Indo-US JWG in defence industrial security to be set up soon

Source: Financial Express, 04 October 2021

Ahead of the 4th edition of 2+2 Indo-US Ministerial talks scheduled for next month, the first Industrial Security Annex (ISA) summit concluded in New Delhi.

The summit level meeting took place in New Delhi between the officials of both countries from Sept 27 –Oct 1, 2021 in which the Indian side was led by Anurag Bajpai and David Paul Bagnati from the US as both are Designated Security Authorities (DSAs).

Why was the summit organized?
During the bilateral meeting between Prime Minister Narendra Modi and the US President Joe Biden last month, a decision was taken to hold the ISA summit level talks at the earliest to facilitate high-end defense industrial collaboration. And they both agreed that the foundational agreements that have been inked between the two countries need to be operationalised soon.

The five day long summit focused on developing protocols for the exchange of classified information between the defense industries on both sides.

The US has already designated India as a Major Defense Partner. The two sides have been engaging on a regular basis to help strengthen military-to-military interactions; sharing of logistics; cooperation in advanced military technologies; and expanding engagements in a multilateral framework including with regional partners.

The government and private stakeholders have to be urged to use existing ecosystems for not only expanding the defense trade, but also for co-development, innovation and co-production.

When was the ISA signed between India and the US?
At the end of the second edition of 2+2 Ministerial level talks in Washington DC in December 2019, the two sides concluded the ISA which is meant to help in exchanging classified information between the defense industries of both countries.

The highlights of ISA summit in New Delhi
To prepare a roadmap for the implementation of the ISA, the DSAs of both sides visited the Indian defence industry.

In-principle agreement set up an Indo-US Industrial Security Joint Working Group.

For allowing the defence industries to collaborate cutting edge technologies, this group will meet from time to assist to align the policies and procedures.

Both countries recently decided to work on co-developing air-launched unmanned aerial vehicles (UAVs). This project is being done under the Defense Technology and Trade Initiative (DTTI).

Under ISA, the US side is expected to help in providing the necessary framework which will be useful in pursuing the co-development and co-production in the defence production centre.

India’s first indigenous aircraft carrier begins sea trials off Kochi

Source: Livemint, 04 August 2021

NEW DELHI : India’s first indigenously designed and built aircraft carrier began its sea trials off the coast of Kochi on Wednesday, propelling India into a select group of countries to achieve the capability to build its own aircraft carriers.

Describing it as a “proud and historic day for India”, the Indian Navy in a statement said, “Reincarnated Vikrant (IAC) sailed for her maiden sea trials today (Wednesday), in the 50th year of her illustrious predecessor’s key role in victory in the 1971 war.” The reference was to third war between India and Pakistan that led to the emergence of Bangladesh as an independent country.

According to the Navy, the Indigenous Aircraft Carrier (IAC) is the “largest and most complex warship ever to be designed and built in India.” The achievement, it said, was key for India’s “quest for Atmanirbhar Bharat and Make in India initiatives”.

The keel of the 40,000-tonne warship was laid in February 2009. The ship has been built by the Cochin Shipyard Limited (CSL). The basin trials were completed in November 2020. The project cost is estimated at almost ₹23,000 crore.

In June, defence minister Rajnath Singh had visited CSL to review the progress of the project. According to the Navy, IAC-1 will operate MiG-29K fighter aircraft, Kamov-31 Air Early Warning Helicopters, the soon-to-be-inducted MH-60R multi-role helicopter and the indigenously-manufactured Advanced Light Helicopters.

Expected to be commissioned by August 2022, the IAC will be named Vikrant and will be India’s second aircraft carrier in service after the INS Vikramaditya, which is a Russian-origin vessel.

The Indian Navy has been seeking a third aircraft carrier of 65,000-tonnes, a proposal backed by Navy chief Admiral Karambir Singh. Addressing reporters in December 2020 ahead of Navy Day, Singh had said that the third carrier would be a necessity as India looks to become a $5 trillion economy. India’s strategic rival China has two aircraft carriers and is building a third. Beijing is expected to have five carriers by the end of the decade, according to news reports.

India, Russia to hold 13-day mega military exercise in Volgograd

Source: Financial Express, 27 July 2021

India and Russia will carry out a 13-day mega military exercise with a focus on counter-terror operations in the Russian city of Volgograd from August 1, the Indian Army said on Tuesday. It said the 12th edition of the “Indra” exercise will be yet another “milestone” in strengthening the bilateral security cooperation and will serve to reinforce the longstanding bond of friendship between India and Russia.

