decisionareexpectedtoincludehightechnologycomplexsystemstobedesigned,developedandproducedindigenously.Theaimoftheprocedureistoundertakeindigenousresearch,design,developmentandproductionbytheIndiandefenceindustry.TheseprojectsaretobeundertakenbyselectIndiancompaniesfromtheIndianindustry/defencePSUs/OFB/consortiaonalevelplayingfield.Thisprocedurewillalsobeadoptedforallupgradescategorizedas“Make.”
Indian private industry: capabilityIndia’smanufacturingprivatesectorhasproveditsmettleandinternationalcompetitivenessinthepastdecade,andsomecompaniessuchasTATA,L&T,Mahindra,Kirloskar,etc.,havealreadybeenworkinginhightechnologyspaceandmissilemanufacturingfordecades.Ithasstrengthsindesign,engineering,financeandmarketing.About75–80privatesectorcompanieshavetilldatereceived179industriallicensesforproductionofavarietyofdefencesystemsandsub-systems.Therearelargeandsmallindustriesthathave,overtheyears,builtcapabilitiesandcapacities,throughpartnershipwithpublicsectorentitiessuchasDRDOandalsowithforeigncompanies.Manylargeindustryhouseshaveeitherbuiltnewfacilitiesorcarvedoutcapacitieswithintheirowndesignandmanufacturingcapacitiesforthedefencesector.
Afterthedefencesectoropenedup,consideringitssignificantcommercialpotential,anumberofjointventures(JVs)andMemorandaofUnderstanding(MoUs)havebeenforgedbetweenforeignandIndianpartners.JVsarethebestrouteforthe“Make”programsandalsofordischargeofoffsetsinthe“Buy”or“BuyandMake”options.Since2005morethan250JVs/MoUsrelatedtodefenceinvarioussectorshavebeenforgedbyIndiancompanies.
Major projects Someoftheindigenousdefenceprograms,whereintheprivatesectorhascontributedinasignificantwayincollaborationwithDPSUsandalsoindividually,includePinakaMBRLs,someofthefieldedupgrades,Rohini/RevatiRadarProgram,Dhanushsystem,andvariousotherongoingprogramssuchasMAFIProgram,VLF/VHF,ATVandvariousshipbuildingprojects.Theintroductionof“Make”(Indian)optionin2009hasprovidedanopeninginthedefenceindustry,whichearlierwastheexclusivepreserveofDPSUs/OFs,totheprivatesector.ThepromulgationoftheDefenceProductionPolicyin2011furtheremphasizestheGovernmentofIndia’s(GoI’s)endeavortobuildarobustindigenousdefenceindustrialbasebyproactivelyencouragingincreasedinvolvementoftheIndianprivatesectorindesign,developmentandmanufactureofdefenceequipment.
0
5
10
15
20
25
30
35
2005 2006 2007 2008 2009 2010 2011 2012 (Till Nov)
Inn
umbe
rs
Source:CompiledbyQ-TechSynergy
JV MoU
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MoDhasclassifiedsomemajorprojectsunderthe“Make”category.Currently,threelargedefencecontracts,comprisingtacticalcommunicationssystem(TCS),FutureInfantryCombatVehicle(FICV)andtheBattlefieldManagementSystem(BMS)projectsfortheIndianArmy,worthacombinedINR750billion,bestepitomizethisnewapproach.SettobeawardedbytheMoDinthenearfuture,allthreeprojectswillbedesigned,developedandbuiltinIndia.Theprivatesectorwilljostleforthesecontractsalongwiththepublicsector.CompaniessuchasTataMotors,TataPower,MahindraandMahindra,AshokLeyland,L&T,WiproandInfosysareallpartofaconsortiabiddingforthesecontracts.Anotherprojectinthepipelineunderthiscategoryis1,300lightbullet-proofvehiclesworthINR7.2billion(US$144million).
Way aheadIndiahasemergedastheworld’sbiggestimporterofdefenceequipmentaccordingtoarecentreport,accountingfor10%ofglobalarmsimportsbetween2007and2011.Moreover,duringthenext10–15years,Indiawillneedtoreplaceaconsiderableproportionofitsmajorsystemsandalsoadoptnewtechnologytokeeppacewiththedefencetechnologies.Accordingly,thedefencespendingisexpectedtogrowattherateof7%to8%annuallyoverthenextfewyearsofferingopportunitiestodomesticandforeignsuppliers.Thus,thefocusoftheGoIisclearlytoincreasethelevelofindigenizationandreducedependencyonforeigncompaniessignificantly.
WhileitisprerequisitefortheprivateplayersindefencetodevelopcapabilityindesignandsystemupgradebyinvestinginIndustryR&DandHumanResources,attemptshouldbemadetowarddevelopinginnovativetechnologyandmanufacturingmethodstoincreasecostefficiency,besidesensuringhealthycompetition.Technologydevelopedorgainedfromanydevelopment/”Make”projectmustbeleveragedfurther.ItisexpectedthattheprivatesectorwillplayanactiveroleinindigenousdefenceprogramsandcontributetotheIndiandefenceindustrialcapabilitybycatchingupwiththepublicsectorinthedomesticdefencemarketshareasdepictedinthefigurebelow.
0102030405060
2012
-13
2014
-15
2016
-17
2018
-19
2020
-21
2022
-23
2024
-25
2026
-27
Am
ount
in $
bill
ion
Source: Compiled by Q-Tech Synergy
Domestic market share public vs. private
DomesticProduction PublicSectorValue
PrivateSectorValue
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Market share (domestic/private/public in US$ billion)
2012-13 2014-15 2016-17 2018-19 2020-21 2022-23 2024-25 2026-27
DomesticProduction
5.30 7.25 10.20 14.72 21.63 30.10 39.74 50.08
PublicSectorValue
3.71 4.78 6.33 8.54 11.68 15.05 19.87 25.04
PrivateSectorValue
1.59 2.46 3.88 6.18 9.95 15.05 19.87 25.04
IncasetheGoIislookingforwardtodevelopingastrongindigenousindustrialbasevia“Make”programs,itneedstomeetjustifiedexpectationsthroughpolicyinitiatives.Mostimportantly,thebasicneedistocreateacompetitiveenvironmentbyprovidingalevelplayingfieldtothecompetitors.TheMoDcouldhelpbyimplementingsomeofthechanges,mentionedbelow,inthenextrevisionoftheDPP,whichisexpectedsoon:
• Makerequirementsofthedefence(LTIPP)availabletotheindustry
• DoawaynominationofDPSUonpreferentialbasis
• Selectioncriteriaforprojectstobespecified
• Methodologyofdecidingindigenouscontentsandtimeframe
• SME’srolein“supplychain”needstobepromoted
• ProtectionfromexchangeratevariationtobeavailabletoIndianvendors
• ParityinpaymenttermsforIndianandforeignvendors
• TaxationprovisionstoberationalizedforIndianvendors
• IPRoftechnologytobeheldjointlybytheIndiancompanyandGoIoronlytheGovernment.
• Permanentbodytoreplaceintegratedprojectmanagementteams(IPMT)wherecontinuityanddomainexpertiselikelytobequestionable
• FDIlimitandpermissiontoexportinthecontextoftheprojectsunderthe“Make”and“BuyandMake”category
• CreationofaforumforinteractionbetweenGoIandindustrytoaddressissuesthatcouldbecomeimpediments
• Auniformvalueadditionprincipletobeappliedforbothmanufacturingandservicessectors,soastoprovideequalopportunitytocompaniesinthesesectorsandavoidpotentialmanipulationbyforeignvendors
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ConclusionTheindigenizationinitiativeviathe“Make”programhaspotentialtoreducedependenceonimportsfromforeignOEMstothedesiredlevel.Figure5belowdepictstheconservativeestimatedscenarioinabout15years,whichcanbeachievedforimportsvs.indigenousproduction,i.e.,a50:50ratioratherthantheoftenrepeatedratioof30:70.
