Geopolitics August 2016

Vol VII, Issue III, AUGUST 2016 n `100

DEFENCE n DIPLOMACY n SECURITY www.geopolitics.in

TARDY PROGRESS There are still a number of missing nuts and bolts in the ‘Make in India’ initiative for defence sector and it will take committed and focused moves to make the Prime Minister’s dream come true

STRONG SUPPORT

27 Stromynka str., 107076, Moscow, Russian Federation Phone: +7 (495) 534 61 83 Fax: +7 (495) 534 61 53

www.roe.ru

Rosoboronexport is the sole state company in Russia authorized to export the full range of defense and dual-use products, technologies and services.

Rosoboronexport accounts for over 85% of Russia's annual arms sales and maintains military-technical cooperation with over 70 countries worldwide.

ADVERTISEMENT

The world meeting of naval technologies for the future

th 25 EDI T ION

REQUEST YOUR BADGE ON

www.euronaval.fr

WITH THE CODE : PART16

OCTOBER

17th 21st 2016

PARIS LE BOURGET

WWW.EURONAVAL.FR

CONTENTS

COVER STORY (P10) THE QUEST FOR SELFRELIANCE IN DEFENCE The ‘Make in India’ initiative has no doubt created a buzz in India’s defence industry, particularly in the private sector. However, the private sector so far constitute the smallest segment of the Indian defence production and technology sector, which continues to be dominated by the state-controlled entities.

PANORAMA (P8) COVER STORY (P14)

TAMING THE GLOBEMASTER

THE EVOLVING PRIVATE SECTOR

Boeing and Mahindra Defence Systems have come together to launch India’s first C-17 simulator centre in Gurgaon to train IAF pilots.

To sustain joint venture businesses, the government needs to channelise its orders to the Indian private sector. That will not only help create Indian capabilities, but also help create a workforce that will last forever.

DEFBIZ SAGA OF THE IAF REFUELLERS

DEFBIZ (P54)

MIRAGE 2000 UPGRADED TO FOC (P59)

With the scrapping of the A330 MRTT deal, India has lost a golden opportunity to acquire what is arguably the world’s best refueller at a competitive price.

Continuing its success on various recent projects, HAL has now flown the first FOC upgraded Mirage-2000 aircraft on July 28, 2016 adhering to the scheduled date.

4

August 2016 www.geopolitics.in

CONTENTS

DPP 2016 – A LEG-UP FOR MSMES (P38)

To help the industry, including MSMEs, in achieving the objective of creating ‘Buy (IDDM)’ category and splitting the ‘Make’ category into two sub-categories, MoD needs to release information about products required by the armed forces under these categories with as much detail as possible.

SLOW MARCH TO INDIGENISATION (P44)

Plans for military modernisation must simultaneously lead to a transformative upgradation in the defence technology base and manufacturing prowess, or else defence procurement will remain mired in disadvantageous buyer-seller, patron-client relationships.

FOCUS

NEW DPP & CONVOLUTED QUALITATIVE REQUIREMENTS (P50)

Poorly conceived and imprecisely drafted SQR create confusion, lend themselves to misinterpretations, compromise quality of equipment, prove expensive and cause immense delays.

It has been seen that flawed SQRs are the cause of a majority of procurement proposals that are aborted.

PUBLISHER

(P69)

K SRINIVASAN EDITOR

AFSPA: TO BE OR NOT? AFSPA cannot be a political tool and its revocation or imposition cannot be done without due diligence as once the Army has gone back to its barracks to expect it to return to active operations at short notice would then be unacceptable and only damage morale and the effectiveness of our last line of defence.

TIRTHANKAR GHOSH VIJAINDER K THAKUR ASSOCIATE EDITOR

MAYANK SINGH CONSULTING EDITOR

M MURLIDHARAN SENIOR CORRESPONDENT

NAVEED ANJUM

SENIOR PROOF READER

RAJESH VAID

DESIGNER

MOHIT KANSAL

PHOTO EDITOR

H C TIWARI

Vol VII, Issue III, AUGUST 2016 n `100

STAFF PHOTOGRAPHER DEFENCE n DIPLOMACY n SECURITY www.geopolitics.in

TARDY PROGRESS There are still a number of missing nuts and bolts in the ‘Make in India’ initiative for defence sector and it will take committed and focused moves to make the Prime Minister’s dream come true

Cover Design: Mohit Kansal The total number of pages in this issue is 76

VOL VII, ISSUE III, August 2016

SENIOR EDITOR

HEMANT RAWAT

DIRECTOR

RAJIV SINGH PUBLISHING DIRECTOR

RAKESH GERA LEGAL ADVISOR

VASU SHARMA SUBSCRIPTION

GEETA JENA DISTRIBUTION

BHUSHAN KOLI, PANKAJ KUMAR For advertising and sales enquiries, please contact : 9810159332, 9810030533 Editorial and Marketing Office Newseye Media Pvt. Ltd., D-11 Basement, Nizamuddin East, New Delhi -110 013, Tel: +91-11-24372050 - 51

All information in GEOPOLITICS is derived from sources we consider reliable. It is passed on to our readers without any responsibility on our part. Opinions/views expressed by third parties in abstract or in interviews are not necessarily shared by us. Material appearing in the magazine cannot be reproduced in whole or in part(s) without prior permission. The publisher assumes no responsibility for material lost or damaged in transit. The publisher reserves the right to refuse, withdraw or otherwise deal with all advertisements without explanation. All advertisements must comply with the Indian Advertisements Code. The publisher will not be liable for any loss caused by any delay in publication, error or failure of advertisement to appear.

Owned and published by K Srinivasan, 4C Pocket-IV, Mayur Vihar, Phase-I, Delhi-91 and printed by him at Archna Printers 18, DSIDC Shed, Okhla Indl Area Ph-1, New Delhi -110020, Readers are welcome to send their feedback at geopolitics@newsline.in

www.geopolitics.in

August 2016

5



LETTERS TO EDITOR

R DEFBIZ

BREXIT: ITS IMPACT ON EUROPE “The world will not stand still, nor will Europe. I hope the divorce will proceed with a view to minimising economic damage to all impacted by Brexit. Britain will suffer but I’m sure it will focus even more now on the competitiveness of its economy vis-a-vis the EU and the world at large. Of course we will review our UK investment strategy, (as) everybody else will”.

Airbus Group Chief Executive Tom Enders

nautics in 12 different locations with nearly 7000 employees

“O

ur companies invest in the UK and employ thousands all over England, Scotland, Wales and Northern Ireland, in every walk of life. Today’s jobs and tomorrow’s investment – and hence future jobs – depend on the EU being firmly and lastingly anchored within the single market.”

Quoting, Jacques Brel, the popular French singer, the appeal said, “Please don’t leave from your French friends”.

It was signed amongst others by Airbus, Air France-KLM, Axa, BNP Paribas, Bouygues, BPCE, Covea, Danone, Dassault, Engie, Eutelsat, Faurecia, Fives, Iliad, Ingenico, International SOS, Ipsen, JCDecaux, Michelin, Orange, Pierre Fabre, Publicis, Radiall, Saint-Gobain, Scor, Société Générale, Solvay, Technicolor, Technip, Thales, Valeo, Vallourec and Vinci and released in major British papers.

But it was to no avail. In a historic vote, Brexit happened and the tremors are still being felt by companies across Europe.

Many major industries will have to reckon with new customs regulations, new tariffs and the complexity of one border becoming multiple in nature simple

“Unlike a lot of companies, the impact would be very small in terms of sales. We sell very little to Europe, but we have strong partnerships there.” However there could be ‘domino’ effect in Europe (for Brexit like situation) BAE Chairman Roger Carr

because the United Kingdom has walked out of the European Union. There are over 3000 companies that focus on Defence Manufacturing in the UK, some very big in their sphere like BAE, Airbus, Rolls Royce, Thales ,GKN and Safran will have complex issues to look at and resolve. It is going to be a long hard and complex road ahead.

Rolls-Royce released a statement following the leave vote, saying it was not the outcome it would have chosen but the referendum would have no immediate impact on the company’s day-to-day business. Europe accounts for a third of revenue and almost a quarter of its order book.

In a statement Rolls-Royce said it respected the result and would offer a commitment to UK operations but warned the longer impact of Brexit is as yet unclear.

“The medium and long-term effect will depend upon the relationships that are established between the UK, the EU and the rest of the world over the coming years,” it said in a release.

Here are a few of the companies that can be impacted by BREXIT: • AIRBUS: 3 factories with 15 000 employees  (Filton for design and engineering  Broughton for production of aircraft wings and  Stevenage for satellites and missiles).

The current turnover is £6 billion and the investment in R&D half-billion every year.

• SAFRAN: has 9 subsidiaries and operates from 13 locations with nearly 3000 employees • THALES: predominant focus on aero-

www.geopolitics.in

The impact on space:

1. ESA European Space Agency: questionable impact because to date ESA also shelters Canada and Norway, nations which are not part of Europe.

GALILEO (The European GPS): the European Commission holds the positioning, navigation and synchronization of the European Galileo network.

Under what conditions will the EU give access to UK to the Galileo service?

Moreover, the British company Surrey Satellite Technology Ltd (SSTL) is the master of work of charging electronics in the Galileo programme. What about orders for new satellites?

2. COPERNICUS (The environmentmonitoring programme): financed by the European Commission… What about the role of United Kingdom in the incoming years?

3. EUTELSAT (satellite operator): what is the future for projects like “Eutelsat’s Quantum flexible-payload satellite programme” and the project for broadband Africa with its partner Facebook The space sector in UK had the ambition to reach 10 per cent of world trade against 6.5 per cent currently. This sector, with $19 billion in 2013 and more than 35,000 jobs, has experienced significant growth. Several countries have invested as the US, France, Germany and Italy by basing their investments on the ESA budgetary projections around $369 million for 2016. Existing decisions are not questioned but the role of EU is more and more important in space programs ... the future so looks complicated.

July 2016

47

R

efer to “Brexit-its impact on Europe” (Geopolitics July 2016). The European Union consists of several member states. A common trade market, such as the EU, has its own benefits. They reduce efforts required to conduct business. The nations that are not a part of the EU should join the Union to help ease trade and commerce in the continent.

Great Britain voted in favour of withdrawing from the EU recently. Young voters in the country polled in favour of the EU, but the older generation opted for ‘Leave’.

This shows that globalisation means different things to different segments of modern British society. In present times, no country can progress economically in isolation. The ramifications of Britain’s decision to leave the EU will only unfold over time.

Mahesh Kapasi New Delhi All correspondence may be addressed to: Editor, Geopolitics, D-11 Basement, Nizamuddin East, New Delhi-110013.

Or mail to: geopolitics@newsline.in

6

efer to “COVER STORY ON UAVS” (Geopolitics July 2016). It was a comprehensive and very beautifully dedicated to the evolving need of using unmanned aerial vehicles for various missions. In one of the parts of your Cover Story, the writer has put in that India’s entry into the 34-member Missile Technology Control Regime (MTCR) is now a foregone conclusion. It is not yet a member is just a matter of fine print that most writers in India have failed to mention. Nevertheless, the membership of the MTCR opens up immense opportunities for both India and the global defence industry. We will, though, deal with the opportunities that the Indian Unmanned Aerial Vehicle programmes and the global industry have in this specific sub-sector.

In another part of the Cover Story that talks about the versatility of MALE UAVs. In this, the writer is talking about the types and launch patterns

of UAVs. Some are launched by support crew stationed at the airbase and then over to UAV pilots who could be thouCOVER STORY

UPTAKE IN UAV USE IN INDIA’S FUTURE MILITARY OPERATIONS Within a decade, India's inventory of UAVs may well cross a thousand at a cost of up to $3 billion

MQ-1 Predator unmanned aircraft

I

ndia will, in the next decade or so, emerge as the world's biggest market for Unmanned Aerial Vehicles (UAVs) of all kinds and the first step in this direction has already been taken by the 1.31-million-strong Indian armed forces. That obviously means there will be an uptake in the use of UAVs in the operations carried out either independently or jointly by the Indian Army, Navy, Air Force and the Coast Guard.

Currently, the Indian armed forces UAV assets holdings are quite low. But this situation is about to change in just a matter of years, as you would see explained below.

The Indian government is focusing on providing a major push to induction of UAVs, built indigenously as well as through off-the-shelf buys from foreign sources. Within a decade, India's inventory of UAVs may well cross a thousand at a cost of up to $3 billion, according to an assessment. The Indian UAV inventory may include platforms of different size, range and parameters, catering to varied military requirements.

UAVs are low-cost, low-risk, highpayoff Intelligence, Surveillance and Reconnaissance (ISR) and Target Acquisition (TA) systems. UAVs can be deployed

8

which work together."

The roadmap listed unmanned systems to be one of the areas that would benefit from miniaturisation, which will make it possible to design small unmanned vehicles. "But the future unmanned vehicle, should become steadily more intelligent. Still further in the future, unmanned vehicles should be capable of working in groups with other vehicles, both unmanned and manned," it noted.

India will look at future UAVs that are smaller and easier to transport. Among the essential features in UAVs that India would look for is, for example, the size. It goes without saying that the size, as well as modern stealth technology, should make them difficult to detect. The systems should also be able to make own assessment of the surroundings and use it as a basis for autonomous smart decisions relating to, for example, its choice of route and the use of sensors, according to the Indian Defence Ministry document.

India also intends to develop technologies to enable unmanned, highly autonomous strike capabilities against the full spectrum of potential targets.

"Flexibility of UAVs to operate from multiple platforms would rationalise manning and financial effects. In addi-

July 2016 www.geopolitics.in

sands of miles away. On completion of mission, a MALE UAV is handed back by its pilot to the support crew for recovery at an airbase.

Another piece talks about the need and requirements of these pilotless machines. India will, in the next decade or so,

R

efer to “ISRO’s RLV-TD” (Geopolitics July 2016). Acknowledged as one of the few space organisations in the world capable of end to end implementation of space projects, RLV-TD has demonstrated ISRO’s ability to successfully sail into uncharted waters in search of new solutions. The successful test flight of ISRO’s RLV-TD (Reusable Launch Vehicle - Technology Demonstrator) on May 23, 2016 was a milestone event that reiterated the Indian Space Research Organization’s (ISRO’s) standing as a space agency of world renown. An agency that boldly steers its own course to meet unique Indian requirements.

ISRO conceived and developed the RLV-TD as a test bed for developing enabling technologies for launch cost reduction using TSTO (Two Stage to Orbit) and SSTO (Single Stage to Orbit) architecture. The author has also given a historical account of RLVs. The con-

quickly to cover vast areas. UAVs can fulfil a number of Reconnaissance, Surveillance and Target Acquisition (RSTA) requirements common to all the three armed forces of India.

UAVs improve situational awareness, increase operational tempo and reduce sensor-to-shooter time lag. Employed along with other sensors, UAVs enhance the efficacy of intelligence inputs and, thus, improve the information available to the troops and the commanders for a robust decision-making mechanism in a dynamic battlefield.

India's armed forces will focus for the next few years on building unmanned capabilities apart from miniaturisation to provide its military operations a punch.

This objective of the Indian armed forces is outlined in a 45-page Indian Defence Technology Perspective and Capability Roadmap (TPCR) for the 2012-27 period.

The roadmap also pointed out that as the world moved towards miniaturisation, the benefits from this technology, which should lead to development of microsystems, should play a key role in the development of navigation systems and warhead guidance. "This should lead to weapons becoming smaller and more effective incorporating multiple sensors

PERSPECTIVE

T

he successful test flight of ISRO’s RLV-TD (Reusable Launch Vehicle-Technology Demonstrator) on May 23, 2016 was a milestone event that reiterated the Indian Space Research Organisation’s (ISRO’s) standing as a space agency of world renown. An agency that boldly steers its own course to meet unique Indian requirements.

ISRO conceived and developed the RLV-TD as a test bed for developing enabling technologies for launch cost reduction using TSTO (Two Stage to Orbit) and SSTO (Single Stage to Orbit) architecture.

Broadly speaking, the enabling technologies include: 1. Winged spacecraft manoeuvring during hypersonic flight regime using reaction control system in combination with aerodynamic surfaces such as rudders and elevons.

2. Electromagnetic actuators powered by lithium ion batteries to move elevons and rudders during manoeuvring.

3. Autonomous navigation and flight control using Closed Loop Guidance (CGS) and Flush Air Data System (FADS).

4. Thermal protection of a winged spacecraft during re-entry using ablative tiles and special materials such as carbon-carbon (for nose cap).

5. Recovery of a launcher either through jet engine powered fly back and landing on a runway or through residual thrusting capability, a la SpaceX’s Falcon-9.

6. Scramjet powered launch assist during atmospheric ascent.

ISRO’s RLV-TD Space Shuttle launch

ISRO’S RLV-TD AN OBJECTIVE ANALYSIS

Already acknowledged as one of the few space organisations in the world capable of end to end implementation of space projects, with the RLV-TD ISRO has demonstrated its ability to successfully sail into uncharted waters in search of new solutions, writes VIJAINDER K THAKUR ISRO

70

July 2016 www.geopolitics.in

cept of Reusable Launch Vehicles (RLVs) to cut down space launch costs is nearly as old as spaceflight itself. However, practical reusability of space hardware has remained elusive.The US Space Shuttle, a reusable launcher cum manned spacecraft, was conceived in 1969 and first flew in 1981. Four fully operational space shuttles were built: Columbia, Challenger, Discov-

August 2016 www.geopolitics.in

emerge as the world’s biggest market for Unmanned Aerial Vehicles (UAVs) of all kinds and the first step in this direction has already been taken by the 1.31-million-strong Indian armed forces. That obviously means there will be an uptake in the use of UAVs in the operations carried out either independently or jointly by the Indian Army, Navy, Air Force and the Coast Guard. The Indian government is focusing on providing a major push to induction of UAVs, built indigenously as well as through offthe-shelf buys from foreign sources. Within a decade, India’s inventory of UAVs may well cross a thousand at a cost of up to $3 billion, according to an assessment. The Indian UAV inventory may include platforms of different size, range and parameters, catering to varied military requirements.

Prerna Mishra, Kolkata

ery, and Atlantis. Of these, two were lost in mission accidents: Challenger in 1986 and Columbia in 2003. A fifth operational orbiter, Endeavour, was built in 1991 to replace Challenger. The Space Shuttle last flew on July 21, 2011, its 133rd successful flight. The programme was discontinued on account of high costs. Fourteen astronauts were lost in the two space shuttle accidents. NASA’s decision to combine a launcher and a manned spacecraft into a single vehicle proved to be the Space Shuttle’s undoing.

The complexity of the design pushed up post flight checks and refurbishment costs to an extent where they completely negated the cost reduction achieved through reusability.

I wish Geopolitics keeps informing its readers with all such developments in the future as well.

Jitender Singh, Mumbai

AT LOCKHEED MARTIN, WE’RE ENGINEERING A BETTER TOMORROW.

© 2016 L OCKH KHH EED E MART ART RRT IIN C ORPOO RA RATION RATI ONN

PANORAMA

G N I M A T THE GLOBEMASTER

Air Marshal BS Dhanoa, Vice Chief of Air Staff, IAF, inaugurates the Boeing C-17 Simulation Training Centre in Gurgaon. (L-R) Vinayak Rajagopal, Global Services & Support, Boeing Defense, Space & Security, Pratyush Kumar, President, Boeing India; SP Shukla, Group President, Aerospace & Defence Sector, and Chairman, Mahindra Defence Systems; Gene Cunningham, VP, Global Sales, Boeing Defense, Space & Security

Boeing and Mahindra Defence Systems have come together to launch the country’s first C-17 simulator centre in Gurgaon to train Indian Air Force pilots.

The centre comprises a full motion Weapon System Trainer, classrooms, brief/debrief rooms and provides virtual maintenance training capability and training management

The centre is established to provide training for IAF pilots and Loadmasters supporting 10 C17s.

The training centre contains a full motion Weapon System Trainer (WST) for pilot training, Loadmaster trainer, classrooms, brief/debrief rooms, virtual maintenance training capability, training management system, and other key support systems.

Current contract is for 2+1 years, and will be extended in 5-year increments for a long time (20+ years).

Mahindra, as an in-country offset partner, provides facility infrastructure, locally hired instructors (trained and qualified by Boeing), and will ensure training system is fully operational.

FSTC is a subcontractor for Mahindra.

FSTCs role is providing facility (leased

by Mahindra) and some infrastructure support.

FSTC provides simulation training for commercial airlines using 737 and Airbus 320 simulators located in separate bay.

This is important for Boeing in creating strong local presence and to be a local company. Boeing will also offer training solutions/training services for other Boeing platforms in India. Boeing established this centre as a commercial training centre.

Leveraging an existing simulator training facility supported its timeline and cost effective training solution.

8

August 2016 www.geopolitics.in

PANORAMA

C-17 simulator cockpit

C-17 Weapon Systems Trainer

Fully-integrated training solutions through a high-fidelity, full-motion simulator that replicates the C-17 flight deck

www.geopolitics.in

August 2016

9

COVER STORY

MAKE IN INDIA: THE QUEST FOR SELFRELIANCE IN DEFENCE The Make in India initiative has no doubt created a buzz in India’s defence industry, particularly in the private sector.

However, the private sector so far constitute the smallest segment of the Indian defence production and technology sector, which continues to be dominated by the statecontrolled entities, writes DR LAXMAN KUMAR BEHERA

W

ith the Modi government coming to power, the ‘Make in India’ initiative has become the new economic mantra to revive India’s moribund manufacturing sector and propel its share in the Gross Domestic Product (GDP) to 25 per cent (from around 16 per cent at present). Encompassing as many as 25 diverse sectors, the new economic mantra includes defence manufacturing, which, in the words of the Prime Minister, constitutes the ‘heart’ of the Make in India initiative. However, the question is: what is Make in India initiative in defence production sector and how it differs from the past initiatives to strengthen Indian arms manufacturing capability? This article tries to offer an answer to this question. It also tries to find an answer as to whether the initiatives taken under the Make in India programme are good enough to make us a truly self-reliant.

In a broad sense, the Make in India initiative intends to push indigenous arms manufacturing and achieve the long cherished goal of at least 70 per cent self-reliance in defence procurement.

Conceptually, the Make in India initiative is not very different from the past initiatives, especially those taken post 2001 when the defence production sector was forced open to the private sector

10

participation. The 2001 liberalisation was intended to create a larger industrial base and at the same time, create a competitive environment in which both the private sector and public sector would compete to the benefit of country’s self-reliance efforts. However, as time progressed, it was found that the environment in which the private sector was allowed to operate was too hostile for it to contribute in any meaningful manner. Consequently, participation of the private sector to the cause of Indian defence production remained more or less on paper.

This is where the Modi government’s Make in India initiative seemingly wants to make a difference – to push for real involvement of the private sector in defence production. Unlike in the past, the new model of defence manufacturing reposes a great deal of trust in the private sector. More importantly, to facilitate private sector’s participation the Modi government has brought in a host of ‘ease of doing business’ measures, besides bringing in an element of decisiveness in decision making – the aspects that were particularly in short supply in the previous model. In the following paragraphs are discussed some of the initiatives taken by the Modi government under its Make in India campaign to propel domestic

August 2016 www.geopolitics.in

defence manufacturing.

In little over two years since coming to power, the Modi government has already taken several broad reforms measures pertaining to the defence industry.

These pertain to industrial licensing, FDI cap, defence exports and level playing field between the private and public sectors. The reform in licensing, which came in the form of a series of government notifications issued between June 26, 2014 and September 22, 2015, is an attempt to codify and simplify the process of granting industrial licence (IL) and remove procedural hurdles and other complexities in the process. It may be noted that from the very beginning when the private sector’s participation was allowed subject to an IL, there was no clarity, at least in the public domain, with regard to the items against which IL would be granted. From the

COVER STORY

From the self-reliance point of view, what is perhaps of greater importance is the Make in India's emphasis of putting the domestic industry, particularly the private sector, in the heart of the procurement process

HAL’s ALH COMPOSITE SHOP

industry’s point of view, what was more painful was the restrictive conditions imposed while granting the IL and also the undue delay in the whole licensing process. In order to streamline the process, the new government has brought out, for the first time, a public version of a list of defence items. The list, while identifying the items that are subject to industrial licence, has also made it clear that any item that falls outside the list is not subject to industrial licensing. It has also extended the validity of IL from earlier three years to now 18 years, removed the annual capacity norm as a condition for grant of IL and permitted sale of defence items to the government and government-owned entities (such as the Defence Public Sector Undertakings (DPSUs) and Ordnance Factories and (OFs)) and companies holding valid IL, without permission from the Min-

istry of Defence (MoD). The human interface involved in filling up of licence application has also been removed by placing an online platform. More significantly, the government has expedited the granting process. In its first year, it has granted some 73 ILs in comparison to 56 ILs given in previous three years.

It is significant to note that some of the ILs granted by the new government were pending since 2009! Post-rationalisation of IL, there is hardly any IL pending for approval. As Table 1 shows only about 20 per cent of the ILs pending for approval were submitted before 2015.

The reform in FDI cap was first announced in the Modi government’s first budget presented to the Parliament on July 10, 2014. Detailed notification was issued on August 26, 2014, which has further been revised via Press Note No. 12 (2015 Series) (issued on November 24,

www.geopolitics.in

August 2016

2015) and Press Note No. 5 (2016 Series), issued on June 24, 2016. As per latest notification, the FDI cap stands increased from earlier 26 per cent to 100 per cent that includes besides FDI, investments by foreign Portfolio Investors (FPI), Foreign Institutional Investors (FII) and the like. It may be noted that under the previous policy, investment from FPI/ FII were either banned or capped at an arbitrary level, causing unnecessary headache for the companies listed on the stock exchanges. While allowing FPI/FII, the new policy also allows all forms of foreign investment up to 49 per cent under the automatic route, requiring no prior government approval.

For FDI beyond 49 per cent, the Foreign Investment Promotion Board (FIPB) is authorised to decide on each proposal ‘whenever it is likely to result in access to modern technology or for other reasons to be recorded’. Apart from this, the Modi government’s defence FDI policy has also dropped an earlier onerous provision which required, for the purpose of control, the single largest resident Indian shareholder of the JV to have at least 51 per cent equity share. As per the new policy, the control is now to be exercised by the resident Indian shareholder’s power to influence the company’s policy decisions and appoint a majority of the board of directors.

Following the FDI cap increase, the government announced in early September 2014 a set of measures to promote defence export. The export measures include an export strategy, and a detailed standard operating procedures (SOP) for grant of no objection certificate (NOC) to the industry. The export strategy outlines various steps such as formation of various promotional

11

COVER STORY

Mahindra and Airbus announcing strategic Make in India relationship during the 2015 Paris Air Show at Le Bourget

bodies and various diplomatic and financial support for the industry’s export promotion. The SOP, which was further revised in July 2015, gives clarity with respect to the processes and documentation required for export licence clearance. It may be noted that the private sector had long demanded an export policy that takes into account the country’s security imperatives while promoting the commercial interests of the industry in a predictable and objective manner. The lack of policy had led to slow and ad-hoc decision making which was not necessarily in the interest of the industry. The SOP is meant to meet that long standing demand.

Like the export policy, the private sector has also long demanded parity with the DPSUs and OFs, which were long exempted from paying central excise duty and customs duty on goods manufactured and supplied to the defence forces. The main contention of the private sector was that the duty exemption enjoyed by the DPSUs and OFs distorts the level playin field, by giving the public entities an unfair advantage to quote lower prices in open competition. In order to allay the concerns, the

12

government withdrew both the exemptions, which were notified on 30 April 2015. Significantly, these notifications have not only created a level playing field for the private sector but also for the foreign companies such as Boeing, Airbus, Lockheed Martin, BAE systems who are actively exploring the scope of

Table 1. Year-Wise IL Pending for Approval Year of No of ILs Pending for Approval Application (As on November 16, 2015) 2011 2012

1 3

2013 2014

5 4

2015

51

Source: Department of Industrial Policy and Promotion, Ministry of Commerce, Government of India

future investment in India.

From the self-reliance point of view, what is perhaps of greater importance is the Make in India’s emphasis of putting the domestic industry, particularly the private sector, in the heart of the

August 2016 www.geopolitics.in

procurement process. It may be noted that the Modi government’s first year itself saw clearance of 39 acquisition proposals, of which 32 proposals worth `88,900 crore (96 per cent) were under ‘Buy (Indian)’ and ‘Buy & Make (Indian)’ categories. Table 2 provides an overview of some of the big ticket projects earmarked for the local industry. Of note is that in almost all the big proposals, there is a role for the private sector and in some cases (as in Avro Replacement Aircraft programme) the role is exclusive. Such a role for the private sector seems to have come out as a result of the government’s conviction of giving this hitherto neglected sector a fair chance, even if it means a change in decisions taken by the previous government and a loss of business to the public sector entities. In case of the P-75 (I) project for procurement of six conventional submarines, the new government has changed the previous government’s decision (to import two submarines followed by licence manufacturing of four by the public sector shipyards) and decided to build all the submarines in the domestic shipyard, in which the private sector would be given a chance to

COVER STORY

Table 2. Select High-Value Projects for Indian Defence Industry Project

No.

Value (` in Crore)

P-75 (I) Conventional Submarines

05

50000

Battlefield Management System

…

50000

Light Utility Helicopters

384

40000

Landing Platform Dock

04

25000

Mounted Artillery Guns (155 mm/52 calibre)

814

15750

Avro Replacement Aircraft

56

11897

Fleet Support Vessels

05

9000

Survey Vessels

04

2324 Source: Author’s database

compete. In Avro Replacement Programme, the government has not only shown decisiveness in quickly overcoming certain reservations (about the exclusion of HAL from the programme) continuing from the previous government but also gone ahead in accepting the only single bid submitted jointly by TATA and Airbus – a rare in India’s decision making scheme of things. In the LPD contract, the government has decided to exclude Cochin Shipyard Ltd (a public sector company) and issue the tender to private shipyards only. More significantly, the new government has taken some concrete steps for operationalising the ‘Make’ procedure, which was in limbo since its articulation in 2006. In February 2015, the government awarded the first ever developmental contract to two shortlisted consortiums – one of which consists of two private companies, TATA and L&T – to develop the BMS prototype.

The trust factor with the private sector is perhaps best amplified in government’s recent decision to allow L&T to sign a Licensing Agreement for Transfer of Technology (LAToT) with the Defence Research and Development Organisation (DRDO) for upgraded digital version of the Pilotless Target Aircraft (PTA), Lakshya. This is the first time that technology of a high value product developed by the DRDO was given to private sector for licence production. Earlier, the DPSUs and OFs had the exclusive rights for undertaking such production of DRDO developed items. All these developments mean that the private sectors, which were hitherto excluded in the big-ticket procurement cases in favour of either direct import or manufacture by the public sector entities, would now play an equally major role in India’s

defence production sector.

In addition to the above, the Ministry of Defence has also taken several measures to streamline the all-important Defence Procurement Procedures (DPP) to give it a Make in India push. In this regard, the government has come out with a revised DPP which was released on June 08, 2016. Among other features, the DPP-2016 includes a brand new procurement category – Buy (IndianIDDM) – favouring purchase of locally designed, developed and manufactured products; higher yet flexible indigenisation content requirement in the existing ‘Buy (Indian)’ and ‘Buy and Make (Indian)’ procurement categories; a comprehensively revamped ‘Make’ procedure.

Besides, the MoD is also considering the recommendations of the Aatre Task Force for selection of Strategic Partners (SPs) from within the private sector. The SPs are intended to be given preferential treatment for execution of high value defence contracts as has been the practice

Despite all the reform measures, the private sector companies are yet to be given any major contract, which is the most critical factor for its interest/existence in the sector

with state-owned entities. This along with the aforementioned measures suggest that the private sector, which was hitherto marginalised, would play an equally important role in India’s defence production sector.

Can Indian Defence Industry Make in India?

The Make in India initiative has no doubt created a buzz in India’s defence industry, particularly among the private sector. However, it may be noted that the private sector so far constitute the smallest segment of the Indian defence production and technology sector, which continues to be dominated by state-controlled entities (DPSUs, OFs and the DRDO). Moreover, despite all the reform measures, the private sector companies are yet to be given any major contract, which is the most critical factor for its interest/existence in the sector. As reported recently in the press, all the major deals (costing `2500 crore or more) signed during the two-year period of the Modi government went either to government controlled entities (DPSUs and OFs) or the foreign companies, with the private sector still waiting for its turn. This unhealthy development needs a serious relook if the private sector is required to contribute in any meaningful manner to the Make in India initiative.

Besides, as it would seem clear from the earlier discussion, the Make in India initiative has hardly touched upon the state controlled entities, which for variety of reasons have contributed much below their potential, resulting in India’s poor self-reliance in defence production. The primary reason for poor contribution of the DPSUs, OFs and the DRDO has been their lack of reforms, even though host of recommendations have been made by committees after committees. What is surprising is that small reform measures by way of corporatisation of the OFs, listing the DPSUs in stock exchanges, and streamlining the DRDO – which would bring in greater accountability of these entries – continue to elude the attention of the policy makers. Considering that these entities are by far the biggest players in the Indian defence industry/technology sector, any delay in reforming these entities will only hamper the progress of the Make in India initiative.

The author is Senior Research Fellow, Institute for Defence Studies and Analyses (IDSA)

www.geopolitics.in

August 2016

13

COVER STORY

PRIVATE SECTOR ARMING FORCES OF INDIA THROUGH OEM TIE-UPS To sustain these businesses, the government needs to channelise its orders to the Indian private sector. That will not only help create Indian capabilities, but also help create a workforce that will last forever, a Geopolitics report

I

ndia's defence sector manufacturing was entirely a public sector industry till 2001 when the then government opened up the military market for the private sector. It is now 15 years since Indian private industry became defence manufacturers. Most of the companies that entered into the defence market, more or less around 2005, were large and had engineering businesses as their backbone.

Some feel that 15 years is too short a time for India to emerge as a major military industrial base. Since opening up of the defence industry for private sector participation, the Department of Industrial Policy and Promotion (DIPP) has so far issued around 342 Industrial Licences till June 2016 for manufacture of a wide range of defence items. Over 50 companies have so far reported commencement of production.

The licenses have been issued to the Indian private sector for manufacture of items ranging from military aircraft, unmanned aerial vehicles, radars, electronic warfare systems, ship-borne platforms, and armoured vehicles. Several MOUs and agreements have been signed between Indian and foreign companies for

setting up joint ventures. However, the actual flow of Foreign Direct Investment (FDI) takes time to mature. From August 2014 to February 2016, a total amount of `1.12 crore has come into the country as FDI in defence sector.

In the recent years, many Indian private industries have been involved in a small way with several defence 'Make' projects. These are Integrated Material Management Online System (IMMOLS), Integrated Air Defence Command and Control System (IACCS) Tactical Communication System (TCS), Battlefield Management Systems (BMS) and Futuristic Infantry Combat Vehicles (FICV). While (IMMOLS) and (IACCS) have been deployed, TCS, BMS and FICV are in the early stages of development. Award of major projects under 'Make' category to Indian private industry is a new beginning in Indian defence industrialization.

Larsen & Toubro, Tata Group, the erstwhile Pipapav Defence and Offshore Engineering Ltd. that is now under Reliance Group of Anil Ambani, Mahindra and Mahindra, Ashok Leyland Defence Systems, Kalyani, Alpha Design, Punj Lloyd, are some of the key Indian players in the defence industry today.

