100% FDI in Defence: Understanding Pros and Cons

Karan M · Post by **Karan M** » 06 Jun 2014 12:34

Cosmo_R wrote:I have a higher confidence in the ability in the genius and perspicacity of Indian entrepreneurs and this new Modi government than the average person. I stand guilty.

This is just handwaving of the highest order. Indian "genius" will save the day, the new Govt will wave a magic wand etc, as versus concrete policy and hard nosed execution.

I have heard this 'tangential' argument since 1974 when it was argued India did not need cars, phones or whatever because we first had to do something at the village level. "We are different you see..."

Pointless comparisons again. Nobody here is saying that India doesnt need cars, mobiles or whatever irrelevant comparisons you bring in.

What is being said is that if India IS buying weapons at huge costs, then the factory that builds those weapons should be owned by Indians so that the next generation of weapons is also Indian or at least part Indian, and the entire weapons industry in India does not become an import sink.

I also note you deliberately side stepped the security loopholes in your policy prescriptions & how they'd expose India to the strategic activities of other establishments.

Clearly, you are ok with that - I am not. I have no faith in other nations security establishments deciding what is good for my national aims and what is not.

It matter little what "kind of economy" we are in anyone's opinion. Fact is we have to make a huge leap and it won't be done by people who don't have money at risk"

Actually, this is our money at risk, Indian money, paid by Indian taxpayers, which is being used to buy arms at prodigious quantities. We wish for this money to be utilized for India's interests. And there are many firms already willing to enter into agreements to access that money at even 26% FDI.

Again, this huge leap business is just rhetoric.

It doesn't take much of a leap to go from a L&T making nuclear submarine hulls to a L&T making small arms.

It takes good policy. Not "faith in Indian genius, perspicacity" or whatever.

We are talking about FDI. If SoKo wants to (and I know they want to) invest 100% in a shipyard to build XYZ that would build civilian and military vessels at their own risk why would I stop them?

We are getting delivery of

http://www.newindianexpress.com/states/ ... 264258.ece

They were built in Abu Dhabi. 100% non FDI

And why should I not point out to SoKo that I will purchase from them if they manufacture those ships in an Indian owned yard and SoKo is perfectly free to invest in it upto 49%. If the deal is big enough, SoKo can come in.

Next, I see you completely sidestep the issue that why would SoKo do any investment in a partnership in India, when it can set up a completely self owned subsidiary and prevent any future competition from developing via passing technologies to a partner.

The exact point a pvt executive noted about the SoKo - L&T deal.

It can be argued that everything is tangential when one is in denial.

Yes, I see denial a lot actually, especially if I were to analyze your soft corner for anything and everything western as versus India's traditional weapons procurement partners and how you loftily dismiss all concerns to the contrary, so lets not go down there, shall we?

Fact remains, that your faith in "Indian perspicacity" is not a policy prescription given that similar lofty sounding rhetoric was used all the time from RG's time to excuse the worst decisions.

Karan M · Post by **Karan M** » 06 Jun 2014 12:41

abhijitm wrote:Speculation. Your risk is acknowledged. What you are speculating is it is hard to mitigate. Just like I too am speculating it can be mitigated.

Hardly speculation in my examples case, because the fact remains we have a very limited footprint in several critical areas and even a minor loss there ends up creating a huge effect downstream. Speak to some HAL/ADA guys sometime and ask them how many vendors they have for each avionics item, locally sourced from India, and the efforts and years, that went into developing that capability, you'll have your answer.

What you are saying is, make a risky move under the assumption that you can mitigate the risk. The point here is not to make the move in the first place, when that risk is completely unnecessary and opens up huge issues down the road.

Again the risk you are highlighting is already there irrespective of fdi. There are other better avenues available to them like bribing for arms import than indigenous development etc.

Don't mix up things please. Even if there is FDI, bribery will still be going on for many cases. And if you actually hand over your assets lock, stock and barrel, then its an even bigger issue than bribery.

In next 20 years at least we will ne net defence importer of billions of $. There is not going to be any magic to turn this around. Now it is up to us to turn this into some kind of opportunity. FDI could be one of the measures. We need to wait and watch.

The simple answer to the above is to follow through on the private player entry aspect, which comes in with 26% FDI, and also ask for offsets.

100% or majority FDI is unnecessary.

JayS · Post by **JayS** » 06 Jun 2014 12:45

disha wrote: Highlighting the above., as it is not just big ticket items like F-22 and Nuke Submarines., but also of items like the following:

http://www.waste-management-world.com/a ... award.html

I remember of reading similar thing developed by DRDO some time ago and they were in process of commercializing it on large scale. "E-Loo" is what they call it IIRC.

But this is not a critical defense tech is it?? Such non-critical technologies can be brought with FDI/JV whater route, no argument with that.

disha wrote:Or you can take any manufacturer from say US DOD small manufacturer for metal panels https://www.dodmantech.com/JDMTP/Metals who would want to manufacture at a lower cost in India. The same panels can be used for say various other industries if the cost comes down!

India needs to get into the manufacturing game and instead of making say cheap iphones, it can make cheap titanium panels and composites and become the advanced material manufacturing hub for the globe.

Further, being plugged into such a global supply chain, it will be difficult for other bakis to show their bakiness.

Everyone will agree, we need a comprehensive mfg policy for bringing in state-of-the-art mfg tech across the spectrum right from harnessing raw materials to building ultra-modern technological items. But a lot of those things can be brought through sectors other than defense, e.g. automobile, semi-conductors etc. Do we really need to open up Defence sector for that?? China became mfg hub without opening its defence sector for 100% FDI. A lot of tech-know-how that we would learn from other sectors can be used in modified form (with some RnD support) for defence manufacturing. This would fast track our mfg capabilities and would also not jeopardise our national security.

Indeed we need to be a sizable part of global suppy chain. Through a tighter economic couplings with the powers in the world, we will weild greater share of say in world forums and it would be difficult for others to ignore or threaten us. But I do not think opening up defence sector for foreigners without even giving a fair chance to our own private players make sense. Today our private companies are more capable, economically more strong and more willing to take risks. Let them have a go. We need to shield our MIC if its trying to take shape, like every other country does, instead of throwing them in a competition with powerful MNCs. Defence sector should not be looked with the same logic which we are applying to other sectors like auto. Defence sector is hardly run by "free-market' principles. Contracts are not awarded solely based on economic sense. Defence MNCs don't play fair even in their own countries. Plus they have blessings from their govts.

Haven't US companies subotaged defence projects from other countries like Europe and Isarael?? E.g. English Electric Lightning killed by bribing scandle from LM?? Didn't US opposed Lavi project by Isarael?? Whats the gaurentee that US won't do it in India?? Would US let India (i.e. ADA/DRDO) build a fighter (which uses technology from US companies with shops in India) which would be pitted against its own fighters in international market?? Or we gonna forever be dependent on their fighters?? Fighter jet being just an example.

