100% FDI in Defence: Understanding Pros and Cons

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abhijitm
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Re: 100% FDI in Defence: Understanding Pros and Cons

Post by abhijitm »

Dhananjay wrote:
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"?
No its not THE route. But it helps in today's world. Two, I am not denying the need of locally researched and manufactured. It must be done. But it takes time and till then we have to import what we cant manufacture. So instead of importing we should ask them to come here and set up the plant. Everything has pros and cons and the risk emerging from them having here and competing with the locals can be managed.
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Re: 100% FDI in Defence: Understanding Pros and Cons

Post by Manish_Sharma »

abhijitm wrote: But it takes time and till then we have to import what we cant manufacture. So instead of importing we should ask them to come here and set up the plant.
Them coming here under 100% FDI buy land, construct manufacturing plants and bringing machinery and tool to make, let's say:

1.) Pistols, guns (walther, beratta, glock etc.)

2.) Heavy artillery (archer, denel etc.)

3.) Armoured vehicle - (Stryker, boxer etc.)

4.) submarines, ships

5.) radar, sonar, ammunition

6.) helicopters

Let's say the 6 above are made here by foreign companies under 100% FDI, how would it help us learn manufacturing these (bold ones the Bhartiya versions of colored foreign ones) :

1.) Pistols, guns (walther, beratta, glock etc.) DRDO developed version

2.) Heavy artillery (archer, denel etc.) DRDO developed version

3.) Armoured vehicle - (Stryker, boxer etc.) DRDO developed version

4.) submarines, ships DRDO developed version

5.) radar, sonar, ammunition DRDO developed version

6.) helicopters DRDO developed version

Bharatiya Micromax is not yet knowing how to make mobile phone, they're trying to learn it. Did the chinese allow some foreign brands like apple, nokia, samsung, gionee to 100% FDI and that's how chinese have 'mastered the art of manufacturing the mobile phones'?
abhijitm
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Re: 100% FDI in Defence: Understanding Pros and Cons

Post by abhijitm »

You are taking the argument too extreme. FDI does not assure you master the manufacturing. It can help to speed up the process. Locals learn by working in those factories. You start generating skilled labors. DRDO owned or funded companies can start benefiting. Key part of GoI regulators in future is to keep the competition fair and give local industry (if and when they demonstrate) a fair share of pie.

Again, we need FDI and companies to come here where we don't have significant capability and we import anyway. If the argument can be taken to extreme then we should not import anything at all. We just sit and wait till local industry provide the supply. But that is not the way to argue.

We are going in circle here. I think I am done putting all my points.
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Re: 100% FDI in Defence: Understanding Pros and Cons

Post by member_20317 »

Arre bhai, I used to believe that all of chinese manufacturing in any thing was completely FDI lead. Prior to their open FDI policy they were riding bicycles by the millions. Not that I am suggesting the chinese way. There circumstances was different.

.................

But seems like this thing is being talked about with a vision for a Mini MIC not a true MIC that is a fit requirement for a 1.5 billion people living in 2025 who are still ambition-ing about moving firmly into the middle income group. Our troubles already have multiplied due to our own choices - right now we were not challenged even w.r.t. our energy supplies but pretty soon we will see even our water supplies getting challenged. We cannot think like others.

To compound matters it is the others who are trying to imagine and work on much larger hitherto unthinkable projects. We OTOH are still stuck targeting Pakistan. We will get forced into a more wider strategic role, whether we like it or not.

Against billions of dollars getting spent on research elsewhere we are always caught in the 'meri to requirement itni hi hai'. Currently that is ok but in future things are going to be very different, unless we plan to overawe only the Pakis and remain 'lesser friends' with the rest of the world.

@Dhananjay ji, 70 billion annually is what US spends on MIC research when it already is a top dog. EU, Russians and Chinese are also spending like crazy when all three are above India. Add to this the Intel budgets designed to crush smaller civilizations (Syria) and keep challenged the poor economies like India. Each with presumably (Out of Mush) 20% content difference. Between them these countries have all the reasonably figure-able permutations of weapons systems and all of this is available to everybody around us. Available to us too but for our poverty of wealth.

