Defence Expenditure Review Committee (DERC) Panel Proposals

A high-level committee, the Defence Expenditure Review Committee (DERC), looking into defence expenditure has recommended a host of sweeping reforms, including a hike in the foreign direct investment (FDI) limit in the defence sector to 49%, and divestment of defence public sector units (PSUs).

The DERC has made far reaching recommendations in our Acquisition System, such as:

The Govt should encourage the private sector to take over foreign defence firms.Consider setting up a sovereign wealth fund to assist this activity.

A five-fold increase in the financial powers of the defence minister -- up to Rs 500 Crores.

For accountability, transparency and efficiency, time-bound disinvestment plans should be worked out for each PSU.

Across the board increase in FDI limit to 49% with the provision for a case by case enhancement to 74%-100%.

Extensive use of ICT in the defence procurement processes.

Compress the time between RFI and actual procurement.

Read the full Report: DERC Panel Proposals

Brigadier (Retired) Sukhwindar Singh
http://www.defenceoffsetsindia.com/

Foreign A & D Majors Insist on Higher FDI Limit

FDI cap in Defence Sector is perceived lower by potential suitors. The upper limit prescribed for foreign companies to invest in JVs is 26 per cent. Echoing the view of industry bodies and foreign companies, the pre-budget economic survey this year suggested that FDI limit in defence industries be raised to 49 per cent from 26 per cent, and even allowed up to 100 per cent on a case-to-case basis, in high technology, strategic defence goods, services and systems that can help eliminate import dependence.

All this needs deliberations in wider national security interests, and NOT purely a business proposition.

Indian Defence Industry is very keen to forge JVs with foreign partners. For example, BEL is keen to forge JVs in the areas such as missiles, electro-optics and "portions of radars like radars for civilian areas". BEL is ready to work with potential partners either through a JV or some sort of arrangement like long-term partnership (not called a JV).

Click to read the full Report: Foreign A & D Majors Insist on Higher FDI Limit

Comments: MOD could always consider higher % of FDI limit on case-to-case basis for technologies extremely essential for India in next 4-5 years of time frame, with some 'special rider' on the JV company ownership and management.

Brigadier(Retired) Sukhwindar Singh
http://www.svipja.com/
(A Global Solution for Offsets)
Credit: USIBC News & Its Agencies.

DRDO & MOD Units for Self-Reliance and Self-Sufficiency

No country would wish to part with its state-of-the-art front line technology know how despite any arrangements. Technology leadership in Aerospace and Defence is a 'strategic tool' and an instrument of policy dictation. This basic fact is reiterated.

Under these terms, we need to view our indigenous capabilities and the fact that we are a large-sized country which can not remain dependent on imports. It has its implications, strategic, developmental and financial. DRDO and MOD Units' Role needs to be viewed in this context; any advocacy contrary to it notwithstanding.

Aerospace and Defence capability can not be seen as a business proposition alone by large-sized countries including India in complex power play game.

The Defence Minister's stance on the DRDO & MOD Units is timely.

Click to read the full Report: DRDO & Govt. Units for Self-Reliance and Self-Sufficiency

Brigadier(Retired) Sukhwindar Singh
http://www.DefenceOffsetsIndia.com/
(A Global Solution for Offsets)
Credit: USIBC News & Its Agencies.

Mahindra Buys 2 Australia Aerospace Firms

Mahindra & Mahindra and India's Kotak Private Equity had bought majority stakes in component firm Aerostaff Australia and aircraft maker Gippsland Aeronautics for 1.75 billion rupees ($37.5 million). Aerostaff supplies components to companies such as Boeing, Airbus, but the firms were not in a position to scale up their operations.

Australian firms would get a small upfront payment, some shares in the group's aerospace unit, and be eligible for milestone payments. Mahindra coming in with capital, they will have the ability to scale up and able to duplicate the facilities in India.

Mahindra are eyeing a potential $100 billion Indian defence market over the next 10 years.

Click to read the full Report: Mahindra Eyeing Offsets

Brigadier(Retired) Sukhwindar Singh
http://www.svipja.com/
(A Global Solution for Offsets)
Credit: Reuters India.

Ten Offset Contracts Signed

Government today said about ten offset contracts worth Rs 8,909 crores have been signed under Defence Procurement Procedure (DPP) with weapons making companies from countries like Russia, Israel and the United States.