Imports vs. domestic opportunities
2012-13 2014-15 2016-17 2018-19 2020-21 2022-23 2024-25 2026-27
Imports 12.38 16.13 20.72 26.17 32.45 38.31 43.05 50.08
Indigenousproduction(domesticopportunity)
5.30 7.25 10.20 14.72 21.63 30.10 39.74 50.08
Theaddedbutoften-overlookedbenefitofreducingrelianceondefenceimportsisthepositiveimpactontheIndianeconomy.Inits2005reportondefenceacquisition,theVijayKelkarCommitteequotedthatamere25%reductiononforeigndependencewilllessenforeignexchangeoutgobyapproximatelyINR85billion,alsocreatingabout120,000newjobs,andacceleratingmanufacturingGDPgrowthby8%.Thereisaninherentbenefitinthe“Make”procedure—thedefencebudget’scapitalexpendituregetsutilizedinthenationaleconomyandhelpsingeneratingskilledemployment,subsequentlyspinoffwillbetheretobeseen.
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MSME development: vital for an inclusive defence industrial baseThedefenceprocurementprocedures(DPP)haveundergonechangeswithfar-reachingconsequences.Onlyonebigoverhaulremainstobeexecutedfortheindustrytomakerapidprogress.Thedefence-offsetguidelinesthathavebeenannouncedrecentlyarecompletelynewintheiroutlookastheMoDhastriedtoincorporatethebestglobalpractices.Wenowhaveasoundsetofoffsetguidelines,whicharewell-documented,havebeenformulatedinanexceptionallyprofessionalmannerandhavebeenputupinthepublicdomain.Thepolicyhasbeenputuponthegovernmentwebsites(www.mod.nic.in)andisaccessibletoeveryone.Thisisarareoccurrencesincenotmanycountrieshavetheirpoliciesuponopenwebsiteslikeus.TheMoDandtheindustryassociationsfollowupeachoftheseannouncementswithanumberofseminarsandconferencestogenerategoodwillandbroad-basedawakening.Thus,thepolicyisproliferatingamongthedomesticindustry,theOEMsandtheacademiaquitewell.
Defenceaccountsfor2.5%oftheGDPandaround15%oftheCentralGovernment’sexpenditure.Ourdefencebudgethasthethird-highestgrowthrate(9.3%)afterRussiaandChina.Accordingtothe13thFinanceCommissionReport,thetotaldefencecapitalbudgetallocationduringthe12thPlanislikelytobeINR4,455billion.Thecapitalacquisitionsbudgetrangesbetween75%and85%ofthetotalcapitalexpenditure,andislikelytobearoundINR3,564billion.The“IndiaInc.”growthstoryisforrealandthecurrentlevelofexpendituresupportforthearmedforcesisexpectedtobesustainedbysuccessivegovernments.Therefore,inmathematicalterms,thisisaprogressincontinuum.Thevolatilesituationofourneighboringcountriesisalsoareasonfortheacceleratingdefenceexpenditure.Wheredothemicro,smallandmediumenterprises(MSMEs)figureinthisgrowthstory?
StreamliningprocurementsintheMoDisawork-in-progress,andasthingsstandtoday,theMoDisseekingincreasedparticipationfromthelocalindustry.The“BuyandMake(Indian)”categoryandthe“Make”categoryisexpectedtobethefocusduringtheplanningprocess,resultinginmoreenquiriesinthesetwo
categories.ThisisgoodnewsforIndiaInc.ItalsoplacesanaddedresponsibilityonIndiaInc.intermsofformingpartnershipsandalliances.Thevariousconsortiaformedinvariouspartsoftheworld—especiallythesuccessfulonessuchasEADS,Finmeccanica,Safran,UTC—islikelytosetthepathforintrospection.Ifthereisanopportunityforsomeofourcompaniestoformsuchpowerfulalliances,itcanbeagamechanger.Thecomingtogetherofcomplementarycapabilitiesisaforceinitself.
Besidesrepatriatingaportionoftheforeignexchangebackintothecountry,defenceoffsetasatoolwasintroducedto,“CreateaDefenceIndustrialBase.”Awidespreadandsoundbasecannotalonebeformedthroughthegrowthoflargeconglomerates.Thiscanhappenonlyifweareabletotakethelargersegmentoftheindustryonboardwithusinthisjourneyofprogress.Onecannotover-emphasizetheimportanceofthesmallscalesectortocreatearobustdefenceindustrialbase.Onlywhenprogressisdistributedandcapability,alongwithinclusivegrowth,isprevalenteverywherecanthenationhaveadecentindustrialcapability.Therefore,“themanandmachinestory”isveryimportant.
Inthiscontext,thereispositivenewsregardingthesmallandmediumenterprises.Thereisagoodamountofsynergybetweenthepoliciesofvariousministrieswhenitconcernsthesmallindustriessector.WhileweallareawareofthemultiplierincentiveprovidedtothesmallsegmentbytheMoD,thereareextantregulationssuchastheMSMEDActof2006andthePublicProcurementPolicythatareinsync.ThePublicProcurementPolicyiscurrentlyonanadvisorynotestageandislikelytobecomemandatoryinacoupleofyears.Theprocedurestosourcefromthesmallsegmentmustbeputintoplaceassoonaspossible.
ThemultipliereffectforMSMEs,asanIndianOffsetPartner(IOP),providedintheDPPisverysignificant.Now,itisaquestionofhowthiscanbeputtogooduse,bothbyforeignOEMsandIndianMSMEs.Thiscallsforadiscussion,andorganizationssuchasNationalSmallIndustriesCorporation(NSIC)canplayasignificantroleinthisgrowthstory.Thegovernmentcanonlyprovideenablersanditisuptotheindustrytocapitalizeonthese
Eye on defence | 12
and“dress-up”toavailthedesiredbenefits.ThebenefitsofvariouspoliciesmustflowtotheMSMEsdirectlyandwemustseethisgrowthhappeninginthenexttwoyearsitself.TheseMSMEsareourbackboneandwemuststrengthenthemsothatwecanstanderectasanindustry.
Itistrulysaid,“IfIndialivesinvillages;theindustrylivesinMSMEs.”
Thereareoftentalksofhand-holdingoftheMSMEstohelpthemgraduatetothenextlevel.Hand-holdingdoesnotmeanspoon-feeding;itismerelyprovidingenablers.Thepolicyinitiativesmustbeputtogoodusetohelpthemprogressandgainaccesstothebenefits.TheGoIrequiresmorefromtheMSMEsthanwhattheMSMEsmayrequirefromtheGoI.Thegovernmentis
awareofthissituationand,thus,thereareenablersatvariouspolicylevels.Wemustbeabletoexploreoptionsforfundingthematratesthatareaffordablebythesmallunits.Thislowratemightbegeneratedthroughinnovativeideas,suchasrawmaterialassistance,creditguaranteesandforeignlineofcreditwithreduced
interestrates.Fundingsupportwithmanagementassistancecanalsobeaverygoodidea.TheMSMEscanthenconcentrateonwhattheydobestandwhilethefundingorganizationcomesupwithmanagementtechniquesforvibrantprogress.
TheinterestingstoryoftheiPhoneisrelevanthere.SometimebacktheTIMEmagazinereportedthat,oftheUS$379thattheiPhonecosts,US$70goesintorawmaterial;US$9goesintomanufacturing(which,incidentally,takesplaceinChina);andUS$300residesintheUSwheretheIPisowned.Thereare,therefore,noshortcutsfordesignanddevelopment.Investmentsinresearchanddevelopment(R&D),anddesignanddevelopmentareessentialifwearetomakeprogressinrealterms.Theoffsetguidelines,bythemselves,provide
forinvestmentinR&Dasavalidmethodofdischargeofoffsetobligations.However,this,somehow,hasnotseenthelightoftheday.Now,intherecentlyissuedguidelines,R&Dhasbeenclubbedwithservices.ThisoffersgreatscopeforinvestmentinR&Dofeligible
Eye on defence | 13
productsasavalidmethodofdischargeofoffsetobligations.NichetechnologiesresideinMSMEsastheyareabletocreateandsustaintechnology.Theyalsoholdthetechnologyclosetotheirchest.DevelopmentoftheMSMEsectoristhekeytobuildingarobustindustrialbase.