You are talking about Glocks, while these others talk about the future. The following link gives the present and future of infantry - you can judge for yourself what is required for India to start calling itself an MIC (not a Mini MIC). When people imagine MIC they immediately jump to F-22 Raptor / JSF. But bhailog, that model of MIC is only one aspect of a true MIC which is much more intimidating because it is finding by itself the ways to challenge itself. A true MIC is one that keeps pushing its own boundaries while pushing the opponents boundaries irrevocably. A true MIC will challenge its own last product when its last product has already established deep benchmarks touching even the last man fighting. Only difference is that they challenge themselves to make themselves strong, but they challenge us to make us weak/dependent.

http://www.militaryaerospace.com/articl ... pg010.html

See unless our scientists find time and money to challenge our circumstances we will not get this hyperlinked exoskeletoned Maharathi to fight for us. We do not spend enough because everybody is living life like an adjustment and trying to make ends meet. This is poverty. This will after a time kill the desire to even hit back (forget winning). This re-allocation of the research rupee is going to happen only if we let go of a few items that are not crucial for our existence.
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Re: 100% FDI in Defence: Understanding Pros and Cons

Post by JayS »

Guess defence vendors lobbying hard in other countries too.

Turk Procurement Chief Signals Overhauling of Offset Deals
http://www.defensenews.com/article/2014 ... fset-Deals
“He is right. Even the mention of the word offset is irritating,” said one Western company executive here. “I think the concept has long gone out of its intended purpose and scope. It practically means extra burden on foreign companies.”
They just want free entry into new markets without conceding any technology to the customers. Incapacitating and crippling local companies would be a logical next step making the nation totally dependent on them.
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Re: 100% FDI in Defence: Understanding Pros and Cons

Post by kshirin »

nileshjr wrote: 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
In addition to above - FICCI (in more independent times) compared what other counties are doing to protect their Strategic Sector interest wrt FDI. Hope someone in Govt sees this to implement national interest:
http://dipp.nic.in/English/Discuss_pape ... ust201.pdf

BTW Jane's report attributes Turkey's (and South Korea's) progress on indigenisation to clever and strategic use of Offsets. Calling it by another name may help but it will still be Offsets. And western companies/their govts of course complain about offsets, a recent US report bemoans that Offsets have led to outsourcing technologies and building capacities in other countries, which is why they are there! http://www.bis.doc.gov/index.php/forms- ... enth-study

And many European countries practise 100% Offsets even as their Code of Conduct pleads with them not to impose more than 100%. And same companies moan at our ridiculously low 30%.

Sad to see lot of misinformation on this Forum, which is dedicated to promoting Indian capabilities.
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Re: 100% FDI in Defence: Understanding Pros and Cons

Post by Karan M »

>>Sad to see lot of misinformation on this Forum, which is dedicated to promoting Indian capabilities.

KShirin - the plain truth is that not many people on this board track defence issues with either the interest or dedication it deserves any longer. It takes a certain kind of passion or even fanatical interest in the subject matter which most will find bewildering. Many such folks have left this board and no longer post here.

For instance, most of the points you made should be known already. That in itself shows the crux of the matter. Most won't be interested in the non glamorous threads like the Defence R&D one or the incremental achievements therein. Whereas the MMRCA et al threads constitute a lot more of the interest.

Its easy for instance to applaud Agni launches - not so much to go about tracking the sort of ecosystem needed to make an Agni, and the myriad subvendors and vendors who make items for Agni. What would happen for instance, if these vendors were no longer Indian.

Next - many folks here correlate the freeing up the IT and other non defence sectors to MNC/FDI investment to the defence sector. They have an instinctive positive perception about foreign capital and hence discount the dangers of extending something similar to the defence space.

Last - you also have some folks who think that western involvement & even ownership of Indian firms & ecosystem is no big deal and laws etc can automatically manage the ecosystem. Never mind that has never worked in India and its pointless to bolt the stable once the horse has bolted.

Fact of the matter is a country gets the leadership it deserves and the mistakes it supports. If folks tend to go for mere argumentation that unrestricted FDI in defence is good for Indian strategic interests, never mind the historic evidence of how time & again, various methods have been used to undermine Indian ownership of its own systems, then nothing much can be done, but for India to make its mistakes and pay the price.

As a matter of fact, the points that you brought out are all from open sources. Those interested can look for it as well.

Offsets so far have given Indian SMEs orders in the most complex design space for electronic modules. Stuff of the order of which would never have come to Indian firms if 100% subsidiaries are allowed.
Yet the lobbying effort against offsets is intense.

I would suggest though you continue with your efforts, and if you have access to think tanks, research outlets, you continue to do what is necessary. If there is anything I or anyone else can do to help, let me know.
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Re: 100% FDI in Defence: Understanding Pros and Cons

Post by Karan M »

Cosmo_R wrote:It's very intellectual and wordy.
Sorry you are the one making rhetorical claims about "Indian genius" and "perspicacity" doing the trick and arguing against practical concerns re: security issues and ownership challenges, and then claim that these legitimate concerns are intellectual and wordy (the irony!).
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?
Obviously the GOI decides based on inputs from Defence R&D, industry and services. The point is to have a policy which lays out the overall framework that notes what kind of investments are worthwhile.
2, What exactly is the hangup on 100% FDI in defense when we gleefully import 100% foreign materiel for defense.
And now you ask this!

