Finance Minister announces hike in FDI in defence production

Source: Business Standard, May 16, 2020

New Delhi: To boost Make in India in defence production, Finance Minister Nirmala Sitharaman on Saturday said FDI limit in defence manufacturing will be hiked to 74 per cent from 49 per cent while some weapons and platforms will be banned for imports.

Items banned for imports can only be purchased from within the country, she said presenting the fourth tranche of the economic stimulus package.

Also, there will be indigenisation of some imported spares, she said adding separate budget provisioning for domestic capital procurement will be done.

This, she said, will reduce the huge defence import bill.

Ordnance Factory Boards will be corporatised for better management and eventually get listed on the stock market, she said adding corporatisation is not privatisation.

For the time-bound defence procurement process and faster decision-making, project management unit (PMU) to support contract management will be set up. The FDI limit in the defence manufacturing under automatic route will be raised from 49 per cent to 74 per cent, she said.

New defence procurement policy gets mixed reaction from industry

Source: Business Standard, Apr 06, 2020

New Delhi: The defence industry has expressed mixed reactions to the proposed Defence Procurement Procedure of 2020 (DPP-2020), which the Ministry of Defence (MoD) released in draft form on February 20.

The MoD has invited suggestions and recommendations by April 17. After that, DPP-2020 will be promulgated and will govern all acquisitions initiated thereafter. It will supersede DPP-2016 as the MoD’s handbook for purchasing of weapons, warships and equipment from the defence capital budget.

A Business Standard survey of small, medium and large defence firms reveals broad agreement that DPP-2020 has been hurriedly finalised and uploaded. Important annexures and appendices have been left out and even page numbering has not been done.

Like successive DPPs since the first in 2002, the draft DPP-2020 is longer and more complex than any other that preceded it. This despite the MoD’s stated aim of simplifying acquisition procedures to speed up the military’s modernisation. A 719-page long, the draft DPP-2020 is far wordier than its predecessor — the 430-page DPP-2016, which has, over the past four years, been amended 47 times for business process reengineering.

This is so, even though the draft DPP-2020 excludes an entire chapter on the Strategic Partnership Model of procurement since no changes are being recommended to the version in DPP-2016.

Abhishek Jain of software firm Zeus Numerix sees a change of soul in DPP-2020. Unlike previous DPPs, which he says primarily laid out guidelines on procuring foreign equipment, this time around there is a full chapter on indigenous innovation, including how single vendor purchase is acceptable for an innovative product developed by an Indian company, which has 50 per cent indigenous content.

However, Rahul Chaudhry, former chief of Tata Power (Strategic Electronics Division), believes the 2020 draft scatters its focus on various government policies at the cost of practicality. DPP-2020 aims to implement Make in India, Start Up India and support to micro, small and medium enterprises. These policies should be left to other government agencies such as the Department of Industrial Policy and Promotion, Securities and Exchange Board of India, and the Technology Development Board. These agencies, with their specialised capabilities, must be allowed to implement these national policies without MoD interference. This will make the DPP simpler and implementable, says Chaudhry.

There is appreciation across the industry for DPP-2020’s proposed enhancement of indigenous content requirements in foreign procurements, most of which have been raised by 10 per cent. This increase will boost self-reliance, allow a greater role for the indigenous defence manufacturing ecosystem and reduce the life cycle cost of the foreign equipment we buy, said Jayant Patil, who oversees L&T’s defence vertical and heavy engineering division.

While there is appreciation for some of the proposed measures to expedite equipment procurement — such as simplifying the procedure for accord of necessity (AoN) for procurements — there is broad dismay that DPP-2020 does not reduce procurement time frames. The target for completing the acquisition of an equipment remains 70-126 weeks, in addition to the time required for the military to frame the requirement and obtain AoN from the MoD.

The current 92 week deadline for a Make-1 category prototype development contract is too high. If we cut procurement time the vendors would be able to reduce prices by 10-20 per cent, says Jain of Zeus.

Ashok Atluri of Zen Technologies believes procurement could be speeded up by building transparency into the process, through measures like publicly posting the movement of the procurement file. He suggests the laying down of stringent penalties for vendors who are found to have overstated indigenisation levels.

Atluri also points to positives in DPP-2020, such as a new clause that allows the MoD to fall back on the second-lowest cost vendor (L-2), if the lowest cost (L-1) vendor backs out during cost negotiations.

Rajesh Dhingra, who heads RNaval, applauds the newly introduced option to lease equipment, where purchase would be too expensive and cost-ineffective. Leasing will spare funds for capital acquisition. But DPP-2020 should identify the role of local industry in leasing cases, specifying responsibility for maintaining, operating and training, he said.

