Archive for October, 2015

India’s Reliance Defence Limited (RDL) has joined a federation of more than 60 defence companies operating within the country that aims to influence policy and promote indigenous manufacturing.

RDL said in a statement on 19 October that it has joined the Association of Defence Companies (ADC) in order to collaborate in supporting Prime Minister Narendra Modi’s ‘Make in India’ campaign, with emphasis on private-sector development.

RDL said that other companies participating in the ADC include Tata Advanced Systems, Punj Lloyd, and Ashok Leyland as well as local representatives of foreign equipment manufacturers such as Dassault, Lockheed Martin, Rafael, Rolls-Royce, DCNS, and Boeing.

Source: IHS Jane’s Defence Industry

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What is Cold Start Doctrine?

Posted: October 21, 2015 in Semco Group

A military doctrine helps standardize operations, facilitating readiness by establishing common ways of accomplishing military tasks. Its objective is to foster initiative and creative thinking and links theory, history, experimentation and practice. Cold Start is a military doctrine developed by the Indian Armed Forces to put to use in case of a war with Pakistan.Here are ten things to know about the Cold Start Doctrine:

  1. The main objective of the Cold Start Doctrine is to launch a retaliatory conventional strike against Pakistan inflicting significant harm on the Pakistan Army before any international community could intercede, but not in way Pakistan would be provoked to make a nuclear attack.
  2. Cold Start Doctrine deviated from India’s defence strategy since 1947 – “a non-aggressive, non-provocative defense policy,” – and will involve limited, rapid armoured thrusts, with infantry and necessary air support.
  3. In May 2001, Operation Vijayee Bhava was launched by the Indian army, involving 50,000 troops to boost synergy between various banches of the armed forces. The objective of this operation was to reduce the mobilisation time drastically to 48 hours, and was successful in achieving it. Operation Vijayee Bhava is considered to be a trail run of the Cold Start Doctrine.
  4. Later in 2011, Operation Sudarshan Shakti was conducted to revalidate Cold Start Doctrine. Focus of Sudarshan Shakti was to practice synergy and integration between ground and air forces.
  5. Indian Army’s official stance was denying the existence of the Cold Start Doctrine. However, a “proactive strategy” being in place have been confirmed by the officials.
  6. Post the deadly 2008 Mumbai attacks, Indian government took a decision not to implement the Cold Start Doctrine. This was to defeat the strategic goals of Pakistan to redirect the attacks of other Islamist millitant groups attacking Pakistan to an external threat – India.
  7. During the years 2007 to 2009, India’s defence budget increased from $24 billion to $40 billion. Sensing threat, Pakistan increated increated its defence budget by around 32%, further stressing their already weak economy
  8. Cold Start Doctrine was developed as the limitations of the arlier doctrine – Sundarji Doctrine – was exposed after the attack on the Indian Parliament.
  9. According to the Cold Start Doctrine, battle Groups will be well forward from existing garrisons. India’s elite strike forces will no longer sit idle waiting for the opportune moment, giving Pakistan the luxury of time.

Source: INDIA TODAY

Continuing with its incremental changes in policy to ease business in the defence sector, the government is set to restore ‘services’ as eligible offsets in military procurement contracts. However, IT companies may have little to cheer as software development and quality assurance are likely to be dropped from the list.

Sources have told ET that the defence ministry is likely to give a go ahead to several amendments in the procurement policy early next week.

The biggest among them is an easing of offset guidelines which require winning foreign vendors to invest at least 30per cent of the contract value into the Indian defence and aerospace sector.

The services industry had been hit with a major blow in May 2013 after the defence ministry had put a stop to services being treated as eligible offsets, effectively cutting out thousands of crores of business for the sector.

The suspension was ordered after the investigations into the VVIP chopper deal that pointed to the services route being used to channel funds.

However, with a strong demand from the industry, the government is now set to restore five out of the seven categories of services that are eligible to be counted for offsets. These include maintenance, repair and overhaul (MRO), engineering, design and testing, upgradation, training and research and development.

The two services likely to be dropped are software development and quality assurance. A final decision on the matter will however be taken by Defence Minister Manohar Parrikar.

The reinstating of the services clause has the potential to be a game changer for new defence players, especially in the MRO and upgradation sector.