Here, let me spell it out for you, since you clearly don't care about how extensive the Indian effort has been to step away from the 100% aspect.

First: Local manufacture wherever possible, under Indian control & with direct benefits for Indian industry

India goes to incredible lengths not to import 100% foreign materiel for defence whenever possible and which is the entire reason it asks for and is willing to pay for TOT.

As matter of fact, the Indian system clearly operates on the basis of understanding the risks of foreign ownership and control against sanctions. It even specifies remarkably high local % contribution, above and beyond mere consumables and spares for its critical expensive platforms!

The Su-30MKI local production for instance, or the BMP - each with its attendant ecosystem created painstakingly in India and with India upgrading the system on its own.

Obviously, this policy cannot be extended to all platforms and is extended to those wherein it procures in bulk - e.g. Su-30s versus Il-76s, T-90s and BMP's versus BTRs.

And in terms of moving with the times, extensive vertical integration @ the manufacturer is now making its way to supplanting that with an ecosystem of SMEs.

The fair playing field to the private sector would also shake up the more lethargic DPSUs and give the Armed Forces more options for local manufacture.

Second: Import substitution with local products

A direct identification of import heavy sectors and making indigenous equivalents and pushing them through painstaking trials and production. Take radars:

For radars - a whole host of LRDE radars - Rohini/Revathi/TCR, Rajendra/WLR, Ashwini LLLR, LLLWR, AESA LLTR/MPR - in each case a direct replacement of what would have otherwise been imported and directly correlated to IAF/IA requirements. Net, the numbers of these systems being imported have decreased steadily.

Weaponry - the next focus area.
Wherever it is importing high tech items, including weaponry, in bulk - it is now working on making its own equivalents on its own wherever possible!

For Air to Air missiles - Astra vs the RVV-AE/Mica, for LGBs - Sudarshan et al versus the Paveway/Griffins, for SAMs - Akash versus importing SA-6 derivatives/follow ons.

Third: Pragmatic use of JVs

Wherein it has challenges in meeting extremely ambitious requirements with local resources, it seeks JVs - again wherein it has significant control over its intended product. E.g. Brahmos - 51% Indian, 49% Russian.

The DPP lays out the same criteria for Make India, with foreign partners now able to join the private sector for making weapons.
For the Arty upgrade program, almost all heavy engineering Indian houses already have a tieup in the 26% space itself for the IA program. Its only pending based on IA trials and MOD (in) decision!
3. What's the magic of 49%? Think about it. What does 49 vs. 51 or 100% achieve for us?
I have thought of it. Problem is you haven't and are being obdurate in the face of facts. 49% ensures Indian control of the direction of the JVs and ensures they meet Indian strategic objectives. 51% and 100% mean we lose control and fall prey to the usual cartel rubbish. Most firms would rather operate via a network of their own firms in India rather than transfer any IP or work with any Indian firm.
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?
The relevance lies in the context of how decisions were made and their impact.

Au contraire, it is you who is dismissive of Indian talent in that you:

a) completely discount the abilities of the current system and how conservative proposals (eg. pvt sector entry) would rapidly improve it
b) think some magical input of FDI & foreign capital/business acumen are required
c) deny the legitimate concerns of Indian talent in the private sector who are against majority Indian FDI as demonstrated by the FICCI note

As regards standing, that rather pointless ad hominem rather indicates that you neither have facts nor data to back your opinions up, and hence have to resort to this sort of stuff. Not effective
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.
If you think that foreign companies will invest in defence in India without preconditions & that India should be a naif in the woods & agree eagerly, then I would submit that you should have spent more time talking to those GOI reps and figuring out exactly what was happening in the space with regards to Indian defence programs, and how fair the support till date has been.

Next, India right now has a huge market & that is the primary driver for all those who are seeking to tap into Indian industry. We should use it to our own advantage as has everyone else. Not a single country out there which doesn't support its MIC in every which way.

Look up PRC a bit more please since you cited them. They have a huge state owned MIC, and a very firm policy in terms of ensuring that any purchases even in the civil space meant TOT and production orders (offsets) executed via the MIC. In short, the antithesis of your prescriptions.

