Nirmala puts shoulder to combat vehicle project. Move to facilitate private sector investments, eliminate delay in project approvals

The Defence Ministry plans to fast-track the $12-billion Future Infantry Combat Vehicle (FICV) program of the Indian Army, in an effort to set in motion the long-pending project.

“The Ministry of Defence has decided to move the FICV project under ‘Make II’ category (of Defence Procurement Procedure-2016). This has been done to fast-track the programme,” a senior Defence Ministry official told BusinessLine.

Under ‘Make II category’ of DPP-2016, industry is free to make investment in the identified programs, thereby eliminating delays on account of the Defence Ministry for approvals up to ‘prototype stage’, or the stage in which the main design is made.

The Indian Army wants to purchase about 2,300 units of combat vehicles that are expected to replace the 2,610 units of BMP-2, belonging to the Soviet-era, of army’s mechanised infantry units by 2022.

The BMP-2 is a second-generation, amphibious infantry fighting vehicle introduced in the 1980s.

$500 Million In Savings

Bringing the project under ‘Make II category’ will entail a savings of about $500 million or more for the Defence Ministry. This is because, earlier under ‘Make II’ category, the Ministry was required to fund three development agencies to the tune of $75 million each, according to sources.

At least two companies have offered to pursue the programme under ‘Make II’ category, the official said. In 2015, when the government floated a global expression of interest (EoI), which is the first step in the procurement procedure, five companies had responded to it — Larsen & Toubro, Tata Motors, Reliance, Mahindra and Titagarh Wagons with Tata Power.

At that time, Ordnance Factory Board (OFB) was to be the nominated development agency whereas two companies were to be selected from the five private sector companies.

‘Originally when the project was conceptualised in 2009, the plan was that the short-listed private sector companies would put in 20 per cent of the design and development cost and the government would put in 80 per cent. But nothing fructified then due to differences in the evaluation process, thereby stalling the project. It was again given a push under the present government in 2014 during which 10 private sector defence firms were empanelled.

Now under Defence Minister Nirmala Sitharaman, the Ministry has decided to expedite the program under a different route of the procurement process.

Multiple deviations from the laid down procedure and terms of EoI were the main reasons for the decision to withdraw the EoI and move the programme to ‘Make II’ category, sources said.

Some of the critical technologies of the FICV have to be imported from original equipment manufacturers (OEMs). Global defence firms vying for the deal are General Dynamics, Lockheed Martin, BAE Systems, Rheinmetall and Russian firms under Rosoboronexport.

According to industry sources, even if the project gets officially approved, it will take at least 20-25 years to complete the entire order.