DefencePublicSectorUnits(DPSUs)areboundbythePublicProcurementPolicyandneedtoproactivelysourceupto20%oftheirannualprocurementfromMSMEs.Therearealsoaround358itemsreservedfortheMSMEsector,whichshouldberigorouslyfollowed.Thereis,however,aneedforrevisingthelisttomakeitrelevantforthecurrentlyevolvingscenario.
CollaborationbetweenMSMEsisthekeytosuccess.Thesmallsegmentindustriesholdthekeytodevelopmentsincetheyholdnichecapabilities.ThecallofthedayistoestablishstronglinkagesbetweenMSMEsdomesticallywiththetierII/IIIcompaniesabroadtoachieveincreasedsynergies.WhiletheoffsetguidelineshaveallowedthetierIcompaniestodischargeoffsetonbehalfoftheOEMs,thisisnotverystrictlyrestrictedtothetierIcompaniesalone.AtierIcompanysuchasPrattandWhitney,GEorSnecmawillalsohaveitsowntierIandtierII.Therefore,theoffsetauthoritiesmustbeabletoseethisfundamentallinkageand,makeapolicyinclusiveforholisticgrowth.
AnadditionalrouteforthedischargeofoffsetbyFDIinvestmentthroughventurecapitalfundsintheMSMEsectorneedstobeexplored.WhilethenewdefenceoffsetpolicymakesitattractivefortheforeignOEMbyassigningamultiplierof1.5foreveryunitofcapitalinvestedintheMSMEsector,itstilldoesnotprovideasolutiontotheviabilitygapinfundingthatexistsintheMSMEsector.Duetohighriskandlonggestationperiods,assetsarenotcreatedtosecuredebtfrombanksforvariousscalingupactivitiesrelatedtoplantandequipment,talentacquisition,R&D,workingcapitalandotheroperations.Asaresult,manycompanieswithcorecompetenciesinthedefencesectorareorareexpectedtobeunabletoabsorbtheoffsetworkthattheOEMiswillingtodischargetotheMSMEs.IntroductionofventurecapitalfundsasanavenueforoffsetdischargeisexpectedtohelpcreateasuitablefinancialplatformthroughwhichOEMscandischargetheiroffsetobligation.ThisisanticipatedtonotonlyhelptheOEMinfasterdischargeoftheiroffsetobligationsbutalsoprovidethemuch-neededviabilitygapfundingthatcontinuestoplaguetheMSMEsector.Thiscallsforseriousconsideration,asthisisaviableroutetotakeMSMEstothenextlevel.
Eye on defence | 14
Request for Information (RFIs)
Date of issue RFI details Response date Issued by Service3Dec2012 PassiveSurveillanceand
ELINTsystem31Dec2012 DASR(EW) IndianArmy
7Nov2012 ModularBridgemountedonHighMobilityVehicle
10Dec2012 CombEngrs–5/CEDteEngineer-in-Chief’sBranch,IntegratedHQofMoD(Army)
IndianArmy
18Oct2012 PracticeAmmunitionforT72,T90(125mm)andArjun(120mm)Tank
18Nov2012 DGMFSenaBhawanIHQHQofMOD(Army)
IndianArmy
17Oct2012 ProjectASCONPhase-4(ArmyStaticSwitchedCommunicationNetwork)
5Dec2012 DteGenofSignals IndianArmy
27Sep2012 155MM/105MMBlankAmmunition
30Oct2012 DirectorateGeneralofArtillery(Arty-5),GeneralStaffBranch
IndianArmy
12Nov2012 QuotationsforProcurementof02Nos09KLAirCraftRefuellersalongwithinitialspares
20Dec2012 DirectorateofProcurement
IndianNavy
20Sep2012 Highspeedexpendableaerialtarget
30Nov2012 DirectorateofStaffRequirementsIntegratedHeadquartersofMoD(Navy)
IndianNavy
27Nov2012 IONofPartnerforAircraftRefueller
10Dec2012 VehicleFactoryJabalpur
---
26Sep2012 ExpressionofInterest:QRs/SpecificationforMineProtectedVehicle(MPV)
12Oct2012 ProvBranchDte.Gen.,CRPF,NewDelhi
CRPF
October 2012 – December 2012
Eye on defence | 15
Request for Proposal (RFPs)
Date of issue RFI details Response date Issued by Remarks4Dec2012 HarnessforBulletProof
Jacket25Dec2012 OrdBranch,HQ
NorthernCommandUdhampur(J&K)
ForIAQty:7810Nos.
4Dec2012 BallisticHelmetwithInbuiltMIC/Headphone
9Jan2013 GOC-in-C,NorthernCommand
ForIAQty:24Nos.
1Dec2012 DigitalNightVisionDevices 26Dec2012 GSO1Avn ForIAQty:6Nos.
29Nov2012 AirBorneTacticalVest 17Dec2012 HQCentralCommandSTBranch
ForIAQty:250units
28Nov2012 FabricationofMockupforDevpofTankTroopsTacticalTrainingSimulator(T4S)
22Dec2012 SimulatorDevelopmentDivision
ForIA
27Nov2012 TacticalVest 27Dec2012 GOC-in-C ForIAQty:4000Nos.
10Nov2012 MountingofGPS(forArjunTank)
3Dec2012 ComdtCODAgra ForIAQty:7Nos.
31Oct2012 BulletProofShield 17Nov2012 GOC-in-C,HQNorthernCommand
ForIAQty:50Nos.
19Oct2012 SparesforRifle7.62mm58P/58V(Ex-Czech)
17Dec2012 DDGPPO ForIA
12Oct2012 FiberReinforcedPlastic(FRP)Boats
19Oct2012 HeadquartersWesternCommand
ForIAQty:10Nos.
1Oct2012 BombML120MMMortarSmokePWPAmmunitionwithFUZEDANO-162MK9(M-1)/DA4Aorequivalent
26Nov2012 DDGPPO,AMGO(SSA)MGO/PPO-5
ForIAQty:9605Nos.
5Dec2012 PortableColourDopplercumUSGMachine
24Dec2012 DirectorateGeneralofMedicalServices(Air)
ForIAF
4Dec2012 LightDrivingSimulator1.5Configurationwith6DoF
14Feb2013 DirectorateofProcurementIndigenousPurchaseWing
ForIAF
25Nov2012 OpticalDeviceforIL-76 24Jan2012 DirectorateofProcurement,IndigenousPurchaseWing
ForIAF
October 2012 – December 2012
Eye on defence | 16
Date of issue RFI details Response date Issued by Remarks16Nov2012 BrakeParachutesforHawk
MK-1325Feb2012 DteofArmt&Safety
Eqpt,AirHeadquartersForIAFQty:218Units
1Nov2012 CommunicationEquipments 16Nov2012 HQWACIAFSubrotoPark
ForIAF
25Oct2012 HeliflexAntennaforGP328 14Nov2012 LPCell,9BRD,AFPune
ForIAFQty:200Nos.
22Oct2012 LowCostSecurityEquipments
26Nov2012 SOProvostHQMC,IAF-Nagpur
ForIAF
18Oct2012 SimulatorTrainingforBoeing737-200Aircraft
8Nov2012 DirectorateofOPS(IEW)AirHQs(VayuBhawan)
ForIAF
16Oct2012 NightVisionGoggles 11Nov2012 ControllerofProcurementMaterialOrganisation(Mumbai)
ForINQty:70Nos.
