100% FDI in Defence: Understanding Pros and Cons

Cosmo_R · Post by **Cosmo_R** » 20 Jun 2014 04:35

matrimc wrote:Cosmo_R: As far as I know, Indian company law doesn't allow for different kinds of common stock. Preferred stock is possible but then they would not have any voting rights though they get dividends in proportion. My knowledge is all very hazy at this point - studied some of this stuff while sleeping in the class a couple+ decades back and did not do well in the classes either.

AJ is defense minister, finance minister and handles corporate affairs. There's a bit of coincidence no?

Rahul Mehta · Post by **Rahul Mehta** » 20 Jun 2014 07:51

The impact of 100% FDI on coming Indo-US war will be a total disaster. When NATO-army comes to shock and awe and liberate India, non of these FDI weapons from US, French, UK or even Japanese companies will work. It will be a slaughter.

Now of course, there are people who claim that USA will never ever never never try to liberate India, and then they move to democracy-democracy brother-brother love fest. As if pappi-jhappi between US president and Indian PM can avert the war. Well, for all I know, these people also said in 1980s that USA will never liberate Iraq and that USA will never liberate Libya. But we saw liberation of both countries. Iran is nex, and then comes India.

Finally, it is matter of personal opinion. There are hose who claim that USA will never liberate India, and those like myself, who believe that USA = NATO will come to liberate India to take over mines, harvest souls etc etc. Those who fear Indo-US war should oppose even 1% FDI in defence, and instead focus on law-drafts to improve local weapon making efficiencies. And those who believe in Indo-US friendship should bat for FDI.

There isnt much to add on this FDI debate.

=====

On 30-may-2014, VK Singh opposed FDI and insisted on improve local weapon manufacturing. And so NaMo/AJ inwarded an anti-VKS affidavit in Supreme Court. So IMO, NaMo/AJ are hardcore pro-100%-FDI in defence, and want to muzzle down anyone who speaks against it.

vic · Post by **vic** » 20 Jun 2014 16:11

NRao wrote:Related to that topic:

Feb 24, 2014 :: Tata Leads Development of Indian Infantry Combat Vehicle

India’s Tata Motors, along with Lockheed Martin and General Dynamics, have developed an infantry combat vehicle that could compete for India’s Future Infantry Combat Vehicle (FICV) if the program is relaunched.

A Tata Motors executive said the Wheeled Armoured Platform (WHAP), based on a vehicle developed by state-owned Defence Research and Development Organisation (DRDO), fits Army requirements.

Under the FICV program, which has been on the shelf for more than three years, 2,600 combat vehicles would replace about 1,400 Russian BMP vehicles at a cost of more than $10 billion. The project would be in the Make India category, meaning only domestic companies can serve as prime contractor.

While FICV has been on hold, the Army still wants to buy some kind of combat vehicle.

For WHAP, Lockheed and GD serve as technology partners. DRDO developed the basic frame of the vehicle, officials said, while Tata built the transmission, gear box and integrated other systems.

Under FICV, the plan was for the shortlisted company or consortium to develop its own prototype while the government funded about 80 percent of the cost. Thereafter, production would be done in India by the winner.

India last year rejected a Russian proposal to provide its advanced BMP-3 infantry combat vehicle along with technology transfer. Russia’s offer was conditional on India putting aside the indigenous FICV project to replace the BMP-1 and BMP-2 vehicles.

The WHAP prototype is integrated with a Raytheon-Lockheed Javelin anti-tank guided missile system, fitted with a 12.7mm machine gun made by General Dynamics and is also mounted with a Norwegian-built Kongsberg medium-caliber remote turret.

The US has already offered technology transfer on the Javelin and the proposal is still under consideration by the Defence Ministry, according to an MoD source.

The Tata Motors vehicle weighs 22.5 tons and is powered by a 600 horsepower engine. Both wheeled and tracked forms of the amphibious vehicle are being developed.

An Army official said the WHAP is close to the FICV’s specifications of weighing 20 tons and having a 25:1 ratio of horsepower per ton. WHAP also is amphibious, as required under FICV.

The FICV project was approved in 2009, and since then, India’s Mahindra Defence Systems has tied up with BAE and Larsen & Toubro is working on overseas partnerships. Tata Motors had initially joined Rheinmetall but had to abandon the partnership after the company was blacklisted on charges of alleged corruption. State-owned Ordnance Factories Board is also in the race

Screw Driver Technology is not the way to go even if it is by TATAs. Though it is not clear who is manufacturing the engine, suspension, sights, sensors etc

GopiD · Post by **GopiD** » 20 Jun 2014 17:06

http://idrw.org/?p=38986

100% FDI IN DEFENCE INDUSTRIES: "NATIONALISTS" DITCH SELF-RELIANCE?
A good analysis on 100% FDI in Defence.

