Defence acquisition proposals worth Rs 4,444 cr cleared

New Delhi: The Defence Acquisition Council (DAC) on Wednesday approved proposals worth Rs 4,444 crore, including the purchase of four helicopters for survey vessels at Rs 2,324 crore, but deferrred a decision on a joint bid of Tata Sons Ltd and Airbus for replacing IAF’s Avro transport fleet.

Besides giving its go-ahead to acquire four choppers, the DAC, under Defence Minister Manohar Parrikar, also cleared the upgradation of the mobile integrated electronic warfare system, Samyukta, at a cost of Rs 1,682 crore, a Defence Ministry spokesperson said. The DAC also cleared a proposal relating to purchase of P-7 Heavy Drop Platform, which is used for military logistics, for Rs 402 crore, the official said. Another proposal of Rs 36 crore for acquiring propeller engine for offshore patrol vessel of the Coast Guard was also given a go-ahead, the spokesman said. The DAC, however, could not arrive at a decision on a joint bid by Tata Sons Ltd and Airbus to replace the Indian Air Force’s Avro transport fleet, according to sources. European consortium Airbus Defence and Space has made a joint bid with Tata Advanced Systems Ltd (TASL) for 56 medium-transport aircraft of IAF valued at Rs 20,000 crore (USD 3 billion). The euro 14 billion (USD 17.8 billion) Airbus Defence has tied up with Tata Sons’ subsidiary (TASL) as its Indian production partner for the order. The bid is for 56 twin-turboprop tactical military aircraft, including 16 in fly-away condition from the Airbus Defence final assembly line and the remaining 40 to be built and assembled by TASL in Hyderabad. The aircraft is in the six-eight tonne class, with a cruise speed of 800 kms per hour and a range of 2,500-2,800 kms. The IAF had floated the tender after the DAC had on July 19 cleared the proposal for manufacturing the 56 transport aircraft in the private sector, excluding state-run defence firm Hindustan Aeronautics Ltd (HAL), which built the Avro planes. Source : Defence News

Obama’s defence secy nominee Ashton Carter instrumental in reviving ties with India

Washington: Ashton Carter, nominee for the US Defence Secretary, was instrumental in reviving India-US defence ties, a top American lawmaker today said, while others welcomed his nomination for the top Pentagon post.

“He (Carter) was instrumental in reviving the US-India defence relationship, a major development that continues to bear fruit, and he has helped forge new security ties with former Communist bloc nations,” House Democratic Whip Steny H Hoyer said after President Barack Obama nominated Carter.
Hoping that the Senate will confirm Carter quickly so he can get to work without delay, Hoyer said Carter is an excellent choice to serve the next Secretary of Defence.
“He has the experience and the judgment required to lead the Department of Defence as it confronts ISIL in Iraq and Syria, brings our troops safely home from Afghanistan, and counters threats against the United States and our allies around the world,” he said.
Congressman Mac Thornberry, Chairman-elect of the House Armed Services Committee, said Carter knows the Pentagon, and he knows that some reforms are essential if they are to meet the national security needs of the country.
Welcoming the nomination, Senator Jim Inhofe, ranking member of the Senate Armed Services Committee, said he has worked with Carter over the years and consider him qualified for the position and look forward to his confirmation hearing.
Senator John McCain said Carter is a highly competent, experienced, hard-working, and committed public servant.
“Throughout Carter’s previous tenure at the Pentagon, I have worked closely with him on a number of issues, including defence acquisition reform,” he said, adding that he was looking forward to his confirmation hearing.
Senator Lindsey Graham said Carter has the knowledge and capability to serve as Secretary of Defence during these difficult times.
“I expect he will face tough questions at his confirmation hearing about President Obama’s failing national security policy, but I expect he will be confirmed,” the Republican Senator said.
Senator Carl Levin, chairman of the Senate Armed Services Committee, said Carter is highly qualified and experienced, and well-versed in the challenges that the next secretary of defence will face.
“Carter understands the threats that confront our country and I believe his experience at the Pentagon will make him an effective leader for our military. Given the many critical national security issues confronting the United States, it is my hope that the Senate will work swiftly to consider and confirm President Obama’s nominee to this critical post,” Senate Majority Leader Harry Reid said.

Source : Defence News

India, Australia To Strengthen Strategic Ties, Counter China

Indian Prime Minister Narendra Modi has made a clear indication that New Delhi is fully prepared to counter Beijing’s increasing influence in the Asia Pacific region.

Indian Prime Minister Narendra Modi has made a clear indication that New Delhi is fully prepared to counter Beijing’s increasing influence in the Asia Pacific region. On Tuesday, Modi and his Australian counterpart Tony Abbott decided to bolster the bilateral strategic partnership on the basis of ‘converging political, economic and interests’. In Canberra, the two PMs discussed various aspects of bilateral relations and expressed serious concern over China’s attempts to increase its influence in the Indian Ocean region. Modi and Abbott finalised a framework for security co-operation between the two countries. They also decided to hold annual meeting to assess the co-operation. According to the statement issued by the Indian External Affairs Ministry, the defence ministers of the two ‘friendly’ nations will hold regular meeting in the coming days. India and Australia will also hold annual defence policy talks and regular joint naval manoeuvres, apart from co-operating in defence research and development. Meanwhile, the Australian media reported that the confirmation of the security framework came only after Chinese President Xi Jinping’s departure from Canberra (after attending the G20 Summit). Political experts are of the opinion that the current geopolitical situation in the Asia Pacific region has forced New Delhi and Canberra to strengthen bilateral defence ties. As China is racing ahead of Australia, Japan and India, the interests of Canberra, Tokyo and New Delhi have sharply converged. As a result, India and Australia announced the new ‘Framework for Security Co-operation’ for close collaboration in defence, counter-terrorism, cyber security and maritime security. In a joint statement, governments of the two countries said: “Prime Minister (Narendra) Modi and Prime Minister (Tony) Abbott decided to extend defence co-operation to cover research, development and industry engagement. They agreed to hold regular meetings at the level of the defence minister, conduct regular maritime exercises and convene regular Navy to Navy, Air Force to Air Force and Army to Army staff talks.” Although the two leaders further decided to push for a free trade pact between their countries, the defence co-operation was more important. Former Indian Foreign Secretary Kanwal Sibal said that it was a crucial development and the Modi administration pursued a strategy to protect the region from China’s unpredictable actions. “The Modi government is playing its cards astutely. While India is taking steps to improve economic ties with China, it is also pursuing a strategy aimed at checking China. It’s a wise approach,” he told the ‘Hindustan Times’ daily. Indian defence analyst Lieutenant General (Retired) B S Jaswal stressed: “Beijing’s hegemonic attitude will continue if not checked.” Israel, too, is eager to ramp up strategic ties with India. A couple of days back, Israel said that China is its trading partner, but India is a ‘strategic’ one. The Israeli authorities also announced that they would not revive arms trade with Beijing in the future. With sales worth USD 1 billion-USD 1.5 billion every year, India is currently No 1 arms market for Israel and Jerusalem is planning to concentrate only on the South Asian country in the region as far as the arms trade is concerned. In its latest report, the Israeli Defence Ministry said that the West Asian nation currently exports defence equipment worth USD 7 billion annually to India, but hardly anything to China in the last decade. The volume of annual trade between India and Israel is around USD 5 billion and the signing of a Free Trade Agreement can easily double the volume, the report said. While welcoming the Indian PM’s commitment to taking ties with Israel to a new level, senior Israeli officials have said that no one should question Jerusalem’s relation with Beijing and dilute it with the strategic partnership with New Delhi. Source : Defence News

India test-fires nuclear-capable Nirbhay cruise missile

BALASORE (Odisha): India’s indigenously developed nuclear capable sub-sonic cruise missile ‘Nirbhay’, which can strike targets more than 700 kms away, was today test-fired from a test range at Chandipur near here.