Airbus Helicopters awarded a contract to Mahindra Aerostructures to make airframe parts for the AS565 MBe Panther

14

August 2016 www.geopolitics.in

The Indian defence industry's import-export ratio is inferior to countries with a much smaller defence industrial base. The 'Make in India' policy for the defence sector aims to reverse the current imbalance between the import of defence equipment and indigenous manufacture of defence equipment without adversely affecting the requirements, capability and preparedness of the user.

Therefore, achieving self-reliance and reducing dependence on foreign countries in defence is a necessity today rather than a choice, both for strategic and economic reasons. The requirement for domestic production of defence equipment is more than for any other sector because it will not only save precious foreign exchange but will address the national security concerns.

'Make in India' policy aims at facilitating investments and fostering innovations for the manufacturing sector in India. The government being the only consumer, 'Make in India' in defence sector will be governed by the defence procurement procedure and production policy of India. The government policy of promoting domestic defence industry is adequately reflected in the Defence Pro-

COVER STORY

curement Procedure, wherein preferential treatment is given to Indigenous Design, Development and Manufacture, Buy (Indian) and Buy and Make (Indian) categories of acquisition over “Buy (Global).”

As the Indian companies may not have adequate capabilities in terms of technology, they are encouraged to partner with foreign companies for joint ventures, technology transfer and tie-ups.

Orders are the challenges

India's private sector has had some successful JVs in the recent years. There have been 32 private sector joint ventures and foreign direct investments that have been approved by the government in the last two years till March 2016. Historically, India’s defence joint ventures in the private sector have had a difficult time. Most of them have not taken off for production.

But some have succeeded in getting to the shop floor in the recent times.

For example, United Kingdom's BAE Systems had tied up with Mahindra for land systems. But that joint venture was wound up three years ago. But they returned to become partners once again earlier this year. The trigger for the revival of the partnership is the BAE Systems' pledge to assemble and integrate its M777 ultra-light howitzers in India under a foreign military sales deal with the US government that is now under works.

Basically, joint ventures in the private sector in India are successful only if there is a successful order behind that union with a foreign company.

It is in the strategic interest of a nation aspiring to be the regional power to develop indigenous and internationally competitive defence industry base. Even nearly 70 years after independence, India continues to be the largest importer of conventional defence equipment, as per the SIPRI data of the last five years.

According to government statistics, roughly 70 per cent of India's defence requirements are met through imports.

If this situation is to be reversed, India needs to use the private sector and leverage the capabilities that they build.

India has the potential to emerge as a global platform for defence research, manufacturing, supply chain sourcing, software development, and offsets, which will strengthen our defence capabilities and spur industrial development as well as exports in this sector. There are indications towards this possibility already.

The government has also carried out reforms in defence procurement procedure to increase efficiency, invite foreign players with excellent capabilities and

‘We are developing a strategic supply chain in India’ LOIC PIEDEVACHE, Country Head (India Operations), MBDA Group, on establishing a successful industrial footprint and developing a strategic supply chain in India How did you go about selecting your partner companies in India?

heart of its strategy, has been to establish a successful industrial footprint throughout the country. In this respect, the inclusion and First of all you should realise that this is work support of the Indian SME and MSME indusin progress. We are already working with a try sector forms a key pillar of MBDA’s Indian number of Indian industry partners, DPSUs supply chain strategy. Of course and the private sector including this strategy ties in very closely to MSMEs, but this is a network that the Modi Government’s Make in InMBDA is intent on expanding. We dia policy and to the requirements are not standing still in this area. listed within the latest DPP-2016 MBDA is actively developing a which came into effect in April strategic supply chain in India that this year. This evolving footprint will not only serve to meet the will also serve well to meet the company’s current offset obliganew ‘Buy IDDM’ category that has tions but also prepare the terrain been established. As I have already for future business activities. The Loic Piedevache pointed out, our partners in India selection process is much like that also form an important element of in any other country including Euour global supply chain, an important considrope. MBDA prides itself on providing its cuseration for MBDA as a global company. tomers with the very highest levels of quality in terms of technology and manufacture so we need to make sure that our partners share How can India's impending defence this same commitment. We look for existing projects come to early fruition with you skills and the ability for those skills to be deand your partners? veloped, if necessary with access to MBDA’s Contracts are in place with a number of expertise and technology know how.

Indian suppliers and organizations for direct purchases and direct foreign investments.

Discussions and negotiations are ongoWhat has been the role of your busiing to include additional Indian companies ness partners in your ongoing initiafrom across the technology and industrial tives? spectrum to further build the indigenous Our partners have been selected for their abilindustrial footprint required to support ity to meet MBDA’s very demanding requirefuture business projects and opportunities ments and the equally demanding requirewithin the country. Indian projects such as ments of our customers, both in India and VSHORAD for which we are proposing MBDA elsewhere in the world. It should be pointed Mistral MANPADs and the need to provide the out that the supply chain we are developing in Indian Navy with an effective self and local India is not aimed at just meeting in country air defence capability, for which we are still requirements but also those of our so-called proposing the much talked about SRSAM domestic countries as well as those of the solution, are highly significant regarding our export market. A partnership has to be a twoindustrial partnerships in India. We are also way relationship so MBDA is happy to share actively discussing the possibility of working its skills while learning new ones. Of course together on a fifth generation ATGM weapon, we rely on our Indian partners for their a weapon designed to India’s specific intimate knowledge of the way business is operational requirements and which would carried out within the country and how best be a perfect example of ‘Buy IDDM’. These to understand our various Indian customers’ projects, representing latest and next generaspecific needs and requirements. tion technologies, would really demonstrate MBDA’s ability to make industrial cooperation On how MBDA and its partner compawork to its best effect for the customer in nies can contribute in making India a terms of quality, performance and, impordefence industrial hub... tantly, delivery times.

MBDA’s goal in India for many years, the very

www.geopolitics.in

August 2016

15

COVER STORY

‘We are constantly working for new ways to expand our cooperation’ GIORA KATZ, Corporate VP Marketing, Rafael, on sharing of knowledge and technology and its commitment towards Make in India programme...

What are the factors considered by you while selecting your partners?

partner. India remains a strategic partner for us and we are moving towered sharing those unique capabilities and systems The establishment of JVs is part under the policy of make in India. We of Rafael's global strategy and as are constantly working for new ways such, we have established over to expand our cooperation and joint 100 JVs with companies around ventures and we have already esthe world. We have a number of tablished a joint venture with Bharat main guiding principle when enForge Limited (BFL) and negotiating gaging in JVs. We mainly strive to with other local Indian industries, team up with companies that have including BDL, BEL as well as with obvious or even potential synergy the DRDO. Such cooperation will with Rafael's activity in a particular ensure our mutual success in the field of activity, primarily similar Giora Katz development and production of technologies, and thereby enjoying leading technologies that will best a mutual added value and multiply serve both countries well into the future. This our unique individual force to develop and is also the reason why at DEFEXPO 2016 we deliver top technologies to our users. set up a joint display in our partners' booths, including BFL, RELIANCE/PIPAVAV, BDL and What has been the role of your business ASTRA. partners in your ongoing initiatives?

In the process of sharing our knowledge and technology, we have enjoyed new ideas and What role can your company play in ways of thinking that have broadened our India's quest for becoming a defence scope of design and development, and have industrial hub? taken us in new different directions. This is Rafael is committed to the Make in India true for production and after sales support, programme as defined by the Prime Minister as it is clear that local companies with which Modi. Rafael has always been willing to we initiate a JV have far deeper knowledge transfer technology as required as Israel and understanding of the local market, which and India have a special relationship and is an invaluable part of joining in with a local have in the past been cooperating in the joint

development and TOT for certain weapons and electronic systems.

We believe that the knowledge we share with our Indian partners will play an instrumental role in helping India become a defence industrial hub, serving not only local Indian interests, including business, industrial, employment and end-user operational needs, but will brand India as a key export player with ground-breaking technologies and substantial solutions for many customers around the world.

Which are the pending projects your company is engaged in?

We are currently engaged in a number of such projects, including air defence, tactical missiles (We are in ongoing process that at the end will allow us to produce spike missiles in India), air-to-ground systems, Litening, SDR communications, and others…

We are optimistic that in 2016 we will be able to see significant progress on all fronts and continue our excellent cooperation with our Indian counterparts and provide the Indian army with advanced systems that will give it a major technological edge, while sharing our knowledge and expertise with the local industries to develop our technologies and produce a benefit for the local economy.

‘We are committed to transforming India into a global manufacturing hub’ ANTOINE CAPUT, VP and Country Director - India, Thales, on developing its industrial footprint in India in line with ‘Make in India’ to develop the industrial defence base of the country On selecting partner companies for defence projects and JVs...

Partnering is our natural way of working - with customers, colleagues, commercial and technology partners – combining knowledge, resources, capabilities, innovations and talent to deliver the smartest of solutions.

Thales is constantly working towards enhancing its industrial footprint in the country by identifying new industrial partners and undertaking a

16

qualification process to assess their financial and industrial capabilities. We strive for a shared vision of providing innovative products and services to ensure the long-term satisfaction of our customers.

On innovation in design and development through partner companies...

Antoine Caput

In India, we have a clear strategy of localisation, strongly based on

August 2016 www.geopolitics.in

partnerships. Innovation is at the heart of Thales strategy. Innovation relies on creativity and technology expertise of a whole ecosystem of stakeholders, including academic researchers, SMEs and customers, working with Thales in an open, collaborative environment. We value our partners who have been enabling us to field technologically advanced products and services in the local and global markets.

On how Thales and its partner companies can contribute in making India a defence

COVER STORY

encourage domestic industry. It has introduced policies to strengthen technology transfer, including liberalised FDI in defence production, up to 100 per cent, provided the necessity for its approval is explained. These radical initiatives present opportunities for the foreign companies to enter India and local companies to collaborate and design, develop and showcase their engineering strength. This will also further India's objective to create jobs, catalyze technology development, and transform India into a self-reliant nation with export capabilities in defence sector. India's existing wealth of talent, technology and cost advantages together can help make defence products globally competitive.

However, the limited success has given hope in the aerospace sector for India, as Tata is gearing up its capability in this sector and is tipped to be a Strategic Partner for the Indian government to make aircraft for the Indian armed forces.

This has also helped in creating skilled manpower and Indian private sector joining the global supply chain, apart from looking to make an aircraft in India soon (C-295). The only impediment is lack of sustained orders. How will Indian government overcome this impediment and help create true aerospace and defence capability in the private sector?

Positive signals

On July 14 this year, India's Tata Advanced Systems Limited announced its tie-up with the American Bell Helicopter, a Textron Inc. company, to work in support of India's aviation and defence modernisation initiatives with an emphasis on 'Make in India.'

This agreement, it is touted, will sup-

industrial hub...

We are planning to expand locally in India through our wholly owned subsidiary Thales India Private Limited, through JVs and through partnerships with the local industry that can be envisaged. To address the region’s needs, we are looking to enhance our industrial footprint, to develop talent and to initiate innovations.

Thales’s strategy of developing its industrial footprint in India is in line with ‘Make in India’ to develop the industrial defence base of the country. Thales has been actively partnering with Indian industry, sharing technology and expertise. Its strong working relationship with Bharat Electronics Limited with whom it has a JV BEL-Thales Systems Limited (BTSL) is a testament to it. In March 2016, Thales and BTSL signed a partnership agreement for the joint development of the PHAROS fire control

port the helicopter and vertical-lift expansion in India and under this agreement, Tata Advanced Systems and Bell Helicopter will join forces to develop both commercial and government, including military, rotary wing markets in the country.

The announcement came from Hyderabad, which is today emerging as one of India's key aerospace and defence destination. The Tata Advanced Systems and Bell Helicopter combine will make a bid to cater to Indian military's Light Utility and Reconnaissance segments. The scope of this agreement is intended to include potential production and assembly capabilities, training and maintenance, repair and overhaul requirements, as well as research and development programs and technology sharing that will grow industrial capabilities and result in innovative 'Make in India' solutions.

"TASL's alliance with Bell Helicopter is significant because of our shared synergies; our defence manufacturing capabilities and focus on innovation are well aligned with Bell Helicopter's core competence. This will build on the partnerships that TASL already has in the rotorcraft market allowing it to offer a full range of products to potential customers. The collaboration, which is in line with the government's 'Make in India' initiative, holds potential not only in the domestic market but will also strengthen India's position in the international market," according to Tata Advanced Systems' Chairman S. Ramadorai.

TASL is focused on providing integrated solutions for aerospace, defence and homeland security. It has become a significant player in the global aerospace market, becoming the premier manufacturing partner for global Original Equipradar that will cater to both domestic Indian and international market requirements.

Thales’s JVs with Samtel for military avionics and airborne sensor systems and L&T Technology Services for avionics software further reinforce the company’s commitment to the country. In addition, through its ‘Go to India’ approach, Thales has also been co-operating with the Indian private sector, particularly large corporate players and SMEs, to build transfer of technology and supply chain partnerships.

Thales remains committed to the country and will continue to strengthen its presence in the country, participating in the various opportunities that come up. We will continue to respond to market requirements, build a strong ecosystem of partners and support the process of transforming India into a global innovation and manufacturing hub.

www.geopolitics.in

August 2016

ment Manufacturers. It has capabilities throughout the aerospace value chain from design to full aircraft assembly, and is well positioned in other areas that include missiles, radars, unmanned aerial systems, command and control systems, optronics and homeland security.

"TASL has been a leader in driving industrial growth in India, and its organization ideally complements Bell Helicopter both in terms of innovative thinking, manufacturing capability and a commitment to business ethics, integrity and customer satisfaction," according to Mitch Snyder, president and Chief Executive Officer of Bell Helicopter.

Bell Helicopter will build on its relationship with TASL to leverage its experience and knowledge to customize, integrate and manufacture specific local Bell Helicopter solutions for India, he says.

Two days ahead of this Tata-Bell announcement, at Farnborough in United Kingdom, India's Mahindra Group was awarded the contract by Airbus Helicopters to manufacture parts of the AS565 MBe Panther rotorcraft. Mahindra Aerostructures will now make the airframe parts for the Panther helicopter from Airbus.

These parts will be produced at the Mahindra facility in Bengaluru, another major hub for defence and aerospace manufacturing in India, and will be shipped directly to the Airbus Helicopter production line in Marignane in France.

At Marignane, the Mahindra-manufacturered parts would be integrated with the rest of the airframe assembly of the Panther helicopter and it will form a critical part of the Airbus' helicopter sold worldwide.

The contract positions Mahindra Aerostructures as the first Indian company to receive a direct manufacturing contract from Airbus Helicopters as a Tier 1 supplier. Mahindra Aerostructures will gradually emerge as the global single source supplier to Airbus Helicopters for these parts. This work package is the first amongst a series of work packages which would embed Mahindra Group firmly in the Airbus Helicopters' global supply chain and bind the two companies in a long-term 'Make in India' partnership.

"We are playing an active role in the development of a helicopter-focused Indian industrial eco-system, and are embedding Indian suppliers into our global supply chain," according to Airbus Helicopters' Director for Make in India, Fabrice Cagnat. “The contract will allow us to qualify Mahindra Aerostructures as a Tier-1 supplier, establish a manufactur-

17

COVER STORY

‘Leveraging capabilities in developing indigenous technology’ RAHUL CHAUDHRY, CEO, Tata Power SED, on exploring partnerships in making India a defence industrial hub On selecting partner companies for defence projects and JVs...

to take Systems Engineering risks as Prime with Foreign Companies /OEMs being Defence needs a multi disciplinary our Technology and co-developapproach; no one company can fulfil ment partners. Tata Power SED is, nor possess all the required technology/ as has always been; open to areacapability to meet the customer requirespecific Strategic Alliances that are ments. Though SED have been undertakProgramme/Customer-requirement ing R&D activities since its inception, in specific.

1974 it has collaborated and partnered Tata Power SED is exploring with many to meet its business requirepartnerships in the areas of Guns, ments. Every defence contract and deC4ISR, Naval Systems, Missiles, Rahul Chaudhry velopment projects that SED undertakes, Optronics and UAV among others demands partners/vendors/suppliers in to augment technology needed with technology, materials etc. in order to meet the a "know-how" and "know-why" to meet Indian requirements of the project.

Armed Forces procurement timelines.

Since SED is intended to participate as Though some of our partnerships can be Prime Contractor in Make and Buy and Make looked as “Prime - Sub Vendor” arrangements, programmes, identifying, forming and managing we do have specific tie-ups for technology cosuccessful associations/partnerships is critical development and ToT (Transfer of Technology) to SED’s strategy. Though each programme in build. requirements are unique which requires specific Since large scale defence programmes forms of engagement, SED has established which SED is targeting as a Prime require wide required process to manage its diverse partners. spectrum of capabilities it is imperative that it Tata Power SED’s focus is on indigenisafinds suitable partners to participate in those tion and ‘know-why’. We not just focus on programmes. They eventually help in increasing indigenisation based on built-to-print or knowSEDs addressable defence programmes. Down how for manufacturing but also contribute to Selection in two of the Make Programmes (TCS the overall system design that meets the Indian and BMS), and securing prestigious programmes requirements and accordingly participate in such as MAFI are examples of how SED leverdetailed System Engineering and Integration. Tata ages its capability to add value by succeeding in Power SED has been an original ‘Make in India’ the market through a “Win-Win” association with company by its very genesis and we continue its Partners. to harness our past experience in finding our partners while contributing to our nation’s selfWhat role has your company played in reliance agenda.

India's quest for becoming a defence inThe following key factors are considered dustrial hub? during due diligence; India is one of the largest importers in Defence and ironically it imports almost 70 per cent of • Ethical and value-based approach in busiits requirements. Recent data suggest that India ness dealings accounts for 14 per cent of arms imports glob• Timely Product Development with full Techally while our bigger neighbour with $215 billon nical Compliance imports only accounts for 4.7 per cent.

• Indigenisation / Value Addition offering This not only creates a crater in our Current (based on know-why) • Price Competency Account deficit but also poses a serious threat • Flexible approach to the MoD procurement to National Security by creating dependency on process foreign OEMs. • Past Track Record in other programs The Government intending to reverse the scenario had introduced preferences like Indig• Past alignments/partnerships with Tata enously Designed Developed and Manufactured Power SED and other competing Indian (in DPP2016), Buy (Indian), Buy and Make (IndiIndustry an) and Make programmes in their procurement On innovation in design and development category where only an Indian Firm is allowed to be a lead partner. Besides, MoD have also through partner companies...

We have been leveraging our capabilities in introduced Offset clauses for programmes which developing indigenous technology and realising Foreign Companies are allowed to lead where Defence Systems through the Incumbency they are bound to re-invest percentage of the gained over the last four decades. Incumbency programme value in India through buying from has been able to garner SED the knowledge base Indian Vendors. Further Raksha Mantri has gone

18

August 2016 www.geopolitics.in

a step ahead and set a target of raising defence exports to $2 billion in the next two years.

Though these initiatives are in its nascent stage, they are believed to reap benefits in long term and will play a significant role in developing a viable defence eco-system in India.

These programmes allows Indian Firms to be a lead partner thus allowing them to foster technology tie-ups with established foreign OEMs thus aiding Technology Transfers in most cases and accelerates the learning curve. For instance, Tata Power SED has currently more than 100 technology partnership agreements with leading companies around the world.

This not only enables us to participate in large defence programme but also allows us to absorb some of the critical technologies over time. This has also given us an opportunity to showcase our capability and elicit interest in foreign OEMs to venture partnerships with us to be a part of their global supply chain. e.g. Tata Power SED will manufacture Self-Protection Systems for Land-based Platforms, for the Indian market and for export to OEMs global market. The partnership will also involve joint development of the next generation Active Protection System.

Moreover, the Offset clauses are intended to bring in opportunities for the SME and MSMEs in India who are expected to emerge as hot spots for job creation. Hence, even the country’s major initiative like ‘Make in India’ is not only looking at encouraging big corporates but also MSMEs. Thus, to enhance their capability DPP 2016 has included funding options for MSMEs for product development. Their innovative capabilities in niche manufacturing, higher flexibility, lower costs and the ability to learn and utilize new technologies make them attractive option for large corporate as well. For instance, Tata Power SED has more than 2500 active registered vendors to support its programmes.

With increasing appetite (for defence spending) and purchasing power compounded with decreasing defence spending across globe owing to bleak economic outlook, India can become an attractive destination for defence manufacturers looking to shift base to cost-effective countries.

Besides, becoming a full member of MTCR (Missile Technology Control Regime) has opened up opportunities for Government to export its successful products like BrahMos Missile, Akash Missile System etc., which will also boost its domestic defence eco-system.

Tata Power SED shall actively participate in all major Land Systems Programmes as Prime and target relevant Naval & Air Programmes as Shadow Prime (Named Sub System Provider) as and when Programmes fructify.

COVER STORY

ing relationship with them on the Panther, and also lay the ground work for a rapid acceleration in terms of industrialising production in India, in case we are selected for the Naval Utility Helicopter programme," he added.

Mahindra Aerostructure's Executive Director and Chief Executive Officer Arvind Mehra says, "we believe this manufacturing relationship will allow us to demonstrate the quality and competitiveness of Mahindra Aerostructures to Airbus Helicopters. We are already committed to become a trusted partner and supplier to the Airbus Group for airframe parts and assemblies.

"This contract with Airbus Helicopters signals our further commitment to work with them to develop a robust Indian ecosystem for both design and build capabilities in aerospace," he says.

As shared earlier, Airbus Helicopters and Mahindra Defence are in the process of forming a joint venture to target India's military helicopter programmes such as the Naval Utility Helicopter, the Naval Multi-Role Helicopter and the Reconnaissance and Surveillance Helicopter. The AS565 MBe Panther is competing for the Naval Utility Helicopter programme. In case the Indian government selects the Panther, Airbus Helicopters will establish India as a global hub for Panther production in partnership with Mahindra Defence.

In the aerostructures domain, Mahindra Aerospace operates a 250,000 sq ft (25,000 sq. m.) facility in Bengaluru that provides comprehensive capabilities to produce sheet metal parts, surface treatment and assemblies. Approved to AS9100C standards, the facility holds all relevant NADCAP certifications as well as numerous OEM and Tier-1 approvals.

Inaugurated in 2013, the plant currently exports parts, components and sub-assemblies for global aircraft platforms.

Mahindra Defence has companies engaged in catering to needs of all three wings of defence forces – Army, Air Force and Navy. Its product range includes armoured vehicles, underwater warfare equipment, radars and surveillance equipment. Through its Land Systems units in India and UAE, the company has been supplying customized armoured vehicles to the Indian Army and para-military forces and overseas customers. Naval Systems unit based in Pune has been supplying Sea Mines, Decoy launcher and Torpedo launchers, large composite structures for defence applications to the Indian Navy. The company is also engaged in Defence Electronics through the

Telephonics JV. On June 18, Tata Advanced Systems and Boeing laid the foundation for a new facility in Hyderabad for its joint venture named TATA Boeing Manohar Parrikar at the foundation laying ceremony of the new facility in Hyderabad Aerospace Lim- for Tata Boeing Aerospace (TBAL) - the joint venture between TASL and Boeing ited (TBAL). The joint venture has The way forward been established to co-produce Boeing First and foremost, the Indian governAH-64 Apache helicopter fuselages and ment should look at ways of sustaining other aerostructures, as well as to pursue these joint ventures in the private sector integrated systems in aerospace. that add capabilities to the Indian naThe Hyderabad production faciltion in the defence domain. To sustain ity will eventually be the sole producer of these businesses, the government needs AH-64 fuselages globally. The Apache has to channelise its orders to the Indian pribeen flown or selected for acquisition by vate sector. That will not only help create the United States and 15 other nations, Indian capabilities, but also help create a including India. workforce that will last forever.

At the ceremony, Parrikar said the The joint ventures in the private secjoint venture is a significant step in develtor are the real job creators and talent oping India's capabilities for aerospace hunters. With nearly 30 million youth and defence manufacturing and becompassing out of colleges and looking for ing a global exporter, and called the joint jobs, it becomes important for private venture as a significant progress made tosector investments go into developing wards 'Make in India' for defence. new businesses that in turn create jobs In November 2015, Boeing and Tata for the young demography of the country. announced the joint venture for manuAs things stand today, the Indian infacturing aerostructures and collaboradustry has no incentive for venturing into tion on integrated systems development this sector. This is not just about busiopportunities in India. This joint venture nesses making money. There is also a nawill create a manufacturing center of extional security angle to it that needs concellence to produce aerostructures for sideration. That said, it is a welcome step the AH-64 Apache and provide affordable for the Indian government to have revised manufacturing capabilities to the global aerospace industry. the Defence Procurement Procedure to The groundbreaking for TBAL is the include an indigenous content clause that next step in Boeing and TASL's journey would not get the first shot at developing to develop key technologies and capabiliequipment for the armed forces. ties, says Boeing Vice President for VertiThe idea of 40 per cent local content cal Lift and a board member of TBAL, to be added to equipment for it to qualify Dave Koopersmith. "We will be making for the "indigenous" category for prefersignificant investments to ensure the sucence in contract allotment is going to be cess of this joint venture as we bring value a game changer. These are what would to our customers globally and compete spur growth in the sector. In India, there for additional manufacturing work in the is no means to track the production and global market." results of defence equipment and how Tata Advanced Systems has develmuch it contributes to the country's oped expertise in manufacturing as well GDP. The government, be it the Defence as in large scale systems integration work Ministry's production department or the in the aerospace and defence sector. ministries dealing with manufacturing "Our capabilities are further enhanced data and GDP calculations should take through collaborations and partnerships the initiative in getting a realistic picture with leading global aerospace majors. We of what is going on in the aerospace and intend to grow this unique joint venture defence sector. partnership with Boeing, focusing on That data could help predict how the opportunities to collaborate on developprivate sector can contribute through ment and life cycle management of intheir foreign collaboration in the days tegrated systems," says TASL Managing to come.

Director Sukaran Singh. —Geopolitics Bureau

www.geopolitics.in

August 2016

19

COVER STORY

JOINT VENTURES WITH DPSUs ON THE UPSWING

Group photograph of the top officials from HAL and Safran Helicopter Engines during the agreement signing event for establishing a helicopter engine MRO support centre in India

HAL

In the emerging scenario with primacy being accorded to indigenous manufacturing/Make in India, it is felt that having multiple set of guidelines may lead to ambiguity and incongruity in the environment, a Geopolitics report

T

he Narendra Modi government on July 27 this year abolished separate guidelines for joint ventures entered into by India's Defence Public Sector Undertakings, four years after the previous UPA government introduced it in February 2012.

From now, the Defence PSUs too would follow the guidelines on JVs issued by the Department of Public Enterprises and Ministry of Finance from time to time, in a manner reverting to a situation that prevailed prior to February 2012.

"The Union Cabinet chaired by the Prime Minister Narendra Modi has approved abolition of existing 'Guidelines for establishing Joint Venture companies

by Defence Public Sector Undertakings (DPSUs)'. These guidelines which were notified in February, 2012 will not be required for separate JV by the DPSUs," a government statement said.

20

"The guidelines issued by the Department of Public Enterprises (DPE) and Ministry of Finance (MoF) from time to time, which are uniformly applicable to all Central Public Sector Enterprises (CPSEs) will be applicable for the DPSUs to set up JV companies now. This will meet the goal of indigenization/self-reliance in this sector," the statement said.

The abolition of the existing JV guidelines will provide a level playing field between DPSUs and the private sector. It will allow DPSUs to forge partnerships in an innovative manner enhancing self-reliance in defence and provide for enhanced accountability and autonomy of DPSUs in ensuring that the process of JV formation is effectively managed by them, so as to secure best outcomes in the interest of national security.

All nine DPSUs, namely, Mazagon Dock Limited, Goa Shipyard Limited, Garden Reach Shipbuilders & Engineers

August 2016 www.geopolitics.in

Limited, Hindustan Shipyard Limited, Bharat Electronics Limited, Hindustan Aeronautics Limited, Bharat Earth Movers Limited, Bharat Dynamics Limited and Mishra Dhatu Nigam Limited will be benefited through this decision.

The decision comes against the backdrop of the issues which emerged in the operationalisation of JV guidelines of DPSUs. The Department of Defence Production came to the conclusion that with the increasing participation of the private industry in defence sector and the transformation taking place in the defence acquisition ecosystem thereon, the requirement of having separate JV guidelines for DPSUs is no longer considered necessary.

In the emerging scenario with primacy being accorded to indigenous manufacturing/Make in India, it is felt that having multiple set of guidelines may lead to ambiguity and incongruity in the environment.

COVER STORY

Defence Production Policy promulgated in January 2011 with the objective of achieving substantive self-reliance in defence production including design and development capability had recommended that all viable approaches including JVs to be undertaken to achieve the desired self-reliance in defence production.

Consequent to this, a need was felt to supplement the DPE guidelines with formulation of JV protocols/guidelines tailored for DPSUs which would address the specific requirements of the defence sector and also ensure that the interests of DPSUs were safeguarded. Accordingly, the existing guidelines for establishing Joint Venture companies by DPSUs was approved by the Cabinet during the meeting held on February 9, 2012 and the same was notified on February 17, 2012.

Now, the requirement for having separate JV Guidelines for DPSUs has been reviewed in the context of the increasing participation of the private industry in defence sector and the transformation taking place in the defence acquisition ecosystem.

This news from the central government regarding DPSUs should enthuse them to undertake more JV opportunities.

The DPSUs have had a distinct advantage for six decades since independence. But that is now turning into a major competition with private sector. But the DPSUs still enjoy a greater thumbs-up from foreign companies wanting to do business with Indian companies.

Best partners

In 2013, Munich-based Roland Berger had concluded in a report that Indian defence public sector undertakings (DPSUs) make better bedfellows for foreign companies than their private sector counterparts, with larger ones among the latter having the worst record.

India's post-independence industrial policy placed the production of defence items in the reserved list making it mandatory for production to be taken up only by the public sector, till it was opened up in 2001. Reforms in the defence industrial sector and the acquisition policy have been one continuous process since then, beginning with the formulation of DPP 2002 and its successive revisions, formulation of the Defence Production Policy and the issuance of joint venture guidelines for Defence public sector undertakings DPSUs. Indian defence industry is dominated

by DPSUs and ordnance factories (OFs) which contribute about 90 per cent of the total domestic defence manufactur-

KEY DPSU JVS 1. BAEHAL Software Ltd - For design, develop and market Software, Firmware and Computer programmes and systems incorporating them and to provide consultancy in the field of computer technology - BAE Systems PLC, UK 11 per cent, BAE HAL Employees Welfare Trust, India 40 per cent, and HAL 49 per cent.

2. Indo Russian Aviation Ltd - Supply of all types of Aircraft (Russian Origin) Engines, Accessories, Aggregates, Systems and Spares of all kinds of aviation equipment Russian firms RAC-MiG 31 per cent, Ryazan SIP 10 per cent, Aviazapchast Plc 6 per cent and Indian firms ICICI Bank 5 per cent, HAL 48 per cent.

3. Snecma HAL Aerospace Pvt. Ltd - To establish a Centre of Excellence for production of Precision Aero Engine components and assemblies as an Export Oriented Unit - Snecma, France 50 per cent and HAL 50 per cent.

4. Samtel HAL Display System Ltd - Manufacture of MFD/HUD/HMDS for Aircraft of Indian Defence services. Later diversify into Civil Aeronautics and Industrial Sector in India and abroad - Samtel Group India 60 per cent and HAL 40 per cent.

5. HALBIT Avionics Pvt. Ltd - Design , Development & Marketing of aircraft simulators & all related applications for Indian & International markets. Integrated logistics support & maintenance services throughout the life cycle of products to the customers in Indian & International markets - Elbit Systems, Israel 26 per cent, Merlin Hawk Associates, India 24 per cent and HAL 50 per cent.

6. HAL Edgewood Technologies Private Ltd - Application through development/acquisition of cutting edge technologies. Phase-I 3D technology for: (i) Memory modules (ii) System in package modules (iii) DC/

ing output. The 41 ordnance factories are spread across 26 different locations and employ close to 125,000 people. The DPSUs and OFs manufacture a wide spectrum of equipment including small arms and field guns, ammunitions, explosives, armoured vehicles, transport vehicles, clothing, parachutes and general stores.

According to experts in defence production, a public-private sector JV should aim to complement their mutual strengths, as public sector companies possess huge infrastructure; experience in systems integration with imported technology; trained engineering and manufacturing manpower; and access

www.geopolitics.in

August 2016

DC Converters (iv) Charge-coupled Device (CCD) / Cameras for space application Edgewood Ventures LLC, US 26 per cent, Edgewood Technologies Pvt Ltd, India 24 per cent, HAL 50 per cent.

7. Infotech HAL Limited - Design/Software development for Aero Engines, Technical publications and anticipated work from various OEMs under offset programme Infotech Enterprises Ltd, India 50 per cent, HAL 50 per cent.

8. HATSOFF Helicopter Training Pvt Ltd - To provide military and civil helicopter pilot training services through operation of a flight training devices to be operated by the company - CAE Inc, Canada 50 per cent, HAL 50 per cent.

9. Tata HAL Technologies Ltd - Work packages related to engineering design services in aero structures and also the captive offshore and onsite workload from OEMs including offset programme - TATA Technologies Ltd, India 50 per cent, HAL 50 per cent.

10. International Aerospace Manufacturing Private Ltd - Manufacturing compressor rings, turbine blades and nozzle guide vanes - Rolls-Royce Overseas Holdings Ltd, UK 50 per cent, HAL 50 per cent.

11. Multirole Transport Aircraft Limited - Codesign / develop and Co-produce Multirole Transport Aircraft - UAC-TA & Rosoboronexport Russia 50 per cent, HAL 50 per cent.

12. GE-BE Private Limited - Set up in 1997 as a joint venture between Bharat Electronics Limited and General Electric Medical Systems. The facility based at Whitefield, Bengaluru, manufactures CT Max and other state-of-the-art X-Ray Tubes. The products are exported worldwide and meet the safety and regulatory standards specified by FDA, CE, MHW, and AERB.

to defence research facilities, while the private sector companies excel in management, marketing and financial skills; are innovative and market driven; and have experience in component and subassembly manufacture.

JVs are not formed to offload extra work load, the experts say. If that be the requirement, outsourcing should be the preferred route. JVs are established to cover gaps in technology, competence, systems and infrastructure for specific products. Thus a JV company positions itself as a niche player and does not threaten the market share of the partnering entities, which continue to operate in their

21

COVER STORY

own fields, the experts opine.

There is a huge backlog of pending orders with DPSUs. They have found JVs to be an ingenious and convenient stratagem to ensure that no major procurement proposal is ever thrown open to competition. In the absence of competition, DPSUs will continue with their inefficiencies. The armed forces being their captive customers will continue to suffer sub-optimal products with time and cost overruns, they say.

The above arrangement will also stunt the growth of competent private sector companies. As they will remain dependent on the DPSUs for orders, their emergence as independent players in defence production will get stalled.

Sample BrahMos

India has allowed for more than 50 per cent foreign participation in defence design, development and production projects only in the case of Russian firms, and the best example of this is BrahMos Aerospace, an Indo-Russian partnership firm that developed and now produces the eponymous 290-km range supersonic cruise missiles that are already in services with both the nation's armed forces.

