hey guys ,check out this article regarding the private sectors defence participation in india.
since this article is too big ,just posting the link here:
http://www.tehelka.com/story_main23.asp?filename=Bu120906Private_sector.asp
The disintegration of the former USSR and the post-Pokhran sanctions hit India’s defence modernisation programme badly, leading to an acute shortage of spare parts and upgraded versions of existing weaponry. The spate of defence scams starting from Bofors to the Scorpene submarine deal has not been helping the cause of defence acquisitions either.
To find a way out of the crisis, the Centre has ushered in phased liberalisation into the defence industry realising the synergy and linkage effects that an enhanced domestic production could bring to the industry. The policy to deregulate certain select areas of the industry is aimed at import substitution through higher domestic production for meeting domestic defence requirements. The key areas of growth identified within the industry are expected to arise from the upgradation of the production capacity, technology transfer, and modernisation of the defence infrastructure
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“The defence industry is gradually liberalising and the public sector is facilitating greater private sector participation in the area of defence goods production. There are about 5,100 companies supplying around 20-25 percent of components and sub-assemblies to State-owned contractors, and the market size was estimated to be around Rs 27,900 crore in 2005, of which the Army alone accounted for Rs 15,000 crore. Of India’s current defence procurement of capital items, more than 30 percent is imported; however, this is expected to change with the creation of more public-private partnerships,” says Shumit Vatsal, research analyst with Frost and Sullivan in his research paper on the Indian defence market.[/FONT]
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To facilitate the acquisitions, the Defence Budget has been increased from Rs 83,000 crore in 2005-06 to Rs 89,000 crore for 2006-07 with Rs 39,400 crore as capital allocations. As far as individual sub-allocations are concerned, the Army is entitled to Rs 41,000 crore while the Air Force and Navy are allotted Rs 25,000 crore and Rs 15,000 crore respectively. The Centre expects its defence expenditure to exceed Rs 90,000 crore by 2008.[/FONT]
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The defence industry in the past has been dominated by government-run public sector undertakings (PSU). This scenario has changed significantly with the ministry of defence providing licences to private companies to manufacture select aerospace and defence products.[/FONT]
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“In 2001, the country opened up for up to 100 percent domestic private sector investments in the defence industry and allowed foreign direct investment of up to 26 percent in select areas. Some of the key non-PSU participants supplying defence equipment and services include Mahindra & Mahindra, Tata Group, Kirloskar Brothers, Larsen & Toubro (L&T), Ashok Leyland, Jindal, Max Aerospace & Aviation, and Ramoss India,” says Commodore (retired) R. Balasubramaniam, president, Pipavav Shipyard.[/FONT]
[FONT=Arial, Helvetica, sans-serif]Several defence
projects remain at the development stage due to paucity of resources[/FONT]
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L&T has proposed to design and construct weapons platforms, weapon launchers, small arms, anti-tank weapon systems, rockets, torpedoes and mines. Mahindra Defence Systems and Ashok Leyland Limited manufacture light armoured vehicles for both the Indian Army and for armed forces of other countries.[/FONT]
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The Indian Space Research Organisation (ISRO) has a strong partnership with the domestic industrial sector for the execution of space programmes. Over 500 small, medium and large-scale enterprises work with ISRO, supplying hardware, undertaking fabrication jobs, and establishing fabrication and test facilities. The domestic industrial sector provides all raw materials and high-tech electronic items required by ISRO and has also contributed towards developing systems for launch vehicles and remote sensing and ground equipment. Around 231 technologies developed by ISRO were transferred to the domestic industrial sector for commercial use. ISRO also undertakes technical consultancy projects for industries.[/FONT]
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According to a market research report by Sanjiv Khanna for Industry Canada, eight regiments of the Pinaka multi-barrelled rocket-launcher have cost Rs 2,812 crore; 250 Light Combat Aircraft for the Air Force have cost Rs 18,900 crore; missiles, including the Agni, BrahMos, Prithvi and tactical missiles have cost Rs 5,850 crore; radars and radio equipment have cost Rs 3,748 crore; 200 self-propelled guns being manufactured with foreign assistance would cost Rs 3,600 crore. India is seeking participation from the private sector for these projects in a bid to reduce their import component by as much as 30 percent.[/FONT]
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“The best example of PSU-foreign-private collaborations in the defence sector is the BrahMos supersonic missile that can travel at a speed of Mach 2.8 and has a range of up to 300 km. It can be launched from various platforms — ship, land, aircraft and submarine,” says Commodore Balasubramaniam. As of today, this is the only supersonic missile produced in the world. It is designed jointly by npom of Russia and India’s Defence Research and Development Organisation. BrahMos is jointly funded by the two countries and involves inputs from 10 Russian and 20 Indian public and private sector industries, including L&T and Godrej.[/FONT]
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Mass production of the missile has commenced and the company expects to supply India’s armed forces with 1,000 missiles by 2015. BrahMos officials are cagey about revealing the cost of the missile. Defence analysts say it is roughly Rs 10 crore per missile. The BrahMos will equip all major Indian warships like the three under-construction Project 15A destroyers and project Project 17 frigates and will be retrofitted on one existing warship each year.[/FONT]
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Godrej-PCS has been working on the development of this complex system for almost four years now. The system has more than 2,000 intricate precision components and subassemblies. L&T, whose revenue target for 2007-08 is Rs 1,000 crore from defence, aerospace and nuclear power contracts, is working towards building the major sub-assemblies for both airframe and aero-engines of the missile.[/FONT]