“The missile was test-fired from a mobile launcher positioned at launch pad 3 of the Integrated Test Range at about 10.03 hours,” said an official soon after the flight took off from the launch ground. “Flight details will be available after data retrieved from radars and telemetry points, monitoring the trajectories, are analysed,” the official said. It is the second test of the sub-sonic long range cruise missile ‘Nirbhay’ from the ITR. The maiden flight, conducted on March 12, 2013 could not achieve all the desired parameters as “the flight had to be terminated mid-way when deviations were observed from its intended course,” sources said. India has in its arsenal the 290 km range supersonic “BrahMos” cruise missile which is jointly developed by India and Russia. Source: Defence News

US rules out trilateral military partnership with India, Japan

Washington: The US has ruled out a trilateral military partnership with India and Japan, days after it decided to upgrade its annual trilateral meetings at the ministerial level.

“No,” Assistant Secretary of State for South and Central Asia Nisha Desai Biswal told reporters when asked if the India-Japan-US trilateral diplomatic ties expand to become a military partnership. “The trilateral relationship between India and Japan is not to be at the exclusion of any other relationships and partnerships in the region. It has its roots on the desire to support economic connectivity across the South Asia and Southeast Asia landscape,” she said. “As you see the transition, the political transition in Myanmar, it has created a new opening and an opportunity to strengthen that connectivity that allows trade to go north, south, east, and west. So the trilateral conversations, have focused on how to do that, how to support trade and economic connectivity across the region,” she added. There are also discussions about how to strengthen humanitarian assistance and disaster response across the region. There’s a great deal of capacity in India. There’s a great deal of capacity in Japan, she noted. Asia is one of the most disaster-prone regions of the world. Over 60 per cent of hydro meteorological disasters that require international assistance occur in the Asia-Pacific region. So another area of discussion has been on creating capabilities and synergies on disaster response, she said. She said there is a very deep interest in strengthening maritime cooperation and maritime security, and India is playing an increasing role in providing that as we look at anti-piracy initiatives and ways to create safe transportation routes and lanes for commerce to be able to take place. “So those have been the nature of the conversations. This is an important trilateral, but I don’t think it comes at the exclusion of other strong, important relationships in the region,” she explained. The US is currently doing joint military exercises with India and with Japan, she said, adding a lot of the countries of the region, including China, have participated in the RIMPAC exercises. “We see these areas not as being exclusive or exclusionary, but we think that the more that we’re able to partner with and work with the militaries of the region, create understanding and capabilities of how we can work together, both in terms of responding to crises when they happen, but also in terms of creating shared understandings,” she said. “I know that we have mil-to-mil conversations in our relationship with China, and we certainly do with many of the other countries of the region. These are conversations that we want to have across the broad expanse of all of our relationships,” she added. Source: Defence News

Government plans to export BrahMos missiles, Tejas, air defence system to Vietnam, Indonesia and Venezuela

NEW DELHI: The Modi government is quietly working on a plan to export defence equipment and armaments produced in India to friendly countries. A beginning could be made by exporting BrahMos missiles to Southeast Asia and South American countries. Vietnam, Indonesia and Venezuela have expressed willingness to procure the supersonic missile jointly produced by India and Russia, sources indicated to ET.
Indo-Vietnam defence ties are on an upward trajectory and Hanoi has been keen for the last few years to purchase this missile. However, there was no progress under the UPA government on the issue, sources indicated. BrahMos missiles have been inducted in all three defence services. The inter-governmental agreement between India and Russia for development of BrahMos missile (290-kmrange) also stipulates use of this advanced system to be inducted into the Indian and Russian armed forces as well  as export to friendly countries.



Vietnam and Russia are partners since the days of the Cold War and it can use Russian made defence equipment. India will sign an agreement for supplying defence equipment to Vietnam, during President Pranab Mukherjee’s trip from September 14-17. India and Indonesia also share good defence ties that encompasses training and defence exercises.
Recently, Prime Minister narendra Modi had stated that India should move towards self-reliance in producing military weapons and systems and also  look for exporting them to friendly nations.
The idea for defence co-development and joint production is not only to obtain cutting-edge technology and self-sufficiency in the long run but also export jointly developed products. So far, India depends on imports for meeting over 65% of its weapons requirement and has been branded as largest importer of arms by international think tanks. India could also export indigenously developed ‘Tejas’ – Light Combat Aircraft, ‘Akash’ – air defence system and ‘Prahar’ class of missiles to friendly countries. Tejas is a lightweight, multi-role, single-engine tactical fighter aircraft.
Akash, a surface-to-air missile, has a range of 25 km. Prahar is a 150 km-range tactical missile system. Several countries have shown interest in the Akash missile system, which was ready to be inducted into the Army. LCA is likely to be ready for induction into IAF by the end of this year after attaining the final operational clearance. Sources also claim that Indian weapon systems are cheaper than Chinese systems.

formal defence exports policy, it had earlier exported rifles to Nepal and Oman, besides supplying defence equipment to Myanmar including tanks, radars to Sri Lanka, defence equipment to Maldives, maritime patrol boats to Mauritius and defence spare parts to Vietnam. India’s current norm for defence exports involve supplies not only to friendly countries but also to countries which do not have civil war. “We do not want a situation where arms supplied by us is used by one group against another within the boundary of one country. 

Source : ET

India, Japan agree to strengthen defense ties

In his first state visit, Indian Prime Minister Narendra Modi has met with a kindred spirit, Japanese Premier Shinzo Abe. The two leaders, wary of China's glowing clout in Asia, have agreed to strengthen defense ties.

semco tech services

During his visit to Japan on Monday, Indian Prime Minister Modi warned Asian powers against territorial expansionism, in a veiled reference to China's ambitions in the region.

"The 18th century situation of expansionism is now visible," Modi said, after holding talks with Japanese Prime Minister Shinzo Abe in the historic city of Kyoto. "Such expansionism would never benefit humanity in the 21st century."

Modi didn't specifically mention Beijing, but China and India contest several regions along their common border. Abe shares Modi's suspicion of China's intentions in the region. Beijing and Tokyo dispute the Senkaku Islands, called the Diaoyu in Chinese.