JayS · Post by **JayS** » 21 Jun 2014 14:54

Good news:

http://ajaishukla.blogspot.in/2014/06/i ... o-cap.html

By Ajai Shukla
Business Standard, 21st June 14

At a meeting scheduled in New Delhi on Saturday between senior MoD brass and defence industry bodies, the Confederation of Indian Industry (CII) is set to align with the Federation of Indian Chambers of Commerce and Industry (Ficci) in restricting foreign direct investment (FDI) in defence to 49 per cent.

With the two biggest industry bodies on common ground, the ministry of defence (MoD) --- which has always held that defence industry must be protected ---would then ensure that a ministry of commerce and industry (MoCI) proposal to allow as much as 100 per cent FDI in defence would be restricted to 49 per cent.

Business Standard has learned that L&T, an emerging defence powerhouse that played a large role in shaping Ficci’s 49 per cent position, objected to CII’s stance as an influential founder member of that industry body. Another influential CII member, Bharat Forge, which is also making a major play in defence, joined L&T in pressuring CII to recommend a 49 per cent cap.

This disagreement echoes a similar confrontation in 2010 over a discussion paper floated by the Department of Industrial Policy & Promotion (DIPP), proposing liberalisation of defence FDI. After CII supported greater FDI, Baba Kalyani of Bharat Forge, who then headed CII’s defence committee, stepped down, protesting that CII had not discussed the matter in the defence committee. Today, the CII president has again supported FDI liberalisation without first discussing it in the defence committee.

Business Standard learns that CII is likely to discuss the issue internally and then issue a revised press release on June 24, recommending a 49 per cent cap on FDI in defence. Like Ficci, CII could propose that foreign companies be allowed majority stakes, even full ownership, only if they fulfil stringent conditions such as transferring cutting-edge technology, retaining Indian control and employment, and keeping Intellectual Property Rights in India.

Even as ardent opposer to 100% FDI in Defence totally, I wouldn’t mind, if GoI make sure we have a US-like model for 100% owned subsidiary of foreign OEM in India with:
-- all operating hands Indians
-- full ToT for cutting edge technology (even source code of s/w)
-- not only know-how but sharing know-why as well (e.g. Opening RnD centers in India)
-- 100% manufacturing in India itself (no off-the-shelf import from outside for any component whatsoever)
-- surety of supply under any conflict situation (failing to which would empower GoI of takeover of the entity)
-- Giving export share for local suppliers

With that, I wouldn't mind them taking few more million/billion $$ home. But this should be supplemented by indigenous efforts of replacing the same technology with our own products.

This is quite wishful though as we don't have that much negotiation power. But we might get some non-critical tech atleast even under such stringent conditions as foreign OEMs are really desperate for new markets. We could try.

brar_w · Post by **brar_w** » 21 Jun 2014 15:01

As Nileshjr mentions the US has apparently worked up a workable model for foreign defense companies to come in and invest 100% into forming subsidiaries in the US. Bae systems comes to mind, and they have some of the most sensitive technology contracts in the air force and the navy.

tsarkar · Post by **tsarkar** » 22 Jun 2014 10:41

There is a mistaken notion going around of using 100% FDI in defence or offsets in a defence deal to leverage transfer of technology.

Firstly, ToT is a highly context specific & subjective. The British gave Gnat ToT because it was not inducting it. The Former Soviet Union gave away a MiG21 line to increase its political influence.

Israel sold Lavi design to China based on 1. It needed money 2. China's geo & political distance from ME geopolitics 3. By the time China operationalizes J10 & fulfills its own requirements and is ready for export, Israel will have superior fighters (F35A).

Similarly, Russians cooperated on Arihant, BrahMos et al because 1. It needed money & 2. these were not cutting edge for Russians.

Classic case is PAK-FA / FGFA. When Russia required development funds, it was keen to offer joint development. Today Russia is flush with oil money, so its offers to India for the same project has diminished significantly.

What India needs is a Defence Industry.

Today we don't have one. The State Owned production organizations at the shop floor level are highly unionized with minimal skilling & lacking continuous personnel development. Consequently, people migrate to civilian job opportunities.

