The document discusses the Wassenaar Arrangement, an international export control regime. It provides background on how the arrangement was established in the 1990s to control the spread of arms and dual-use technologies. The key goals of the arrangement are to promote transparency in arms transfers, prevent destabilizing accumulations of weapons, and enhance cooperation between member states on export controls. The arrangement maintains control lists of munitions and sensitive dual-use items that member states agree to regulate according to established criteria.

1. Eye on defence
December 2012
Dear readers,
I would like to take this opportunity to wish all of you a Merry Christmas
and a very happy New Year.
India is the largest importer of arms in the world, which is due to
our volatile neighborhood. Therefore, the Ministry of Defence (MoD)
and the Government of India have always stressed upon the need to
become self reliant to meet our defence needs. Under the Defence
Procurement Procedure (DPP), the “MAKE” procedure is one of the
important ways by which this agenda of indigenization is being pushed forward. In this issue of
Eye on Defence, we have tried to throw some light on this topic and also tell you about some of
the “MAKE” programs that provide exciting opportunities for the domestic defence industry to
play an important role in nation building.
Contents The DPP is an evolving document and the latest edition of DPP 2013 is expected in the first
couple of months of 2013. Throughout its evolution, the DPP has taken steps to harmonize
• Introduction 1 with the extant regulations of the Government of India. One of the areas where this
harmonization is really needed is to define a “defence” product. Due to multiplicity of lists,
• The Wassenaar Arrangement
there is considerable ambiguity regarding the products on which an Industrial License (IL) is
and its relevance in the
mandatory and products on which the 26% FDI limit applies. It should be noted that whereas
Indian context 2
DPP 2006 made it mandatory for the Indian Offset Partner (IOP) to have an IL, this condition
• Impact of “Make” procedure was removed in DPP 2008 and further relaxed in DPP 2011. The “Wassenaar Arrangement”
on Indian defence and its lists are likely to present itself as a suitable solution to this problem and we analyze this
industrial capability 7 aspect.
• MSME development: vital for an The private sector was permitted to enter defence production in 2001 and we have seen some
inclusive defence industrial base 12 remarkable achievement by large Indian conglomerates, thereafter. However, the same cannot
be said about the micro, small and medium enterprises (MSMEs), which form the majority of
• Request for Information (RFIs) 15
the industrial base of this country. The Revised Defence Offset Guidelines-2012 has taken a
• Request for Proposals (RFPs) 16 bold step of introducing multipliers for providing a boost to the prospects of the MSME’s. In this
issue, we try to highlight some of the other steps that could further help their cause.
• List of Industrial Licenses (ILs)
filed for the month of September Among the regular sections, we have industrial license applicants, new projects and
2012 - October 2012 19 investments, joint ventures and alliances, country-level deals and the latest buzz in the
industry.
• New projects/investments/
contracts 20 I hope you find the last issue of this year useful. It has been our constant endeavor to
make this publication increasingly relevant to you and will appreciate your comments and
• Joint ventures and alliances 23
suggestions in this regard.
• Country-level deals and
initiatives 25
• Industry buzz 27
K. Ganesh Raj
• Sources 32 Partner and Leader
Aerospace and Defence Practice

2. The Wassenaar Arrangement and
its relevance in the Indian context
How did it come into being?
After the end of the Cold War, members of the former
Coordinating Committee for Multilateral Export Controls
(COCOM) export control regime recognized that COCOM’s
focus on restricting exports to the former Soviet Union and
Eastern bloc was no longer an appropriate basis for export
control. There was a need to establish a new arrangement
to deal with risks posed to regional and international
security and stability due to the spread of conventional
weapons and dual-use goods and technologies.
Accordingly, at a High Level Meeting (HLM) on 16
November 1993 in The Hague, representatives of 17
COCOM member states agreed to terminate COCOM and
establish a new multilateral arrangement, temporarily
known as the “New Forum.” This decision was confirmed
at another HLM in Wassenaar, Netherlands, held on
29–30 March 1994. COCOM ceased to exist on 31 March
1994. Participating states agreed to continue the use of
COCOM control lists as a basis for global export controls
on a national level until a new arrangement could be
established. Agreement to establish the “Wassenaar
Arrangement” was reached at the HLM held on 19
December 1995. The first Plenary Meeting of the now-
operational Wassenaar Arrangement was held on 12–13
December 1996 in Vienna.
What is it and what does it hope to achieve?
The Wassenaar Arrangement (WA) is the first multilateral,
voluntary export controls regime for conventional arms
and dual-use goods and technologies. It categorizes all
arms and dual-use items under two lists — Munitions List
under eight categories (derived from the UN Register of
Conventional Arms), and Sensitive Dual Use Goods and
Technologies list. The WA countries maintain effective
export controls for the items on the agreed lists. This is
achieved through voluntary exchange of information at
annual conferences by the WA members.
The objective of WA is to contribute to regional and
international security by controlling the transfer of
weapons and sensitive technologies to destabilizing
elements. It seeks to achieve this through the following:
Eye on defence | 2

3. • Promoting transparency and increased responsibility Control lists
in transfers of conventional arms and dual-use
goods and technologies, and therefore, preventing In order to place an item on the lists, member states take
destabilizing accumulations into account the following criteria:
• Preventing the acquisition of conventional arms and • Availability outside participating states
dual-use goods and technologies by terrorist groups • Ability to effectively control the export of the goods
and organizations as well as by individual terrorists
• Ability to make a clear and objective specification of
• Enhancing co-operation to prevent the acquisition of the item
armaments and sensitive dual-use items for military
• Controlled by another regime, such as the Australia
end-uses if the situation in a region or the behavior
Group, Nuclear Suppliers Group or Missile Technology
of a state is, or becomes, a cause for serious concern
Control Regime
to the participating states
Participating states practice export control on all items
set forth in the Munitions List and the List of Dual-Use
Member states Goods and Technologies with the objective of preventing
Membership in the WA is universal and non- unauthorized transfers or re-transfers of those items.
discriminatory for countries meeting the established
1. Munitions List: The Munitions List has 22 categories,
criteria:
which are not labeled. Conventional arms appearing
• Produce/export arms or associated dual-use goods in this list fall under eight broad weapon categories
and technologies — battle tanks, armored combat vehicles (ACVs),
large-caliber artillery, military aircraft/unmanned
• Implement national policies that do not permit the
aerial vehicles, military and attack helicopters,
sale of arms or sensitive dual-use items to countries
warships, missiles or missile systems, and small arms
whose behavior is a cause for concern
and light weapons. (The ACV, aircraft, and helicopter
• Adhere to international non-proliferation norms and categories include models designed to perform
guidelines reconnaissance or conduct command of troop’s
missions).
• Implement fully effective export controls
2. Dual Use List: List of Dual Use Goods and
Members of the WA are obligated to maintain rigorous
Technologies has a Basic List, which are further
national export control systems. The latest list of 41
divided into two annexes — 1) Sensitive List and 2)
countries that are part of the WA is:
Very Sensitive List
• Argentina • Finland • Malta • Slovakia
• Australia • France • Mexico • Slovenia
• Austria • Germany • Netherlands • South Africa
• Belgium • Greece Hungary • New Zealand • Spain
• Bulgaria • Ireland • Norway • Sweden
• Canada • Italy • Poland • Switzerland
• Croatia • Japan • Portugal • Turkey
• Czech Republic • Latvia • Republic of Korea • Ukraine
• Denmark • Lithuania • Romania • United Kingdom
• Estonia • Luxembourg • Russian Federation • United States
Eye on defence | 3

4. • The Basic List is composed of ten categories • Basic List of Dual Use Goods and technologies: Semi-
based on increasing levels of sophistication. The annual notifications of licenses issued, transfer of
categories are — special material and related items and denials for items in the Basic List of dual-
equipment; materials processing; electronics; use goods and technologies
telecommunications and information security;
• Sensitive and Very Sensitive List of Dual Use Goods
sensors and lasers; navigation and avionics;
and Technologies: Semi-annual notifications of
marine; aerospace and propulsion.
licenses issued and transfer of items for items in
• Sensitive List: Items on Annex 1 of the WA’s list the Sensitive or Very Sensitive Lists. Members are
of dual-use goods and technologies represent required to report any denials of transfers or licenses
critical items that are keys for the development of items in these lists within 30–60 days.
of military applications. It includes material
• Any member who undercuts such denials (i.e., export
for stealth technology, equipment that can be
the denied item to the same end-user) within three
used for submarine detection, advanced radar,
years of the denial is supposed to report the issuance
and jet engine technologies.
of the export license within 30–60 days.
• Very Sensitive List: Items on Annex 2 of the WA’s
list of dual-use goods and technologies represent
the most critical items for use in military Critical points
applications. Participating atates are expected to In the context of export control and clear categorization
exert extreme vigilance for items included in the of arms and dual-use goods and technologies, the
very sensitive list. following points are to be noted:
• WA is just a body for exchanging and collecting
Administration information. It is not a treaty. Hence, there is no
legal, binding aspect to it.
The WA Plenary is the decision-making and governing
body of the WA. It is composed of representatives of • All decisions at the WA are made by consensus,
all participating states who normally meet once a year, even for induction of new members. Thus, a single
usually in December at Vienna, where the WA has country can block any proposal. Often, there is no
established its headquarters and a small secretariat. consensus regarding the scope of WA, the countries
The Chairman of the Plenary is appointed annually on a that are “states of concern” or the constituents of a
rotational basis among participating states. The Plenary “destabilizing” transfer.
has established a General Working Group and an Experts’ • The Arrangement does not have an observer
Group, which meet periodically. Official language of the category. Information exchanged in the Arrangement
WA is English. remains confidential to the participating nations and
Information exchanged in the WA can include any matter is treated as privileged diplomatic communication.
that individual participating states wish to bring to the • The decision to transfer or deny an item is the
attention of other members, such as emerging trends sole responsibility of each participating state, and
in weapons programs, projects of concern and the the Arrangement does not impede bona-fide civil
accumulation of particular weapon systems. transactions.
The WA’s specific information exchange requirements • All measures undertaken with respect to the
involve: Arrangement are according to national discretion.
• Munitions List: Semi-annual notifications of arms • The Arrangement considers exports to non-members
transfers, licenses issued and denied to all non- only, and is not directed against any state or group of
participating states, covering eight categories states.
of Conventional Arms (including model and type
information)
Eye on defence | 4

