Archive for February, 2016

The defence ministry has identified about 25 projects under the `Make in India’ initiative and plans to open them up to the industry for participation shortly.“We have initially shortlisted these. There will have to be many interactions with the ministry and other stakeholders to finalise them,“ said AK Gupta, secretary, defence production, without revealing details of the possible size of the projects.

India is among the world’s biggest markets for defence products. In the past year alone, the country has signed defence contracts worth about $15 billion.

Gupta said the government has made defence procurement simpler and more transparent. “A lot of things have been streamlined. Earlier, what used to happen in offset agreements was that once you are part of an agreement, you can’t change anything. Now full flexibility has been given to the industry to choose their offset partners and components, provided both are on the eligibility list,“ he said.

In January, the ministry gave its nod to key policy changes to give more importance to locally made defence equipment and fund Indian private sector research and development in defence. It changed the defence pro curement procedure to introduce a new category under which it is mandatory to source 40% of the content locally.

Besides, in a move that seeks to address one of the major concerns of foreign players, the ministry has revised the defence offset clause, which will now be applied only to contracts of more than `2,000 crore instead of the current `300 crore. An offset clause means a company has to plough back a chunk of its contract size in terms of business to Indian companies.

The government has provided 319 licences to 190 companies since 2001, said Gupta. Of these, 50 companies having 79 licences have already started production, he said.

Source: The Economic Times


India is close to concluding a clutch of bilateral military deals and projects with Israel, collectively worth around $3 billion, ahead of PM Narendra Modi’s first visit to the country later this year.At least three deals with Tel Aviv are headed to the Cabinet Committee on Security (CCS) for the final nod, which will consolidate Israel’s position as one of the top three arms suppliers to India, defence ministry sources said on Monday .

The main pact concerns the Rs 10,000-crore joint development of a medium-range surface-to-air missile system for Indian Army . The deal is undergoing financial vetting after conclusion of final contract negotiations. India is readying a slew of military deals with Israel worth $3 billion before Prime Minister Narendra Modi visits Tel Aviv this year.

The pacts include the acquisition of 164 laser-designation pods or `Litening-4′ for IAF fighters like Sukhoi30MKIs and Jaguars as well as 250 advanced `Spice’ precision stand-off bombs capable of taking out fortified enemy underground command centres.“It should be cleared by the CCS within a month or so,“ said an MoD source.

Some headway has been made over the stalled negotiations for an initial Rs 3,200crore contract for 321 `Spike’ anti-tank guided missile (ATGM) systems and 8,356 missiles. “There was a major difference (of opinion) in the ATGM project cost between the Israeli commercial bid and the much-lower price benchmarking done by the MoD. Over 20 contract negotiation committee meetings have been held till now… the effort now is to close the gap,“ said the source.

The Army desperately needs third-generation ATGMs, with a strike range of over 2.5-km and fire-and-forget capabilities, to equip all its 382 infantry battalions and 44 mechanised infantry units.

In October 2014, the Modi government had selected the Israeli Spike ATGM over the US Javelin missile system, but the actual contract has been hanging fire since then. The project involves an initial offthe-shelf induction, followed by large-scale indigenous manufacture by Bharat Dynamics Ltd (BDL) to equip the 1.18-million strong Army .

The proposed MR-SAM project between DRDO and project between DRDO and Israeli Aerospace Industries (IAI), too, will be huge. The initial order is for one MRSAM regiment, with 16 firing units along with their multifunction surveillance and threat tracking radars as well as weapon control systems. But the SAM systems are also to be subsequently produced in bulk by BDL, in keeping with the similar ongoing DRDO-IAI projects worth around Rs 13,000 crore for Navy and IAF.

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Source: The Times of India

A rudimen ary contraption usually associated with childhood mischief will now help Haryana Police as they put away their guns to control violent agitators with as ittle violence as possible.With marbles and chilli balls as the ammo, the `gu ail’, or slingshot, will serve as the weapon of choice for a force reeling under criticism for being harsh with protesters.

The tactic has been devised by Hisar range IG A K Rao, who got the idea from his counterparts in Jammu and Kashmir. “Those agitating are our own people,“ Rao said, “They are not criminals. We can’t pelt stones at them. We’ve or dered 1,000 gulails. They don’t kill but are effective in dispersing mobs.“

The gulail as a weapon to restore order is likely to be test-fired at those planning to restart the Jat community’s agitation for reservation from February 15. Riot po lice in the six districts of Hisar range have already begun practice. During a confrontation, the `gulail brigade’ will form the third row, behind counterparts carrying shields and batons.

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Source: The Times of India

What was supposed to be cheaper when made in India is much costlier. What was supposed to be a joint development programme has been reduced to a purchase from abroad. That is among the key findings of internal government audits of major aerospace projects in recent years.

All the aerospace reports accessed by The Hindu are scathing in their indictment of agencies such as the Defence Research and Development Organisation (DRDO) and Hindustan Aeronautics Ltd. over the way they have handled joint development programmes involving foreign partners, or produced aircraft in India under transfer of technology.

