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FDI IN DEFENCE MAY GO UP TO 100% IF CEO IS INDIAN

defNew Delhi: Global defence equipment majors such as BAE Systems and Lockheed Martin could set up manufacturing units in India and bring in foreign direct investment (FDI) exceeding 49 per cent, provided the company’s chief executive officer (CEO) is Indian.

 

As the objective was to let only serious players enter the market, the defence FDI policy approved by the Cabinet on Wednesday categorically stated investee companies should be self-sufficient in product designing and have maintenance and life cycle support facilities for the products they manufactured here, said a senior department of industrial policy and promotion (DIPP) official.

 

The Union Cabinet had approved an increase in the composite foreign investment cap in the defence sector from 26 per cent to 49 per cent. For investment exceeding 49 per cent, the Cabinet Committee on Security (CCS) will clear applications on a case-by-case basis.

 

“It could go up from 49 to 100 per cent, depending on modern and state-of-the-art technology, with the approval of the CCS,” said the DIPP official.

 

The CCS might consider such proposals only in rare cases in which original equipment manufacturers such as BAE Systems, Lockheed Martin, Airbus Group and Sikorsky intend to set up manufacturing units here.

 

This is aimed at ensuring only top defence original equipment manufacturers, with robust and proven track records, enter the market, with large-scale investment proposals. The government is hopeful this will not only lead to more manufacturing facilities in the country, but also ensure the life cycle of products is catered to by foreign companies.

 

The CCS will see to it that the management and control remains with Indian companies in case the FDI exceeds 49 per cent, more so in case it is more than 51 per cent, on a case-by-case basis. The official said in these cases, the CEO had to be Indian.

 

However, experts say subjective norms such as modern and state-of-the-art technology, self-sufficiency in product designing and maintenance and life cycle facilities will be hurdles to attracting FDI.

 

Amber Dubey, partner and head of aerospace and defence, KPMG in India, said, “Subjective conditions such as local design, maintenance repair and overhaul, lifecycle support facility and state-of-the-art technology run the risk of interpretation, delays, misuse and litigation. Once an original equipment manufacturer wins a competitive tender, market forces will force these to be transferred to India in stages.”

 

Putting onerous preconditions ended up discouraging serious investors, Dubey said, adding the government could, instead, bring in practical checks and balances that would help build a strong defence industrial base in India through 10-15 years.

 

“The CEO has to be an Indian national by default, from the perspective of national security and individual accountability. It would be practically difficult to get a CEO of foreign nationality extradited to India and prosecuted in case of an adverse event,” he said.

 

Officials said all foreign institutional investment up to 24 per cent would be allowed under the automatic route. The DIPP official said proposals related to FDI exceeding 26 per cent would be approved on a case-to-case basis, apparently due to “national security concerns, as it (defence) is a highly sensitive sector”.

 

Since the Indian defence sector was opened to private companies in 2001, barely $5 million of FDI has flowed into it, according to official statistics.

(Source: Business Standard August 8, 2014)

 

 

HYPERSONIC MISSILES ARE THE FUTURE FOR INDIA AND RUSSIA

 

In his first interview after being appointed chief executive of BrahMos Aerospace, Sudhir Kumar Mishra talks to RIR about the joint development of hypersonic missiles and export potential of BrahMos systems.

 

BrahMos Aerospace has already signed an MoU with the Moscow Aviation Institute on the development of hypersonic missiles There is need to sign some more agreements between India and Russia, isn’t it? Can you elaborate on this?

Both India and Russia have successfully demonstrated that if they work together they can create systems unparalleled in the world such as the BrahMos. DRDO in India is working on the hypersonic field and Russia is also working on it.

 

We want to bring number of institutions from India and Russia together to realize the best possible configuration. As you rightly mentioned we have signed a MoU with MAI through our JV partners NPO Mashinostroyenia for initiating necessary actions. They are getting the required approvals from the government to start the work.

Similarly we are working with DRDO and Indian Institute of Science, Bangalore in this field. Once all the permissions are received from both the governments, we will initiate this project. Right now, hypersonic is an evolving technology and it is the future for both the countries. I believe that we will be able to develop the missile as per our Vision 2050, maybe within 6 to 10 years.

 

Are there any expectations how much time it can take to get all these approvals?

It can take from 4 to 10 months.