5. • The Arrangement does not interfere with the rights of nations. This places increased onus on India to commit
of states to acquire legitimate means with which to a global regime of defence and nuclear cooperation,
to defend themselves pursuant to Article 51 of the promoting transparency and responsibility in exports of
Charter of the United Nations. sensitive items.
• There is a periodic review of information and control The WA has 41 participating countries — and accounts for
lists to account for technological advancement. more than 90% of global production of defence goods.
Therefore, becoming a part of these regimes will help India
• Apart from the above, WA regularly endorses
fully and effectively integrate itself into the global defence
voluntary ”best practices” to dispose off surplus
industry, increase its ability to bypass strict licensing
military equipment and approves non-binding criteria
requirements that have prevented it from procuring
to guide exports of small arms and light weapons. It
sophisticated defence equipment and technologies in the
also effects agreements to exercise increased control
past. It will also enable India to gain full benefits of free
on arms brokers and commitments to better regulate
commerce in the goods covered by these regimes.
exports of dual-use goods purchased by recipients
subject to arms embargos if the item is intended for a
military end use. Defining “defence”
Globally, defence goods and services are defined clearly
The Indian context as part of comprehensive lists and, thus, what constitutes
“defence” is easily identifiable — enabling a clear definition
As part of its export control regime for sensitive items,
of the defence industry. However, in India, there is no such
India enacts The Foreign Trade Development and
list that specifies what constitutes a defence product. The
Regulation Act (FTDR) of 1992; the Atomic Energy Act
matter of defining the defence nature of their product has
of 1962; the Customs Act of 1962; and the Weapons of
intrigued both foreign and OEMs.
Mass Destruction (WMD) Act of 2005.
To define a defence product, they have to refer to at least
Besides these laws, India had notified, under the
four different lists, depending on the purpose of defining
Foreign Trade Act in 1995, a detailed list of “dual-use”
their product:
items called SMET (Special Material, Equipment and
Technology). This list was revised in 1999, 2005 and 1. Indian Trade Classification Harmonized System
2007, and is now called the SCOMET (Special Chemicals, (ITC HS) Code: It is maintained by the Ministry of
Organisms, Material, Equipment and Technology) list. In Commerce’s Director General of Foreign Trade (DGFT)
2008, India’s SCOMET controls were harmonized with for the purpose of India’s external trade. The list is
the NSG (Nuclear Suppliers Group) and MTCR (Missile not defence-specific. It caters to items of defence,
Technology Control Regime). dual-use and even products that can be considered to
be commercially off-the-shelf in nature. For instance,
Exports control for items related to aerospace and
under the HS Code 88 (aircraft, spacecraft and parts
defence is governed by the SCOMET list in India, which
thereof) there are sub-categories such as “gliders,”
outlines the procedure, process and factors relating to
“balloons” and “under-carriages and parts thereof,”
the licensing of controlled items.
which are commercially available products or, at best,
dual-use items.
Increasing cooperation 2. National Industrial Classification (NIC) Codes of the
India has been pushing for a membership in the worlds’ Ministry of Statistics and Programme Implementation:
four major export control regimes — the Nuclear According to the requirements of the Department of
Suppliers Group (NSG), Australia Group (AG), WA and the Industrial Participation and Production, companies
Missile Technology Control Regime (MTCR). India’s claim wanting to apply for an industrial license are required
to these regimes is based on the stringent export control to provide the “item code” from the National Industrial
safeguards that it has instituted in recent years. Opening Classification (NIC) Code list of 1987, which has
up of India’s civil nuclear cooperation program with other only two codes — 359.4 (manufacture of arms and
nuclear regimes also signals India’s joining of an elite club armaments) and 308.2 for (ammunition) — for the
Eye on defence | 5

6. entire defence manufacturing sector. It does not specify This lack of clarity on what constitutes defence goods
what constitutes arms, armaments, dual-use items or and services can lead to some very serious difficulties.
components that go into arms and ammunition.
For foreign OEMs, the lack of a clear definition has led
3. Product List: This list is as articulated in the MoD’s to many of them offering, as part of offsets, goods and
Defence Procurement Procedure (DPP) for the services, which are not part of any of the international
discharge of offset obligations by foreign vendors. definition of such goods. As a result, there was a
Although this list provides some details of items in possibility of India ending up with goods and services
27 categories under three broad headings — defence that cannot be seriously considered as advancing the
products, products for internal security and civil Indian defence industrial base. According to the CAG
aerospace products, it does not define dual-use report of 2012–13 on defence offsets, since 2005 India
products or deal with component-level products and has signed 16 offset contracts with various vendors for
raw material for defence production. INR184.45 billion.
To discharge offset obligation, an Indian company
needs to become an Indian Offset Partner (IOP). To
become an IOP, the defence manufacturer needs Conclusion
to provide an item code from the NIC (1987) in the It is therefore essential for India to adopt a strict
application. Ideally, the “product list” should be in line definition of the defence industry, goods, services
with the NIC Code to enable the IOP and OEM to finalize and technologies — preferably along the lines of WA.
products for offset discharge with ease. However, this is This is likely to be done in one of the following ways:
not what actually happens.
• Adopting the WA Munitions List, Basic List,
4. Special Chemicals, Organisms, Material, Equipment Sensitive and Very Sensitive List as standard
and Technology (SCOMET) List: The SCOMET list is lists of reference for the defence industry in
maintained by the Ministry of Commerce’s, DGFT. India.
Although defence goods and technologies are covered
• Defining an indigenous list that clearly lays out
in Category 3 (material, material-processing equipment
defence goods, services, technologies, dual-use
including technologies); Category 5 (aerospace
items and raw material for the defence industry.
systems, equipment including production and test
equipment, related technology and specially designed This is expected to help India to get maximum
components and accessories thereof); and Category benefits from the offset policy. It is also expected
7 (electronics, computers and information technology to simplify the process of licensing for Indian
including information security). It does not have a manufacturers, and clearly help define the Indian
separate dedicated section for them. It also does not offset partners for offset projects with OEMs,
does not coincide with any of the lists mentioned resulting in better governance of such projects.
above.
Eye on defence | 6

7. Impact of “Make” procedure on
Indian defence industrial capability
The defence industry in India has been dominated by the Emergence of private sector in Indian
government-owned and managed Defence Public Sector
defence industry
Undertakings (DPSUs), Ordnance Factory Board (OFB)
and Defence Research and Development Organization With the aim to achieve self-reliance in defence
(DRDO) labs. Private sector units, which comprise production, certain project categories were promulgated
around 5,200 small and medium enterprises (SMEs), are under defence procurement procedures (DPP) to
supplying around 20%–25% of raw material, components, encourage indigenous development.
and sub-assemblies to the defence sector. The chart and • “Buy & Make”: This involves purchase from a foreign
table given below depicts the total imports done by the vendor followed by licensed production/indigenous
country and the total output generated by the DPSUs manufacture in the country. Private sector/public
and OFB since 2004–2011. It is pertinent to mention sector can also participate in licensed production in
here that OFB and DPSUs source around 30% of their this category.
inputs from the private sector.
Imports vs. domestic turnover Years Imports OFB DPSU
6 (US$ billion) Turnover Turnover
(US$ billion) (US$ billion)
5
2004-05 2.14 1.24 2.25
4
2005-06 1.05 1.38 2.61
Amount in $ billion
3
2006-07 1.33 1.24 3.17
2 2007-08 2.21 1.39 3.35
1 2008-09 1.80 1.45 4.08
0 2009-10 2.20 1.74 5.18
2004-05
2005-06
2006-07
2007-08
2008-09
2009-10
2010-11
2010-11 2.85 2.24 5.20
Notes:
Imports OFB Turnover DPSU Turnover 1. The import only include the complete equipment directly
Source: Compiled by Q-Tech Synergy procured by MOD and does not include the subsystems
imported by DPSU/OFB.
2. The figures indicate the turnover of OFB/DPSU and not
necessarily supplied to Defence.
• “Buy & Make (Indian)”: The RFP will be issued only to
Indian vendors, who are assessed to have requisite
technical and financial capabilities to undertake such
projects.
• “Buy” (Indian): This implies out-right purchase of
existing products from an Indian vendor.
• “Make”: This will mean indigenous design and
production of a high tech and complex system.
Eye on defence | 7