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Modi's Japan visit signals strengthening of bilateral ties

Indian PM Narendra Modi will be heading to Japan on his first bilateral visit outside South Asia. Topping his agenda is the modernization of India's infrastructure and military, analyst Rajiv Biswas tells DW. (27.08.2014)

Over the summer, Prime Minister Abe's Cabinet approved a reinterpretation of Japan's pacifist constitution, permitting Tokyo to defend allies and deploy troops abroad for combat missions.

'Strategic, global partnership'

Although Abe and Modi failed to set up a permanent forum for their foreign and defense ministers to hold regular consultations, they did agree to "upgrade and strengthen" their defense ties. Tokyo is keen to sell New Delhi US-2 amphibian aircraft. The two countries also agreed to participate in joint maritime drills, and for Japan to continue participating in US-India drills.

"Together, working hand-in-hand with Prime Minister Modi, I intend to fundamentally strengthen our relationship in every field to elevate our relationship to a special strategic and global partnership," Prime Minister Abe said.

The two leaders also agreed to double Japan's investment in India over the course of five years to a total of 3.5 trillion yen ($33.6 billion, 25.5 billion euros).

slk/kms (AFP, dpa, Reuters)

Source : http://www.dw.de/ 

For First Time Since World War 2, Japan Will Sell Military Equipment. To India

TOKYO:  During his visit to Japan, Prime Minister Narendra Modi may not have closed a deal on nuclear energy cooperation, but he is returning with a pledge from counterpart Shinzo Abe for nearly 34 billion dollars in investment over the next five years, and the  sale of an amphibious aircraft to India's navy. The deal marks the intent of Asia's second and third largest economies to counter an increasingly aggressive China. 

The specialised sea-plane, the US-2, will be Japan's first overseas military sale in nearly 50 years. Because it provides landings on sea and land, the plane will significantly enhance the Indian Navy's ability to carry out, casualty evacuations, deliver humanitarian assistance and conduct long-range surveillance and reconnaissance.

In keeping with Mr Modi's emphasis on developing military technology indigenously to check India's dependence on foreign defence manufacturers, the US-2 planes will be made in India. The Indian Navy has been lobbying to get 15 of these.

A statement issued in Tokyo after Monday's summit between Prime Ministers Modi and Abe said "both sides directed the Joint Working Group to accelerate progress in the discussions and preparations for a road map for the development of the Indian aircraft industry through US-2 amphibian aircraft cooperation including the transfer of the aircraft and its technology to India." 

This is the first time since World War-II ended seven decades ago that Japan will be selling military hardware abroad. Following its defeat, Japan had imposed an embargo on sale of weapons and military equipment.

The four-engine US-2 aircraft will act as a force multiplier for the Indian Navy, allowing it to quickly insert troops at places where there is no landing strip on shore, including the numerous far-flung islands in Andaman and Nicobar and Lakshwadeep. 

Currently, ground troops are delivered to areas like this using a 'Landing Ship Tank' which isn't always effective. The Sea Planes will allow faster troop insertion of small clusters of soldiers for specialised operations.

India's coastline runs nearly 7,500 kilometres and the Navy had earlier projected a requirement of 15 such sea planes, but their acquisition was stalled by a shortage of funds and other competing requirements, seen as more urgent - like acquiring multi-role helicopters, torpedoes, submarines and ships. 

The US-2 is one sturdiest aircrafts and can operate in sea state 5 conditions (wind speed of 30 to 38 km per hour) on the high seas as well as on rivers and lakes. Each plane can carry about 30 personnel and lift 18 tonnes and fly 4,500 km at stretch without needing to stop for refuelling. 

Story First Published: September 01, 2014 21:30 IST

Source: NDTV

Mahindra & Mahindra prefers consortium for defence; in talks with BAE, others

NEW DELHI: Learning from past experience in bidding for defence orders in India, Mahindra & Mahindra has decided to go the consortium way and is talking to global players, including erstwhile joint venture partner BAE.

"What we have discovered was that it's better to work as consortium because we have so many areas of interests right now," Mahindra Group Chairman and Managing Director Anand Mahindra told PTI in an interview.

Last year in February, the group had ended its joint venture with BAE Systems by buying out the partner's 26 per cent stake. The JV was formed in 2009 with plans of supplying artillery howitzers and anti-mine vehicles to the Indian armed forces.

"We dismantled the JV because we ran out of patience. Nothing was happening," he said.

Mahindra said that with the new government led by Narendra Modi in place, things have started to move now.

"They are moving. In certain areas like defence, RFPs (request for proposals) are being floated now," he said.

Elaborating on the group's decision to form consortium rather than enter into JVs, he said: "It's just a practical decision, which we have taken that given the number of areas we are in, we are probably better off bidding for large projects... JV is not the right way to do it. The right way to do is through consortium."

When asked about global players that the group was talking for such projects, Mahindra said: "We are in fact talking to the BAE again and to all the others... We are talking to BAE for the same bid, but we are saying that we do not know, so let's not go through the JV thing once again. Let's form a consortium."

He said while the easing of FDI norms to allow up to 49 per cent in defence was welcome, what was more important was to take "quick and transparent" steps.

"Suddenly we find out RFPs are being made. Will it be followed up? Will spending be carried out? Will the process be quick and transparent?" he wondered.

Mahindra further said: "Even at 26 per cent we had the partner BAE and they were ready to do business. That's not the problem. The problem was is the process of procurement happening. Is it happening transparently and predictively? And that's what will change defence and get production in."

Source :Economics TImes

Indian Defense Ministry to decide fate of Rs 6,000 cr light helicopter deal

New Delhi: The Defence Ministry will decide the fate of the controversial Rs 6,000 crore deal to procure 197 light choppers which has been on hold due to an ongoing CBI probe into charges that a Brigadier had sought bribe from AgustaWestland to help it bag the contract.

During a meeting of the Defence Acquisition Council (DAC) scheduled this week, the Defence Ministry will also discuss deals worth around Rs 15,000 crore for procuring Apache attack helicopters and Chinook heavylift choppers for the IAF from the US, Defence Ministry officials said. The DAC, headed by Defence Minister Arun Jaitley, is scheduled to take up the deal for discussion in its meeting where it is expected to decide its fate, they said. The 197 light utility choppers are to be procured for the Army and the IAF who use them for ferrying troops and supplies in high altitude areas such as Siachen Glacier and would be used to replace the vintage Cheetah/Chetak choppers which were inducted 40 years ago. CBI has been probing allegations against the Brigadier which surfaced during investigations into the VVIP chopper deal about the alleged involvement of AgustaWestland in paying kickbacks to secure the Indian contract for 12 VVIP choppers. CBI probe was ordered by the Defence Ministry after the Army requested it to investigate the charges against the Brigadier before taking any decision on the future developments in the deal. Allegations have been levelled against the Brigadier in a letter allegedly sent by an AgustaWestland official in India to his superiors in Italy saying the officer was seeking USD 5 million for facilitating the deal in their favour. Only two firms European Eurocopter and Russian Kamov are left in the race for the deal to supply 197 light choppers to the Army and the IAF as AgustaWestland was knocked out of the deal in the preliminary stages itself. The deal for procuring 197 light choppers has already been cancelled once in 2007 in the last stages. The Brigadier has denied the charges made against him.

