New ac­qui­si­tions – Boost to do­mes­tic in­dus­try

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[ By Ran­jeet Kumar

In a ma­jor push to de­fence man­u­fac­tur­ing in In­dia the De­fence Ac­qui­si­tion Coun­cil (DAC), un­der the Min­is­ter of De­fence Arun Jait­ley, has given a clear­ance to make high-tech de­fence prod­ucts in In­dia which in­cludes sys­tems and plat­forms from light util­ity he­li­copters (LUH) to Ar­jun Tanks and even leav­ing the door open for the Americans to jointly de­velop and man­u­fac­ture more ad­vanced ver­sions of their anti-tank mis­sile Jave­line in In­dia in col­lab­o­ra­tion with In­dian pri­vate or pub­lic sec­tor firms. Over­all, the clear­ances given by DAC will gen­er­ate business worth ` 40,000 crore for the In­dian de­fence sec­tor.

Prime Min­is­ter Naren­dra Modi, from the ram­parts of the Red Fort had ex­pressed his re­solve to en­cour­age do­mes­tic pri­vate man­u­fac­tur­ing in de­fence sec­tor and had said that he will en­cour­age ‘Make in In­dia’ pol­icy which will lay a new foun­da­tion for the man­u­fac­tur­ing sec­tor of In­dia that is vi­tal for In­dian econ­omy. While launch­ing the in­dige­nous de­stroyer INS Kolkata on Au­gust 16 Prime Min­is­ter Modi had said, “My gov­ern­ment has taken im­por­tant steps in im­prov­ing in­dige­nous de­fence tech­nol­ogy. We dream about mak­ing In­dia strong enough to ex­port de­fence equip­ment to the world.”

Since In­dia im­ports de­fence equip­ments worth over $8 bil­lion an­nu­ally, it is de­sir­able that the gov­ern­ment adopts pol­icy which is com­pat­i­ble with en­cour­ag­ing the for­eign equip­ment sup­pli­ers to man­u­fac­ture their sys­tems in In­dia it­self in col­lab­o­ra­tion with In­dian part­ners. Only a month ago the De­fence Min­istry had an­nounced the re­vised for­eign di­rect in­vest­ment (FDI) pol­icy which raised the limit from 26 to 49 per cent. Though the for­eign man­u­fac­tur­ers are not en­tirely happy over this pol­icy, they see it as a step in right di­rec­tion and ex­pect en­hance­ment of the limit by next an­nual bud­get. Per­haps within the con­fines of 49 per cent FDI limit the In­dian de­fence sec­tor is en­thused as it will give them con­trol­ling stakes in the de­fence com­pa­nies.

Said Sujith Hari­das of CII, “Key de­ci­sions on ma­jor de­fence pro­cure­ments have fi­nally started rolling out. The vi­sion state­ment of the Prime Min­is­ter in his In­de­pen­dence Day speech ‘Make in In­dia,’ is be­ing im­ple­mented in an ex­pe­di­tious man­ner. In the sec­ond meet­ing of DAC, the Min­istry of De­fence (MoD) has cleared projects worth ` 17,500 crore. In the first DAC meet­ing, Avro project was cleared. CII wel­comes the Gov­ern­ment of In­dia ap­proach of ‘Make in In­dia’ which will def­i­nitely give a boost to the man­u­fac­tur­ing sec­tor, re­vive econ­omy and cre­ate mil­lions of jobs in In­dia.”

It is in­deed a sig­nif­i­cant decision as it opens vast door for In­dian pri­vate de­fence in­dus­try and pose a chal­lenge to In­dian pub­lic sec­tor de­fence in­dus­try to gear up to face the com­pe­ti­tion, con­sid­er­ing the fact that a coun­try which plans to im­port weapon sys­tems worth over $100 bil­lion in the next decade, should have a con­ge­nial in­vest­ment regime so as to en­cour­age the for­eign com­pa­nies to set up their shops in In­dia and make the coun­try as the in­ter­na­tional man­u­fac­tur­ing and ex­port hub.

How­ever, be­fore mov­ing on to this level, the DAC, headed by De­fence Min­is­ter Jait­ley, took a land­mark decision, which will have

] a sig­nif­i­cant bear­ing on the na­ture of fu­ture ac­qui­si­tion de­ci­sions.