The Army said 250 personnel from each side will participate in the 12th edition of the joint military exercise. “The 12th edition of Indo-Russia joint military exercise Indra-21 will be held at Volgograd, Russia from August 1 to 13,” the Army said. It said the exercise will entail the conduct of counter-terror operations mandated under the UN’s framework of joint forces against international terror groups. “Exercise Indra-21 will further strengthen mutual confidence and interoperability between the Indian and Russian armies and enable sharing of best practices between the contingents of both the countries,” the Army said in a statement.

“The exercise will be yet another milestone in strengthening security cooperation and will serve to reinforce the longstanding bond of friendship between India and Russia,” it added. It said the Indian Army contingent participating in the exercise will comprise a mechanised infantry battalion. Volgograd is a major Russian city situated on the western bank of the Volga river.

Defence ministry signs contract with Mahindra Telephonics for 11 airport surveillance radars

Source: Economic Times of India, June 03, 2021

The Ministry of Defence on Thursday signed a contract with Mahindra Telephonics to procure 11 airport surveillance radars for the Indian Navy and the Indian Coast Guard, according to an official statement.

Installation of these radars will increase the air domain awareness around airfields and enhance safety and efficiency in flying operations of the Navy and the Coast Guard, it noted.

These 11 monopulse secondary surveillance radars are much more accurate compared to the conventional ones when there are several aircraft in close proximity in a specific area of airspace.

“The procurement, at a cost of Rs 323.47 crore, will be made under the ‘Buy and Make’ category,” the Defence Ministry’s statement noted.

Under the ‘Buy and Make’ category of defence procurement, initial purchase of equipment can be done from a foreign company, followed by indigenous production through an Indian company in a phased manner involving ‘Transfer of Technology’ of critical technologies according to “specified range, depth and scope”.

The Ministry of Defence said the signing of this contract between it and  Mahindra Telephonics Integrated Systems Limited is an achievement of the Central government towards the ‘AtmaNirbhar Bharat Abhiyan’ (self-reliant India campaign) and the objectives envisaged in it.

“This would enable absorption of technology, skill development, indigenous manufacture and boosting of employment opportunities, it added.

Atmanirbhar Bharat in Defence: 108 more items to be Made in India for the armed forces

Source: Financial Express, June 1, 2021

The defence minister Rajnath Singh approved a ban on the import of 108 military weapons and systems such as next-generation corvettes, airborne early warning systems, tank engines and radars.ms.

108 military weapons and systems including next-generation corvettes, airborne early warning systems, tank engines and radars are to be made in India. Building on the first positive list released in August 2020 notifying 101 items whose import was to be banned between December 2020 and 2025, on Monday, (May 31, 2021) the Ministry of Defence (MoD) issued the second list with 108 items. The second list -like the previous one- lays special emphasis on various types of ammunition.

The defence minister Rajnath Singh approved a ban on the import of 108 military weapons and systems such as next-generation corvettes, airborne early warning systems, tank engines and radars. In an official statement issued by the MoD, he has said that “the ministry is now ready to take forward the initiative of self-reliant India.”

The second list covers a wide range of complex military systems that include sensors, simulators, sonars, radars, assorted weapons, helicopters, next generation corvettes, airborne early warning and control (AEW&C) systems, tank engines, medium power radars for mountains, medium-range surface-to-air missile systems (MRSAM), and much else.

On the list are the light medium and heavy combat armoured vehicles which are meant for the infantry, mission systems for AEW&C, single engine land variant helicopters weighing less than 3.5 T, also helicopter launched anti-tank guided missiles (ATGM) for up to 7 km, among others.

Most of the items mentioned in the list are already being manufactured in India, and several others have not been imported for years now—like the single engine helicopters, or corvettes for the Indian Navy and many other items.

While the list is exhaustive, industry sources, while welcoming the initiative, acknowledged that the majority of the things on the list are already manufactured within the country and lots of systems have not been imported in years, including the single-engine light helicopter and the corvettes for the Indian Navy besides others.

The ban on import of 49 of the 108 items comes into effect by the end of the year and on the remaining 59 by the end of December 2025, coinciding with the culmination of the first positive list.

Views of an expert

“Continued reliance on import of ammunition and chronic shortages have been a subject matter of various official reports in the past. Every time a crisis surfaces -the most recent one in the Galwan valley in Ladakh last June- MoD scurries to buy assorted ammunition from abroad. It is unclear whether these lists will help MoD in at least getting over this embarrassing situation,” opines Amit Cowshish, former Financial Advisor (Acquisition), Ministry of Defence.