The private sector is still nascent, and investments are chicken & egg situation.

Newer global players will lead to 1. More job opportunities, ensuring a larger pool of shop floor personnel. 2. A larger & healthier ecosystem within which personnel can move around. 3. Better skilling of personnel as they switch jobs 4. Good shop floor practices.

Today, rather than ToT, lack availability of people due to lack of individual growth in PSU's & Private Defence Industries and lack of available skills and continuous skilling is the major lacunae.

INSAS manufacturing issues to Su-30 crashing after overhaul at HAL are symptoms of that. India imports basic bombs & rockets with local production bombs crashing a Sukhoi & a Jaguar in recent years.

100% FDI should be allowed just to grow the industry, create a larger pool of skilled personnel, allow people to grow by creating new job opportunities and people will self learn for those new job opportunities.

Ofcourse, regulations need to be effective to ensure manufacturing is actually done here with locally sourced components rather than a front office selling white labeled products.

ToT will always remain a subjective issue.

brar_w · Post by **brar_w** » 22 Jun 2014 14:40

What is required in addition to the vibrant private defence industry is their ability to on their own form strategic partnerships, make strategic acquisition of defence companies outside of India and to bring home technology from outside that is offered for Indianized products. They need to have the freedom and backing to do this. No need to spend a decade hammering out TOT and workshare deals on co-design, co-production and transfer. Let the companies work that out by themselves.

deejay · Post by **deejay** » 22 Jun 2014 15:38

What is required in addition to the vibrant private defence industry is their ability to on their own form strategic partnerships, make strategic acquisition of defence companies outside of India and to bring home technology from outside that is offered for Indianized products.

Infact a lot of activity by private players have started in this regard. The Kalyani grop buying Austrian Noricum (military), Tata's in JV with Sikorsky, Mahindra tying up with Spanish Aerospace firm and buying an Austrailian firm, Godrej entering the fray are some examples of Indian private sector developing critical infrastructure in key areas in either direct military know-how or know-how where military applications will be a spin off.

Beside these I have received job offers from firms in Bangalore and Pune for Simulators and Software applications. I know of a few more working their way up the value chain. Lots of activity and excitement in the private space though mostly at the initial stages. More will happen and FDI will help.

NRao · Post by **NRao** » 22 Jun 2014 17:58

X-Posting:

India can export fighter planes, missiles: DRDO chief

member_23694 · Post by **member_23694** » 22 Jun 2014 18:12

X-Posting:

India can export fighter planes, missiles: DRDO chief

I am fine with the word missile in the headline. But fighters

Really.
Come on , honestly such kind of attention grabbing statements is the root cause of all the confusion. May be the statement will be true for 2020 but for now based on the info in public domain , how come ?

abhik · Post by **abhik** » 22 Jun 2014 18:34

^^^
Why not, How much more mature was the JF-17 than the LCA is today before the Packis started hawking them? Of course no one is going to buy weapons from a country that itself does not buy them.

NRao · Post by **NRao** » 22 Jun 2014 18:38

^^^^^

*Need to upgrade*.

compare with Western air crafts. That will help.

(Aside: nothing to do with exporting the LCA.)

member_23694 · Post by **member_23694** » 22 Jun 2014 18:40

Why not, How much more mature was the JF-17 than the LCA is today before the Packis started hawking them? Of course no one is going to buy weapons from a country that itself does not buy them.

So India needs to benchmark against whom ?

VKumar · Post by **VKumar** » 22 Jun 2014 21:52

The factories are to be located in India. The very large majority of the employees will be Indians. In case of war, the factory and all its assets can be taken over if it is not supporting India. As regards the software in the machines and war equipment, we have to be alert that no Trojans are built in, and some solution to this has to be found and demonstrated to the satisfaction of the defense forces.

If the above is possible then 100% FDI in defense is possible.

The large private companies are opposing this perhaps because they want access to highest level of manufacturing technologies, so they can use the same in their other ventures to compete globally. Will any foreign player agree to bring in really top notch technology without being sure it will not be copied?

NRao · Post by **NRao** » 22 Jun 2014 22:11

As an example ..........................

Alstom board votes to accept General Electric bid

The board of French rail and energy group Alstom has unanimously voted to accept an offer from General Electric.

US conglomerate GE is bidding $17bn (£10bn) for Alstom's energy business. The deal still needs regulators' and Alstom staff representatives' approval.