As regards SoKo, its impressive industrial achievements apart, its a country which requires US approval for even building its own ballistic and cruise missile deterrence, and as such is actually behind us in several strategic sectors thanks to its limited autonomy in decision making. Food for thought, if your mind hadn't already been made up and you were actually interested in the topic.
Too much 'policy', 'data', 'analysis'. It's like saying "We know it works in practice everywhere else but will it work in theory here?"
Oh please. All countries operate on the basis of hard data & security issues, but somehow India must airy-fairy wave its hand away and disregard its defence industry because you claim its mere theory.

Wake us all up when Russia allows 100% FDI and foreign control of its core defence industry assets.
member_23694
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Re: 100% FDI in Defence: Understanding Pros and Cons

Post by member_23694 »

How about the below proposal

FDI = 100% Local sourcing = 75% Export = 50% of the produce
FDI = 74% Local sourcing = 70% Export = 40%
FDI = 51% Local sourcing = 60% Export = 40%
FDI= 26% Local sourcing = 50% Export = 30%
member_20317
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Re: 100% FDI in Defence: Understanding Pros and Cons

Post by member_20317 »

Last I had mentioned how a MIC these days is going out and creating newer ways of challenging itself. It is often lamented on BRF how the good old days of better knowledge base are gone. The artillery thread has for so long been a place where people would find all sort of problems with OFB/Raksha Mantralaya/DRDO even the 3.5 friends who would keep the pakis better supplied. But how was South Africa able to develop its artillery hardly ever got discussed. Today South Africans freely undermine indigenous Indian efforts in artillery development. Anyways even if we find another talented engineer to head some other project today we will not be able to use him because whatever....

We have a titanium manufacturing and casting facility. That much under state control is needed but our system got so busy in it that it just could not find time and resources to actually extend a totally doable thing like using titanium for artillery. Net result, a less patient jingo is left with no option but to cuss the efforts of a singular company in a smallish island.

Somebody had raised the issue of policy announcement not having been properly handled in the 100 percent FDI case. Mostly that is right. Remember the liberalisation in 90s was also accompanied by an Industrial policy press note also. That is how this should have been balanced also. Having said that, is it unthinkable that somebody who has not yet countered the idea of FDI, probably wanted to assess the reaction of jingos and his own camp followers about the more sticky aspects of it all, having already raised a ruckus about India manufacturing for far too long now.
JayS
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Re: 100% FDI in Defence: Understanding Pros and Cons

Post by JayS »

Karan M wrote: Third: Pragmatic use of JVs

Wherein it has challenges in meeting extremely ambitious requirements with local resources, it seeks JVs - again wherein it has significant control over its intended product. E.g. Brahmos - 51% Indian, 49% Russian.

The DPP lays out the same criteria for Make India, with foreign partners now able to join the private sector for making weapons.
For the Arty upgrade program, almost all heavy engineering Indian houses already have a tieup in the 26% space itself for the IA program. Its only pending based on IA trials and MOD (in) decision!
That's the point many pro-FDI people are not even trying to see. All those benefits which are being promised by 100% FDI can be in fact reaped by us with cunning use of existing policies. How hard is this to understand?? May be it will take 15 yrs instead of 10 years, but that without ceding on national security and self-reliant MIC built-up right from RnD to mfg.
Karan M wrote: As regards SoKo, its impressive industrial achievements apart, its a country which requires US approval for even building its own ballistic and cruise missile deterrence, and as such is actually behind us in several strategic sectors thanks to its limited autonomy in decision making. Food for thought, if your mind hadn't already been made up and you were actually interested in the topic.
I think, SoKo is trying to acquire cutting-edge technology-know-how in defence as they want to be self reliant (Don't ask me why I feel this way, consider it based on chaiwalla intel) There approach has been to imitate the best that's out there to fast-track basic technical capability until you are not proficient in high fundu technical design. Mean-while Try to get theoretical knowledge from which ever way possible. They are using academia/small research companies for that which can in turn work with foreign experts. Once you are familiar with the working of systems its easy to build next gen technology. I guess Hyundai and Samsung has used this methodology in their own sectors quite successfully and today they are developing ground-breaking technology.

Karan M wrote:Wake us all up when Russia allows 100% FDI and foreign control of its core defence industry assets.
LOL. Nice.