 

BrahMos Aerospace promised that the BrahMos-A missile for SU-30MKI would be ready for induction by 2016? Are these plans still on?

 

Yes, I confirm that by this year end, we would conduct the first flight test of BrahMos-A with SU-30MKI and we will start deliveries in 2016 to the Indian Air Force. Hindustan Aeronautics Limited, Bangalore and Sukhoi Design Bureau (SDB) with Indian Air Force are working very intensively to ensure that the missile flight test can be carried out by the year end and I am going personally this month to review the situation together with Chairman, HAL.

 

When is India planning to achieve 100 percent localization of BrahMos missile production?

 

As of now, we believe that it is a joint development programme. So the joint production also should take place in both the countries and we do not talk about percentage to develop the local production but the objective is to develop capacity building. The requirement, the demand is very high for BrahMos and right now, the objective is to deliver the missile in time to the users and if we do not deliver, then there is a problem. So we are trying to ensure the proportion, the agreed joint production ratio between India and Russia and make the delivery schedule. This is the first priority and only priority.

 

What we want is that 100 percent of the missile should be manufactured in India and 100 percent to be manufactured in Russia so that when big amount of deliveries are to be made, both the places can deliver but the capabilities should be available both in India and in Russia on 100 percent delivery basis.

 

And secondly, now there is an export potential for BrahMos. The government of India has declared that we would like to export our weapon system and India and Russia both have agreed that we will export the missile to mutually agreed countries we will identify together. So that would happen. When that happens, then there will be more demand for capacity building in both the countries, Russia as well as India. So we develop 100 percent capability, in Russia, you already have a 100 percent capability so that we can meet our commitments.

 

It takes some time. I have taken over only recently. I would like to study and then give answer exactly.

 

You mentioned the export potential of the BrahMos missiles. When are you planning to start exporting them?

 

First of all as per the IGA the missile can be exported to friendly countries of India and Russia. We have jointly worked out the list of countries. Export will be taken up on case to case basis with both the Indian and Russian governments for approval.

 

Secondly, the interest of India and Russia should not be affected in any way and thirdly, it should be only for defensive purpose, not for offensive purpose. So these are the basic fundamentals and we are talking to each other to ensure that export takes place but export is a very long process. So we are onto the process.

(Source: Russia India Report August 8, 2014)

 

 

INDIA OFFERS TO BUY MORE US ATTACK HELICOPTERS, HOPES TO DRIVE DOWN COSTS

 

NEW DELHI: India has offered to significantly increase an order for US attack helicopters, Indian officials said, as US defense secretary Chuck Hagel began a visit to New Delhi on Thursday aimed at boosting defence and strategic ties.

 

The Apache gunships and a deal for Chinook helicopters, both built by Boeing, will top the agenda in Hagel’s talks on Friday with India’s new administration led by Prime Minister Narendra Modi.

 

India has offered a follow-on order of 39 AH-64D Apache helicopters in addition to the 22 now being negotiated, an Indian defence ministry official said. The sides have been wrangling over the price of the gunships, however, with the initial deal having been estimated to be worth $1.4 billion.

 

The two countries have rapidly expanded military and business ties in recent years, despite discord over issues such as intellectual property rights and market access.

 

Washington is keen to step up cooperation across the board, seeing India as a strategic partner in the face of an increasingly powerful and assertive China.

 

According to defence research firm IHS Jane’s, India was the top foreign buyer of US arms last year. An Apache deal would be the first big military contract since Modi’s government took office in May.

 

Hagel’s trip follows one by US secretary of state John Kerry last week and is part of the build-up to talks between Modi and President Barack Obama in Washington in September.

 

Hagel’s talks will also cover military exercises and co-production and co-development of armaments and the renewal of a 10-year defence cooperation agreement that runs until 2015.

 

Hagel said the purpose of his visit went beyond arms sales.

 

“Our interests are varied and common — stability, security, economics, possibilities, freedom,” he said en route to India. “I’ll be there, working, yes, our specific issues, but it’s larger … than that.”

 

“We need partners”

 

Hagel said Asia-Pacific was a region of great opportunities, but also of challenges. “We need partners. We need relationships. That’s the kind of world we live in, and that’s the kind of world that we’re going to be living in.”

 

Speaking to reporters on his plane, Hagel was asked about India’s apparent reluctance to be seen as a full US ally and he replied that Washington was “mindful” of India’s tradition as a independent, non-aligned state.