The French government agreed to support the deal, which will involve the state buying a 20% stake in Alstom, and other steps to protect French interests.

A rival offer from Siemens-Mitsubishi Heavy Industries was rejected.

GE chief Jeff Immelt said the deal would be "good for France, GE and Alstom".

If approved, the deal is expected to be completed in 2015. Reports say it would be GE's largest ever industrial acquisition.
Assurances given

Under the deal, GE will sell its railway signal business to Alstom, and set up three joint ventures with the French company.

The joint ventures would cover Alstom's power grid business, renewable operations, and nuclear steam turbines.

Alstom employs about 18,000 people in France. The government had asked for assurances that French energy and transport interests and jobs would be safeguarded.

It plans to acquire a controlling stake in Alstom by buying shares from French group and main shareholder Bouygues.

However, the government wants to pay market price (28 euros per share) while Bouygues is demanding about 35 euros per share.

abhishek_sharma · Post by **abhishek_sharma** » 24 Jun 2014 06:14

Putting up a better defence: Vinay Shankar

Even as it considers FDI in the sector, the government should give our private firms a level playing field.

The writer, a retired lieutenant general, is former director general, Artillery, in which capacity he oversaw artillery operations during the Kargil War.

NRao · Post by **NRao** » 25 Jun 2014 22:29

Antony Criticises Modi Govt over FDI Move in Defence

deejay · Post by **deejay** » 26 Jun 2014 13:00

I am severely hampered in expertise, experience and knowledge here but this is an attempt to organise this raging debate across threads and other places. This is just an opinion and an attempt to organise thought. The real gurus of Procurement will of course tear it down and will come up with something much better.

In a lot of threads here the major debate has shifted to Import vs. Swadeshi. So intense is the debate that participants (including me) have felt the need to push their respective POV's at the cost of civilised interaction and arguments which stand on wafer thin grounds.

I am sure this debate is raging in MOD, Services, DRDO, HAL and other Def PSU's plus the privates sector. Today, more than ever we can manufacture domestically many of our defence requirements or we will be able to make in a few years time. Our engineers and scientists have tamed the nuclear power into a submarine and their achievements are worth lauding.

At the same time the 'Services' are on a major 'modernization' drive which I would like to call an 'upgrade drive'. This has resulted in a heap of very expensive imported weapons. Many have broad commonality with Indian systems already developed or under development. Most such weapons or platforms will be ready in the next 10 years time frame, some even this year.

Justifiably then, the debate for the need of expensive imports to swadesi weapons vis a vis the 'Op Preparedness' of the Services. We will agree that the need for the platform will be derivative of its utility in the 'Op Preparedness'. This is where we lack objectivity and start questioning the core competence, either of Services in understanding their reasons for 'wishing' an equipment or understanding the local industries ability to manufacture these as per the exact Services specifications in the given time frame.

IMO, both approaches are a result of an unclear policy and work sharing arrangement. I say this as there is no defined ground on which we discuss 'Op preparedness'. We also do not have policies or vision documents from Government on how and when would the Services be required to act and in which possible theater. Until a few years ago, readiness on the western front, CT/COIN ops were enough. Occasional, off shore deployment like IPKF did not require many changes. Today, we think differently. Our neighbour in the east has probably given all its neighbours a wake up call. We have countered diplomatically but occasionally in a military way like base in Tajikistan, port building in Iran, arms to Afghanistan, Vietnam, etc. We also train some foreign armed forces personal. We have faced situations where we are required to protect interest of Indian companies like ONGC Videsh, far from the Indian shores. Suddenly, Lakshwadeep and Andaman & Nicobar will need to be protected. The IOR is our backyard, can we cover our back yard. This view has been further strengthened by the call for our role by the nations in this region, namely, Vietnam, Maldives, etc. We have increased our participation in the UN peace keeping missions because we eye a permanent chair in the UNSC. And we are a Nuclear Weapons nation now.