At present $4.87 billion worth of offset contracts have been signed and the potential value till 2028 is $15 billion.

Besides the services reinstatement, the defence ministry will also deliberate on other recommendations of the Dhirendra Singh Committee report, including providing a level playing field for Indian manufacturers competing for defence contracts with foreign vendors.

MoD is likely to ease out payment terms for Indian manufacturers by allowing letter of credit payment in which charges are borne by the buyer.

Source: ET

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PE firm’s infusion in the auto components maker will be used to expand capacity
Singapore-based private equity firm Everstone Capital has purchased a controlling stake of over 51% in domestic auto components maker SJS Enterprises for an estimated ` . 350 crore, executives close to the development said. The money will be used to expand capacity .The PE firm, launched by former Goldman investment bankers Samir Sain and Atul Kapur, acquired 26% stake owned by American specialty printing company Serigraph and another 25% stake from the three owners of the Bengaluru-based auto components maker.

The day-to-day operations will be managed by the three entrepreneurs ­ S Sivakumar, KA Joseph and V Srinivasan ­ who started the company in 1987. Joseph will continue as the managing director, senior officials said.

“We welcome Everstone’s interest in financing our expansion plans,“ Joseph told ET. The investment includes secondary as well as primary purchase. Everstone will help the company set up its next plant near Bengaluru and finance its expansion plans.

SJS makes industrial graphics for refrigerators and washing machines, and auto component makers in India as well as overseas. It earns a sizeable chunk of its revenues from auto and appliances makers such as TVS Motor Company , Bajaj Auto, Maruti Suzuki, Tata Motors, LG, Samsung and Whirlpool.

As per the March 2015 rating release from ICRA, SJS Enterprises recorded a profit after tax of . 8.9 crore in 2013-14 on an operat` ing income of ` . 92.7 crore, compared to profit of ` . 3.7 crore on an operating income of ` . 78.07 crore in 2012-13. During the nine months to December 2014, the company reported a profit before tax of `. 27.5 crore on an operating income of ` . 110.2 crore.

The auto industry contributed about 75% to the company’s revenue in 2013-14 while exports accounted for about 14%. In the first nine months of 2014-15, the company saw its operating profitability increase to 29.4% from 13.5% in the previous fiscal.

“SJS is a leader in its space and has a track record of excellence in manufacturing and customer service,“ said Sameer Sain, cofounder and managing partner at Everstone Capital. “We believe a company such as SJS exemplifies the `Make in India’ philosophy and we will continue to focus investments in such sectors.“

Everstone is an India and Southeast Asia focused private equity and real estate investment firm with assets under management of $3.3 billion.

Everstone, which has been aggressive in the consumption business, had raised $580 million under Everstone Capital Partners II and $425 million Indivision India Partners. In September it closed its third fund of $730 million from global investors.

“The automobile sector is expected to benefit from the expected lower interest rate regime. Howev er, PE investors have been cautious in the sector and are expected to continue to be so. At the same time, SJS falls more in the consumerauto derivative space which may be more attractive,“ said Sanjeev Krishan, executive director and head of private equity transactions advisory services at PricewaterhouseCoopers India.

Early this month HUL sold its bread and bakery business, Modern foods to Nimman Foods, a company backed by Everstone Group. Its other recent investments include Ritu Kumar, VLCC Healthcare, Tikona Digital Networks, Burger Kind India, Pan India Solutions, Capital Foods and Sula Vineyards.

Auto components industry in India is growing fast. As per a recent report by India Brand Equity Foundation, the sector is expected to grow to $115 billion by 2021 from $66 billion at present.

Source: The Economic Times

The government’s decision to insist that the Indian Air Force induct a large number of Light Combat Aircraft (LCA) fighters is the kind of shock treatment that was needed to push the ‘Make in India’ project. A news report says that the government has rejected the IAF’s demand for 44 more Rafale aircraft, in addition to the deal for 36 announced by the government earlier this year.

Instead, the IAF has been told that the kind of numbers it wanted could only be met by inducting the LCA. The Indian Air Force will now induct 120 home-grown Tejas light fighter jets instead of the 40 planned earlier

The IAF has itself to blame for its predicament. The medium multi-role combat aircraft (MMRCA) was originally intended to be a stop-gap measure to enable the LCA project to be completed. However, the IAF rigged the competition by including the heavier, more` capable two-engine fighters and knocking out the best option, the Swedish Gripen. 