 

“We’re not trying to change that,” he said. “But…we have common interests, and…we think there’s more potential to build on those common interests.”

 

US officials say there is the potential for billions of dollars of new arms sales in the next few years and hope Modi can overcome bureaucratic obstacles that have held up some.

 

Last month, India’s cabinet cleared a proposal to allow 49 percent foreign participation in the defence industry, up from a current cap of 26 percent.

 

Hagel said he would be looking at whether there would be the potential to go beyond 49 per cent something US defence firms want before allowing technology transfers India craves.

 

The initial batch of Apache helicopters is meant to replace the Indian Air Force’s ageing fleet of Soviet-era aircraft and will be armed with Hellfire and Stinger missiles.

 

The Indian Army has separately requested a fleet of at least 39 of these attack aircraft, some of which will be deployed as part of a new mountain division it is raising along the disputed border with China, an army official said.

 

“The point is we are looking at 60 to 70 pieces eventually, so the expectation is the vendor will factor that in, in the price negotiations,” said the defence ministry official, who asked not to be identified in line with ministry policy.

 

US defence sales to India have grown from the low hundreds of millions of dollars in the decade to 2008 to more than $9 billion since that year.

(Source: Times of India August 8, 2014)

 

DEFENCE FDI MAY BOOST MANUFACTURING

 

New Delhi: The government’s move to allow 49% foreign direct investment (FDI) in defence is likely to boost Indian manufacturing in a number of areas connected to defence production, government officials and analysts say.

 

Defence has strong inter-sectoral linkages with industries such as automotive, textiles, precision machining, heavy engineering, light engineering, medical equipment, earth moving, plastics, automotive components, machine tools, electronics, communication, power generation, ceramics and rubber, etc., said a government note that has been discussed by the cabinet and reviewed by Mint.

 

“Thus, enhancement of FDI cap would have significant multiplier effect in the economy beyond the defence sector,” the note added.

 

India ranks among the top 10 countries in the world in terms of military expenditure. Its cumulative defence budget (including both-capital and revenue expenditure) has grown 32% during the fiscal years 2010-11 (`1,54,116 crore) to 2013-14 (`2,03,672 crore).

 

According to estimates, nearly 70% of the defence requirements are met through imports, with only 30% being met through domestic production, the note said.

 

The total FDI inflow in the defence industries sector from May 2001 to February 2014 has been only $4.94 million. During this period, the total FDI inflow from all sectors into the country has been $321.81 billion.

 

Enhancement of the FDI cap will lead to a renewed thrust to domestic manufacturing, promoting innovation in terms of transfer of know-how/technology and generating thousands of new jobs, it added.

 

“(There are a) couple of joint ventures awaiting the government’s further steps for the industry. As a next step, the industry is looking for prolonged contracts to actualize the FDI increase in India in the form of joint ventures,” Nidhi Goyal, director, Deloitte in India, said. “This is to give an opportunity to the Indian industry to build up industrial base in India and make India a self-reliant country in terms of self-sustained arms and ammunitions.”

(Source: Mint August 8, 2014)

 

GOVT DOUBLES NSG COMMANDO STRENGTH IN EACH OF FOUR HUBS

 

The National Security Guard crack commando strength has been almost doubled to 460 personnel each stationed at select hubs in Mumbai, Chennai, Kolkata and Hyderabad to undertake quick and swift counter-terror or counter-hijack operations.

 

The hubs in these cities, covering key areas, were set up in the aftermath of the November 2008 Mumbai terror attacks during which the elite force came under criticism for slow response time.

 

“It has been decided to reinforce the strength of each of the four regional hubs from 241 to 460 personnel with immediate effect,” the Union Home Ministry said in its annual report for 2013-14 tabled in the Parliament on Wednesday.

 

All the four hubs were made operational in 2009 by the Home Ministry after residential and training infrastructure was developed in these hubs for commandos and other administrative staff of the NSG, a federal contingency force that was raised in 1984 to undertake special missions against terrorists and hijackers.

 

Specially trained commandos of the NSG counter-terror taskforce have been since stationed at these locations and they are armed with sophisticated weapons, communication gadgetry and other logistics to launch themselves in an combat scenario at a short notice.

 

Hyderabad and Chennai hubs have also been upgraded to the level of regional centres with 600 acres and 34.31 acres of land allotted to NSG in these cities respectively.