And the best example that is cited for any public sector joint venture in India is the BrahMos Aerospace. What has been the outcome of the BrahMos joint venture between India and Russia is that they now have the world's only supersonic cruise missile deployed by its land forces, on board most of its modern India-built warships and is now readying to be functional on board Su-30MKI combat planes, making it the most potent of weapons in India's arsenal.

BrahMos missile is currently the only operational supersonic cruise missile with 290-km range that can touch up to Mach 3 or three times the speed of sound.

BrahMos is an Indo-Russian joint venture of over 15 years.

The next big leap for BrahMos Aerospace is going to be its hypersonic technology flight test any time before December 2016. That will put India's military research and development in the annals of history. If successful, BrahMos chief Sudhir Kumar Mishra has said earlier this year, would be India's biggest scientific breakthrough.

On July 12 this year, French company Safran Helicopter Engines and India DPSU Hindustan Aeronautics (HAL) inked an agreement to establish a support centre for national and international rotorcraft customers in India. A joint venture will be opened in the coming

22

BEL-Thales Systems Limited (BTSL), the joint venture between Bharat Electronics Limited (BEL) and Thales signed a partnership agreement for the joint development of the Pharos fire control radar at Defexpo 2016

months, the two entities announced at the Farnborough International Airshow.

This new centre will provide maintenance repair and overhaul (MRO) services for Safran TM333 and HAL Shakti engines installed on HAL-built helicopters. This scope would be enlarged to include other engines which both partners may further agree. Safran Helicopter Engines and HAL will provide their customers with a firstclass service including optimized engine availability.

With a fleet of over 1,000 engines, including 250 TM333 and 250 Shakti, India's armed forces are one of the largest operators of Safran-designed helicopter engines. Shakti is the Indian designation for the Safran Ardiden 1H1, co-developed with HAL and produced under license.

"The venture reflects the close relationship established over many years between HAL and Safran Helicopter Engines. It places both partners on an ambitious path towards world-beating customer support in the field of engine MRO," says HAL CMD T. Suvarna Raju.

The joint venture will provide the impetus for the ‘Make-in-India’ initiative and its ambition of flying around 1,000 Shakti engines in India during the coming years. Shakti is fitted to HAL's ALH Dhruv and has been selected to power the HALdesigned Light Combat Helicopter (LCH).

On March 15, HAL and Pawan Hans Ltd (PHL) signed an MoU to establish a Joint Venture at Rohini in Delhi to carry-

August 2016 www.geopolitics.in

THALES

out the maintenance work related to all types of helicopters and address the needs of defence and civil markets in India. They made the announcement at the India Aviation-2016 at Hyderabad.

HAL has been manufacturing and overhauling its Cheetah/Chetak and Dhruv helicopters besides providing support for Seaking helicopter. The PHL is the largest civil helicopter operator in the country.

Helicopter Business of HAL presently contributes to sizeable business of HAL. In years to come, this business segment will grow fast. The fleet size of helicopters in civil segment in India is expected to go up to 800 in the next 10 years. In addition, there is expected induction of 600 helicopters in defence. All this will require MRO and logistic support to sustain.

On March 29 this year, Thales and BEL-Thales Systems Limited (BTSL), the joint venture between Bharat Electronics Limited (BEL) and Thales, signed a partnership agreement for the joint development of the PHAROS fire control radar.

The announcement came at the DefExpo in Goa this year.

This strategic co-operation contract will allow Thales and BTSL to jointly develop PHAROS, a fire control radar for both gun and missile systems. PHAROS provides defence against small, fast moving and highly manoeuvrable air and surface targets that may also be encountered in littoral missions. The multiple target

COVER STORY

tracker is capable of simultaneously controlling — in all weather conditions — the engagement of these targets with guided ammunition.

This joint development will strengthen the co-operation of Thales and BTSL in the field of innovative technologies.

The responsibility of overall system design will be borne by Thales. BTSL will develop the mechanical design and radar processing modifications while Thales will be responsible for the design and production of the radar antenna.

BTSL will carry out its share of the development work in Bengaluru. This codevelopment agreement between Thales and BTSL is in line with the 'Make in India' vision of the Indian government. The jointly developed PHAROS system will cater to both domestic Indian and international market requirements.

"This strategic step goes beyond the co-development partnership; it reaffirms our commitment to the country and to actively contribute to the 'Make in India' policy," says Serge Adrian, Senior Vice President of Surface Radars Activities at Thales.

On December 29 last year, when Prime Minister Narendra Modi was in Moscow on an official visit, India and Russia signed an agreement on cooperation for helicopter manufacturing in India.

State Corporation Rostec will join hands with HAL to produce at least 200 Russian Kamov Ka-226 light utility helicopter in India. The agreement also provided for the maintenance, operation and repair of helicopters and providing them with technical support.

"This is the first Russian-Indian hightech project, implemented by the Indian government within the framework of the 'Make in India' programme. The two sides will form a Russia-India joint venture in India, which includes Rostec's JSC Rosoboronexport and Russian Helicopters from the Russian side and HAL on the India side as partners," Rostec State Corporation's CEO Sergei Chemezov said.

In future, the programme could be extended and the two partners could consider joint access to other markets for exports as well. This tie-up has ensured not only local manufacturing of the Ka-226, but also the entire production technology being provided by Rostec to HAL. Just a week later, on January 3 this year, Modi laid the foundation for the HAL's `5,000-crore military helicopter production facility in Tumkuru in Karnataka, in a bid to put India on the global defense manufacturing map. The facility is expected to produce around 600 helicopters over the next 15 years, beginning its production in another two years. The facility would primarily manufacture the Russian-origin Kamov Ka-226T light utility helicopter. The first helicopter built in this unit should take flight by 2018.

The ambitious project can build 600 helicopters in the next 15 years. "Under this ‘Make in India’ project, the facility will have a helicopter flying out of it in the next two years. It will create 1,000s of jobs in the rural area of Karnataka and put this rural town on the aerospace map of India," Defence Minister Manohar Parrikar said on the occasion. Parrikar hoped that HAL will one-day transform into a lead integrator and spearhead the development of aerospace eco-system in India.The state government has transferred 610 acres to HAL at a concession rate of `1 lakh an acre, Karnataka CM, Siddaramaiah said, noting that HAL wanted a four-acre plot of adjacent land, which too would be provided for the helicopter facility.

Challenges ahead

Hawk production at HAL

HAL

For a successful crystal gazing into what to look forward in the case of joint ventures that the Indian Defence Public Sector has had, it is important to look at the past and to see where the intended objectives could not be achieved. That sort of a review puts the crystal gazing in the right

www.geopolitics.in

August 2016

context.

While HAL has had some of the greatest successes in terms of the DPSU joint ventures, it has had its share of failures too. Its success was in the arrangements it has had with BAE Systems for the Hawk advanced jet trainers. This joint venture has orders for 143 Hawk aircraft of which nearly 120 have been successfully delivered.

The two sides have consciously ironed out their rough edges to come out with a highly successful jet trainer in Indian Air Force and Navy history. It is a similar arrangement with the Russians for HAL, but with a lesser quantum of success for the MiG and Sukhoi aircraft built in India.

The joint venture that actually didn't meet expectation happened with the French Snecma for aero engines. While the two did produce the Kaveri engines from their stable, but it wasn't enough to power a Light Combat Aircraft that now recover over 90Kn of thrust. But the joint venture has not taken this failure, leading to Light Combat Aircraft having to choose an American engine to power it to the desired levels of thrust, in its stride. They haven't made that a failure entirely. They have now decided to use the Kaveri engines on autonomous air vehicles that India is planning to build, such as the AURA. The tie-ups with the DPSUs have been a highly profitable ventures for the foreign original equipment and Tier-I manufacturers. In some ways, Indian DPSUs act both as 'system of systems' manufacturers and as Tier-I suppliers to some foreign OEMs. Thus, the way forward is for Indian DPSUs and government-owned institutions to enter into joint ventures for critical technologies that eluded India for a long time.

The DPSUs should target joint ventures with American institutions and companies for obtaining systems that India hasn't had the success in. In this regard, the programmes such as the Defence Technology and Trade Initiative (DTTI) with the U.S. is a great step.

Though the DTTI programme is in its infancy, it has the potential to enmesh Indian and American military technologies like never before, even taking it to greater heights than with the Russians.

India should choose wisely in the technologies for which it wants a joint venture. Leveraging their large labour force and technically qualified staff members, the DPSUs should obtain processes for manufacturing, assembly, integration and testing from the foreign partners in the years to come.

—Geopolitics Bureau

23

COVER STORY

VALUE ADD TO DEFENCE INDUSTRIES THROUGH TECHNOLOGY, R&D AND SKILLS

A team of senior Lockheed Martin executives led by Dr. Keoki Jackson, Chief Technology Officer, and Phil Shaw, Chief Executive - LM India, at the Tata-Lockheed Martin Aerostructures Limited facility LOCKHEED MARTIN

S

ince the announcement of Make in India, a number of leading industrial houses have started or enhanced the defence manufacturing divisions in their companies. It will require longterm commitment from these groups to sustain investments in their defence arms. Without these investments, the private producers will fail to create capabilities that stretch their technical, operational and research capabilities. Once such capabilities have been acquired by these firms, global OEMs will also start finding them an attractive partner.

The success of Make in India in defence will depend on how these large private companies build their capabilities, whether through global partnerships, technology transfers or even fundamental R&D programmes. For this to happen, these private firms will have to focus on their ability to work with global OEMs and government. This will require a capable leadership and a radically new approach from private defence manufacturers, which has hitherto been missing.

A significant objective of 'Make in

24

India' is to develop export capabilities in the defence sector. India is currently not exporting even one-fifth of its annual defence budget. It will be worthwhile for India to first attempt increasing its defence exports to at least 10 per cent of its defence budget of $40 billion. This is necessary to build economies of scale and to become globally competitive for the Indian defence industry.

A small country such as Israel, in comparison, exports nearly 50 per cent of its annual defence budget, while many European nations export upto 30 per cent. US, which has the largest defence budgets in the world, exports are worth nearly 10 per cent of its annual defence expenditure.

To meet this modest and achievable target in defence exports, India needs an ecosystem that facilitates building a domestic defence industrial base. For that, besides providing incentives for exports, government will also have to simplify policy and make synergistic, constructive and proactive interpretations in policy implementation. The government should also encourage tie-ups between

August 2016 www.geopolitics.in

Indian companies venturing into the defence sector and foreign Original Equipment Manufacturers.

India's private sector needs to ensure there is some value addition that it gets from its tie-ups with foreign OEMs. India can emulate the Chinese example in this case, according to experts in this field.

In the late 1970, when the Chinese economic reform started, Deng Xiaoping is said to have realized that the Chinese defence industry was a 'golden rice bowl' that is rich, yet asking for more resources.

The Chinese undertook radical reforms, which followed the strategy of 'import, innovate and export.' It was realistic in its ambitions to use imported engines for its fighter jets, while working on developing its own. JF-17 fighter jets are now in service with Pakistan Air Force while the Indian Tejas has just become operational in Indian Air Force squadron.

India can also learn from the Chinese how to consolidate its future requirements and demand that global OEMs set up complete assembly lines for those critical platforms. China consolidated its future demand for commercial aircraft – as a quid pro quo – and convinced Airbus to establish an A320 assembly plant in Tianjin. A facility for components of the A350 aircraft at Harbin and an A330 completion centre is now planned in Tianjin.

While the Dhirendra Singh Committee has suggested the strategic partners model for developing critical defence industrial base in India, it has also identified six sectors in which strategic partners from the private sector can be identified. * Aircraft: fighter, transport and helicopter and their major systems; * Warships of stated displacements, and submarines and their major systems; * Armoured fighting vehicles and their major systems; * Complex weapons which rely on guidance systems to achieve precision hits, which may include antiship, air defence, air-to-air, air-tosurface, anti-submarine, land attack;

COVER STORY

‘Our long-term approach to partnerships has worked very well’ JAN WIDERSTRÖM, Chairman and Managing Director, Saab India Technologies, on tying up with Indian companies as Prime/ integration partners...

Reliance Defence signing a JV with Rafael Advanced Defense Systems Ltd at Defexpo 2016

* Command, control, communication and computers, intelligence, surveillance, target acquisition and reconnaissance; * Critical materials (titanium alloys, aluminium alloys, carbon composites, nickel/cobalt alloys etc.).

While India acquires these technologies as part of Make in India, the rest of the defence requirements can be procured from global OEMs. The proof of Chinese success lies in the fact that it was the fifth-largest arms exporter by 1987, but in 2014 it had become the third-largest defence exporter globally.

Here, we will now take a look at some of the contributions that foreign OEMs brought to their Indian partners and the value-addition that they achieved.

On May 13, 2016, the world's largest ever cargo aircraft Antonov An-225 Mriya made its first landing in India at the Rajiv Gandhi International airport at Hyderabad. That event also marked the announcement of Reliance Defence signing a Strategic Partnership Agreement with Antonov of Ukraine for Assembly, Manufacture and MRO of Antonov Platforms in India, both for the commercial and the military market.

Reliance Defence together with Antonov would jointly address various requirements including 50-80 seat passenger aircraft programme of the HAL, in its basic configuration and in all its variants such as transport, maritime patrol and other military roles. The two companies have now submitted a joint proposal for creating passenger regional aircraft.

The partnership of Reliance Defence and Antonov envisions design of fixedwing military aircraft configured for use in tactical as well strategic roles. India has requirement of over 200 medium

What are the factors considered by you while selecting your partners?

We consider a lot of factors when selecting a partner, including their certifications, their facilities & infrastructure, their capabilities and track record, their financial strength, and more.

Besides this, we have a very strict due diligence procedure that potential partners must go through.

What are the value additions your partners bring to the table?

world.

Our long-term approach to partnerships has worked very well for us across the world. For instance, Saab Grintek Defence in South Africa has been awarded the Best Exporter Award in South Africa two years in a row. In Brazil, where we have the contract for 36 Gripen Aircraft, we have tied up with a large number of Brazilian companies for local production, design and support.

The programme there involves extensive technology transfer.

Our partners definitely bring a Jan Widerström lot to the table – otherwise they Jointly with your partners, wouldn’t be our partners! Our which are the defence projdifferent partners in India provide value adects you are working on? dition to our business in terms of excellent All our major opportunities in India involve manufacturing capabilities at a reasonat least one Indian partner. We expect this able cost; knowledge of the Indian market to continue in the future, especially given and requirements; R&D and engineering the Government’s focus on Make in India. strengths, or other specific capabilities that For example, we have tied up with the Kalywe might need for a specific project. ani Group for the VSHORAD and SRSAM programmes. Kalyani Group will be our main integration partner in India for these Saab’s contribution in India’s quest for programmes. They will play a very large role becoming a defence industrial hub... in execution of these programmes and we This question has a multi-fold answer, will be working towards rapidly increasing because our vision for Make in India goes the level of Indigenous content through far beyond simply finding suppliers in India.

Kalyani and our other Indian partners. We Firstly, of course, many Indian companies have also tied up with Tata Power SED are a part of our global supply chain, and to manufacture our LEDS self-protection the number will escalate quickly. Secondly, systems for our existing global customers, we are tying up with Indian companies and for potential Indian orders. Aequs (and as Prime/integration partners for Indian our JV Aerostructures Assemblies India in programmes, depending on the programme Belgaum), besides many other companies in requirements. Thirdly, we don’t simply and around Bengaluru, play a very large role look at how we can work with our partners in our global commitments towards Airbus today, but also how we will be collaborating and Boeing. Besides this, our collaboration five or ten years into the future. This will with Tech Mahindra, the Saab India Technolhelp in capability development. Finally, India ogy Centre, is currently working on multiple has tremendous strength in engineering and R&D/engineering projects for our global R&D – we have had an excellent experience business – including engineering work for so far with our R&D partner in India, Tech the Gripen E. Mahindra, and we have no doubt that our So our Indian partners contribute a engagement with them will increase. whole lot to our Indian and global opporAll these facets – component & subtunities and ongoing programmes, and we system manufacturing, systems integration, foresee many more such collaborations long-term capability building and R&D with Indian companies in the near future, expertise – will together contribute to the given our very positive experiences so far. goal of making India a defence hub for the

www.geopolitics.in

August 2016

25

COVER STORY

‘Make in India is at the heart of Honeywell’s India strategy’ FAIZI MOHSINI, Country Head - Defense & Space, Honeywell - Honeywell Aerospace, on its commitment to continue to work with the best in the country to provide India world class technologies On various factors for selecting partner companies…

• It led us to secure a license for the production of the TPE331-5 engine for domestic and international use, and the engine remains in service today with the Indian military services.

• In June 2015, we won the engine contract for the Hindustan Turbo Trainer-40 (HTT-40) being developed

by HAL. We are committed to continuing to work with the best in the country to provide India world class technologies for the civil and military aviation industry.

Faizi Mohsini

We have established several positive relationships with well-known operators, technology manufacturers and state departments in India that have helped us maintain a presence in the country for the last 40 years. Honeywell’s strategic relationships with defence organisations like Hindustan Aeronautics Limited (HAL), the Indian Air Force and other important stakeholders help us better meet India’s aerospace and defence needs now and in the future.

Our agreement with Tata Power’s Strategic Engineering Division (SED) supports the Indian government’s ‘Make in India’ initiative. This agreement sets the standard for locally produced defence technologies to sustain India’s military growth and mission success over the coming years. For example, based on this agreement Honeywell can deliver quality service to the Indian Armed Forces with state-of-the-art inertial navigation technology. This makes it possible to precisely navigate even where GPS satellite guidance is not available, increasing troop safety and maximizing mission success.

Honeywell has been manufacturing advanced technology products for HAL in India for more than 40 years. As a result of this working relationship: • Our technology is present in multiple homegrown platforms, including the Advanced Light Helicopter and the Light Combat Aircraft.

What has been the role of your business partners in your ongoing initiatives?

Honeywell understands India’s requirements in terms of military and defence and remains committed to supporting the country to the best of our ability. Our range of defence technologies are backed by five decades of engineering experience and support a wider range of military capabilities extending more than 300 platforms.

Our work with Tata Power SED allows us to offer the first locally produced inertial navigation system for the Indian Armed Forces that is designed to improve troop safety and enhance mission success. Organisations like Tata Power help us deliver a competitive and attractive position in India, by locally manufacturing advanced technologies for the Indian defence industry. HAL has been an ideal organisation to work with, making it possible for Honeywell to attain a strong presence in the local defence market. This relationship has

influenced our engine designs, which are focused on improving the safety, efficiency and performance of civil and defence aviation services.

There are opportunities for us on the avionics front too, including a wide range of military aircraft in the Indian Air Force, which are being prepped for glass cockpit and avionics systems upgrades.

These upgrades will let pilots take advantage of more accurate and automated systems over the next few years.

Your initiatives in India's quest for becoming a defence industry hub?

The recent implementations and policy changes by the Indian government to enhance regional connectivity and scrap the 5/20 rule will aid the growth of healthy competition and boost airport connectivity within the country. However, the government needs to ensure the vigorous implementation of these policies to realize the potential of the Indian aviation industry.

“Make in India” is at the heart of Honeywell’s India strategy. The company’s investments and partnerships in India have only grown stronger with our presence in the country. These commitments help us deliver world class service to the defence and military sector with the presence of a reliable, localised organisation. India is one of the main hubs for manufacturing as well as maintaining components and subcomponents that are overhauled either directly by us or by the local organisations we work with.

We have more than 6,000 Indian engineers working on advanced technologies every day and

‘OEMs have helped bringing in more business to India’ COL HS SHANKAR (Retd.), Chairman & Managing Director, Alpha Design Technologies Pvt. Ltd, on R&D and contract manufacturing for Indian market as well as for exports On selection of business partners…

for the specific projects of mutual interest. c. Standing of the Partner Company in India and Global markets, including their success stories.

Our Company may be one of the first to get into “JVC” area. We have two successful JVCs and third is in the pipeline. The selection methodology adopted was:How this partnership has helped a. Synergy between us and the in your business initiatives?

Partner Company (either Indian It is our experience that though initialor abroad).

COL HS SHANKAR ly JVCs may start from manufacture b. Professional capabilities and of mechanical and electronic PCBs/ availability of “core” technologies needed parts/assemblies only, once the JVC Partner

26

August 2016 www.geopolitics.in

gains confidence in the quality and cost effectiveness of the indigenously made items, more in-depth professional work results, both in R&D and contract manufacture not only for Indian market but also for exports; partnering selected OEMs from abroad has definitely helped bringing in more business in India and abroad.

On global supply chain and the export market…

With the GOI and MOD’s focus on ‘Make in India’ projects and the recently published

COVER STORY

tackling some of the toughest challenges faced

by India and the rest of the world. In addition, we have more than15,000 employees in 50 cities. These employees are spread across seven manufacturing locations and five design centres.

These centres support our dedication to empower India in order to become a strong link in the global hub of defence and military services.

About upcoming business opportunities in the Indian market...

Honeywell is dedicated to catering its latest technologies and product developments to the needs of the Indian civil and military aviation. We believe that Indian defence aviation will evolve in terms of opportunities and modernisation due to an increased demand for equipment provision and fleets, which will result in greater system accuracy, troop safety, asset protection and mission success. Moreover, we are seeing the benefits of this modernisation with the delivery of platforms including the C-17, C-130J and P8I to the Indian Air Force.

We are currently focused on the Indian government’s ‘Make in India’ initiative. An important factor of success with this initiative is our strong working relationship with Tata Power SED on the Honeywell TALIN inertial land navigator, which has been made possible because of the government’s efforts to attract foreign investment into the country.

Honeywell’s defence and space sector is also exploring opportunities in surface systems and space with the Indian Space Research Organisation. Honeywell believes that India has the potential for long-term growth, and is committed to being an integral part of this growth based on the technology and expertise we are able to provide.

DPP-2016 (which our Raksha Mantri has personally driven) and the vast defence market readily available in India, most of the defence manufacturers abroad have realised that the only way of doing business in India is by either collaborating or establishing JVCs with suitable Indian Partners. As such, it is a happy sign that senior representatives of such OMEs from abroad are moving around all-over India, visiting big industries and MSMEs in the Private Sectors for tie-ups. There have been offers of even shifting completely some of the manufacturing base from abroad to India. Big firms from abroad, such as, L&M, USA; Boeing, USA; Airbus, Germany; Elbit, Israel; IAI, Israel, etc., are already developing their own alternative global supply chains with Indian industries. This, initially, is for Export Market

lift turbofan aircraft valued at Rs. 35,000 crore, which is the back bone of all tactical Logistic Transport Support Role (TSR) as well as Route Transport Roles (RTR) of the Air Force, Army and Para military forces.

The programme will be located at India's first integrated aerospace Park at Dhirubhai Ambani Aerospace Park at MIHAN, Nagpur. This tie up has helped Reliance Defence to not only create a manufacturing facility, but the value the tie-up brings to the table is in terms of training of local manpower to take up such complex project in India.

Reliance Defence Ltd is a wholly owned subsidiary of Reliance Infrastructure under industrialist Anil Ambani's ADAG. On April 27, 2016, a new large-scale Ukrainian-Indian partnership in the military-technical sphere was launched with SC Ukroboronprom, SE SpetsTechnoExport and SE Antonov signing three important documents with Reliance Defence Limited. They have together launched a large-scale UkrainianIndian partnership in the military-technical sphere.

The SC Ukroboronprom and Reliance Defence Limited signed an agreement on strategic partnership which involves implementing a number of joint projects in aircraft building and aviation repairing, modernization of armoured vehicles, maintenance of marine machines, engineering, production and supply of UAVs. The aim of this collaboration is access to leading positions in the defence sector in India in manufacturing, assembly and repair of military equipment and technology.

The same day, Antonov and Reliance

and later for Indian Market. This is resulting in change of mind set both in Indian Industry and abroad and has brought in positive dividends to Indian industries, particularly, in the Private Sector.

Which are the defence projects being pursued?

Few of them are:a. Comprehensive upgrade of BMP2. b. 155 mm Gun – Towed, Tracked, Mounted. c. Software Defined Radios (SDR). d. Upgradation of Russian Radar Systems of all the three Services. e. HALE & MALE Unmanned Ariel Vehicles. d. Critical Technologies, such as, Thermal Detectors, Image Intensifier Tubes, Ring Laser Gyros, etc.

www.geopolitics.in

August 2016

Saab's BAMSE SRSAM

Defence have signed a memorandum on joint participation in the tender announced by Hindustan Aeronautics for production of passenger and cargo aircraft AN-148, AN-158, and AN-178. The work share between the parties will be decided by mutual agreement.

In case, they win the tender, they will establish a joint venture for production and supply of aircraft to commercial and government operators in India in collaboration with Hindustan Aeronautics. The plane assembly will take place in India with a gradual increase of localisation of production in accordance with Indian laws and requirement. The partners also plan to organise a support in maintenance of the produced aircraft for the duration of their service with the Indian operators and in other countries.

Between SE SpetsTechnoExport and Reliance Defence, a memorandum on joint participation in the modernisation of BMP-2 for the Indian Army was signed. Collaboration primarily concerns the manufacture and supply of components and systems for improving of BMPs mobility, modernisation of BMPs sighting and fire control systems.

India has approximately 2,000 BMP-2 vehicles and most of them need upgrading and improving tactical and technical characteristics.

On March 29, in one of the biggest joint venture between an Indian company and any OEM, Reliance Defence and Israeli Rafael Advanced Defence Systems

27

COVER STORY

‘Committed to co-develop solutions for both local use and global export’ SUNIL RAINA, Managing Director, Rockwell Collins India, on partnering with Indian companies to address the Asia Pacific and larger global markets What were the parameters considered while selecting a partner company?

to co-develop solutions for both local use and global export. We do a great deal of research and due diligence before we enter into a partnership to ensure the combined offering is really something needed by the customers and differentiated from the competition.

By understanding the strategic intent of a country – such as India – and aligning our priorities around that strategic intent, we can work with our partners to become a part of the desired outcome.

This includes understanding customer requirements, market trends and drivWhat are the value additions your ers, government mandates and where partners bring to the table? the country wants to go. At the same Today, we have partnerships with TATA time we are investing in the country, as Power SED for software defined radio we are in India, building long term caopportunities, a long standing relationSunil Raina pabilities, and forming strong strategic ship with HCL to augment our developpartnerships. ment work, and a partnership with Zen Our partnership strategy is about quality, Technologies to co-develop flight simulators for not about quantity. It’s about marrying a partner India’s defence forces. For commercial aviation, for the long term, thinking big and helping each we are partnered with AirWorks for aftermarket other succeed. We are focused on finding the services work. We are honoured to work with all right partnerships that align with each party’s of our strategic partners in India. We seek partstrategies. And we are looking for opportunities ners that are experts in their fields and that are that span the entire lifecycle of our business. looking for long term, committed relationships.

Part of our strategy in India is to form At the same time we bring the best capabilities committed, long-term strategic partnerships with and value propositions to partners to ensure we local companies to customize our offerings and are also attractive to them.

decided to set up a joint venture company in India in the highly specialised areas of air-to-air missiles, air defence systems and large aerostats. The joint venture, with 51 per cent from Reliance and 49 per cent from Rafael, will provide a big thrust into the field of indigenous production and development of high precision weapon systems in India.

The JV is located at Dhirubhai Ambani Land Systems Park, Pithampur, Indore in the state of Madhya Pradesh and will generate more than 3,000 highly skilled jobs. The project will have an initial capital outlay of more than `1,300 crore, without including the cost of technology.

Rafael is a market leader in the airto-air missile segment and has products like Python and Derby. For the air defence systems, Rafael portfolio includes SPYDER short range and medium range, and Barak missiles family of surface-to-air missiles in the short and medium range.

The two companies, through the JV, will offer the entire range of products in these fields to the Indian Armed Forces.

Rafael is also willing to offer solutions

28

through the joint venture even for the ongoing "Buy Global" programs where it is currently competing, in line with ‘Make in India’ initiatives of the Indian government. Based on the current requirement, the JV will address multiple Indian programmes valued at more than `65,000 crore over next 10 years.

In the case of Kalyani Group, it announced plans for a JV with Swedish firm Saab for the Short Range Surface-to-Air Missile and VSHORAD air defence programmes in India. The joint venture, which will be set up by Saab and Kalyani, will handle the main part of production and delivery of these air defence systems to the Indian customer. The production in India will comprise of subsystems and systems for SRSAM and VSHORAD with the aim to transfer production as well as development knowledge to India.

To secure production quality, orders of missile parts have already been issued to Kalyani and production-readiness reviews are ongoing. Saab and Kalyani are already planning for the technology transfer for different packages within the programmes. "The joint venture com-

August 2016 www.geopolitics.in

Our partners in India in general offer direct customer access and tremendous experience in their fields. For example, our strategic alliance with Zen Technologies offers the Indian defence market the best of both worlds: ‘Make in India’ design and support, combined with world class simulation capabilities, such as open system architecture, image generation, databases and other visual systems.

How can you jointly contribute in India's quest for becoming a defence industrial hub?

Using our strategic alliance with Zen Technologies as an example, our target market initially will be flight simulation for Indian defense. Long term we plan on leveraging this partnership to address the Asia Pacific and larger global markets with our joint solutions.

How can India's impending defence projects come to early fruition with help from you and your partners?

In addition to providing our avionics and communications on many commercial and military

pany will combine Saab's knowledge and experience as a developer and supplier of high-technology radar and missile systems, with the engineering excellence and manufacturing capabilities of the Kalyani Group. The joint venture will create a global supplier in the area of Ground Based Air Defence Systems based in India," says Amit Kalyani, Executive Director at Kalyani Group.

Another example of a foreign OEM creating value through its Indian partner is the tie-up between Airbus Helicopters and Mahindra Defence. On January 24 this year in Chandigarh, with French President Francois Hollande in India, they announced that significant progress had been made by the two companies following their Memorandum of Understanding (MoU) last July to form a Joint Venture as a part of the 'Make in India' initiative to produce military helicopters in India.

"Through this partnership, we target building several of our globally leading helicopter models in India. This will lead to the transfer of state-of-the-art technologies, development of manufacturing activities and creation of high-skilled

COVER STORY

aircraft in India, we see tremendous opportunities in networking the battlespace, across all domains. We offer our Talon software defined radio and our newest TruNet™ networked communications system for various communications opportunities in India. We launched our TruNet family of Software Defined Radio (SDR) systems just last year and see many opportunities for this next generation, exportable product in India.

Our TruNet family of networked SDRs offers the capability for Indian military customers to establish the first ground-air network truly tailorable to their mission needs. The radios were designed with the international market in mind, providing export-ready solutions, along with low-latency high node count networked solutions based on our SCA compliant architecture. In addition, TruNet brings control into the user’s hands through the use of development kits, enabling the customer to port missionunique waveforms to the platform to maximize indigenous content.

We see direct application of our TruNet radios in the growing Network Centric Operations (NCO) applications for the Indian Navy, Army, and Air Force. Rockwell Collins is currently engaged with several development agencies as the SDR technology provider of choice, and is highly active in military Make in India programmes.

jobs in India," says Guillaume Faury, Airbus Helicopters President and CEO. Mahindra Defence and Airbus Helicopters have already initiated industrial relationship to produce helicopter parts locally and are defining additional work packages to be industrialised in India which would facilitate the required rapid ramp-up in the case of a programme awarded to the joint venture. Simultaneously, both sides are evaluating potential industrial sites and are screening the existing local supply chain, while moving ahead with the setting up of the Joint Venture.

"We have made significant progress in setting up the joint venture and together the companies are creating a world class advanced helicopter production facility in India," says SP Shukla, Group President, Aerospace and Defence, Mahindra & Mahindra.

The companies are proposing to setup a final assembly line in India, develop tier-1 and tier-2 suppliers and make extensive transfer of technology, with the intent to ultimately achieve 50 per cent indigenous content.

In Hyderabad on May 31 this year, a

team of senior Lockheed Martin executives led by Dr Keoki Jackson, Chief Technology Officer, and Phil Shaw, India Chief Executive, visited the Tata-Lockheed Martin Aerostructures Limited (TLMAL), and Tata Sikorsky Aerospace Limited (TSAL) facilities. Set up in 2012, TLMAL manufactures airframe components for the global supply chain of the C-130J Super Hercules. TLMAL was the winner in the best joint venture category at the 2013 Aerospace and Defence Awards.

Tata Advanced Systems Limited (TASL) holds a 74 per cent stake in TLMAL joint venture, with Lockheed Martin holding the remaining 26 per cent stake.

Tata Sikorsky Aerospace Limited (TSAL) is a unique facility of its kind in private sector in India with capabilities of Engineering, Machining, Fabrications and Special Process all under one roof. This facility annually delivers over 100,000 parts to various end customers globally. TSAL is 74:26 Joint Venture between Tata Advanced Systems Limited and Sikorsky Aircraft Corporation (A Lockheed Martin Company).

Dr. Jackson met with the winning teams of the Lockheed Martin C-130J Roll-On/ Roll-Off University Design Challenge. The teams from IIT Chennai and University of Petroleum & Energy Studies have been awarded a grant to develop a prototype of their modular design and additional mentoring to develop a go-to-market strategy.

At the end of the design challenge, Lockheed Martin will work with each team to explore options with government and industry to mature the prototype for global markets. The visit provided an opportunity for the university teams to interact with Lockheed Martin and TASL Aerospace engineers and receive valuable feedback and guidance on their designs.

To further Science, Technology, Engineering and Mathematics (STEM) education of India's next generation, Lockheed Martin started the C-130 Rollon/Roll-off (RO/RO) University Design Challenge in November 2014 to help build Indian Industrial capacity to design, develop and produce transformational indigenous capabilities in addition to global customers.

Students from five leading Indian Universities (IIT Delhi, IIT Chennai, Delhi Technological University (DTU), BITS Pilani - Goa Campus and University of Petroleum and Energy Studies) designed disaster relief modules with the focus of Indian Air Force (IAF) and National Disaster Response Force (NDRF)

www.geopolitics.in

August 2016

as their initial target. The student teams were provided grants to work with local industry partners and were guided and mentored by current and former IAF and Defence Research Development Organisation (DRDO) personnel in addition to NDRF. In addition to funding, Lockheed Martin also supported each team with engineering, technical, and business development expertise.

As a part of its larger commitment to enhance the growth and development of India's innovation and entrepreneurial pursuits, Lockheed Martin has been successfully running the India Innovation Growth Programme (IIGP) since 2007 in partnership with the Indian Department of Science and Technology, Indo-US Science and Technology Forum, Federation of Indian Chambers of Commerce and Industry, Stanford Graduate School of Business, and the IC2 Institute at the University of Texas.

Lockheed Martin's urban unmanned aerial system programme with DTU has been equally successful and demonstrates a model for future collaborative research and development efforts in India. They will continue to explore opportunities for fostering talent as well as industrial partnership by supporting programmes for innovation, excellence and industrial partnerships to support India’s industrial base.

Lockheed Martin is engaged in building deeper and stronger collaboration with India.

Saab is also committed to enhance design and development capability of India in the aerospace sector for the next 100 years and has a centre in Hyderabad, along with Tech Mahindra, that designs for the Swedish company's Gripen NG aircraft that are for Swedish and Brazilian air forces. As part of its pitch to India to supply combat aircraft, Saab has offered to transfer a credible aerospace capability to India.