Sharing his view with Financial Express Online, the former financial advisor (Acquisition) says, “The MoD’s expectation is that taking a cue from these lists, the private industry, especially the Micro, Small and Medium Enterprises (MSMEs) and the Startups, will ramp up their research and development efforts and shore up manufacturing capabilities to meet the demand for these items.”

“It sounds promising, especially if one considers MoD’s claim that a hefty chunk of around Rs 70,000 crore has been kept aside for procurement from the domestic industry this year. On closer look, however, this claim does not inspire much confidence, as the payments to the public sector undertakings and the ordnance factories, apart from the expenditure on meeting the committed liabilities arising from the ongoing contracts could consume a sizable portion of this kitty,” Mr Cowshish adds.

“More importantly, there is a gap of more than Rs 77,000 crore between the requirement for capital expenditure projected by the services and the allocation for the current year. Budgetary constraints cannot be wished away and there is a possibility these could trump MoD’s claims about, and the industry’s expectations from, the positive list,” he observes.

View of SIDM

In an official statement issued by Society of Indian Defence Manufacturers (SIDM) late Monday evening, Jayant D Patil, President, SIDM said: “The List is comprehensive and has big ticket items that will be built in India and a great boost to making India ‘Aatmanirbhar’.”

The government and the armed forces have placed their confidence in the Industry to deliver cutting-edge Defence Technology for India’s security requirements, the President of SIDM has said. According to the SIDM note, this list is expected to create long term opportunities for the industry, across the broad spectrum of military capabilities and will attract fresh investments into defence technologies and manufacturing capacities.

India’s import of arms decreases by 33 per cent, says SIPRI

Source: The Economic Times, Mar 15, 2021

India’s import of arms decreased by 33 per cent between 2011-15 and 2016-20 and Russia was the most affected supplier, according to a report released on Monday by Stockholm-based defence think-tank SIPRI. It said the drop in Indian arms imports seemed to have been the result of the country’s complex procurement processes combined with an attempt to reduce its dependence on Russian arms.

In the last few years, India has taken a series of measures to boost domestic defence industry with an aim to reduce dependence on imported military platforms and hardware.

In reply to a question in Rajya Sabha, Minister of State for Defence Shripad Naik said approval (Acceptance of Necessity) was given to 112 proposals between 2018-19 and 2020-21 (till December) worth around Rs 1.99 lakh crore under various categories of capital acquisition to promote the domestic defence manufacturing.

The report by the Stockholm International Peace Research Institute (SIPRI) said, “Arms imports by India decreased by 33 per cent between 2011-15 and 2016-20. Russia was the most affected supplier, although India’s imports of US arms also fell, by 46 per cent.”

“The drop in Indian arms imports seems to have been mainly due to its complex procurement processes, combined with an attempt to reduce its dependence on Russian arms. India is planning large-scale arms imports in the coming years from several suppliers,” it said.

The government has been majorly focusing on boosting domestic defence production and set a target of Rs 1.75 lakh crore (USD 25 billion) turnover in defence manufacturing by 2025.
In May, Finance Minister Nirmala Sitharaman rolled out a number of reform measures for the defence sector including making separate budgetary outlay to procure Indian-made military hardware, increasing FDI limit from 49 per cent to 74 per cent under the automatic route and generating a year-wise negative list of weapons which won’t be imported.

The SIPRI report said Russia and China both saw their arms exports falling. Arms exports by Russia, which accounted for 20 per cent of all exports of major arms in 2016-20, dropped by 22 per cent to roughly the same level as in 2006-10.

“The bulk — around 90 per cent — of this decrease was attributable to a 53 per cent fall in its arms exports to India,” it said.

“Russia substantially increased its arms transfers to China, Algeria and Egypt between 2011-15 and 2016-20, but this did not offset the large drop in its arms exports to India,” said Alexandra Kuimova, a researcher with the SIPRI Arms and Military Expenditure Programme.

The report said exports by China, the world’s fifth largest arms exporter in 2016-20, decreased by 7.8 per cent between 2011-15 and 2016-20. Chinese arms exports accounted for 5.2 per cent of total arms exports in 2016-20. Pakistan, Bangladesh and Algeria were the largest recipients of Chinese arms, it added.