26Sep2012 PassiveNightVisionMonocular
20Nov2012 DG,CRPF(ProcurementCellofProvisioningDirectorate)
ForCRPFQty:3804Nos.
26Sep2012 PassiveNightVisionBinocular&KitProv
21Nov2012 DirectorateGeneral,CRPFProvisioningDte.(ProcurementCell)
ForCRPFBinocular:3241Nos.andKit:22Nos
22Sep2012 MobileSignalBoosterDualBand2Sig
6Nov2012 Commandant2SignalBn,CRPF,Hyderabad
ForCRPFQty:15Nos.
15Nov2012 HandHeldThermalImager(Biocular)
20Nov2012 DirectorateGeneral,BorderSecurityForce
ForBSFQty:355Nos.
12Oct2012 LifeSavingEqpts,LifeJacketsandLifeBuoys
30Oct2012 AC/WWForInspectorGeneralFTRHQBSFSB
ForBSFQty:286Nos.
26Sep2012 NewTrimble(GPS)forMI-17IVHelicopter
30Oct2012 DGBSF,AirWing ForBSFQty:04Nos.
29Oct2012 RDX-TNT60-40Type-AandType-B
18Dec2012 OrdnanceFactoryBadmal
IssuedbyOFBQty:Type-Ais205MTandType-Bis275MT
20Oct2012 AutomaticCaseGaugingMachinefor5.56mmCartridgeCase
18Dec2012 IndianOrdnanceFactoriesVarangaon
IssuedbyOFBQty:04Nos.
Eye on defence | 17
Date of issue RFI details Response date Issued by Remarks20Oct2012 AutomaticCaseGauging
Machinefor7.62mmA-7CartridgeCase
18Dec2012 IndianOrdnanceFactoryVarangaon
IssuedbyOFBQty:01No.
17Oct2012 ProximityFUZEforFB40(Filled)for40MMPFFCAmmn
30Nov2012 OrdnanceFactoryKhamaria,Jabalpur
IssuedbyOFBQty:69700Nos.
17Oct2012 SupplyErectionCommissioningofLeadSwagingPressfor5.56mmAmmunition
11Dec2012 OrdnanceFactory,Varangaon
IssuedbyOFB
17Oct2012 SupplyErectionCommissioningofLeadSwagingPressforA-7Ammunition
11Dec2012 OrdnanceFactory,Varangaon
IssuedbyOFB
3Oct2012 SupplyErectionCommissioningofAutomaticPrimerFillingPlantfor5.56mmAmmunition
27Nov2012 OrdnanceFactoryVarangaon,Maharashtra
IssuedbyOFB
3Oct2012 SupplyErectionCommissioningofAutomaticPrimerFillingPlantfor7.62mmAmmunitionwithconversionkitfor5.56mmammunition
27Nov2012 OrdnanceFactoryVarangaon,Maharashtra
IssuedbyOFB
20Nov2012 Deepsearchmine/metaldetector
12Dec2012 DGCISF ForCISFQty:21Nos.
9Dec2012 Longrangeelectroopticpayload
9Feb2013 ADRDE*AerialDeliveryResearch&DevelopmentEstablishment
IssuedbyDRDO
4Dec2012 FRPspeedboat 8Jan2013 ITR*IntegratedTestRangeLab
IssuedbyDRDO
Eye on defence | 18
List of industrial licenses (ILs) filed from September 2012 - October 2012Application no. and date
Name of the applicant Item of manufacture
6503/09/2012
MicropackLtd. Manufactureofprintedcircuitsfordefenceandaerospace
6611/09/2012
RangsonsDefenceSolutionsPvt.Ltd. Design/development/manufacture/serviceofelectronicsystemsandcommunicationsystemsincludingpartsandaccessoriesforRFandMW;opticandsurveillancesystems;interconnects;metalandcompositesusedindefenceandaerospaceapplication
6714/09/2012
HBLPowerSystemsLtd. Airconditionersandpartsthereof
6814/09/2012
BharatForgeLtd. Telecommunications—manufactureandupgradeofcombatsurveillancesystems
6917/09/2012
NallaboluIndustriesPvt.Ltd. Slurry/emulsion
7021/09/2012
SpectrumAntenna&AvionicsSystemsPvt.Ltd.
Airborneantennas,avionicssystemsRadomesantennasparts
7126/09/2012
PipavavDefenceAndOffshoreEngineeringCo.Ltd.
DevelopmentandmanufactureofC4IsystemsincludingCMS,BMS,IPMSandIBS,Electro-opticalsystems,underwatersystemsincludingsonars,andavionic
7303/10/2012
RealtimeTechsolutionsPvt.Ltd. Blocks/segmentsofcombatsimulators,commandcontrolcentersmanagementsystems,platformmanagement-systemsandcompleteATES,simulators,commandcontrolcenters
7404/10/2012
SakthiAerospacePvt.Ltd. PartsandaccessoriesN.E.C.forspecialpurposenon-electricalmachinery/equipmentNEC-partsofrifle,gunandcarbine
7504/10/2012
AtulLtd. PhosgeneCarbonylChloride,CarbonylDi-Chloride,CarbonOxy-Chloride
7604/10/2012
SandeepMetalcraftPvt.Ltd. Sub-assembliesofarmsandammunitionweaponparts,safeandarmmechanism,timers,cartridgeSAAparts
7717/10/2012
AppliedElectroMagneticsPvt.Ltd. SpeciallydesignedsoftwareforCommandCommunication,Control,ComputerandIntelligence(C4I)applications,VOIP-basedvoicecommunicationequipmentandcontrolsystem
7830/10/2012
VinirEngineeringPvt.Ltd. Opendieforging,closeddieforging,CNCmachinedcomponentsandassembliesfordefenceindustries
Eye on defence | 19
New projects/investments/contracts
Name of entity
Project details Value*
IndianArmy
►
►
• TheVeryShortRangeAirDefenceSystem(VSHORADS)contractfornearly1,000launchersystemsandmorethan6,000missileshasprogressedintoacrucialphase.ThecurrentphasewillinvolvequalityassurancetestsatBengaluruandacheckingoftheelectronicssystemsonthethreeremainingcontendersinLadakh.
• Thereisathree-waycompetitionbetweentheFrenchMBDAMistral,Sweden’sSAABRBS70NGandRussia’sKBMnewgenerationIgla-S.
• Inthecurrentphase,therewillalsobediscussionsontransferoftechnologytothedefaultlicensemanufacturingpartner,BharatDynamicsLtd.
INR323.1billion
IndianAirForce
►
►
• IndiasignedadealwithRussiafor40Su-30MKIfighteraircraft,whichwillbeupgradedtotheSuperSukhoiconfiguration.
• Thefirstdeliveryisexpectedin2014–15andwiththeadditionofthese40aircraftthetotalnumberofSukhoiwillreach270.
• ThedelayinthesigningofthecontractwithFrance’sDassaultfor126RafalefightherjetshasalsonecessitatedtheneedtoprocureSuperSukhois.
INR188.5billion
IndianAirForce
►
►
• TheGoIhasshortlistedBoeing,withitsChinookhelicopter,toprocure15heavy-liftchoppersforIAF.
• ThecostofthecontactisestimatedtobeworthINR53.85billion(US$1billion).
• Indiaalsoplanstobuy22AH-64DBlockIIIApachehelicoptersfromBoeingatanestimatedcostofINR75.39billion(US$1.4billion).
►INR129.24billion
IndianAirForceandIndianArmy
►
• TheUnionCabinetapprovedaplantoproduce200airversionsoftheBrahmoscruisemissileandtoprocure10,000InvarmissilesfromRussiafortheT-90tanksoftheArmy.
• Undertheproposal,10,000InvarmissileswillbeprocuredbyRussianmanufacturersandanother15,000missileswillbelicensemanufacturedbytheBharatDynamicsLimited(BDL)underthetransferoftechnology.