Correct me if I am wrong Karan, since my knowledge in very limited. They didn't do it when there economy crumbled and there MIC was under serious threat after 1990. The Bear is cunning. They survived that phase somehow and are now again trying to be the power they were during USSR days. Thats the benefit of keeping the reins in hand.
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Re: 100% FDI in Defence: Understanding Pros and Cons

Post by Karan M »

Ravi G South Africa and Israel were examples of security states which saw their existence primarily through the security angle, no soft power etc and were threatened by a ring of less sophisticated but more plentiful adversaries. In their worldview military strength was essential, hence their disproportionate focus on that arm. Backed by the west for differing reasons. That is the basis for their advances in any security field, their zeal and focus. In contrast India has always been withy washy about force and started defence indigenisation in a limited manner only post 1971 after arms embargoes. All the stuff about xyz, Avbcs was founded in 1890 etc is rubbish because as recent as 1971 India was running around for stuff as basic as shoes and rifle bullets. Our big name programs started off on paper only in the 1980s, and most of the other stuff till the early 80s was literally screwdriver stuff. In contrast, the aforementioned security states were begging, borrow and stealing tech at a prodigious rate. Gerald Bull was invited to SA with tacit US approval. India was under sanctions and therein lies the rub. If you want to create your own industry, you need focus, we never had that, the occasional deal apart. As a result we never invested as a fully independent power would do, and nor did we have the blessings of a great power either as their people against the communist heathens.
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Re: 100% FDI in Defence: Understanding Pros and Cons

Post by abhik »

The ratio of imported weapons which is currently at 70%(or whatever the real figure really is) can be brought down to 30% (my guesstimate) TODAY, even with our current R&D and manufacturing capabilities. Production of the T90 should have been stopped the day the the first Arjun rolled out. We should have never signed up for the Barak-8, at least for our land based requirements, just upgraded the Akash SAM. The MRCA deal should be scrapped now that the LCA is ready. Stop the 155mm howitzer charade and commit to OFB / BF guns. There are many such steps that can be taken to reduce our dependency on foreign weapons, but only if we want to.
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Re: 100% FDI in Defence: Understanding Pros and Cons

Post by vic »

You bloody sdre, don't you know imports disguised as fake jv are the best and with 100% foreign fdi would be even better.
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Re: 100% FDI in Defence: Understanding Pros and Cons

Post by vic »

You bloody sdre, don't you know imports disguised as fake jv are the best and with 100% foreign fdi would be even better.
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Re: 100% FDI in Defence: Understanding Pros and Cons

Post by SBajwa »

by Disha

shiv wrote:

I am myself ignorant of the pros and cons - but imagine Beretta setting up a plant with 100% FDI. They could export to a whole lot of nations while supplying Indian needs. Indian labor would be paid and whatever can be outsourced to local companies will benefit local industry. The young engineer who works for Beretta for 10 years and leaves may some day start something on his own at a later date. etc.


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

Imagine a Sulabh sited on the above technology and 100s of such Sulabhs? Of course the technology is exported for US Army's Sulabh and also implemented in Indian Cities and towns.

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.

Yes, it is a double edged sword, but I think we need to stop this negative thinking and stop looking everything from the prism of zero-sum game.
EXACTLY!! FDI in defense helps the over all infrastructure. The USA defense industry developed as they innovated from years., Hand guns for example have been in the market since Yuan Dynasty (1271 - 1365)., but not until the revolver was patented by Samuel Colt they became popular

The first revolver was patented by Samuel Colt in 1835 and he mass produced revolvers.
Then Smith and Wesson patented cartridge in 1856 and they became a competitor to Colt.

There were semi auto pistols but were not considered reliable or good until 1970s.
Then Beretta 92 pistol became very famous in USA in 1970s by Beretta company of Italy.
Then Glock of Austria in 1980s and so forth.

they all added some value to the original hand gun and thus got the market around the world (along with name brand). We do not even have any stand among the current tech while we are ignoring the future tech trying to reach to the current tech (through R & D) . We will always be doing the "catching up game" so thus! It is good to let 100% FDI in defense in at least small items which are useful for both civilian and defense work.
Then
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Re: 100% FDI in Defence: Understanding Pros and Cons

Post by kshirin »

Karan M wrote: I would suggest though you continue with your efforts, and if you have access to think tanks, research outlets, you continue to do what is necessary. If there is anything I or anyone else can do to help, let me know.
Can you give me your email? We are trying to work through a think tank and would welcome inputs, support, participation. We have been told to prepare an objective paper, and therefore trying to rush through other countries' similarly placed FDI/ Offset policies. So far discovered no one has 100%, everyone insists on national control, and everyone tries to extract technology. Sure, sacrifices are made on pace of development. But there is measurable progress.