Somehow I don't see how foreign companies would simply let us build any indigenous defence system which would use their technology in parts if they have a free hand in our market, which effectively means crippling of indigeneous capabilities. And please don't expect indian companies to compete against those big MNCs, its not possible for them. Because the technological background that they have cannot be easily outdone. Also remember, private companies receive huge govt/armed forces funding for RnD and other activities and direct tech-transfers from national labs such as NASA. Our companies do not have such luxury till date and it will be absolutely impossible for them to compete with them even with unlimited capital source. So there is a definite need of shielding here for a decade or so atleast, of coarse assuming that we give a free entry to our private companies rightaway with whatever tech-transfer from DRDO and govt support possible.

Also the argument that we have market muscle currently and the US/European defence OEMs are desparate has a merit. We could use it even in current investment framework. Get all non-critical technology from JVs/Offsets or with 49% direct FDI. And make DRDO focus on developing critical technology with resources pooled from all academia and labs. We could also either divest DPSUs or make them autonomous and accountable and pit them against private players. Or we could make them have partnerships with private companies wherein private players can bring in their superior operational capabilities and efficiencies and DPSUs can bring in its infra. I sense a lack of will at the helm, or things can be done w/o 100% FDI or w/o any FDI for that matter.

I have read many opinions on this as well as other forums about FDI in defence. A lot of pro-FDI people talk only from economical POV neglecting the national security related repurcussions that we would have, altogether or undermining it, which is by the way, the essence of arguments from the people who are opposing it. Those opposing FDI are not gainsaying economical aspects but think that its too risky to do it from national secutiry POV given our track-record. And as such there are other ways to achieve economical or technological advances and even current framework it not that bad but there is lack of implementation issues from the top.

member_23694 · Post by **member_23694** » 06 Jun 2014 12:51

the basic issue for all the apprehension regarding 100% FDI is that all of us have been conditioned with the understanding that this is how things works in India and based on that this policy will not be good.
The new PM will hopefully bring some changes in the Defence purchase and implementation of the 100% FDI policy which will go some way to allay the fears against 100% FDI

Karan M · Post by **Karan M** » 06 Jun 2014 12:52

Nileshjr, well summarized (+1 for a great post).

Karan M · Post by **Karan M** » 06 Jun 2014 12:56

dhiraj wrote:the basic issue for all the apprehension regarding 100% FDI is that all of us have been conditioned with the understanding that this is how things works in India and based on that this policy will not be good.

Simplified post..what if its not conditioning? Think of the big assumption made there...that eliminates the below possibility!

That we made the effort to research the issue, follow it, discuss it, and come to our own conclusions. .

JayS · Post by **JayS** » 06 Jun 2014 13:37

Karan M wrote:Nileshjr, well summarized (+1 for a great post).

Its nothing compared to the efforts you are taking here. Really impressed by your perseverance.

dhiraj wrote:the basic issue for all the apprehension regarding 100% FDI is that all of us have been conditioned with the understanding that this is how things works in India and based on that this policy will not be good.
The new PM will hopefully bring some changes in the Defence purchase and implementation of the 100% FDI policy which will go some way to allay the fears against 100% FDI

You can hardly blame anybody for not believing in Indian system. Frankly I don't think there will be a paradigm shift in the kind of bribing happens in procurement. Remember, corruption is in our blood. There will be change for sure. but how much, only time will tell. We have abused even good policies so far. This one is a bad policy to say the least.

And last time I checked, PM does not look into technical details of each and everything, neither hes the one who take every decision in govt. Nor is he expert in each and every field. He has bureaucratic machinery for that. He receives advice from subject-matter experts. He takes decision based on that. If two defence systems are getting compared in a tender, he's not gonna personally test them technically. Army will do it and pass on reco. MoD will decide based on that with PM's direction perhaps. What if he gets wrong advice?? The whole corrupt system hasn't changed so far and it will take a long time for that. Perhaps more than one tenure by Modi. Modi can make excellent policies but they may not be followed by the everybody. Thats the issue we have: no frame work to ensure that.

I remember Modi saying he believes in Institution-centric system, (where you build institutions very much like our constitution has done, empower them, make them autonomous and form a system wherein they will keep check on each other), rather than a leader-centric system, where when the leader departs everything is left in disarray because he never cemented good policies in the system which would last beyond his time and no mechanism was formed to ensure their proper implementation.

Please have in mind, 100% FDI, once allowed, will not be easy to be rolled-back without perhaps sounding trade-war horns with countries which would have invested money. So it make sense to try out first other possible ways viz. opening the sector with indian private players, exploiting existing framework to gain as much as possible through JVs, straightening the DPSU mess by making them autonomous and accountable, and making DRDO to focus on only critical, high-risk and cutting-edge technologies for future, along with strengthening academic research culture, establishing state-of-the-art RnD facilities and promoting RnD in private companies. If all this fails, Atleast I wont argue against 100% FDI. Frankly, I dont think anything will be left to argue at the point when we will find out that we are unable to defend ourselves on our own.

member_23694 · Post by **member_23694** » 06 Jun 2014 14:31

Karan M wrote:That we made the effort to research the issue, follow it, discuss it, and come to our own conclusions. .

Count me as the last person who will doubt anyone's ability in this forum

By conditioned , I meant that we have always been seeing defence equipment as direct import or through license manufacturing. Rarely manufacturing things from scratch. Even the TOT received for a lot of items has not led rapid advancement in our defence R&D. We still import
70% of arms. Why not try to create an environment so that the foreign vendors find it attractive to create a manufacturing base in India and exploit the low cost benefits.

By 100% FDI here the main idea seems to be to leverage the massive Indian defence requirment in the form of creating a defence
industrial complex which apart from meeting the internal requirement provides opportunity for export. Simple business pov.
Even if 50% of the imported equipment starts getting manufactured here then we start with a few billion $ industry with enormous
potential down the line.
All the mentioning of strategic concern etc will still remain if the equipment / components are either imported or manufactured within by foreign companies.
Regarding starting with pvt. industries , I am not sure if they have the capability or resources to pump in dollars for R&D so they will again be dependent on foreign vendors.
DPSU on its part already have there order book full and pays a lot of money as dividend to the government. Probably they can use the money for R&D and come out with better product in the face of local competition.