Source : Zee News

India imposes ‘Partial Ban’ on Finmeccanica

NEW DELHI: India will not ink fresh arms deals with Finmeccanica, if other armament companies can provide the same equipment, but will allow ongoing contracts with the Italian conglomerate to continue unhindered.

This “partial ban” — instead of what could have been a “complete” one — was officially notified by the defence ministry on Tuesday. It will come as “a major breather” for Finmeccanica, all dealings with which were earlier put on hold after its UK-based subsidiary AgustaWestland got enmeshed in the infamous VVIP helicopter kickbacks case. It also marks a shift from the earlier UPA era, under A K Antony as defence minister, where there was “indiscriminate blacklisting” of armament companies after allegations of corruption and bribery. “It often proved counter-productive. The aim now is not to block military acquisitions and spares, even as any wrongdoing is punished,” said an official. This is the second such case after the Narendra Modi government ruled out blacklisting of global engine manufacturer Rolls-Royce, which too is under CBI scanner for allegedly employing agents, on the grounds of “operational urgency and national security”. As was first reported by TOI on August 7, attorney general Mukul Rohatgi had advised the MoD that a complete ban or blacklisting of the entire Finmeccanica group, which produces warship guns and torpedoes to helicopters and radars, would jeopardize the battle-readiness of the armed forces. On Tuesday, the MoD issued a graded set of guidelines for dealings with Finmeccanica: * It will go ahead with all contracts under execution. Contracts already executed but requiring supply of spares and upgrades on a regular basis will also continue. This means ongoing contracts for manufacture of 76mm warship guns by BHEL under licence from Otomelara, a subsidiary of Finmeccanica, as well as those for Selex radars and electronic systems will continue. * Contracts where any Finmeccanica company is a sub-contractor or supplier to the main contractor will also continue. So, Russian upgrades of the Kamov-28 anti-submarine helicopters, where a Finmeccanica company is a supplier, will go-ahead. * All acquisition cases where Finmeccanica has been declared L-1 (lowest bidder) after competition shall be put on hold till further orders. A special exception for the Rs 1,800 crore project to buy 98 ‘Black Shark’ heavyweight torpedoes for the Scorpene submarines being constructed at Mazagon Docks is likely to be done. * In an ongoing tender process, in which L-1 has not been declared, Finmeccanica may not be considered if other vendors are available. But Finmeccanica may remain in the fray to supply naval multi-role helicopters to avoid a single-vendor situation. * A fresh tender or RFP (request for proposal) will not be issued to Finmeccanica if there are other vendors which can provide the same equipment or system. This could rule out Otomelara from participating in the new project for heavy 127mm guns India is now looking for new warships. As earlier reported by TOI, one estimate holds Finmeccanica, apart from ongoing contracts like the supply of Selex radars or Otomelara naval guns, is in contention for Indian military contracts worth over $6 billion. The crucial ones include the Rs 1,800 crore project to buy 98 ‘Black Shark’ heavyweight torpedoes, manufactured by another Finmeccanica subsidiary Whitehead Alenia Sistemi Subacquel (WASS) for the six Scorpene submarines being built at Mazagon Docks in Mumbai. Another case is for the procurement of naval multi-role helicopters (MRHs), with the contenders being European NH-90 choppers, which have Finmeccanica as a partner, and the American Sikorsky-70B choppers. The first contract for the 16 MRHs is to be followed by a bigger one for 123 helicopters at a cost of over $3 billion.

Source : TNN

Indian firms tool up for defence orders on Modi’s ‘buy India’ pledge

(Reuters) – Some of India’s biggest companies are pouring billions of dollars into manufacturing guns, ships and tanks for the country’s military, buoyed by the new government’s commitment to upgrade its armed forces using domestic factories.

India, the world’s largest arms importer, will spend $250 billion in the next decade on kit, analysts estimate, to upgrade its Soviet-era military and narrow the gap with China, which spends $120 billion a year on defence. Under the last government, procurement delays and a spate of operational accidents – especially dogging the navy – raised uncomfortable questions over whether India’s armed forces are capable of defending its sea lanes and borders. Even before his landslide election victory in May, Prime Minister Narendra Modi promised to assert India’s military prowess and meet the security challenge posed by a rising China and long-running tensions with Pakistan. Within weeks of becoming prime minister, he boosted defence spending by 12 percent to around $37 billion for the current fiscal year and approved plans to allow more foreign investment into local industry to jump-start production. Launching a new, Indian-built naval destroyer last week, Modi said: “My government has taken important steps in improving indigenous defence technology … We can guarantee peace if our military is modernised.” This build-up comes as Southeast Asian nations expand their own defence industries, spurred by tensions with China. India, reliant on a state defence industry that often delivers late and over budget, risks being caught flat-footed. “The opportunity is huge,” said M.V. Kotwal, president (Heavy Engineering) at Larsen and Toubro Ltd, one of India’s biggest industrial houses. “We really expect quicker implementation. There are signs that this government is very keen to grow indigenisation,” added Kotwal, referring to increasing domestic production. Tata Sons, a $100 billion conglomerate, said last month it will invest $35 billion in the next three years to expand into new areas with a focus on a handful of sectors including defence. Larsen is putting $400 million into a yard to build ships for the navy, while Mumbai-based Mahindra Group is expanding a facility that makes parts for planes, including for the air force, and investing in armoured vehicle and radar production. The companies are being lured by the prospect of lucrative returns on their investments as the Modi government has pledged to make “buy Indian” the default option for future orders. Larsen is targeting a fourfold increase in annual defence revenue to $1 billion within the next five years. Critics of indigenisation argue that producing gear – especially in the lumbering state sector – is more costly than buying from abroad. Such deals can add layers of bureaucracy, increasing risks of corrupt dealings. Indian industry is renowned for its ability to adapt, yet questions remain whether the private sector can come up with the solutions needed to bring armed forces into the 21st century without sufficient access to world-class foreign technology. DELAYS Some companies are also sceptical of the government’s commitment to grow the private market given New Delhi’s history of delays and order cancellations, and the traditionally strong ties between the military and state-run manufacturers. They cite the case of a $10 billion Future Infantry Combat Vehicle (FICV) programme. Conceived in 2009, the defence ministry invited three private players and the Ordnance Factory Board, a state entity, to bid for the 2,600-vehicle contract but suddenly withdrew the letter of intent in 2012. Bidders included Mahindra and Tata, which is developing a vehicle along with Lockheed Martin Corp and General Dynamics Corp that could compete for a future contract, said Rahul Gajare, an analyst at Edelweiss Securities. A quick decision to relaunch the programme would demonstrate Modi’s resolve, said S.P. Shukla, who heads Mahindra’s defence business. Past tenders have stalled amid wrangling over whether or not to allow state manufacturers to bid and under what terms. Larsen’s Kotwal said its Kattupalli shipyard in south India has yet to receive any orders for warships or submarines despite being designed to do just that and despite past government pledges to build at least two submarines in private yards. In the meantime, the yard has switched to constructing and repairing commercial vessels. “The policy in India has been right since 2006. The problem has been implementation,” said Rahul Chaudhry, CEO at Tata Power SED, which makes rocket launchers, sensors and radars. Local firms have captured a fraction of the Indian defence market since it first opened to private participation in 2001. Consecutive governments have handed orders to state factories or to foreign giants like Boeing, Lockheed and BAE Systems. Gajare at Edelweiss estimates total India private sector revenues from defence, including overseas orders, at below $2 billion last year, less than 6 percent of the country’s defence spending.   Source :Defence News

Rafale fighter jet deal contract with France almost ready: Defence ministry

The much-awaited multi-billion Rafale combat aircraft deal with France has moved a step further with the defence ministry finalizing a ‘draft contract’, according to top defence ministry officials.

