• 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.

Eye on defence | 11

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

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► Totalexperience of66manyearsin theArmedForces

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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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