Similar offers of establishing a manufacturing base for their combat planes - F/A-18 and F-16, have also come from American Boeing and Lockheed Martin. The three companies are trying to fill in a gap caused by India restricting its Medium Multi-Role Combat Aircraft need of 126 planes to just 36 planes for which French Dassault Aviation’s Rafale was chosen. The three companies, which were not selected in the 2007 tender, are now trying to grab the business for supplying a minimum of 90 combat planes to the Indian Air Force.

—Geopolitics Bureau

29

COVER STORY

CREATING TIERED SUPPLIER BASE FOR GLOBAL PRODUCTS IN INDIA Tata Power SED’s System Integration Bay

TATA POWER SED

The Aerospace and Defence industry continues to be challenged by increasing competition and cost pressures as well as rising energy costs, high raw material prices and a weak US Dollar. To combat these challenges, defence manufacturers, aerospace Original Equipment Manufacturers and Tier-1 suppliers are leveraging the advantages arising from the globalisation of the Aerospace and Defence supply chain. They are adapting to these challenges by outsourcing more and more elements of technology, design and component/ sub-assembly manufacture, a Geopolitics report

F

or the Aerospace and Defence supply chain, this decade is an opportunity as well as a threat.

It is an opportunity for those suppliers who can innovate, adopt high level technologies, implement best practices and invest in change – such suppliers will win larger amounts of work from their customers. Those suppliers who cannot do this, could find themselves removed from the Original Equipment Manufacturers' supply chain.

For the successful players, the coordination and integration of supply chain practices and processes are becoming increasingly important, and requires lots

30

of attention. Traditionally the large aerospace and defence manufacturers would define and specify exactly what their suppliers should produce for them.

According to NITI Aayog member and former Defence Research and Development Organisation (DRDO) chief V K Saraswat, the micro, small and medium enterprises (MSMEs) have up to $200 billion worth of opportunities in the defence sector as suppliers to system integrators and 'system of systems' manufacturers.

For that to happen, they need to upgrade their infrastructure in terms of modern methods of manufacturing, and also focus on quality control, certification and

August 2016 www.geopolitics.in

stringent regulatory mechanisms.

The tiered suppliers would find opportunity in a large scale for the simple reason that the government's focus today is on making most of the aerospace and defence equipment within the country.

The 'Make in India' initiative could easily be the game-changer for the MSMEs for getting in to the aerospace and defence sector and to absorb all of the opportunities that are available.

"Defence is not a conventional business," Saraswat had aptly warned at that time and had pointed out that the sector is investment intensive and the waiting time is very long, considering that there

COVER STORY

is only one customer - the armed forces.

Low volume of production, specific material, very unique processes, all have to be made available to the small sector that wants to make use of the opportunity open in the vast defence sector.

To be a part of the defence ecosystem, the MSMEs need to learn the processes through interaction with various R&D organisations as well as academic institutions in the country. They have to upgrade infrastructure in terms of modern methods of manufacturing in MSMEs also if they want to make use of these opportunities. Quality control, certification and also stringent regulatory mechanisms which control the supply of these items to the armed forces have to be all part of the learning exercise.

Large number of industries — the Tier 1 and Tier 2 ones — have already started harnessing the availability of the defence offsets, which is estimated to be a $150 billion market in itself. Even for Tier 2 or tier 3 supplier, there are huge opportunities. The opportunities lie in electronics, armaments, hydraulic, pneumatics, sensors, naval systems for the suppliers in the MSME sector for defence industry.

The new Defence Procurement Procedure-2016, also stresses more on utilitising the opportunity in the sector within India and there have been tweaks in the DPP-2016 that gives greater importance to indigenisation.

For example, both Indian and foreign industry believes the new category, Indigenously Designed Developed & Manufactured (IDDM), will be a game changer for the future, leading to real participation of domestic companies. This category is expected to bring significant investments in R&D and will ensure that the scientific talent in India is engaged in developing cutting-edge technologies in defence.

Foreign Original Equipment Manufacturers have also welcomed the change but with some suggestions. They feel that this category will be difficult to implement as Original Equipment Manufacturers have moved away from manufacturing systems and components in their factories. They rely on a global supply chain and have limited influence in mandating suppliers to localise in a given country unless economics and technical capability justify the investment.

While the industry is upbeat about the IDDM category, some OEMs are apprehensive about achieving the indigenous content of 60 per cent (most are struggling to achieve the existing 30 per cent). They feel that this needs to be reduced or, at least, calibrated. For

‘India remains at the heart of DCNS’ global strategy’ BERNARD BUISSON, MD, DCNS India, on its partnership with a range of Indian MSMEs in sync with indigenisation programmes...

Please provide an overview of how you went about selecting your partner companies for defence projects and JVs?

parallel to the transfer of production through the transfer of technology.

DCNS has developed a sound industrial How can you jointly contribute in India's ecosystem of qualified Indian vendors in India quest for becoming a defence industrial to serve the Indian Navy in line with governhub? ment’s Make in India policy. We are providing Both DCNS and qualified Indian partners Indian industries know–how and technical ashave invested in infrastructure, specific tools sistance to manufacture high-tech and intense manpower training for equipment respecting defined qualthe long term to respond to Indian ity standards, which are installed on Navy's future requirements. This board the P75 submarines. qualified industrial ecosystem needs To select our industrial partners to be nurtured with additional asfor the indigenisation of the P75 signments in order to preserve and programme, DCNS India has visited build upon the acquired expertise hundreds of MSMEs, and underthrough increased participation and taken stringent shortlisting, auditthus furthering self-reliance of the ing, qualification and certification Bernard Buisson Indian Navy. process to select five main partners The empowerment of a gamut (SEC, HBL, FFL, CFF, Axis-Cades, Walchandof Indian Industries today, owing to indinagar industries Ltd.). These co-operations genisation process and through observance have helped DCNS in procuring quality prodof stringent quality requirements, will reap ucts in a cost effective and time-bound manmanifold benefits in the long run as they are ner, meeting rigorous specifications needed capitalised upon, extended to other private for the P 75 submarines programme. partners and sustained to serve the Indian Navy and further India’s self–reliance. These What has been the role of your business Indian companies have now donned the role of strategic qualified partners to support MDL partners in your ongoing initiatives? as the centre of excellence for submarine DCNS is working with a range of MSMEs building in India. like SEC, Flash Forge Limited (FFL), HBL and many more under the P75 programme.

This has enabled equipment to be locally Which are the Indian defence projects manufactured in the vital categories of Float your company has been working on? (hull hatches, ballast valves), Move (steerIndia remains at the heart of DCNS’ global ing consoles) and Fight (weapon handling strategy. The Make in India initiative has and loading) equipment in sync with Indian paved way for a positive atmosphere to be Navy’s indigenisation targets. DCNS has also accompanied by simpler decision-making been instrumental in cementing partnerships processes. between French and Indian MSMEs to deliver Today DCNS is in discussion with the locally manufactured equipment in India – Indian Navy, for a number of future proCoyard Flash Forge is one such example of a grammes, which include service support joint venture. to Indian Navy for maintenance of P75 DCNS is so satisfied with the quality submarines, LPD project, future indigenised standard adhered to, that they have taken aircraft carrier and the future advanced a step further and procured certain key torpedoes amongst others. DCNS is also components from Indian partners like FFL and supporting Indian Navy’s Green Initiative with Omega Bearing for the French Navy’s latest its Ocean Thermal Energy Conversion (OTEC) naval projects. solution for Andaman Island. DCNS believes So we can say that the flow of knowledge that indigenisation and sustainable industrial has been directed in multiple ways to position ecosystem in India is the key to long-term Indian vendors as long term partners of the success for Indian defence industry. This group. DCNS as well as DCNS India have uncaters to a win-win situation for both DCNS dergone a tremendous learning curve running and India as a nation.

www.geopolitics.in

August 2016

31

instance, almost 70 per cent of the raw material in aerospace has to be imported as composites and many exotic alloys are not made in India.

The industry also welcomes the proposal to identify select Indian private sector defence manufacturers as strategic partners. These companies would play central roles in developing complex and strategic systems within the country, or receive technology transferred from foreign suppliers in large defence contracts.

While the government has taken several policy initiatives to lower entry barriers and improve ease of doing business, there is a need to also focus on improving infrastructure to create aerospace and defence hubs. As per an industry report, creating clusters is particularly relevant for MSMEs, who supply components and sub-assemblies to the defence PSUs, ordnance factories, Defence Research and Development Organisation and private players.

The palpable change in the government's mindset regarding private players as equal partners rather than competitors to defence PSUs was also highlighted, along with measures such as aligning tax policies to create synergies and treatment of private sector as equal partners. These moves have the potential to further boost industry sentiment.

Big players

Boeing's industrial partnership programme is focused on capitalising on India's competencies to build a supplychain capability that will be globally competitive. This will support aerospace and defence programmes across the Boeing enterprise, according to the company.

Dynamatic Technolgies and Boeing inaugurated a plant to manufacture critical parts for the Chinook Heavy Lift Helicopters. In a state-of-the-art facility with TAL Manufacturing Solutions Ltd., Boeing supports manufacture of complex floor beams for the Boeing 787-9 Dreamliner, one of the most advanced airplanes in the world. TAL also makes ground support equipment for the C-17.

Dynamatic Technologies and Tata Advanced Materials Limited have delivered P-8I power and mission equipment cabinets, and TAML is on contract to provide P-8I auxiliary power unit door fairings and composite tailcones for the P-8I. Avantel has delivered the mobile satellite systems for the P-8I and Maini.

Hyderabad-based Cyient (formerly Infotech) has supported a number of critical design-engineering projects for Boeing

32

ROSSELL TECHSYS

COVER STORY

Rossell Techsys (Division of Rossell India Limited) being recognised as ‘Supplier of the Year - 2015’ in the Pathfinder Category by The Boeing Company

airplanes, and currently provides design and stress support on the 747-8 Freighter and the 787-8 and 787-9.

Bharat Electronics Limited (BEL) has delivered the Indian-designed Data Link II for the P-8I. Data Link II is a communications system that enables exchange of tactical data and messages among the Indian Navy aircraft, ships and shore establishments. BEL has also delivered the identification friend-or-foe interrogator, a battle management system that enables the aircraft to distinguish friendly aircraft and forces. BEL is on contract to provide F/A-18 flight deck cockpit panels. Electronics Corporation of India (ECIL) has provided the speech secrecy systems for the P-8I. Hindustan Aeronautics Ltd. (HAL) was the single-source producer of 757 over wing exit doors. HAL has also manufactured the 777 uplock boxes, F/A-18 gun bay doors, F/A-18 wire harnesses, P-8I weapons bay doors, and P-8I identification friend-or-foe transponders.

Since 1997, Boeing has worked with India's premier software development companies, including HCL, Infosys, Wipro and Tata Consultancy Services (TCS), on several projects related to systems re-engineering and development, web enabling, e-business applications and long-term maintenance. Beyond direct work placement, Boeing collaborates with Indian industrial suppliers on lean manufacturing techniques, on program management and supplier management best practices, and in specialized trainings as part of its drive to bring the best of Boeing to India.

In June this year, Boeing Company

August 2016 www.geopolitics.in

recognised Rossell Techsys, a division of Rossell India Limited, as its 'Supplier of the Year - 2015' in the Pathfinder Category. Rossell Techsys was one of 12 companies honoured on the evening of April 13, 2016, at the Washington State Convention Center, Seattle, for outstanding performance in working with Boeing.

Achieving the 'Supplier of the Year' distinction is an acknowledgement of its superior performance and puts Rossell Techsys in the best of the best class of winners, amongst the 13,000-odd active suppliers of Boeing. This selection was based on stringent performance criteria for quality performance, delivery performance, cost, environmental initiatives, Training and Learning initiatives, customer service and technical expertise, all of which are charecteristic of the value proposition from the American giant's Tier-2 and Tier-3 suppliers.

"What they have done has built a company culture that has resulted in 100 per cent on time and quality and has met our expectations, especially for a company that has been around 2 years. It is kind of unheard of to have a company go from start up to 'Supplier of the Year' this quickly," accorrding to Phil Ament, Boeing Director – International Supplier Management, Boeing Defence, Space and Security.

"We have made focussed investments in infrastructure, people and processes, to offer best in class manufacturing services, with commitments to be a trusted and reliable partner for Boeing," Rossell India Limited Executive Vice President Rishab Gupta says about its tie-up with Boeing.

Rossell Techsys is currently working

COVER STORY

with Boeing on a number of airborne military platforms that include the F/A-18, the F-15, the AH-64, the H-47, the KC-46 Tanker and the P-8 platforms.

Rossell Techsys has also been the first company to partner with Boeing in its skilling initiatives in India, and has completed the first ever industry-sponsored, year-long, aerospace domain specific post diploma course that has enabled 30 trained students to obtain global standard skill and experience to be gainfully employed. The Rossell Techsys Training Infrastructure, has been recognised by Boeing for its state-of-the-art training facilities and curricula.

Fokker Technologies, a division of GKN Aerospace, and Aequs of India, have signed a Long Term Agreement (LTA) for the supply of machined components for Boeing's Chinook helicopter. Under the agreement, Aequs will supply machined detail parts which will be made in India for the Chinook heavy lift helicopter. Fokker Technologies will build the parts into final subassemblies in facilities in Papendrecht, The Netherlands. Aequs was selected after a careful process of qualification proving the ability and affordability through trial production.

“This agreement between Fokker Technologies and Aequs is significant because it capitalises on India’s industrial capability, innovation and talent to contribute to the country’s long-term competitiveness as a global aerospace leader,” says Pratyush Kumar, President, Boeing India. “Boeing is rapidly expanding its supplier footprint in the country to reinforce our commitment to ‘Make in India’ and we have doubled our sourcing from India in the last 12 months.”

Fokker Technologies started to set up its supply chain in India in early 2014. In that year, Fokker Technologies selected its first parts suppliers in India and trial production started, leading to the successful first article inspection in mid-2015 and the signing of the first ‘Make in India’ parts production LTA with Aequs. Fokker Technologies and Boeing have worked, and still work, together to identify and award work packages.

Aequs is among India’s fastest growing precision engineering companies specializing in precision machining, sheet metal fabrication, assembly, forging, and special processing. The company’s customers include global industry leaders such as Airbus, UTAS, Bosch, Eaton, Baker Hughes and Halliburton.

Aequs operates several manufacturing facilities in India, US and Europe. The

significant facilities are located in the Aequs SEZ, Belagavi, India's first integrated precision engineering ecosystem.

On June 15 this year, Aequs and Magellan joint venture inaugurated its manufacturing facility at Belgavi.

European major Airbus too has created a long line of Tier-1 and Tier-2 suppliers for its products from India. In April 2015, Airbus had announced that it will procure components and sub-systems worth $2 billion for its civil and defence projects, up from $500 million in 2015.

Airbus India also has another long list of companies from India that do services support to the Europeaon major.

That Airbus India intends to achieve through its suppliers from India which includes Aequs, Alpha Design, Ankit Fasteners, CIM Tools, Deutsch Connectors, Dynamatic Technologies, Eaton, EIS Electronics, Gardner Pranita Engineering, Lakshmi Precision Screws, Machaero, Mahindra Aerospace, Maini Precision, Moog, Rangsons, Racaero, San Auto, Sansera, Sefee, Tata Advanced Materials, Tata Advanced Systems, Taneja Aerospace, TE Connectivity, Titeflex India, Triveni Hitech, Wipro-CESA, and XOL Technologies. These suppliers support Airbus in its manufacturing business.

Way forward

Overall, it is important to upskill the entire value chain, and not just focus on large private players. Currently, the interaction is more among or with large companies on both sides, while capable SMEs (even some large companies but not currently into defence) are being left out in India, and global OEMs T1/2/3 don’t have the bandwidth to scout for worthy partners among many probable companies, says Anurag Garg of Strategy&. With this in mind, interactions of global OEMs' Tier 1/2/3 vendors must happen with current or possible counterparts in India, especially where the case for shifting the supply chain is strong for the foreign OEM given cost/ other considerations.

True indigenisation will not be achieved till the time we stay dependent upon built-to-print approach and licensed production, where we end up importing most of the critical content anyway. We need to start respecting our own designs, and provide support and visibility of orders to those who invest.

This is strategically important not only to reduce dependence on foreign OEMs, but also to have advantage in the battlefield where equipment and military machinery in use is not a globally know and

www.geopolitics.in

August 2016

understood platform.

Leakage of MRO revenue outside the country is a huge unnecessary loss to the aerospace and defence sector as a whole.

Economies of scale will be achieved only when the business case for MRO in India is attractive enough not only for Indian carriers, but also other regional carriers. Private sector can also play a vital role in improving availability of defence aircrafts, and must be included in a big way. A lot of distance is still to be gained to make this happen, and incremental steps in sequence will not help.

There is a severe shortage of trained talent to take up diverse roles in defence design and production, and hence there is a need to have a concerted strategy to producing job-ready personnel for defence sector. Focused effort needs to be spent on nurturing talent to support this effort of ‘Make in India’ in defence, wherein specialized skills and way of thinking is required. This goes beyond the need for talent for business development, design or manufacturing, but also needs understanding of the nature of defence business, its systematic risks, and devising smart ways to build a sustainable franchise within any constraints of the ecosystem.

While certain states have taken the lead by providing land, tax breaks and other incentives, it is critical to build defence hubs to provide growth of the ecosystem rather than working with individual companies. This has to be a critical guiding principle in selecting the fighter aircraft to be manufactured in India. New collaborative business models are coming up as companies have realized that they are better off joining forces with companies with complimentary capabilities, than pitching individually to the defence sector customers, and in turn reduce their cost base and improve success probability.

Overall assumptions are that programmes move forward at good pace, and that the policy framework and MoD mindset progressively becomes an "enabler" to the ambition of 'Make in India' in Defence.

These multiple work-streams with common goals have to be implemented "in parallel" for the self-sustaining "network effect" to kick in. Delay or lack of emphasis on any one of these elements will either mean that the pace of indigenization will be slow, or that 'Make in India' in Defence will remain a pipe dream.

—Geopolitics Bureau

33

COVER STORY

FOREIGN PLAYERS COULD HELP INDIA SECURE ITS FUTURE MILITARY PROGRAMMES

Kalyani Strategic Systems Ltd (KSSL) barrel shop KALYANI

Since the present Modi government came to power, the interaction between the industry and the military has only increased. India's present Defence Minister Manohar Parrikar has been open to reach out to the industry, a Geopolitics report

I

ndia's armed forces are changing, that too at a rapid pace. The 1.32-million armed forces are opening up to both the Indian defence companies and to foreign firms with presence in India, to match- up each other's capabilities to meet the requirements of men behind the war machines.

As part of that initiative, Indian Army had on two consecutive weekends in the middle of July, opened up to the industry representatives that will now go down as paradigm shift in the thinking process of the excessively secretive force. Giving up their closed mindset, the Indian Army has now decided to make the most of the ‘Make in India’ initiative of the Narendra Modi government and has decided to interact more freely and openly with the industry.

At the events held on two days each in the week ending July 7 and July 14 at Ahmednagar in Maharashtra, hosted by the Directorate General of Mechanised

34

Forces, the first week was for engineers and designers from the Indian industry, to whom the Indian Army officials threw open their tanks and infantry combat vehicles. The industry representatives, all technical guys, were able to get into the tanks and the vehicles and get a feel of what the Indian Army personnel wants while inside such cramped spaces and still fight a war effectively.

The second weekend was devoted purely for senior executives from these companies, who were surprised at the level of open sharing of information happening with the senior military officers.

About 170 industry representatives from associations such as the CII, FICCI and NSIC were participants in the two weekend events, where they got to check on current lot of equipment that Indian Army's mechanised forces used and the likely upgrade projects and modernisation efforts.

August 2016 www.geopolitics.in

Held with adequate government approvals, the event is said to be the first of its kind in India by the armed forces. This positive change in the Indian armed forces have come about based on the thrust provided to the 'Make in India' initiative

by Prime Minister Narendra Modi, acknowledge industry representatives who attended the events.

The institutionalised access to the Mechanised Forces platforms for interested industry representatives were facilitated for battle tanks such as the Russian-origin T-90s, T-72 and its variants, T-55, and the India-made Arjuns. Among the Infantry Combat Vehicles presented for access to the industry were the Russian-origin BMP-1 and BMP-2/2K and the wheeled platform BRDM, Armoured Recovery Vehicles, apart from simulators for these 'A' class vehicles.

All this was something new for the industry. These were new for the Army too. But the two sides got along well with

COVER STORY

mutual understanding and trust formed at the first event of this nature. More such events are expected to be organised for other equipment too that the armed forces need, according to senior Defence Ministry officials.

"This was an effort to align the industry capabilities with the felt-needs of the mechanised forces, so as to enable them to prepare to meet these requirements of the future. Up for grabs are programmes like the upgrade and modernisation of the infantry combat vehicles and the battle tanks, apart from new projects such as the Futuristic Infantry Combat Vehicles, Future Ready Combat Vehicles and the Futuristic Main Battle Tanks," an official pointed out.

About three years ago, India had come up with a publicly released document on its military technological perspective and capability road map that listed out an overview of what would be Indian armed forces' technological requirement before the end of 2027, when the 12th, 13th and 14th five-year plans culminate into the armed forces' 15-year Long Term Integrated Perspective Plan.

That document pointed out that the market in the defence sector for the Indian industry (without taking foreign companies into account) could turn out to be $100 billion in the 15 years till 2027.

Yet, there have been comments from the industry that the document's content was not enough for them to crystal gaze into what specific equipment the Indian armed forces may need. The industry wanted specific leads into the equipment need that could translate into saleable products that the armed forces would buy.

The basic demand was that they get committed orders for the sweat through their hardwork and the research and development where they put their money into.

Since the present Modi government came to power, the interaction between the industry and the military has only increased. Unlike his predecessor, AK Antony, under the Manmohan Singh government, India's present Defence Minister Manohar Parrikar has been open to reach out to the industry. During the 2015 AeroIndia air show in Bengaluru and during the DefExpo at Goa earlier this year, Parrikar took that extra effort to visit each exhibit put up by the industry — both Indian and Foreign — to know and understand their offerings and capabilities.

Parrikar has an industry background and has also been a minor defence supplier as part of the ecosystem before he got into politics. In the last three months since the DefExpo, Parrikar has held at

least three meetings with industry representatives from the defence sector to discuss policy on choosing a private industry as a strategic partner for defence contracts. That's again unprecedented in the defence sector history in India that the ministry consults the industry at the minister's level on a policy matter.

The two-day event organised by the Directorate General of Mechanised Forces was an attempt to get industry help by India in some of its futuristic projects.

The Indian Army has in February this year received six bids for the estimated `60,000-crore ($8.75 billion) Future Infantry Combat Vehicle (FICV) programme, for rapid movement of troops into the battlefield. The six competing bids were submitted by eight of the 10 companies invited to participate through an Expression of Interest (EoI) issued by Army Headquarters on July 16, 2015. Of the field of 10, Punj

The two-day event organised by the Directorate General of Mechanised Forces was an attempt to get industry help by India in some of its futuristic projects

Lloyd and Rolta did not responded and dropped out of the competition.

Significantly, two Tata entities, Tata Motors and Tata Power SED, will be competing against each other in separate consortia. While Tata Motors has submitted a joint proposal with Bharat Forge, Tata Power SED has tied up with Titagarh Wagons Ltd. to form the second consortium.

Rules restrict formation of consortium among only those companies invited to bid for this project.

Individual bids have been submitted

by Mahindra Defence, Larsen & Toubro, Pipavav Defence & Offshore Company (now Reliance Defence & Engineering Limited) and the government-owned Ordnance Factory Board (OFB), the last having been guaranteed a free pass through nomination when the competition commenced in July last year.

The competition involves short-

www.geopolitics.in

August 2016

listing two of the five bids by the private sector for the development of a prototype each of a modern, tracked FICV, meant to replace the Indian Army's Soviet-origin BMP-II armoured vehicles and meet troop mobility needs in a contemporary battlefield.

The OFB and the two shortlisted private bidders will be declared development agencies. The Army will fund 80 per cent of the development cost of the prototypes. The development process under this 'Make' category procurement will be followed by competitive trials of prototypes before award of the contract for supplying 2,610 FICVs to the Indian Army.

In their respective bids, the companies are required to present the concept and spell out details of technology tieups. The bidding entities are free to select foreign partners for design, technology and funding. The 10 entities were initially given 90 days to respond to the EOI, but extensions of the deadline were provided for an additional four months that ended on February 15.

Bharat Forge-Tata Motors combo had in March 2016 roped in American firm General Dynamics as the technology partner, while Tata Power SED and L&T may leverage their existing partnerships in ongoing programmes with South Korean companies Doosan and Samsung Techwin, respectively, for the FICV project.

This second attempt will be one of the most keenly watched 'Make in India' programmes in the defence sector. Similar 'Make' programmes for the Army's Battlefield Management System (BMS) and Tactical Communication System (TCS) have evoked a lot of interest. Two industry consortia — Tata Power SED-L&T and Bharat Electronics Limited (BEL)-Rolta — have been down-selected as development agencies.

The Indian Army is planning to design and develop a new generation, state-ofthe-art combat vehicle platform for its armoured and mechanised forces in the next decade and it has sought information from global and Indian defence firms to state by July 31, 2015 if they could do it.

These combat vehicles will replace the Indian Army's Soviet-era T-72 battle tanks in the Armoured Corps and its induction has been planned for 2025-27 period, according to a Request for Information (RFI) put up by the Army on its website on June 12, 2015. The Indian Army has called this next-generation fighting machine as the Future Ready Combat Vehicle. The Army has expressed its intent to populate its armoured fighting vehicle fleet with the FRCV and also to subsequently develop 10

35

COVER STORY

‘Moving from a business opportunity market to a more strategic partnership’ KISHORE JAYARAMAN, President, Rolls-Royce India and South Asia, on long-term commitment to develop the Indian Aerospace ecosystem and its partnership with Indian companies How did you go about selecting your partner companies in India and what were the attributes you looked for?

have long-standing partnership with HAL since the mid-1950s. Throughout this time we have continued to learn from each other’s experiences. Rolls-Royce continues to share Selection of a partner who will make a best practice today with HAL as compatible and successful partnership part of our long-term commitment in the long term is a complex endeavto developing the Indian Aerospace our. Each joint venture or partnership industry and delivering Indian selfis unique in its own way, and must be reliance. The Adour Mk871 is made approached accordingly. Yet there are in India by HAL, with Rolls-Royce certain basic criterions for selection. support, which is an excellent Firstly, there has to be synergy in example of Rolls-Royce’s long-term goals, vision and objectives. Secondly, a match of technical skills, financial Kishore Jayaraman commitment to develop the Indian Aerospace ecosystem. IAMPL is an strength and resources needs to be extremely successful joint venture aligned. Lastly, no partnership can be between Rolls-Royce and HAL, producing parts successful without the foundation of for our customers globally and we are keen mutual understanding, inter-partner trust to build on this success in future. Over the and commitment. years, HAL has acquired a significant legacy Throughout our relationship with India of knowledge and experience in design and as a whole — we are moving progressively development and production. With the current from that of a business opportunity market to focus on Make in India and private partnerships, a more strategic partnership. We have strong there is immense potential available for strategic partnership with QuEST and TCS, where more partnerships and technology sharing and further than 1000 engineers work at Rolls-Royce strive towards realising India’s dream of selfmanaged engineering centres in Bengaluru. Our reliance in Aerospace & Defence. biggest partnership is with HAL — International Aerospace Manufacturing Pvt Ltd (IAMPL) — a 50:50 JV with HAL is now at full production How can you jointly contribute in India's employing over 120 people for a wide range quest for becoming a defence industrial of engine programmes, including the Trent hub?

XWB. We therefore, look forward to continue to India’s aerospace industry growth indicates that grow our partnerships by providing the breadth the country is rapidly building capabilities to and diversity of portfolio that Indian defence emerge as a preferred destination to support the customers demand of our products and of our global A&D supply chain. We currently have a after-market support.

JV with HAL (IAMPL) that manufactures components for technologically advanced Trent family of civil aero engines. This means that we are alWhat has been the role of your business ready building capabilities within the framework partners in your ongoing initiatives? provided and will continue to evolve and provide The fact that we have been in India for over 80 more expertise and choices as the framework years means that the partnerships have worked expand. IAMPL facility represents another comwell for us. With all our key partners, we’ve mitment to the long-standing partnership with grown from strength to strength as India goes HAL and the future of Indian aerospace industry. through various stages of modernisation. We

more need-based variants in various roles, with the first 'tracked' variant of the FRCV as the base vehicle for the future variants.

Israeli firms, such as Rafael Advanced Systems are tying up with India companies such as Bharat Forge for the upgrade programme for BMP-II that the Indian Army holds in its inventory. This tie-up was announced by the two companies

36

in February this year. The joint venture was "to address programmes relating to BMP-II upgrade, tactical control systems, other advanced systems and other such programs floated or to be floated by the Ministry of Defence, India, under the joint venture company Kalyani Rafael Advanced Systems Private Limited."

British engine maker Rolls-Royce has

August 2016 www.geopolitics.in

In addition through our partnership with QuEST and TCS, we are leveraging the vast engineering talent pool that the country provides.

With the government opening up and providing enormous opportunities to the private sector, many global and domestic players are collaborating and forming joint ventures for manufacturing aero components, Maintenance, Repair and Overhaul (MRO) facilities for civil and military aviation sectors, besides overhaul and maintenance of aero engines. Today, we are well positioned to cater to the future growth opportunities available in the India and South Asia region. We will continue to offer India a unique combination of experience and innovation that can help to improve the capability of our customers.

Which are the defence projects you are working on?

Whilst I cannot talk about specific projects, we have always said that we would welcome the opportunity to support India achieve self-reliance and continue to support Make in India.

With HAL, we intend to grow the JV partnership (IAMPL) with a focus on opportunities to collaborate on co-development. Other than this we intend to grow our supply chain in India.

Our suppliers include Bharat Forge, Godrej & Boyce and TASL (Tata Advanced Systems Ltd.).

Currently with three tier-I suppliers in 2015, we are working on doubling the supplier base in 2017. We are also working towards introducing Indian supply chain to more complex commodities like Complex Fabs, Pipes (Installations SCU) and Mainline shafts (Rotatives SCU) as well as introducing new commodities such as; External Brackets, Casings, Wire Harnesses, Castings, Stub Shafts/Blisks. We look forward to continued commitment towards the India region and work more closely with our stakeholders across businesses to enable them to benefit from our innovative products and technologies.

previously expressed its willingness to work with the Indian Army on engines that power battle tanks. The MTU 838 KA 501 German-origin engines powers the indigenous Arjun Mk1 tanks and RollsRoyce that owns MTU, will be more than happy to work with the Army to create a product for Arjun Mk2. Engine makers like Rolls-Royce and American General

COVER STORY

Electric have the necessary expertise to help India in developing indigenous aeroengines for its future combat planes programmes such as the Advanced Medium Combat Aircraft (AMCA).

On the aerospace front, Swedish Saab AB plans a tie-up with the Indian firms, including Hindustan Aeronautics Limited, for the Gripen aircraft primarily to support Prime Minister Narendra Modi's 'Make in India' initiative to boost local defence industry. As part of its pitch to India, Saab AB has also offered to help India on Tejas aircraft and the futuristic AMCA programmes. Saab is offering its very latest AESA radar, in package with Electronic Warfare and weapons integration and has responded to a Request for Information from Hindustan Aeronautics Limited.

Saab has also tied up with Indian company Kalyani Group (KSSL) for a Joint Venture firm in India for the Short Range Surface-to-Air-Missile (SRSAM) and man-portable Very Short Range Air Defence (VSHORAD) Missile programmes.

The joint venture, which will be set up by Saab and KSSL, will handle the main part of production and delivery of these air defence systems to the Indian customer.

The production in India will comprise of sub-systems and systems for SRSAM and VSHORAD with the aim to transfer production as well as development knowledge to India.

To secure production quality, orders of missile parts have already been issued to KSSL and production-readiness reviews are ongoing. Saab and KSSL are already planning for the technology transfer for different packages within the programmes. Saab has pitched its BAMSE SR-SAM and the RBS 70 NG in the Indian SR-SAM and VSHORAD competitions, respectively. Saab had in February 2014 tied up with vehicle manufacturer Ashok Leyland to combine the BAMSE SR-SAM system with the Indian company's highmobility vehicles.

Already, Russian companies like Kamov have joined hands with HAL in India for providing the technology to produce a Light Utility Helicopter for the Indian armed forces. Similar opportunities are available to foreign helicopter manufacturers in helping India to better its indigenous Advanced Light Helicopter 'Dhruv'.

The United States has recognised India as a Major Defence Partner. As such, the United States will continue to work towards facilitating technology sharing with India to a level commensurate with that of its closest allies and partners. The two nations already have reached an understanding under which India would

India's Purchase List 1.

2.

3.

5.56mm/7.62mm RiflesTo replace INSAS rifles CQB Carbines

9.

5.56mm Light Machine Gun1,000 metre range Sniper Rifle1,000 metre range Very Short-Range Air DefenceMan-portable system 155mm 53 calibreTowed guns 155mm 52 calibreWheeled self-propelled guns 155mm 52 calibreTracked self-propelled guns Armed Drones

10.

Mid Air Refuellers

11.

Light Utility Helicopters

12.

Conventional Submarines

4.

5.

6.

7.

8.

65,000 required - 1,40,000 to be made by OFB 43,000 required - Another 1,20,000 to be license produced

by OFB Initial requirement by import - Rest to be made in India Sight variable magnification to be fitted for greater accuracy 5,175 missiles required - Part of the order to be made in India 1,180 guns required immediately - Army to try out OFB-made Dhanush 180 required - tender awaited 100 required - tender awaited Over 100 required. India considering Israeli Heron TP and American General Atomics' Avenger drones.

Six aircraft needed - Tenders cancelled twice, the second in June 2016 - government-to-government deal likely 197 helicopters required by Army and Air Force - Tenders cancelled twice earlier - Make in India Six to be built in Indian shipyard - Foreign collaboration Tender awaited

receive license-free access to a wide range of dual-use technologies in conjunction with steps that India has committed to take to advance its export control objectives. In support of India's 'Make In India' initiative, and to support the development of robust defence industries and their integration into the global supply chain, the United States will continue to facilitate the export of goods and technologies, consistent with US law, for projects, programmes and joint ventures in support of official US-India defence cooperation.

The two countries are also committed to enhance cooperation in support of the Government of India's 'Make in India' initiative and expand the co-production and co-development of technologies under the Defence Technology and Trade Initiative (DTTI). They have also established new DTTI working groups to include agreed items covering Naval Systems, Air Systems, and other Weapons Systems.

The two sides have already finalised the text of an Information Exchange Annex under the Joint Working Group on Aircraft Carrier Technology Cooperation.

Under the last of these Joint Working Groups on Aircraft Carrier Technology, US firm General Atomics is in all likelihood help Indian Navy in its futuristic aircraft carrier programme that could be of over 65,000 tonnage. General Atomics is in discussion to provide its Electro Magnetic Launch System (EMALS) for the future aircraft carrier India is planning to build.

www.geopolitics.in

August 2016

Unlike the steam catapult system currently operational on US and French aircraft carriers, the EMALS consists of a linear motor drive instead of a steam piston on the former, to propel the aircraft off the deck. The advantages of such a system, listed by the Indian Navy, are several, including less stress on aircraft, greater control on graded acceleration, lower maintenance requirement and more reliable performance. It also purports to sport a lower logistical footprint. General Atomics, with its nuclear power business expertise, could easily also advise India on the nuclear-powered aircraft carrier option.

