http://indiatoday.digitaltoday.in/i...k=view&id=9360§ionid=36&issueid=57&latn=2
Italians are coming
Last year, when Paolo Girasole, a senior executive with Italian arms major Finmeccanica, was given the option of a foreign posting, he instantly picked India.
The slow-moving decision-making process would need getting used to but the world's second-largest defence market marked an exciting business opportunity.
Reason enough for Italian arms major Finmeccanica to pack its coffee, olive oil and pasta and head for New Delhi.
From one-off suppliers of torpedoes, radars and naval guns to India, Italy is the arriviste in the Indian defence market, quietly becoming one of India's largest potential military equipment suppliers.
Earlier this year, the Indian Navy signed a ¤200 million (Rs 1,300 crore) contract with Italian shipbuilder Fincantieri for a new fleet tanker.
The tanker to be built in Italy and delivered by 2010 will greatly increase the naval fleet's endurance at sea.
Finmeccanica's helicopter division, Augusta Westland, is the frontrunner in a multi-million contract to supply 12 AW-101 VVIP helicopters worth around Rs 110 crore each for use by the President and prime minister.
The AW-101 has been shortlisted to carry the President, prime minister and SPG
Four of these are for the use by the Special Protection Group. In a replay of the Marine One contest for the US presidential helicopter last year, field evaluations conducted by the Indian Air Force (IAF), the triple-engined Italian helicopter trumped its only competitor, the US Sikorsky S-92.
The contract to be signed later this year for the flying offices equipped with advanced communication aids and self-protection devices could well be the greatest Italian export to India since the iconic Vespa scooter in the 1960s.
The Italian story rides mostly on the 'two Fins'-state-owned Finmeccanica which supplies electronics, radars, artillery and aircraft, and Fincantieri that makes ships.
Co-located in a single building in downtown Delhi's Nehru Place and co-incidentally headed by two engineers who attended the Italian naval academy together, the firms with turnovers of ¤12.5 and ¤2.5 billion (Rs 81,250 crore and Rs 16,250 crore) respectively are frontrunners in practically every significant defence contract.
"India is the number one export priority for us," says Massimo de Benedictis, country representative, Fincantieri.
Italy on the go
With an EU-imposed arms embargo against China, India is the largest potential arms market. The Italians are front-runners in a number of aerospace and naval programmes. Rapid delivery schedules, high technology and competitive costs make them attractive for tie-ups. For good reason. Current European Union (EU) arms embargoes against China make India, with $45 billion (Rs 1.89 lakh crore) earmarked for defence acquisitions over the next five years, an attractive alternative.
Fincantieri's FREMM stealth frigate is a contender for a seven-warship order worth Rs 30,000 crore. The shipbuilder is also vying to sell six advanced offshore patrol vessels to the navy and coast guard.
If the 38,000-tonne Indigenous Aircraft Carrier being built at the Cochin Shipyard Limited looks like a bigger version of Italy's new carrier, the Cavour, it is because it was designed with assistance from Fincantieri which is also integrating the ship's propulsion system. Italy has emerged as an attractive shipbuilding destination due to rapid delivery schedules, high technology and competitive costs.
While accepting a new oceanographic survey vessel from Fincantieri in December 2007, Science and Technology Minister Kapil Sibal joked how it had taken his ministry three years to get the financing for a ship which took the yard just 18 months to build.
The navy will get its new Italian tanker in just two years, while it took Garden Reach Shipyard 12 years to build the navy's last tanker- the INS Aditya.
The induction of the AW-101 will give Italy a toe-hold into the burgeoning defence aerospace market.
Augusta Westland's NH-90 is a frontrunner to supply 16 Anti-Submarine Warfare (ASW) choppers for the navy, 324 light utility choppers for the air force and army, 13 ATR turbo-prop maritime patrol aircraft to the navy and coast guard and two C-27J Spartan medium transport aircraft for the Border Security Force.
The company owns 40 per cent of Eurofighter which is a contender in the $10 billion (Rs 40,000 crore) contract to supply 126 fighter aircraft to the air force.
The entry of the Italians is not incidental. Ever since the nations decided to enhance bilateral cooperation in defence production in 2002 and inked a memorandum of understanding on defence industrial cooperation the following year, defence ties have been on a steady trot.
The joint working group on defence, headed by the defence secretaries, held its seventh meeting last March.
One reason for the Italian connection is the recent policy of diversifying India's arms suppliers.
Over 70 per cent of the Indian military machine is of Soviet and Russian origin with the navy almost entirely dependent on Russian weaponry for its warships, submarines and aircraft.
A troublesome relationship, particularly over the acquisition of spares has left the armed forces keen on alternate sources.
"Overall it is best to diversify the supplier base and enter into technological collaboration with the best in different fields because we always face the risk of resumption of sanctions," says Brigadier Gurmeet Kanwal, director, Centre for Land Warfare Studies.
India's Defence Procurement Procedure, floated in 2005, calls for open tenders for procuring all major arms systems, transfer of technology and offsets of 30 per cent (suppliers have to procure 30 per cent of the value of their contracts from Indian industry).
Italian firms are vying for
Patrol vessels: At least 12 advanced offshore patrol vessels for the navy and the Coast Guard.
Frigates: Seven stealth FREMM frigates worth Rs 4,000 crore each for the navy’s Project 17A programme.
Fleet tanker: ¤200 m contract signed with Fincantieri for delivery of tanker in two years.
Patrol aircraft: Italy’s ATR is in the reckoning to supply medium range patrol aircraft for the navy and the Coast Guard.
NH-90 helicopter: Sixteen anti-submarine warfare choppers for the navy.
C-27J Spartan: Two for the Border Security Force for rapid deployment of forces around the country.
"While Italy has expertise in the production of high-tech weapon systems, India brings in the great asset of manpower," says a defence official.
This allows Italian majors to acquire stakes in private and public sector Indian defence industry and even setting up shop.
This hasn't happened because the cap of 26 per cent Foreign Direct Investment (FDI) is not attractive enough for the Italian majors.
The Government says it is only a matter of time before FDI is hiked to 49 per cent. And when that happens, the Italians would have truly arrived.
