ARMY WON’T NEED TO GO TO DEFENCE ACQUISITION COUNCIL OR CCS This will ensure that the time taken in procuring such equipment will reduce tremendouslyReplenishing stocks necessary to maintain optimum level to fight short intense war

The Centre has given Army vice-chief Sarath Chand full financial powers to procure critical ammunition and spares to maintain an optimum level to fight a short intense war following “critical voids“ in capabilities of the Army . The major decision means procurement process of such ammunition and equipment that would take months would be completed much faster.The procurement of critical ammunition will be done for most of 46 types of ammunition the Army uses.The procurement of spares under the new scheme will be for 10 different types of equipment. The Army faces severe shortage in ammunition, mainly for artillery guns, tanks, air defence and certain infantry weapons, which will make it very difficult to fight a short intense war that lasts for 10 to 15 days.

“The Army’s vice-chief has been notified with full financial powers to procure critical ammunition and spares to maintain optimum levels,“ a top defence ministry official said. “By giving full financial powers to the Army vice-chief, the procurement of such equipment will be done faster. This is the revenue route for in-service equipment and there will be no need to head to the Defence Acquisition Council (headed by defence minister Arun Jaitley) or the Cabinet Committee on Security, for procuring such critical equipment. This will ensure that the time taken in procuring such equipment will reduce tremendously ,“ the official said.

The government has conducted faster procurement in the past when it realised that there were several voids in the capabilities of the Army, mainly in ammunition.

“To make up for the voids, emergency powers were given to the Army vice-chief for three months.It was extended for three more months. During this time, 19 contracts worth `12,000 crore were signed. The six months expired in March. Granting full financial powers to the vice-chief is meant to ensure an optimum level to fight a short intense war,“ the official added. In addition, the Army also intends to have enough ammunition to fight a 40-days intense war or a full-scale war.

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Shotguns, rifles and bullets become cheaper; security agencies, banks among gainers
GST has come out all guns blazing. Under the new tax regime, shotguns, rifles and bullets are cheaper, giving a shot in the arm to weapons dealers across the country as well as their high-profile customers.“Big business houses, film industry and industrialists have been making queries. We are waiting for the ordnance factories to announce new prices,“ Hanif Bandukwala, Mumbai-based dealer and retailer who owns Bansons said.

Security agencies and banks are other customers who will gain, apart from big farmers who use weapons to ward off stray animals from their fields and goons from their homes. Politicians are also among the people who may keep personal weapons.

While dealers like Bandukwala are likely to gain, dealers have a problem selling guns in the biggest potential market, Uttar Pradesh. The Allahabad High Court banned fresh licences four years ago because it turned out that the 2.15 lakh guns with the state police were heavily outnumbered by private licences that were more than 11lakh. The court said the state was sitting on a volcano. UP, Bihar, Punjab, Haryana and Maharashtra are the biggest markets for the arms and ammunition industry which is around Rs 200-250 crore. It is growing 2% a year, according to the All India Arms Dealers Association that represents 4,000 dealers in the country .

“Rifles and guns will be cheap by 9%, while prices of revolver and pistol will go up,“ says Charan Pal Singh Ghei, chairman of the association.

Rifles, in which the barrel is grooved to make the bullet spin, and other shotguns account for 90% of the Indian market while smaller handguns make up the rest. Bandukwala said customers generally prefer Indian guns as new ones are generally available unlike foreign weapons that are mostly 10-20 years old.

Ghei said the popular 12-bore gun, which costs about Rs 20,000, will now sell for about Rs 18,000 while the 315-bore rifle will fall to about Rs 55,000 from the earlier price tag of up to Rs 60,000.

Under GST the government has kept pistol, revolver under 28% tax slab and guns and rifles under 18%. “Earlier, we were paying 12.5% VAT, 2% central state tax and 12.5% sales tax for guns, revolvers, pistols and rifles,“ informs Ghei.

Harjeet Bindra of Bindra Armoury in Bareilly district of Uttar Pradesh said that farmers in the hinterland of the state are the biggest buyers of arms. “The law and order situation in these areas is so bad that it is not safe to venture out after sundown. With the police station far off, one can’t rely on their assistance and hence it is necessary to keep guns and rifles,“ he said.

In UP, state taxes were the highest at 21% apart from the 12.5% VAT and 1% other taxes.Bindra added that the industry will benefit more if the government started issuing fresh licences.

Jodhpur-based New Light Art Works, which is one of the 100 private companies given licence by the government to manufacture guns, said that lower tax would encourage investment in the sector. “Orders have slowed down since June as the industry was waiting for the new tax slabs. In a month, I sell 125-200 guns to arms dealers. Till date in July, I have sold 25 and expect a pickup in demand,“ said 78-year-old Vijay Singh Bhati who sells guns under the `Óm VSB’ brand.