This can be done in India if we continue to develop indigenous R & D, retain control of defence production companies by making Indian partner lead integrator, leverage our market for access (hope we have the spine for that, some of us have a notorious record of being over awed by white skinned people - not the white skinned people's fault - during negotiations. Eg. one of my high-tech SME friends told me an Indian rep at an international forum was overwhelmed with pride when the DG of that organisation actually condescended to walk upto him to personally tell him the outstanding Indian product had been rejected for an international tender, on wholly specious grounds. I was stunned at this display of obsequieousness), and promote the right people for this job, not people who have a vested interest in promoting foreign interests in our country. Too many of them in the system.
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Re: 100% FDI in Defence: Understanding Pros and Cons

Post by JayS »

kshirin wrote:
Karan M wrote: I would suggest though you continue with your efforts, and if you have access to think tanks, research outlets, you continue to do what is necessary. If there is anything I or anyone else can do to help, let me know.
Can you give me your email? We are trying to work through a think tank and would welcome inputs, support, participation. We have been told to prepare an objective paper, and therefore trying to rush through other countries' similarly placed FDI/ Offset policies. So far discovered no one has 100%, everyone insists on national control, and everyone tries to extract technology. Sure, sacrifices are made on pace of development. But there is measurable progress.

This can be done in India if we continue to develop indigenous R & D, retain control of defence production companies by making Indian partner lead integrator, leverage our market for access (hope we have the spine for that, some of us have a notorious record of being over awed by white skinned people - not the white skinned people's fault - during negotiations. Eg. one of my high-tech SME friends told me an Indian rep at an international forum was overwhelmed with pride when the DG of that organisation actually condescended to walk upto him to personally tell him the outstanding Indian product had been rejected for an international tender, on wholly specious grounds. I was stunned at this display of obsequieousness), and promote the right people for this job, not people who have a vested interest in promoting foreign interests in our country. Too many of them in the system.
+1. We need such conscious efforts from citizens who are in the know of matter.

And yes, there is a definite tendency to be overwhelmed by western people/products. I know of a SME which supplies some stuff to Army. The promoter had to open a front end office in West with a white-guy taking telephone calls. The army is not be very keen to buy his Indian product even if its good enough in quality and substantially cheap if he goes as purely local company. But they are happy to buy the same product (which is still made in India wholly) through his western office at 10 times more cost. I also remember someone quoting on BRF about a guy from Agra who makes special shoes for US forces IIRC. When he approached MoD for supplying such shoes to our forces, he was discouraged. There are plethora of such incidences.

So I also think, we need a change in mindset, and change in the mechanism in which we are applying existing policies or perhaps streamlining/fine-tuning the policies at best. We don't need any substantial change in policies, least of all 100% FDI.
NRao
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Re: 100% FDI in Defence: Understanding Pros and Cons

Post by NRao »

FDI, whatever the %age, it is after all India and Indians in control. Or am I Missing anything?

So, why all this fear?

Make up rules that benefit India/Indians.

The problem - as I see it - is Indians. Middle men, corruption, bad PSUs, this, that, loss of SMEs, ......................... Indians.
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Re: 100% FDI in Defence: Understanding Pros and Cons

Post by kshirin »

NIleshjr I know two more such instances of people having to open a foreign office to sell back to India. Same logic applies to energy imports, better make it profitable to produce/ extract it in India than buy an Indian product at even more inflated foreign cost.
I lost access to my BR email account long ago, how do i get in touch, we do need support and your resources (intellectual, networks, etc) as there are too many "I love you Foreign OEMs" hiding in the system. Can Admin help?
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Re: 100% FDI in Defence: Understanding Pros and Cons

Post by SBajwa »

Indians engineers are working in all fields (not just defense) in USA and this phenomenon of engineers going to become MBA is very recent. These Indian engineers can help India and GOI immensely as well as defense is concerned.

almost 15-20+% of hard core engineers in USA are Indians!! (may be more!! but not less) and (judging by the students enrolled in higher education as I myself work in a big university) in future (10 years) it will be around 35-45%.
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Re: 100% FDI in Defence: Understanding Pros and Cons

Post by NRao »

It is not that Indians have not tried.

In fact, there a few where they have even got SD permission to help.

I am a lot more hopeful with this PM. Read somewhere that one can even directly send him emails. Expect some good to come out of this situation.
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Re: 100% FDI in Defence: Understanding Pros and Cons

Post by Manish_Sharma »

SBajwa wrote:
EXACTLY!! FDI in defense helps the over all infrastructure. The USA defense industry developed as they innovated from years., Hand guns for example have been in the market since Yuan Dynasty (1271 - 1365)., but not until the revolver was patented by Samuel Colt they became popular

The first revolver was patented by Samuel Colt in 1835 and he mass produced revolvers.
Then Smith and Wesson patented cartridge in 1856 and they became a competitor to Colt.
But how did 100% fdi helped them, did they have 100% fdi from french-brits-germans and that helped them?