8. The “Make” category, in the acquisition process, is akin 35
to the acquisition procedure followed in major weapon- 30
producing countries and formulated to ensure design, 25
In numbers
research, development and production of indigenous 20
defence equipment through optimal utilization of 15
the potential of the Indian industry. The underlying 10
principle to formulate a separate procedure for the 5
‘’Make’’ category of procurements is to enhance the
0
indigenization component in acquisitions. To genuinely 2005 2006 2007 2008 2009 2010 2011 2012
promote indigenous research and development in the (Till
Nov)
defence sector, DPP provided for cost sharing, in the JV MoU
ratio of MoD (80%) and industry (20%). Projects covered Source: Compiled by Q-Tech Synergy
under the “Make” decision are expected to include high
technology complex systems to be designed, developed Major projects
and produced indigenously. The aim of the procedure is
Some of the indigenous defence programs, wherein the
to undertake indigenous research, design, development
private sector has contributed in a significant way in
and production by the Indian defence industry. These
collaboration with DPSUs and also individually, include
projects are to be undertaken by select Indian companies
Pinaka MBRLs, some of the fielded upgrades, Rohini/
from the Indian industry/defence PSUs/OFB/consortia on
Revati Radar Program, Dhanush system, and various
a level playing field. This procedure will also be adopted
other ongoing programs such as MAFI Program, VLF/
for all upgrades categorized as “Make.”
VHF, ATV and various shipbuilding projects. The
introduction of “Make” (Indian) option in 2009 has
Indian private industry: capability provided an opening in the defence industry, which
earlier was the exclusive preserve of DPSUs/OFs, to
India’s manufacturing private sector has proved its mettle
the private sector. The promulgation of the Defence
and international competitiveness in the past decade, and
Production Policy in 2011 further emphasizes the
some companies such as TATA, L&T, Mahindra, Kirloskar,
Government of India’s (GoI’s) endeavor to build a robust
etc., have already been working in high technology space
indigenous defence industrial base by proactively
and missile manufacturing for decades. It has strengths
encouraging increased involvement of the Indian private
in design, engineering, finance and marketing. About 75–
sector in design, development and manufacture of
80 private sector companies have till date received 179
defence equipment.
industrial licenses for production of a variety of defence
systems and sub-systems. There are large and small
industries that have, over the years, built capabilities and
capacities, through partnership with public sector entities Battle Field
Management System -
such as DRDO and also with foreign companies. Many $2.5 bn
large industry houses have either built new facilities
or carved out capacities within their own design and
manufacturing capacities for the defence sector.
After the defence sector opened up, considering its Make indian
significant commercial potential, a number of joint projects
ventures (JVs) and Memoranda of Understanding (MoUs) ($17bn)
have been forged between foreign and Indian partners.
JVs are the best route for the “Make” programs and also
for discharge of offsets in the “Buy” or “Buy and Make” Tactical
options. Since 2005 more than 250 JVs/MoUs related FICV - $12.5 bn Communication
System - $2 bn
to defence in various sectors have been forged by Indian
companies.
Eye on defence | 8

9. MoD has classified some major projects under the “Make” While it is prerequisite for the private players in defence
category. Currently, three large defence contracts, to develop capability in design and system upgrade by
comprising tactical communications system (TCS), investing in Industry R&D and Human Resources, attempt
Future Infantry Combat Vehicle (FICV) and the Battlefield should be made toward developing innovative technology
Management System (BMS) projects for the Indian Army, and manufacturing methods to increase cost efficiency,
worth a combined INR750 billion, best epitomize this besides ensuring healthy competition. Technology
new approach. Set to be awarded by the MoD in the near developed or gained from any development/”Make”
future, all three projects will be designed, developed project must be leveraged further. It is expected that
and built in India. The private sector will jostle for these the private sector will play an active role in indigenous
contracts along with the public sector. Companies such as defence programs and contribute to the Indian defence
Tata Motors, Tata Power, Mahindra and Mahindra, Ashok industrial capability by catching up with the public sector
Leyland, L&T, Wipro and Infosys are all part of a consortia in the domestic defence market share as depicted in the
bidding for these contracts. Another project in the figure below.
pipeline under this category is 1,300 light bullet-proof
vehicles worth INR7.2 billion (US$144 million). Domestic market share public vs. private
60
Way ahead
Amount in $ billion
50
40
India has emerged as the world’s biggest importer 30
of defence equipment according to a recent report, 20
accounting for 10% of global arms imports between 2007 10
0
and 2011. Moreover, during the next 10–15 years, India
2012-13
2014-15
2016-17
2018-19
2020-21
2022-23
2024-25
2026-27
will need to replace a considerable proportion of its major
systems and also adopt new technology to keep pace
with the defence technologies. Accordingly, the defence Domestic Production Public Sector Value
spending is expected to grow at the rate of 7% to 8% Private Sector Value
annually over the next few years offering opportunities
to domestic and foreign suppliers. Thus, the focus of the Source: Compiled by Q-Tech Synergy
GoI is clearly to increase the level of indigenization and
reduce dependency on foreign companies significantly.
Eye on defence | 9

10. Market share (domestic/private/public in US$ billion)
2012-13 2014-15 2016-17 2018-19 2020-21 2022-23 2024-25 2026-27
Domestic 5.30 7.25 10.20 14.72 21.63 30.10 39.74 50.08
Production
Public Sector 3.71 4.78 6.33 8.54 11.68 15.05 19.87 25.04
Value
Private Sector 1.59 2.46 3.88 6.18 9.95 15.05 19.87 25.04
Value
In case the GoI is looking forward to developing a strong • Taxation provisions to be rationalized for Indian
indigenous industrial base via “Make” programs, it vendors
needs to meet justified expectations through policy
initiatives. Most importantly, the basic need is to create a • IPR of technology to be held jointly by the Indian
competitive environment by providing a level playing field company and GoI or only the Government.
to the competitors. The MoD could help by implementing • Permanent body to replace integrated project
some of the changes, mentioned below, in the next management teams (IPMT) where continuity and
revision of the DPP, which is expected soon: domain expertise likely to be questionable
• Make requirements of the defence (LTIPP) available • FDI limit and permission to export in the context of
to the industry the projects under the “Make” and “Buy and Make”
• Do away nomination of DPSU on preferential basis category
• Selection criteria for projects to be specified • Creation of a forum for interaction between GoI
and industry to address issues that could become
• Methodology of deciding indigenous contents and impediments
time frame
• A uniform value addition principle to be applied for
• SME’s role in “supply chain” needs to be promoted both manufacturing and services sectors, so as to
• Protection from exchange rate variation to be provide equal opportunity to companies in these
available to Indian vendors sectors and avoid potential manipulation by foreign
vendors
• Parity in payment terms for Indian and foreign
vendors
Eye on defence | 10

11. Conclusion
The indigenization initiative via the “Make” program has
potential to reduce dependence on imports from foreign OEMs
to the desired level. Figure 5 below depicts the conservative
estimated scenario in about 15 years, which can be achieved for
imports vs. indigenous production, i.e., a 50:50 ratio rather than
the often repeated ratio of 30:70.
Imports vs. domestic opportunities
2012-13 2014-15 2016-17 2018-19 2020-21 2022-23 2024-25 2026-27
Imports 12.38 16.13 20.72 26.17 32.45 38.31 43.05 50.08
Indigenous
production
5.30 7.25 10.20 14.72 21.63 30.10 39.74 50.08
(domestic
opportunity)
The added but often-overlooked benefit of reducing reliance on
defence imports is the positive impact on the Indian economy.
In its 2005 report on defence acquisition, the Vijay Kelkar
Committee quoted that a mere 25% reduction on foreign
dependence will lessen foreign exchange outgo by approximately
INR85 billion, also creating about 120,000 new jobs, and
accelerating manufacturing GDP growth by 8%. There is an
inherent benefit in the “Make” procedure — the defence budget’s
capital expenditure gets utilized in the national economy and
helps in generating skilled employment, subsequently spin off
will be there to be seen.
Eye on defence | 11