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The Army too has placed a substantial order for the missiles that would be inducted into the force in 2007. The land-to-land version is designed to be mounted on a Tata vehicle produced by Bharat Earth Movers Limited and the command post has been designed by Hyderabad-based Electronic Corporation of India Limited.[/FONT]
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It is not just hardware production that has private participation. Tata Consultancy Services (TCS) has announced the integrated materials management online services (IMMOLS), a nationwide systems-integration project addressing the computerisation needs of the inventory control and logistics management of the [/FONT][FONT=Arial, Helvetica, sans-serif]
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Air Force. “Involving an investment of Rs 55 crore, TCS IMMOLS has been implemented in a distributed manner at Air Force stations to replace the current manual system for materials management,” says a TCS source.[/FONT]
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However, there are some major areas of concern. According to a US Congressional Research Service report, India’s defence spending is likely to increase in the years ahead for two reasons. One, India has repeatedly stated that it will not compromise on spending for national defence. Two, for the second year running, the ministry of defence has surrendered Rs 4,500 crore earmarked for capital purchases, with major acquisitions such as those of the Advanced Jet Trainers (AJT) not being finalised. [/FONT]
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A separate accounting head for capital equipment purchase may become the precursor for establishing a “rolling fund” over the next two-three years. This fund will allow the ministry to carry forward unused amounts allocated for equipment purchases from one financial year to the next. [/FONT]
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Several important Indian defence projects remain at the development stage, hampered by a paucity of resources and a lack of technical know-how that requires technology transfer. These projects include the Light Combat Aircraft, Main Battle Tank, Air Defence Ship, Advance Technology Vessel and AJT. [/FONT]
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“India’s defence exports were a moderate Rs 234 crore as compared to Rs 130 crore in 1999, Rs 180 crore in 1998 and Rs 585 crore in 1997. India aims to reach Rs 936 crore worth of defence exports per annum by the next five years,” the US report says. [/FONT]
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Several initiatives are in place to achieve this target. India will manufacture spares for MIG-21 aircraft and service and overhaul MIG aircraft in the region. Hindustan Aeronautics Limited (HAL) is establishing a centre of excellence for the machining of forgings and castings. HAL has been shortlisted by Honeywell for global procurement, as have the Tata group, L&T, SKF Bearings, AT&S India and Kirloskar. Honeywell plans to source products worth Rs 1,125 crore annually from these companies.[/FONT]
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HAL has finalised orders worth Rs 81 crore with four buyers. These include its first order for the Advanced Light Helicopter; a Rs 27-crore sub-assembly order for Sukhoi aircraft; a Rs 22-crore order for forgings and castings from Rolls-Royce; and a Rs 4.5-crore deal with Snecma of France, also for forgings and castings.[/FONT]
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“With a greater role to play for the private companies in the defence sector’s indigenisation programme, we can certainly hope for a gradual decrease in the country’s dependence on foreign nations. We can save valuable foreign exchange and gradually eliminate middlemen who have been involved in major defence scams and thus have adversely hit the defence modernisation programme,” says N. Nigam, executive vice-president, L&T.[/FONT]
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Agreeing with Nigam, former director general, military operations, Lieutenant General DB Shekatkar says, “Indian industry’s technical expertise is on par with global standards. We have made our own supercomputer param. Till recently our import content was 70 percent; indigenous content was 30 percent. But by 2015 we are hoping it would be opposite. If given the required design and the format, the industry undoubtedly would deliver.”[/FONT]
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Shekatkar, who was also the additional director general, perspective planning, responsible for defence procurement and had worked closely with President APJ Abdul Kalam, who was then the scientific advisor to the defence minister, says that the industry could play a larger supportive role through partnerships with the ordnance factories and defence PSUs. [/FONT]
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“These ordnance establishments lack the research and development (R&D) technological expertise, which the industry has. Initially the joint venture could begin with a 60:40 ratio between the government and private industry. But as the profits grow, the share could change to equal or may be even 40:60 ratio, or even more depending upon the circumstances. Even the Kelkar Committee report has given the same recommendations,” says Shekatkar.[/FONT]
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He however warned the defence forces from resorting to delaying tactics. According to him, the defence forces change their order specifications mid-way. Allegedly, PSUs first approve everything and suddenly backtrack. [/FONT]
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There are also, reportedly, delays in R&D. This halts the entire manufacturing process and prevents the industry from delivering in time. Apparently, this forces the armed forces to look at foreign markets for fulfilling their requirements. [/FONT]
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“There has to be a two-way approach. First is a firm commitment from the forces on not changing the parameters after being approved, as this procedure itself goes through a lengthy scanning. Second, the industry should deliver the goods within the scheduled time. Otherwise the entire indigenisation process would lose effect,” says Shekatkar. “The industry too should come out with its own design specifications. This will reduce the dependency on the services to provide the specifications. Hence the entire process can begin must faster by having their own design ready and start working on it as soon as it is approved. This would be much better than first waiting for the designs and then beginning the manufacturing”[/FONT]
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A greater role in defence by Indian firms may well lessen the need for intermediaries and foreign firms, hopefully eliminating potential scams. But, this will be possible only if the process isn’t derailed by bureaucratic tangles.[/FONT]