If we skip the complete defence product and just concentrate on defence component then below are some details about the auto component
industry in India

- The cumulative foreign direct investment (FDI) inflows into the Indian automobile industry during the period April 2000 to January 2014 was recorded at US$ 9,344 million
- India's position is highlighted by the fact that 874 MNCs have set up 1,031 centres and 45 per cent of the top 500 global R&D spenders have a presence here.
- Indian auto component industry is estimated to have a US$ 66 billion turnover by 2015–16
- industry exports are estimated to reach US$ 12 billion by 2015–16

Can we have something similar for the defence sector

abhijitm · Post by **abhijitm** » 06 Jun 2014 15:44

A little old but balanced article by McKinsey on Indian defense industry
warning: pdf download
A bright future for India's defense industry?

abhijitm · Post by **abhijitm** » 06 Jun 2014 15:57

dhiraj wrote:Can we have something similar for the defence sector

Defense is more sensitive. You will not see a foreign company setting up a unit to produce h/w s/w components for missile guidance system. The concerns raised here are legitimate. My guess is FDI will not be blanket 100% pan industry. It will be selective.

shiv · Post by **shiv** » 06 Jun 2014 16:31

I think handguns, communication handsets and base units, specialized lights (runway/aircraft lights?) and fittings, special fabrics used in uniforms, cold/high altitude clothing, ballistic protection equipment, lenses and optics, small engines needed for boats and other applications etc are items that could be given 100% FDI. Just a guess. We need to look at small items that get imported - not big ticket like F-22.

vic · Post by **vic** » 06 Jun 2014 16:42

There are huge number of import lobby supporters on BRF who seem to be posting with multiple IDs and it is difficult to even have a sane discussion about Indian R&D effort without calls to import everything.

IIRC I believe East India Company was more than happy with 100% FDI in defense industry and now we are going back on same sad history.

First order of business should be raise Indian defense R&D budget to Rs 50,000 crore per annum and give Pvt Sector a fair share and adequate chance.

NRao · Post by **NRao** » 06 Jun 2014 17:10

What is preventing companies/nations from killing Indian projects right now - with no FDI? Have we ourselves not thought that the Russians or some intermediary are killing the Arjun? I think there are a few in the nuclear industry that have been bumped off, right? And, we have seen a post in this very thread of companies trying to entice Indians from not chasing "stuff" in the hardware arena.

The ARjun example provides a case for -ve FDI - India imports + invests her own *funds* in the Arjun in competition to the T-90!!!!!! Who, other than a handful, cared?

That is a given - no one wants the other to make progress for fear of competition and loss of a revenue stream. But that is exactly what this fight is about. FDI input is *not* about making things in India to make India self sufficient. That is a secondary goal. Which will become a primary one *after* this fight is won. Whatever this "FDI" does, it *must* make the field a level one. And, it will never be an easy fight - that is a given.

But fear is not one component that should enter this picture. Get bloodied and bloody others.

JayS · Post by **JayS** » 06 Jun 2014 18:11

NRao wrote:What is preventing companies/nations from killing Indian projects right now - with no FDI? Have we ourselves not thought that the Russians or some intermediary are killing the Arjun? I think there are a few in the nuclear industry that have been bumped off, right? And, we have seen a post in this very thread of companies trying to entice Indians from not chasing "stuff" in the hardware arena.

The ARjun example provides a case for -ve FDI - India imports + invests her own *funds* in the Arjun in competition to the T-90!!!!!! Who, other than a handful, cared?

That is a given - no one wants the other to make progress for fear of competition and loss of a revenue stream. But that is exactly what this fight is about. FDI input is *not* about making things in India to make India self sufficient. That is a secondary goal. Which will become a primary one *after* this fight is won. Whatever this "FDI" does, it *must* make the field a level one. And, it will never be an easy fight - that is a given.

But fear is not one component that should enter this picture. Get bloodied and bloody others.

If they can kill Indian projects with current system with so much policy firewall on paper, imagine how weak is our system. There lies the problem. What stops the outsiders to take full advantage of open market to cripple our indigenous defence capability for long long time (That too, when there are a lot of "Ghar ke Bhedi' around who won't think twice before selling our motherland for few bucks)?? The fears people are expressing are very real and indisputable. What do we have to stop from happening?? If GoI had used the current DPP and all those offset/ToT clauses in other contracts cunningly and strictly we would have already got a lot of (at least) non-critical technology in India. It didn't happen. Even current framework which allows upto 49% FDI is very attractive for foreign OEMs if implemented and exploited with rigor and shrewdness for our own benefit.

Anyways I found this response of FICCI to DIPP proposal which was first circulated in 2010 and now is repackaged. FICCI seems very apprehensive themselves about "majority stake" FDI and feel that upto 49% FDI is way to go, that too a with very stringent policies and safeguards. Dunno if it was posted before here. But here it goes:

http://www.ficci.com/PressRelease/633/july27release.pdf

FICCI: 26% FDI CAP HAS ALREADY ATTRACTED TOP OVERSEAS DEFENCE OEMS
49% CAP CAN ONLY BE CONSIDERED ON THE
BASIS OF CONDITIONS SUGGESTED BY FICCI
(A RESPONSE TO THE DISCUSSION PAPER RELEASED BY DIPP)

NEW DELHI, July 26, 2010. The 26% FDI cap in the defence sector has already attracted top overseas defence OEMs like BAe, EADS, Sikorsky, Lockheed Martin, Electtronica Defence Systems, etc to hugely invest in India’s defence sector. Therefore, any increase in FDI Cap in a strategic sector like Defence will require careful thinking and analysis. The following is an indicative list of the types of JVs between Indian and global companies that are currently operational in India (with 26% FDI cap):

• BAe – Mahindra & Mahindra, 26:74 JV addressing multiple platforms in Land Systems
• Sikorsky – TATA, 26:74 JV dedicated to manufacture of S-92 cabin;
•EADS – L&T Manufacturing Co. – Tripartite JV between EADS-L&T-L&T Holding-Operating (Design) Company, Proposed JV for EW Systems at 24.5:24.5:51;
• Speck –IAI, 26:74 JV for UAVs under evaluation by DIPP;
• recently announced Lockheed Martin – TATA 26:74 JV for Aerostructures;
• ITL Electro Optics – Alpha Design Technologies, 26:74 JV for;
• ElettronicaDefence Systems Pvt. Ltd. - Alpha Design Technologies, 26:74 JV for Solid State Trans-Receiver and
• Sofema Engineering & Systems Pvt Ltd - Alpha Design Technologies, 26:74 JV for engineering, warehousing & supply of spares and assemblies for CHEETAH & CHETAK helicopters to HAL.

Countries like Germany, China, South Korea, and Canada have recently revised their FDI policies in defence, post September 11, 2001 (9/11), making the policies much more stringent. They have inducted methodologies to punitively scrutinize FDI inflows in this
sensitive and strategic sector.