India’s quest for advanced surveillance drones to keep a hawk eye on the Indian Ocean Region will now be met through the proposed acquisition of Predator naval drones from the US. But what it really wants is combat drones or unmanned combat aerial vehicles (UCAVs) in the long run.Akin to fighter jets but remotely controlled through satellites from thousands of miles away , combat drones are capable of firing missiles and precision-guided munitions on enemy targets before returning to their home bases to re-arm for the next mission. Their gamechanging impact on modern-day warfare can be gauged from the way the US has been extensively using Predator and Reaper armed drones to fire deadly `Hellfire’ missiles against Taliban targets in the Af-Pak region with devastating effect.

India, as of now, is in talks with the US for only unarmed Predator, or MQ-9B Guardian unmanned aerial vehicles (UAVs), which are high-altitude, long-endurance drones capable of flying non-stop for over 27 hours for intelligence, surveillance and reconnaissance missions. This, too, became possible only after India joined the 34-member Missile Technology Control Regime, which prevents proliferation of missiles and UAVs over the range of 300km, in June 2016.

Ahead of PM Narendra Modi’s trip to Washington, the Trump administration had cleared the sale of 22 MQ-9B Guardian drones manufactured by General Atomics to India, in what will eventually be a governmentto-government deal after the US Congress is first notified and long-drawn bilateral negotiations are then held.

Though figures upwards of $2 billion for the 22 drones, with their associated spares, maintenance and training package, are being quoted, government sources said the actual procurement process was yet to begin.

“The US has just responded to our `price and availability inquiry’. It’s early days yet,“ said a source.While India is slated to become the first country outside the NATO alliance to get these drones, Washington is so far unwilling to sell actual combat or armed drones to New Delhi because it believes the move will disrupt the military balance in the region.

India, however, is on course to acquire 10 HeronTP missile-armed drones for around $400 million from Israel, even as PM Modi is scheduled to visit the Jewish state early next month, as was earlier reported by TOI.The IAF already has Israeli Harop “killer“ drones.

The IAF, incidentally , has proposed the creation of a separate cadre to handle UAVs, apart from the flying, technical and ground duty branches, in the future.

The Defense Advanced Research Projects Agency’s (DARPA) new self-steering bullet is about to change the pretend part into reality. As part of its Extreme Accuracy Tasked Ordnance (EXACTO) program, DARPA has been developing a .50 caliber ammunition that can maneuver in flight after being fired from a weapon.

DARPA has created self-steering bullets which use a real-time optical guidance system to hit both moving and accelerating targets with high accuracy.
A post in DARPA’s website describes EXACTO’s specially designed bullet as using a “real-time optical guidance system” that not only tracks but directs the bullets right to their targets. This guiding system is what ensures the high accuracy rate of snipers—regardless of external factors that could affect the trajectory of the bullet such as weather, wind, and target movement. “For military snipers, acquiring moving targets in unfavorable conditions, such as high winds and dusty terrain commonly found in Afghanistan, is extremely challenging with current technology,” DARPA said. “It is critical that snipers be able to engage targets faster, and with better accuracy, since any shot that doesn’t hit a target also risks the safety of troops by indicating their presence and potentially exposing their location.”

SELF-GUIDING ROUNDS
In 2014, DARPA demoed its guided sniper bullets for the first time. The video showed the EXACTO bullet changing direction in mid-flight, almost like it was following its target. Live-Fire tests were conducted February 2015, which showed the EXACTO rounds self-steering to hit not just moving, but also accelerating targets.
“True to DARPA’s mission, EXACTO has demonstrated what was once thought impossible: the continuous guidance of a small-caliber bullet to target,” said Jerome Dunn, DARPA program manager. “This live-fire demonstration from a standard rifle showed that EXACTO is able to hit moving and evading targets with extreme accuracy at sniper ranges unachievable with traditional rounds. Fitting EXACTO’s guidance capabilities into a small .50-caliber size is a major breakthrough and opens the door to what could be possible in future guided projectiles across all calibers.”

US air force is trusting the billionaire to launch its secret space plane this summer, and the stakes are high
Not long ago, SpaceX founder Elon Musk cracked what he once labelled a monopoly for defence department space launches, successfully breaking into a business that was dominated by United Launch Alliance.The defence department’s appetite for space access is voracious, given the myriad reconnaissance, defence and communications roles there, coupled with a future where conflicts are almost certain to involve space assets. Musk’s 2014 lawsuit against the government was settled out of court and the Pentagon cer tified SpaceX, also known as Space Exploration Technologies Corp., as a suitable supplier of military space launches.