The SIPRI said the US remained the largest arms exporter, increasing its global share of arms exports from 32 to 37 per cent between 2011-15 and 2016-20, adding it supplied major arms to 96 states in 2016-20, far more than any other supplier.

“Almost half (47 per cent) of US arms transfers went to the Middle East. Saudi Arabia alone accounted for 24 per cent of total US arms exports. The 15 per cent increase in US arms exports between 2011-15 and 2016-20 further widened the gap between the US and second largest arms exporter Russia,” the report noted.

It said France increased its exports of major arms by 44 per cent and accounted for 8.2 percent of global arms exports in 2016-20. “India, Egypt and Qatar together received 59 per cent of French arms exports,” it said.

DAC approves ₹13,700 crore for various weapons, equipment

Source: The Hindu Business Line, Feb 23, 2021

New Delhi: The Defence Acquisition Council (DAC), under the chairmanship of Raksha Mantri Rajnath Singh, on Tuesday approved capital acquisition proposals totalling ₹13,700 crore for various weapons, platforms, equipment and systems for the Indian Army, Navy and the Air Force.

“Three Acceptance of Necessities (AoNs) for an overall cost of ₹13,700 crore were accorded. All these AoNs are in the highest priority category of Defence Acquisition viz ‘Buy ((Indian-IDDM (Indigenously Designed, Developed and Manufactured)),” the Defence Ministry said in a statement.

All these acquisition proposals will be indigenously designed, developed and manufactured.

These will include, inter alia, platforms and systems designed and developed by the Defence Research and Development Organisation (DRDO), it said.

To meet the Atmanirbhar Bharat goals of the government on time-bound defence procurement process and faster decision-making, and to systematically work towards reducing the time taken for capital acquisition, the DAC also approved that all capital acquisition contracts (delegated and non-delegated) other than D&D cases shall be concluded in two years. “The Ministry, in consultation with the services and all stakeholders, will come up with a detailed plan of action for achieving the same,” it added.

New defence acquisition policy to come into force from October 1

Source: Business Standard, Sept 29, 2020

New Delhi: Defence Minister Rajnath Singh on Monday unveiled the new Defence Acquisition Procedure of 2020 (DAP 2020), which will govern the procurement of defence equipment from the capital budget. It will supersede the Defence Procurement Procedure of 2016 from October 1.

Taking its cue from the prime minister’s Atmanirbhar Abhiyan (self-reliance campaign), DAP 2020 reserves several procurement categories for indigenous firms. “The categories of Buy (Indian designed, developed and manufactured), Make I, Make II… and SP model will be exclusively reserved for Indian vendors…,” stated the MoD on Monday.

DAP 2020 defines an “Indian vendor” as a company that is owned and controlled by resident Indian citizens, with foreign direct investment (FDI) not more than 49 per cent.

The new policy introduces a significant new procurement category called “Buy (Global–Manufacture in India).” This stipulates indigenisation of at least 50 per cent of the overall contract value of a foreign purchase — for example fighter aircraft — bought with the intention of subsequently building it in India with technology transfer. Meeting the difficult indigenisation requirement would force the vendor to build the equipment in India, rather than supply most of it ready-built from abroad.

This category also encourages vendors to set up facilities in India to manufacture spares and assemblies for the basic equipment, and to set up maintenance, repair, and overhaul (MRO) facilities. With the FDI cap recently raised to 74 per cent, the foreign vendor could do this through a joint venture (JV) firm in India.

The new procedure promotes greater indigenous content in arms and equipment of the military procures, including equipment manufactured in India under licence. In most acquisition categories, DAP-2020 stipulates 10 per cent higher indigenisation than DPP 2016.

For the contentious business of measuring indigenous content, DAP 2020 has instituted a simple benchmark. “Indigenous content will now be calculated on ‘Base Contract Price’, that is Total Contract Price, less taxes and duties,” stated the MoD. The “import embargo list” of 101 items that the government promulgated last month has been specifically incorporated into DAP 2020.

The new policy seeks to curb the long-running equipment trials the military carries out on equipment offered for procurement. “DAP 2020 emphasises the need to conduct trials with an objective to nurture competition based on the principles of transparency, fairness and equal opportunities to all and not as a process of elimination,” stated the MoD.

There are also important changes in the “Make” procedure, under which the MoD reimburses Indian vendors a percentage of the cost they incur on developing equipment.

The Make-1 procedure now incorporates a limit per vendor of Rs 250 crore and reimburses only 70 per cent of the development cost, as compared to 90 per cent in DPP 2016. Under the Make II procedure, defence companies themselves fund the development of equipment to offer the military.