India is currently also looking for a submarine builder within India that could construct the six futuristic conventional submarines under a programme named Project 75I. Though a Request for Proposal is still awaited, the Indian government has already evaluated five state-owned and three private shipbuilders in India for selecting one of them for the project.

This opportunity will come by for foreign players too, who can tie-up with the selected Indian shipbuilder. India could be looking for an Air Independent Propulsion and Stealth technology as far as its future submarines are concerned. Several foreign players can be of help to India in this regard, including French DCNS, Spanish Navantia, Swedish Saab and others with submarine building experience. —Geopolitics Bureau

37

OPINION To help the industry, including MSMEs, in achieving the objective of creating ‘Buy (IDDM)’ category and splitting the ‘Make’ category into two sub-categories, MoD needs to release information about products required by the armed forces under these categories with as much detail as possible, analyses AMIT COWSHISH

Aequs's inside plant view

AEQUS

DPP 2016 – A LEG-UP FOR MSMES?

P

reamble to the just released Defence Procurement Procedure 2016 proclaims its commitment to enhance the role of Micro, Small and Medium Enterprises (MSMEs) in the defence sector as one of its defining features.

Though it seems more of an overstatement than an indication of any shift in policy, some structural and procedural changes will indeed have an impact on around 6,000 MSMEs presently operating in the defence sector. Two changes stand out – introduction of a new procurement category and creation of a niche for MSMEs in the category of ‘Make’ projects — even if the impact of the first of these two is somewhat uncertain.

‘Buy (Indian Designed, Developed and Manufactured)’, or ‘Buy (IDDM)’

All capital procurements were hitherto being made under one of the five categories prescribed in the DPP: ‘Buy (Indian)’, ‘Buy and Make (Indian)’, ‘Make’, ‘Buy and Make’, and ‘Buy (Global)’. These categories were arranged hierarchically in a descending order of priority in DPP 2013 with ‘Buy (Indian)’ being the most preferred category.

This did not, however, prevent India from emerging as the largest importer of defence equipment in the years following the promulgation of DPP 2013.

As if in desperation, Ministry of Defence (MoD) decided to revamp the hierarchy of procurement categories in January 2016, resulting in superimposition of a new category – ‘Buy (IDDM)’ – to replace

38

‘Buy (Indian)’ as the most preferred category in the hierarchy. Interestingly, the Committee of Experts set-up by MoD last year, which gave its recommendations after extensive consultations with the industry and other stakeholders, had found no reason to tinker with the earlier hierarchy of procurement categories. Be that as it may, the new category has ostensibly been introduced with the objective of promoting indigenous design, development and manufacture of defence equipment. This, incidentally, is also the broad objective of the ‘Make’ category, the only difference being that the focus of the ‘Make’ procedure is on design and development of prototypes of futuristic equipment.

The need for creating a new category is puzzling. The objective now sought to be achieved through the ‘Buy (IDDM)’ route could also be achieved under the ‘Buy (Indian)’ category. In fact, it would have been easier for the Indian industry to supply Indian designed, developed and manufactured equipment under ‘Buy (Indian)’ category as the requirement of indigenous content in such equipment was hitherto limited to 30 per cent.

This requirement has now been raised to 40 per cent to match the requirement of indigenous content in the equipment to be procured under the new ‘Buy (IDDM)’.

Thus, equipment that can be procured under both these categories will have to have a minimum indigenous content of 40 per cent. This similarity is superficial.

The condition regarding extent of indigenous content under ‘Buy (IDDM)’ comes

August 2016 www.geopolitics.in

with the rider that the equipment must be designed and developed in India, failing which it will have to have indigenous content of 60 per cent. The requirement of 60 per cent indigenous content under ‘Buy (IDDM)’ if the equipment is not designed and developed in India is incongruous with the blanket requirement of 40 per cent indigenous content under ‘Buy (India)’ irrespective of where the equipment is designed and developed.

Consequently, it will now be possible for MoD to buy equipment designed and developed in India that has a minimum of 40 per cent indigenous content both under the ‘Buy (IDDM)’ and ‘Buy (India)’ categories. But if the equipment is not designed and developed in India it will have to have 60 per cent indigenous content if it is to be bought under ‘Buy (IDDM)’, whereas the same equipment could be bought under ‘Buy (Indian)’ category with 40 per cent indigenous content.

It is difficult to disentangle the overlapping and even conflicting features of these two procurement categories. Sooner or later MoD will need to make it simpler for everyone to understand this riddle, but, going by the past experience, that may not happen any time soon. Meanwhile, the Indian industry, particularly the MSMEs, will need to live with it and gear up to meet the requirement of the armed forces by ensuring that the equipment manufactured by them is not only designed and developed in India but also has an indigenous content of at least 40 per cent. Availability of equipment in India answering that

OPINION description will make it virtually impossible for MoD to resort to procurement of the same item under any other procurement category. This is where the opportunities lie for the Indian industry.

Essential Parameters ‘A’ and ‘B’

What will help the industry further is the procedural change made in DPP 2016, which allows the essential parameters of the equipment to be split into two parts – Essential Parameters ‘A’ and ‘B’. It may be recalled that essential parameters are mentioned in the Request for Proposal (RFP) and the equipment offered by the vendors in response to the RFP has to conform to these parameters.

Essential parameter ‘A’ will comprise features that are normally present in the equipment generally available in the market. Technical evaluation and field trials will be conducted based on these parameters. The contract will be awarded to the vendor whose equipment meets essential parameter ‘A’ and who also happens to be the lowest bidder. It is only after winning the contract that the vendor will be required to suitably modify the equipment to incorporate essential parameter ‘B’, which will comprise the features required to make the equipment suitable for military use. With this change, it will no more be necessary for the manufacturers to be ready with equipment that is already customised for use by the armed forces even before the RFP is issued. This will save the expenditure that all competitors previously had to incur to customise the equipment for no-cost-no-commitment field trials. This implies that the industry, especially the MSMEs, can design, develop, manufacture and market equipment which may not ab initio be customised specifically for the armed forces. In fact, they need not customise it at all till one of them bags the contract.

This should make it commercially viable to design, develop and manufacture items that have a demand in the civil market which can subsequently be customised to meet the requirement of the armed forces. Such items can be sold in the civil market, or even exported, till the demand is raised by the armed forces. What is important is that MoD is adequately sensitised by the industry in response to the Request for Information (RFI) as to what features are generally present in the equipment that is available off the shelf so that essential parameters are properly classified into two groups by MoD while issuing the RFP.

Splitting of ‘Make’ projects

The ‘Make’ procedure introduced by MoD sometime in 2006 also entails design, development and manufacture of prototypes

of futuristic equipment, systems, sub-systems, sub-assemblies, major components or upgrades of the existing equipment.

Sadly, not a single contract has been awarded under this category till date.

Considering the stringent criteria for empanelment of manufacturing entities by the ministry as prospective development agencies, MSMEs anyway stood no chance of making it to the panel in the past. All this is set to change. The DPP 2016 not only lays down more pragmatic criteria for empanelment of the Indian companies but has, in fact, carved out a separate niche for the MSMEs in the context of ‘Make’ projects.

Sub-categories of ‘Make’ projects

The ‘Make’ category has been split into two sub-categories. While ‘Make I’ subcategory will comprise government funded projects, the projects under ‘Make II’ sub-category will have to be self-funded by the industry. The ‘Make I’ projects with 90 per cent cost of development of the prototype being borne by the government, will typically entail harnessing of critical technologies and making large infrastructure investment for setting up development, integration, testing and manufacturing facilities. Such projects could entail a development period of three years or more.

The self-funded ‘Make II’ projects, on the other hand, will typically involve making use of readily available commercial, military or dual use mature technologies, which may involve marginal infrastructure investment for setting up development, integration, testing and manufacturing facilities. Import substitution will be the key focus of projects under this sub-category.

What makes the scheme more attractive now is the provision made in DPP 2016 that the balance 10 per cent of the cost of development of the prototype under ‘Make I’ sub-category and full cost of development under ‘Make II’ category will be reimbursed to the vendor if the RFP for the equipment is not issued within two years of successful development of the prototype.

Involvement of MSMEs

Addressing a long standing grievance of being marginalised in ‘Make’ projects, DPP 2016 has created a special niche for MSMEs. Projects under the ‘Make I’ subcategory, in which the estimated cost of prototype development does not exceed `10 crore, will be earmarked for them but if at least two MSMEs do not evince interest, the project will be opened to all.

Under ‘Make II’ sub-category, projects with estimated cost of prototype development not exceeding `3 crore, will be earmarked for MSMEs but, in this case also, if no MSME expresses interest, the project

www.geopolitics.in

August 2016

may be opened to non-MSMEs. The doors will remain open for MSMEs till the selection of the Development Agencies, for if any MSME evinces interest in the project even at that stage it will get preference over non-MSMEs provided it meets the eligibility criteria. One of the problems being faced by MSMEs concerns access to funds. Since under ‘Make-II’ sub-category, the projects are to be self-funded by the industry, MSMEs may find it somewhat difficult to take up projects on their own. This problem may get addressed with the setting up of Defence Technology Fund and/or Venture Capital Fund, both of which seem to be on MoD’s agenda.

What to make?

All variants of the ‘Buy’ category — ‘Buy (IDDM)’, ‘Buy (Indian)’, or even ‘Buy (Global)’ — entail outright purchase of defence equipment, weapons systems and platforms. Considering the monopsonic nature of the defence market, manufacturers, especially the MSMEs, cannot be ever ready with all the products for which the RFPs are issued by MoD, barring those products for which there is a demand in the civil market also.

To help the industry, including MSMEs, in achieving the objective of creating ‘Buy (IDDM)’ category and splitting the ‘Make’ category into two sub-categories, MoD needs to release information about products required by the armed forces under these categories with as much detail as possible so that the Indian companies could take advance action to be reckoned as prospective suppliers of the desired products as and when the RFP is issued. A beginning has been made by MoD by releasing a list of 23 projects which are likely to be categorised as ‘Make’ projects. It is an improvement on Technology Perspective and Capability Roadmap (TPCR) released by MoD in 2013 with a similar objective. It is difficult to say how far the list now released will help the industry. It will be desirable for MoD to interact with the industry to ascertain if this list serves the purpose, and to improve upon it if it does not.

More importantly, a similar list of products likely to be procured under the ‘Buy (IDDM)’ category, as also the items which are bought through the revenue procurement stream, must be released by MoD urgently. This will go a long way in promoting the Indian industry to move up the value chain and reverse the embarrassing dependence on import of even lowtechnology defence equipment.

The author is a retired Additional Secretary in the Ministry of Defence

39

OPINION

Tata Advanced Systems Chairman S. Ramadorai (third from left) and Tom Bell, Senior VP, Global Sales & Marketing, Boeing Defense, Space & Security (second from right) signing the agreement. Boeing International President, Marc Allen (second from left), Boeing India President Pratyush Kumar (left) and Tata Advanced Systems CEO Sukaran Singh (right) are also seen

The idea behind strategic partnership model is to create a panel of preselected private sector entities and to nominate PAs from this panel in specific acquisition cases, writes AMIT COWSHISH

BOEING

IN SEARCH OF A STRATEGIC

PARTNERSHIP MODEL

E

ver since a Committee of Experts (CoE) set up by the Ministry of Defence (MoD) last year came up with the idea of involving private sector entities as strategic partners in defence procurement, the Ministry of Defence (MoD) has been trying to figure out how to do that.

The CoE wanted the idea of ‘strategic partners’ to become an integral part of the Defence Procurement Procedure (DPP), but that was not to be. The DPP 2016, finally released just last month, does not expatiate on the strategic partnership model.

Apparently the recommendations of a Task Force and five sub-groups set up subsequently to work out the criteria for selection of the strategic partners have not been able to offer a ready-to-implement solution to the ministry.

While there is no point second guessing when and in what form the strategic partnership model will be unveiled, it is fairly clear that the criteria to be adopted for selection of strategic partners is not the only stumbling block. The fundamental question of where will the strategic partners fit into the existing system of procurement itself is a riddle.

CoE’s vision of the role of strategic partners ‘The primary focus of the strategic

40

partners’, noted CoE in its report, ‘would be to support sustainability and incremental improvements in capability of platforms through technology insertions over their lifetime.’ The committee went on to say that their recommendations relating to the strategic partners would be applicable to ‘Buy and Make’ cases.

Even in the ‘defining attributes’ of various procurement categories, included for the first time in DPP 2016, ‘strategic partners’ find a mention in the context of ‘Buy and Make’ cases. But the way the public discourse is shaping, it appears that the ‘strategic partners’ may also be involved in procurement programmes under other categories.

Sticking for the moment to what the CoE had recommended, ‘strategic partners’ from the private sector will play a leading role in procurement programmes under the ‘Buy and Make’ category. This category refers to initial procurement of a specified quantity of equipment from a foreign vendor in a fully-formed state, followed by indigenous production of the remaining quantity of the same equipment in India by an Indian Production Agency (PA). Both the ‘buy’ and the ‘make’ components are covered by a single contract.

As per the existing procedure, the IPA is nominated by MoD. Although such

August 2016 www.geopolitics.in

an agency can be from the public or the private sector, it is only the public sector entities that have generally been getting nominated in the past. This is probably because of the problems associated with identifying a private sector entity that could be nominated as PA in a particular procurement programme.

The idea behind the strategic partnership model is to create a panel of preselected private sector entities and to nominate PAs from this panel in specific acquisition cases. The strategic partner identified for a particular segment will be the ‘automatic choice’ for being nominated as the PA if and when a procurement programme is undertaken in that segment. The nominated partner will then participate in negotiations with the foreign vendor from whom the equipment is to be bought (and later licence-produced in India), along with the ministry officials.

The same partner will also be responsible for lifetime sustenance and upgradation of the equipment.

The CoE had visualised the role for strategic partners in six specific segments: aircraft, warships and submarines, armoured fighting vehicles, complex weapon systems, C4ISTR systems, and critical material. (These Task Force and sub-groups constituted by MoD subsequently have tweaked these segments.)

The committee had also recommended that having been nominated as the strategic partner for any one platform, or a family of complex weapons, or a major network programme, that entity or its associates or subsidiaries should not be eligible to be chosen as a strategic part-

OPINION

ner for any other purpose under this dispensation.

Expatiating CoE’s vision

There are far too many loose ends that will need to be tied up to make the model work. To begin with, it must be understood that the adoption of the model is not so much dependent on its acceptance by the private industry as on the resistance from those who may rightly or wrongly perceive it as inimical to their interest. The strategic partnership model recommended by CoE has an uncanny similarity with the concept of Raksha Udyog Ratna (RUR), which was recommended by the Kelkar Committee more than a decade back. That recommendation came very close to being implemented till it got shelved at the eleventh hour.

Some believe that the RUR scheme was shelved because of the pressure from employees of the defence public sector undertakings, who feared being crowded out of the defence sector by the private sector. Whether or not it is true, MoD needs to make sure that history does not repeat itself.

This is important as the ‘strategic partnership model’ does aim at creating ‘additional’ capacity in the private sector over and above the existing capacity in the public sector. This overlap could have implications for the defence public sector and possibly even the ordnance factories.

But this is not the only concern. The committee of experts had observed in its report that the procedure for selection of strategic partners is the most crucial element in operationalising the idea as the entire scheme rests on it.

As observed earlier, the Task Force and the sub-groups have not been able to offer a ready-to-serve solution to the ministry. It is not going to be easy to adopt a set of criteria for selection of ‘strategic partners’. The stakes being extremely high for the private sector, whatever criteria are finally adopted are bound to be challenged by those who miss the bus.

There is yet another concern. As the strategic partners are also expected to take on lifetime sustenance and upgradation of the equipment after absorption of technology under the original ‘Buy and Make’ contract, this could possibly lead to creation of monopolies.

Mindful of the possibility of the strategic partners taking MoD ‘for a ride’, the committee of experts had recommended creation of strong databases and a mechanism for rigorous audit, including cost audit, entailing access to books of account of the strategic partners.

Airbus awarding Aequs A320neo Titanium parts contract

This is easier said than done. Costing is presently one of the weakest links in financial management in defence.

There has been little focus on creating robust databases and developing expertise in defence costing, especially in the context of cost-plus contracts, in any sustained manner. Audit is an equally neglected area. Considering that MoD has shown scant regard for the existing internal audit mechanism, it will be a tall order to create a new mechanism or revamp the existing one for handling cost and other forms of audit. The ‘long-term covenants’ required for managing relationship with the ‘strategic partners’ over the entire lifetime of the platform, lasting several decades, will also require specialised administrative, financial, commercial and legal expertise, which MoD presently does not possess.

Since expertise in handling matters related to costing, audit, and commercial/ legal aspects is a sine qua non for adoption of the strategic partnership model it would be a mistake to adopt the model even before building up this capacity.

Why does MoD want to micro-manage?

At this stage all this looks rather complicated. Managing a long-term relationship with a ‘strategic partner’ will entail micro-management by MoD, which could prove to be the bane of the scheme.

If the main purpose of the ‘strategic partnership model’ is to identify Indian private sector companies which could be nominated as IPAs, and also undertake the additional responsibility for provid-

www.geopolitics.in

August 2016

AIRBUS

ing lifetime sustenance of the equipment as well as its upgradation, there may be a comparatively easier way out. The choice of choosing a ‘strategic partner’ from among the Indian entities could be left to the foreign vendors. This will not be unprecedented. A similar approach was adopted in the Avro-replacement programme of the Indian Air Force in 2012.

It is unfortunate that the contract is yet to be signed with the only manufacturer who had come forward to supply 16 transport aircraft in a fly-away condition and make the remaining 40 in India in collaboration with an Indian entity. But the principle of leaving it to the foreign vendors to select the Indian PA has now been formalised.

An enabling provision has been made in DPP 2016 to permit foreign vendors to select IPAs in ‘Buy and Make’ cases.

This model could be suitably modified to enlarge the scope of responsibilities to be undertaken by the Indian companies chosen by the foreign vendors in regard to lifetime sustenance and upgradation of the equipment, apart from licensedproduction of the equipment under the ‘make’ portion of the initial contract.

If nothing else, this will save MoD the trouble of having to select strategic partners and assign various strategic projects to them – a function which could prove to be more bothersome than it appears in the present state of excitement about the potential of strategic partnerships.

The author is a retired Additional Secretary in the Ministry of Defence

41

PERSPECTIVE

‘MAKE IN INDIA’ IN DEFENCE FROM RHETORIC TO REALITY

T

he unfortunate disappearance of India’s AN-32 with 29 people onboard has again put the spotlight on the state of affairs in our defence preparedness.

While most leading armed forces of the world suffer accidents, the regularity of these occurrences in India means that we can't just sweep it under the carpet.

Since March 2015, three Jaguars have crashed in Kurukshetra, Nagaon and Allahabad, two Dorniers in Goa and Tamil Nadu, a Hawk trainer in Odisha, a MiG21 in Badgam, a MiG-27 in Jodhpur, a BSF helicopter in Delhi and a microlight aircraft in Meghalaya. The navy suffered the sinking of the submarine INS Sindhurakshak in Aug 2013. There have been accidents thereafter involving INS Konkan, Betwa, Sindhuratna, Kolkata, Ganga, Viraat, Nireekshak and Vikramaditya, etc.

The causes behind these accidents are varied – obsolescence, non-availability of spare parts, faulty maintenance and human error. It is ironic that a country with stellar performance in the hi-tech fields like space, nuclear and information technology has allowed itself to be completely dependent on foreign technology in defence – something that affects our very survival as a nation.

The government has rightly picked on defence as a thrust area for its 'Make in India' programme. Two years later, very little has actually happened on this front.

What needs to be done? Here are ten action steps – some simple, some tough.

 Change the mindset – future wars will be won by technology

Future wars will be fought on computer screens remotely with satellite feed and smart weapons. This will require lesser, younger and nimbler boots on the ground – both military and civilian.

Ministry of Defence (MoD) should aggressively look at cutting the flab in the military and diverting limited financial resources to next-gen technologies. This will require external experts, not military’s internal task forces.

China reduced its standing army by a whopping 1.7 million troops over the last

42

Rolls-Royce & HAL JV company IAMPL’s Thermal Spray System ROLLS-ROYCE

AMBER DUBEY & CAPT VINOD NARASIMHAMURTHY say that Indian defence sector needs radical reforms and should facilitate greater investments from global OEMs, through reforms in FDI limits and a faster procurement procedure and acquisition processes three decades and plans to reduce it by another half a million. The money saved has been put into technology – and its showing results.

 Establish a Commission

Defence

Technology

A lot of time and energy of our highly committed and hardworking Raksha Mantri (RM) is taken up by day-to-day fire fighting, public events, political meetings, non-defence related activities and travel. Future technologies are a completely different ballgame and require undivided attention of a duel empowered leader.

August 2016 www.geopolitics.in

India needs to establish a Defence Technology Commission (DTC), headed by a technical expert and reporting directly to the Prime Minister. Successful similar experiments in atomic energy and space have done wonders for India.

 Engage more with the private sector

DRDO and DPSUs have to shed their age-old distrust, insecurity and animosity towards the private sector, in their and India’s interest. The defence minister has been trying hard – but this mindset change may take another 10-15 years.

Most leading private players have ex-defence personnel in leadership

PERSPECTIVE

positions.

MoD, DRDO and DPSUs should choose private partners carefully and make life hell for the ones who break the trust. There’s no point tarring the entire private sector with a wide brush using corruption cases of the past.

DARPA, the US equivalent of DRDO, has just around 150 technical personnel and no labs. It depends entirely on US industry, universities, government labs and individuals for cutting-edge research for the US forces. That’s the model we have to gradually shift to.

 Pick and choose technology areas

The Defence Technology Commission should identify 6-8 technologies, critical to India. These could include advanced materials, stealth, avionics, sensors, cyber-security, precision guided missiles, etc. and pour passion and resources into the same. No country in the world has been able to master it all. Doing R&D on every small system dissipates energy, time and scarce national resources.

 Shorten procurement cycles

Today, a procurement lead time of 7-8 years in India is considered normal. The cost and modernity of the technology diminishes by the time it is finally ordered.

Cancellation of a tender after a long drawn and costly selection process – for example, the case with Dassault’s Rafale fighters shows India in a very poor light.

Procurement cycles have to be brought down to under three years. This can be done only by way of a Procurement Maturity Assessment (PMA) of India’s procurement procedure. This has to be done by external experts involving some from friendly countries. Doing it in-house will be superficial and lead to minor incremental changes. MoD can always reject any or all the recommendations of PMA experts. But its time MoD should consider using professional consulting firms for defence procurement, rather than leaving it solely to, with all due respect, bureaucrats and military officers. Consulting firms bring in deep knowledge of supply chain, finance and legal issues; have several ex-defence officers and will work under the overall supervision and monitoring of the MoD. This is how most of the leading countries in the world procure defence equipment.

This will lead to faster deals, tighter contracts and lower cost.

 Negotiate offsets at the platform level

India has messed up its offset opportunity. It negotiated offsets specific to a programme and not on country-basis.

The OEM suppliers, in turn, passed on non-critical assembly technology to Indian companies to discharge their offsets.

No defence industry can be set up with piecemeal component manufacturing.

MoD needs to go for a Strategic Offset Management Programme (SOMP). It should consolidate its current and likely future requirements from supplier countries on a G2G basis and demand establishment of complete platform level development in India along with its entire ecosystem of ancillary suppliers, maintenance and R&D. It should be developed in collaboration with the OEM and over a 10-15 year period. The OEM, in turn, may be offered long-term, assured off take and freedom to export to friendly countries.

 Ease FDI norms further

The authors have been, unfortunately, proved right in their assessment in June 2014 that increasing FDI limit from 26 per cent to 49 per cent would bring no meaningful investment. Defence technology is so complex that the biggest military power – USA – has permitted 100 per cent subsidiaries of non-US companies like Airbus, BAE, Rolls Royce, Saab, etc, albeit with several checks and balances.

The government’s move to ease FDI in defence is praiseworthy. The subjective clause on ‘state of the art’ technology has been dropped and replaced with ‘modern technology’ or ‘other reasons to be noted’. The government should drop these open-ended terms too. Every FDI proposal over 49 per cent foreign stake, and for that matter even below that, will be subject to government scrutiny before and after being set up. So why have these terms?

FDI always helps. It helps create an ecosystem that allows Indian professionals to learn and innovate. Twenty years from now, some Indian defence companies may rise to become competitors to global OEMs.

 Fast track the joint development programmes

India should push hard for co-development programmes with the USA, Russia, the UK, France, Israel, etc. for strategic technologies and platforms. Proposed joint programmes which are critical to India are still stuck at the drawing board due to various issues. Global programmes such as the Joint Strike Fighter, Eurofighter Typhoon, etc. and commercial platforms like Boeing 787s and Airbus 380s are built by several companies collaborating across the world. The BrahMos programme with Russia has benefit-

www.geopolitics.in

August 2016

ted India tremendously.

 Enhance the demand pull from commercial aviation

The aerospace industry thrives on strong local demand. Defence and commercial aerospace have a symbiotic relationship. Civil aerospace manufacturing offers low hanging opportunities to Indian players. The Indian civil aviation market is one of the fastest growing in the world. Huge aircraft orders are being placed by Indian carriers but with very little 'Make in India' or ‘Repair in India’.

This is ridiculous.

India should leverage its purchasing power to encourage global OEMs & Tier1s to set up their commercial aerospace manufacturing facilities in India, a la China. Attracting five to six such anchor units in near term would enable development of a robust component manufacturing ecosystem in the country.

 Facilitate 4-5 aerospace clusters with plug & play infra

Defence production needs world class infrastructure – uninterrupted power, water, land, logistics network, etc. India requires 4-5 such aerospace clusters.

Central and state governments need to work with anchor OEMs to identify the right locations and facilitate its development through PPP, fast clearances and fiscal incentives.

Defence R&D and manufacturing should be given ‘infrastructure’ status.

This shall facilitate access to cheaper loans and incentives, a la sectors like, IT, automotive, ports, roads, etc. Given the huge import dependence, government should also consider a ‘deemed export’ status for defence industry for a ten-year period, extendable in future.

Time for bold reforms

Indian defence sector needs radical reforms. We should facilitate greater investments from global OEMs, through reforms in FDI limits and a faster procurement procedure. We should collaborate with them, innovate and then better them in certain critical technologies, over the next 20 years. A close collaboration with the Indian private sector is key, a la India’s space and nuclear programme.

We’ll get there!

Amber Dubey, Partner and India Head of Aerospace and Defence at global consultancy KPMG. Assisted by Capt Vinod Narasimhamurthy, Associate Director, Aerospace and Defence at KPMG in India.

Views are personal

43

OPINION

DEFENCE PROCUREMENT: SLOW MARCH TO INDIGENISATION Plans for military modernisation must simultaneously lead to a transformative upgradation in the defence technology base and manufacturing prowess, or else, defence procurement will remain mired in disadvantageous buyer-seller, patron-client relationships like that with Russians, argues GURMEET KANWAL Need for Transformative Reform

In recent years, successive Defence Ministers have been repeatedly exhorting the armed forces to procure their weapons and equipment from indigenous sources. The NDA government has been pushing ‘Make in India’ as a cardinal principle of its economic policy to enhance manufacturing in the private sector. It was realised by the Modi government that it is necessary to undertake major reforms of defence procurement policy to promote indigenisation.

It is a well-established fact that no nation aspiring for a great power status can expect to achieve it without being substantively self-reliant in defence

production. However, the armed forces are not the stumbling block to indigenisation. The government has begun to change its defence procurement policies but implementation is slow. For at least another decade the import content of defence acquisitions will continue to remain between 70 to 80 per cent.

Military modernisation has two major facets — the replacement of obsolete and obsolescent weapons and equipment with modern ones, which results in increasing combat effectiveness; and, the qualitative upgradation of combat capabilities through the acquisition and induction of force multipliers. As the defence budget is invariably

L&T's K9 VAJRA-T 155mm/ 52 Cal. Tracked Self-Propelled Howitzer

L&T

44

August 2016 www.geopolitics.in

much smaller than the requirement, military planners face a major dilemma — how to improve operational preparedness while simultaneously making concerted efforts to modernise.

Logically, operational preparedness must take precedence over modernisation. The art of leadership lies in finding an optimum balance so that all efforts that are made to enhance operational preparedness also contribute substantively to modernisation.

Plans for military modernisation must simultaneously lead to a transformative upgradation in the defence technology base and manufacturing prowess, or else, defence procurement

OPINION

will remain mired in disadvantageous buyer-seller, patron-client relationships like that with the erstwhile Soviet Union and now Russia. While India has been manufacturing Russian fighter aircraft, tanks and other equipment under licence for long, the Russians never actually transferred technology to India. New weapon acquisitions must take place with a transfer of technology (ToT) clause being built into the contract, even if it means having to pay a higher price.

Although the country has now diversified its acquisition sources beyond Russia to the West and Israel, recent deals have failed to include transferof-technology (ToT) clauses. The much delayed MMRCA deal with Rafale also appears to have run into rough weather on this account, besides the attempt to bring down the price. If this trend continues, India’s defence technology base will continue to remain low and the country will remain dependent almost solely on imports for major defence acquisitions. Whatever India procures now must be procured with a ToT clause being built into the contract even if it means having to pay a higher price. The aim should be to make India a design, development, manufacturing and export hub for defence equipment in two to three decades.

Strategy for Defence Research and Development

Though it seeks to encourage public-private partnerships, privately the government continues to retain its monopoly

The DRDO must concentrate its efforts on developing critical cutting edge technologies that no strategic partner is likely to be willing to share. It will remain the responsibility of the DRDO to conduct original R&D into strategic technologies

on research and development and defence production through the DRDO, the ordnance factories and the defence PSUs (DPSUs). Since its inception in 1958, the DRDO has achieved some spectacular successes like the missile development programme (Prithvi, Agni, BrahMos), but also has many failures to its name.

Programmes like the Light Combat Aircraft (LCA) and the Main Battle Tank (MBT) Arjun have suffered inordinate delays and time and cost overruns.

However, to its credit, the DRDO worked under extremely restrictive technology denial regimes and with a rather low indigenous technology base. The DRDO is now in the process of implementing the report of the P Rama Rao committee that had asked it to identify eight to 10 critical areas that best fit its existing human

resource pool, technological threshold and established capacity to take up new projects. And, it must scrupulously stay out of production. The private sector has shown its readiness and technological proficiency to take up the production of weapons and equipment designed and developed by the DRDO and must be trusted to deliver.

The DRDO must concentrate its efforts on developing critical cutting edge technologies that no strategic partner is likely to be willing to share, such as nuclear warhead and ballistic missile technologies, know-how on building nuclear-powered submarines and ballistic missile defence (BMD) technology. It will remain the responsibility of the DRDO to conduct original R&D into strategic technologies. For the development of hi-tech weapons platforms like fighter-bomber aircraft and sophisticated defence equipment like over-the-horizon (OTH) radars, there should be no need to reinvent the wheel. These should be developed jointly in conjunction with India’s strategic partners by forming Joint Ventures (JVs) with defence MNCs that are willing to transfer modern technology.

The development of technologies that are not critical should be outsourced completely to the private sector. Also the armed forces should be given funding support to undertake research geared towards the improvement of in-service equipment with a view to enhancing operational performance and increasing service life. Gradually, the universities and the IITs should be involved in undertaking defence R&D. This approach

Despite a June deadline set to close negotiations on the purchase of 36 Rafale aircraft, the deal continues to get delayed

MOD

www.geopolitics.in

August 2016

45

OPINION

will help to raise India’s technological threshold over the next two decades by an order of magnitude.

Defence Acquisition Reviewed by MoD

Procedures

The Defence Procurement Procedure (DPP) manual was introduced in 2005.

Since then it has been revised and modified several times based on the experience gained during its implementation. On May 1, 2015, the Defence Minister, Manohar Parrikar, appointed a 10-member committee headed by former Home Secretary Dhirendra Singh, to review the defence procurement policies and procedures and to recommend fresh guidelines with a view to implementing Prime Minister Narendra Modi’s appeal to ‘Make in India’.

The review was utilised to learn from the experience gained in the implementation of the DPP that was then current and many pragmatic recommendations were made by the committee.

The DPP was amended in March 2016 to ref lect the new thinking on making and buying Indian. DPP 2016 envisages the production of defence equipment under four categories: ‘Buy (Indian Designed Developed and Manufactured – IDDM)’, ‘Buy and Make (Indian)’, ‘Buy and Make’ and ‘Make’. Except the ‘Make’ category, all others are open to Indian companies as well as JVs with FDI more than 49 per cent. Another innovation is the introduction of the ‘strategic partner’ model for specific projects for licensed production, upgradation, extension of life of the equipment or for life-time sustenance. Selected Indian companies will be nominated as strategic partners for projects involving ToT from defence MNCs. The criteria for the selection of strategic partners are yet to be finalised.

The Defence Production Policy (DPrP) was unveiled in 2011. Its objectives are to achieve substantive selfreliance in the design, development and production of equipment, weapons systems and platforms required for defence in as early a time frame as possible; create conditions conducive for the private industry to play an active role in this endeavour; enhance the potential of small and medium enterprises (SMEs) in indigenisation; and, broaden the defence research and development base of the country. Though many changes have been incorporated in the DPP and DPrP manuals, these are mainly incremental and not far reach-

46

ing. The procurement process still favours the defence PSUs (DPSUs) over the private sector.

Many issues remain to be resolved. The DPP document is still too long and needs to be cut down to not more than 12 to 15 pages with perhaps a few appendices.

Approval of necessity (AoN) has been accorded to defence acquisition projects worth approximately `100,000 crore, mostly for ‘Make in India’ projects. Notwithstanding the AoN, the emphasis on self-reliance will remain wishful thinking and most weapons systems and equipment will continue to be imported as the government continues to retain its monopoly LCA Tejas on research and development and defence MOD production through the DRDO, the ordnance factories and the DPSUs. Most of the ordnance factories and some of the DPSUs should be privatised on a priority basis. The private sector has shown its readiness and technological proficiency to take up the production of weapons and equipment designed and developed by the DRDO and must be trusted to deliver.

Changes in FDI Norms and Offsets Policy

FDI in the defence sector was permitted to the extent of 26 per cent in 2001.

In July 2014, the government permitted FDI in the defence sector up to 49 per cent without prior approval — known as the automatic route — and beyond 49 per cent after prior approval, provided the MNC brought in or agreed to transfer ‘state-of-the-art’ defence technology. The flow of FDI remained insignificant. Much more is needed to be done to attract a greater quantum of FDI. In the third week of June 2016, the government tweaked the norms for FDI further to encourage defence MNCs to invest in the production of weapons systems and defence equipment in India through JVs with Indian companies. The requirement of transferring ‘state-of-the-art’ technology has now been relaxed to permit FDI beyond 49 per cent even if ‘modern’ technology is transferred and for ‘other reasons to

August 2016 www.geopolitics.in

be recorded’. The government has also brought the manufacture of small arms and ammunition under the FDI in defence rules. The government hopes that these policy changes will encourage the manufacture of weapons systems, ammunition and defence equipment in India. The manufacture of ammunition

by MNCs in India is expected to reduce the large-scale deficiencies in critical categories of ammunition that were pointed out by the CAG in 2015.