Spac eX’s f i rst g ig for t he military was in May when it launched a satellite for the National Reconnaissance Office.But in a very public sense, Musk and the government this summer will test the theory that cheaper space launches are suitable for sensitive military missions.

In August, SpaceX will carry one of the Pentagon’s premiere yet highly classified platforms into orbit. The X-37B spy craft, an unmanned miniature version of the Space Shuttle, logs missions that are well over a year in length. The most recent X-37B sojourn ended in May after more than 700 days circling the Earth.Boeing has built two of the craft, with the first launched in 2010.The August blastoff will be the programme’s fifth flight.

One major reason for SpaceX’s app e a l t o Pent a gon br a s s : Sticker price. With its launches starting around $ 61 million, Musk’s company has been able to undercut its more established rival. United Launch Alliance, a Colorado-based joint venture of Boeing and Lockheed Martin, boasts an unblemished record of more than 100 launches, but it’s still working to bring its cost below $100 million. It plans to do so by 2019.

SpaceX’s new role as a military contractor is a key source of income for Musk’s company and supplements its Nasa contracts for resupply missions to the International Space Station. Its far more ambitious plan, flying astronauts to the ISS, is set for next year.

The Cabinet Committee on Security of GoI recently cleared the Strategic Partnership (SP) model for defence acquisitions. This essentially allows for joint ventures between Indian and foreign firms for defence manufacturing in India. This has been pending for more than a year after the revised Defence Procurement Procedure (DPP) was announced in March 2016.

Much of the changes to the DPP were based on the 27 recommendations of the Dhirendra Singh Committee Report submitted in July 2015.The committee had also recommended the SP model for certain areas of strategic importance. Later, the task force under former Defence Research and Development Organisation (DRDO) chief V K Aatre laid down the criteria for selecting SPs among Indian private sector companies that was made public in April 2016.

Over the years, all defence procurements were based on general staff quality requirements that allowed widely spread technical criteria, and then selection by the lowest price (L1) after necessary technical evaluation.The adherence to procurement guidelines strictly based on fair play and probity -and set under the guidelines of the Central Vigilance Commission (CVC) -often led to system acquisition. This was not necessarily the best deal, in terms of state-of-theart and modern technical aspects in the long procurement cycle.

Also, indigenous capacity-building in most areas was never brought into focus. This resulted in continuing foreign acquisitions due to operational necessities. So, almost 30 years were frittered away , despite policy and intent to reduce defence imports.

So far, only four segments have been chosen to set the SP model rolling: single-engine fighter aircraft, helicopters, armoured fighting vehicles and submarines. In all these four segments, some level of collaboration exists, with Indian entities -mostly public sector undertakings (PSUs), ordnance factories and shipyards -partnering an original equipment manufacturer (OEM) as a serial manufacturer or providing its premises for such manufacturing.

However, the intent of the Narendra Modi government is very clear as to its focus on `Make in India’ with defence as a major focus area. Also, the intent of the SP model is to clearly establish the base, have the supply chain system established, and imbibe in the latest technology for these equipments and systems. So, the focus on matching and mapping respective OEMs to Indian private sector players should be defined with the extent of technology available to build a modern and robust system.

While the platform-based approach might be a natural start with the absence of significant success via the DRDO or defence PSU route, the larger advantage of the SP model is to leverage the strengths that are residual in Indian industry and look at more futuristic areas in the system as well as subsystem stage. This way , optimal capacity-building would be possible in many areas. A case in point is the competence of Indian engineers in IT-based systems.With most platforms today performing under a Command, Control, Communications, Computers and Intelligence (C4I)-based tactical approach, focus on C4I systems integration can be very pertinent. Future warfare will be more around electronic approaches and focusing to complete the Tactical Command, Control, Communication and Intelligence (Tac3I) with superior competency .

Picking cyber security as a first-phase strategic area would have been more optimal today . As an increasing number of countries build cyber arsenals and treat this as a future battlefield, India’s competence and advantage in the sector can be put to advantageous use.

Most of the OEMs in the fray in the SP projects have already focused and built their competency in technology aspects under various guises of C4I.It would be wise to involve them to orient our interests on these technologies, and at the same time, incorporate India’s indigenous encryption.This way , it can be ensured that mandatory national security checks are always adhered to.

