Raksha Mantri Nirmala Sitharaman Re-Energises The Mood Of Indian And Foreign Defence Industry

Raksha Mantri Nirmala Sitharaman in her first interaction with the private defence companies including Indian defence and foreign original equipment manufacturers (OEMs) on Saturday assured that a decision on the three big make projects – the Futuristic Infantry Combat Vehicle (FICV), Tactical Communication System (TCS) and Battlefield Management System (BMS) – will be taken by the Ministry of Defence (MoD) in the next two months and by 31 December 2017, according to industry sources who attended the meeting.

The three major ‘Make’ programmes including FICV, TCS and BMS have been stuck for placement of development contracts for many months. A timely decision on these programmes is a major milestone in India’s quest for self-reliance in defence and is seen as a significant step in setting up a contemporary defence industrial base in the country.

However, a delay spanning over seven years in initiating this programme has been a major concern amongst a large section of the Indian industry as also many global technology providers, who forged partnerships and entered into memorandums of understanding (MoUs) for developing or providing critical technologies for this programme.

Therefore, the foremost request from the Indian industry to boost the sector was to compress the procurement decision time lines in order to align or even better the stipulated time lines.

“The industry is very happy and hopeful after today’s meeting with the RM, who has assured us that none of these Make I projects will be stuck due to lack of decision making at the end of the Ministry of Defence…. Whichever way, a decision will be taken before 31 December 2017,” a leading industry source said.

Even for Make II projects, the RM has asked the industry to draw up a list of 10-12 projects, which will then be looked into by a to-be-constituted committee of MoD.

“As industry we are going back very satisfied and hopeful after today’s meeting,” another industry official said.

A special meeting of the Defence Acquisition Council (DAC) is also expected to be held on Monday, sources said.

In the round table, a wide range of issues relating to private participation in defence manufacturing, including matters relating to licensing, taxes and duties, speeding up of procurement processes, streamlining of the offsets regime and creation of a tiered defence industrial ecosystem with full integration and skilling of manpower in the micro, small and medium enterprises (MSME) sector were also discussed.

As part of the meeting, industry sources said the RM also assured the industry that regular interactions will be held with them on a bi-monthly or quarterly basis in order to speed up the process of implementation and to iron out issues coming in the way of major programmes.

The industry told the Defence Minister that getting ‘Make’ programmes on the way is a sure way to indigenisation and for kicking off a series of design and development programmes. Inspite of great intentions, since 2010, EOI’s have been issued only for three programmes (TCS, BMS and FICV); and as on date progress on development phase orders is yet to happen.

“In response, she (RM) told us that decisions will be speeded up and major programmes will soon be taken up for the consideration of the cabinet committee on security (CCS) and that nothing will be pending at the end of the Ministry of Defence,” sources added.

In an initiative undertaken by the Confederation of Indian Industry (CII), this was the first interface of the Indian and foreign defence companies with Nirmala Sitharaman after she assumed charge as the new Defence Minister on 7 September.

The agenda for this meeting was to re-energise the defence sector and resolve issues that are delaying major programmes in the defence sector.

As many as 25 Indian and foreign defence companies including Larsen and Toubro, Bharat Forge, Mahindra and Mahindra, Adani, Tata Motors, Ashok Leyland, Dynamatic Technologies and others, besides Boeing, Airbus, BAE, Rolls Royce attended the meeting with Raksha Mantri Nirmala Sitharaman on Saturday morning.

Defence Secretary Sanjay Mitra was also present at the meeting of the private defence companies with the minister. Those who represented the industry include Baba Kalyani from Bharat Forge, J D Patil from L&T, Udayant Malhotra from Dynamatic Technologies, V S Noronha from Tata Motors besides others from MKU, Adani and other defence companies.

“The present government is fully committed to removing all the stumbling blocks and facilitating private participation in defence manufacturing with the objective of bringing high-value foreign investment into the defence sector, building indigenous capabilities, fostering absorption and assimilation of technologies, and ensuring self-reliance in meeting the country’s defence needs by providing a level playing field,” said an official statement from MoD.

“Raksha Mantri issued directions to the team of officers headed by the Defence Secretary for time bound action on key issues raised at the round table, including the resolution of licensing with the Ministry of Home Affairs, tax related matters with the Ministry of Finance, commercialisation of technologies developed by Defence Research and Development Organisation and timely conclusion of procurement proposals,” the statement added.

It may be noted here that increasing indigenisation in defence manufacturing has been given due thrust in DPP 16. This assumes even bigger significance under ‘Make in India’ programme where the focus needs to be on critical value addition in India, and not limited to delivery from within the country.

The Ministry of Defence under the current government has taken progressive steps towards indigenising the defence sector through series of policy initiatives such as strategic partnership with private sector, introducing IDDM (indigenously design, developed and manufactured) category, performance-based acquisition enshrined in the DPP 2016, granting FERV for all Indian categories on par with that for global categories, besides promoting defence exports.

Over the past three-and-a-half years, nearly 80 per cent prospective contracts have been categorised in one or the other Indian category (Buy Indian, Buy & Make (Indian), Make). It is for the first time that efforts to create an equitable level playing field to bring Indian OEMs on par with FOEMs and with Indian defence public sector undertakings is gathering traction although more needs to be done in this regard.

This article was originally published on Defence Aviation Post and has been republished with permission.