Others believe leasing should be approached with caution, being a potential debt trap. Increased liabilities from leasing, including embedded interest pay out, could cut the capital funds available for fresh contracts, says L&T’s Patil.

“Increased liabilities from leasing, including embedded interest pay out, could cut the capital funds available for fresh procurement contracts,” says L&T’s Patil.

The new offset rules remain an area of concern for industry, with DPP-2020 proposing to exempt government-to-government (G2G) purchases from offsets. “With the lion’s share of the capital budget going on G2G procurements, this will cut down offsets significantly,” said Dhingra. There is also concern that the DPP-2020 reduces government funding for “Make-I” category procurements, in which indigenous firms develop complex platforms and systems, with financial support from the MoD. Till 2016, the government’s share of funding for “Make I” projects was 80 per cent and DPP-2016 increased that to 90 per cent. DPP-2020, however, proposes to slash government funding to just 70 per cent. “This would dissuade our defence industry from participating in large platform development programmes, where the prototype development cost exceeds a few hundred crore,” says Patil.

India, US sign $3 bn deal for military helicopters

Source: The Economic Times, Feb 26, 2020

New Delhi: India and the US on Tuesday signed a $3 billion military helicopter deal during President Donald Trump’s visit. The clearances for the pact were rushed through in anticipation of the high-profile visit.

The US President described the deal for 24 MH-60 Sikorsky Romeo multi-role helicopters and six Apache attack choppers as a highlight of the visit and said it would contribute to interoperability.

“Earlier today, we expanded our defence cooperation with agreements for India to purchase more than $3 billion of advanced American military equipment, including Apache and MH-60 Romeo helicopters. These deals will enhance our joint defence capabilities as our militaries continue to train and operate side by side,” Trump said. Read the rest of this entry »

BHEL signs pact with Russian firm to undertake joint defence projects

Source: Business Standard, Feb 12, 2019

New Delhi: State-run engineering firm BHEL on Wednesday said it has signed a pact with Rosoboronexport, Russia, for cooperation and undertaking projects for defence systems.

The memorandum of understanding (MoU) was signed during the 5th India Russia Military Industrial conference held in Lucknow, BHEL said in a statement.

The aim of the MoU is to cooperate and undertake joint projects and operations for defence systems. This will help in leveraging BHEL’s capabilities in the defence sector in association with Russian OEMs under the Make in India’ initiative and offer indigenous support and solutions to the Indian defence forces, it added.

India now exports defence products to 42 countries

Source: LiveMint.com, Feb 10, 2019

New Delhi: India may be a big importer of defence equipment but has been making steady progress in exports of such products to a number of countries including those who are big names in the export market like the US, Australia, Finland, France, Germany, Israel, South Africa and Sweden.

These countries are in the list of 42 nations that also included Azerbaijan, Seychelles, Estonia, Indonesia, Guinea and the Philippines.

Minister of State for Defence, Shripad Naik, in a written reply to Rajya Sabha on Monday said the “cost of the items and quantum of foreign exchange earned varies from company to company” and the ministry did not keep a record of the quantum of foreign exchange earned. Read the rest of this entry »

Army invites high-tech start-ups to meet defence equipment challenges

Source: Business Standard, Dec 23, 2019

New Delhi: At the fifth annual Army Technology Seminar (ARTECH 2019) in Delhi on Monday, the army invited ten start-up innovators to describe game-changing, high-technology products that the military could use.

One by one, they described their products: a humanoid robot that mimicked the actions of a human controller in a holographic suit; a spray-on, titanium nano-coating that renders an area bacteria-free and fungal-free; a thermal jacket made of fabric infused with graphene ink that generates heat on application of electric power, creating a warm micro-environment for the wearer to cope with extreme cold; and an encrypted Block Chain communications technology with multiple applications, such as Block Vote – an application that lets soldiers on the border exercise their ballot in secret.

Urging young innovators to develop products for the military, army chief General Bipin Rawat released a “Compendium of Problem Definition Statements”, in which the army listed out its specific technology challenges for which it sought innovative indigenous solutions from the industry and academia.

The army’s deputy chief, Lieutenant General SS Hasabnis, underscored the success of four problem compendia released in previous ARTECHs, stating that “136 of our over 150 problem statements issued over the last three years have been responded to by academia and industry.”

Alongside this, the 15 challenges the army has put out under the “Innovations for Defence Excellence” (iDEX) scheme have received “an overwhelming 164 responses”, said Hasabnis.

Forty-four winners of these challenges are presently being provided with funding for developing the innovative technologies they have proposed.