Rafale was declared the lowest bidder in Janaury 2012 but the deal has not been inked so far on account of escalation in the cost. The Cost Negotiation Committee, which was set up in February 2012 to work out the modalities for the deal has not reached a conclusion after 30 months of negotiations. The government raised its concerns over this last month, during the visit of French foreign minister Laurent Fabius to New Delhi. “Yes, we are in the process of finalizing the draft contract for the deal. And we also expect the Cost Negotiation Committee to submit its report soon,” said a senior defence ministry official, who was privy to the developments. But the official refused to give a time frame for inking the deal. “It is very difficult to predict any date for signing the contract. But, it should happen in the next few months,” the officer said, requesting anonymity. The Indian Air Force (IAF), which is coping with a depleted combat strength, claims that even if the deal is signed by the end of the year the first lot of Rafale aircraft would arrive only by 2017, by which time the IAF would have to phase out its MiG-21 squadrons. The likelihood of an early signing is encouraging. Besides, the ruling NDA government has promised to address all the needs of the armed forces to ensure defence preparedness. According to officials privy to the development, the defence ministry has asked representatives of M/s Dassault Aviation – the French manufacturer of Rafale aircraft – to revise the price structure which has gone beyond expected estimates. Officials claim that when the tender was floated in 2007 the cost of the programme was $12 billion (Rs42,000 crore).When the lowest bidder was declared in January 2012, the cost of the deal shot up to $18 billion (Rs90,000 crore). Now with the inclusion of transfer of technology, the life cycle cost and creation of an assembly line, the deal has climbed to a whopping $20 billion. The air force is seeking to replace its aging MiG-21s with a modern fighter and the medium multi-role combat aircraft (MMRCA) fits between India’s high-end Sukhoi-30MKIs and the low-end Tejas LCA lightweight fighter. The IAF has a sanctioned strength of 45 fighter jet squadrons. However, only 30 squadrons are operational as old aircraft have been retired. Eighteen of the 126 new aircraft are to be purchased directly from Dassault and Hindustan Aeronautics Limited will manufacture 108 under a licence, at a new facility in Bangalore. Defence minister Arun Jaitley informed parliament last week that “given the complexity of the procurement case, the process of negotiations with Dassault Aviation on various aspects of the commercial proposal and provisions of draft contract is on.” Dassault Aviation emerged as L-1 bidder for procurement of the MMRCA based on its quotation.   Source : Defence NEws

Indian defence modernisation plan needs pragmatic action

The Army’s war waging capability is increasingly handicapped. Concerned with dwindling operational preparedness and operationally hard pressed, it wants to induct advanced technology hardware that it perceives would serve its operational needs optimally.

