Top defence manufacturers line up to sell their cutting-edge weapon system at a time when the govt has fine-tuned its procurement policy that lays overwhelming stress on local manufacturing. That’s easier said than done in the absence of local infrastructure and fears about secrecy

by Ajay Banerjee

Eminent defence data analyst Global Firepower Index says the Indian military has a combined 4,207,250 active and reserve personnel in service. Various defence groups rate India’s military as one of the top five biggest in the world. India is also the world’s largest importer of weapons and military equipment, accounting for 13% of all such international imports, according to the Sweden-based think-tank Stockholm International Peace Research Institute (SIPRI) in its report. 

Lined up before the country are the top defence manufacturers ever since the BJP came to power in 2014 and promised to open up the sector through ‘Make in India’ route. The objective is not only to generate thousands of jobs but also replace obsolete equipment and offer the best weapons and platforms to the defence forces. That has not been simple in the absence of adequate manufacturing ecosystem, veils of secrecy in a severe bureaucratic environment and dithering among some manufacturers to part with sensitive cutting-edge technology. Nevertheless, arms manufacturing companies see it as a golden chance. Sample this: 

  • Europe’s Airbus Group wants to sell its Panther helicopter. It says if it wins a contract, it would make India its global hub for the multi-purpose choppers. The company currently builds them at Marignane in France.
  • Lockheed Martin says if its F-16 fighter jets are selected (it may compete with Saab for a $15 billion order) it will “support the advancement of Indian manufacturing expertise”.
  • Germany’s ThyssenKrupp Marine Systems and France’s Naval Group want to vie for a contract of up to $10 billion to build submarines in a South Asian country.

It is clear India imports at least 90% of its defence equipment. It is banking on foreign companies to bring in new technology. The lowest bid is one key selection factor that worries some of the competitors. “We’d like to see the Indian government work with the US government to ensure that these acquisition policies don’t disadvantage US firms just because we can’t get the lowest price,” Cara Abercrombie, former US deputy assistant secretary of defence for southeast Asia, told a panel in New York.

The Procurement Model

India’s attempt to join the nations producing world-class military equipment hinges on a new policy: ‘strategic partnership (SP) model’. Production of four crucial military items fighter jets (both for the Navy and IAF), submarines, helicopters (for all three services) and new-generation tanks are listed under this model, all cutting-edge equipment needed in a battle.

The ‘SP model’ allows the Ministry of Defence (MoD) to select an Indian private company to collaborate with a foreign partner and produce military equipment in India. On paper, it looks fine, but technology transfer is tricky.

In May last year — ending almost two years of discussions with industry and experts — the Modi government cleared the SP model. It was made a part of defence procurement procedure (DPP), the guiding framework of making military equipment in India.

The Red-Tape

Why should MoD select and nominate an Indian partner for foreign companies some of whom are in the Fortune 500 list? It is a question often asked in industry circles. For the Indian companies, this clause could create a monopoly. The ideal situation should be to allow a foreign company to select its own partner from a bunch of Indian companies cleared by the MoD. 

It has seen some success and also failures. The Rs-32,000 crore ‘Make in India’ project to build 12 advanced minesweepers for the Navy with a South Korean firm was cancelled in January this year. An artillery programme for specialized artillery guns, the K-9 Vajra, has moved forward. 

The plan to include new rifles for the Army has been on the drawing board for long. Several rounds of talks later, 72,400 rifles have been cleared and the remaining 6.5 lakh will be purchased from eligible Indian vendors in tie-up with foreign manufacturer. Bullet-proof jackets are being made in India. 

On Jan 16, defence minister Nirmala Sitharaman allowed direct proposals from builders instead of the existing system of the MoD sending out a request for information. The industry, start-ups or individuals can suggest their projects, as per a list put out by the armed forces. The industry can also have a foreign tie-up to the tune of 49% foreign holding. 

Ready For A Long Haul

Several big-tickets items are listed to be ‘made in India. In reality it could take years for them to fructify. It’d also reflect if India can shed the position of being a leading arms importer or continues to be dependent on others for technology. The SP-model can help in building a military industrial complex and a failure could leave India still struggling with technology. 

Whatever decisions Sitharaman takes will decide timelines of new inductions and the quantum of transfer of technology offered by foreign partners to their Indian counterparts.

Since the new policy was announced, the MoD has invited and studied proposals for the ‘Make in India’ six stealth submarines costing Rs 75,000 crore. Four major global players -- Naval Group-DCNS (France), ThyssenKrupp Marine Systems (Germany), Rosoboronexport Design Bureau (Russia) and Saab Kockums (Sweden) are vying to bag contracts running into thousands of crores. 

The MoD has asked global helicopter makers to send in their bids to make a total of 234 copters for the Indian Navy. These copters will be of two types, 123 naval multi-role helicopters (NMRH) with anti-submarine warfare (ASW) capabilities, and another 111 armed light naval utility helicopters (NUH). The two contracts are estimated to cost nearly $10 billion (Rs 65,000 crore). Overall, 1,000 copters are needed; some 400 are being built by Hindustan Aeronautics Limited (HAL) under two separate projects, one with the Russians and another of its own.

The Next Big Buys

In Nov 2017, the Army sent out a global bid for 1,770 Future Ready Combat Vehicle (FRCV) — a fancy name for a tank

India is looking for some 200 single-engine jets for which talks have been conducted under the ‘SP-model’ 

The ministry has placed an order for 114 pieces of Dhanush, a variation of the Bofors design and transfer of technology. The Army is carrying out exploitation-trials

The desi-made Advanced Towed Artillery Gun System, jointly developed by DRDO and the private sector, has completed winter trials 

Army’s Field Artillery Rationalization Plan aims to acquire 2,800-3,000 155 mm/52-calibre guns of all kinds and 155 mm/39-calibre lightweight howitzers by 2027 

The Big ‘if’ in FDI 

On July 25, 2017 the ministry said there been a mere Rs 1.13 lakh crore FDI in the defence sector in the past three years 

In Sept, secretary of defence (production) Ashok Gupta (now retired) speaking at the US-India Strategic Partnership Forum said: “The government would be open to consider 100% FDI in defence, should a company be willing to provide full technology transfer”

100% FDI is allowed in defence sector, out of which up to 49% is under automatic route. FDI above 49% is permitted through govt route on a case-to-case basis 

The Collaborations

Single-engine fighter jet Tejas is powered by US-produced General Electric engines

The Arjun tank runs on German engines and over 30% of it has German parentage

The latest version of Dhruv helicopter, now tasked for Siachen ops, flies on Snemca engines from France 

The Shivalik-class warships are designed in India, but are powered by French Pielstick engines. These warships used steel produced by Steel Authority of India

Italian shipbuilder Fincantieri helped in design but used Indian steel for Vikrant, the under-construction sea-borne aircraft carrier. The engines are from General Electric, US

N-powered submarines Arihant & Arighat are first such vessels constructed outside the five permanent members of the UNSC. While Russia helped in design, the main hull was built by India’s L&T 

The Scorpene Submarine is classic example of a joint venture with France 

Russian equipment such as Sukhoi 30MKI fighter jets and T-90 tanks are licence-produced in India