However, though FDI in defence manufacturing has been increased from 26 to 49 per cent through the automatic route, this is not considered attractive enough by defence MNCs as FDI up to 74 per cent is permitted for many non-defence sectors. Given the time and effort that goes into locating a JV partner, the risks involved in managing a JV successfully and the fact that they are expected to bring in proprietary technology, the MNCs prefer to have a controlling stake. Just like the government had not defined stateof-the-art technology in specific terms, it has not defined modern technology that would be eligible for FDI beyond 49 per cent with prior approval. Broadly speaking, modern technology would be mature third-generation technology bordering on fourth generation — for example, Hellfire air-to-surface mis-

OPINION

siles and OTH radars. While exports of defence equipment have been permitted, the procedures for according the approvals that are necessary and the regulatory framework needs to be streamlined.

The initial attempts at formulating an ‘offsets’ policy did not work to India’s advantage. The defence industry’s ability to absorb 50 or even 30 per cent hi-tech offsets in defence acquisition projects worth more than `300 crore is extremely low. For example, the MMRCA contract, which is likely to be worth $10 billion approximately, will result in an offset obligation of $5 billion. This is much more than the Indian defence industry can possibly absorb over 10-12 years. It may have been more prudent to consider offsets only in cases where the benefits expected to accrue will outweigh the additional costs and Indian JV partners can absorb the technology that is brought in.

The policy on offsets has also been reviewed and several amendments have been made. In November 2015, the government restored 'services' as eligible offsets for defence contracts, opening up a business potential of over $3 billion in immediate projects. The government also added the development of software and engineering design to the list of eligible offsets, but limited it to 20 per cent of the project cost. This will bring some relief to the maintenance, repair and overhaul (MRO) and software industries, as also companies involved in the upgradation of military systems and life extension projects of defence equipment. According to a news report, the government is considering the creation of a Venture Capital Fund (VCF) with a corpus of `30,000 crore for defence production. Defence MNCs may be permitted to invest part of their offset obligations in the VCF. In the past, the selective tweaking of the technical requirements during the procurement process sometimes led to one company being favoured over another. All technical requirements must be frozen when a Request for Proposals (RfP) is issued by the MoD. GSQRs must also be frozen when the procurement process begins. Frequent tinkering with GSQRs by the Services is detrimental to the smooth f low of the acquisition process and the indigenous development of weapons systems. It may sound heretical, but the reports of user trials must be made public. This step will not only amount to a huge leap forward in transparency,

but also insulate the trials teams of the three Services from being unduly inf luenced to stage-manage trials in favour of any of the contending parties.

The government should examine the feasibility of establishing Defence Economic Zones (DEZs) to provide incentives for indigenous defence manufacturers. There is an inescapable need to establish an Institute of Defence Acquisition under the Chiefs of Staff Committee. The US has a Defence Acquisition University where all officers nominated for posts dealing with defence procurement are trained.

The ‘life cycle concept’ of evaluating defence equipment for acquisition was completely alien to the armed forces till very recently.

The reports of user trials must be made public. This step will not only amount to a huge leap forward in transparency, but also insulate the trials teams from being unduly influenced to stage-manage trials in favour of any of the contending parties

Speed and Transparency in Decision Making

The defence procurement decision making process must be speeded up.

The army is still without towed and self-propelled 155 mm howitzers for the plains and the mountains and urgently needs to acquire weapons and equipment for counter-insurgency and counter-terrorism operations. The navy waited for very long for the INS Vikramaditya (Admiral Gorshkov) aircraft carrier, which was refurbished in a Russian shipyard at exorbitant cost. Construction of the indigenous air defence ship is lagging behind schedule.

The plans of the air force to acquire 126 multi-mission, medium-range combat aircraft in order to maintain its edge over the regional air forces are also stuck in the procurement quagmire.

The indigenously designed fighter aircraft LCA Tejas, a replacement for the obsolescent MiG-21, has begun to be

www.geopolitics.in

August 2016

inducted only recently – 15 years late.

All three Services need a large number of light helicopters. The armed forces do not have a truly integrated C4I2SR system suitable for modern network-centric warfare, which will allow them to optimise their individual capabilities.

All of these high-priority acquisitions will require extensive budgetary support. With the defence budget languishing at less than two per cent of India’s GDP it will not be possible for the armed forces to undertake any meaningful modernisation in the foreseeable future. Leave aside genuine military modernisation that will substantially enhance combat capabilities, the funds available on the capital account at present are inadequate to suffice even for the replacement of obsolete weapons systems and equipment that are still in service well beyond their useful life cycles. The central armed police and paramilitary forces (CAPFs) also need to be modernised as they are facing increasingly more potent threats while being equipped with obsolescent weapons.

While the need for confidentiality in defence matters is understandable, defence acquisition decision making must be made far more transparent than it is at present, so that the temptation for supplier companies to bank on corrupt practices can be minimised.

For example, tenders should be opened in front of the representatives of the companies that have bid for the contract. Before a contract is awarded, the file should be reviewed by the Chief Vigilance Commissioner (CVC). If the CVC continues to have reservations about such scrutiny, either his charter should be amended or an eminent persons group should be appointed to vet large purchases. Surely, many such persons with unimpeachable integrity can be found in India.

India is expected to spend approximately $100 billion over the 12th and 13th five-year defence plans on military modernisation. As 70 to 80 per cent of weapons and equipment are still imported, there is an urgent need to further refine the defence acquisition process and insulate it from the scourge of corruption that has afflicted all other national endeavours, including major development projects, while simultaneously encouraging self-reliance and indigenisation.

The writer is a Distinguished Fellow, IDSA and former Director, Centre for Land Warfare Studies (CLAWS), New Delhi

47

PERSPECTIVE

Saab and Tata Power SED joining hands to manufacture Self-Protection Systems for Land-based Platforms for the Indian market and for export HEMANT RAWAT

A HORSE FOR THE LONGER RACE “To buy or make?” That has been the question and a critical topic of discussion in Indian defence sector for quite some time now. This is the right time to intelligently move ahead, write ANKUR GUPTA and ANKIT TYAGI

‘M

ake in India’ is a significant step in the right direction and hence, a progressive one. India has one of the largest armed forces in the world, with a defence budget close to a $35 billion to $40 billion annual run rate.

However, more than 50 per cent of India’s defence requirements are met by imports, highlighting the limited indigenous manufacturing capabilities of one of the faster growing economies of the world.

‘Make in India’ is an initiative with an inherent desire to give direction to the country’s aerospace and defence industry and along the way: (a) increase in-house manufacturing, (b) build technical expertise by aligning with the global defence players, (c) increase self-reliance, (d) reduce bureaucratic control, (e) increase research and development

48

(R&D) focus in the industry, and (f ) also to a certain extent create employment.

The causes and effects from our past industrial and economic reforms led us to move directly into service sector without fully maturing ourselves in the manufacturing phase in our growth chart. Of late, IT Enabled Services (ITES) has developed and largely contributed to India’s growth story. This has worked wonders for India’s skilled labour – but it is the unskilled and semi-skilled labour, class that still lags behind. What ‘Make in India’ has set out to do includes partnerships with established international industry players wherein they set up manufacturing facilities in India, and at the same time ‘groom’ the domestic companies with technology transfers.

It is a win-win situation for both — the

August 2016 www.geopolitics.in

international companies get a huge market to reach out to and also benefit from a lower cost of operations, while India benefits as gradually unskilled labour becomes skilled and technologically competent. In order to develop, every nation has to embolden the three economic pillars/functions of production: Land, Labour and Capital. In India, currently, land reforms are at a nascent stage and require substantial work; labour laws are improving and require further reforms; and capital needs to be further pumped in from all avenues. Amidst this, ‘Make in India’ has been launched at the right time and will drive these three factors in the right direction so that we become a manufacturing hub to not only meet our own demands but also supply outside.

A country’s GDP is calculated as GDP=C+I+G+(X-M), where, among oth-

PERSPECTIVE

ers, (X-M) means net exports which is (exports minus imports). Clearly 'M' is a loss to output and going forward our endeavour should be to bring down this number to as close to zero as possible.

This is one of the reasons for the call to ‘Make in India’.

While formulating the ‘Make in India’ policy for defence, possible points that can be considered include: (a) Extent of engagement with international defence companies on strategic issues concerning national security. (b) Ownership ratios to be taken for Joint Ventures and/or alliances. (c) Which segments of defence should be opened up for 'Make in India'. (d) Which companies to involve in the 'Make in India' programme – preference to ones with an excellent track record and possibly no history of involvement in kickbacks and/or bribes. (e) Potential impact and/or benefits for domestic players. (f ) Giving incentives to domestic players in the form of subsidies and/ or tax benefits to engage in this industry. (g) Terms and conditions for the offset clauses.

Now, a look at the efforts of the three armed forces – Army, Navy and Air Force: Army is currently involved with indigenous manufacturing in the form of tanks and some forms of heavy infantry vehicles (in partnership with private players). In the Navy, there are programmes running for manufacturing submarines in Indian shipyards and also manufacturing of warships and aircraft carriers. In the Air Force, within the fighter aircraft segment, India currently has close to 33 squadrons, against the required number of 42 squadrons. That is a dearth of approximately 180 aircraft, and when the MiGs and Jaguars start to retire sometime next year onwards, new fighter aircraft induction would become imminent. 'Make in India' is a step to fill that gap as soon as possible.

Traditionally, DPSUs have shouldered the defence manufacturing responsibility of the nation. Defence Research and Development Organisation (DRDO) and Hindustan Aeronautics Limited (HAL), the public entities responsible for providing latest arsenal to the Army and the Air Force, respectively, are at times unable to match each other’s expectations.

Manufacturing of sub-standard products and the dynamics of carrying out a project with shared responsibilities, coupled with increased focus only on bigticket projects spread out over decades, have limited India's growth potential in

the defence sector. Given the resourcefulness that India possesses, 'Make in India' has been developed to make the best of what we already have so that we combine economies of scale with high-end technology. The focus should also be on low-cost, high-volume and high-quality products.

With ‘Make in India’, global aerospace and defence companies are now willing to invest in India and set up manufacturing facilities. Boeing, Airbus and Lockheed Martin are now partnering with the Mahindra, the L&T and the Tata groups to set up facilities in India. The government is also lubricating its 'Make in India' policy to make it more investor-friendly, while also maintaining the desired sovereignty. The government has taken some very ambitious steps to rope in private players, a few of which include:

Sub-standard products manufacturing and dynamics of carrying out a project with shared responsibilities coupled with increased focus only on big ticket projects spread out over decades, has limited India's growth potential in the defence sector

(a) Designating the private players as ‘strategic partners’. This has gotten private players more involved in the policy, resulting in faster implementation. (b) Easing export regulations and doing away with requirement of multiple assurances for the end use of components sold by Indian companies. This has made the export policy hasslefree, resulting in faster processing. (c) Demystifying the defence offset clause and in the process increasing the threshold for the same. The offset clause, mandating at least a 30 per cent procurement of defence equipment from domestic manufacturers for deals priced above `2,000 crore would benefit the domestic players as they gain expertise and at the same time improve their bottom line. Having increased the minimum threshold for offset clause, the government has also made it a bit simpler for the international players and also for the local

www.geopolitics.in

August 2016

players as the latter get the cushion to expand their defence related infrastructure in order to take full benefit of the offsets. (d) Assuring minimal government control – in line with the central governments policy of ‘minimum government, maximum governance’. Indian companies have accepted that the atmosphere is more focused and will result in a pro-development environment. (e) Relaxing the licensing process for setting up manufacturing facilities. (f) Provision of 'mobilisation advance' of up to 20 per cent to private players to start R&D work. (g) Protection from forex fluctuations by providing slight flexibility in terms of fixing exchange rates.

'Make in India', as a long-term objective, is a very novel idea and will definitely benefit every stakeholder. A national level policy should be like a Chinese Bamboo Tree – in the initial years growth is not visible but work goes on at the foundation level. Suddenly one fine day, the tree grows tall. That is not because the tree grew that much in one day by itself – it is because of the efforts of all the years gone by.

As things have unfolded over the last year or so, it has dawned on the establishment that constant changes are required in the policy to make it more competitive and beneficial for India. India now has a clearer vision – improvements can always be done and will always be done. India has the right intent and if the strengths are capitalised on, Make in India can do wonders for the country, especially in strategically important areas like defence where billions of exchequers’ money goes on imports.

The ‘Make in India’ initiative for the defence sector could do with: (a) A much larger emphasis on a few other low-cost – high-volume areas like small arms manufacturing, battle gear and increased support from existing ordnance factories, (b) Immediate focus on R&D by making investment friendly policies for domestic players, and (c) Improved existing infrastructure in the country by leveraging unused capacity within ordnance factories, shipyards and docks for private sector utilisation.

Time will tell to what extent ‘Make in India’ will benefit, but a step forward has been taken and more importantly in the right direction.

Ankur Gupta - VP, Aerospace & Defence and Ankit Tyagi at Ernst & Young

49

OPINION

NEW DEFENCE PROCUREMENT PROCEDURE AND CONVOLUTED QUALITATIVE REQUIREMENTS Poorly conceived and imprecisely drafted SQR create confusion, lend themselves to misinterpretations, compromise quality of equipment, prove expensive and cause immense delays, writes MRINAL SUMAN

S

ervices Qualitative Requirements (SQR) form the basis of India’s defence equipment philosophy. They act as the basic building blocks on which the complete edifice of the defence procurement procedure rests – the primary objective being to acquire the equipment that satisfies the laid down qualitative requirements. SQR flow from India’s operational doctrines and plans; prospective enemy’s capabilities, their probable plans and tactics; likely pattern of employment of the equipment in obtaining terrain and climatic conditions; current and anticipated technology levels; and availability of the systems in the world market.

50

SQR are evolved by the concerned Service Headquarters (SHQ) to spell out users’ requirements in terms of functional characteristics in a comprehensive, structured and concrete manner.

In other words, they define minimum performance attributes corresponding to the task or tasks to be performed by the system. They let vendors know as to what is being sought and provide a well set benchmark for subsequent inter-se appraisal of equipment tendered by different vendors for evaluation.

The Defence Procurement Procedure (DPP) mandates that SQR should be broad-based, realistic and must express the users’ requirements in terms of

August 2016 www.geopolitics.in

capability desired with minimum required verifiable functional characteristics. SQR should be prescribed in clear-cut terms and should result in a multi-vendor situation. If a single vendor situation is likely to emerge, then the reasons for the formulation of such SQR have to be recorded.

In addition, SQR have to be of a contemporary technology widely available in the world/indigenous market. DPP considers all SQR to be ‘Essential Parameters’. There are no ‘Desirable Parameters’.

Poorly conceived and imprecisely drafted SQR create confusion, lend themselves to misinterpretations, compromise quality of equipment, prove expensive and cause

OPINION

immense delays. It has been seen that flawed SQR are the cause of a majority of procurement proposals that get aborted.

Therefore, importance of diligent formulation of SQR cannot be over-stressed.

Infirmities of the Current System

There are two major SQR-related infirmities that need highlighting. One, the government is extremely wary of singlevendor situations. In case a solitary vendor appears SQR-compliant after paper evaluation of the technical proposals, the whole case has to be retracted. A fresh Request for Proposals (RFP) is required to be issued with reformulated SQR to facilitate larger participation. It implies that SHQ have to pitch SQR at base levels to ensure that multiple vendors can satisfy them.

In other words, SQR have to correspond to widespread technology – latest/ exclusive technology cannot be demanded. As a result, the services are denied cutting edge technologies that may be available with limited vendors. It must be appreciated that technologies that are widely available at the time of preparing SQR would be close to becoming obsolete by the time the equipment gets inducted into service, with normal time lag varying between 5 to 8 years. Two, if a particular system performs in excess of the laid down SQR, it gets no additional credit. All vendors who satisfy SQR are considered at par and the services cannot indicate any preferences. After the commercial quotes of all technically acceptable vendors are opened, the lowest bidder is determined. Further contract negotiations are carried out with him. As a high-tech system that performs far better than the standards laid down by SQR can never be cheaper than a common-place system.

The services are deprived of a far superior product that may be available for nominal increase in cost. The services thus get saddled with mediocre equipment.

Convoluted Reforms in DPP-2016

Despite the fact that DPP has undergone a number of reviews since 2002, it is the first time that an attempt has been made to revisit the SQR policy. Two major changes have been introduced in DPP-2016.

To start with, instead of having only one category of essential parameters, SQR have been split into ‘Essential ParametersA’ (EP-A) and ‘Essential Parameters-B’ (EPB). EP-A will form the core of SQR and will generally correspond to the contemporary equipment available in the market.

These parameters will be tested and validated at the Field Evaluation Trial (FET) stage itself.

EP-B will be the parameters that may not be available originally in the equipment fielded for FET but can be developed and achieved by the vendors using available technologies. These may also be incorporated in the Statement of Case for provision of partial quantities of the items being procured, to meet different/higher specifications for specific operational requirements. These parameters need to be tested and validated within a specified time frame as stipulated in the contract.

Tests for EP-B should also validate that there is no adverse effect on any of EP-A. However, EP-B will not be evaluated at the FET stage, even if any vendor claims compliance by equipment.

Approval of the Defence Acquisition Council will be necessary to invoke provision to incorporate EP-B in any procurement proposal. In case two or more vendors claim compliance of EP-B at the Request for Information stage itself, there should not be any need to specify EP-B separately. A single set of essential SQR should be evolved, duly incorporating higher parameters. Importantly, EP-B cannot be included in ab-initio single vendor cases. EP-A and EP-B are nonnegotiable requirements to be met by the vendor. In procurement cases involving EP-B, it will be essential for vendors to substantiate their ability to develop the item further to meet EP-B with their existing capabilities at the bid submission stage itself. Such an undertaking will be required while entering into a contract.

In addition to the performance bank guarantee, an additional bank guarantee (valued between 5 and 10 per cent of the contract value of equipment required with EP-B) will be required. The quantum will be determined by the authority granting Acceptance of Necessity (AoN) and must be mentioned upfront in RFP. On meeting EP-B (as per the contract terms), the additional bank guarantee will be released and returned to the vendor.

Failure to meet EP-B within the contracted time frame will lead to forfeiture of all bank guarantees (performance bank guarantee, additional bank guarantee and advance bank guarantees, if any) and attract other penal provisions as may be prescribed by the government.

The second major SQR-related change in DPP-2016 relates to the introduction of the concept of Enhanced Performance Parameters (EPP). As stated earlier, SQR are formulated on the basis of widespread technology to generate maximum competition and the essential parameters are fixed accordingly. With a view to retain an option to choose equipment with

www.geopolitics.in

August 2016

parameters higher than those mentioned in SQR, DPP-2016 allows introduction of EPP, if considered desirable. All cases need not have EPP. EPP entails readiness of the government to pay extra for those parameters that enhance the capability of the equipment vis-à-vis the essential parameters.

EPP and their credit scores need to be approved by AoN issuing authority and explicitly explained in RFP. Vendors must be fully aware of the proposed credit criteria while preparing their bids. Equipment successfully meeting EPP parameters are awarded a credit score of up to 10 per cent while determining the lowest bidder (L1), with each individual attribute not exceeding a credit score of 3 per cent.

Inability to meet EPP does not preclude vendors from being eligible for the bidding/bid evaluation. However, if a vendor claims to have equipment meeting EPP, then he must provide details of the same in his technical bid, which have to be tested for compliance during FET itself. If a vendor’s equipment does not possess EPP, his commercial quote will remain unchanged for the purposes of L1 determination. In case a vendor’s equipment meets EPP, his commercial quote will be multiplied by a credit factor less than 1 and greater than or equal to 0.9, based on the additional technical score assigned for EPP, as detailed in the RFP. For example, if a vendor quotes $100 million for his equipment and earns EPP credit worth 5 per cent, his commercial quote will be assumed to be $95 million for identifying L1. However, for all other purposes, the value of the commercial quote will continue to be $100 million.

An Appraisal

Although both the above discussed changes are well-intentioned, the methodology chosen for their implementation is highly convoluted. It will be well not impossible to implement them. Worse, they are likely to generate controversies, get embroiled in a vortex of allegations of favouritism and corruption, and vitiate the complete environment. As a result, the associated procurement proposals will get mired in inquests and the services will remain deprived of critical equipment. It is indeed a nightmarish scenario.

The underlying concept of having two sets of parameters (EP-A and EP-B) is illconceived and suffers from several drawbacks. Most disconcertingly, it makes the whole procurement process dependent on the potential of vendors rather than their demonstrated competence.

All vendors who promise further

51

S m

OPINION

development will have to be invited to bid as it is not possible for the Ministry of Defence (MoD) to ascertain vendors’ potential to develop further technologies. Their word will have to be accepted. Any vendor denied RFP on the basis of ‘inadequate potential’ will become an aggrieved party and start questioning the rationale.

Past experience shows that all vendors make grossly exaggerated claims. They profess full compliance with SQR in their technical bids but most claims turn out to be false during the field trials. Therefore, it will not be prudent to sign contracts with vendors on the basis of their assertions.

Misplaced quest for equipment with EP-B will restrict the vendor base considerably. As per the new norm, only those vendors would be issued RFP who claim competence to upgrade equipment for EP-B within the specified time period.

It implies that all those vendors who are currently manufacturing equipment with EP-A specifications but not having commercial/technological resources for upgradation will get ruled out. Not a wise move at all; it militates against the underlying spirit of DPP of generating maximum competition. Although failure to meet EP-B within the contracted time frame will lead to the forfeiture of all bank guarantees, it will be of little consolation to the services. Penal provisions cannot compensate for the non-availability of equipment. MoD will have to initiate fresh proposal for the equipment, entailing a delay of 4-5 years. The services will be forced to function with critical deficiencies. Coming to the policy of granting extra credit to higher performing equipment through EPP, the process of determining the criteria will have to be highly objective and transparent. To obviate allegations of favouritism, it will be essential that methodology and justification for assigning credits for various parameters are made known to the environment. The credibility of the system should not come under a cloud. That shall be highly counter-productive.

EPP system will also put extra load on the field trial regime. Arrangements will have to be made for validating both regular and enhanced parameters. For certain trials, additional infrastructure and testing facilities will need to be created. What is more, DPP-2016 is silent about the action proposed to be taken against the vendors whose EPP claims turn out to be hollow. In the absence of strong deterrence, most vendors are likely to claim compliance with EPP standards. Confident in the belief that failure to meet EPP would not render their equipment ineligible for

52

competition, they may see no harm in trying their luck to earn some extra credit.

Another concern relates to the application of ‘life-cycle-cost’ to the commercial bids to arrive at L1. In case the government implements its often repeated resolve to make ‘life-cycle-cost’ to be the basis of choosing L1, the system of EPP will introduce considerable complications. It is not clear whether the discounted cost for comparison purposes will be applicable only to the commercial bids or to ‘life-cycle-cost’. It appears that the government may be forced to dispense with ‘life-cycle-cost’ in the cases entailing EPP.

Procurement of defence equipment on the basis of PMS has enormous advantages as it provides positive linkages between performance and cost

The Way Forward

Initiation of procurement proposals with two sets of essential parameters is fraught with uncertainties. It is perhaps the most ill-advised change. Contracts cannot be signed with vendors based on their claimed potential. Worse, the whole concept is inflexible. For example, if a vendor is able to develop equipment satisfying most parameters of EP-B, except some of lesser importance, will MoD accept such equipment? DPP-2016 does not allow any dilution of SQR. In case MoD takes the extreme step of getting clearance of DAC, it will be rightly accused of playing favourites.

A simpler way out would be to split the total required quantity into two separate procurement proposals for equipment with EP-A and EP-B, respectively.

RFP for EP-A could be issued to a large number of vendors who are currently manufacturing the required equipment.

For the requirement of equipment with EP-B, vendors who claim potential can be given RFP with a much longer period for the submission of bids, say two years. It will give them adequate time to upgrade their equipment.

In addition to eliminating dependence on a single vendor, such a step will provide

August 2016 www.geopolitics.in

MoD with multiple products with EP-B (developed by different vendors) for trial evaluation. On the negative side, in case two different vendors succeed in getting contracts for EP-A and EP-B equipment, there will be an increase in inventory.

Introduction of EPP is a half-hearted reform. In fact, if during RFI interaction, two or more vendors claim to possess equipment meeting enhanced parameters, there should be no necessity of resorting to EPP at all. AoN can be obtained based on SQR with enhanced parameters.

In case the government feels that it should have an option to procure better performing equipment, even if it costs a little more, it should switch over to the Performance Matrix System (PMS).

Whereas SQR lay down minimum essential requirements, PMS defines performance parameters in the form of a range.

The lower end specifies minimum inescapable requirement while the upper end benchmarks maximum useable limit.

Preparation of a practical performance matrix is undoubtedly a highly complex and painstaking task. Translation of all parameters into measurable, gradable and comparable parameters requires thorough knowledge of envisioned exploitation of equipment. As it is difficult to incorporate all SQR into a matrix, a judicious mix of a matrix of quantifiable factors and other hygiene factors offers best option.

Procurement of defence equipment on the basis of PMS has enormous advantages as it provides positive linkages between performance and cost. While fixing parameters at minimum essential levels, India can retain the option to opt for equipment with higher performance parameters, thereby ensuring that the services are not deprived of superior equipment with advanced technologies.

After short listing top performers through fair competition between near-equals, India can buy the most suitable and costeffective system.

Finally, meaningful reforms must streamline procedures/processes and lend themselves to smooth implementation. Unfortunately, every review of DPP has resulted in retrograde reforms – instead of correcting deficiencies and infirmities, they make matters more convoluted. Introduction of enhanced parameters and splitting of SQR cannot be termed as forward movements. Intentions may be praiseworthy but the measures suggested are impractical and fraught with numerous uncertainties.

The author is a retired Major General

DEFBIZ

‘Indigenisation needs long-term commitment’ VERNON NORONHA, Vice President, Defence & Government Business, Tata Motors, on integration of skills and technology to turn India into defence industrial hub What are the factors considered by you while selecting your partners?

MDL’s Submarine Assembly Workshop

ucts globally competitive. Defence Procurement Policy in 2016 has also encouraged the private sector to invest and participate in defence production and thereby pursue large defence contracts in India.

The Defence industry particularly needs partners with long-term commitments to see development of Indigenous products and solutions with multiple generations of evolution and we at Tata MoWhich are the pending defence tors partner with Defence OEMs with similar outlook. projects your company is purVernon Noronha In short partners have suing?

I. We are also pursing folbeen selected based on their lowing programmes where RFPs have willingness to transfer technology. been issued: The company recently signed a strategic agreement with Bharat Forge i. SMERCH: Limited and General Dynamics Land Indian Army has issued an RFP Systems (GDLS) of the US, for the Indifor SMERCH Ammunition Carrier an Ministry of Defence’s (MoD) prestiin which TML has offered 8x8 & gious Future Infantry Combat Vehicle 10x10 platforms. Currently, User (FICV) programme. Tata Motors is trials are in progress which will leading the consortium, with Bharat be followed by Technical/VRDE Forge Limited as a partner, while trials. Bagging this capital proGeneral Dynamics Land Systems will curement contract is important bring in its much proven expertise in for TML for expanding the reach combat vehicle platforms. The Tata of its MAV platforms and for deepMotors-led consortium’s response to er lifecycle volumes the Indian Ministry of Defence EoI ii. LAMV and LSV: (Expression of Interest) commits to TML responded to the RFP for indigenisation, through various Tata LAMV (Light Armoured Multigroup companies. Some of the group role vehicles) and LSV (Light Specompanies involved in the Tata Mocialist Vehicles) with VFJ as the tors led FICV programme are Tata Adprime bidder for LAMV. The trials vanced Systems, Tata Advanced Matefor these vehicles will begin this rials, Tata Consultancy Services, TAL Financial Year. Contract value is Manufacturing Solutions, Tata Techexpected to be around `2000crs. nologies Limited. iii. GS 800 class vehicles What role can your company play in The results of this order are expected in the next couple of India’s quest for becoming a defence weeks. The Tata Safari Storme if industry hub?

Tata Motors Ltd., will be a SOSI (Sysselected will replace the GS 500 tems of System Integrator). It is our (Maruti Gypsy) class of vehicles integration skills that will deliver platin the Army. forms whilst our partners will bring in technology and Tata Group of CompaII. In the Combat segment Tata Monies as mentioned earlier will pursue tors is a strong bidder for the FICV the indigenisation thus creating the programme and is also looking to Defence Industrial hub. take part in a lot of programs where India’s existing wealth of talent, request for proposals (RFPs) are betechnology and cost advantages toing issued such as BMP 2 upgrade, gether can help make defence prodWHAP 8x8 and T-72 upgrde.

www.geopolitics.in

August 2016

Raksha Mantri, Manohar Parrikar inaugurating the newly constructed Submarine Assembly Workshop at Mazagon Dock Shipbuilders Limited (MDL), Mumbai on May 28, 2016

W

ith the commissioning of the state of the art Submarine Assembly Workshop, Mazagon Dock Shipbuilders Limited (MDL) has acquired unique capability of second construction/assembly line for Submarines. Built at a cost of approximately `153 crore, it would be possible to assemble/outfit five submarines in the workshop concurrently. The new workshop is one of its kinds in the country incorporating green building features such as rain water harvesting, sewage treatment plant, grey water treatment plant, oily water separator plant for treatment of sewage, grey water and oily water respectively with zero discharge into the municipal drains. The workshop of size 220M x 45M x 39M is a pre-engineered building structure with a total of 07 Nos EOT/Semi-Goliath cranes at different levels to handle construction of multiple submarines. The facility also has an Office Complex adjoining the workshop with a unique architectural design. The Submarine Assembly Workshop in addition to the various infrastructure facilities created under the Mazdock Modernisation Project will gear up MDL in meeting the long term needs of submarine construction for the Navy.

53

DEFBIZ

THE DECADE-LONG SAGA OF THE IAF REFUELLERS With the scrapping of the A330 MRTT deal, India has lost a golden opportunity to acquire what is arguably the world’s best refueller at a competitive price. K SRINIVASAN Reports

O

n July 26, Rahul Bedi of Jane’s put out a story on an issue that most hoped would not occur under the Narendra Modi regime. “Airbus Defence and Space has said, India’s Ministry of Defence (MoD) terminated in late June the six-year-old $2 billion tender for six multi-role tanker transport (MRTT) aircraft for the Indian Air Force (IAF), for which the company’s A330 MRTT had been shortlisted,” said the news item and added: “We have been notified by the MoD of the withdrawal of the request for proposals (RfP), but we do not see this as the end of the road for the A330 MRTT campaign in India,” an Airbus official told IHS Jane’s and added that the aerospace company “will engage with the Indian government in finding a way to bring the A330 MRTT’s capabilities to the IAF”.

Obviously, Airbus not forgetting the vast Indian market and several other projects they are involved in, were muted in their reaction and deferential to the powers that be. Nonetheless, privately, not just them but virtually every OEM has been wondering: “What the heck is happening?” This isn’t the transformative

54

and fast track approach to business they had been promised, there isn’t any of the transparency they were assured they could look forward to. If anything it was a ringing reaffirmation of the age-old adage: The more you try to change, the more you look the same! For a regime that said that speed would be its raison d’être, the whole thing looks so laughable.

Contrast this with what the country’s Defence Minister Manohar Parrikar told Parliament (Lok Sabha) at the fag-end of the Budget session in May 2015: “The procurement case of Flight Refueler Aircraft (FRA),” he said with reference to the state-of-the-art twin-engine wide body (A 330 MRTT) from Airbus Military “is at the Contract Negotiation Committee (CNC) stage”. Just 12 months later, the deal stands scrapped. No one knows why and no one is bothering to explain it as well.

Look at the way things have panned so far: • India acquired its first tankers in 2003-04 with the induction of six Russian IL-78s Illyushins.

• In 2006, a tender for six more tankers was announced and the ultimate winner was the Airbus A330MRTT that

August 2016 www.geopolitics.in

scored over the IL-78.

The tender was scrapped in 2010 after a controversy over the final calculation of the bid price. The Finance Ministry had issues over the “competitiveness of the bids and the reasonableness of the price”.

• A fresh tender was floated later in 2010 and once again the two bidders were the IL-78 and the A330 MRTT. In 2013, the Airbus tanker was chosen as the victor.

• Negotiations on the deal moved forward in fits and starts and finally came to a grinding halt, thanks to a peripheral issue; an enquiry by the Ministry of Civil Aviation on the alleged purchase of 43 A320s from Airbus. That had something to do with the civil offset contract for that acquisition (and the setting up of an MRO) and the refuellers were apparently caught in the crossfire.

• May 2016, the second tender was scrapped. No one knew why. Vigilance, administrative politics, political compulsions? No one knows.

The fact of the matter is that the Defence Minister has lost a golden oppor•

DEFBIZ

Airbus A330 MRTT at Leh airbase in India AIRBUS

tunity to acquire what is arguably the world’s best refueller at a competitive price (at may be 2010 prices) in a relatively modest time frame (24 months).

With the scrapping of the deal that window is now lost.

To quote from a piece I wrote earlier this year in this very publication outlining why the refuellers were important to the Air Force and why they were looked at as force multipliers: “In 2010, the Defence Minister had decided that all combat aircraft would have refuelling facilities and now six years later that mandate was still waiting to be fulfilled. This was post an assessment of the country’s geostrategic embrace over the next three decades and the need to provide for fulfilling that mandate. The refuellers became critical, post this course correction and the need to have the IAF ready to zip without the constraints of pit stops. What it meant was that the IAF fleet — combat aircraft and helicopters — must have a mid-air refuelling capability. There is little doubt that this ability to refuel would hugely bolster the strike range of the Indian Air Force fleet and give it unprecedented strategic

depth. No doubt they are viewed as force multipliers.”

What gave the A 330 MRTT the edge— compared to its primary competitors, namely the Boeing KC-46A Pegasus and KC-135 Stratotanker; Israel Aerospace Industries (IAI) B767-300 Multi-Mission Tanker Transport (MMTT); Ilyushin Il-478, the A330-200 MRTT is arguably the most modern and most capable.

The biggest advantage that every generational leap that the A330 makes on the commercial side is available to the defence segment since it is the green aircraft from Toulouse that form the basis of the MRTT. No wonder Airbus has won every refuelling tanker contract since it launched the programme (excepting Japan where it protested at the manner in which it believes the tender was ‘rigged’ to favour Boeing).

According to Jane’s, there are other advantages as well: “It can carry more fuel (111 tonnes) than its nearest competitor — the KC-46A (96 tonnes) and travel much farther (14,800 km) as compared to the 12,200 km for the KC-46A; 2,419 km for the KC-135; 9,700 km for the Il-478; and 14,800 km for the MMTT.” Not just that. In the case of the A330, the Indian Air Force would have had the great advantage of getting every element of the new standard as the refueller is upgraded and its abilities expanded. As of now there are 27 A330 MRTT refuellers in service (5 with Australia, 13 with the UK, 6 with Saudi Arabia and 3 with the UAE).

With over 85,000 flight hours and a robust 5000-plus flight hour operations in the complex Middle East conditions, the A330 MRTT has proved that it has both the endurance and the capability and reliability.