INR80billion
BharatDynamicsLimited
►
• BDLplanstosetupamissileproductionunitatIbrahimpatnaminAndhraPradesh.
• Thisislikelytogeneratedirectandindirectemploymentforaround700and2,000people,respectively.
INR25billion
Eye on defence | 20
Name of entity
Project details Value*
IndianArmedForces
►
• Indiawillpurchase10thousandeachofKonrurs-Mguidedanti-tankmissilesandtheInvarguidedanti-tankmissilesfromRussia.
• Inadditiontothe10thousandInvarguidedantitankmissilesdeliveredfromRussia,another15thousandwillbemanufacturedinIndiabyBDL.
INR12billion(foranti-tankmissilesfromRussia)
IndianArmy
►
• TheCabinetCommitteeonSecurityclearedtheproposaltoprocure10,000Konkurs-Manti-tankguidedmissilesfortheArmyfromRussia.
• TheKonkurs-Mweaponsystemswillaugmenttheanti-tankarsenalintheArmy.
INR12billion
DefenceResearchandDevelopmentOrganisation(DRDO)
• TheDRDOhasidentifiedanewmissilelaunchsiteatMachalipatnaminAndhraPradeshforwhichithasaskedtheGovernmentofAndhraPradeshfor260acresofland.
INR10billion
DefenceResearchandDevelopmentOrganisation
• TheDRDOhaslaunchedanambitiousprojecttodevelopIndia’sownfieldgun(a155-mmfieldgun)inassociationwiththeordnancefactoriesandtheprivateplayers.
INR3–4billion
IndianNavy
►
►
• TheUSNavyplacedanorderforthelightweightair-launchedMk-54torpedoesfromtheUS-basedRaytheonfortheIndianNavy.
• ThetorpedoeswillbedeployedontheeightP-8Ilong-rangemaritimeaircraftbeingbuiltbyBoeing.
• TheMk-54canbedeployedfromasurfaceship,helicopterorfixedwingaircrafttotrack,classifyandattackunderwatertargets.
INR2.4billion(fortheIndianandAustraliannavies)
Boeing
►
• TheUSgovernmenthasawardedBoeingacontracttobuild“BeddownInfrastructureFacilities”fortheC-17heavylifttransportaircraftorderedbytheIndianAirForce(IAF)atHindonAirForceStation,nearNewDelhi.
• Beddowninfrastructureisatypeoffacilitythatisspecifictoaparticularaircrafttypeataparticularbase.Thisisthefirstphaseofconstructionexpectedtobeexecutedby2013.
INR1.1billion
HindustanAeronauticsLimited(HAL)
• HALopeneditsstrategicelectronicsfactoryatKasaragodinKeralatoproduceadvancedavionicssystemsforaircraftandhelicopters.
INR660million(Phase-I)
Eye on defence | 21
Name of entity
Project details Value*
CRPF
►
• TheGoIhasfloatedamulti-countrytendertoprocurearound4,000specialized“humandetecting”nightvisiondevicesapartfrommorethan3,000binocularsforuseinthedarkfornaxaloperations.
• Themandatoryrequirementofthesenightvisiongadgets,accordingtothetender,isto"detectandrecognizehumanbeingswithin125–200metresinstarlitconditionswithoutmoonlight".
NA
IndianAirForce
►
►
►
• TheIAFhascontractedfor230SukhoiSu-30MKIfighterjetsfromRussia,ofwhich140willbemanufacturedatHALinIndiaby2013–14.
• ThesenewjetswillreplacethephasingoutofMiG-21sandMiG-27s.
• Inaddition,Indiahasfinalizedanothercontractfor42moreSu-30MKIfighters,tobebuiltunderlicencefromRussiaatHAL'sNashikfacility,takingthetotalnumberofSu-30sinserviceto272.ThishasmadeIndiatheworld'slargestoperatoroftheSu-30type.
• FurthermoreIndiaisintalkswithRussiatoupgradeitsfleetofSukhoiSu-30swithnewradarandavionics,beginningwiththefirst50Sukhoisinductedin1997.
NA
TataSteel
►
►
• TataSteelhasinaugurateditssecondaerospaceservicecenterinXi’aninChina,boostingitsaerospaceoperationsinthecountry.
• ThecompanyopeneditsfirstservicecenterinSuzhouin2009.
• Thenewfacilityisapproximately600milessouthwestofBeijing,theregionthataccountsfor40%ofthetotalaerospacemanufacturingcapacityinChina.
NA
IndianArmy
►
• In2013,IndiawillreceivethefirsttankdigitalcontrolsystemsdevelopedincooperationwithtwoRussiancompanies—UralvagonzavodandSozvezdie.
• Thesedigitaltanksenablethecommanderstocommandunitsonthebattlefieldinrealtimemodeconnectingallarmoredvehiclesintoaunifiedinformationnetwork.
NA
IndianCoastGuard
►
• NorthropGrummanCorporationwillsupplyadvancedshipboardnavigationsystemsfor20fastpatrolvesselsfortheIndianCoastGuard.
• Theshipsetwillbedeliveredstartinglate2012till2015.
NA
*ThevaluesofthedealshavebeenconvertedtoIndianRupeesusingOandacurrencyconversiontool
1US$=INR53.85(Averageofthevaluefrom1October2012to12December2012)
Eye on defence | 22
Joint ventures and alliances
Name of entities
Nature of transaction Value*
IndianAirForce,HAL,BrahMosAerospace
►
►
• Indiahassignedajointventure(JV)withRussiaunderwhichthelatterwillsupply200high-precisionsupersoniccruisemissileBrahMostotheIAF.
• Onthebackofthisdeal,IndiahassetupanothermanufacturingandsystemintegrationplantinThiruvananthapuramformissileproduction.
• TheintegrationoftheairversionofthemissilewillbedonebyHALandthemissileswillberetrofittedontheRussian-builtSukhoiSu-30MKIfighterjets.
INR60billion
UnitedAircraftCorporationandHAL
►
►
►
• AnIndo-Russianproject,tojointlydesignatransportaircraftformilitariesofboththecountries,waskickedoffinMoscowon3December.
• InOctober,IndiaenteredanagreementwiththeRussiancompanyforthepreliminarydesignphase(PDP)contractforMultiroleTransportAircraft.TenmonthsafterthePDPcontract,thedetaildesignphase(DDP)contractwillbesignedtocompletethedesignanddevelopmentofMTA.
• Theprojectisbeingexecutedby30engineersfromIndia'sstate-runaerospacecompanyHALanditsRussiancounterparttheUnitedAircraftCorporation(UAC).
INR32.31billion(US$600million)
SAABABandPipavavDefenceandOffshoreEngineeringLimited
• SAABAB,aSwedishaerospaceanddefencecompany,signedanMOUconcerningastrategicinvestmentinPipavavDefenceandOffshoreEngineeringLimited(Pipavav).Withthisdeal,SAABhasacquiredagoodplatformforgrowthintheIndianmarket.
• Aftertheinvestment,SAABhasapproximatelya3.5%shareholdinginPipavav.
INR2.01billion
QuestGlobalandSAABAB
►
►
• India-basedengineeringservicesprovider“QuESTGlobal”hassetupaJVwithSwedishdefenceandsecuritycompanySAABABtoestablishanaero-structureassemblyventure.
• QuESTwillholda74%stakeinthenewcompany,whichwillbebasedinBelgaum(Karnataka).
• Theunitwillcommenceitsoperationsinmid-2013andmanufacturespecificpartsandassemblesubstantialsectionsofcommercialaircraftsuchasBoeing787DreamlinerandAirbusA320andA380.
INR550million
PipavavDefenceandOffshoreEngineeringLimitedandMazagonDock
• PipavhasincorporatedaJVwiththeDPSU,MazagonDock.
• The50:50JVnamed“MazagonDockPipavavDefence”willconstructsurfacewarshipsfortheIndianNavy.