In light of the above: (i) significant involvement of OEMs in the Indian defence sector at the existing 26% FDI Cap,
(ii) recent global trends of a measured approach on FDI in defence, any revision upwards from 26% will have to be approached carefully. 49% FDI Cap can only be considered on the basis of a set of conditions suggested below: A higher FDI should be clearly linked with the full platforms being produced and has to be a minimum capitalization of US$100 million. The proprietary technology content being inducted in the JV is that what is sought by the country and will form the basis of further indigenous technological development. JV provides an undertaking to source between 50% to 70% of their components/subsystems by value, indigenously, by nurturing Tierised Indian vendor industries. Export obligation of ten times the equity must be committed by the OEM within ten
years of entering into the contract. The technology received, once cleared by the Home Country Government, should have no restrictions on its global exploitations. Post the transfer no retrospective law should be applicable to restrict the technology exploitation. All these should be in writing from by the Home country Government of the OEM / defence major. (Since there are dual use technology restrictions and a technology denial regime in many developed countries). The companies cleared with more than 26% FDI should not be eligible for “Make” funding.

Under no circumstances the 51% Indian ownership pattern should alter. Any dilution in the equity structure of any sort has to be from the 49% portion of the foreign partner. Management of the company would be Indian and any and all understanding between
the shareholders will be disclosed. All requests for up to 49% FDI must be linked with the fact that these companies will
qualify for participation in the “Buy & Make Indian” category projects. Therefore, they must be mandated to at least 20% extra indigenous content in their products than the currently stipulated 50% limit applicable for all other Indian companies within 26% FDI limits. These exemptions to 26% FDI limit should be done through wider participation of Industry in private and public sectors and should not be the exclusive preserve of Department of Defence Production & Supply.

In its response to the DIPP Discussion Paper, which has proposed a hike in the defence FDI cap to 74%, FICCI has maintained that globally, there are restrictions on allowing foreign capital in strategic sectors like defence for safeguarding of national security interests. FICCI has pointed out and argued that FDI & transfer of technology are not always directly proportional, so raising FDI is no guarantee for true transfer of technology. The fact is that leveraging latest technologies from overseas suppliers would be difficult even if the FDI ceiling were raised as the OEMs exercise no control over the release of technology which is exclusively under their government’s control. FICCI strongly believes that India would continue to attract OEMs for co-development and JVs at the existing FDI celing of 26%. This is so because India and China are only two countries where the spending on new defence platforms and systems will continue to grow in the post –global economic crisis period. In western countries, firstly, the defence markets are more or less saturated and secondly, the defence budgets have already started declining in the post economic crises period. For example in USA even a programme like F- 22 was capped and their exports to Japan have been prohibited though Japan wanted to import F-22. Thus India is undoubtedly a promising destination for the foreign Defence players. Additionally, defence is a long-term business case and given the current demand-supply dynamics of Indian defence sector, OEMs are convinced about the long-term benefits and business cases in India.

The following are the key recommendations by FICCI to facilitate a robust and qualitative growth of the Indian defence industry:
• The Government’s objective should be to create defence industry verticals that are self sufficient, self reliant & export capable and across industry sectors (public and private).
• Creation and owning of IPR is critical to the growth of Indian defence Industry and to guarantee the long term national security goals. Toward this, FICCI would advocate that the Raksha Udyog Ratnas (RURs) scheme needs to be implemented to effect a ‘Long term Product & Technology Strategy’.
• Along with the RURs for the SME sector there is a need to implement schemes like Technology Development Fund with up to Rs. 5 crore grant-in-aid to the SME sector. Concurrently, the autonomy of the DPSUs should be enhanced,
• ‘Employment Generation’ within the country is also a consideration when it comes to Strategic/Defence industry and we need to look at Long term Product and Technology Strategy along with indigenization to achieve the same.
• There needs to be a policy document duly ratified by the Parliament and linked with the overall procurement policy on indigenization. This policy document should articulate a roadmap and milestones to be set in terms of indigenization. The
defence budget should be allocated in terms of the indigenization milestones to be achieved.
• Promoting indigenous capability as an essential instrument of National Security must get reflected through legislature measures relating to the GOI’s Defence Procurement policy. The Defence Technology Commission proposed by Dr. Ramarao
Committee is very relevant in this context.
• The Department of Defence Production should be restructured. A separate post of Additional Secretary with Joint Secretaries with sectoral (verticals) responsibilities should be created and mandated to look after private industry’s issues and address
the grievances of the private industry and provide active government support. Such vertical created for private sector should report to the Secretary (Defence Production) through institutionalized enhancement and enlargement in the role of Department of Defence Production to look after private as well as government owned units.
•Identify current state of art of technologies needed to be developed / acquired by India. This list is to bear in mind that the “procurement” by MoD tends to be lumpy and suffers from the limitations on short term balance of power and capability
rather than long term capability required to be developed / acquired by the country. The technologies enlisted may be prioritized for acquisition through allowing special case-to-case deviations to the 26% FDI limit.

The private industry leaders understand the strategic importance of defence sector and are not making any demands for more FDI (which they would have for other sectors, right??) which should be good for them according to many. May be they do not want to be exposed to global competition but the truth remains that they are not ready for it and there is high probability they will not survive through it. As a nation we should protect our own private industries' interests at least for few years and give them a fair chance to get to the mark where they would be ready to take on MNCs from outside.

member_23694 · Post by **member_23694** » 06 Jun 2014 18:41

nileshjr wrote:As a nation we should protect our own private industries' interests at least for few years and give them a fair chance to get to the mark where they would be ready to take on MNCs from outside.

How many companies in the private sector are ready to invest large sum of money in R&D without an assured purchase order ?
Correct me if i am wrong but i seriously doubt the R&D base of private sector in the area of defence manufacturing at least for now.
Best case for them will be JV for sub-components and become a sourcing hub. Down the years develop expertise and buy back the foreign vendor shares if possible.
50 years have been given to DPSU and now another how many years needs to be given to pvt. sector before we become self sufficient in defence R&D.

. And till then we continue to do direct import and remain the number 1 importer of defence equipment in the world

JayS · Post by **JayS** » 06 Jun 2014 18:55

dhiraj wrote: Can we have something similar for the defence sector

We can't have anything similar for defence, simply because defence is not similar to any other sector. It does not necessarily work on "Free-market" principle and competitive basis. In defence 2+2 is not 4 always. We should not compare it with any other sector solely based on economic arguments.

Thinking aloud:
In a galaxy far far away...Say, NG sets fully owned shop in India, and supplies some critical cutting-edge parts (e.g. AESA radar) to an indigenous fighter in future, say AMCA. In the event of war with China, say US sidelines with China or does not support India from fear of crossing with China (valid scenario right??) and make NG stop supply of any part any more to AMCA manufacturing or say as spares. Now As its 100% NG shop they retain all the IP for the tech and would not have outsourced (in any way possible) with the key components manufacturing/development (would US govt allow that anyway??). US govt can refuse to comply to any contractual obligations and we can't do much about it while war is going on. What should we do in such scenario?? Or worse if US passes on critical info about AMCA covertly to enemy which could render it useless in war, then what will we do??

abhijitm · Post by **abhijitm** » 06 Jun 2014 19:04

^ the argument is valid even today. How fdi will make it worst?

abhijitm · Post by **abhijitm** » 06 Jun 2014 19:17

shiv wrote:I think handguns, communication handsets and base units, specialized lights (runway/aircraft lights?) and fittings, special fabrics used in uniforms, cold/high altitude clothing, ballistic protection equipment, lenses and optics, small engines needed for boats and other applications etc are items that could be given 100% FDI. Just a guess. We need to look at small items that get imported - not big ticket like F-22.