With the above in mind what should be our 'Op Preparedness'? I do not know. Maybe the IDSA or the General Staff will answer that. However, irrespective of view the GOI will have to lay down the policy on vision and usage of Armed Forces in synchronization with the National Political Objectives of the present day and the future. This policy may be as simple to state as the Nuclear Policy - 'No First Use' based on which we have developed the 'Secondary Strike Capability". Based on this policy a direction may be achieved for doing the following:
- Role Definition of individual services in various situations therefore lesser turf wars (CDS wll also be needed)
- Objectives to be achieved in such situations and hence the 'Op Preparedness' required
- This helps identify which equipment or platform to have. Presently, we see some one else doing something and we react or so it appears. (China has stealth, we should have stealth!)
- The policy of domestic ownership of IPR for all weapons or platforms of use within the first decade or any particular time frame.
- Role of Services vis a vis R & D in defence fields
- Role of Services vis a vis Manufacturing of Swadesi equipments
- Role of Defence R & D establishments and Services in future weapon developments
- A policy of Weapon or Defence Equipment purchase which gives a 'First Right of Refusal' to wholly Swadesi firms on each platforms based on Specs (range of specs and not fixed), timeline and quantity fulfillment. Only when the Swadesi option is not available on Specs , timeline and quantity should we explore foreign. We may study the policies of other nations mil-ind-services and adopt from there if required.
-Legislative support wherever needed.
- 100% FDI in defence allows foreign firms to easily achieve offsets in India, hence all imports to be on strict Offset and TOT clauses based on the need.

(Gurus this may be laughable, but the sparring on many threads compels me to try)

dinesh_kimar · Post by **dinesh_kimar** » 26 Jun 2014 13:09

Chaiwalla info that Jet Engine starter made by HAL uses parts from Unkil, who periodically produces " end -user" documents and knows the mission profile and deployment of platforms. Maybe critical items no alternate source .....

SanjayC · Post by **SanjayC** » 26 Jun 2014 13:13

abhishek_sharma wrote:Putting up a better defence: Vinay Shankar

Even as it considers FDI in the sector, the government should give our private firms a level playing field.

The writer, a retired lieutenant general, is former director general, Artillery, in which capacity he oversaw artillery operations during the Kargil War.

The argument makes sense. It is absurd to fully open the defence sector to foreign firms but not to Indian firms.

NRao · Post by **NRao** » 26 Jun 2014 19:39

51 pc FDI in defence will be a game changer for India'

Raising foreign direct investment cap to at least 51 per cent in the defence sector will help India become a major manufacturing and export hub, reducing dependency on imported equipment.

"India can be a game-changer only by allowing at least 51 per cent FDI in the sector. With access to critical technology, the domestic companies will be able to manufacture products indigenously and make India a global defence manufacturing and export hub," said a government source.

India imports defence equipment worth over USD 8 billion annually. It is one of the largest defence importers in the world with only a minuscule component of exports.

Allaying concerns of few domestic industries, the sources said that the proposal mooted in the draft note has enough safeguards to protect this sensitive sector.

"Giving controlling stake to a foreign player will be an incentive for them to bring modern technologies in India. Besides making India as their manufacturing centre, they will also export from here. It would lead to creation of jobs," said a source.

While the government is holding inter-ministerial consultations, intense lobbying is being witnessed within the major industry chambers, the sources said.

A section of the domestic industry, with less than 1 per cent share in the sector, holds a view that the FDI should be restricted to 49 per cent, while another view is that without a majority stake why would the global investor invest in India, they added.

They said that caping FDI to 49 per cent is not going to help. It would be a status-quo type situation.

"India should not lose this chance. To become self-reliant in defence sector, 51 per cent FDI must be allowed. Between 2001 and August 2013, 49 per cent foreign investment (26 per cent FDI + 23 per cent FII) was allowed. During this time, India has attracted only USD 5 million investments, which is lowest in any sector," the source said.

Between 2001 and 2013, India has received about USD 320 billion in foreign investment. The figures clearly reflect that India has not received any investment when the cap was 49 per cent.

The sources also argued that due to sagging economies in the West, multi-national companies want to expand their manufacturing base in Asia and India can become a major centre for that.

"Now the country cannot afford to miss the bus. Fixing foreign investment cap to 49 per cent will not help in getting modern technologies. Figures are clearly reflecting that 49 per cent foreign investment has not changed anything. It will be a game spoiler," they added.

The Department of Industrial Policy and Promotion has circulated a draft Cabinet note to relax foreign investment policy in defence sector.

They have proposed up to 100 per cent FDI in case of state-of-the-art technology and 74 per cent (FDI + FII) in case of technology transfer.

The sources further said that defence PSUs too are not able to meet India’s requirement.

"Currently, over 70 per cent of India’s defence requirement is done though imports. The government can reverse this trend by permitting 51 per cent FDI in the sector, they added.

Several Indian companies including Mahindra and Mahindra, Tata and Ashok Leyland have interest in the sector. Further liberalisation of the FDI policy would help them in joining hands with foreign firms to produce equipment.