Sukhoi-30 MKI fighters

HAL was originally tasked by the Cabinet Committee on Security (CCS) with undertaking licence production of 140 Sukhoi-30 fighters under transfer of technology from Russia, with conditions including: indigenous manufacture of the aircraft at a cost lower than that of the imported aircraft.

The IAF entered into four different contracts with HAL for supply of the 140 aircraft, and later two contracts for 40 and 42 additional fighters. Thus a total of 222 S-30 MKI were to be assembled by HAL. When HAL began to assemble, however, the story was different. “Contrary to projection in the CCS note, where it was estimated that the indigenous aircraft production cost would be lower than that of the imported aircraft cost… the actual cost of phase IV aircraft has always been higher than that of the imported aircraft,” the report says.

In the production year 2014-15 in phase I, when aircraft was directly imported from Russia, the average cost per fighter was Rs. 270.28 crore. In phase IV, when aircraft is manufactured by HAL from raw material, the cost is Rs. 417.85 crore.

The report also indicts HAL for taking 2-3 times more man-hours than those taken by Russians.

Advanced Light Helicopter

An audit of the Advanced Light Helicopter (ALH) project of HAL from 2001 to 2009 carried out by the Controller-General of Defence Accounts (CGDA) pointed out: “As against the envisaged indigenisation level of 50 per cent, about 90 per cent of the value of material used in each helicopter is procured from foreign suppliers.”

The audit said that during the production of the helicopter, despite gaining experience of making 90 of them, the labour hours remained almost double of what was prescribed by the consultant.

The Air Marshal Matheswaran report on the aeronautical sector points out that the Shakti engine used in the helicopter “only has an indigenous name with hardly any self-reliance or technology control.”

Missile development

The Matheswaran report points out that in 2003, a decision was taken to allow the services to meet their operational requirements of surface-to-air missiles (SAMs), till 2010, by acquiring through the “buy global” route because the development of the indigenous Akash and Trishul missile systems was delayed.

The DRDO stepped in and proposed joint development with Israel. So the DRDO and Israel Aerospace Industries (IAI) started development of a long-range SAM (LRSAM) for the Navy in 2005. In 2007, they started work on developing a medium-range SAM (MRSAM) for the IAF under a separate contract. “Incidentally, LRSAM & MRSAM is the same missile,” the report says.

In a scathing indictment of the entire project, the report says IAI remains the design authority for the complete system. “IAI is doing the role of supplier and the DRDO is the buyer, which is contrary to the DRDO role of design agency.”

“No transfer of technology (ToT) has been taken as part of the contract. We will remain dependent on IAI for its share,” the report points out, adding that the intellectual property rights (IPRs) remains with the design authority.

Conflict of interests

The report also tears into the Department of Defence Production.

“The DDP, which on behalf of the Services and the MoD would have been the instrument of indigenisation, became primarily a custodian of a large collection of ordnance factories and de-facto owner of shipyards, aircraft factories etc.”

This resulted in a conflict of interest, the report says.



40% of modernisation budget unspent; Army worst spender
Even though several major defence purchases are in their advanced stages, the defence ministry is struggling to exhaust its modernisation funds with almost 40% of the capital budget unspent as the financial year enters its last quarter.Latest expenditure data with ET show that over `. 37,000 crore of the defence re of the defence ministry’s modernisation budget remains unutilised as of December-end, with the Army struggling the most, having spent only 45% of its capital allocation. In 2014-15 too, the ministry could not spend 22% of the initially allocated `. 80,545-crore capital budget for the three armed forces. Eventually, the balance ` . 18,200 crore under the capital head was used mainly for revenue expenses. Of the three forces, the army seems to be the laggard, having failed to exhaust half its modernisation budget.

The ministry now faces a situation where a part of its funds earmarked for new purchases and upgrades are likely to be shifted either to the revenue head or returned to the central kitty, in what would be a dent to modernisation efforts. Official spending numbers obtained by ET indicate that the defence ministry could fall short of its target of signing deals worth over `. 1 lakh crore. The air force has been able to spend funds at a good pace, with 73% of its `. 33,657-crore capital budget exhausted. DRDO, meanwhile, has spent 64% of its ` . 7,788-cro re allocation.

Officials believe the air force may end up overshooting its budget and could pull in funds earmarked for the army and navy.

With several major projects stuck -the M777 howitzer purchase and selfpropelled howitzers, for example -the army is at the bottom of the spending list. Only 45% of its Rs 27,227-cro re capital budget has been exhausted till the end of December. The Navy fares slightly better, having spent 57% of its Rs 25,003-crore allocation.

The numbers also reflect an increasing concern on the part of the private sector over the government’s ability to go ahead with major `Make in India’ projects that require firm orders.

While there have been several policy changes which have been welcomed by the industry, the lack of substantial orders has been a spoiler.