 

The force is also mulling to finalise a land for its fifth hub that could come up in Gujarat near Ahmedabad.

(Source: Rediff August 8, 2014)

 

US DEFENCE SECRETARY HAGEL ARRIVES IN INDIA

 

New Delhi: The US will make India an offer to “co-produce and co-develop” state-of-the-art Javelin infra-red-guided anti-tank missiles during defence secretary Charles ‘Chuck’ Hagel’s three-day visit. Hagel arrived in New Delhi on Thursday and will be meeting Prime Minister Narendra Modi and defence minister Arun Jaitley on Friday.

 

The high probability of the US bringing up the Javelin deal springs from US President Barack Obama’s July 7 letter to Modi, in which he sought closer defence and strategic ties and directly made the missile offer to the PM. He also wrote that Hagel would be discussing the Javelin details with his Indian counterparts during his visit.

 

India is currently looking to buy some 3,600 anti-tank missiles with 900 launchers at a cost of $700 million (Rs 4,284 crore approximately) through the foreign military sales route. The army is in desperate need of an anti-tank missile as the indigenous Nag missile continues to be a work in progress.

 

Under the Javelin deal, India and US would jointly produce the third-generation FGM-148 missile through transfer of technology (ToT) and jointly develop a fourth-generation missile that can successfully hit a target 2.5km away. The weapon uses fire and forget technology where the launcher locks on to the target via thermal image and guides the missile through infra-red technology without being in the line of sight.

 

While India is keen on co-production, it wants full transfer of technology and the talks on Friday will be centred on this. “The Javelin makers are willing to do 97% ToT and want to withhold the algorithms related to core infra-red seeker technology,” said a senior defence ministry official.

 

Hagel is also expected to remind India that the window for purchase of Chinook and Apache helicopters at current rates will close by September. The US, which has kept aside six Boeing C-17 cargo aircraft for possible purchase by India, is extremely concerned about slow decision-making in the Indian defence ministry and Hagel will be looking to find a new equilibrium with Jaitley.

 

Apart from the Javelin deal, talks with Hagel will centre around a new defence framework agreement for 2015-20, a tri-lateral maritime exercise with Japan, and the regional environment, including the rise of China and the situation in Af-Pak and West Asia.

 

Maritime security is another top priority for both India and the US in the backdrop of Chinese attempts to acquire long legs in the South China Sea and Indian Ocean. With US capabilities declining in the Asia-Pacific and India unable to cope with Beijing on naval upgradation, both sides need each other to maintain the balance of forces in the region.

 

Hagel’s visit follows a similar stop in the country last week by secretary of state John Kerry and commerce secretary Penny Pritzker aimed at wooing a key ally in Asia.

(Source: Hindustan Times August 8, 2014)

 

MODI MAY SOON VISIT INDIAN ARMY’S FORWARD POSTS IN SIACHEN

 

New Delhi: Prime Minister Narendra Modi may soon visit Indian Army’s forward posts in the Siachen Glacier, the highest battlefield in the world, during his tour of Ladakh.

 

The Prime Minister is expected to be in Leh and Kargil districts of Ladakh region of Jammu and Kashmir to dedicate two hydroelectric projects and lay the foundation stone of a electricity transmission line there next week or in the third week of the month.

 

The Prime Minister may visit Indian Army posts in Siachen in that area during that time, sources said here.

 

Army sources said Army Chief Gen Dalbir Singh Suhag is also planning to visit the area in second week of the month but his schedule may now be changed in view of the Prime Minister’s programme.

 

Army posts are located in the Siachen at altitudes ranging from 17,000 feet to 23,000 feet along the Actual Ground Postioning Line (AGPL) with Pakistan.

 

Pakistan has been seeking the withdrawal of Indian troops from there as a confidence-building measure but this has been opposed by the Army and the Defence Ministry which say the heights are of strategic importance.

 

The Prime Minister was invited by the then Army Chief Gen Bikram Singh to visit the Siachen Glacier to boost the morale of the troops and show solidarity with them.

 

Power Minister Piyush Goyal had yesterday stated that “probably next week or the week thereafter, the Prime Pinister will visit Leh to dedicate two projects in Leh and Kargil as also lay the foundation stone for an transmission line from Leh to Kargil and on to Srinagar.”