Six Indian companies to be selected, orders worth $20 billion on offer.
The approval to the strategic partnership policy comes as a major boost to the private defence manufacturing sector, where a race has already begun among top Indian companies to get onto a select list of six that would be eligible for deals worth more than $20 billion on offer over the next year.The policy, which had been stuck for over 18 months due to differences within the bureaucracy, has been cleared after the intervention of defence minister Arun Jaitley and several rounds of meetings with stakeholders.

The private sector had been upset with a lack of orders by the defence ministry for the past three years, with several top companies complaining to the government about all big projects going to the public sector, as has been the norm for decades.

Jaitley, who holds charge of both finance and defence ministries, said the Union Cabinet was made aware of the strategic partnership policy in a meeting on Wednesday. Four sectors ­ helicopters, submarines, armoured vehicles and fighter jet have been identified under the policy for now, as ET reported on May 11. It is, however, unclear whether the policy would require a formal approval from the Cabinet Committee on Security or would now be rolled out by the defence ministry as a new chapter in its procurement policy. As reported by ET, a pool of six Indian companies will be created to accord a special status for defence manufacturing. The companies, selected on the basis of financial strength and technical expertise, would be given the opportunity to bid for mega defence production orders, expected to be worth over $20 billion.

The ministry will also initiate work to identify foreign partners for the four identified pro jects. An ambitious target of nine months has been set to select the Indian companies. This will be done based on technical evaluation and field trials.

Once the foreign vendors are shortlisted, the Indian pool would be invited to plan collaborations and present joint proposals that would be the basis of a final selection.

As per the policy, one Indian company would be allowed to participate in only one strategic partnership project, to avoid a monopolistic situation. With this model, the ministry is hoping to avoid questions on competitiveness and price discovery, given that a pool of both Indian and foreign vendors would be competing for collaborative projects.

RADICAL MILITARY REFORM Headed by management guru Pritam Singh, the committee has recommended the dismantling of the current system that is described as `diffused across the MoD and services’ and is prone to bureaucratic delaysTo be created within MoD, it will be responsible for policy, acquisition and exports.

Batting for a radical change to make military procurement’s more efficient and time bound, a high level committee, government appointed committee has recommended the setting up of an autonomous defence acquisition organization (DAO) within the defence ministry that will be in charge of formulating policy , planning and executing weapons purchases for the armed forces.Setting up a detailed road map for the creation of the new organization, the committee, headed by management guru Dr Pritam Singh has recommended the dismantling of the current system that is described as `diffused across the MoD and services’ and is prone to bureaucratic delays.

The report, prepared with a number of industry experts as well as senior defence ministry bureaucrats, is now being studied by the government, with defence minister Arun Jaitley keen to roll out reforms to unlock the potential of the defence sector.

The committee has recommended that the word acquisition be used instead of procurement for the new organization as it would cover a spectrum of activities, from policy making, planning and budgeting to execution.

The main objective of the DAO will be to provide a single point responsibility for acquisition of capabilities ­ combat platforms, systems and equipment as per plans and within the allocation of funds and the time agreed.

At present, acquisition is carried out within the defence ministry by a system that includes an additional secretary as the head, representatives from the services and several officials from the administrative services who move in and out from different ministries and sectors.

The idea, according to officials aware of the matter, is to create an organization that will not fall into the ambit of normal rules of the government. A long standing problem has been that officers and officials deputed to procurement hardly spend 3-5 years in the department before moving on to other unrelated duties, diluting a professional set up.

This issue has been addressed in the DAO by recommending a professional cadre that will man posts and will be independent of government rules on postings and deputation. “The normal rules will not apply . People will be able to have longer tenures and there will be a flexibility in hiring people, even from outside the organized cadres,“ sources told ET. To be headed by a CEO, who would nominally be equivalent to a Secretary , the DAO will have eight directors responsible for different areas of acquisition, including one with the critical responsibility of interfacing with the industry and governing exports. To make the organization autonomous, it has been recommended that it would be funded with a percentage of the funds that it utilizes every financial year. In the first year, this has been recommended to be Rs 400 crore.

While the committee has submitted a detailed roadmap for execution, the defence ministry will have its task cut out to roll out the reform, given that stiff opposition is expected from within the existing system on the radical changes recommended. Experts believe that it can take the plan two years to roll out ­ to both address the concerns of the system and create the systems required to set up the new organization.

Defence ministry to unveil new policy this week; move to render memoranda of understanding signed between Indian companies and foreign players over the last three years infructuous
The defence ministry has finalised its roadmap for the selection of private sector companies for mega military production orders, with an elaborate procedure spelt out in a new policy to be unveiled this week. Financial strength, technical capability and existing infrastructure will be the main criteria for selection of the Indian companies while foreign partners will be selected in a parallel process on technical and commercial grounds.ET has learnt that the defence ministry’s new strategic policy (SP) model will create a pool of six Indian companies that will be accorded special status. Once the pool is created, the companies will be given the opportunity to bid for mega defence production orders, expected to be worth over $20 billion.