Source: The Economic Times
Minister says there should be a mechanism to quickly and effectively punish those who violate the existing system
I believe the lesser a government is involved in any manufacturing sector , the faster it will progress. In India, we have a tendency -and it is not totally wrong from the bureaucratic side to have such a tendency -but many a times when something wrong happens, we try to curb it by creating more regulations rather than punishing the person who has misused the power . So, more restrictions are put in and those restrictions ultimately lead to a situation where one is totally tied down.Make in India will succeed if there is a change in mindset. Rather than putting more regulatory systems, there should be a mechanism to quickly and effectively punish those who violate the existing system. For example, environmental laws in the past 10 years have been tightened to such a level where doing anything today is impossible.

With more regulation, one will not be able to perform, but show me a single case where a violation of major regulation has resulted into a severe punishment, including jail of major regulation has resulted into a severe punishment, including jailing. So, I think, we should have an effective system where violators will be punished heavily but tightening the regime should be reduced.

The defence sector -unluckily -is of a nature where I am the sole buyer. In export, we have almost removed all the restrictions and I promise in 2016, it will be easier to export even certain higher-end materials, subject of course to some international treaties.

For this, we are reducing some of the framework. For example, we realised sometime back in 2013, software is being used for transferring money for kickbacks.Nothing was proved but that was thought to be one of the routes.Immediately , in offset, software was banned. We have opened it up again and changed the regulations, it is now about trusting the people more. We have done the unleashing (of potential) but there is a difference between unleashing a doberman and unleashing a mild mannered (dog), defence is more like the doberman, so when you unleash it, you have to be careful that it doesn’t bite someone.

I think we have done a lot of things in defence and the government has supported the sector a lot. Forty-nine per cent FDI was absolutely essential and on a case to case basis, we can even consider sential and on a case to case basis, we can even consider more, especially in technologies that are difficult to get for local companies. Even tha process has now been reduced to the ministerial level rather than the cabinet level, which was much more difficult. So, we have done a lot of ground preparations and the results will be seen in the coming years.

I have been asking various de fence (business) people of the dif ficulties (they face). I am on their side, I fight for ease of doing busi ness. Transparency has to be main tained, you cannot sacrifice trans parency and procedures. However it should not be that procedures be come supreme. In many ways their attitude is changing. One area, for example, is skilling in off set (policy). It was deeply resisted I had to tell them how socio-eco nomic situations are changing. We have been pushing for skills to be part of offset, of course that does not mean there is freedom for any manipulation but with proper guidelines, skills can be included as part of offsets.

Source: The Economic Times
Business will get much easier if the govt responds to misdeeds with swift action
The Make in India programme can unlock vast opportunities in the defence sector, while big-ticket foreign investment in the railways will hoist smaller enterprises into the global arena, top cabinet ministers said, drawing cautious optimism from industry and demands of effective implementation with a trustful approach.During the Make in India session at the Airtel-Economic Times Global Business Summit, defence minister Manohar Parrikar, railway minister Suresh Prabhu and Department of Industrial Policy and Promotion secretary Amitabh Kant said the government had taken steps that would catalyse sustained growth and highlighted the role of the private sector, strict accountability and the need for disruptive changes.Business leaders shared the government’s optimism but sought more action. BCG chairman Hans-Paul Bürkner said manufacturers around the world wanted to make India their manufacturing base but added that to make business easier, cutting red tape was not enough. It also required a climate of reliability, stability and predictability .

Larsen & Toubro president SN Subrahmanyan lauded the government for creating “positivity“ and doing what should have been done a quarter of a century ago, but asked for more focused implementation.

A change in government approach was also needed, Parrikar said. Business will get much easier if the government responds to misdeeds with swift action.

“We try to curb the wrong by creating more regulation, rather than punishing the person. Make in India can succeed by changing this mindset,“ he said. “The less the government in any manufacturing sector, the faster it will progress.“ The defence minister said the same approach is being taken on environmental rules.

“Environmental laws in the last 10 years have been tightened to the extent that it is impossible to do anything,“ he said. “With more regulation, you will not be able to perform. Show me a single case where a violator is punished heavily .“

Prabhu said the railways was attracting big-ticket investment from companies like General Electric, a development that the US conglomerate’s vice chairman John Rice lauded at the conference. Prabhu said hightech investment by companies like GE would also develop an ecosystem of suppliers.

“The ecosystem will promote medium and small enterprises to a level that will upgrade them to the global supply chain,“ he said.

Ministers cautioned against impatience. “If you are running a marathon, you don’t run like a sprinter,“ Prabhu said. Parrikar urged caution. “The defence sector is like a Doberman. When you unleash it, you have to be careful that it does not bite anyone,“ he said. Vedanta CEO Tom Albanese said India needed a “can-do“ attitude; Sunita Reddy , MD of Apollo Hospitals, said what is made in India should also be designed in India; Michael Thiemann, CEO, ThyssenKrupp, suggested that India should be the “best-cost“ country; and Subrahmanyan favoured smart manufacturing.

Source:  The Economic Times