"About 10 offset contracts have been signed so far under the DPP. The companies with which the offset contracts have been signed include Rosoboronexport and RAC MiG from Russia, Lockheed Martin and Boeing from the US, Israel Aerospace Industries and Elta from Israel and Fincantieri from Italy," Defence Minister A K Antony said in a written reply to a Lok Sabha query.

Read the full Report: Ten Defence Offset Contracts Signed

Brigadier(Retired) Sukhwindar Singh
http://www.svipja.com/
(A Global Solution for Offsets)
Credit: Business Standard

Engine for Tejas, Imported and Indigenous

European Aerospace Company, Eurojet, and America's General Electric (GE) has submitted offset proposals for their bids for Tejas engines of LCA to the MOD on Friday, 11 Dec, a day before the deadline expires -- Dec 12.

Eurojet, which will be supplying its EJ200 for the new LCA Tejas, appears to have got clearance from Nato Eurofighter and Tornado Management Agency (Netma) for the transfer of "key technology" under the offset programme.

GE, which will supply the F-414 engine, also appears to have taken approval of the US Govt. for technology transfer for the LCA programme.

The two companies have bid for the 750 mUSD order for 99 engines for Tejas.

Pse Click for full Report: Offset Offers for Tejas Engine

Kaveri Engine meant to power the indigenous Tejas, after completing flight tests that are underway in Russia, comes alive. Eurojet EJ200, and the GE F-414 engines are its two alternatives.

The MoD wants to keep its options open, apprehending that Eurojet and GE may hang back from providing India with critical engine technologies, even if ToT was mandated in the purchase contract - now wants to co-develop an engine in India rather than manufacturing one under licence.

Pse Click for full Report: Kaveri Engine of Tejas Comes Alive

OEMs would get more 'friendly' in offering substantive state-of-the-art technologies in co-development & co-production once they infer that if not given, India is up with its alternative(s) - our win mantra. DRDO or any other R & D Houses in India should therefore be fully supported by the MOD for relevant technologies/ products / services.

Brigadier(Retired) Sukhwindar Singh
http://www.svipja.com/
(A Global Solution for Offsets)
Credit: USIBC News and Its Agencies.

M&M and BAE Systems Set-up JV

India’s Mahindra and Mahindra (M&M) and UK’s BAE systems signed an agreement on November 30 to set up a joint venture (JV) with an initial investment of $21.25 million. The JV has already been approved by the Department of Foreign Investment Promotion Board earlier in the year. M&M has a 74 per cent stake in the JV, which will operate out of a facility in Faridabad, Delhi.

Initially employing about 100 employees, the JV is expected to manufacture the Axe high mobility vehicle, bulletproof Scorpios, Boleros, Rakshak, Rapid Intervention Vehicles and Marksman light armoured vehicles. It will also manufacture the Mine Protected Vehicle India (MPVI), the developmental process of which has been completed as well as artillery equipment like the M777 light weight howitzer and the FH77B howitzer

Brigadier(Retired) Sukhwindar Singh
http://www.svipja.com/
(A Global Solution for Offsets)
Credit: http://www.mahindra.com/

Defence Acquisitions, Time Overruns, Costs and Military Preparedness

The basic is that a nation undertakes burden of defence acquisitions to maintain edge of its military. Within this overall objective our procedures must flow however multi-faceted or complex these may be. Our 'thinking executives' which includes our bureaucracy , military and process experts, must keep this in view in all their activities.

Shifting causes of delay / failures within any complex acquisition chain is inevitable and may even be 'past time' of some. The bottom line is, Is nation's military getting it wherewithal in time? If not, we need to worry. As is often said 'radical problems need radical solutions'. Lip service or minor changes to existing procedures and practices will not suffice. Let there be an overhaul of the Process.

An Article by Mr Harinder Singh, IDSA, and the recent Seminar by the IDSA on Defence Acquisitions is timely. Click to read the full Article:

Defence Acquisitions, Time Overruns, Costs and Military Preparedness

Brigadier(Retired) Sukhwindar Singh
http://www.svipja.com/
(A Global Solution for Offsets)
Credit: Institute for Defence Studies & Analyses, http://www.idsa.in/