DAP 2020 incorporates a new Make III procedure in which indigenous firms manufacture equipment, platforms or spares for import substitution.

Offsets

DAP 2020 features important changes in the offset guidelines, which under current norms, require vendors who win contracts worth over Rs 2,000 crore to plough back 30 per cent of the contract value into designated defence R&D, manufacturing and services. The new policy exempts vendors from offset liability in contract processed under the government-to-government route, as was the Rafale purchase or most contracts concluded with Russia. Nor will offsets be imposed on single-vendor purchases.

Under the new offset policy, “preference will be given to manufacture of complete defence products over components”, states the MoD. In addition, multipliers have been introduced to direct offsets to chosen sectors, e.g. micro, small, and medium enterprises (MSMEs). The new procedure has been drawn up by a review committee headed by the acquisition chief of the Ministry of Defence (MoD), Apurva Chandra. Reacting to the new policy, the Confederation of Indian Industry stated: “DAP 2020 is expected to provide a major boost to the Indian industry… It mandates the MOD to engage with the Indian industry during early stages of capability planning.”

Govt permits up to 74% FDI under automatic route in defence sector

Source: The Economic Times, Sept 17, 2020

NEW DELHI: The Department for Promotion of Industry and Internal Trade (DPIIT) on Thursday issued a press note permitting foreign direct investment (FDI) in defence production above 74 per cent on the automatic route. This would be subject to access to modern technology or for ‘other reasons’ that needs to be recorded.

FDI in defence production is automatic upto 74 per cent, the department said.

Till now, 100 per cent foreign investments were permitted in the defence industry – 49 per cent under the automatic route and government approval was required beyond that.

The press note has stipulated that foreign investments in the defence sector would be subject to scrutiny on the grounds of national security and the government reserves the right to review any foreign investment in the sector that affects or may affect national security.

As per the Press Note 4 (2020 series), FDI up to 74 per cent under automatic route shall be permitted for companies seeking new industrial licences.

DPIIT also said that infusion of fresh investment up to 49 per cent in a company not seeking industrial licence or which already has government approval for FDI in defence, shall require “mandatory” submission of a declaration with the defence ministry in case change in equity/shareholding pattern or transfer of stake by existing investor to new foreign investor for FDI up to 49 per cent within 30 days of such change.
“Proposal for raising FDI beyond 49 per cent from such companies will require government approval,” it added.

The government has retained the condition that investee company should be structured to be self-sufficient in the areas of product design and development. “The investee/joint venture company along with the manufacturing facility, should also have maintenance and life cycle support facility of the product being manufactured in India,” it said.

Licence applications will be considered and licences given by the DPIIT in consultation with Ministry of Defence and Ministry of External Affairs.

The decision will take effect from the date of Foreign Exchange Management Act notification.

Rajnath meets Russian counterpart, discusses ways to deepen defence ties

Source: Business Standard, Sept 04, 2020

Defence Minister Rajnath Singh on Thursday met his Russian counterpart General Sergey Shoigu in Moscow wherein the duo discussed about strengthening defence and strategic cooperation between both the two countries.

“Excellent meeting with the Russian Defence Minister General Sergey Shoigu in Moscow today. We talked about a wide range of issues, particularly how to deepen defence and strategic cooperation between both the countries,” said Rajnath Singh in a tweet.

Singh reached Moscow on Wednesday on a three-day visit to Russia to attend the combined meeting of Defence Ministers of Shanghai Cooperation Organisation (SCO).

Meanwhile, Defence Secretary Dr Ajay Kumar held a meeting with Dmitry Shugaev, Director, Federal Service of Military-Technical Cooperation, Russia.

According to a tweet by Russian Embassy in India, Russian Defence Minister Sergey Shoigu thanked Defence Minister of India Rajnath Singh for visiting Moscow in June and highlighted colossal potential of collaboration between Russia and India. “Military and military and technical cooperation were discussed.”

Minister of State for External Affairs, V Muraleedharan spoke at the India-Russia Young Scholars International e-Conference 2020 on the 20th anniversary of India-Russia Strategic Partnership.

“The time tested India-Russia relationship is based on unparalleled mutual trust and respect, common interests and concurrence on fundamental issues of global affairs,” he said in a tweet.

“The dynamism of the India-Russia relationship has propelled the bilateral cooperation beyond the traditional areas to almost all sectors of the economy benefitting the people of both countries. Our trade has also increased by 40,” he added.