India is expected to spend over USD 250 billion in the next 6-7 years in procurement of defence equipment for homeland security. Indian private and public sector firms would not be able to provide equipment so the country will end up importing all the requirement.

"Countries like China and Mexico have emerged as a major hub for defence manufacturing, why can’t India move the step towards that direction.

India can become a very important place for foreign firms to set up manufacturing units here. They can also export to whole of Asia from here," said a source.

In the discussion paper, the DIPP has said that the bulk of the domestic production is met either through the Ordnance Factories or the Defence PSUs.

Even when defence products are manufactured domestically, there is a large component of imported sub-systems.

Ankit Desai · Post by **Ankit Desai** » 26 Jun 2014 19:45

Divided CII opts for defence FDI cap of 49 per cent

The controversy has been boiling within CII since a meeting on Saturday between senior ministry of defence (MoD) officials and industry bodies, where Gandhi had recommended on behalf of CII that 51 per cent FDI should be allowed through the automatic route, with higher FDI permissible in cases where high-technology was being brought into India.

This led to defence majors like L&T and Bharat Forge expressing their ire to CII president, Ajay Shriram. Today, the CII defence committee overruled Gandhi, recommending that no more than 49 per cent FDI should be allowed through the automatic route, with higher FDI permissible “only on a case-by-case basis.”

-Ankit

soumik · Post by **soumik** » 26 Jun 2014 19:58

my 0.02
I believe that 51% of FDI or even 100% can be allowed but with a rider stating that if ever the parent nation to which the company belongs imposes sanctions or otherwise forbids the trading of defence goods with India, all property intellectual and material of that company in india at that moment becomes forfeit, this alongwith a second rider stating that at all times 70% of the management and staff at all levels must be Indian citizens and that copies of all designs and material being utilized would have to be submitted to DRDO(this should let us create a bank of easily reverse engineerable items)these three things should let us continue to operate the plants should at some point in the future relations with the parent countries falter.

NRao · Post by **NRao** » 26 Jun 2014 20:27

Dynamics, for you:

GE's Alstom Deal Shattered France's Dream

All part of *the* game.

Private industry, governmentS, worker's unions, national interests, regional interests .................. what have you................ FDI.

SanjayC · Post by **SanjayC** » 26 Jun 2014 22:16

Don't know how far it is true.

Tajinder Pal S Bagga @tajinderbagga · 49m
Indian companies now don't need license for manufacturing of more than 100 defense equipments- Narendra Modi decision

putnanja · Post by **putnanja** » 26 Jun 2014 22:35

SanjayC wrote:Don't know how far it is true.

Tajinder Pal S Bagga @tajinderbagga · 49m
Indian companies now don't need license for manufacturing of more than 100 defense equipments- Narendra Modi decision

Govt liberalises defence manufacturing; delicenses products

...
In a major liberalisation, the government on Thursday allowed manufacturing of several hundreds of equipment and products in the defence sector without licence.

Manufacture of products such as sub-assemble items, components, castings, night-visions and surveillance would not require an industrial licence. Simplifying the licensing process, a Commerce and Industry Ministry order listed four categories of products that would require prior permission and freed the rest from any licence condition.
...
...
Industrial licences would now be required only to make items such as tanks and other armoured fighting vehicles; defence aircraft, spacecraft and parts; warships of all kinds; and arms and ammunition and allied items of defence equipment, parts and accessories.
...
...
According to a top government official, this is a major breakthrough which would enhance defence manufacturing in the country. "From the earlier list, now we have removed over 50 per cent of items which would not require industrial licence to manufacture. The previous list was a total of 6 pages, out of which 4 pages have been removed. A foreign company too can come and set up units to manufacture those items without prior approval," the official said.
...
...
Those companies, which are making equipment, castings and other smaller items and are not fully integrated as weapon system, have been left out of this list, defence sources said.

"Items not included in the list would not require industrial licence for defence purpose. Further, it is clarified that dual-use items, having military as well as civilian applications, other than those specially mentioned in the list, would also not require industrial licence for defence angle," the commerce and industry ministry said.
...
...

Defence items, which need industrial licences include tanks, military armoured vehicles, deep water fording vehicles, unmanned aerial vehicles, vessels of war, anti-submarine, all rifles, howitzers, torpedoes, electronic equipment used for electronic counter measure and concealment and deception equipment specially designed for military application
...