NA
Eye on defence | 23
Name of entities
Nature of transaction Value*
DefianceTechnologiesandAusyGroup
►
►
• India-basedDefianceTechnologiesLtd.,aHindujaGroupcompanyprovidingengineering,manufacturingandenterpriseservicesandsolutionsforvariousindustrieshassignedanMoUwithAusyGroupofFrance(whichspecializesinhightechnologyandengineering)tosetupaJVtoaddressdefenceoffsetrequirementsinIndia.
• Defiancewillholdamajoritystakeinthejointventure.
• TheJVwillmeetAusy’scustomers’commitmentforthesourcingobligationasmandatedbydefenceoffsetpolicynormsofIndiaandallowAusytobelistedintheoffsetdefencesupplierlist.
NA
AxisAerospaceandTechnologiesLtd.
• AxisAerospaceandTechnologiesLtd.islookingforacquisitionstoexpanditsofferinginengineeringservicesforcivil,commercialanddefenceoffsetmarkets.
► • Thecompanyhassetupadedicatedoffshoredevelopmentcenterwithitssubsidiary(CADES)todevelopfuselageforAirbus.ItsnewfacilityatKirloskarBusinessParkwillprovidesolutions,includingproductdevelopmentandmanufacturingprocessesforaerospace,defence,automotiveandheavyengineeringindustries.
► • Italsoplanstosetupa75-acresupplychainclusterintheupcomingaerospaceparkneartheBengaluruinternationalairportatDevanahalli,around40kmfromthecitycenter,toprovidemanufacturingandalliedsupportfacilitiestoglobalaerospaceanddefencefirms.
NA
KamanAerospaceGroupandKinecoPrivateLtd.
►
• KamanAerospaceGroup,Inc.,asubsidiaryofKamanCorporationandKinecoPvt.Ltd.signedadefinitiveagreementtoformamanufacturingJVinIndia.ThenewcompanywillbenamedKinecoKamanCompositesIndiaPvt.Ltd.
• TheventureisbasedinGoaandwillmanufactureadvancedcompositestructuresforaerospace,imaging/medicalandotherindustries.
NA
MahindraandMahindra(M&M)
►
• M&MrenewedtalkstobuyUS-basedaircraftmaker,HawkerBeechcraft.ThecompanyhadearlierlostitsbidtotheChinesefirmSuperiorAviationBeijingCo.
• BeechcraftislikelytoinvitebidsagainforasaleprocessasitstalkswiththeChinesefirmislikelytohavefailed.
NA
*ThevaluesofthedealshavebeenconvertedtoIndianRupeesusingOandacurrencyconversiontool
1US$=INR53.85and1SEK=INR8.07(Averageofthevaluefrom1October2012to12December2012)
Eye on defence | 24
Country-level deals and initiatives
Country Nature of transaction Additional detailsUnitedStates
• TheIndiaNavyalongwithitsUScounterpartheldIndo-USsubmarinerescueexercise“INDIAEX-2012.”Thenaviespracticedtherescueoftrappedsubmarinesunderthesea.
• TheUSNavy’sUnderseaRescueCommandshippedasubmarinerescuesystem–adeep-submergencerescuevessel(DSRV)orasubmarinerescuechamber(SRC)totheexerciseareaoffMumbai.
• TheDSRVorSRCwilldivedeepunderwaterto“mate’’with“disabled’’submarinestorescuesailorsinintricatemaneuversrarelypracticedbyIndiansailors.
Russia • ThetwelfthmeetingoftheIndia-Russiainter-governmentalCommissiononMilitaryTechnicalCooperationwasheldinNewDelhi.
• TheCommissionreviewedanddiscussedthestatusofsomeofthemajorissuesinmilitarytechnicalcooperation.
• TheCommissionalsoendorsedtheprotocolsofthemeetingsoftheWorkingGrouponShipbuilding,AviationandLandSystems,(WGSALS)andtheWorkingGrouponMilitaryTechnicalCooperation(WG-MTC),whichwereheldinNewDelhion27–28August2012and30–31August2012,respectively.
Spain
►
• IndiaandSpainsignedanMoUunderwhichtheywillencouragecollaborationbetweentheirdefenceindustriesandexchangeofpersonnel.
• TheMoUwassignedbytheIndianDefenceMinister,AKAntony,andhisSpanishcounterpartPedroMorenésEulate.
• Thetwosidesagreedtoexchangedefence-relatedexperienceandinformation,andencouragevisitsofpersonnelandcollaborationinthedefenceindustryandsimilarareasofcooperation.
• TheMoUondefencewasamongthefivepactssignedaftercomprehensivetalksbetweenthePrimeMinister,ManmohanSingh,andthevisitingKingJuanCarlosIonbilateral,regionalandinternationalissues.
Indonesia • IndiaandIndonesiadecidedtosignificantlyenhancetheirdefencecooperationinthefirstministeriallevelbiennialdefencedialogbetweenDefenceMinister,Mr.AKAntony,andhisIndonesiancounterpart,MrPurnomoYusgiantoro.►
• Thetwosidesexchangedviewsonissuesrelatingtoregionalandglobalsecurity,bilateralexercisesinvolvingservices,training,co-productionofdefenceequipmentandammunitionsandvisitsathighlevels.
• ThetwosidesalsoexchangedviewsontheemergingscenarioinAfghanistanandWestAsia.
Eye on defence | 25
Country Nature of transaction Additional details
Nigeria • NigeriaandIndiaagreedtostrengthentheirbilateraltiesinthedefencesector.
• TheneedtostrengthenthebilateralrelationswasstatedbytheActingMinisterofDefence,Mrs.OlusolaObadawhenstudentsoftheNationalDefenceUniversityofIndia,ledbyIndia'sHighCommissionertoNigeriavisitedherinAbuja.
• Mrs.ObadastressedonexpandingthesynergybetweentwocountriestomovetheMOUforwardandfocusontherecentsecuritychallengesfacingNigeria.
• IntheMoUsignedbetweenIndiaandNigeriain2007,IndiahadpledgedtoassistNigeriatoraiseitsdefencecapabilities.
Singapore • TheIndianDefenceMinister,AKAntony,andthevisitingMinisterofDefenceofSingapore,Dr.NgEngHen,exchangedviewsontheglobalandregionalsecurityscenario.
• IndiaandSingaporeagreedtofurtherenhancethebilateraldefencerelationshiptocontributetoregionalpeaceandstability.
• Bothministersagreedtocontinuewiththeon-goinginteractionsbetweenthedefenceestablishmentsofthetwocountries,throughregularjointmilitarytrainingandexercisesetc.
• TheyalsodiscussedthesecuritysituationintheAsia-PacificregionandacknowledgedtheroleoftheASEANDefenceMinistersMeeting(ADMM)plusframeworktopromotedialogintheregion.
Japan • GeneralHaruhikoKataoka,ChiefofStaff,JapanAirSelfDefenceForcewasinIndiafrom19–21Nov2012forathree-daygoodwillvisit.
• Thevisitassumedspecialsignificanceinthelightofimprovingmilitarycooperationandconsolidationofexistingtiesbetweenthetwocountries.
Eye on defence | 26
Industry buzz
Government decided to divest its 10% stake in HALTheCabinetCommitteeonEconomicAffairshasalreadyapproveddivestmentofa10%equityinHALthroughaninitialpublicofferinthedomesticmarket.InawrittenreplytotheRajyaSabha,theMinisterofStateforFinance,SSPalanimanickam,saidthattheGoIhasdecidedtodivestitsstakeinnineothercompaniesincludinga10%stakesaleeachinRashtriyaIspatNigamLtd,OilIndiaandNationalMineralDevelopmentCorporationaswellasa12.15%stakeinNationalAluminiumCompanyLimited,10.82%inSteelAuthorityofIndiaLimited,9.50%inNationalThermalPowerCorporation,9.33%inMineralsandMetalsTradingCorporation(India),5%inBharatHeavyElectricalsLimitedand4.01%inHindustanCopper.ThismoveisinlinewiththeGoI’splantoachievethebudgetarytargetofINR300billionsetforthefinancialyear2012–13.