Agree Shiv.

Even truck manufacturers can be brought here. We need lot of manufacturing companies here on our land. Slowly our own will start learning. Making things here should be the mantra, indigenous or foreign.

JayS · Post by **JayS** » 06 Jun 2014 19:26

dhiraj wrote:
nileshjr wrote:As a nation we should protect our own private industries' interests at least for few years and give them a fair chance to get to the mark where they would be ready to take on MNCs from outside.
How many companies in the private sector are ready to invest large sum of money in R&D without an assured purchase order ?
Correct me if i am wrong but i seriously doubt the R&D base of private sector in the area of defence manufacturing at least for now.
Best case for them will be JV for sub-components and become a sourcing hub. Down the years develop expertise and buy back the foreign vendor shares if possible.
50 years have been given to DPSU and now another how many years needs to be given to pvt. sector before we become self sufficient in defence R&D. . And till then we continue to do direct import and remain the number 1 importer of defence equipment in the world

Some companies have come up for 155mm Howitzer manufacturing. Some have already made prototypes. There are investments in ship-building and so on. This shows there's willingness for risk today. JV/FDI with minority share, should not be an issue, as long as manufacturing is done in India. The private companies will ensure they get enough ToT form the partners if they want to survive in long term. Anyways with 100% FDI you can't get any better than this. If GoI gives a free hand (which its apparently too willing in case of foreign vendors), and start a competitive process for development of defence equipment, much like in US, I am confident many will stand up to the challenge. Not every one needs to bring in billions of $ each on table. Everyone can have a piece of pie at starting. And big players can form a JV for complete defence system with bigger OEMs, rather than just sub-components. Sub-contractors can form small JVs with smaller vendors from outside.

Remember, everybody in this sector started small, everybody received large chunks of money from their govts for RnD and mfg capability build-up, everybody received direct tech-know-how from govt supported labs. Let our private players have the same luxury and then we will see. I would say within a decade we can achieve a lot of progress in terms of non-critical technology and manufacturing. And in 20-30 years our industries can come up to par with the world. Side by side DRDO/Academia can RnD for high-risk/critical-technology and it can keep passing it on to relevant companies.

50 years which were given to DPSUs were not with autonomy and full support. So this argument is not valid. GoI constantly meddled with them, many vested interests within GoI itself tried to sabotage DPSU project. You can hardly say that they were given a fair chance. And private industries were not even given a chance till now.

Lets give a chance to our industry first. We can surely wait how things turn out in 5-10 years. These matters cannot be decided upon in haste. Things do not happen overnight. Even 100% FDI cant do it. As I said in another post, 100% FDI, once implemented will be very tough to roll back later.

abhijitm · Post by **abhijitm** » 06 Jun 2014 19:42

nileshjr wrote:Lets give a chance to our industry first. We can surely wait how things turn out in 5-10 years. These matters cannot be decided upon in haste. Things do not happen overnight. Even 100% FDI cant do it. As I said in another post, 100% FDI, once implemented will be very tough to roll back later.

Why FDI == denying chance to local industry? We can bring companies to fill the gap where we lack currently and we are importing anyway. How come manufacturing or assembling here is worse than importing?

JayS · Post by **JayS** » 06 Jun 2014 19:46

abhijitm wrote:^ the argument is valid even today. How fdi will make it worst?

By killing indigenous capability to build one. In current scenario we will try to make it on our own. Or even if we get it from indian private player who is holding majority-stock in a JV from NG, we retain a lot of IPR and technology and more importantly the decision making ability. Secondly in such scenario, our national labs only has to concentrate on key technologies to fill in the gaps which we wont get from JVs. Eventually we complete full circle and have an ability to build next gen equipment total on our own. We keep our own secrets, we keep our ability. 49% FDI is already in place. Its enough to fast track our development. We dont need 100% FDI. What we need is change of mind. That's all I am saying.

And lets not argue whether there are chances or not that foreign vendors will try to sabotage indigenous developments capabilities. They are doing it now, they will do it then albeit legally. This makes sense from biz POV as well as from their own country's interests POV.

PS: I am assuming you meant 100% FDI.

abhijitm · Post by **abhijitm** » 06 Jun 2014 19:57

If the concern is protection of national security and local industry then as long as it is met there should not be problem for FDI. Things are anyways risky for us and we are not better off. If the argument is - those concerns can never be addressed then I say it is only speculation and the argument can go to any extend.

abhijitm · Post by **abhijitm** » 06 Jun 2014 19:58

nileshjr wrote:PS: I am assuming you meant 100% FDI.

To be accurate '100% FDI in selective segments where we don't have any significant capability'

JayS · Post by **JayS** » 06 Jun 2014 20:18

abhijitm wrote:
nileshjr wrote:Lets give a chance to our industry first. We can surely wait how things turn out in 5-10 years. These matters cannot be decided upon in haste. Things do not happen overnight. Even 100% FDI cant do it. As I said in another post, 100% FDI, once implemented will be very tough to roll back later.
Why FDI == denying chance to local industry? We can bring companies to fill the gap where we lack currently and we are importing anyway. How come manufacturing or assembling here is worse than importing?

Today when indigenous capability is our only hope in defence self-reliance, we are not supporting it full heartedly. Some are even helping outsiders sabotage it. I somehow don't think we will be any better when we will have foreign shops here. We have fetish for foreign maal we will go for it. And with the feeling of pseudo-self-reliance that comes with local manufacturing, I think we as a country, will lose impetuous in developing indigenous capabilities, or it will at least set back out true-self reliance by decades leaving us vulnerable to wishes and whims to out side powers.

BTW I didn't say local manufacturing is bad. I oppose local manufacturing by 100% owned subsidiaries of foreign OEMs. There are not gonna help us develop our own abilities or at least not willingly. Its not in their long-term interest. They will try to kill it. I have read that when Coca-cola bought Thumps-up, it order to kill competition, even after owning the brand they tried to kill it in favour of Coca-Cola, They wanted to eliminate it altogether. But apparently they figured Thumps up wielded a lot of public support and they could not have replaced with Coca-cola completely without loosing market share, so they started supporting it finally. Point is MNCs mentality is insidious. If local mfg is happening through 49% FDI I am happy. Just keep the reins in our hands.

abhijitm · Post by **abhijitm** » 06 Jun 2014 20:42

I was actually thinking of coca-cola parle incident

I didn't like it, GoI should have been more protective and thats why I said FDI where we don't have significant capability.