The NDA government has identified defence reforms and building a self sustaining defence industrial base as a priority reform sector. To transform this into reality, it is not so much of the government commitment but its ability to take policy decisions and put processes in place by spurring public and private sector investments through higher indigenisation, transfer of technology, simplifying procedures, etc. The Army’s war waging capability is increasingly handicapped. Concerned with dwindling operational preparedness and operationally hard pressed, it wants to induct advanced technology hardware that it perceives would serve its operational needs optimally. However its efforts at modernising be it combat or combat support arms are hardly encouraging – plagued by procurement and indigenous production delays and lack of timely planning. The Parliamentary Standing Committee on Defence’s figures reveals that the army’s equipment modernisation is steadily falling. In 2008-09, the army spent 27 paisa of every rupee on capital expenditure. This fell to 24 paisa in 2009-10; 23 paisa in 2010-11; 20 paisa in 2012-13 and just 18 paisa in the last two years. Indian army’s mechanised fleet comprises T-72 and T72 M1s Main Battle Tanks (MBTs), T-90S MBTs and indigenously produced Arjun MKI tanks. The main issue facing operational efficiency of mechanised forces are two: night fighting capability and ammunition. Resultantly the army’s ambitious plans to transform from a ‘threat-based to a capability force’ by 2020 are being consistently thwarted as a result of process driven MoD breaucracy and the Army headquarters delays in drawing up credible qualitative requirements. Army’s Modernization Perspective :: Let us take the armour first. Indian army’s mechanised fleet comprises T-72 and T72 M1s Main Battle Tanks (MBTs), T-90S MBTs and indigenously produced Arjun MKI tanks. The main issue facing operational efficiency of mechanised forces are two: night fighting capability and ammunition. In so far as night fighting capability is concerned only the 650-odd Russian T90S MBTs along with indigenously designed Arjun MKI tanks have full solution night fighting capability. T-72 and T72M1s that form the backbone of 59-odd armour regiments along with some 2200 Soviet-designed BMP-II infantry combat vehicles (ICVs) lack night fighting capability. Majority of the T72s await upgrades that will provide them with either full solution thermal imaging fire control systems (TIFCS) or third generation partial solution thermal imaging stand alone systems (TISAS) enabling all weather including night operations. Till date only 620 partial solution TISAS have been acquired. In terms of armour ammunition there is critical deficiency of anti tank ammunition; 125 mm armour piercing fin-stabilised discarding sabot (APFSDS). Indigenous production is held up on account of black listing of Israeli company, resultantly availability of 125 mm APFSDS including war wastage reserves have dropped to critical levels necessitating urgent imports of around 66,000 rounds from Russia at highly inflated prices. Next major deficiency is that of Artillery, where no new gun has been inducted in last three decades. Despite years of attempts at modernisation; army’s artillery profile remains beseeched by the inability to decide on the 155 mm gun to replace the 180-odd field artillery regiments employing as many as six different calibres that are fast approaching obsolescence. Even the 32 artillery regiments equipped with 410 FH-77B 155 mm Bofors guns imported in the late 1980s-are reduced to half following cannibalization owing to the non-availability of spares. Upgradation of approximately 200 Soviet 130 mm M-46 carried out jointly by the Ordnance Factory Board and Soltam of Israel has been unsatisfactory resulting in CBI enquiry. The proposal under the Artillery Rationalisation Plan to acquire by 2020-25 a mix of around 3000-3600; 155mm/39 calibre light weight and 155mm/52 calibre towed, mounted, self-propelled (tracked and wheeled) and ultra light weight 155mm/39 calibre howitzers through imports and local, licensed manufacture have been continually postponed for over a decade. Tenders for almost all these guns have been issued, withdrawn and re-issued, along with several rounds of inconclusive trials. Matters have been further complicated by the MoD completely or partially blacklisting at least four top overseas howitzer manufacturers. The infantry’s F-INSAS (Future Infantry Soldier as a System) project that includes a fully networked, all-terrain, all-weather personal equipment platform as well as enhanced firepower and mobility for the digitalised battlefield of the future continues to be abnormally behind schedule. Similarly eight-odd Special Forces battalions face an identity crisis, operating without a specialised operational mandate, organisational support or “dedicated budget” resulting in piecemeal and incomplete weapon and equipment packages. Adding to the Infantry’s woes is the shortages of credible assault rifles (ARs), carbines, ballistic helmets, lightweight bullet proof jackets and night vision devices. These are largely produced indigenously. Last year the MoD issued a global tender for 66,000, 5.56 mm ARs for an estimated $ 700 million to replace the locally designed Indian Small Arms System (INSAS). The eventual requirement for the proposed AR is expected to be around 2 million units for use not only by the army but also the paramilitary forces and the numerous provincial police forces in a project estimated to cost around $3 billion. Other infantry shortages include; close quarter battle carbines, general purpose machine guns, light-weight anti-materiel rifles, mine protected vehicles, snow scooters for use at heights above 21,000 feet in Siachen, 390,000 ballistic helmets, over 30,000 third generation NVDs, 180,000 lightweight bullet proof jackets together with other assorted ordnance including new generation grenades. Similar is the story of air defence. The bulk of the army’s air defence guns – Bofors L 70s and the Soviet Zu-23-2s and ZUS-23-4s and missiles like the Russian OSA-AK and Kradvat – date back 30-40 years and need replacing. The Army Aviation also faces similar shortages. There is an urgent need to replace obsolete aviation assets like the Chetak and Cheetah helicopters. Acquisition of 197 helicopters under the Army Aviation Corps Vision 2017 was postponed after the procurement of Eurocopter AS 550 C3 Fennec was scrapped in November 2007. Four years later after trials, evaluation and negotiation the contract is under re-assessment featuring Russia’s Kamov 226 and Eurocopter’s AS 550 models, with little chance of early conclusion. Addressing Army’s Modernization Needs :: The major issue that emerges is how will the army get out of the vicious cycle of delays in procurement, and get its modernisation plans back on track. Is it feasible to undertake an all encompassing procurement backed by indigenous production taking the transfer of technology (TOT) route? What are the likely constraints? Let us take a look at the budgetary support first? The Defence Budget for 2014-15 has an allocation of Rs. 2, 29,000 crores ($38 billion) an increase of 12 per cent over the previous year’s allocation. The capital outlay is Rs.94, 588 crores ($15.7 billion), and the remaining allocation of Rs. 1, 34,412 crores is the revenue outlay. The sub allocation of capital outlay to Army is Rs. 20, 655 crores, Navy Rs. 22, 312 crores, Air force Rs. 31,818 crores, DRDO Rs.9298 crores and modernization of Ordnance Factories (OFs) Rs. 1, 207 crores. While the figures might look impressive it needs to be noted that fairly large amount of capital outlays get consumed by committed liabilities leaving fairly modest amounts for new procurements. Second, even if the money was available how can the army make up such huge shortages in any acceptable time frame? Procurement procedures, deciding on vendors for transfer of technology, issues regarding off sets, participation of the private sector and above all skill development are long drawn process which in the best case can take anything from 5 to 7 years. To deal with the problem two critical aspects need to be addressed: One, the nature of future threats both in short-and-medium-to-long-terms basis. If the trigger for conflicts is likely to be unacceptable provocation requiring immediate military response; this requires basic level of preparedness and modernization to deal with such contingencies. Two, the long-term capability needs require a more nuanced and detailed induction perspective more attuned to R&D, technology transfers and indigenous production, etc. The essential take away from the above analysis is two-fold – laying down induction priorities and tri service synergy. [Author Brigadier (Retd.) Arun Sahgal, PhD, is Deputy Director Research and Head, Centre for Strategic Studies and Simulation, at the United Service Institution of India. He is a member of National Task Force on Net Assessment and Simulation, under the NSCS, Government of India.]   Source : Defence News

Why is India offering to buy more US helicopters

(Reuters) – India has offered to significantly increase an order for U.S. attack helicopters, Indian officials said, as U.S. Defense Secretary Chuck Hagel began a visit to New Delhi on Thursday aimed at boosting defence and strategic ties.

The Apache gunships and a deal for Chinook helicopters, both built by Boeing, will top the agenda in Hagel’s talks on Friday with the new administration led by Prime Minister Narendra Modi. India has offered a follow-on order of 39 AH-64D Apache helicopters in addition to the 22 now being negotiated, a Defence Ministry official said. The sides have been wrangling over the price of the gunships, however, with the initial deal having been estimated to be worth $1.4 billion. The two countries have rapidly expanded military and business ties in recent years, despite discord over issues such as intellectual property rights and market access. Washington is keen to step up cooperation across the board, seeing India as a strategic partner in the face of an increasingly powerful and assertive China. According to defence research firm IHS Jane’s, India was the top foreign buyer of U.S. arms last year. An Apache deal would be the first big military contract since Modi’s government took office in May. Hagel’s trip follows one by U.S. Secretary of State John Kerry last week and is part of the build-up to talks between Modi and President Barack Obama in Washington in September. Hagel’s talks will also cover military exercises and co-production and co-development of armaments and the renewal of a 10-year defence cooperation agreement that runs until 2015. Hagel said the purpose of his visit went beyond arms sales. “Our interests are varied and common – stability, security, economics, possibilities, freedom,” he said en route to India. “I’ll be there, working, yes, our specific issues, but it’s larger … than that.” “WE NEED PARTNERS” Hagel said Asia-Pacific was a region of great opportunities, but also of challenges. “We need partners. We need relationships. That’s the kind of world we live in, and that’s the kind of world that we’re going to be living in.” Speaking to reporters on his plane, Hagel was asked about India’s apparent reluctance to be seen as a full U.S. ally and he replied that Washington was “mindful” of India’s tradition as a independent, non-aligned state. “We’re not trying to change that,” he said. “But…we have common interests, and…we think there’s more potential to build on those common interests.” U.S. officials say there is the potential for billions of dollars of new arms sales in the next few years and hope Modi can overcome bureaucratic obstacles that have held up some. Last month, India’s cabinet cleared a proposal to allow 49 percent foreign participation in the defence industry, up from a current cap of 26 percent. Hagel said he would be looking at whether there would be the potential to go beyond 49 per cent something U.S. defence firms want before allowing technology transfers India craves. The initial batch of Apache helicopters is meant to replace the Indian Air Force’s ageing fleet of Soviet-era aircraft and will be armed with Hellfire and Stinger missiles. The Indian Army has separately requested a fleet of at least 39 of these attack aircraft, some of which will be deployed as part of a new mountain division it is raising along the disputed border with China, an army official said. “The point is we are looking at 60 to 70 pieces eventually, so the expectation is the vendor will factor that in, in the price negotiations,” said the defence ministry official, who asked not to be identified in line with ministry policy. U.S. defence sales to India have grown from the low hundreds of millions of dollars in the decade to 2008 to more than $9 billion since that year.   Source : defencenews.in

Indian Air Force Not Keen on Rs. 30,000 Crore Indo-French Missile Deal

New Delhi: An Indo-French proposed joint venture expected to be worth around Rs. 30,000 crore to develop short range air defence missiles seems to have run into rough weather as the Indian Air Force feels that its requirements could be met by indigenous Akash surface-to-air missile weapon system.