(Source:“Govttodivestminoritystakein10PSUsincludingHAL,OILandNMDC:FinanceMinistry,”MetisEnergyInsider,9December2012,viaFactiva,©2012MetisBusinessSolutionsPvt.Ltd.)
US reluctant to provide full military knowhow for anti-tank guided missilesIsraelhasupstagedtheUStosupplythird-generationanti-tankguidedmissiles(ATGMs)totheIndianArmy,worthapproximatelyINR53.85billion(US$1billion).TheplantogoinfortheAmericanFGM-148JavelinATGMshasbeenshelvedbecauseofWashington’sreluctancetoprovidefullmilitaryknowhow—licensed“transferoftechnology‘’,whichcanallowIndiatoindigenouslymanufacturethe“tankkillers’’inlargenumbers.ThishasrekindledfearsintheIndiandefenceestablishmentabouttheUSnotbeingareliablelong-termsupplierofcutting-edgemilitarytechnology.Thedeal,iffinalized,willbethethirdmajormissileprogrambetweenIndiaandIsrael.
(Source:“IsraelpipsUSinanti-tankguidedmissilesupplytoIndia,”AgenceFrancePresse,30November2012,viaFactiva,©2012PlusMediaSolutionsPakistan)
India moves a step closer to missile shield plans for DelhiIndiaplanstosetupamissiledefenceshieldinNCRby2014.Aspartoftheplan,Indiatesteditsexperimentalballisticmissiledefence(BMD)system.Itsuccessfullytest-firedasupersonicinterceptormissile,whichdestroyeda“hostile”ballisticmissileofftheOdishacoast.
(Source:“Indiatest-firesmissileshield,hitsthetarget,”FreePressJournal,24November2012,viaFactiva,©2012IndianNationalPressBombayLtd.)
IAF plans to induct first combat dronesIAFplanstoinductHaropcombatdronesfromIsraelbynextyearforthatwerebroughttwoyearsbackwithadealvalueofINR5billion.Theunmannedcombatairvehicle(UCAV)willgiveIAFthecapabilityofhittinghighvaluetargetssuchasenemymissileandradarsiteswithoutsendingitsmannedfighteraircraft.ItwillenhanceIndia’sfirepowerinconventionalandlow-intensityconflict.
(Source:“IAFtoinductfirstkillerdrones,”PressTrustofIndia,4October2012,viaFactiva.)
Pune airfield plans to get modern defence systemTheIndianAirForce’s(IAF)airbaseatLohegaon,Punewillbeequippedwithnetwork-centricall-weatherairdefenceweaponsystemcalled”Akash,”whichwillprotecttheairfieldfromenemyairstrikes.TheAkashweaponsystemcanshootdownfighteraircraft,choppers,unmannedaerialvehicles(UAVs)orcruisemissilesuptoarangeof30km.AkashisanindigenousweaponssystemdevelopedbytheDRDOinpartnershipwithBharatElectronicsandiscurrentlyintheinductionphase.
(Source:VishwasKothariTNN,TheTimesofIndia-PuneEdition,4October2012,viaFactiva,©2012Bennett,Coleman&Co.,Ltd.)
Eye on defence | 27
IAF plans to upgrade UAV fleet of three defence servicesTheIAFplanstoupgradetheUAVsofthethreedefenceservicesunderaprojectworthINR50billion.Thethreeservicesoperateafleetofmorethan150UAVsprocuredfromtheIsraeliAircraftIndustries.TheupgradewillenhancethesnoopingcapabilitiesoftheseUAVs.TheIAFwillalsobecapableofoperatingtheseaircraftfromfar-offdistancesandcontrolthemthroughsatellitecommunicationsystem.
(Source:“IAFtoupgradeUAVfleetunderRs5,000croreproject,”PressTrustofIndia,2October2012,viaFactiva.)
Jaguar fighters to be equipped with missiles TheIndianAirForce(IAF)willsoonchooseawinnerinaprotractedbidtobuynewshort-rangeinfraredhomingmissilesformorethan125Jaguarfighters.TheIAFoperatesJaguarsfordeeppenetrationandmaritimestrike,carryingbothconventionalandnuclearweapons.TheIAFissuedaRFPtoHoneywellAerospace,theUS-basedaircraftenginesandavionicsmanufacturerto“completelyre-engine’’Jaguarsandprovide270F-125INturbofanengines.IAFplanstofinishthe“designanddevelopment’’phasewithHoneywellontheinitialtwofightersby2015–16andtheremaining123fightersby2023–24byHALundertransferoftechnologyfromHoneywell.
(Source:RajatPandit,“IndiatogivepowerpunchtoJaguarfighters,”TheTimesofIndia,viaFactiva,17October2012;“MissileRaceForIndianJaguarsInHomeStretch,”AerospaceDaily&DefenceReport,5October2012,viaFactiva,©2012McGraw-Hill,Inc.)
Negotiations with Rafale to enter final stageTheGoIislikelytoconcludenegotiationswithDassaultAviationfor126Rafalefighterswithinsixmonths.Theinquiriesintotheselectionprocesshaveconcludedandcontractnegotiationshavereachedacrucialstage.The
negotiationsarenowfocusingonthecostoftransferringtechnology,thecostofmaintenance,totallifecyclecostinastipulatedtimeperiod,andtheunitcostofeachaircraftacquired.ThenegotiationsareexpectedtoenterthefinalstageinJanuary2013withadraftcontractdrawnupbyFebruary.
(Source: “Indian Fighter Talks Continue Following Selection Inquiries,” Aerospace Daily & Defence Report, 5 October 2012, via Factiva, © 2012 McGraw-Hill, Inc.)
Procurement of light utility helicopters faces hurdleTheprocurementfor197lightutilityhelicopterstoreplacetheIndianArmy’scurrentfleetofCheetahandChetakhelicopters,havehitaroadblockbecauseofcorruptionallegationsquestioningtheprobityofthedeal.AugustaWestland,anassociateofFinmeccanicaisunderinvestigationinItalyforallegedkickbacks.India’sDefenceMinister,AKAntonyreferredthefileofprocurementtoCentralVigilanceCommission,whichrecommendedcancellationofthedeal.
(Source:“HurdleinCheetah-Chetakreplacement,”TheTimesofIndia,28October2012,viaFactiva,©2012Bennett,Coleman&Co.,Ltd.)
Additional funds allocated to the Tejas Light Combat Aircraft programTheMoDhasallocatedadditionalINR15billiontotheTejasLightCombatAircraft(LCA)program.TheadditionalamountwillboosttheprojectedINR140.47billionbudgetandwillbespentonaproductionlineforHALtobuild20fightersfortheIndianAirForce’sorder.Theadditionalmoneyhadtobeallocatedbecause,sofar,thecompanyhasnotbeenabletoestablishaproductionlineeventobuildeightTejasfightersayear.
(Source: Ajai Shukla, “Rs 1,500 cr more for combat aircraft Tejas as HAL fails to meet targets,” Business Standard, 9 December 2012, via Factiva, © 2012 Business Standard Ltd.)
Eye on defence | 28
China unleashes its line of second fifth-generation stealth jetsChinahasunleasheditslineofsecond,fifth-generationstealthcombataircraft.China’srecenttestflightofJ-31,isindicativethatChinaiscatchingupwiththeUS,thepioneerofstealthtechnologyplatforms.ThishasincreasedtheneedforIndia’sindigenousaircombatcapabilityenhancement.
(Source:“NW18:Focus:CatchinguptimeforIndia,asChinazoomswithstealthjets,”TheTimesofIndia,5December2012,viaFactiva,©2012.NewsWire18Ltd.)