I am sure DRDO is not going to shut its researchs because now a foreign company in India supplying the product. Now thinking this sequence
1. we dont have capability so we are importing now
2. a foreign comp sets up a unit in India
3. down the line an indian company demonstrates its capability to produce same product
4. foreign company takes over or use any mean to suppress the company

This is a valid concern. Now in my point 4 the later part foreign elements can still do now but by bringing them here we will give them legal means to do that. Even though this is hypothetical and may not happen in near future, I still agree. And I want and expecct GoI to take proper precautions to protect our own interest. This can be prevented by putting strong regulatory measures (including fair practice) which I assume with FDI reform GoI will bring along. If not then we will have to fight. But jumping the gun right away, what purpose will it serve?

SaiK · Post by **SaiK** » 06 Jun 2014 20:57

100% FDI should be allowed only where we have the following objectives/drivers laid out/constraints identified:

- DRDO labs have raised their hands on both schedule and delivery of the product/solution
- DRDO labs agree that they need FDI support.
- Indian industry development plan has a clear cut objectives to delivery exactly what our forces wants
- There is a need for FDI because local technology is not adequate
- It makes sense for 100% FDI when compared against 100% import (or SDK).
- Indian industry has a clear and present need for the component, tool, product, support or setup
- There is a well laid out schedule with FDI, and maps to DRDO incapability.

Now, list down all the products/projects.

member_23694 · Post by **member_23694** » 06 Jun 2014 21:02

nileshjr wrote:We have fetish for foreign maal we will go for it

I think mostly the middle men have fetish for foreign maal. The rest of us are more interested in quality which can be used to defend the country no matter where it comes from.
PAF with such patriotism will be using JF-17 to counter Su-30 MKI. Looking from an objective pov, direct import or for that matter even some offset clause has not led to creation of any new manufacturing base for defence equipment in India. So lets try for major push for FDI in defence, with the possibility of global vendors creating new manufacturing base for local demand and outsourcing hub and then I would definitely like to see which foreign vendor would like to close there million/billion investment and walk out of such a promising market and outsourcing hub.

Regarding government meddling and so our DPSU and R&D suffered etc. Yes could be. But did I still don't understand why even the Nepalese army mentioned that Insas rifle were substandard and we have Indian army issuing RFP for rifles and here too license manufacturing in 2011.
FDI in defence does not mean you cut down in your defence R&D, but at the same time past record does not seem to suggest that no FDI have been useful either

kshirin · Post by **kshirin** » 06 Jun 2014 21:50

Karan M wrote:BTW FICCI was firmly opposed to the July 2010 proposal to raise the cap to 100% and only supported it to 49%. Please read it.

http://dipp.nic.in/English/Discuss_pape ... ust201.pdf

But recent FICCI and CII pronouncements have done a 180 degree. This is a great pity as the 2010 circular basically encapsulates the positions we need to safeguard while considering defence FDI. Indian industry reps. tell me the two organisations have been infiltrated by MNCs and their "collaborators" on East India Company lines.

http://www.niticentral.com/2014/06/02/f ... 29928.html
http://www.deccanherald.com/content/406 ... fence.html
http://defenceforumindia.com/forum/econ ... e-fdi.html

If these reports are correct one can only draw this conclusion. This would then be part of the concerted strategy to beat down Indian industry and monopolise the Indian market for Pharma, defence and other FDI companies and imports which i wrote about in my earlier post.

JayS · Post by **JayS** » 06 Jun 2014 22:26

kshirin wrote:
Karan M wrote:BTW FICCI was firmly opposed to the July 2010 proposal to raise the cap to 100% and only supported it to 49%. Please read it.

http://dipp.nic.in/English/Discuss_pape ... ust201.pdf
But recent FICCI and CII pronouncements have done a 180 degree. This is a great pity as the 2010 circular basically encapsulates the positions we need to safeguard while considering defence FDI. Indian industry reps. tell me the two organisations have been infiltrated by MNCs and their "collaborators" on East India Company lines.

http://www.niticentral.com/2014/06/02/f ... 29928.html
http://www.deccanherald.com/content/406 ... fence.html
http://defenceforumindia.com/forum/econ ... e-fdi.html

If these reports are correct one can only draw this conclusion. This would then be part of the concerted strategy to beat down Indian industry and monopolise the Indian market for Pharma, defence and other FDI companies and imports which i wrote about in my earlier post.

OK this is confusing. In below news item, its said that Indian industries are opposing 100% FDI through FICCI and ASSOCHAM.

http://freepressjournal.in/indian-firms ... n-defence/

Whereas in the video quoted above the FICCI seems to welcome the decision but says it has pros and cons. The other news item from Deccan Herald quoted above is related to FII investment issue and is not pertinent to this discussion per se.

But yes, now I am definitely confused as to what FICCI is actually thinking. Whether its against or whether its in favour of 100% FDI?? If its in favour, what made it to do the U-turn??

JayS · Post by **JayS** » 06 Jun 2014 23:12

dhiraj wrote:
nileshjr wrote:We have fetish for foreign maal we will go for it
I think mostly the middle men have fetish for foreign maal. The rest of us are more interested in quality which can be used to defend the country no matter where it comes from.
.
.
.

FDI in defence does not mean you cut down in your defence R&D, but at the same time past record does not seem to suggest that no FDI have been useful either

OK, let me put in another way. Do you think that the previous ToT clauses or the offset policies we had achieved what we could have possibly?? Or what other countries have with similar policies?? Could we exploit totally these existing policies??

If answer is YES, I don't have anything any more to argue with you.
If the answer is NO, what makes you think we can exploit the 100% FDI as much as its being promised?? Why wouldn't it be as useless or worse backfire on us??

What some here arguing is, the reason the ToT and offset policies, which BTW were used well by other countries, could not be exploited by us, because we didn't want to. Those were bypassed thanks to the corrupt system. So now what extra-ordinary thing has happened that 100% FDI policy is gonna be implemented as its theorized??

Just today there was this news of CBI inquiry about Airbus contract for 43 airliners.

http://www.thehindu.com/news/national/c ... 086211.ece

This is what CAG had to say about the contract:

In its Performance Audit Report on Civil Aviation in India (2011-12), the Comptroller and Auditor-General of India said: “The commitments made by Airbus regarding creation of MRO and training facilities were quite open-ended. Unlike the other clauses, there was no mention of a timeframe by which such facilities will be created … It was not clear who or what combination of promoters (Airbus and/or other entities) would together make up the required investment.”