12. MSME development: vital for an
inclusive defence industrial base
The defence procurement procedures (DPP) have categories. This is good news for India Inc. It also places
undergone changes with far-reaching consequences. an added responsibility on India Inc. in terms of forming
Only one big overhaul remains to be executed for partnerships and alliances. The various consortia formed
the industry to make rapid progress. The defence- in various parts of the world — especially the successful
offset guidelines that have been announced recently ones such as EADS, Finmeccanica, Safran, UTC — is
are completely new in their outlook as the MoD has likely to set the path for introspection. If there is an
tried to incorporate the best global practices. We now opportunity for some of our companies to form such
have a sound set of offset guidelines, which are well- powerful alliances, it can be a game changer. The coming
documented, have been formulated in an exceptionally together of complementary capabilities is a force in itself.
professional manner and have been put up in the public
Besides repatriating a portion of the foreign exchange
domain. The policy has been put up on the government
back into the country, defence offset as a tool was
websites (www.mod.nic.in) and is accessible to everyone.
introduced to, “Create a Defence Industrial Base.” A
This is a rare occurrence since not many countries
widespread and sound base cannot alone be formed
have their policies up on open websites like us. The
through the growth of large conglomerates. This can
MoD and the industry associations follow up each of
happen only if we are able to take the larger segment of
these announcements with a number of seminars and
the industry on board with us in this journey of progress.
conferences to generate goodwill and broad-based
One cannot over-emphasize the importance of the small
awakening. Thus, the policy is proliferating among the
scale sector to create a robust defence industrial base.
domestic industry, the OEMs and the academia quite
Only when progress is distributed and capability, along
well.
with inclusive growth, is prevalent everywhere can the
Defence accounts for 2.5 % of the GDP and around nation have a decent industrial capability. Therefore, “the
15% of the Central Government’s expenditure. Our man and machine story” is very important.
defence budget has the third-highest growth rate (9.3%)
In this context, there is positive news regarding the small
after Russia and China. According to the 13th Finance
and medium enterprises. There is a good amount of
Commission Report, the total defence capital budget
synergy between the policies of various ministries when
allocation during the 12th Plan is likely to be INR4,455
it concerns the small industries sector. While we all are
billion. The capital acquisitions budget ranges between
aware of the multiplier incentive provided to the small
75% and 85% of the total capital expenditure, and is likely
segment by the MoD, there are extant regulations such
to be around INR3,564 billion. The “India Inc.” growth
as the MSMED Act of 2006 and the Public Procurement
story is for real and the current level of expenditure
Policy that are in sync. The Public Procurement Policy
support for the armed forces is expected to be sustained
is currently on an advisory note stage and is likely to
by successive governments. Therefore, in mathematical
become mandatory in a couple of years. The procedures
terms, this is a progress in continuum. The volatile
to source from the small segment must be put into place
situation of our neighboring countries is also a reason
as soon as possible.
for the accelerating defence expenditure. Where do the
micro, small and medium enterprises (MSMEs) figure in The multiplier effect for MSMEs, as an Indian Offset
this growth story? Partner (IOP), provided in the DPP is very significant.
Now, it is a question of how this can be put to good use,
Streamlining procurements in the MoD is a work-in-
both by foreign OEMs and Indian MSMEs. This calls for
progress, and as things stand today, the MoD is seeking
a discussion, and organizations such as National Small
increased participation from the local industry. The
Industries Corporation (NSIC) can play a significant role
“Buy and Make (Indian)” category and the “Make”
in this growth story. The government can only provide
category is expected to be the focus during the planning
enablers and it is up to the industry to capitalize on these
process, resulting in more enquiries in these two
Eye on defence | 12

13. and “dress-up” to avail the desired benefits. The benefits interest rates. Funding support with management
of various policies must flow to the MSMEs directly and assistance can also be a very good idea. The MSMEs
we must see this growth happening in the next two can then concentrate on what they do best and while
years itself. These MSMEs are our backbone and we the funding organization comes up with management
must strengthen them so that we can stand erect as an techniques for vibrant progress.
industry.
The interesting story of the iPhone is relevant here.
It is truly said, “If India lives in villages; the industry lives Some time back the TIME magazine reported that, of
in MSMEs.” the US$379 that the iPhone costs, US$70 goes into
raw material; US$9 goes into manufacturing (which,
There are often talks of hand-holding of the MSMEs
incidentally, takes place in China); and US$300 resides
to help them graduate to the next level. Hand-holding
in the US where the IP is owned. There are, therefore,
does not mean spoon-feeding; it is merely providing
no short cuts for design and development. Investments
enablers. The policy initiatives must be put to good use
in research and development (R&D), and design and
to help them progress and gain access to the benefits.
development are essential if we are to make progress in
The GoI requires more from the MSMEs than what the
real terms. The offset guidelines, by themselves, provide
MSMEs may require from the GoI. The government is
for investment in R&D as a valid method of discharge
aware of this situation and, thus, there are enablers at
of offset obligations. However, this, somehow, has not
various policy levels. We must be able to explore options
seen the light of the day. Now, in the recently issued
for funding them at rates that are affordable by the
guidelines, R&D has been clubbed with services. This
small units. This low rate might be generated through
offers great scope for investment in R&D of eligible
innovative ideas, such as raw material assistance, credit
guarantees and foreign line of credit with reduced
Eye on defence | 13

14. products as a valid method of discharge of offset An additional route for the discharge of offset by FDI
obligations. Niche technologies reside in MSMEs as they investment through venture capital funds in the MSME
are able to create and sustain technology. They also hold sector needs to be explored. While the new defence
the technology close to their chest. Development of the offset policy makes it attractive for the foreign OEM by
MSME sector is the key to building a robust industrial assigning a multiplier of 1.5 for every unit of capital
base. invested in the MSME sector, it still does not provide
Defence Public Sector Units (DPSUs) are bound by the a solution to the viability gap in funding that exists in
Public Procurement Policy and need to proactively source the MSME sector. Due to high risk and long gestation
up to 20% of their annual procurement from MSMEs. periods, assets are not created to secure debt from
There are also around 358 items reserved for the MSME banks for various scaling up activities related to plant
sector, which should be rigorously followed. There is, and equipment, talent acquisition, R&D, working capital
however, a need for revising the list to make it relevant and other operations. As a result, many companies
for the currently evolving scenario. with core competencies in the defence sector are or
are expected to be unable to absorb the offset work
Collaboration between MSMEs is the key to success. The that the OEM is willing to discharge to the MSMEs.
small segment industries hold the key to development Introduction of venture capital funds as an avenue for
since they hold niche capabilities. The call of the day is to offset discharge is expected to help create a suitable
establish strong linkages between MSMEs domestically financial platform through which OEMs can discharge
with the tier II/III companies abroad to achieve increased their offset obligation. This is anticipated to not only help
synergies. While the offset guidelines have allowed the the OEM in faster discharge of their offset obligations
tier I companies to discharge offset on behalf of the but also provide the much-needed viability gap funding
OEMs, this is not very strictly restricted to the tier I that continues to plague the MSME sector. This calls for
companies alone. A tier I company such as Pratt and serious consideration, as this is a viable route to take
Whitney, GE or Snecma will also have its own tier I and MSMEs to the next level.
tier II. Therefore, the offset authorities must be able to
see this fundamental linkage and, make a policy inclusive
for holistic growth.
Eye on defence | 14

15. Request for Information (RFIs)
October 2012 – December 2012
Date of issue RFI details Response date Issued by Service
3 Dec 2012 Passive Surveillance and 31 Dec 2012 DASR (EW) Indian Army
ELINT system
7 Nov 2012 Modular Bridge mounted on 10 Dec2012 Comb Engrs – 5/CE Dte Indian Army
High Mobility Vehicle Engineer-in-Chief’s
Branch, Integrated HQ
of MoD (Army)
18 Oct 2012 Practice Ammunition for 18 Nov 2012 DGMF Sena Bhawan Indian Army
T72,T90 (125mm) and IHQ HQ of MOD(Army)
Arjun (120mm) Tank
17 Oct 2012 Project ASCON Phase-4 5 Dec 2012 Dte Gen of Signals Indian Army
(Army Static Switched
Communication Network)
27 Sep 2012 155MM / 105MM Blank 30 Oct 2012 Directorate General Indian Army
Ammunition of Artillery (Arty-5),
General Staff Branch
12 Nov 2012 Quotations for Procurement 20 Dec 2012 Directorate of Indian Navy
of 02 Nos 09 KL Air Craft Procurement
Refuellers along with initial
spares
20 Sep 2012 High speed expendable 30 Nov 2012 Directorate of Staff Indian Navy
aerial target Requirements
Integrated
Headquarters of MoD
(Navy)
27 Nov 2012 ION of Partner for Aircraft 10 Dec 2012 Vehicle Factory ---
Refueller Jabalpur
26 Sep 2012 Expression of Interest: 12 Oct 2012 Prov Branch Dte.Gen., CRPF
QRs/Specification for Mine CRPF, New Delhi
Protected Vehicle (MPV)
Eye on defence | 15