JayS · Post by **JayS** » 27 Jun 2014 01:24

putnanja wrote: Govt liberalises defence manufacturing; delicenses products

Good step. Some red-taping will be reduced now. Here is the list of items which only would need license from now on.

http://pib.nic.in/archieve/others/2014/ ... 062601.pdf

member_23694 · Post by **member_23694** » 29 Jun 2014 11:26

http://timesofindia.indiatimes.com/indi ... 444360.cms

Eye on defence deals, western powers rush to court Modi

"They get a sense from their dealings that something dramatic is going to happen and they want first-mover advantage," said Pant, who specialises in Indian defence.

one source at the Indian defence ministry said the deal was likely to be finally closed during Fabius' visit and could be signed this year.

"For higher-tech intellectual property we would want to go over 50 percent to be in a position to share technology that we have significant investments in," said Phil Shaw, chief executive of Lockheed Martin India Pvt Ltd.

"An uplift from 26 to 49 percent maintains the status quo and may not be sufficient incentive to make an investment here."

AK Antony, who was India's longest serving defence minister until his Congress party's election defeat in May, said this week that allowing higher foreign investment in defence would be "suicidal".

JE Menon · Post by **JE Menon** » 29 Jun 2014 14:36

Don't worry be happy. Good days are coming. In another 60 odd days the landscape and mindscape will change even further....

NRao · Post by **NRao** » 29 Jun 2014 17:21

dhiraj wrote:
Eye on defence deals, western powers rush to court Modi

For what it is worth, of relevance:

India's Department of Industrial Policy and Promotion has circulated a discussion document that proposes allowing up to 100 percent foreign direct investment, or FDI, in defence production, two government officials told Reuters.

The note suggested allowing 100 percent FDI in manufacturing of state-of-the art equipment, one of the officials said. It also recommends a cap of 49 percent for investments which do not involve transfer technology and a 74 per cent ceiling in such cases where the foreign investor is ready to share technology know-how, the official added.

Last week, Commerce and Industry Minister Nirmala Sitharaman said foreign investment in the sector would help increase defence preparedness of the country and reduce import dependence, saving billions of dollars in foreign exchange.

However, she said the government was yet to take a final call on increasing the FDI ceiling and the decision would be taken by Jaitley and Modi. The proposals face pockets of resistance in Indian industry, Modi's party and the military establishment.

(BTW, Anthony also said that Mother + Son will revive his party.)

Cosmo_R · Post by **Cosmo_R** » 29 Jun 2014 18:22

dinesh_kumar wrote:Chaiwalla info that Jet Engine starter made by HAL uses parts from Unkil, who periodically produces " end -user" documents and knows the mission profile and deployment of platforms. Maybe critical items no alternate source .....

The GE 404/414 and Honeywell F125 also have EUMA

Karan M · Post by **Karan M** » 29 Jun 2014 19:25

Makes it even more worrisome then as to why these were selected.

NRao · Post by **NRao** » 30 Jun 2014 05:05

Industry chambers flip-flop on 100% FDI in defence sector

Churning. All entities are trying to find their comfort levels. Very interesting process.

kmkraoind · Post by **kmkraoind** » 30 Jun 2014 10:26

How to transform the country from world's largest defence equipment importer to major exporter - AM Naik of L&T

vishvak · Post by **vishvak** » 30 Jun 2014 10:28

Cosmo_R wrote:
dinesh_kumar wrote:Chaiwalla info that Jet Engine starter made by HAL uses parts from Unkil, who periodically produces " end -user" documents and knows the mission profile and deployment of platforms. Maybe critical items no alternate source .....
The GE 404/414 and Honeywell F125 also have EUMA

Does this apply also to their terrorist little mujahid allies in war on terror ie our terrorist neighbors paki? Pakis seems to have not sent their F16s when towns in Iraq were overrun in north by purer ISIL. More specific is USA interference even when their weapons aren't bought for example MMRCA deal must be only china specific and so on. Such conditions aren't acceptable nor official. But then USA also got to placate ever complaining terrorist mujahid paki allies.

Neshant · Post by **Neshant** » 30 Jun 2014 20:42

Transfer of Technology is a useless buzzword. At the end of the day, the brains of foreign scientists nor their lifetime experience and knowledge can be downloaded into local brains.

FDI in defence is nothing more than an extension of the concept of licensed production. Mostly it involves assembly of foreign wares that has already been developed overseas.

As long as decision makers are aware of that, FDI is not a problem.