As per the policy, in the first stage, the six Indian companies will qualify to bid for four upcoming projects ­ submarines for the navy, a single-engine fighter for the air force, helicopters and armoured vehicles for the army.

Interestingly, the new policy means that almost all memoranda of understanding (MoUs) that have been signed between Indian companies and foreign players over the last three years for these projects will be rendered infructuous, given the new model of selection.

“The defence ministry will shortly invite companies for the qualification process. The companies will be asked to give their priority preference for the four projects. A total of six companies will be selected based on financial parameters and capability,“ a senior offi cial told ET.

The ministry has an ambitious target of nine months to select the pool of Indian companies. The selection will be carried out in a fivestep process, starting with financial and technical evaluation that will have certain criteria, including a Crisil A rating and a minimum turnover of ` . 4,000 crore for the past three years.

Concurrently, the ministry will initiate work to identify foreign partners for the four identified projects. This selection will be based on technical evaluations and field trials. Once the foreign vendors are shortlisted, the Indian pool will be invited to plan collaborations and present joint proposals that will be the basis of a final selection.

As per the policy, one Indian company will be allowed to participate in only one strategic partnership project to avoid a mo nopolistic situation. With this model, the ministry is hoping to avoid questions about competitiveness and price discovery, given that a pool of both Indian and foreign vendors will be competing for collaborative projects. “Concerns that were raised from various quarters, including from within the ministry, have now been addressed,“ the official said.

While the industry is relieved that the stalled process ­ the SP model has been in the works for over two years ­ has got back on track, top executives said that they are waiting for the fine print of the policy that will contain details about the selection process.

Tokya:
Says govt will look at consolidating PSU banks and reduce its stake once stressed assets come down, rules out taxing farm income
Finance and defence minister Arun Jaitley said foreign companies need to be incentivised to set up defence manufacturing bases in India, adding that policies have to be in sync with reality. Companies, he added, will establish manufacturing units only if there is a likelihood that they will get business.The government has liberalised rules as far as investment is concerned and Indian companies, both in the public sector and the private sector, have already started entering into arrangements with international firms to establish manufacturing facilities in India, even “outside FDI limits“.

“In the context of defence, government is the only buyer and, therefore, people will establish units only if there is a likelihood of them getting business and, therefore, our policies have to be tuned to this reality,“ he said in an interview. “Our policies have to be tuned so that we are able to incentivise people (so) that it is worthwhile to set up manufacturing bases in India… Some discussions are on,“ he added, without disclosing details.

His statement assumes significance as defence ministry is set to decide on strategic partners in the private sector for equipment soon.

Jaitley, who met the Japanese de fence minister on Monday , said Tokyo is looking at business-to-business ties and is keen to make in India. “They would like to be considered both for the purposes of India buying and any possibility of India domestically manufacturing with their technologies,“ he said.

BAD LOAN RESOLUTION

The government will look at consolidating public sector banks and reduce its stake in them to 52% once non-performing assets (NPAs) decline, Jaitley said. “The equity can be brought down (to 52%) only at a time when the values are there. The stress period is hardly the best time to go to the market. So, let us improve their health and then we will do it. Once their health improves, as far as consolidation is concerned, in some cases, we are looking at the matter. I won’t give the details as yet,“ he said. A new ordinance gives the Reserve Bank of India increased powers to recover bad loans. He said NPA resolution will take time but the process has to be pushed by the banks.

“RBI itself has come out with some guidelines. Some management changes have taken place. Now the next stage is that through the JLF (joint lenders’ forum) mechanism, the resolutions should start and we do expect the banks to cooperate in making the JLF mechanism a success,“ he said.

TAXING FARM INCOMES

Reiterating that the government is not in favour of taxing farm income, the minister said the agriculture sector is in distress and it ne eds to be supported instead of getting further burdened.

“The (land) holdings are very small in size. The rich farmer is a very rare institution. It is not the norm. It is only a rare exception and, therefore, at a time when you need to support agriculture because of the distress, this is hardly the time to deflect the issue and start taxing agriculture,“ the minister said.

While the Centre has no say in the matter, none of the states would do it either, he said.

“In any case, the central government has no power,“ he said. “It is the power of state governments and my own view is none of the states is going to do it.“

(The correspondent is in Tokyo at the invitation of the Confederation of Indian Industry)