Currently, multiple channels exist for industry and academia to offer innovative solutions to meet the army’s requirements: The “Make-2” procurement category in which industry or individuals can make suo moto proposals to the army; in response to “Innovations for Defence Excellence” (iDEX) challenges; proposals under the “Technology Development” head’ or as “Army Technology Board” projects.

Read the rest of this entry »

Rs 26k-crore order for building Tejas Mark 1A to open door for Mark 2

New Delhi: After months of negotiations, the Indian Air Force (IAF) and Hindustan Aeronautics Ltd (HAL) have fixed the price of the Tejas Mark 1A light combat aircraft (LCA) at about Rs 310 crore per fighter, say Ministry of Defence (MoD) sources involved in the negotiations.

Now HAL is awaiting a formal contract, worth some Rs 26,000 crore for building 83 Tejas Mark 1A fighters that the MoD has already green-lighted for purchase. According to the agreed schedule, delivery of the Mark 1A will begin 36 months after the contract date. If the order is placed at the start of 2020, Tejas Mark IA deliveries will start in 2023.

With 16 fighters to be delivered each year it would take another five years to deliver all 83 fighters – that is by 2028.

“We should be signing the contract very soon”, IAF boss, Air Chief Marshal RKS Bhadauria, had said on October 4. That is now imminent.

Girish Deodhare, chief of the Aeronautical Development Agency (ADA) – the Defence R&D Organisation (DRDO) agency responsible for the Tejas programme – spoke exclusively to Business Standard about the Tejas Mark 1A fighter. He described it as a bridge between the current Tejas Mark 1 and the Mark 2 fighter that ADA is developing. He says the latter will be, from the standpoint of size, sophistication and capability, far superior to the Mark 1 fighter.

Read the rest of this entry »

Modi govt asks global warship makers to build new submarines for $6.6 bn

Source: Business Standard, Jul 11, 2019

Prime Minister Narendra Modi’s administration has asked global warship makers to submit proposals to build six conventional submarines in India to boost local shipyard capability and plug gaps in the navy’s underwater warfare fleet.

France’s Naval Group SA, German Thyssenkrupp Marine Systems GmBH, Swedish Saab Kockums, Spanish Navantia SA and Russian Rosoboronexport OJSC were asked to show if they can transfer technology to build the diesel-electric powered submarines in India, people familiar with the matter said in New Delhi, asking not to be identified as the discussions were private.

The request for expression of interest to the foreign companies were issued earlier this month, they said, but the award of contract could take at least three years. Read the rest of this entry »

India seeks to buy $2 bn worth warships to meet security challenges

Source: The Hindu Business Line, Jul 02, 2019

New Delhi: India sought bids for purchase of warships and support vessels for its navy and coast guard as it ramps up security of its maritime border in the Indian Ocean region.

The government on Monday asked seven shipyards to submit proposals for the construction of six missile warships and other smaller vessels worth ₹15,000 crore ($2.2 billion), the Defence Ministry said in a statement. The tender includes eight fast patrol vessels, 12 hovercrafts and eight missile-cum-ammunition barges.

The shipbuilders invited include private shipyards Larsen & Toubro Ltd. and Reliance Naval & Engineering Ltd., apart from the state-run Mazagon Dock Shipbuilders Ltd., Garden Reach Shipbuilders and Engineers Ltd., Goa Shipyard Ltd., Hindustan Shipyard Ltd. and Cochin Shipyard Ltd., people with knowledge of the matter said. They asked not to be identified citing rules. Read the rest of this entry »

Indian Navy signs 10-year lease for third Russian nuclear-submarine

Source: Business Standard, Mar 07, 2019

New Delhi: Underlining slow progress in the indigenous project to design and build six nuclear-powered attack submarines (SSNs), India and Russia have signed a 10-year lease for a new Russian SSN, which will join the Indian fleet around 2025.

The navy already operates a Russian SSN, called INS Chakra, which was taken on a 10-year lease in April 2012 for almost a billion dollars. This was to return to Russia in 2022, but defence ministry sources say its lease could be extended by three years, while the next INS Chakra is built.

India leased its first nuclear submarine, the Charlie-class INS Chakra, in 1988. That went back to Russia in 1991 and the navy did without an SSN for 21 years until it leased an Akula-class SSN, the second INS Chakra, in 2012.

India has indigenously designed and built a nuclear-propelled, nuclear ballistic missile submarine (SSBN), called INS Arihant. A second SSBN, called INS Arighat, is to follow shortly, with two more in the pipeline. SSBNs are not a part of the navy’s combat fleet. Read the rest of this entry »