The proposed joint venture is planned between DRDO and the French missile manufacturer MBDA under which they were planning to produce short-range surface-to-air missile (SR-SAM) systems for the Indian Air Force for the Maitri programme.The Akash air defence missile system has already been developed by the DRDO indigenously and its development trials were completed successfully by the agency in Odisha recently. The SR-SAM is also planned to be a project in the same class, highly placed sources said in New Delhi. The IAF feels that when the indigenous system meets the requirements of the force, then there is no requirement for importing or co-developing a similar system, they said. As per the proposed SR-SAM project, the IAF had to induct 49 Missile Firing Units (MFUs) of the co-developed missiles. The IAF has already placed orders for eight squadrons of the Akash surface-to-air missile and it would require to place orders for another 25 squadrons of the weapon systems to meet its complete requirement of air defence missiles of this range, the sources said. The induction would also save a lot of foreign exchange and help in expanding the indigenous missile production industry in view of the large orders to be placed, they said. The negotiations for the SR-SAM project were started in 2007-08 and it was discussed in detail in parleys between the Indian and French government at highest levels during visits by senior dignitaries to each other’s country. During talks between French President Francois Hollande and the then Prime Minister Manmohan Singh in January 2013, the two sides had stated that negotiations for finalisation of the joint development programme have been concluded. The indigenously developed Akash missile, with a 27-km range and an effective ceiling of 15 km, was recently test fired from Integrated Test Range in Balasore district in Odisha. The Akash air defence weapon system has been designed, developed and led to production by DRDO for defending and protecting important assets of the country from penetrating aerial attacks. The missile is planned to be inducted in to the Army and the Air Force. It was developed by the DRDO as part of the integrated missile development programme under which Agni, Prithvi, Trishul and Nag missile systems were to be developed. Source : defencenews.in

General Dalbir Singh Suhag Takes Over As New Indian Army Chief

General Dalbir Singh Suhag today took charge as India’s new army chief, succeeding General Bikram Singh, who has retired. Lt. Gen. Suhag was appointed chief in May by the outgoing UPA government despite protests from former army chief, General VK Singh, and the BJP.
General Dalbir Singh Suhag today took charge as India’s new army chief, succeeding General Bikram Singh, who has retired.

Lt. Gen. Suhag was appointed chief in May by the outgoing UPA government despite protests from former army chief, General VK Singh, and the BJP.
59-year-old Lt. General Suhag, a Gurkha officer who had participated in the 1987 Indian Peace Keeping Force operation in Sri Lanka, will have 30-month tenure.
He comes from a family of soldiers.
A village in Jhajjar, Haryana, is celebrating the rise of the boy they knew as fearless.
“He had a sharp brain and worked hard. He has achieved all this because of his hard work. He was fearless,” his mother said. Asked if she was happy, she said, “When my son has reached such great heights…of course I am.”
His father Rajpal Singh Suhag is a retired flying officer.
“Generations of our family have been in the army. So he also had the desire to serve the nation. I was in the army, my grandfather and great grandfather were also in the army,” the former soldier said with pride, sitting in a room filled with medals and trophies.
Lt. General Suhag was made the Vice Chief of Army Staff in December last year. Before this he was the Eastern Army Commander.
He was at the centre of a controversy after a vigilance ban on him by then army chief General VK Singh in connection with an intelligence operation in Assam.
The ban was removed after General Bikram Singh took over in May, 2012.
General VK Singh is currently a minister in the BJP-led government. The BJP had questioned what it called the UPA’s alacrity to appoint Lt General Suhag and had insisted that the matter be left to the next government.
Soon after the BJP took power, however, Defence Minister Arun Jaitley said the appointment would not be scrapped.
Lt. General Suhag also commanded 53 Infantry Brigade engaged in counter insurgency operations in the Kashmir Valley in 2003-2005.
An alumnus of Sainik School, Chittorgarh, he joined National Defence Academy in 1970 and was commissioned in June 1974.

Source : Defence News

Indian Defense is in the air again

Defense is in the air again. There is a palpable sign of excitement amongst the Industry players who are suddenly awake to new sense of anticipation as far as defence sector is concerned. After a lull of almost a decade where inaction at large and negative action to some extent was the norm, the industry is looking forward to slew of measures from the new government to kick start the sector out of its deep slumber. And so far government has made right kind of noises. In fact, the new BJP led government’s manifesto explicitly envisages India as an exporter of defense equipments over the next decade. Government has already stuck a right note by increasing FDI in defence to 49% and also enhanced capital expenditure budget by 20%. Well, what it means for domestic defence players? Let’s take a deep breath and soak in the following facts:
a) According to a recent report by a reputed financial house, given Mr. Narendra Modi’s push to reduce import dependence in defence equipments and also to make India self-reliant, India’s likely defence outlay is estimated at USD 248 billion over next decade.
b) According to another report by KPMG, the defence budget is likely to grow at CAGR of 8% to reach $64 billion by 2020. The growth is to be primarily driven by capital expenditure.
The above figures suggest a huge opportunity for not only foreign players but more significantly even for domestic players, given the present government intent to promote the domestic defense industry as also to reduce dependence on imports.
Now, are these mere numbers or are we staring at a tremendous business opportunity?
The anecdotal data as well as common sense approach suggest, the later.
a) NDA has always been known to promote private business enterprise and the current PM is known for his “Gujarat Model” that has a strong place for private enterprise.
b) BJP intends to have a clear focus on Indian Defence with a vision to make it self- reliant & import independent.
c) Govt also clearly intends to promote domestic defence manufacturing that serve three purposes:

1. It revs up the Indian Manufacturing sector and help aid our economy
2. Create much needed employment for youth and
3. Takes a significant step towards its ultimate goal of being self-reliant in defence.

No doubt that Indian top business houses like TATA, RIL, Mahindra, L&T are aggressively eyeing defense as a sunrise sector for coming decade. It is noteworthy that currently Indian Domestic defence manufacturing is distinctly dominated by Public Sector (DPSU) & Govt (OFB) which together account for 90% of defence manufacturing. Here, it is also noteworthy that opening up of largely govt dominated sectors in the past has meant huge business opportunities for private sector, teleocm, media and Aviation being the cases in point.