16. Request for Proposal (RFPs)
October 2012 – December 2012
Date of issue RFI details Response date Issued by Remarks
4 Dec 2012 Harness for Bullet Proof 25 Dec 2012 Ord Branch, HQ For IA
Jacket Northern Command Qty: 7810 Nos.
Udhampur (J&K)
4 Dec 2012 Ballistic Helmet with Inbuilt 9 Jan 2013 GOC-in-C, Northern For IA
MIC/ Headphone Command Qty: 24 Nos.
1 Dec 2012 Digital Night Vision Devices 26 Dec 2012 GSO 1 Avn For IA
Qty: 6 Nos.
29 Nov 2012 Air Borne Tactical Vest 17 Dec 2012 HQ Central Command For IA
ST Branch Qty: 250 units
28 Nov 2012 Fabrication of Mockup for 22 Dec 2012 Simulator For IA
Devp of Tank Troops Tactical Development Division
Training Simulator (T4S)
27 Nov 2012 Tactical Vest 27 Dec 2012 GOC-in-C For IA
Qty: 4000 Nos.
10 Nov 2012 Mounting of GPS (for Arjun 3 Dec 2012 Comdt COD Agra For IA
Tank) Qty: 7 Nos.
31 Oct 2012 Bullet Proof Shield 17 Nov 2012 GOC-in-C, HQ Northern For IA
Command Qty: 50 Nos.
19 Oct 2012 Spares for Rifle 7.62 mm 17 Dec 2012 DDG PPO For IA
58P/58V(Ex-Czech)
12 Oct 2012 Fiber Reinforced Plastic 19 Oct 2012 Headquarters Western For IA
(FRP) Boats Command Qty: 10 Nos.
1 Oct 2012 Bomb ML 120 MM Mortar 26 Nov 2012 DDG PPO , AMGO(SSA) For IA
Smoke PWP Ammunition MGO/PPO-5 Qty: 9605 Nos.
with FUZE DA NO-162 MK 9
(M-1)/DA 4A or equivalent
5 Dec 2012 Portable Colour Doppler 24 Dec 2012 Directorate General of For IAF
cum USG Machine Medical Services (Air)
4 Dec 2012 Light Driving Simulator 1.5 14 Feb 2013 Directorate of For IAF
Configuration with 6 DoF Procurement
Indigenous Purchase
Wing
25 Nov 2012 Optical Device for IL-76 24 Jan 2012 Directorate of For IAF
Procurement,
Indigenous Purchase
Wing
Eye on defence | 16

17. Date of issue RFI details Response date Issued by Remarks
16 Nov 2012 Brake Parachutes for Hawk 5 Feb 2012 Dte of Armt & Safety For IAF
MK-132 Eqpt, Air Headquarters Qty: 218 Units
1 Nov 2012 Communication Equipments 16 Nov 2012 HQ WAC IAF Subroto For IAF
Park
25 Oct 2012 Heliflex Antenna for GP 328 14 Nov 2012 LP Cell, 9 BRD, AF For IAF
Pune Qty: 200 Nos.
22 Oct 2012 Low Cost Security 26 Nov 2012 SO Provost HQ MC, For IAF
Equipments IAF- Nagpur
18 Oct 2012 Simulator Training for 8 Nov 2012 Directorate of OPS For IAF
Boeing 737-200 Aircraft (IEW) Air HQs (Vayu
Bhawan)
16 Oct 2012 Night Vision Goggles 11 Nov 2012 Controller of For IN
Procurement Qty: 70 Nos.
Material Organisation
(Mumbai)
26 Sep 2012 Passive Night Vision 20 Nov 2012 DG, CRPF For CRPF
Monocular (Procurement Cell Qty: 3804 Nos.
of Provisioning
Directorate)
26 Sep 2012 Passive Night Vision 21 Nov 2012 Directorate General, For CRPF
Binocular & Kit Prov CRPF Provisioning Dte. Binocular: 3241
(Procurement Cell) Nos. and Kit: 22 Nos
22 Sep 2012 Mobile Signal Booster Dual 6 Nov 2012 Commandant 2 Signal For CRPF
Band 2 Sig Bn, CRPF, Hyderabad Qty: 15 Nos.
15 Nov 2012 Hand Held Thermal Imager 20 Nov 2012 Directorate General, For BSF
(Biocular) Border Security Force Qty: 355 Nos.
12 Oct 2012 Life Saving Eqpts, Life 30 Oct 2012 AC/WW For Inspector For BSF
Jackets and Life Buoys General FTR HQ BSF Qty: 286 Nos.
SB
26 Sep 2012 New Trimble (GPS) for MI-17 30 Oct 2012 DG BSF, Air Wing For BSF
IV Helicopter Qty: 04 Nos.
29 Oct 2012 RDX-TNT 60-40 Type-A and 18 Dec 2012 Ordnance Factory Issued by OFB
Type-B Badmal Qty: Type-A is 205 MT
and Type-B is 275 MT
20 Oct 2012 Automatic Case Gauging 18 Dec 2012 Indian Ordnance Issued by OFB
Machine for 5.56 mm Factories Varangaon Qty: 04 Nos.
Cartridge Case
Eye on defence | 17

18. Date of issue RFI details Response date Issued by Remarks
20 Oct 2012 Automatic Case Gauging 18 Dec 2012 Indian Ordnance Issued by OFB
Machine for 7.62 mm A-7 Factory Varangaon Qty: 01 No.
Cartridge Case
17 Oct 2012 Proximity FUZE for FB 40 30 Nov 2012 Ordnance Factory Issued by OFB
(Filled) for 40MM PFFC Khamaria, Jabalpur Qty: 69700 Nos.
Ammn
17 Oct 2012 Supply Erection 11 Dec 2012 Ordnance Factory, Issued by OFB
Commissioning of Lead Varangaon
Swaging Press for 5.56 mm
Ammunition
17 Oct 2012 Supply Erection 11 Dec 2012 Ordnance Factory, Issued by OFB
Commissioning of Lead Varangaon
Swaging Press for A-7
Ammunition
3 Oct 2012 Supply Erection 27 Nov 2012 Ordnance Factory Issued by OFB
Commissioning of Automatic Varangaon,
Primer Filling Plant for 5.56 Maharashtra
mm Ammunition
3 Oct 2012 Supply Erection 27 Nov 2012 Ordnance Factory Issued by OFB
Commissioning of Automatic Varangaon,
Primer Filling Plant for Maharashtra
7.62mm Ammunition with
conversion kit for 5.56 mm
ammunition
20 Nov 2012 Deep search mine/metal 12 Dec 2012 DG CISF For CISF
detector Qty: 21 Nos.
9 Dec 2012 Long range electro optic 9 Feb 2013 ADRDE*Aerial Issued by DRDO
payload Delivery Research
& Development
Establishment
4 Dec 2012 FRP speed boat 8 Jan 2013 ITR*Integrated Test Issued by DRDO
Range Lab
Eye on defence | 18

19. List of industrial licenses (ILs) filed from
September 2012 - October 2012
Application no. Name of the applicant Item of manufacture
and date
65 Micropack Ltd. Manufacture of printed circuits for defence and aerospace
03/09/2012
66 Rangsons Defence Solutions Pvt. Ltd. Design/development/manufacture /service of electronic
11/09/2012 systems and communication systems including parts and
accessories for RF and MW; optic and surveillance systems;
interconnects; metal and composites used in defence and
aerospace application
67 HBL Power Systems Ltd. Air conditioners and parts thereof
14/09/2012
68 Bharat Forge Ltd. Telecommunications— manufacture and upgrade of combat
14/09/2012 surveillance systems
69 Nallabolu Industries Pvt. Ltd. Slurry/emulsion
17/09/2012
70 Spectrum Antenna & Avionics Airborne antennas, avionics systems Radomes
21/09/2012 Systems Pvt. Ltd. antennas parts
71 Pipavav Defence And Offshore Development and manufacture of C4I systems including
26/09/2012 Engineering Co. Ltd. CMS, BMS, IPMS and IBS, Electro-optical systems,
underwater systems including sonars, and avionic
73 Realtime Techsolutions Pvt. Ltd. Blocks/segments of combat simulators, command control
03/10/2012 centers management systems, platform management-
systems and complete ATES, simulators, command control
centers
74 Sakthi Aerospace Pvt. Ltd. Parts and accessories N.E.C. for special purpose non-
04/10/2012 electrical machinery/equipment NEC- parts of rifle, gun and
carbine
75 Atul Ltd. Phosgene Carbonyl Chloride, Carbonyl Di-Chloride, Carbon
04/10/2012 Oxy-Chloride
76 Sandeep Metalcraft Pvt.Ltd. Sub-assemblies of arms and ammunition weapon parts,
04/10/2012 safe and arm mechanism, timers, cartridge SAA parts
77 Applied Electro Magnetics Pvt. Ltd. Specially designed software for Command Communication,
17/10/2012 Control, Computer and Intelligence (C4I) applications,
VOIP- based voice communication equipment and control
system
78 Vinir Engineering Pvt. Ltd. Open die forging, closed die forging, CNC machined
30/10/2012 components and assemblies for defence industries
Eye on defence | 19