Chaturvedi committee recommends civil aviation focus for HALReportoftheBKChaturvedicommittee,submittedtotheMoDinOctober,hasmadevariousrecommendationsonrestructuringHAL.Theseinclude—civilaircraftfocusforHAL,strengthenorplugtechnologygapswithin,payscalereformsandpayparitywithMaharatnassuchastheNationalThermalPowerCorporation,empowermentofexecutivemanagementandchiefexecutivestoheadindependentbusinessunits.
(Source:MadhumathiD.S.,“HALlikelytoventureintocivilaviationsector,”TheHindu,3August2012,viaFactiva,©2012Kasturi&SonsLtd)
Northrop Grumman, Lockheed looks to compete for aerostat radars contractTheIAFhasdecidedtoseekbidsforsixaerostatradarsworthmorethanINR21.54billion(US$400million).NorthropGrummanandLockheedMartinareexpectedtobeamongthecontendersforthecontract.
(Source:“NorthropGrumman,LockheedtocompeteforIndiancontract,DefenceNewssays,”Theflyonthewall,2November2012,viaFactiva.)
Karnataka Government is likely to unveil Aerospace policyTheKarnatakaGovernmentislikelytocomeoutwithits“AerospacePolicy-2012,”toattractaerospaceindustriesandemergeasarelativelylowcostaerospacemanufacturingandMROhubinAsiaandtheMiddleEast.Inthepolicy,theGovernmentisexpectedtounfolda10-yearperspectiveplanontheaerospaceindustry.ItiseyeinganinvestmentofINR377billion(US$7billion)inthenext5to10years.
(Source:“KarnatakatocomeoutwithAerospacePolicyinDec,”UnitedNewsofIndia,21November2012,viaFactiva.)
UNIDO and SIATI have come up with a work-plan to support Indian Aerospace SMEsTheUnitedNationIndustrialDevelopmentOrganisationandSocietyofIndianAerospaceTechnologiesandIndustrieshaveenteredaco-operationworkplantocreatealong-termdevelopmentprogramforaerospaceSMEsinIndia.TheroleofSMEsintheIndianaerospaceindustryispoisedtogrowwithbillionsofdollarsontheofferaspartofoffsetclausefordefenceequipmentpurchase.
(Source:“UNIDO,SIATItosupportAerospaceSMEs,”UnitedNewsofIndia,21November2012,viaFactiva)
Labor unions stall private sector entry into warship buildingTheMoD’smovetospeedupwarshipbuildingbyinvolvingprivatesectorhasbeendelayedbecauseofresistancebylaborunionstotransferworktothenewlyformedprivateJVs.MazagaonDockhasasignificantorderbookandhadformedJVswithtwoprivatesectorwarshipbuilders,PipavavandL&T,tospeedupthebuildingofsurfacewarshipsandsubmarines,respectively.MazagaonDockhasnotgivenasingleordertotheJVsbuthasinsteadengagedaconsultant,IDBICapital,toadvisetheshipyardontheoperationstobetransferredtotheJVs.
(Source:AjaiShukla,“Unionsstallprivate-sectorentryintowarshipbuilding,”BusinessStandard,8October2012,viaFactiva)
Eye on defence | 29
India plans to scale up the Navy’s undersea combat capabilities IndiawillspendmorethanINR550billion(US$10billion)toscaleuptheNavy’sunderseacombatcapabilitiestodeterChina.Thecontractalsoincludesinductionofnextgenerationsubmarines.AccordingtotheNavyChief,AdmiralDKJoshi,theMoD’sacquisitioncouncilhasgivengreensignaltobuysixsubmarinesandaglobaltenderforthesamewillbefloatedsoon.
(Source:“R55,000-crsubpurchaseokayed,”TheHindustanTimes,5December2012,viaFactiva,©2012HTMediaLimited)
India’ first nuke submarine set to be operational by end-2013TheIndianNavyplanstogetitsfirstindigenouslybuiltnuclear-poweredsubmarine,INSArihant,operationalbytheendof2013.The6,000-tonnesubmarinewillbeputthroughrigorousseatrialsbythemiddleof2013beforeitscommissioning.Nuclear-poweredsubmarinescanlurkdeepseaclosertotheenemywatersformonthswithoutbeingdetected.INSArihantwillbethesecondnuclear-poweredsubmarineofIndia,whileChinaalreadyhas10nuclearsubmarines.
(Source:“India’sFirstNukeSubmarinetobeReadyby2013-end,”NewIndiaExpress,4December2012,viaFactiva,©2012TheNewIndianExpressGroup)
Tarkash commissioned into Indian Navy at Yantar ShipyardINSTarkash,thesecondofthethreestealthFrigates,hasbeencommissionedintotheIndianNavyatYantarShipyard,atKaliningrad,Russia.ThishasbolsteredtheIndianNavy’sroleasakeyfacilitatortopromotepeaceandstabilityintheIndianOceanregionandalsostrengthenedIndo-Russianmilitarytechnicalcooperation.
(Source:“TarkashjoinsIndiannavy:Announcement,”UnitedNewsofIndia,9November2012,viaFactiva.)
CRPF plans to buy advanced UAVs to fight NaxalsCentralReservePoliceForce(CRPF)planstopurchaseunmannedaerialvehiclesthatitcanoperatewithoutthehelpofanyexternalagency.TheUAVsareexpectedtocombattheMaoistsandliftreal-timeimages.TheExpressionofIntereststatesthattheairvehicleshouldbeeasytohandleandhavelowheatandnoise,whichisinaudibleat3,000ft.Itshouldalsohavelowradarsignaturestoavoiddetectionandengagementbyadversary.
(Source:VijaitaSingh,“CRPFtobuyadvancedUAVstofightNaxals,”IndianExpress,viaFactiva,©2012IndianExpresssOnlineMediaPvt.Ltd)
Eye on defence | 30
Why choose team EY?
Unique team experience
► TeammemberwasapartoftheteamthatwrotetheIndianDefenseOffsetpolicy in2006
► Teammemberhelped infounding DOFA
► Teammemberhaswrittenacomplete bookonOffsetswith theCII
Offset structuring
► OffsetStructuringworthUS$2.4billionexecutedsuccessfully
► Totalexperience of66manyearsin theArmedForces
► MoDexperience of14manyears
Industrial connects
► Teamhasmembersfromtheautopractice —India’sonlyprovenmanufacturingcompetence
► Wehaveoffices inBengaluru, PuneHyderabadandChennaiwherethesemanufacturing and ITcapabilities reside
End to end solutions
► IndustrialLicenseApplication
► FIPBapproval
► Due-diligence services
► Transaction AdvisoryforM&A
► Taxmitigation inoffsetcontracts
► Creationofacompliantoffsetschedule
► Halfyearlyoffsetprogress report
Unparalled support and advantage for you
Eye on defence | 31
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Eye on defence | 32
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Eye on defence | 33
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14thFloor,TheRuby29SenapatiBapatMarg,Dadar(W),Mumbai-400028Tel: +9102261920000Fax: +9102261920030
5thFloor,BlockB-2NirlonKnowledgeParkOff.WesternExpressHighwayGoregaon(E)Mumbai-400063Tel: +912261920000Fax: +912261923000
14,MittalChambers,1stfloor,OppInoxMall,NarimanPoint,Mumbai-400021Tel: +912261920040
NCRGolfViewCorporateTowerBNearDLFGolfCourseSector42Gurgaon-122002Tel: +911244644000Fax: +911244644050
6thfloor,HTHouse18-20KasturbaGandhiMargNewDelhi-110001Tel: +911143633000Fax: +911143633200
4th&5thFloor,PlotNo2B,Tower2,Sector126,NOIDA201304GautamBudhNagar,U.P.IndiaTel: +911206717000Fax: +911206717171
PuneC-401,4thfloorPanchshilTechParkYerwada(NearDonBoscoSchool)Pune-411006Tel: +912066036000Fax: +912066015900
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