OR

That the US didn't have quota-permission-license raj of indira-nehru model helped Colt , S&W to rise up, unlike Bharatiya companies which are discouraged by our laws?
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Re: 100% FDI in Defence: Understanding Pros and Cons

Post by abhik »

NRao wrote:FDI, whatever the %age, it is after all India and Indians in control. Or am I Missing anything?
One of the problems is that Indian Laws will only be able to regulate the Indian entity not the parent OEM.
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Re: 100% FDI in Defence: Understanding Pros and Cons

Post by SBajwa »

by Dhananjay
That the US didn't have quota-permission-license raj of indira-nehru model helped Colt , S&W to rise up, unlike Bharatiya companies which are discouraged by our laws?
What US has the free capitalist marker., anybody who wants to buy a gun can go to a local gun store and buy it based on its brand value and popularity. That is the reason that in India we have "Desi Katta" market. For those who do not know Desi Katta is a single shot hand gun illegally manufactured and sold to criminals.

Through years of Nehruvian policies and earlier British rule we have been left far behind we are just trying to catch up to the western technology and will continue to do so. But in today's world (2014), most of the companies and/or universities doing Research and Development has Indian diaspora working diligently in all fields (Defense, medicine, etc)., so even as Government of India and Indian nation is behind in Technology the knowledge of Indian diaspora is the top level in world.

So!! What government of India can do.

1. Allow Indian (NRIs) to invest in defense .
2. Get to the current best standards of product development.

and then... improve upon them!!

Japan, Germany did exactly that after second world war. Now they are on par with USA in many things.
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Re: 100% FDI in Defence: Understanding Pros and Cons

Post by Karan M »

KShirin, please give me a day - snowed under at work @ urgent project
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Re: 100% FDI in Defence: Understanding Pros and Cons

Post by kshirin »

dhiraj wrote:How about the below proposal

FDI = 100% Local sourcing = 75% Export = 50% of the produce
FDI = 74% Local sourcing = 70% Export = 40%
FDI = 51% Local sourcing = 60% Export = 40%
FDI= 26% Local sourcing = 50% Export = 30%
Interesting but any ideas how you would achieve this? 100% after all means surrendering leverage. But would be interested in ideas to this effect. A special defence production economic zone perhaps? But from all accounts no SEZ has worked in India. Or have they?
kshirin
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Re: 100% FDI in Defence: Understanding Pros and Cons

Post by kshirin »

Karan M wrote:KShirin, please give me a day - snowed under at work @ urgent project
OK, how do we stay in contact, lost access to my email linked to BR. Lalmohan knows my current ID.

Need ideas on how to make high-tech indigenous production work. President of India has just announced liberalised FDI in defence.
Karan M
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Re: 100% FDI in Defence: Understanding Pros and Cons

Post by Karan M »

Could you share your email (can edit later)? Will send you my contact
kshirin
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Re: 100% FDI in Defence: Understanding Pros and Cons

Post by kshirin »

How do i find your email? Dont want to share my email publicly please. Is there any feature on BR which allows me to message members?
Karan M
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Re: 100% FDI in Defence: Understanding Pros and Cons

Post by Karan M »

I'll share mine when I am back from work, if you can wait till then..or you could create a temporary one and I'll mail you there..
kshirin
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Re: 100% FDI in Defence: Understanding Pros and Cons

Post by kshirin »

Great idea. Just did. kshirinbr@gmail.com.
President has already announced, but it is nuanced and there's hope for a more nuanced policy which benefits India. At least he didnt mention 100%.
Karan M
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Re: 100% FDI in Defence: Understanding Pros and Cons

Post by Karan M »

Mailed!
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Re: 100% FDI in Defence: Understanding Pros and Cons

Post by JayS »

Saw this news item, I dunno if its posted on BRF previously.

http://www.defensenews.com/article/2014 ... le-Program
NEW DELHI — India’s Defence Ministry is considering restarting a US $10 billion infantry vehicle replacement program in order to include more domestic defense companies as potential bidders.

The Future Infantry Combat Vehicle (FICV) program is likely to be among the first major decisions by the new government voted in last month, an MoD source said.

The Indian Army wants to produce 3,000 vehicles to replace upgraded Russian combat vehiclesat a cost of over $10 billion under the FICV program, first conceived in 2009.