20. New projects/investments/contracts
Name of Project details Value*
entity
Indian Army • The Very Short Range Air Defence System (VSHORADS) contract for nearly INR323.1 billion
1,000 launcher systems and more than 6,000 missiles has progressed into
►
a crucial phase. The current phase will involve quality assurance tests at
► Bengaluru and a checking of the electronics systems on the three remaining
contenders in Ladakh.
• There is a three-way competition between the French MBDA Mistral,
Sweden’s SAAB RBS 70 NG and Russia’s KBM new generation Igla-S.
• In the current phase, there will also be discussions on transfer of technology
to the default license manufacturing partner, Bharat Dynamics Ltd.
Indian Air • India signed a deal with Russia for 40 Su-30MKI fighter aircraft, which will INR188.5 billion
Force be upgraded to the Super Sukhoi configuration.
► • The first delivery is expected in 2014–15 and with the addition of these 40
aircraft the total number of Sukhoi will reach 270.
►
• The delay in the signing of the contract with France’s Dassault for 126
Rafale fighther jets has also necessitated the need to procure Super
Sukhois.
Indian Air • The GoI has shortlisted Boeing, with its Chinook helicopter, to procure 15 INR129.24 billion
►
Force heavy-lift choppers for IAF.
► • The cost of the contact is estimated to be worth INR 53.85 billion (US$1
billion).
►
• India also plans to buy 22 AH-64D Block III Apache helicopters from Boeing
at an estimated cost of INR75.39 billion (US$1.4 billion).
Indian Air • The Union Cabinet approved a plan to produce 200 air versions of the INR80 billion
Force and Brahmos cruise missile and to procure 10,000 Invar missiles from Russia
Indian Army for the T-90 tanks of the Army.
► • Under the proposal, 10,000 Invar missiles will be procured by Russian
manufacturers and another 15,000 missiles will be license manufactured by
the Bharat Dynamics Limited (BDL) under the transfer of technology.
Bharat • BDL plans to set up a missile production unit at Ibrahimpatnam in Andhra INR25 billion
Dynamics Pradesh.
Limited
• This is likely to generate direct and indirect employment for around 700
► and 2,000 people, respectively.
Eye on defence | 20

21. Name of Project details Value*
entity
Indian Armed • India will purchase 10 thousand each of Konrurs-M guided anti-tank missiles INR12 billion (for
Forces and the Invar guided anti-tank missiles from Russia. anti-tank missiles
from Russia)
► • In addition to the 10 thousand Invar guided antitank missiles delivered from
Russia, another 15 thousand will be manufactured in India by BDL.
Indian Army • The Cabinet Committee on Security cleared the proposal to procure 10,000 INR12 billion
Konkurs-M anti-tank guided missiles for the Army from Russia.
►
• The Konkurs-M weapon systems will augment the anti-tank arsenal in the
Army.
Defence • The DRDO has identified a new missile launch site at Machalipatnam in INR10 billion
Research and Andhra Pradesh for which it has asked the Government of Andhra Pradesh
Development for 260 acres of land.
Organisation
(DRDO)
Defence • The DRDO has launched an ambitious project to develop India’s own field INR3–4 billion
Research and gun (a 155-mm field gun) in association with the ordnance factories and the
Development private players.
Organisation
Indian Navy • The US Navy placed an order for the lightweight air-launched Mk-54 INR2.4 billion
torpedoes from the US-based Raytheon for the Indian Navy. (for the Indian
►
and Australian
• The torpedoes will be deployed on the eight P-8I long-range maritime
► navies)
aircraft being built by Boeing.
• The Mk-54 can be deployed from a surface ship, helicopter or fixed wing
aircraft to track, classify and attack underwater targets.
Boeing • The US government has awarded Boeing a contract to build “Beddown INR1.1 billion
Infrastructure Facilities” for the C-17 heavy lift transport aircraft ordered by
►
the Indian Air Force (IAF) at Hindon Air Force Station, near New Delhi.
• Beddown infrastructure is a type of facility that is specific to a particular
aircraft type at a particular base. This is the first phase of construction
expected to be executed by 2013.
Hindustan • HAL opened its strategic electronics factory at Kasaragod in Kerala to INR660 million
Aeronautics produce advanced avionics systems for aircraft and helicopters. (Phase-I)
Limited (HAL)
Eye on defence | 21

22. Name of Project details Value*
entity
CRPF • The GoI has floated a multi-country tender to procure around 4,000 NA
specialized “human detecting” night vision devices apart from more than
►
3,000 binoculars for use in the dark for naxal operations.
• The mandatory requirement of these night vision gadgets, according to the
tender, is to "detect and recognize human beings within 125–200 metres in
star lit conditions without moonlight".
Indian Air • The IAF has contracted for 230 Sukhoi Su-30MKI fighter jets from Russia, NA
Force of which 140 will be manufactured at HAL in India by 2013–14.
► • These new jets will replace the phasing out of MiG-21s and MiG-27s.
► • In addition, India has finalized another contract for 42 more Su-30MKI
fighters, to be built under licence from Russia at HAL's Nashik facility, taking
►
the total number of Su-30s in service to 272. This has made India the
world's largest operator of the Su-30 type.
• Furthermore India is in talks with Russia to upgrade its fleet of Sukhoi
Su-30s with new radar and avionics, beginning with the first 50 Sukhois
inducted in 1997.
Tata Steel • Tata Steel has inaugurated its second aerospace service center in Xi’an in NA
China, boosting its aerospace operations in the country.
►
• The company opened its first service center in Suzhou in 2009.
►
• The new facility is approximately 600 miles south west of Beijing, the region
that accounts for 40% of the total aerospace manufacturing capacity in
China.
Indian Army • In 2013, India will receive the first tank digital control systems developed in NA
cooperation with two Russian companies — Uralvagonzavod and Sozvezdie.
►
• These digital tanks enable the commanders to command units on the
battlefield in real time mode connecting all armored vehicles into a unified
information network.
Indian Coast • Northrop Grumman Corporation will supply advanced shipboard navigation NA
Guard systems for 20 fast patrol vessels for the Indian Coast Guard.
► • The shipset will be delivered starting late 2012 till 2015.
*The values of the deals have been converted to Indian Rupees using Oanda currency conversion tool
1US$ = INR53.85 (Average of the value from 1 October 2012 to 12 December 2012)
Eye on defence | 22

23. Joint ventures and alliances
Name of Nature of transaction Value*
entities
Indian Air • India has signed a joint venture (JV) with Russia under which the latter will INR60 billion
Force, HAL, supply 200 high-precision supersonic cruise missile BrahMos to the IAF.
BrahMos
• On the back of this deal, India has set up another manufacturing and system
Aerospace
integration plant in Thiruvananthapuram for missile production.
►
• The integration of the air version of the missile will be done by HAL and the
► missiles will be retrofitted on the Russian-built Sukhoi Su-30 MKI fighter
jets.
United Aircraft • An Indo-Russian project, to jointly design a transport aircraft for militaries INR32.31
Corporation of both the countries, was kicked off in Moscow on 3 December. billion (US$600
and HAL million)
• In October, India entered an agreement with the Russian company for the
► preliminary design phase (PDP) contract for Multirole Transport Aircraft.
Ten months after the PDP contract, the detail design phase (DDP) contract
►
will be signed to complete the design and development of MTA.
►
• The project is being executed by 30 engineers from India's state-run
aerospace company HAL and its Russian counterpart the United Aircraft
Corporation (UAC).
SAAB AB • SAAB AB, a Swedish aerospace and defence company, signed an MOU INR2.01 billion
and Pipavav concerning a strategic investment in Pipavav Defence and Offshore
Defence and Engineering Limited (Pipavav). With this deal, SAAB has acquired a good
Offshore platform for growth in the Indian market.
Engineering
• After the investment, SAAB has approximately a 3.5% shareholding in
Limited
Pipavav.
Quest Global • India-based engineering services provider “QuEST Global” has set up a JV INR550 million
and SAAB AB with Swedish defence and security company SAAB AB to establish an aero-
structure assembly venture.
►
• QuEST will hold a 74% stake in the new company, which will be based in
►
Belgaum (Karnataka).
• The unit will commence its operations in mid-2013 and manufacture
specific parts and assemble substantial sections of commercial aircraft such
as Boeing 787 Dreamliner and Airbus A320 and A380.
Pipavav • Pipav has incorporated a JV with the DPSU, Mazagon Dock. NA
Defence and
• The 50:50 JV named “Mazagon Dock Pipavav Defence” will construct
Offshore
surface warships for the Indian Navy.
Engineering
Limited and
Mazagon Dock
Eye on defence | 23