Had this decision been put in place decades ago, In­dia would have been to­day a ma­jor pro­ducer of weapon sys­tems. How­ever, this be­lated decision has opened new op­por­tu­ni­ties, as a plat­form like light util­ity he­li­copter of not great tech­no­log­i­cal value needed a gov­ern­ment push. A coun­try man­u­fac­tur­ing ad­vanced light he­li­copter, light com­bat air­craft, etc could eas­ily make such ro­tary plat­form. The Hin­dus­tan Aero­nau­tics Limited (HAL) should have been en­cour­aged to pro­duce such plat­forms in In­dia, con­sid­er­ing its tech­no­log­i­cal and hu­man re­sources strength.

How­ever, the lat­est decision to man­u­fac­ture 400 he­li­copters in In­dia would leave the field wide open for not only HAL but other emerg­ing pri­vate sec­tor com­pa­nies to set up joint ven­tures in In­dia. The or­der for 197 LUH would also have en­tailed off-the-shelf pur­chase of a few dozen and li­cence man­u­fac­ture of the rest, but that would have closed the chap­ter. Not only In­dian armed forces, but civil­ian agen­cies also need such ro­tary plat­forms, which would need sev­eral com­pet­ing com­pa­nies to sup­ply for decades to come. So the or­der for 197 LUH worth ` 6,000 crore would not re­main limited to this fig­ure.

Sim­i­larly, the or­der for in­dige­nous main bat­tle tank Ar­jun Mk-II has also given another op­por­tu­nity for the In­dian pub­lic sec­tor company to strengthen its base. Due to skep­ti­cism in the Army Head­quar­ters over the ca­pa­bil­i­ties of the Ar­jun Tank, the coun­try had to im­port the Rus­sian T-90 tanks. Now, in fu­ture Army will have to rely on the ca­pa­bil­i­ties of the Ar­jun Tanks. The or­der worth ` 6,600 crore for 118 Ar­jun Tanks will em­bolden the In­dian PSU and ex­pand the In­dian mar­ket.

Also the midlife up­grade of six sub­marines will be car­ried out in In­dia, a pro­gramme worth ` 4,800 crore. This will in­clude four of the Rus­sian-made Kilo class sub­marines and two Ger­man-built HDW sub­marines. The MoD has also given job to In­dian com­pa­nies, from both pub­lic and pri­vate, for the ac­qui­si­tion of in­te­grated anti-sub­ma­rine de­fence suits for 11 front­line war­ships worth ` 1,170 crore.

For the Army, the DAC has cleared the sup­ply of bor­der com­mu­ni­ca­tion sys­tem for the de­ploy­ment along Sino-In­dian bor­der at a cost of ` 900 crore, to be sourced do­mes­ti­cally. The clear­ance of at­tack he­li­copter Apache and heavy-lift he­li­copter Chi­nook for the In­dian armed forces has also off­set el­e­ment which will ben­e­fit In­dian de­fence in­dus­tries. The ` 15,000-crore deal will have more than one-third do­mes­tic sourc­ing re­quire­ments. Be­sides, the decision is also a sig­nal to the US Ad­min­is­tra­tion that In­dia will con­tinue to deepen de­fence re­la­tions with US, which has emerged on the top slot as for­eign de­fence sup­plier to In­dia. The MoD has also cleared the In­dian Navy pro­posal to ac­quire 16 multi-role he­li­copters at a cost of ` 1,800 crore.

Be­sides Apache and Chi­nook he­li­copters the anti-tank Jave­line deal will also of­fer good business to In­dian de­fence in­dus­tries, which will also add to the kitty of com­mit­ments de­liv­ered to the US Ad­min­is­tra­tion. The Jave­line mis­siles will be man­u­fac­tured in In­dia after the ini­tial off-the-shelf ac­qui­si­tions.

The DAC decision on ma­jor ac­qui­si­tions clearly in­di­cates that the MoD has em­barked on a def­i­nite roadmap of the in­di­geni­sa­tion of de­fence in­dus­try in the coun­try.

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