NRao · Post by **NRao** » 30 Jun 2014 21:44

the brains of foreign scientists nor their lifetime experience and knowledge can be downloaded into local brains

Forget ToT (and the likes). Even if such brains work for you - you pay them, in your country, forget about getting what you *really* want. It just cannot happen. The latest and greatest will never be parted with, even in a great strategic relationship.

NRao · Post by **NRao** » 02 Jul 2014 17:53

Jun 30, 2014 :: India's Defense Spending Boost Won't Be As High, Sources Say

Despite calls by India’s new defense minister for a 20 percent boost in spending, sources in the Foreign Ministry say that number will more likely be 10 percent due to New Delhi’s financial conditions.

In a note to the Finance Ministry last week, the Defence Ministry sought a $7.5 billion jump over the existing allocation of $35 billion, announced by the outgoing United Progressive Alliance government in February

NRao · Post by **NRao** » 07 Jul 2014 04:45

India Reworks Defense Licensing Categories

India has made major changes in its defense production policy that will enable foreign manufacturers to set up production in India without going through the cumbersome process of seeking licensing.

Under the changed policy, several defense products will no longer require licensing from the Defence Ministry. Only procedural approvals to set up any ordinary industrial unit will now be required for these products. Obtaining licenses for products is a cumbersome process involving security clearances.

The Department of Industrial Policy and Promotion (DIPP) announced on June 26 that it had removed several defense items from the compulsory license list, but it is not clear how many. The list of defense products that will require licensing has been reduced to only four sections.

The move to de-license several defense items is the first major move by the new Narendra Modi government to help boost the domestic defense production base, as more production units will be set up. However, there is lack of clarity among domestic firms and analysts over whether the new notification will allow 100 percent foreign direct investment (FDI) by overseas firms to produce the select list of defense products for which license is no longer required.

MoD officials declined to answer questions that would clarify the ambiguity.

The new compulsory license categories are now:

■Tanks and other armored fighting vehicles.

■Aircraft, spacecraft and parts.

■Warships.

■Arms and ammunition and allied items of defense equipment and their parts and accessories.

The items removed from the compulsory license list are: computers, avionics, software systems, infrastructure development, combat management systems, engineering services including validation and design, wire harnesses, avionics design, civil aerospace castings and forgings, surveillance suites, training services including simulators, bullet proof jackets and vehicle armoring, weather radar and display systems and components.

“The list [of de-licensed items] notified by the DIPP essentially covers platforms, weapons and equipment. However, most of the sub-assemblies, parts and components have been done away with,” said Sujith Haridas, deputy director general at domestic industry lobbying agency Confederation of Indian Industry. “This means that small and medium enterprises [SMEs] will be the biggest beneficiaries.”

Mrinal Suman, retired Indian Army major general and procurement expert, said it will help the defense industry. “With most items not needing license, entry for industrialists, including foreign investors, will be easy. As a matter of fact, it is another way of allowing 100 percent FDI in such items.”

Amit Cowshish, retired MoD finance adviser and defense analyst, said “As per my understanding, it does not automatically mean that anyone can bring in 100 percent FDI, or even 49 percent, and start manufacturing items not on the list.

“As per the FDI policy, the cap in the defense sector continues to be 26 percent,” he added. “I am of the view that government will have to amend the FDI policy to say that FDI up to whatever limit it wants to stipulate will be allowed for manufacturing items not on the list of defense items now notified.”

Rajinder Bhatia, CEO of private sector defense major company Bharat Forge, is also not clear about the percent of FDI to be allowed and said the MoD must clarify the issue.

A senior executive from the private sector defense major Larsen & Toubro, who requested not to be quoted by name, agreed. “However, theoretically speaking, the de-licensing would mean that the de-licensed products can be manufactured without the any further MoD or DIPP approval,” the executive added.

The domestic defense industries have welcomed the move to de-license several defense products. “This move will also help foreign OEMs harness frugal manufacturing by medium and small manufacturing enterprises working in niche technology and products to also expand offset relationships erstwhile restricted for participation due to cumbersome licensing procedure and requirements,” said the Federation of Indian Chambers of Commerce and Industry, a lobbying agency.

“The move [to de-license some defense items] would also help to maintain a fair balance between addressing genuine security concerns and promoting India’s defense industry,” Haridas said. “Given the opportunity, this industry has the potential to become a huge foreign exchange earner for the country and also lead India to its professed goal of self-reliance.” ■