(Source: First post August 8, 2014)

 

DELHI GEARS TO JOIN CHINA-RUSSIA CLUB – AMERICA SNIFFS NATO ‘COUNTERWEIGHT’

 

New Delhi: India is preparing to join the influential Shanghai Cooperation Organisation (SCO) strategic grouping, currently led by China and Russia, just days ahead of the Prime Minister’s September visit to the US where his bonhomie with Moscow has already triggered unease.

 

The SCO has informed New Delhi that it plans to approve documents making India a full member at a September 11-12 summit in Dushanbe, Tajikistan, senior officials have told The Telegraph.

 

Iran, Pakistan and Mongolia will join India as new members of the grouping, now made up of Russia, China, Kazakhstan, Kyrgyzstan, Uzbekistan and Tajikistan.

 

America views the SCO as a potential post-Cold War counter-balance to Nato, and Beijing and Moscow have accused Washington of trying to split the grouping. Unlike Nato, the SCO has so far not engaged in military action beyond joint exercises.

 

India and the three other nations on the cusp of joining are currently observer states at the SCO, and China had till now been ambivalent about offering full membership to India despite Russian backing for New Delhi.

 

However, keen not to alienate the new Indian Prime Minister, China joined the other members to back the expansion move at a meeting of the grouping’s foreign ministers on July 31.

 

Indian foreign minister Sushma Swaraj is expected to travel to Dushanbe for the September meeting where India’s membership will likely receive a formal stamp of approval.

 

If the new members’ formal induction is completed at Dushanbe, Modi may travel in December to Astana, Kazakhstan, where the heads of government of all the SCO’s member states will meet, officials said.

 

“China supports the SCO summit in Dushanbe to complete the legal preparation of the expansion of the SCO members, thus to open up new ways to absorb new members,” a senior Chinese diplomat quoted his country’s foreign minister, Wang Yi, as telling the July 31 meeting.

 

India has been keen to join the SCO since it first became an observer in 2005. However, tensions within the grouping’s members on the countries to be allowed entry under any expansion had so far prevented the absorption of any new full member.

 

Over the past two years, as Russia and the US have returned to near-Cold War brinkmanship, both have turned to India as a critical nation whose support could tilt the balance of opinion among the developing countries, which make up most of the world.

 

The stalemate at the SCO — with China cautious about India’s entry, Russia uncertain about Pakistan’s, and all the members concerned about the implications of fully embracing Iran — suited the US well.

 

But global fissures have only deepened over the past two years, frequently placing China, Russia and India together against the US — as in Syria and Ukraine, where New Delhi backed Moscow over Washington.

 

China is also convinced that it has a potential friend in Narendra Modi despite his election speeches critical of Beijing. China had welcomed Modi with open arms three times when he was Gujarat chief minister — at a time Washington treated him as a pariah and refused him a visa.

 

Chinese President Xi Jinping signalled his intent to pull India closer when he indicated to Modi that Beijing was willing to consider expanding the SCO. This was when the two met on the margins of the BRICS summit in Brazil last month. Xi is expected to visit India in September.

 

India’s entry into a strategic grouping that will include three nations that America wants to distance from its allies — Russia, China and Iran — will almost certainly upset fence-sitters in the US establishment, already unsure of the fruits of courting India over the past decade.

 

“New Delhi has given Russia’s aggression in Crimea implicit approval and strongly opposed sanctions on Moscow, calling Moscow’s interests in Crimea legitimate,” Steve Chabot, the Republican chairman of a key foreign affairs panel of the US House of Representatives, told senior members of the Obama administration last month.

 

The administration officials were deposing before the panel ahead of secretary of state John Kerry’s visit to India for the India-US strategic dialogue last week.

 

“Can the US trust India to be a reliable partner on significant geopolitical challenges if, for example, we can’t get India’s support on this growing crisis?” Chabot asked.

 

“And has the Malaysian airliner shoot-down changed India’s attitude at all in this particular area?”

 

Kerry and the US received the answer to where India would stand on sanctions against Russia during the strategic dialogue when Sushma bluntly said that India’s foreign policy was “not flexible”.

 

Kerry accepted that he was disappointed but appeared resigned to India’s decision.

 

“We would obviously welcome India joining in with us with respect to that (the sanctions),” Kerry said. “But it is up to them. It is India’s choice.”

(Source: Telegraph India August 8, 2014)

 

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