24. Name of Nature of transaction Value*
entities
Defiance • India-based Defiance Technologies Ltd., a Hinduja Group company providing NA
Technologies engineering, manufacturing and enterprise services and solutions for
and Ausy Group various industries has signed an MoU with Ausy Group of France (which
specializes in high technology and engineering) to set up a JV to address
►
defence offset requirements in India.
►
• Defiance will hold a majority stake in the joint venture.
• The JV will meet Ausy’s customers’ commitment for the sourcing obligation
as mandated by defence offset policy norms of India and allow Ausy to be
listed in the offset defence supplier list.
Axis • Axis Aerospace and Technologies Ltd. is looking for acquisitions to expand
Aerospace and its offering in engineering services for civil, commercial and defence offset
Technologies markets.
Ltd.
► • The company has set up a dedicated offshore development center with
its subsidiary (CADES) to develop fuselage for Airbus. Its new facility
at Kirloskar Business Park will provide solutions, including product
development and manufacturing processes for aerospace, defence,
automotive and heavy engineering industries.
► • It also plans to set up a 75-acre supply chain cluster in the upcoming NA
aerospace park near the Bengaluru international airport at Devanahalli,
around 40 km from the city center, to provide manufacturing and allied
support facilities to global aerospace and defence firms.
Kaman • Kaman Aerospace Group, Inc., a subsidiary of Kaman Corporation and NA
Aerospace Kineco Pvt. Ltd. signed a definitive agreement to form a manufacturing JV
Group and in India. The new company will be named Kineco Kaman Composites India
Kineco Private Pvt. Ltd.
Ltd.
• The venture is based in Goa and will manufacture advanced composite
► structures for aerospace, imaging/medical and other industries.
Mahindra • M&M renewed talks to buy US-based aircraft maker, Hawker Beechcraft. NA
and Mahindra The company had earlier lost its bid to the Chinese firm Superior Aviation
(M&M) Beijing Co.
► • Beechcraft is likely to invite bids again for a sale process as its talks with the
Chinese firm is likely to have failed.
*The values of the deals have been converted to Indian Rupees using Oanda currency conversion tool
1US$ = INR53.85 and 1SEK = INR8.07 (Average of the value from 1 October 2012 to 12 December 2012)
Eye on defence | 24

25. Country-level deals and initiatives
Country Nature of transaction Additional details
United • The India Navy along with its US counterpart • The US Navy’s Undersea Rescue Command
States held Indo-US submarine rescue exercise shipped a submarine rescue system – a
“INDIAEX-2012.” The navies practiced the deep-submergence rescue vessel (DSRV) or
rescue of trapped submarines under the sea. a submarine rescue chamber (SRC) to the
exercise area off Mumbai.
• The DSRV or SRC will dive deep underwater to
“mate’’ with “disabled’’ submarines to rescue
sailors in intricate maneuvers rarely practiced
by Indian sailors.
Russia • The twelfth meeting of the India-Russia • The Commission reviewed and discussed the
inter-governmental Commission on Military status of some of the major issues in military
Technical Cooperation was held in New Delhi. technical cooperation.
• The Commission also endorsed the protocols
of the meetings of the Working Group on
Shipbuilding, Aviation and Land Systems,
(WG SALS) and the Working Group on Military
Technical Cooperation (WG-MTC), which were
held in New Delhi on 27–28 August 2012 and
30–31 August 2012, respectively.
Spain • India and Spain signed an MoU under which • The two sides agreed to exchange defence-
they will encourage collaboration between related experience and information, and
►
their defence industries and exchange of encourage visits of personnel and collaboration
personnel. in the defence industry and similar areas of
cooperation.
• The MoU was signed by the Indian Defence
Minister, AK Antony, and his Spanish • The MoU on defence was among the five pacts
counterpart Pedro Morenés Eulate. signed after comprehensive talks between
the Prime Minister, Manmohan Singh, and the
visiting King Juan Carlos I on bilateral, regional
and international issues.
Indonesia • India and Indonesia decided to significantly • The two sides exchanged views on issues
enhance their defence cooperation in the relating to regional and global security,
first ministerial level biennial defence dialog bilateral exercises involving services, training,
between Defence Minister, Mr. AK Antony, co-production of defence equipment and
and his Indonesian counterpart, Mr Purnomo ammunitions and visits at high levels.
Yusgiantoro.►
• The two sides also exchanged views on the
emerging scenario in Afghanistan and West
Asia.
Eye on defence | 25

26. Country Nature of transaction Additional details
Nigeria • Nigeria and India agreed to strengthen their • Mrs. Obada stressed on expanding the synergy
bilateral ties in the defence sector. between two countries to move the MOU
forward and focus on the recent security
• The need to strengthen the bilateral relations
challenges facing Nigeria.
was stated by the Acting Minister of Defence,
Mrs. Olusola Obada when students of the • In the MoU signed between India and Nigeria
National Defence University of India, led by in 2007, India had pledged to assist Nigeria to
India's High Commissioner to Nigeria visited raise its defence capabilities.
her in Abuja.
Singapore • The Indian Defence Minister, AK Antony, and • Both ministers agreed to continue with the
the visiting Minister of Defence of Singapore, on-going interactions between the defence
Dr. Ng Eng Hen, exchanged views on the establishments of the two countries, through
global and regional security scenario. regular joint military training and exercises etc.
• India and Singapore agreed to further • They also discussed the security situation in
enhance the bilateral defence relationship to the Asia-Pacific region and acknowledged the
contribute to regional peace and stability. role of the ASEAN Defence Ministers Meeting
(ADMM) plus framework to promote dialog in
the region.
Japan • General Haruhiko Kataoka, Chief of Staff, • The visit assumed special significance in the
Japan Air Self Defence Force was in India light of improving military cooperation and
from 19–21 Nov 2012 for a three-day consolidation of existing ties between the two
goodwill visit. countries.
Eye on defence | 26

27. Industry buzz
Government decided to divest its 10% India moves a step closer to missile shield
stake in HAL plans for Delhi
The Cabinet Committee on Economic Affairs has India plans to set up a missile defence shield in NCR by
already approved divestment of a10% equity in HAL 2014. As part of the plan, India tested its experimental
through an initial public offer in the domestic market. ballistic missile defence (BMD) system. It successfully
In a written reply to the Rajya Sabha, the Minister of test-fired a supersonic interceptor missile, which
State for Finance, SS Palanimanickam, said that the GoI destroyed a “hostile” ballistic missile off the Odisha coast.
has decided to divest its stake in nine other companies
(Source: “India test-fires missile shield, hits the target,” Free
including a 10% stake sale each in Rashtriya Ispat Press Journal, 24 November 2012, via Factiva, © 2012 Indian
Nigam Ltd, Oil India and National Mineral Development National Press Bombay Ltd.)
Corporation as well as a 12.15% stake in National
Aluminium Company Limited, 10.82% in Steel Authority
of India Limited, 9.50% in National Thermal Power IAF plans to induct first combat drones
Corporation, 9.33% in Minerals and Metals Trading IAF plans to induct Harop combat drones from Israel
Corporation (India), 5% in Bharat Heavy Electricals by next year for that were brought two years back with
Limited and 4.01% in Hindustan Copper. This move is in a deal value of INR5 billion. The unmanned combat air
line with the GoI’s plan to achieve the budgetary target of vehicle (UCAV) will give IAF the capability of hitting
INR300 billion set for the financial year 2012–13. high value targets such as enemy missile and radar
(Source: “Govt to divest minority stake in 10 PSUs including sites without sending its manned fighter aircraft. It will
HAL, OIL and NMDC: Finance Ministry,” Metis Energy Insider, 9 enhance India’s firepower in conventional and low-
December 2012, via Factiva, © 2012 Metis Business Solutions intensity conflict.
Pvt. Ltd.)
(Source: “IAF to induct first killer drones,” Press Trust of India,
4 October 2012, via Factiva.)
US reluctant to provide full military
knowhow for anti-tank guided missiles Pune airfield plans to get modern defence
Israel has upstaged the US to supply third-generation system
anti-tank guided missiles (ATGMs) to the Indian Army,
The Indian Air Force’s (IAF) airbase at Lohegaon, Pune
worth approximately INR53.85 billion (US$1 billion). The
will be equipped with network-centric all-weather air
plan to go in for the American FGM-148 Javelin ATGMs
defence weapon system called ”Akash,” which will protect
has been shelved because of Washington’s reluctance
the airfield from enemy air strikes. The Akash weapon
to provide full military knowhow — licensed “transfer
system can shoot down fighter aircraft, choppers,
of technology ‘’, which can allow India to indigenously
unmanned aerial vehicles (UAVs) or cruise missiles up
manufacture the “tank killers’’ in large numbers. This has
to a range of 30 km. Akash is an indigenous weapons
rekindled fears in the Indian defence establishment about
system developed by the DRDO in partnership with
the US not being a reliable long-term supplier of cutting-
Bharat Electronics and is currently in the induction phase.
edge military technology. The deal, if finalized, will be the
third major missile program between India and Israel. (Source: Vishwas Kothari TNN, The Times of India - Pune
Edition, 4 October 2012, via Factiva, © 2012 Bennett, Coleman
(Source: “Israel pips US in anti-tank guided missile supply to & Co., Ltd.)
India,” Agence France Presse, 30 November 2012, via Factiva,
© 2012 Plus Media Solutions Pakistan)
Eye on defence | 27