Who in a sane mind will sign such a big contract with such lousy clauses?? I be more careful with my rent contracts for gods sake. Similar things must have had happened in past with ToT and offset clauses as well. Do we wonder how it happened? Such deeds from GoI does not help instil any kind of confidence in people's mind. How long we gonna go with this shit??

Until and unless there is an effective mechanism in place which would ensure that the policies would be strictly implemented solely based on our national interests, I am very Sorry, I have no confidence in the GoI in such matters. Giving them a policy like "100% FDI" is like giving a knife in a monkey's hand.

kshirin · Post by **kshirin** » 06 Jun 2014 23:19

nileshjr wrote:
OK this is confusing. In below news item, its said that Indian industries are opposing 100% FDI through FICCI and ASSOCHAM.

http://freepressjournal.in/indian-firms ... n-defence/

Whereas in the video quoted above the FICCI seems to welcome the decision but says it has pros and cons. The other news item from Deccan Herald quoted above is related to FII investment issue and is not pertinent to this discussion per se.

But yes, now I am definitely confused as to what FICCI is actually thinking. Whether its against or whether its in favour of 100% FDI?? If its in favour, what made it to do the U-turn??

Thanks for posting the link on Indian Industry up in arms...
Some Industry reps tell me many in Indian "industry" have been quietly bought over - over the past few years, infiltrated as Industry from the West eyes our economy (now expected to boom with good governance) for growth prospects even as theirs reels from the effects of 2008. The situation was particularly shameful in the telecom sector when interested parties colluded to disqualify Indian industry from bidding in a domestic 13000 crore project.
http://articles.economictimes.indiatime ... ssociation

http://economictimes.indiatimes.com/ind ... 562692.cms

I was not keen on this theory as I know a few people dedicated to R & D in Indian industry (private and public sector) but this 180 degree makes me apprehensive that it may be true.

Also look at this report, plugging uncritically the FDI 100% idea.

http://www.icrier.org/icrier_wadhwani/I ... i_vol2.pdf

I am disappointed because ICRIER released a much better report on the PMA (preferntial Market Access) arguing there was no need to dilute it to accommodate Western pressure against indigenous industry. Shyam Ponappa argued PMA is a misnomer, one doesn't get preferential market access to one's own market! That is one's right and GATT/WTO don't use PMA in the domestic context, only for access to foreign markets.

http://www.icrier.org/icrier_wadhwani/I ... port_1.pdf

Someone commented this is what happened to our indigenous telecom industry. Looks like we will not be allowed to raise our heads unless eyes are opened.

That's why we shouldn't look at the proposal for defence FDI in isolation. It is part of a well thought out strategy to make India's new beginning work to the benefit of foreigners, not Indians. Am reproducing my earlier post here:
• Why was the DIPP note leaked in the first place and by whom? This leaves the scent of blood and MNCs will not let go, sensing an opening.
• Why was the PMA (preferential market access policy which would have helped the indigenous electronics and telecom sectors ) diluted and further scuttled in the national spectrum project for the armed forces to make Indian companies ineligible? TEMA stalled it by filing a court case.This was done by our own people! (God help us). the entire manufacturing and its attendant skills/ R & D/ employment eco system would have shifted abroad.
• Why was brown-field investment in pharmaceuticals permitted? Please see the eye opening Parliament committee report which pointed out all the disadvantages of the policy being followed: http://164.100.47.5/newcommittee/report ... ce/110.pdf
• Why does nobody look at any anti competitive practices of FDI companies and MNCs in our economy including acquisitions?
• Why are we continuing unilaterally to give away airlines seats when our goal is to be an air traffic hub so that we can reap the attendant benefits of the huge market that will be created by Maintenance Repair and Overhaul facilities, as pointed out by Chairman HAL?
• Why are we allowing the RBI to permit free outflow of our capital when our rupee still remains below the 45 per dollar bandwidth before 2012?

JayS · Post by **JayS** » 07 Jun 2014 00:10

dhiraj wrote:
nileshjr wrote:We have fetish for foreign maal we will go for it
I think mostly the middle men have fetish for foreign maal. The rest of us are more interested in quality which can be used to defend the country no matter where it comes from.

BTW we should be very careful about where the stuff that defends us comes from. Otherwise the whole discussion here is a folly. Quality doesn't matter always in defence, what matters is how fast we can manufacture workable/good-enough equipments in required quantities in the event of war, without external help if possible. As they say "the best weapon is the one that turns out to be useful during the times of adversity".

kshirin · Post by **kshirin** » 07 Jun 2014 06:36

nash wrote:Apprehension regarding 100% FDI is very much similar to FDI in auto sector which happened about 2 decade back.

Then also peoples were worried about maruti, auto SMEs, etc.

But after 2 decade of FDI in Auto sector , India is among the top producer of auto parts, Maruti still no.1 producer in country, Hero's splendor, mahindra's scorpio, tata's nano,pixel,manza etc CAN be classified as world class product.

Apart from that Tata Motor, which was a non-existent entity in cars, now the owner of JLR.

Various auto giants are using or want to use India as hub for their auto export.

Similar thing has happened in field of telecommunication, infra sector and others.

Analogy may be irrelevant but if FDI in a particular sector done in proper way then not only job creation and mass manufacturing can be done but also in the mean time we can get our hands into niche technologies.

Auto components sector In India was flourishing in early 90s before opening upto FDI. It was India's fastest growing export and ahead of China in technology. Not true that FDI helped it grow. FDI came into a promising sector. Proves my point that FDI is attracted to ALREADY successful sectors, doesnt help create them. And domestic telecom equipment sector was given a body blow by FDI.

Anyway defence sector is different, other countries permit limited FDI only through offset route. You get better terms that way.

Cosmo_R · Post by **Cosmo_R** » 07 Jun 2014 06:38

Karan M wrote:
Cosmo_R wrote:I have a higher confidence in the ability in the genius and perspicacity of Indian entrepreneurs and this new Modi government than the average person. I stand guilty.
This is just handwaving of the highest order. Indian "genius" will save the day, the new Govt will wave a magic wand etc, as versus concrete policy and hard nosed execution.

I have heard this 'tangential' argument since 1974 when it was argued India did not need cars, phones or whatever because we first had to do something at the village level. "We are different you see..."
Pointless comparisons again. Nobody here is saying that India doesnt need cars, mobiles or whatever irrelevant comparisons you bring in.

What is being said is that if India IS buying weapons at huge costs, then the factory that builds those weapons should be owned by Indians so that the next generation of weapons is also Indian or at least part Indian, and the entire weapons industry in India does not become an import sink.

I also note you deliberately side stepped the security loopholes in your policy prescriptions & how they'd expose India to the strategic activities of other establishments.

Clearly, you are ok with that - I am not. I have no faith in other nations security establishments deciding what is good for my national aims and what is not.