The above argument clearly suggests a huge door (not window) of opportunities for private enterprises in this now rightly called “Sunrise Sector”.

'India should be more aware of cyber security threats'

NEW DELHI: India should be more aware of cyber security threats and the time to act in this regard is now, an Israeli security solutions firm has said even as it averred that the two countries have many common "opponents".
"I believe India should be more aware of cyber threats. I am sure that once India will be aware of cyber threats, the necessary steps would be taken," Zori Kor, vice president of Israeli firm ASERO Worldwide, said here.
Stressing on the importance of having cyber security, Kor said it was "unfortunate" that the Indian public is not fully aware of threats in this field, which can even have a ripple effect on the economy.
"As the public still doesn't understand how complex the challenge is, may be some decision makers are hesitating whether to take the necessary steps in order to meet the future challenges," said Kor, who is on a visit to India in connection with an upcoming homeland security conference in Israel.
"My recommendation is to start dealing with it (cyber security needs) now because it takes time," said Kor, who recently retired from Israeli Security Agency after 25 years of service in a number of counter-terrorism and protective security posts.
Adding that cyber security is not an area where one size fits all as the environment and threats keep changing from time to time, he said, "If we answer only the current situation, it might not be good enough. We have to think what the bad guy's next step would be in order to answer that."
Talking about the salient features of Israeli security capabilities, he said the country believes in partnership and in sharing knowledge and experience regarding implementation of technological platforms for internal security.
"We are in the same boat. Many of our opponents are unfortunately yours as well because we have good ideas and creativity and so do you. So, whoever is trying to steal good ideas from us might want to steal it from you as well," he said while opining that India was one of the "few friends" that Israel had.
India is now the main export target of the Israeli defence industry; however, both countries avoid revealing details about the scale and nature of their security trade.
In 2012, the Israeli defence ministry announced that the country's defence exports stood at an annual USD 7 billion of which homeland security accounted for about USD 1.5 billion.
Source  : The Economics Times

Defence could be sunrise industry for Indian firms in the next decade

With Prime Minister Narendra Modi’s push to reduce import dependence in defence equipment, India’s likely defence outlay is estimated at $248 billion over the next 10 years, according to the report.

Mumbai: Defence could be the sunrise industry of the next decade for Indian companies, according to a report released by Edelweiss Securities Ltd on 18 July. And Indian conglomerates such as the Tata group, Reliance Industries Ltd (RIL), Larsen and Toubro Ltd (L&T), and Mahindra Group are increasingly forging partnerships with global defence companies, and are “heavily enhancing production bases in the defence and aerospace businesses as India is on the cusp of a major spending drive to modernise its armed forces”, the report said.  With Prime Minister Narendra Modi’s push to reduce import dependence in defence equipment, India’s likely defence outlay is estimated at $248 billion over the next 10 years, according to the report. In the budget unveiled on 10 July, the government proposed to raise the foreign direct investment limit in defence production to 49% from 26%. On Saturday, Press Trust of India (PTI) reported that the government cleared procurement proposals worth over Rs.21,000 crore and also approved a project for the production of transport aircraft, which is open only to Indian private sector companies. Among the major proposals to receive approval is a Rs.9,000 crore tender to provide five fleet support ships for the Indian Navy, for which the request for proposal (RFP) would be issued to all public and private sector shipyards, defence ministry officials said. The majority of the proposals cleared would involve only Indian public and private sector firms and are aimed at increasing the indigenization of military hardware, PTI reported. The Indian defence sector will be a significant opportunity for both foreign and domestic players, given the government’s intent to promote the domestic defence industry via a fresh dose of defence reforms. The minimum opportunity for domestic entities is worth $75 billion, given the 30% offset requirement, the Edelweiss report said. India’s defence offset policy mandates that foreign contractors source components and systems from local vendors for at least 30% of the value of orders worth more than Rs.300 crore that they get from India. Other industry experts have a similar view. According to KPMG, the defence ministry expects the defence budget to grow at a compounded annual growth rate of 8% to touch $64 billion in the financial year 2020. The growth will primarily be driven by capital expenditure, the component of the defence budget used for creation of assets and expenditure on procurement of new equipment. The offset opportunities are expected to be around $15 billion within the next 10-15 years, assuming that the proposed acquisitions which are under different stages are completed on time, according to KPMG. “The new BJP-led government’s manifesto explicitly envisages India as an exporter of defence equipment over the next decade. The government has done away with the requirement of licences for defence manufacturing for all but 16 items. Further, in Budget 2014-15, it has increased FDI (foreign direct investment) in defence to 49% and also enhanced capital expenditure budget by 20%,” the Edelweiss report said. Domestic defence manufacturing is dominated by defence public sector undertakings (DPSU) and Ordnance Factories Board (OFB), which together have an 80-90% share of domestic defence manufacturing. However, various private sector companies have been involved in a small way with several defence projects over the past years. Larsen & Toubro, the Tata group, Pipavav Defence and Offshore Engineering Ltd, among others, have tied up with global defence companies and have created infrastructure required to take on bigger roles in the defence space. “These companies are yet to make a significant impact given the tardy processes involved in bagging defence orders…(However,) we believe defence could be the sunrise industry of the next decade for Indian companies,” the Edelweiss Securities report said. For instance, Mukesh Ambani-controlled RIL has been nurturing its ambitions in the defence space over the past few years and is likely to be a formidable entity in the aerospace business with several tie-ups in place, according to the research report. The report said RIL is currently incubating the defence business, which looks promising. RIL did not offer any comments for the story. RIL had set up two defence subsidiaries—Reliance Aerospace Technologies and Reliance Security Solutions—in 2011. The group is set to enter the defence space by investing and signing new deals with global original equipment manufacturers (OEMs) primarily towards offset arrangement of defence equipment, the report said. RIL had recently signed an agreement with Dassault Aviation (France) for medium-multi-role combat aircraft (MMRCA) towards the offsets clause. RIL has also signed agreements with Raytheon Co. and Boeing Co. of the US and Siemens AG of Germany for homeland security systems. Rival Tata group has also further fortified its presence in the defence space. “Chairman Cyrus Mistry’s strategy is to increase the Tata group’s footprint in the sectors opened up by the government, namely, defence and aerospace,” the Edelweiss report said. In June, Mint had reported that the $100 billion Tata group’s strategic aerospace and defence arm, Tata Advanced Systems Ltd (TASL), has scaled up operations across its seven lines of manufacturing and was preparing to bid for building full aircraft in the next three to five years. To start with, TASL is eyeing a defence ministry contract to manufacture 56 military transport planes to replace an ageing fleet of Avro jets with the Indian Air Force at an estimated cost of Rs.11,900 crore. The Mahindra Group began its Mahindra Defense Systems division in 2000; this was later carved out as a separate company in July 2012. The group expects most of the projects to come from artillery systems and armoured vehicles. It hopes to ramp up revenues to $430 million by FY16E from the current $51 million. Source : Defense News