While the endurance came from realtime operations both in the Gulf and over the Baltics, its capability has been proven through its ability to interoperate with E-3A and KE-3 as well as the F-35A, F-35B, F-16 and the C-17A. Airbus is also working on a vast spectrum of other added elements including additional ISR capabilities, automatic refuelling and improved avionics. Those are issues one will deal with separately on the evolving nature of the A330 refueller. Suffice to say for the moment that India has missed a trick by cancelling the order. It has ignored not just its own stated objectives, but it is also a telling commentary that acquisition in this country continues to be opaque, without logic and completely bereft of any connect with national interest or stated objectives. As we said, the more you believe things have changed, the more they turn out be just the same!

www.geopolitics.in

August 2016

Delaying tactics I

ndia had awarded a helicopter contract estimated at $1 billion to Sikorsky in 2014. It was on a bid that had been made originally in 2008. What the Ministry of Defence wants is for prices that are not just pegged at the rates quoted eight years ago, but also for a discount to be offered as an icing on the cake.

One reason for the deal not being inked so far has been Sikorsky’s request that prices be upped for the deal that has taken ten years to fruition — far more than the time stipulated for the contract to be finalised and the deliveries to begin.

According to the Economic Times, in a written reply to Lok Sabha in August 2015, Defence Minister Manohar Parrikar said the procurement proposal for the helicopters is being processed in accordance with the Defence Procurement procedure and the request for price escalation was not found acceptable by the Contract Negotiation Committee (CNC). However, Nathalie Previte, Vice President of Sikorsky told ET at the Defence Expo 2016 earlier this year in March: “We are working diligently with Contract Negotiation Committee to complete the deal this year.”

There is no clarity on why the Ministry of Defence sought extension after extension from Sikorsky when the other bidder had been ruled out for a Finmecannica connection. But they were clear that there was no provision for cost escalation during the selection and negotiation process. As usual, the government will tell you that negotiations are at an advanced stage, just as they have been with the Rafale for the past two years.

The original plan was to acquire 54 MRHs with the first lot of 16 coming by 2007-08 to replace the over 30-year-old Westland Sea Kings. With the deal yet to be inked one wonders what will be in store for the Navy. The Sikorsky deal is estimated to be around $1 billion-plus for the 16 choppers.

And this to a company that can rightly claim to make in India and supply to the world. Their JV with the Tatas in Hyderabad can actually act as a ready reckoner for any other ‘Make in India’ programme. And if this is the state of affairs with Sikorsky, one shouldn’t be surprised at the short shrift given to Airbus.

55

DEFBIZ

Zen Technologies receives export order worth `30 crore

Z

en Technologies Limited won its biggest export order till date, of about `30 crore. The Ministry of Defence (MoD), Government of Egypt, has chosen Zen Technologies to provide range of training equipment, including Smart Target Systems.

Zen Technologies emerged as the front runner against tough international competition from global companies.

Ashok Atluri, CMD, Zen Technologies, said “Zen Technologies has over

the years emerged as a strong player in the field of defence training simulation in India and it has been our endeavour to expand our presence abroad - specifically the Middle East & African region.

The order from the Egyptian Government (MoD) is a reflection of our commitment towards providing the best training tools to security forces to tackle and neutralise both external and internal threats. We look forward to a fruitful and longterm association with the Egyptian Government.

Additionally, various MoD’s globally have been showing intense interest in our training solutions, especially Combat Training Centre, and look forward to more breakthroughs in the coming months.”

Rosoboronexport and UAC sign sales promotion programme

S

tate special exporter Rosoboronexport and the United Aircraft Corporation (UAC) have signed a programme to promote military aircraft on external markets for the period of 2016-2019.

The document was signed

by Rosoboronexport Director General Anatoly Isaykin and UAC President Yury Slyusar.

“The Programme will enhance the efficiency of our cooperation in promoting Russian aircraft on the international market. This will help us expand our sales geography and increase exports of combat, military transport, combat trainer and special aircraft. Among them are Su and MiG fighters, Yak-130 combat trainers, Il-76MD-90A military transports and Be-200 amphibious air-

craft,” said Rosoboronexport Director General Anatoly Isaykin.

Under the programme, the parties plan to jointly analyse foreign markets, coordinate their marketing activities in accordance with the overall strategy for promotion of aviation equipment in the international market, and conduct multimedia presentations to potential customers.

The programme will make it possible to implement Rosoboronexport’s strategy aimed at improving the marketing efficiency of Russian weapons and military equipment on the arms market.

Earlier, Rosoboronexport signed a similar document with the Russian Helicopters Holding Company.

Esterline signs contracts with Antonov

E

REMEMBERING THE HEROES: Defence Minister Manohar Parrikar and three Service Chiefs paying homage to the martyrs at Amar Jawan Jyoti, India Gate on the occasion of Kargil Vijay Diwas on July 26, 2016. Seen in the picture (to his left) Chief of the Army Staff, General Dalbir Singh, Chief of the Naval Staff, Admiral Sunil Lanba and Chief of the Air Staff, Air Chief Marshal Arup Raha

56

August 2016 www.geopolitics.in

sterline CMC Electronics (CMC) has been awarded two key contracts to supply its high-performance avionics systems for the AN-124 transport aircraft operated by Antonov Airlines as well as for the AN148/158/178 aircraft. Under the terms of the first contract, Esterline CMC Electronics will supply its CMA-9000 Flight Management System (FMS), CMA-5024 GPS Sensor and MFD-2068 Multi-Function Display in a dual configuration for the upgrade of seven AN-124 aircraft. For the second contract, Esterline CMC Electronics will supply dual CMA-9000 FMSs as well as five MFD-3068 Multi-Function Displays for a quantity of sixty new production AN-148/158/178 aircraft for commercial and military use.

DEFBIZ

INS Viraat’s final voyage

T

he Aircraft Carrier, INS Viraat, in July, set sail for Kochi for Essential Repairs and Dry Docking (ERDD) at the Cochin Shipyard. This was the last sailing under her own propulsion as INS Viraat is slated for decommissioning later this year.

The carrier was escorted out of harbour

by Fast Interceptor Craft and helicopters from the Western Naval Command. INS Viraat left Naval Dockyard Mumbai, for ‘one last time’ under its own power. The ship will be towed back to Mumbai on completion of ERDD for the decommissioning ceremony later this year.

INS Viraat was commissioned into the Indian Navy on 12 May 1987. The ship operated Sea Harrier (White Tigers - fighter aircraft), Seaking 42B (Harpoons – Anti Submarine helicopters) & Seaking 42C (Commando Carrier helicopters) and Chetak (Angles - SAR helicopter) as her main air elements. The Sea Harrier fleet was recently decommissioned at Goa in May 16.

Chowgule Group appoints Rajiv Chib as Senior VP

T

Indian Navy’s life saving endeavour

T

he Navy yet again pitched in with timely assistance for an organ transplant, emphasising its commitment to social issues by providing a Naval Dornier for the transportation of medical team for heart harvesting and their subsequent return with the harvested heart.

On July 18, 2016, the District Collector, Ernakulam, forwarded a request to Headquarters, Southern Naval Command (HQSNC) for transportation of a harvested heart from Thiruvananthapuram to Kochi. Accordingly, four doctors of Lisie Hospital and their medical equipment were airlifted by an IN Dornier from INS Garuda to Thiruvananthapuram on July 19, 2016 at 06:30 am.

The medical team along with the harvested heart returned to INS Garuda, Kochi at 01:00 pm by the same IN Dornier.

The medical team along with the harvested heart returned to Lisie Hospital for the heart transplant, by their ambulance which was positioned at INS Garuda.

he Chowgule Group have made their intentions clear to emerge as a key player in the defence sector over the next few years with the hiring of industry veteran Rajiv Chib, former Director of Aerospace and Defence practice at the global audit and consulting firm Pricewaterhouse Coopers Pvt Ltd. Effective July 23, 2016, Rajiv as a senior VP, will lead the entry into the defence business segment which is likely to involve a number of licensing and strategic partnerships.

Rajiv has more than 30 years of experience in the defence industry and has assisted a large number of defence firms in formulating their growth strategies, structuring bids and partner search. During his earlier tenure in the Ministry of Defence, he was involved with capital procurement and headed the erstwhile Defence Offset Facilitation Agency (DOFA) Secretariat.

Mhadei returns after successful completion of all women expedition

T

he Indian Navy’s only Ocean going sailboat, Mhadei, returned to her homeport, Goa in July. A team of six young women officers from the Navy registered a thrilling historic first when they returned to Goa successfully after a voyage to Mauritius. The team on their maiden, and India’s first all-women crew ocean voyage, covered a distance of over five thousand nautical miles through treacherous monsoon seas and heavy winds. The voyage had commenced in Goa on May 24, 2016

and reached Port Louis, Mauritius on June 14, 2016. The team has thereafter successfully completed expedition when they reached INS Mandovi Boat Pool.

The Skipper, Lieutenant Commander (Lt Cdr) Vartika Joshi, and her five-member team comprising Lt B Aishwarya, Lt P Swathi, Lt Pratibha Jamwal, Lt Vijaya and SLt Payal Gupta were received by Vice Admiral Girish Luthra, the Flag Officer Commanding-in-Chief Western Naval Command.

www.geopolitics.in

August 2016

57

DEFBIZ

C-17 Training Centre for IAF

B

oeing and Mahindra Defence Systems opened a centre in Gurgaon to provide C-17 training services to the Indian Air Force (IAF). Once fully operational, the new centre will be capable of conducting local and multi-site simulations for added realism and more robust training.

“The centre, in partnership with Mahindra Defence, is another example of the steps we are taking to contribute to the building of a holistic aerospace ecosystem in support of Make in India,” said Pratyush Kumar, President, Boeing India.

“This demonstrates our commitment to provide reliable support and services for our customers throughout the lifecycle of a product.”

The C-17 training facility, which is located at the Flight Simulation Technique

Centre in Gurgaon, will be a full-service location offering instruction to aircrews that operate the 10 C-17 airlifters that Boeing delivered to India in 2014.

The centre features a complete training solution for C-17 pilots and loadmasters with advanced simulation, courseware and computer-based training to practice the complete range of tasks required for military airlift operations and humanitarian missions, along with other scenarios such as aerial refuelling and emergency procedures.

The facility includes weapons systems and loadmaster station trainers that can be employed individually or networked together to rehearse complete missions. The simulator’s flight deck supports training with night vision goggles for comprehensive mission training.

Safran and HAL to form JV in India

S

afran Helicopter Engines and Hindustan Aeronautics Ltd. (HAL) have agreed to establish, in India, a support centre for national and international rotorcraft customers. The joint venture will be opened in the coming months.

This new centre will provide MRO services for Safran TM333 and HAL Shakti engines installed on HAL-built helicopters. This scope would be enlarged to include other engines which both partners

58

may further agree upon. Safran Helicopter Engines and HAL will provide their customers with a firstclass service, including optimized engine availability. With a fleet of over 1,000 engines, including 250 TM333 and 250 Shakti, India’s armed forces are one of the largest operators of Safran-designed helicopter engines. Shakti is the Indian designation for the Safran Ardiden 1H1, co-developed with HAL and produced under licence.

August 2016 www.geopolitics.in

BEL wins PSE Excellence Awards

Girish Kumar, Director (Bangalore Complex), BEL, and MM Joshi, GM (National Marketing), BEL, receiving the PSE Excellence awards for BEL from TNR Rao, Chairman for the PSE Excellence Awards jury and former Petroleum Secretary

N

avratna Defence PSU Bharat Electronics Ltd (BEL) has won four PSE Excellence Awards 2015, instituted by the Indian Chamber of Commerce, Kolkata: second prize in ‘Operational Performance Excellence’, second prize in ‘R&D, Technology Development and Innovation’, ‘third prize in Corporate Governance’ and third prize in ‘HR Management Excellence’, under the Navratna category.

DEFBIZ

Chief of the Naval Staff commissions INS Karna

A

dmiral Sunil Lanba, PVSM, AVSM, ADC, Chief of the Naval Staff, commissioned the Marine Commandos Unit as ‘INS Karna’ in a ceremony held at the Naval Base at Bheemunipatanam on July 12, 2016.

Vice Admiral HCS Bisht, Flag Officer Commanding-in-Chief, Eastern Naval Command, and senior naval dignitaries were also present on the occasion. The Marine Commando

Certifiable Predator B fuselage integration begins

G

eneral Atomics Aeronautical Systems, Inc. (GA ASI), a leading manufacturer of Remotely Piloted Aircraft (RPA) systems, radars, and electro-optic and related mission systems solutions, has announced that fuselage integration of its new Certifiable Predator® B (CPB) RPA system is now underway. During fuselage integration, numerous components will be installed, including brackets and mounting hardware, electrical cables, fuel systems, oil and cooling systems, landing gear, avionics hardware and software, and a propulsion system.

The next major phase of the aircraft assembly effort consists of wings and tails integration, which is planned for 2016, to be followed by complete electrical factory testing.

Force (MCF), also called as the ‘MARCOS’, was raised in February 1987 as the Indian Marine Special Force (IMSF), capable of operating in all three dimensions, at sea, in air and on land.

The event commenced with an impressive parade which was reviewed by the Chief of the Naval Staff.

Vice Admiral HCS Bisht, Flag Officer Commanding-in-Chief, Eastern Naval Command, addressed the gathering, which was followed by reading out of the Commissioning Warrant

by Commanding Officer (Designate) Captain Varun Singh, SC. The ceremony was solemnised by an invocation in Sanskrit. Smt Reena Lanba, wife of Admiral Sunil Lanba, unveiled the Commissioning Plaque and named the Special Forces Unit as ‘INS Karna’. This was followed by hoisting of the Naval Ensign and playing of the National Anthem in accordance with the time honoured customs and traditions of the Indian Navy.

Thales launches Fulmar X

T

hales is launching Fulmar X, a new concept that uses a small, flexible Unmanned Air Vehicle (UAV) to meet the needs of both military and civil customers in order to suit a wide range of surveillance missions (border surveillance, natural disasters, illegal traffic monitoring…). Fulmar X is a highly reliable solution that delivers exceptional endurance and high-quality aerial intelligence

using a small, flexible air platform with low running costs. The Fulmar X system includes a simple user interface so that personnel can focus on the mission itself.

It is highly reliable and easy to maintain, requiring only simple technical support.

www.geopolitics.in

August 2016

Mirage 2000 upgraded to FOC

C

ontinuing its success on various recent projects, HAL has now flown the first FOC upgraded Mirage-2000 aircraft on July 28, 2016 adhering to the scheduled date. “We have done it again on time. What it proves is HAL’s capability of midlife upgrade of platforms to overcome obsolescence issues, enhance the reliability and maintainability of these aircraft. The introduction of state of the art facility created for this project ensures the timely upgradation of the Mirage fleet”, said T Suvarna Raju, CMD, HAL.

The Final Operational Configuration (FOC) design was implemented on an Initial Operational Configured (IOC) aircraft, which was received at HAL only about eight months ago. “This significant milestone could be achieved by the dedicated efforts of the HAL’s team of designers and engineers with active support from IAF, RCMA and DGAQA”, added Raju.

The initial operation configuration was designed by the Dassault and Thales of France. HAL took up the FOC design and development activities. The FOC configuration covers the integration of Indian specific weapons, sensors and EW system. This FOC upgrade on Mirage 2000 gives additional capability of air-to-ground weapon, training, helmet mounted display, etc. The system having a unique feature of integrating different types of data bus for IOC and FOC configuration is achieved without any degradation. The total design and development was done by HAL, which includes mission computer hardware, OFP software, system design, aircraft modification, etc. The company is responsible for the IOC and FOC upgrade of the Mirage fleet of IAF.

59

DEFBIZ

Gripen leads the world

First flight test for upgraded C-130

A

D

efence and security company Saab, the Swedish Air Force and Sweden’s Defence Materiel Administration, have successfully implemented a revolutionary enhancement to the operational capabilities of the Gripen fighter. Among many significant new advances, Gripen is now the world’s first and only combat aircraft to be operational with the MBDA Meteor BVRAAM missile.

Saab, the Swedish Air Force and Sweden’s Defence Materiel Administration (FMV) have now certified, approved and accepted into service the latest operational upgrade and combat enhancement for the Gripen fighter.

Known in Swedish terms as MS20, this upgrade is the latest step in Gripen’s process of constant capability expansion. It puts a truly unique operational asset into the hands of Gripen operators. The Swedish Air Force is now in its Initial Operational Capability phase with the Meteor. The complete MS20 upgrade is now flying with Swedish Air Force Gripens and MS20 enhancements will soon be implemented in the Gripens of the Czech Air Force.

successful first flight test was recently completed for the C-130H (Hercules) transport aircraft upgraded

by Elbit Systems for the Israeli Air Force (IAF), under an agreement signed with the Israeli Ministry of Defense. This initial flight test was the first in a series of flight tests, and future flight tests were agreed upon and will be performed in the coming months.

During the flight tests, the aircraft’s systems performance was tested in various modes of operation and in a variety of flight altitudes and conditions, in both day and night. The test demonstrated “out of the window” flight, in which live video was displayed on the head-up display (HUD), presenting flight and navigation data overlay-

G

ing the real world by using two and three dimensional symbols, enhanced degraded visual landing applications and head tracking capabilities. Airborne refuelling was also demonstrated as part of the flight tests.

India orders 4 more Boeing P-8I surveillance aircraft

iving a boost to maritime surveillance operations of the Indian Navy, India has signed a pact with

US defence major Boeing for the purchase of four P-8I (Poseidons) long-range aircraft. The contract is a follow-on order to eight P-81 planes already bought by India in a deal worth $2.1 billion. The P-8I fleet is being augmented to further improve the Indian Navy’s anti-submarine and anti-surface warfare capabilities.

The deal for more Poseidons is being seen as an attempt to bolster India’s defence in the Indian Ocean and check China’s presence in the area.

Elbit Systems launches SPECTRO XR E

lbit Systems launched its SPECTRO XR (Extra Range), the latest and most advanced electro-optic payload developed by Elbit Systems for Intelligence, Surveillance, Target Acquisition and Reconnaissance (ISTAR) missions. SPECTRO XR was launched during the Farnborough Airshow.

SPECTRO XR is an ultra-long range, day/night, multi-spectral electro-optical ISTAR system that provides 20” payload performance in a 15” payload. The heart of the system is a large multi-spectral imaging system that combines multiple cameras

60

into one, allowing it to significantly improve performance without increasing size and weight. SPECTRO XR implements up to 9 advanced and fully digital sensors (Medium Wave length Infrared – MWIR, Visible and Near Infrared – VNIR and Shortwave Infrared – SWIR) and lasers with a very high level of stabilisation, providing users with high performance in adverse weather conditions. The modular design enables users to select the configuration best suited their needs, both in terms of performance and cost.

August 2016 www.geopolitics.in

DEFBIZ

‘India has been a key market for DSM Dyneema’ NICOLE NG, Regional Business Manager, Life Protection, DSM Dyneema, on its commitment to bring new technological dimensions to support India’s evolving needs for life protection solutioins On selecting Indian partners for defence projects and criteria for choosing such partners...

On making India a defence industrial hub...

India has always been a key market for DSM Dyneema and we continue to be Globally, DSM Dyneema works with inhighly engaged and active with our key dustry leading armour manufacturers customers and partners. Dyneema is who have a strong understandwell-known since the 1990s as the ing of industry and market needs, material of choice in many dealong with their excellent track fence and law enforcement prorecord and experience in working grammes which require higher with military or law enforcement ballistic protection at a lighter end users. weight for both personal and veAs life protection trends and hicle armour. needs continue to evolve, they DSM Dyneema remains highare able to innovate, expand their ly committed to bringing new product offerings and develop technological dimensions to supNicole Ng new concepts and applications port India’s evolving needs for life that meet different and increasprotection with our ever-expanding local threats and protection requireing portfolio of innovative Dyneema techments of the respective countries, innologies and solutions. cluding India. They are able to innovate India is also one of the first countries and collaborate closely, and leverage new in the region where we launch our latest technologies to develop modern armour technologies, such as the game changing concepts that meet and current and fuDyneema Force Multiplier Technology ture requirements. and recently Dyneema Anti Stab TechnolMoving from innovation, these partogy for the latest in high performance and ners who lead the market are also highly lightweight multi threat protection solucommitted to quality in their production tion that offers excellent comfort. It is a to ensure consistent high performance ‘win-win’ situation for us and our partand robustness in their applications proners, as it enables them to expand their duced. offerings and strengthen their market positioning locally, regionally and even globWhat has been the role of your business ally; through newer and more innovative partners in your ongoing initiatives? concepts for stronger and lighter armour DSM Dyneema is leading the innovaapplications with the latest technologies. tion of ultra high molecular weight polyWhich are the defence projects you are ethylene (UHMWPE) fibers branded as Dyneema for ballistic and anti-stab working on in India?

There is a pipeline of defence related projprotection. Armour solutions made with ects planned by Indian government for Dyneema are evolving the entire life promilitary and law enforcement purposes in tection industry by meeting ballistic prothe short, medium and even longer term. tection and anti-stab performance stanDSM Dyneema supports our key partners dards with much lighter, more ergonomic and customers on concept development solutions than can be achieved with araand solutions to meet local protection mids, ceramics and other materials. needs, including working closely with Our leadership in the life protection Government Defence and R&D agencies. industry is linked to our close collaboraAt the heart of our operations in the tion with armour developers and ballistic Asia Pacific region is DSM Dyneema’s Asia protection manufacturers to develop next Pacific Technical Center in Singapore. generation technologies and solutions.

This technical center supports our ofThere is no ‘one size fits all’ solution fices in this region and also importantly when it comes to life protection. DSM the needs of our customers and partners, Dyneema is an innovations and solutions including India. It offers extensive applidriven organisation and we work closely cations development and ballistic testing with our partners who bring valuable capabilities for evaluating and validating trends and insights on evolving requirethe performance of personal and vehicle ments and even innovative ideas for fuarmour concepts and applications made ture technologies, solutions, designs and with Dyneema according to various interconcepts.

www.geopolitics.in

August 2016

national standards. It complements our regional technical centers in USA and Europe and is another important step in our strategy of having local teams and facilities to support our growing customer base by fostering closer collaborations and accelerating development in the region.

Thales HMSD Scorpion onboard South Korean Light Armed Helicopter

T

hales’ Scorpion helmet-mounted sight and display (HMSD) has been selected for Engineering, Manufacturing and Development (EMD) for South Korean Light Armed Helicopter (LAH) and to equip after completion on LAH EMD. At the end of an open competition, KAI made the choice of efficiency, modern technology and reliability. Thales will provide 400 HMSD Scorpion which will be onboard LAH at the beginning of the 2020’s. LAH programme represents 200 helicopters. Korean Aerospace Industries (KAI) places Thales HMSD Scorpion as the new reference regarding monocular HMSD for armed and scout helicopters. Scorpion head tracking system is HObIT (Hybrid Optical based Inertial Tracking) provides highly accurate, reliable, and nonintrusive cockpit integration. The only full color display on the market using a single display for day and night, pilot can operate a smooth transition from day mode to night.

Scorpion is fully compatible with all standard Night Vision Google.

Conformal and color symbology is now always available by day and night on an unlimited field of regard.

Any standard video will be also available at anytime.

61

INTERVIEW

We are looking forward to partnering with companies through ‘Make in India’ RAFIQ SOMANI, Country Manager INDIA, ASEAN & ANZ at ANSYS, in an interview with Geopolitics, talks about the growing aerospace industry and its involvement with a number of digital initiatives launched by the Government of India

What is ANSYS' solution for the Aerospace and Defence sector?

Given the large investments involved in launching new products in the aerospace and defence sector, industry players need simulation solutions that can predict how products are likely to perform in real-world conditions. ANSYS engineering simulation solutions help aerospace and defence companies outperform their competition and launch products faster in a competitive market.

In addition, physics-based simulation, combined with big data analytics, industrial devices, and embedded intelligence, enables our customers to reduce risks and unplanned downtime. This is capable of addressing the entire breadth of applications without compromising the three critical factors to A&D: Accuracy, Robustness and Speed. By combining scalability, superior multi-physics foundation and dynamic architecture, our offerings deliver efficiency and

62

drive innovation, and reduce physical constraints. This helps our customers quickly develop next generation products such as aircraft, space vehicles, complex electronics, and cutting edge technologies, including unmanned systems. This breadth and depth of capability enables the aerospace and defense industry, to meet with confidence, the challenges of evolution in technology today and the revolution in the technology of tomorrow.

Leaders in the A&D industry focus on process and people as much as tools and the ANSYS simulation framework support; training and services are recognised as key enablers for maximising return on investment in physics based engineering simulation. Radar simulation and modelling are other critical focus areas for the aerospace and defence segment. Radars are integral parts of highly complex systems – be it air-traffic control, air-defence, or ballistic-missile

August 2016 www.geopolitics.in

defence systems. The heightened nature of safety and security demanded by these systems make it imperative to evaluate and analyse radar performance, and quantify how radar operations impact system performance.

Our platform accelerates the radar modelling process, enhances integration and cross domain analysis and verification, as well as validates systems under realistic, complex scenarios

What is the scope of engineering simulation and IoT in A&D in India and the world?

Engineering simulation will play a vital role in the aerospace and defence sector, which is seeing increasing product complexity and shorter delivery times.

It is also evident that many of our customers today are moving towards cloud computing, the Internet of Things (IoT), and Big Data. Gartner Inc. forecasts that 6.4 billion connected things will be in use worldwide in 2016, up 30 per cent from 2015, and that the number will reach 20.8 billion by 2020. Our focus is on delivering engineering simulation solutions that are in line with business priorities in such a connected environment. ANSYS focuses on superior customer engagement by driving innovation, and enabling businesses to create robust and reliable products.

The aerospace industry in India is witness to a growing commercial aviation market combined with large defence investments in the world. Major global aerospace companies have already made their presence here for their R&D activities. Domestic government organisations have under their belt, a number of prospective projects to help meet the country’s aerospace demands.

The number of aeronautics projects running in India, have outnumbered other aerospace projects across the globe.

Several of our Indian customers in the aerospace and defence markets are already innovating and gaining unparalleled competitive advantage by turning to simulation early. Implementation of engineering simulation in the initial stages of product development increases scope of error detection, recognises product limitations, and optimises system performance. By the end of the

INTERVIEW

decade, we believe that every engineer will use simulation as part of his daily routine.

ANSYS’s relationship with Indian companies has matured over the last decade. We helped an established company, located in Bengaluru, explore critical virtual simulation tools to enhance their product. We helped them choose the right choice of the tools to solve complex physics problems, ensuring a short learning curve. With proper design implementation and team planning, we helped them achieve enormous success.

What are the solutions ANSYS can provide to its customers in A&D industry in terms of digitisation (IoT)?

Irrespective of the size of their business, many of our customers today are moving towards cloud computing, IoT and Big Data. A survey by RightScale, a cloud vendor, reveals that hybrid cloud adoption has increased significantly – up from 58 per cent to 71 per cent. Given these trends, we have launched a subscription based pricing model for our simulation software to optimise licences, and enhance flexibility and value for our customers.

ANSYS Elastic Licensing is the first engineering simulation software that provides hourly-based access to the breadth of ANSYS’ world-class multiphysics platform in a single licence.

Elastic licences offer multiple benefits - they promote flexibility across the full portfolio of simulation products, allowing adjustments for peak usage. They are also beneficial for ad-hoc development teams focused on short-term projects.

Using this model, we have licensed our engineering simulation tools to ARM, one of the world’s leading semiconductor intellectual property (IP) companies. Our simulation technology supports ARM in serving multiple markets, and designing smarter and faster chips for electronic devices. Recently, we also signed an agreement to collaborate with GE Power Engineering to pilot ‘simulation as a service’.

These agreements bear testimony to our goal of helping our clients adopt emerging technologies such as the IoT by providing them with a diverse array of choices across licensing and deployment.

How does ANSYS plan to leverage the Indian A&D industry (simulation and IoT solutions) in its future growth plans?

ANSYS is actively present in the aero-

space & defence sector in India and hopes to make it a significant growth engine for the company. We have an aggressive approach to expand our presence and are working towards supporting OEMs and suppliers to create top-notch product inventions on an international scale. In India, we are trying to provide our customers a 360-degree solution that combines people, products and processes.

Nationally, we will continue to expand and enhance our existing product portfolio by talking to our customers to understand how best we can increase value. It is important that we create best-of-the-breed products within reasonable timeframes and optimal costs.

We plan to further extend our product functionality by partnering with key hardware and independent software vendors. The continued investment in the development of fully integrated CAE software and services has placed us at the vanguard of advances in engineering simulation.

In terms of our biggest asset - our people - we currently have six offices across India, a global presence in more than 75 strategic sales locations, and a network of channel partners across more than 40 countries. Over the last few years, we have made significant acquisitions, and added several partners as well as sales and support staff. We will continue to invest in growth to better serve our customers and help them augment their product line up.

What is your assessment of India as an emerging aerospace simulation and IoT hub in terms of volume and investments?

India is a fast growing critical market for ANSYS. Demand for simulation is growing rapidly within Asia. Asia revenues contribute about 30 per cent to the overall revenue of the company, out of which India contributes a significant portion.

We serve our customers through our sales offices located across the country and constantly endeavour to give our customers 360-degree solutions that bring people, products and processes together.

What initiatives have been launched by ANSYS to make talent employable?

While 1.5 million engineers graduate every year in India, only a very small percentage of them are employable, making employability training an urgent imperative. Skill India is a critical initiative from the government that will play a pivotal role in creating structures and

www.geopolitics.in

August 2016

mechanisms to nurture youngsters, and empower training institutions.

We have developed a number of creative approaches to train the next generation of engineers through project sponsorships, student competitions, and hands-on programmes. Since R&D is as essential element for all our products, skill training is ingrained in the ANSYS culture. Apart from typical quality analysis, Indian engineers at ANSYS work on some critical projects with their colleagues from the US. We have centres in Pune, Noida and Bengaluru and our R&D operations in India are the second largest for the company, outside the US. In addition, we also actively support the start-up culture through our ‘Startup India – Stand up India’ initiative.

This initiative aims to boost employment generation and wealth creation.

As a part of this initiative, we have established academic partnerships with IITs as well as other reputed universities and engineering colleges throughout India. We are closely involved with IIT Chennai’s Incubation Cell - IITMIC, and Society for Innovation and Entrepreneurship (SINE), IIT Mumbai’s Incubation Centre. We offer sponsorships for engineering academic projects, and are the key sponsors for SAE BAJA and SAE SUPRA competitions.

How is ANSYS contributing to speed up the ‘Make in India and Digital India’ agenda in the A&D as well as IoT sector?

ANSYS is currently involved with a number of digital initiatives launched by the Government of India. We strongly believe that innovation is a key ingredient for these initiatives to truly succeed – this includes innovation in terms of processes, practices, technology, equipment and materials.

We are quite excited about the ‘Make in India’ initiative and the possibilities it has opened up for us. Manufacturing businesses can drive innovation and maintain their competitive edge only by compressing their product design cycles and accelerating time to market. Given costs associated with time and resources, it is imperative to adopt virtual product development and prototyping or ‘Simulation-Driven Product Development’. We are looking forward to partnering with companies through the ‘Make in India’ initiative. Our goal is to help them improve business outcomes by lowering development time and costs, reducing time to market, and optimising product performance by using our simulation tools.

63

GHOST OF ANOMALIES

HEMANT RAWAAT

SPOTLIGHT

The Indian Armed Forces cry about major issues unresolved by the Seventh Central Pay Commission that will affect them, reports MAYANK SINGH

T

he ghost of Sixth Pay Commission is to get another life and more vigour when it comes to the recommendations related to Army, Air Force and Navy, as proposed by the Seventh Central Pay Commission. The ghost of anomalies has besotted the recommendations right from the beginning.

Unwavering focus on their task is imperative to accomplish the demanding service conditions of the military service.

But it seems the scenario has changed since the Sixth Central Pay Commission recommendations which appear to continue with the Seventh Central Pay Commission recommendations.

Geopolitics spoke to officers and the others about their observations on the Seventh CPC recommendations about the ‘anomaly ghost’. A senior officer pointed out, “Several recommendations of the Seventh Pay Commission have Sixth CPC recommendations as their base. We had clearly pointed out the anomalies of the previous pay

64

commission recommendations and the government had constituted a high powered committee to resolve them. Now the problem is aggravated with the new recommendations.” The officer did not wish to be identified.

August 2016 www.geopolitics.in

The Anomalies Committee formed to resolve the anomalies of the Sixth CPC could not do so in the last seven years.

Thus, by default the recommendations of the Seventh CPC have the effect of those anomalies. While the request to

SPOTLIGHT

remove these anomalies has been sent to the government, the requirement to include a military representative is yet again being raised. Major General GD Bakshi (Retd) says, “Invariably, the Central Pay Commissions are constituted from amongst those ‘experts’ who have observed Armed Forces in big towns and cities during parades or ceremonials only. When they go on ‘flying visits’ to field areas, their itinerary is such that not much can be seen and perceived what goes on behind the scene. Thus, the kind of anomalies and the mismatched comparisons should not surprise people.”

It is to be understood that the military regulates not only the conditions of employment and conduct of its members but also aspects of their personal lives. The military often engages in sudden and unexpected transitions which transform regular operations into dangerous and life-threatening ones.

Sources in the military informed that about 90 per cent of defence officers never draw salary and allowances of higher scales on account of their retiring at the rank of colonel. Only 2.3 per cent get the opportunity to become Brigadier, 0.6 per cent Major General and only 0.2 per cent of the entire military rise to the rank of Lieutenant General. Due to strict and time-bound promotions, these officers draw corresponding salaries late and that too for least portion of their residual careers. In sharp contrast to this, 100 per cent of Civil Services Officers draw salary of Joint Secretary (Major General).

It was to bridge this gap that a special

provision of Military Service Pay (MSP) was introduced in the Pay Commission.

The intent of the MSP has always been to compensate for regime of vast deprivations during the entire career and its lifelong adverse impact post retirement.

It also was to permit the Defence Officers to retain ‘Edge’ over salaries and allowances of their civilian counterparts in each year of service in their careers.

This condition is also due to the

commissioned officers, are reviewed for promotion at all levels. Thus, those not selected for a higher rank must leave.

There is no such strict provision applied in promotion of the civil personnel.

Another demand of Non Functional Upgradation (NFU) is being impressed upon by the armed personnel. NFU is the provision to provide similar pay to the entire batch with the promotion of any one member of the batch. Batch is the group of people who join the service together in the same rank. This also leads to implications on the pension.

Disparity in Allowances with the Civil Counterparts: The demand to provide allowances at par has also not been considered. Civilian employees are entitled to a large number of allowances, which are not provided to the defence personnel. For example, a CAPF DIG posted in Leh gets `57,000 as part of allowance, whereas a brigadier posted in the same region gets only `17,000.

Less Disability Pension: The demand of military personnel to increase the disability pension to match with that of the bureaucrats was turned down.

While an Additional Secretary would get `60,000 as disability pension, a Lt General would get only `27,000.

Disparity in Risk-Hardship Allowance: A civilian bureaucrat from the All India Services draws 30 per cent of his salary as “hardship allowance” when

structure of the ranks and positions which are pyramidal in nature; the higher the rank, the fewer the incumbents. Some of the thinning out is accomplished by the attrition of officers voluntarily leaving the force, but most of it comes from their forced exit from the military through a process of selective retention. Officers, including the non-

posted anywhere outside the comfort zone. For example, a senior IAS officer posted in a city in northeast will draw much more as "hardship allowance", compared to `31,500 per month drawn by military officers in Siachen.