It matter little what "kind of economy" we are in anyone's opinion. Fact is we have to make a huge leap and it won't be done by people who don't have money at risk"
Actually, this is our money at risk, Indian money, paid by Indian taxpayers, which is being used to buy arms at prodigious quantities. We wish for this money to be utilized for India's interests. And there are many firms already willing to enter into agreements to access that money at even 26% FDI.

Again, this huge leap business is just rhetoric.

It doesn't take much of a leap to go from a L&T making nuclear submarine hulls to a L&T making small arms.

It takes good policy. Not "faith in Indian genius, perspicacity" or whatever.

We are talking about FDI. If SoKo wants to (and I know they want to) invest 100% in a shipyard to build XYZ that would build civilian and military vessels at their own risk why would I stop them?

We are getting delivery of

http://www.newindianexpress.com/states/ ... 264258.ece

They were built in Abu Dhabi. 100% non FDI
And why should I not point out to SoKo that I will purchase from them if they manufacture those ships in an Indian owned yard and SoKo is perfectly free to invest in it upto 49%. If the deal is big enough, SoKo can come in.

Next, I see you completely sidestep the issue that why would SoKo do any investment in a partnership in India, when it can set up a completely self owned subsidiary and prevent any future competition from developing via passing technologies to a partner.

The exact point a pvt executive noted about the SoKo - L&T deal.

It can be argued that everything is tangential when one is in denial.
Yes, I see denial a lot actually, especially if I were to analyze your soft corner for anything and everything western as versus India's traditional weapons procurement partners and how you loftily dismiss all concerns to the contrary, so lets not go down there, shall we?

Fact remains, that your faith in "Indian perspicacity" is not a policy prescription given that similar lofty sounding rhetoric was used all the time from RG's time to excuse the worst decisions.

It's very intellectual and wordy. Point is that it fails to answer some fundamental issues:

1. Who gets to decide on what constitutes valuable FDI: you or some babu or a successful foreign company that wants to invest in India in the defense sector without preconditions?

2, What exactly is the hangup on 100% FDI in defense when we gleefully import 100% foreign materiel for defense.

3. What's the magic of 49%? Think about it. What does 49 vs. 51 or 100% achieve for us?

Rajiv Gandhi, et al what's the relevance? You are dismissive of both Indian talent and foreign business acumen and long term thinking. Do you really have that kind of standing?

I've heard of similar arguments for 40 years from GoI reps that led to India falling behind SoKo, and PRC.

Essentially, it boils down to saying "we are different".

No we are not

If foreign companies want to invest in India without preconditions, we should not be dictating what they invest in and how much.

Too much 'policy', 'data', 'analysis'. It's like saying "We know it works in practice everywhere else but will it work in theory here?"

Manish_Sharma · Post by **Manish_Sharma** » 07 Jun 2014 06:39

1.) Has there been any country which allowed 100% FDI in defence? I don't recall where, but i read at least 7-8 years back that walther has outsourced gun factories to porki land. But can't find it through google anywhere.

2.) For a new tech gun like this:

what is the best option?
a.) Allowing the company to 100% FDI, that they set up a factory but with a condition that the factory should manufacture the gun from 'raw material' to 'finished stage' all in Bharatvarsh?

b.) Mahindra OR TATA OR L&T etc. tie up with company giving them 26% and produce the gun here from 'raw material' to 'finished stage' in desh? Sell it to Armed forces and export.

c.) Mahindra OR TATA OR L&T etc. purchase the manufacturing rights and technology from company and manufacture the gun from 'raw material' to 'finished stage' in desh? But without making the company a partner and only paying the fee.

d.) DRDO takes a look at the gun and then proceeds to develop similar gun for our armed forces inhouse, once developed and trials cleared, one of the desi private company buys the rights and produces the gun in desh?

Yagnasri · Post by **Yagnasri** » 07 Jun 2014 07:55

Option D any day.

manjgu · Post by **manjgu** » 07 Jun 2014 08:20

'DRDO takes a look ' ,,, is a very difficult thing. We can take a look at Rafale but can we build it??. I think the correct way forward will be a mix of strategies. One shoe fits all wont work.... a mix of local R&D ( in the long term the only answer), promote local def companies, colloborate with overseas cos and scale up with a little dated technologies if the not the latest latest....

Pratyush · Post by **Pratyush** » 07 Jun 2014 08:37

Why not have take a holistic look at what is required by all services in the country. divide that into lo tech & hi tech. Strategic & non strategic. The low tech items & not strategic are to be thrown open to domestic industry only. No FDI no imports. Only made in India.

Now, when it comes to strategic and high tech, The DRDO in consultations with services can come up a road map of techs to be required in the next 20 to 30 years. Work with domestic industry for capacity building and do it in India only.

In the mean time on a case to case basis JV and TOT can be used fro such items.

abhijitm · Post by **abhijitm** » 07 Jun 2014 08:41

Narayana Rao wrote:Option D any day.

If it needed now or quickly then option a and d should go together.

researching tech and setting up supply chain and production line are two different ball games. You may research in a year but to take the second thing up and running producing first operation approved product might take many years. We have discussed this many times for LCA and its production line.

Mobile manufacturing has no secretes. Yet Indian phone makers are struggling to manufacture one mobile in India. Micromax has just started a plant in Uttarakhand but I doubt it is yet producing mobiles. Whereas the chinese have master the art of manufacturing. Why? How did they learn?

Manish_Sharma · Post by **Manish_Sharma** » 07 Jun 2014 09:19

abhijitm wrote: researching tech and setting up supply chain and production line are two different ball games. You may research in a year but to take the second thing up and running producing first operation approved product might take many years. We have discussed this many times for LCA and its production line.

Mobile manufacturing has no secretes. Yet Indian phone makers are struggling to manufacture one mobile in India. Micromax has just started a plant in Uttarakhand but I doubt it is yet producing mobiles. Whereas the chinese have master the art of manufacturing. Why? How did they learn?

Is 100% FDI the route to "master the art of manufacturing" as you put it? Is that how america-france-england-germany-russia OR even china learned the "art of manufacturing"?

For sure there will be hiccups in manufacturing like 'LCA' but with time and sweat spent it will be learned and make nation more viksit.

I remember Dr. Shiv had put a news last year that how eurofighter typhoon's robot manufacturing was having a problem at the time of full moon as the factory was near to ocean. land position would change few milimeters and robots missed the target by the same amount of milimeters. So brits had to put up the entire factory on a platform which prevented the movement on full moon times.

I remember Shiv ji's remarks that time "brits made a mistake and then corrected it and pat themselves on the back, if the same case had happened with DRDO everybody would curse that sdre's are too incompetent to see such a thing beforehand"

Learning the whole thing with mistakes makes one mature rather than other's solving that for you or giving you readymade solutions.