As a result, a competition for a $8 billion stop-gap fighter morphed into a huge buy involving 126 Rafales which would have cost the nation anywhere between $25-30 billion.

Requirements 

Critics cite a C&AG report of May 2015 claiming that the aircraft had 53 shortcomings in respect of the IAF’s requirements such as an integral self-protection jammer and a radar warning receiver. They also noted that the aircraft weighed more than it should and had a lower internal fuel capacity.

But K Tamilmani, the DRDO’s aerospace chief, has, more recently, said that the modified version of the LCA addressed most of the air force’s concerns relating to electronic warfare systems, flight computer, radar and maintenance problems.

In pushing the LCA in the IAF’s face, the government has dealt with one of the two big problems faced by the project – the IAF’s refusal to take ownership of the LCA.

In contrast, the Indian Navy has ‘owned’ the LCA-Navy project and has worked with the DRDO to tweak the aircraft to meet its requirements.

Some of these modifications — a stronger undercarriage and Levcons to provide it greater agility — will figure in the aircraft that will now be made for the IAF. It needs to be noted that the LCA, which will be used for close air support or countercounter air missions, will not need the kind of sophisticated electronics that an aircraft designed to operate deep in enemy territory needs.

Third party assessments are that the LCA is a capable fighter, better than its counterparts like the Sino-Pak JF-17. Its use of composites which cover 90 per cent of its surface provides it natural stealth. Its design makes it highly stable and easy to fly, a fact attested to by Ruag specialists who wanted to market a tandem-seat version as a lead-in fighter trainer (LIFT).

Manufacturing 

But the government still needs to deal with the second big problem – getting the state-run Hindustan Aeronautics Ltd (HAL) to deal with the project with the seriousness it deserves.

As the C&AG report noted, the manufacturing facilities at HAL currently cater to the production of only four aircraft per year, as against the eight needed, because of delays in procuring plant and machinery, tools and the construction of production hangars.

Likewise, repair and overhaul (ROH) facility for LCA, as specified in the ASR, has not been fully created. HAL, which makes a great deal of money through licence-producing aircraft like the Su- 30MKI, for which it charges the government Rs 100 crore more than the cost for an off-the-shelf item from Russia, couldn’t be bothered with the need to encourage an Indian project.

Indeed, some years back, the Swiss-German giant Ruag wrote to HAL offering its expertise in setting up assembly lines to manufacture the LCA and offering an industrial partnership to sell the aircraft abroad. But HAL did not even have the courtesy to reply.

This would be a good time for the government to look into the IAF’s claim that it needs at least 45 squadrons to take on the ‘two-front collusive threat’ from Pakistan and China. As of now, says the IAF, it only has 35 active fighter squadrons, and even this could go down to 32.

There are two issues here – the nature of war of the future. Given the fact that India, Pakistan and China are nuclear-armed states, the chances of any kind of an all-out war are low. At worst, we may see localised clashes such as the Kargil mini-war.

Capabilities 

But this is not something which the IAF can decide, it requires the government to make an overall strategy assessment and then pinning down the kind of capabilities India’s armed forces need.

This will enable a planned acquisition of capabilities, instead of the present chaos which has led to the fiasco of the Rafale buy and the decision to halve the size of the mountain strike corps.

Source Mail Today

PANAJI: Arms agents earning sales commissions could soon be passe, Defence Minister Manohar Parrikar said, adding that agents would have to be paid fixed fees while representing foreign defence manufacturing companies.

Parrikar, who was speaking during a public interaction event near here, late on Sunday, also said that guidelines for foreign defence manufacturing companies to enlist arms agents will be issued by the third or fourth week of October.

“Giving percentage is very risky in India. Money can be paid to various people through this percentage, so we are permitting agents, but not by way of percentage or success fee or failure penalty. By fixed amount reasonable payment to the agency, you can keep an agency for following up your work,” he said.

“Amended new guidelines will start coming from the third or fourth week of this month, they are under final drafting. I feel that agents can be there as a supplementary supporting technically or administratively to the companies, because foreign companies may not be able to keep an office for every supply they make,” the defence minister said.

Source ET

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