Flawed Pay Matrix and other grievances add on to the woes of armed personnel.

www.geopolitics.in

August 2016

65

INTERNAL SECURITY

FORCES ORPHANED Burst of bullet tests human spirit and determination.

Jawans of our forces involved in Left-Wing Extremism, Counter-Insurgency, Counter-Terrorism and along the active borders face it quite often. It seems the top echelon feigns ignorance of the kind of demotivation and hopelessness that has encompassed our paramilitary forces. It is due to the lack of leadership that the forces are suffering within.

MAYANK SINGH bares the sham of personnel/human resource management that has hurt these men the most

D

eath seems catching the men of the paramilitary forces unaware. Ten CRPF commandos belonging to its Commando Battalion for Resolute Action (CoBRA) were killed in an improvised explosive device blast on July 18, 2016 in the forests of Bihar’s Aurangabad district. Eight CRPF jawans were killed and 20 others injured on June 25 in a militant ambush on a convoy in Jammu and Kashmir’s Pulwama district.

Three Border Security Force personnel were killed and 12 others injured on June 3 after suspected militants opened fire at a BSF convoy in South Kashmir’s Bijbhera town. The battalions of the Indo-Tibetan Border Police and Shashastra Seema Bal involved in the left-wing areas, apart

from their primary Border Guarding role and other commitments, keep repelling attacks and thwarting the nefarious plans of the perpetrators.

The number of deaths is the immediate concern. And then, there is a long battle that besets casualties, making these men lifelong physically handicapped. An officer who did not wish to be quoted told, “Here, the injured means someone loses a leg, someone loses a hand or a few get splinters damage their stomach in such a way that they are unable to eat properly for their entire life.” Thus, the force is left with living examples of operational casualties. It is the training and the camaraderie that keeps these men motivated to continue to fight the losing battle of their lives. Although, with the time the

BSF

BSF jawans undergoing training

66

August 2016 www.geopolitics.in

CRPF jawan on the banks of Dal lake Srinagar

financial benefits have gone up, but the service conditions still remain in question. And then there is something bigger — indifferent approach of the leadership in keeping these men motivated to fight the anti-nationals.

What keeps these men facing the bullet and marching towards the bellowing guns is the training, based on the typical style of infantry unit of Indian Army. BSF has its own Artillery, Air power and Infantry weapons similar to Indian Army’s.

The weapons of BSF battalions are 81 MM Mortars, Rocket Launchers, MMG and 5.56 INSAS Rifle. With time, there was an increase in force size but something has been amiss.

There is an all-pervasive demotivation and helplessness amongst the personnel of the force. No scientific approach was followed when Ministry of Home Affairs sanctioned the increase in the man power of all the CPMFs/CAPFs. The planners giving the go ahead for

INTERNAL SECURITY

keep the promotion avenues smooth for all of them. While the forces were already reeling under the charter of duty for the Border Security Force (BSF), Indo Tibetan Border Police (ITBP) and Sashastra Seema Bal (SSB) were to guard borders. Central Reserve Police Force (CRPF) is mandated with the responsibility of Internal Security, National Security Guard (NSG) is quick response anti-terrorist and anti-hijacking force. Assam Rifles (AR) is meant to fight insurgency in Northeast.

BSF and ITBP also have war-time role in their constitutionally assigned roles.

But most of these forces in reality have ambiguity of role as they are into counter insurgency and counter terrorism, fighting Left-Wing Extremism, protecting VIPs, guarding important installations and buildings, supporting civil administration in maintaining law and order, like riots, and holding elections. These forces have also been now tasked with disaster relief.

Thus, even before resolving the issues of promotion, training and roles, MHA increased the size of the forces without any practical changes in the organisational structure to cope up with this swell in the forces. This was possible with cadre review but it has come up as yet another exercise that is brewing problems to emanate in future. BSF is already in the court, CRPF officers are planning to approach the court on this and the ITBP officers have their blueprint ready.

The CRPF, formed in 1939, had its last cadre review done in the year 1983.

Though no formal cadre review has been CRPF carried out thereafter, major augmentation-cum-restructuring were The state of stagnation of cadre officers is very high and is further expansion did not factor in the carried out in 2004 and 2009. worsening with the passage of time. It is evident from the following table:- During these augmentations, rules of personnel management leading to lots of anomaPromotion Residency (in years) Time being taken (in years) additional battalions were raised lies and various administrative without proportionate addition From To In the rank Total Gp A In the rank Total Gp A and organisational problems of supervisory and support staff.

AC DC 5 5 5 5 creeping in. The worst was The condition of the BSF DC 2IC 5 10 11 18 when the very people who were personnel and their career manassigned to manage the cadre agement is also pathetic. The 2IC COMDT 5 15 6 22 of the jawans and others within first cadre review of the BSF COMDT DIG 2 20 10 28 the force failed in their duty.

Group ‘A’ posts was approved in DIG IG 2 24 8 31 These people were then comFebruary 1981 and second cadre IG ADG 3 30 3 38 pelled to take legal course to review was approved by the govfight against stagnation and to ernment in June 1990. No cadre claim right allowances and status. the cadre review is also going on in DHC. review was done thereafter. However, reThere are eight cases filed by CRPF Non-Functional Senior Grade case was structuring of Supervisory and Support alone. BSF and ITBP had filed their own decided in favour of the CRPF, but governInfrastructure was approved by the govcases, but now many have been clubbed ment has gone for SLP in this case.” told ernment in November 2003. together and are at various stages in the an officer of the BSF. The discontentment amongst jawans Delhi High Court (DHC). “We have the There has been a dramatic rise in the and officers, which is seen when one incase of Non-Functional Financial upgrasize of the paramilitary forces in recent teracts with them, does not bode well. At dation filed by all the forces and it has years. But the associated structure of the present, CRPF has 233 battalions, BSF has been clubbed together. It was decided by organisation has not been matched. There 173 battalions, the Indo-Tibetan Border the DHC. Government has filed a Special was no planning done to recruit officers Police (ITBP) has 55 and the CISF, which is Leave Petition. Another case related to and jawans matching the foresight so as to not deployed on the battalion pattern, has

www.geopolitics.in

August 2016

67

INTERNAL SECURITY

THIRD CADRE REVIEW OF GROUP ‘A’ EXECUTIVE CADRE OF THE CRPF Sl.No.

1 2 3 4 5 6 7 8 9

Name of post

Pay Band/Pay Scale (`)

DG SPL DG 75500 HAG+ ADG 67000-79000 HAG IG 37400-67000 PB-4 DIG 37400-67000 PB-4 Comdt 37400-67000 PB-4 21/C 15600-39100 PB-3 Deputy Comdt 15600-39100 PB-3 Senior Duty Posts Asstt. Comdt 15600-39100 PB-3 Total

a total force strength of 1,33,000 personnel. The officer cadre of the CRPF alone is around 4,000. The combined strength of the CPMFs officers is close to 10,000.

The lack of cadre review for 25 years in the Border Security Force has resulted in no post creation at command level, leading to “frustration” among the already ageing officials due to extremely slow promotions, as observed by the Delhi High Court and directed the Centre to appoint a panel for conducting the exercise within six months. The last cadre review, according to the petitioners, was done way back in 1990.

This ought to be looked into seriously as these forces have been carrying out their internal security and border guarding duties, apart from so many other responsibilities, with dedication and have been sacrificing their lives and their social and family responsibilities.

Although, in end June, the Union Cabinet, chaired by the Prime Minister Narendra Modi, had approved the Cadre Review of Group 'A' Executive officers of Central Reserve Police Force (CRPF) with the creation of 90 posts of various ranks, from Deputy Commandant to Special DG ranks, yet the aim behind the cadre review exercise to attain better operational efficiency and to build capacity and to enhance its administrative capabilities is yet to be achieved. But, it seems, these forces are nobody’s baby. The instructions of DOP&T require that cadre review exercise should be carried out every five years, whereas it was held after a gap of 25 years, in 1991. Seeing the changes in the security environment, the cadre review after 25 years has been justified by creating 90

68

Existing Strength (1)

Net Creation (2)

Revised Strength (Including IPS Quota) (3)

1 3 4 34 177 316 286 1044 1865 2345 4210

0 1 0 11 23 51 203 -199 90 0 90

1 4 4 45 200 367 489 845 1955 2345 4300

posts in various ranks and by abolishing about 200 Deputy Commandant posts to create the same number of the Secondin-Command posts. Thus these Second in Command (21C) will do the task of DCs. This is even worse in the case of the BSF. BSF has grown more than 7 times from 25 Bns in 1965 to 186 at present.

More than 100 units have been raised in CRPF in the last 15 years and it stands today at 233 battalion strength. However, the command and supervisory levels have not been matched with the growth in the same proportion. In the year 2001, one more coy was added to each battalion making it a 7 service coy unit. An additional post of Assistant Commandant as coy commander was created. Later, two Deputy Commandants were also added in each unit. These three additional posts at the lowest strata has broadened the base of pyramid and created a bottleneck for want of proportionate growth at senior supervisory levels. All this was happening under the eyes of the personnel departments in the forces which have the duty to manage the personnel in such a way that the forces, remain motivated. But, as the court cases reveal, these officers have failed to fulfill their responsibilities.

“It is the case of the petitioners that non-creation of posts at Commandant to Additional Director General level (which is the Command level) with the growth of the force has resulted in acute stagnation in promotions as a Deputy Commandant earns a promotion after 15 years. The stagnation in the ministerial cadre is alleged to be from the lower rank of Sub-Inspector onwards,” noted the judgement given against the case filed by BSF personnel.

August 2016 www.geopolitics.in

Thus there is realisation that the solution lies in creation of posts at all levels.

While the judge understood the issue, it did not catch the attention of the leadership within the force. As per sources, CRPF is creating additional 203 posts of Second in Command (2IC) which will have a temporary relief for the Deputy Commandants and the Assistant Commandants and this will again become difficult for them because there is an acute stagnation at the senior level. Also, the post of one Deputy Commandant (DC Operations) is being augmented to that of Second in Command (2IC). Thus there will be only two 2ICs in the units, which will create problems not only within the units but also between the units where the channel of communication will be disturbed. In forces, officers of junior batch are not supposed to take reports from the seniors. Also, while having one 2IC was good for the officer to train to command a unit once the Commandant was on leave.

A young officer serving in CRPFM said, “There is a critical need of DCs in the units. While the BSF has 4 DCs in their units yet there remains a crunch. And, in CRPF where there are only 2 DCs, one is being raised to that of 2IC rank, which will hurt the force adversely.” While the process is under court order, there seems no logic is being followed as on one side this exercise was called cadre review and on the other the forces were instructed to follow a rule of “Matching-Saving” which means that there should be no financial implication because of the review. Are we creating a smooth structure of a force entrusted to guard borders and dedicated to look after the internal security of the country or is it a financial transaction?

Nobody bothered that this exercise is to match the force command and structure with the rising and fast changing situation of national security.

This has been highlighted to the leadership of CRPF and MHA earlier. Around 2007, Accenture was reposed by MHA with the responsibility to come up with recommendations to improve the organisational structure. That report is yet to see the light of the day as it had not only analysed the wrongs in the organisational structure, but had also asked for increase in posts at various levels.

It is not hidden from the echelons and the personnel departments of each force that the men and the officers are suffering, nibbling the spirits of the forces.

Hope rests on policy makers, the MHA, the leadership of the force to objectively analyse and mete out appropriate remedial measures.

FOCUS

ARMED FORCES SPECIAL POWERS ACT

TO BE OR NOT?

Indian Army personnel securing a road stretch in disturbed areas NEWS24ONLINE.COM

AFSPA cannot be a political tool and its revocation or imposition cannot be done without due diligence as once the Army has gone back to its barracks to expect it to return to active operations at short notice would then be unacceptable and only damage morale and the effectiveness of our last line of defence, writes DEEPAK SINHA

T

he Armed Forces Special Powers Act (AFSPA) has been in force in some of the North eastern states from 1958 and in Jammu and Kashmir from 1990. Human rights activists have been agitating for its repeal, over the years, on grounds that it is a draconian act that has little applicability in a democratic polity, so much so that it has been called “an abomination� by Sanjoy Hazarika.

Of course, the fact that no human rights activist has ever gone on record to condemn the killings of security force personnel by militants does nothing for their democratic credentials. There have also been objections to the powers that the Act provides soldiers, especially the provision that requires permission of central government as a prerequisite before any legal action can be initiated. It has been suggested that this

provision has been used with impunity by the Army in perpetrating atrocities and mayhem and committing criminal acts such as intimidation, rape and murder on the hapless population in areas where it has been invoked. Added to this are calls by political leaders and judicial luminaries for its amendment or partial revocation.

This has been opposed by the Army, which has categorically stated that any such action would greatly degrade its ability to function in such areas without suitable legal cover for its activities, as is presently provided by this Act. It has also tried to justify its stand on the grounds that while there have been some cases of misbehaviour and human rights violations, these were aberrations and the hierarchy has been prompt in initiating strict disciplinary actions against those involved, an argu-

www.geopolitics.in

August 2016

ment that is brushed aside with statistics, that show that the government has not sanctioned any legal action against personnel allegedly accused of murder in Kashmir since 1989.

While the debate continues on these issues, little or no attention has been focussed on the impact of AFSPA on counter-insurgency/ anti-militancy operations. This is because most activists, bureaucrats, politicians or judicial and legal luminaries have little, if any, idea as to how exactly the army operates in such areas. It stands to reason, therefore, that to be able to take an enlightened position on the debate it would be worthwhile for all stakeholders to understand the prevalent environment where it is invoked and as to how its provisions assist the army in the conduct of its operations. It is only after this that the controversies surrounding the Act

69

FOCUS

HEMANT RAWAT

Indian paramilitary personnel stands guard in Srinagar

can be fully understood in their correct perspective.

To start with, the Act is applicable to an area that has been notified by the central or state government as disturbed. These conditions have been very broadly defined as ‘the situation prevailing in the area is such that use of armed forces in aid of civil power is necessary.’ As is to be expected there is much academic quibbling that the definition is far too subjective, broad-based and prone to political manoeuvring. Be that as it may, what is of relevance is that by the time the government of the day finally decides to declare an area or state “disturbed” and to requisition the Army in aid of civil authorities, the writ of the elected representatives and the state no longer runs in that area and the existing law and order machinery is wholly ineffective.

The political leadership lives in fear of being eliminated if it does not follow the diktats of the militants, and all opposed to the insurgency are restricted to staying in protected zones. The administrative and police machinery, especially in rural areas, is largely absent

70

or compromised and supportive of the insurgents. Majority of government servants deployed at the district and lower levels pay regular “tax” to the militant establishment. The rule of law is wholly absent and summary justice is provided by the militants through the barrel of the gun. The regional media, too, faces serious threats and by and large acts as

The administrative and police machinery, especially in rural areas, is largely absent or compromised and supportive of the insurgents

August 2016 www.geopolitics.in

a propaganda tool for the insurgents and is strongly biased in its reporting.

Finally, the influence of the militants is all pervasive and they are the chief benefactors of any funds that the government or any other organisation may expend in the region as no contract can be either given or accepted without their approval or partnership.

In practical terms, this means that the local population is completely terrorised and has no faith in the ability of the government or the local police to provide it with governance or security of any kind. While the militants may enjoy a degree of popular support there are local elements opposed to them, but in these circumstances they have little option but to support the militant organisation. It is worthwhile recalling that in Punjab, Kashmir, Manipur, Nagaland and even in Sri Lanka the initial killings by militants targeted opposition within their community, tribe or ethnic groupings. Even today, the ISIS has killed more Muslims than non-believers.

For the Army it implies that actionable intelligence on insurgent activi-

FOCUS

ties, personnel or organisation will be either not available or hard to come by.

To add to this, information about security forces deployment, their plans and movement will be leaked to the militant leadership by over-ground sympathisers, making them vulnerable to ambushes and other militant actions.

In addition, and an aspect that tends to be largely ignored, is that the forces will be kept constantly under pressure by a well orchestrated campaign of disinformation to malign their reputation with allegations of large-scale rape, torture, murder and a host of other human rights abuses. In a country where the police are commonly associated with third-degree methods such allegations against the military are invariably taken for granted as there is a general perception that the ethos of the military and the policeman are same because both are uniformed government servants.

When the Army first deploys into any disturbed area its primary task is to ensure that the militants’ capacity to terrorise is sufficiently neutralised as to enable the government to re-establish itself and carry out its legitimate function of governing. To do this the Army, at the outset, establishes a counter insurgency grid. This involves establishment of secure posts throughout the area, in towns, in the hinterland and along the lines of communication. Each of these posts has an area of operational responsibility which is clearly delineated and within which the deployed troops send out patrols to familiarise themselves with the terrain and the local population. It establishes an intelligence network with the help of sympathisers and through interactions with locals that will provide it with real time information of the militants’ organisation, leadership and activities in the area.

Once established, units and sub units work on two major thrust areas: the first to neutralise the militants in the area by breaking their cohesion and ability to plan and carry out attacks and secondly to understand and mitigate the sufferings of the local populace. The former is achieved by carrying out raids on likely or known hideouts. In addition cordon and search operations are conducted in population centres to gain information about militant activity and identify militants and over ground activists. Area domination patrols and interdiction of roads and tracks are also executed, thereby restricting militant movement to small groups, forcing

them to avoid population centres and restricting their ability to operate freely. Finally action is also taken to identify and neutralise over ground support so that militants are denied intelligence about security forces and logistics.

Loyalty of the locals towards the state is re-established by providing them a safe and secure environment, working in partnership to provide civic amenities that are urgently required, providing medical assistance and enabling the district administration to restart its governance and development efforts in the area. It goes without saying that for this process to fructify and deliver, time is of essence and the process cannot be speeded up without impacting the fine

When the Army first deploys into any disturbed area its primary task is to ensure that the militant’s capacity to terrorise is sufficiently neutralized as to enable the government to reestablish itself and carry out its legitimate function of governing

balance the army needs to establish with the local populace.

Thus, from all this it is amply clear that for the army to be able to stabilise the situation and ensure adequate security to enable the elected government to exercise its constitutional and administrative authority effectively, requires that it be pro-active, aggressive, impactful and be given adequate time. That is the only option available to regain the initiative which, in the long run, will result in the security of the local population and ultimate success. It, therefore, stands to reason that without a suitable mechanism in place that permits the army to operate effectively, it makes little sense to deploy the army and expect it to succeed. This is especially so, as in our system of governance, the military has no “police powers” of search, arrest, detention or use of force. As numerous examples across the world have clearly shown the guiding principle of military use is that it is the option of last resort and once deployed

www.geopolitics.in

August 2016

must be given adequate resources and a suitable environment for it to succeed. Any compromise on this issue not only adversely impacts the military but bodes ill for the state and the government and consequently for the well being of its citizens.

When we focus on the manner in which this Act has been implemented the most common criticism that is made is as The Telegraph in its editorial on 24 July 2013 on the issue of firing by Border Security Force personnel on a rally at Gool in Jammu & Kashmir, goes on to say “Mr Abdullah knows, just as his voters do, that the killing of unarmed protestors is a function of the culture of impunity that guides the actions of the security forces in the state...The chief minister can fool no one into believing that official enquiries into killings by the police or the military will bring justice to the aggrieved...” To generalise and state that any official investigation will lack credibility is neither fair nor just. There are numerous examples of very fair investigations that have uncovered the facts. The Abdul Rahman Paddar case of 2007, for one, is an example. As to whether the government of the day has gone on to take action as it was required to, is a moot point as the Pathribal case of March 2000 shows us.

But then, that is not something that is specifically applicable to areas where the AFSPA has been applied but to the country in general as poor and incompetent policing, political patronage and a justice delivery system on its death bed show.

The second aspect of this editorial that needs to be pointed out in no uncertain terms is the linkage that it draws between the BSF and the military. The terminology “Security Forces” universally used to cover all uniformed forces does not do justice to the military as it fails to note the varying standards of motivation, discipline, training and operational employment that exist between the forces. The Central Reserve Police Force (CRPF) and the Border Security Force (BSF) are Central Armed Police Forces (CAPF), as defined by the Government of India and have completely different operational profiles, manning patterns, training focus and traditions from the Army. Two examples to illustrate this aspect should suffice. While the foundation of army discipline, training and motivation is based on the regimental system wherein troops from a particular region along with officers (from all over the country) serve together in the same unit

71

FOCUS

INTERIM ORDER OF THE TWO-JUDGE BENCH OF THE SUPREME COURT ON ALLEGED FAKE ENCOUNTERS IN MANIPUR Bench of the Supreme Court delivered an interim 85-page judgment on A 8 July 2016 on a petition filed by fami-

lies of victims of alleged fake encounters from Manipur. The Extrajudicial Execution Victim Families Association petitioned the Supreme Court four years ago seeking a detailed investigation into 1,528 documented cases of alleged fake encounters in the state. Till now a court-appointed commission led by former judge Santosh Hegde has gone into 62 of these cases, recommending further prosecution in 15 cases.

Without questioning the validity of the Act, the apex court has frowned on the deployment of the Army in “Aid of Civil Authorities” for an indeterminate period of time, then there clearly has been a systemic failure in governance.

The court also went into a detailed examination of who is a militant or an enemy as understood in various laws such as the Criminal Penal Code and the Army Act that governs the functioning of the Indian Army and also on what constitutes excessive force. They have concluded that “a person carrying a weapon in a disturbed area in violation of a prohibition to that effect cannot be labeled a militant or insurgent.”

In its conclusions on what constitutes excessive force, the Judges had this to say, “There is a qualitative difference between use of force in an operation and use of such deadly force that is akin to using a sledgehammer to kill a fly; one is an act of self defence while the other is an act of retaliation.”

Finally in its most far reaching conclusion the court concluded that in their interpretation of relevant sections of the Criminal Penal Code and the Army Act allows local courts to unilaterally commence proceedings against army personnel despite immunity provided by AFSPA.

72

for decades and establish familial bonds, the police forces have units manned on a rotational basis, which implies that while unit locations are permanent, personnel are posted for fixed tenures and rotated out. Obviously, these units can never have the close knit bonding and friendship that exists in the army’s combat units, an important aspect that is pertinent to morale, discipline and motivation. The second example pertains to the leadership issue because police officers, especially battalion commanders and above, are required to be easily accessible to the general public operational employment of armed police is under the leadership of Head Constables, Sub Inspectors and Inspectors. The army works on completely different lines and units and sub units are always led by commissioned officers with the attended advantages. Finally, the Army and the CAPF have completely different chains of command that they follow with differing perceptions, requirements and focus.

Finally, the ethical standards and the question of accountability are radically different in what exists within the Armed Forces and Police Forces.

The most serious criticism that is raised time and again in various forums pertains to an overwhelming belief that the military chain of command protects all who commit human rights abuses.

This lack of accountability supposedly percolates down to the rank and file who then believe that they have complete immunity from prosecution and thus indulge in torture, loot, rape and even murder. The army, unfortunately, has added to this perception gaining ground because of its apparent inaction in a number of well documented cases where evidence of human rights abuses appears to be credible. The Pathribal case, for example, in which five officers are allegedly accused of organising a fake encounter in which seven innocent villagers were killed and declared to be foreign militants is a case in point. This incident occurred in 2000 and it was only in March 2013 that the General Court Martial against those allegedly involved had commenced. That it required intervention by the Supreme Court does the army hierarchy no credit. This is ironic, since there are a number of individuals who have faced disciplinary action for various offences committed in areas under AFSPA, mostly based on robust internal review mechanisms rather than on reports from locals or the police. The Army hierarchy, instead of publicising these figures, prefers to keep it classified,

August 2016 www.geopolitics.in

on what it probably perceives as adverse performance, instead of showcasing it to show the high level of accountability that exists within the military.

It goes without saying that matters of this nature are extremely complex and very little can be seen in clear black or white. For example, let us examine one case of alleged fake encounter that has been investigated by the Justice Hegde Commission. This Commission was established on the directions of Supreme Court in January 2013 to inquire into six cases of encounter killings in Manipur. The Commission consisted of Justice Hegde as Chairman with two other eminent members, Mr Lyngdoh, former Chief Election Commissioner, and Dr Ajai Kumar Singh, former DGP Karnataka. In the first case that they examined, that of Mohammad Azad

The most serious criticism that is raised time and again in various forums pertains to an overwhelming belief that the military chain of command protects all who commit human rights abuses

Khan, who was killed in an alleged encounter in March 2009.

The family claimed that Azad was a student aged 12 years and was at home with a friend when the Security Forces (SF) came to their house in broad daylight, allegedly caught hold of the deceased and beat him up and then killed him and placed a pistol next to his body.

The SF version is markedly different in that they alleged that Azad Khan was a member of the Peoples United Liberation Front (PULF) with a number of cases registered against him, including under the Arms Act. In their version they stated that they received hard intelligence as to his whereabouts, based on which, they launched an operation to apprehend him. However, the deceased fired at them with a pistol while trying to evade being apprehended. On his opening fire the SF returned the fire

FOCUS

and Azad Khan was killed while another alleged militant escaped.

The Commission in its deliberations came to the conclusion that this encounter was false. The primary reasons given justifying these conclusions were that: 1. While the individual may have been member of the PULF and did have various cases registered against him prior to this incident, the fact was that PULF was not a banned organisation.

2. Since he was sitting at home with another associate when the SF came to apprehend him, he was, therefore, at that time not involved in extorting any money.

3. That 20 SF personnel armed with sophisticated weapons could not have disabled or apprehended the victim was not believable and that they were afraid as the youths fired at them is also doubtful since they were equipped with bulletproof jackets.

4. The bullets that entered the victim’s body establish that he was not shot while facing the SF. 5. The fact that Azad Khan was hit by six or seven bullets while no personnel of the Security Forces was even injured shows that disproportionate force was employed and the case could not be pleaded under the right of private defence on that ground.

The Commission appears to have forgotten that this was not a tournament of skills at the Olympics and even if a twenty-member group was participating it was more than likely that only one or two personnel may have been involved in the actual exchange of fire. Moreover, to expect SF personnel to avoid firing back and attempt to capture the individual, who is firing at them just because they are wearing bulletproof jackets, verges on the ludicrous. The Commission appears to be unaware that bulletproof jackets are not a cloak of invincibility and soldiers have been known to perish despite wearing them. It is unfortunate that despite the experience and eminence of all members of the Commission, their knowledge of military and militant tactics and the prevailing insurgency environment was woefully inadequate. That they were further hamstrung by their lack of detailed knowledge of the area of operations and the state of administration in Manipur is also clearly reflected in their conclusions.

There are many questions that still remain which the Commission appears not to have considered relevant to the case. For example if PULF is in-

volved in militant activities why was it not banned? Was it due to bureaucratic bungling? Why did a 12-year-old boy have serious charges against him, or was he actually 12 years old? Why had the parents not mentioned this fact in their statement? Does it not destroy the credibility of what they have stated? What was the motive of the SF in launching an operation to apprehend a 12-yearold boy? The bigger question that arises is that if Commissions of inquiry reach conclusions that appear to be flawed, how is it possible for the government to sanction prosecution against the SF personnel involved without completely destroying morale? Especially since the cases are likely to be prolonged and the career of the SF personnel would be destroyed even if at the conclusion of the case he is found to be innocent, as the Batla House case has shown.

A law and order problem has been categorized as an insurgency and by insisting on keeping the AFSPA in place, the administration is able to utilize the Army to put pressure on the local population

It would thus be fair to conclude that in the environment in which the state has little option but to deploy the army to reclaim its legitimate right to govern, it requires to provide the army with a suitable legal framework within which it can function without fear or favour. The AFSPA meets this very requirement. It is also worth emphasising the fact that the leadership and the rank and file of the army is clearly aware of the symbiotic relationship that they share with the local populace. A warm, close and friendly relationship leads to greater availability of intelligence which in turn enables the army to perform more effectively in neutralising and degrading militant organisations and their supporters. Thus, the army rank and file deployed in disturbed areas clearly understands the benefits of having good relationships

www.geopolitics.in

August 2016

with the locals as their own success and security is directly linked to the manner in which they operate.

Finally, as per the existing processes in place, the imposition and revocation of AFSPA is wholly a political decision advised by the bureaucracy with only very limited consultation with the army, mainly on the issue of operational deployment. There now appears to be a need for the army hierarchy to also be more intimately involved in this process because there appears to be a growing suspicion that the political leadership and the bureaucracy are using AFSPA to achieve to serve their own personal agenda. Manipur is a perfect example of this. As most observers of the situation there are aware that the situation there is mainly due to the humungous levels of corruption that exist within the establishment and the nexus between smugglers, militant groups, drug traffickers, politicians, administration and the police. A law and order problem has been categorised as an insurgency and by insisting on keeping the AFSPA in place, the administration is able to utilise the army to put pressure on the local population. The democratic process there has been very robust over the years and what is presently categorised as an insurgency appears to be no more than a law and order situation. However by not revoking AFSPA, the army is being used to tackle a law and order situation, which is not its job, thereby ensuring the status quo remains. Those environments where reports on the low level of militancy are credible and if the political leadership decides to revoke AFSPA in those areas, it must then ensure that the military is sent back to barracks and ceases operations. If the political leadership decides to revoke it in an area it must ensure that the military is sent back to barracks and ceases operations. The leadership must then accept responsibility and be accountable for the security situation that prevails. It cannot be a political tool and its revocation or imposition cannot be done without due diligence, as once the Army has gone back to its barracks to expect it to return to active operations at short notice would then be unacceptable and only damage morale and the effectiveness of our last line of defence.

The author is a second generation para-trooper and author of "Beyond the Bayonet: Indian Special Operations Forces in the 21st Century." He is currently a consultant with the Observer Research Foundation

73

OPTIQUE

TIME NEEDED FOR POSITIVE IMPACT

C

hange is the only constant, the wise say. When change happens in a sector that is by nature averse to change, then it’s called a revolution. India’s defence sector has been a witness to this revolution over the last two years and a silent one at that. Not many people want to admit it.

The changes have come in trickles, say his critics. They have been incremental, say some more. They have been cosmetic, says those diplomatic in their review of this government’s performance. But things have moved forward, even if these were in singles and twos, as in cricket parlance. Most of the critics have forgotten that trickles make an ocean. The incremental changes mean a lot. And cosmetics make it most attractive. But that’s not the point here.

All of the tweaks that the Modi government’s Ministry of Defence, first led by the affable Arun Jaitley and later by the no-nonsense Manohar Parrikar, have turned India’s defence sector into an attractive business option. The country is now entering the third phase with a more proactive industrial policy captured in the ‘Make in India’ call. Several initiatives have been taken recently to promote the entry of private sector into defence manufacturing.

The FDI policy for the defence sector has been reviewed and as per the revised policy, the composite foreign investment up to 100 per cent is allowed with the approval of the FIPB. The process of approval has been made quicker. Now such a proposal would get approved at the level of Foreign Investment Promotion board (FIPB), instead of Cabinet Committee on Security (CCS). Several conditions attached to the policy have been removed to make the process simpler.

The Defence Products List for the purpose of issuing Industrial Licenses (ILs) under the IDR Act has been revised and most of the components, parts, sub-systems, testing equipment and production equipment have been removed from the List, so as to reduce the entry barriers for the industry, particularly the small and medium segment.

The initial validity of the Industrial License granted under the IDR Act has been increased from three years to 15 years with a provision to further extend it by 3 years on a case-tocase basis. To establish a level-playing field between Indian private sector and the public sector, the anomalies in excise/ custom duty have been removed. As per the revised policy, all Indian industries (public and private) are subjected to the same kind of excise and custom duty levies.

The Defence Security Manual for the private sector defence manufacturing units has been finalised and put in public domain. It clarifies the security architecture required to be put in place by the industry while manufacturing defence equipment. The list of military stores has been finalized and put in the public domain to make the process transparent and unambiguous.

The Exchange Rate Variation (ERV) protection has been allowed on foreign exchange component to all Indian companies, including private companies in all categories of capital acquisitions, so as to create a level playing field between the Indian and foreign industry.

For the first time, a specific Defence Export Strategy has been formulated and put in public domain. The strategy outlines specific initiatives/steps to be taken by the gov-

74

ernment for encouraging the export of defence items. It is aimed at making the domestic industry more sustainable in the long run as the industry cannot survive purely on domestic demand.

The Standard Operating Procedure (SOP) for the issue of No Objection Certificate (NOC) for export of military stores has been revised and put on the website. Under the revised SOP, the requirement of End User Certificate (EUC) to be countersigned/stamped by the government authorities has been done away with, for the export of parts, components, sub-systems, etc.

The department has issued a comprehensive Outsourcing and Vendor Development Guidelines to all the DPSUs and OFB in May 2015, so that the private industry, particularly SMEs are closely integrated into the supply chain of defence manufacturing. Some of the salient features of the guidelines are: * DPSUs and OFB to have short-term and long-term outsourcing and vendor development plans with emphasis on gradual increase in quantum of outsourcing from private sector, including SMEs. * Involvement of Indian industry, including SMEs for indigenous development of parts/components/sub-systems, which are presently being imported. * Joint or co-development of systems or sub-systems between the public and private sector.

The requirement of prescribing Indian Offset Partners and components for offset discharge for the entire period of contract, at the time of signing of contract, has been done away with. The OEMs now can inform the name of the IOPs and the components just one year prior to the year of offset discharge.

Even for previously signed contracts, the procedure to change the IOPs and the components has been simplified.

One of the major demands of the industry has been to reinstate the provision of services for discharge of offsets. This also has been considered and some of the services have been restored for discharge of offsets with certain conditions and limitations.

In Buy (Global) cases, level playing field has been established for discharge of offset obligations between Indian and foreign vendors.

The Defence Procurement Procedure has been revised and implemented from April 1, 2016 making it the most comprehensive revision in the decade since India came out with one such document. The real emphasis of the DPP this time around is vigorous pursuance of the indigenous route for defence procurement.

The procedure now gives first preference to the indigenously designed, developed and manufactured equipment over foreign defence goods. What else could be a good news for the Indian defence industry?

The proof of pudding is in eating. The real test for the changes brought about by the government in the defence procurement procedure will come soon. The changes though are bound to impact positively.

In the enthusiasm to criticise, the nay-sayers forget that even the most urgent work needs time to be completed.

August 2016 www.geopolitics.in

tghosh@newsline.in

BRAHMOS SUPERSONIC CRUISE MISSILE WORLD LEADER IN CRUISE MISSILE FAMILY

SPEED PRECISION POWER MULTIPLE PLATFORMS|MULTIPLE MISSIONS|MULTIPLE TARGETS

www.brahmos.com

Postal Reg No. DL(E) 01/5363/2014-16, RNI No. DELENG/2010/35319, Publication Date: 1st of every month, Posting Date: 8-9th every month

THE PRIDE OF VANDE MATARAM STILL FLYING HIGH. HAPPY INDIAN INDEPENDENCE DAY.

www.rafale.co.in

Rafale_IndepD_Inde_210x274_GP_0716.indd 1

OVER

60 YEARS.

TO O FA N I

MYSTERE

5 IV

AIRCRAFT ALIZE

TYPES.

JAGUAR

1

N AT I O N

MIRAGE

2000

28/07/2016 14:31