28. IAF plans to upgrade UAV fleet of three negotiations are now focusing on the cost of transferring
technology, the cost of maintenance, total life cycle cost
defence services
in a stipulated time period, and the unit cost of each
The IAF plans to upgrade the UAVs of the three defence aircraft acquired. The negotiations are expected to enter
services under a project worth INR50 billion. The three the final stage in January 2013 with a draft contract
services operate a fleet of more than 150 UAVs procured drawn up by February.
from the Israeli Aircraft Industries. The upgrade will
(Source: “Indian Fighter Talks Continue Following Selection
enhance the snooping capabilities of these UAVs. The
Inquiries,” Aerospace Daily & Defence Report, 5 October
IAF will also be capable of operating these aircraft from 2012, via Factiva, © 2012 McGraw-Hill, Inc.)
far-off distances and control them through satellite
communication system.
Procurement of light utility helicopters
(Source: “IAF to upgrade UAV fleet under Rs 5,000 crore
faces hurdle
project,” Press Trust of India, 2 October 2012, via Factiva.)
The procurement for 197 light utility helicopters to
replace the Indian Army’s current fleet of Cheetah and
Jaguar fighters to be equipped with Chetak helicopters, have hit a roadblock because of
missiles corruption allegations questioning the probity of the deal.
AugustaWestland, an associate of Finmeccanica is under
The Indian Air Force (IAF) will soon choose a winner in a
investigation in Italy for alleged kickbacks. India’s Defence
protracted bid to buy new short-range infrared homing
Minister, AK Antony referred the file of procurement
missiles for more than 125 Jaguar fighters. The IAF
to Central Vigilance Commission, which recommended
operates Jaguars for deep penetration and maritime
cancellation of the deal.
strike, carrying both conventional and nuclear weapons.
The IAF issued a RFP to Honeywell Aerospace, the US- (Source: “Hurdle in Cheetah-Chetak replacement,” The Times of
based aircraft engines and avionics manufacturer to India, 28 October 2012, via Factiva, © 2012 Bennett, Coleman
“completely re-engine’’ Jaguars and provide 270 F-125IN & Co., Ltd.)
turbofan engines. IAF plans to finish the “design and
development’’ phase with Honeywell on the initial two
Additional funds allocated to the Tejas
fighters by 2015–16 and the remaining 123 fighters
by 2023–24 by HAL under transfer of technology from Light Combat Aircraft program
Honeywell. The MoD has allocated additional INR15 billion to
(Source: Rajat Pandit, “India to give power punch to Jaguar the Tejas Light Combat Aircraft (LCA) program. The
fighters,” The Times of India, via Factiva, 17 October 2012; additional amount will boost the projected INR140.47
“Missile Race For Indian Jaguars In Home Stretch,” Aerospace billion budget and will be spent on a production line for
Daily & Defence Report, 5 October 2012, via Factiva, © 2012 HAL to build 20 fighters for the Indian Air Force’s order.
McGraw-Hill,Inc.) The additional money had to be allocated because, so far,
the company has not been able to establish a production
line even to build eight Tejas fighters a year.
Negotiations with Rafale to enter final
(Source: Ajai Shukla, “Rs 1,500 cr more for combat aircraft
stage
Tejas as HAL fails to meet targets,” Business Standard, 9
The GoI is likely to conclude negotiations with Dassault December 2012, via Factiva, © 2012 Business Standard Ltd.)
Aviation for 126 Rafale fighters within six months. The
inquiries into the selection process have concluded and
contract negotiations have reached a crucial stage. The
Eye on defence | 28

29. China unleashes its line of second fifth- Karnataka Government is likely to unveil
generation stealth jets Aerospace policy
China has unleashed its line of second, fifth-generation The Karnataka Government is likely to come out with
stealth combat aircraft. China’s recent test flight of its “Aerospace Policy-2012,” to attract aerospace
J-31, is indicative that China is catching up with the US, industries and emerge as a relatively low cost aerospace
the pioneer of stealth technology platforms. This has manufacturing and MRO hub in Asia and the Middle East. In
increased the need for India’s indigenous air combat the policy, the Government is expected to unfold a 10-year
capability enhancement. perspective plan on the aerospace industry. It is eyeing an
investment of INR377 billion (US$7 billion) in the next 5 to
(Source: “NW18: Focus: Catching up time for India, as China
zooms with stealth jets,” The Times of India, 5 December 2012, 10 years.
via Factiva, © 2012. NewsWire18 Ltd.) (Source: “Karnataka to come out with Aerospace Policy in Dec,”
United News of India, 21 November 2012, via Factiva.)
Chaturvedi committee recommends civil
aviation focus for HAL UNIDO and SIATI have come up with a work-
Report of the BK Chaturvedi committee, submitted to plan to support Indian Aerospace SMEs
the MoD in October, has made various recommendations The United Nation Industrial Development Organisation and
on restructuring HAL. These include — civil aircraft focus Society of Indian Aerospace Technologies and Industries
for HAL, strengthen or plug technology gaps within, pay have entered a co-operation work plan to create a long-term
scale reforms and pay parity with Maharatnas such as development program for aerospace SMEs in India. The role
the National Thermal Power Corporation, empowerment of SMEs in the Indian aerospace industry is poised to grow
of executive management and chief executives to head with billions of dollars on the offer as part of offset clause
independent business units. for defence equipment purchase.
(Source: Madhumathi D.S., “HAL likely to venture into civil (Source: “UNIDO, SIATI to support Aerospace SMEs,” United News
aviation sector,” The Hindu, 3 August 2012, via Factiva, © of India, 21 November 2012, via Factiva)
2012 Kasturi & Sons Ltd)
Labor unions stall private sector entry into
Northrop Grumman, Lockheed looks to warship building
compete for aerostat radars contract
The MoD’s move to speed up warship building by involving
The IAF has decided to seek bids for six aerostat radars private sector has been delayed because of resistance by
worth more than INR21.54 billion (US$400 million). labor unions to transfer work to the newly formed private
Northrop Grumman and Lockheed Martin are expected to JVs. Mazagaon Dock has a significant order book and
be among the contenders for the contract. had formed JVs with two private sector warship builders,
(Source: “Northrop Grumman, Lockheed to compete for Indian Pipavav and L&T, to speed up the building of surface
contract, Defence News says,” Theflyonthewall, 2 November warships and submarines, respectively. Mazagaon Dock has
2012, via Factiva.) not given a single order to the JVs but has instead engaged
a consultant, IDBI Capital, to advise the shipyard on the
operations to be transferred to the JVs.
(Source: Ajai Shukla, “Unions stall private-sector entry into warship
building,” Business Standard, 8 October 2012, via Factiva)
Eye on defence | 29

30. India plans to scale up the Navy’s undersea Tarkash commissioned into Indian Navy at
combat capabilities Yantar Shipyard
India will spend more than INR550 billion (US$10 billion) INS Tarkash, the second of the three stealth Frigates,
to scale up the Navy’s undersea combat capabilities to has been commissioned into the Indian Navy at Yantar
deter China. The contract also includes induction of next Shipyard, at Kaliningrad, Russia. This has bolstered
generation submarines. According to the Navy Chief, the Indian Navy’s role as a key facilitator to promote
Admiral DK Joshi, the MoD’s acquisition council has given peace and stability in the Indian Ocean region and
green signal to buy six submarines and a global tender also strengthened Indo-Russian military technical
for the same will be floated soon. cooperation.
(Source: “R55,000- cr sub purchase okayed,” The Hindustan (Source: “Tarkash joins Indian navy: Announcement,” United
Times, 5 December 2012, via Factiva, © 2012 HT Media News of India, 9 November 2012, via Factiva.)
Limited)
CRPF plans to buy advanced UAVs to fight
India’ first nuke submarine set to be Naxals
operational by end-2013
Central Reserve Police Force (CRPF) plans to purchase
The Indian Navy plans to get its first indigenously built unmanned aerial vehicles that it can operate without
nuclear-powered submarine, INS Arihant, operational by the help of any external agency. The UAVs are expected
the end of 2013. The 6,000-tonne submarine will be put to combat the Maoists and lift real-time images. The
through rigorous sea trials by the middle of 2013 before Expression of Interest states that the air vehicle should
its commissioning. Nuclear-powered submarines can lurk be easy to handle and have low heat and noise, which
deep sea closer to the enemy waters for months without is inaudible at 3,000 ft. It should also have low radar
being detected. INS Arihant will be the second nuclear- signatures to avoid detection and engagement by
powered submarine of India, while China already has 10 adversary.
nuclear submarines.
(Source: Vijaita Singh, “CRPF to buy advanced UAVs to fight
(Source: “India’s First Nuke Submarine to be Ready by 2013- Naxals,” Indian Express, via Factiva, © 2012 Indian Expresss
end,” New India Express, 4 December 2012, via Factiva, © Online Media Pvt. Ltd)
2012 The New Indian Express Group)
Eye on defence | 30

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Eye on defence | 31

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Eye on defence | 32

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Eye on defence | 33

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