Under the “Make India” arrangement, the government will finance up to 80 percent of the cost of the prototype, to be built by two short-listed development partners. After the prototype is put to trial and evaluated, one development partner is selected to produce the futuristic vehicles.


After the program was conceived in 2009, India’s domestic defense major Mahindra & Mahindra created a joint venture with BAE Systems. Also, Larsen & Toubro, Tata Motors and state-owned Ordnance Factories Board (OFB) gave their detailed report to the MoD nearly three years ago, but no development partner has been short listed so far.

The overseas firms likely to join the domestic ones include Rafael of Israel, Nexter and Thales of France, General Dynamics of the US, Rosoboronexport of Russia, Doosan Group of South Korea and Krauss-Maffei Wegmann of Germany, according to an industry source.

“Since the MoD has no previous experience of making weapons under the Make India category, it is likely that the whole program will get bogged down in bureaucratic details at a later stage, and there is every possibility of the FICV program becoming a non starter,” said Nitin Mehta, New Delhi-based defense analyst.

In 2012, the FICV program went into limbo after the Russians offered their BMP-3 infantry combat vehicle if the FICV project was scrapped. The MoD has since rejected the Russian offer of scrapping the FICV because the domestic defense companies have already invested heavily in the program, the MoD source added.

The Army will need advanced vehicles to replace the upgraded BMP-2 in another 10 years, said an Army official, who hoped that by then the FICV program will be in the production line.
An applaudable step, if GOI goes through with this kind of model and let our private players come up with a competitive product. Our private players would try to make a defense system by pooling all the local expertise they have from other sectors (e.g. auto). Through JVs, these private players will ensure some ToT where they can't do something, filling in the blanks. So they will learn how to make the whole systems in time. And if we can concentrate our RnD (both private companies and DRDO) on indigenization of critical (i.e. ToT-ed) technology, we will be able to have full capabilities in defense system manufacturing sooner. Then we can start concentrating on next-gen technology. GOI surely needs to make sure they give fair chance and support to our private players.

Also note the bold part, how Russians tries to sabotage the FICV program by offering new technology as import option. This happens all the time, whenever foreign countries see we can build something of our own they offer something new as a bargain, in order to lure us and keep us dependent on them and kill any local capabilities from developing. We need to get out of the vicious circle.
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Re: 100% FDI in Defence: Understanding Pros and Cons

Post by NRao »

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
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Re: 100% FDI in Defence: Understanding Pros and Cons

Post by brar_w »

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.
Huge export potential if the contractors get it right.
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Re: 100% FDI in Defence: Understanding Pros and Cons

Post by Cosmo_R »

Ajai Shukla has mapped the FDI debate by type of player:

http://ajaishukla.blogspot.in/2014/06/p ... s-for.html
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Re: 100% FDI in Defence: Understanding Pros and Cons

Post by Karan M »

Superb analysis by Shukla - mirrors the reality well. Only question is whether Tata will indeed walk away from defence. That I doubt with Tata Power SED and Tata Advanced Materials both in defence with significant expertise built up over decades.
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Re: 100% FDI in Defence: Understanding Pros and Cons

Post by Cosmo_R »

I've forgotten where I left off on the level of FDI issue.

To my very simplistic way of thinking percentage of ownership <> (not ) necessarily = to control.

For example, Mark Zuckerberg's (class B) shares have a 10X voting premium. IOW, one of his share's has 10x the votes class A shares have. He would to be under 10% ownership of Facebook before theoretically the other shareholders could outvote him.

Similarly, Page and Brin at Google have class B shares that a XX multiple over class A shares.

It all started with the Ford family when Ford went public. They wanted to maintain control even if their ownership percentage went below 51%. So, Goldman came up with class B shares.

In our Indian FDI context, I don't see for example, why say a Boeing which wants to take 90% of the risk (investment) in exchange for 90% of the profits while the GoI or Indian private companies put up 10% , get 10% of the profits while having class B share with a 9x voting power, should be told no.

They take 90% of risk and get matching profits. India(ns) take 10% of risk and get 10% of profits plus effective veto on any sensitive issue that comes up at the board level.

Repatriation of capital through dividend worries? Two thoughts: Boeing will have to think long and hard where gets a better return on investment(not so easy). Second, Boeing has to pay US taxes upon repatriation of dividends. Just Google "Tax Inversion".

This is without counting the benefits to India's military, manufacturing jobs and tax revenues.

Also, why worry about small companies who want to cash out by selling to a 'Boeing'. They are entitled to have a pay day for taking risks. Once cashed out, they'll look for the next big thing in defense.

The Tatas will never cash out. They'll keep investing in upstream/downstream and adjacencies.
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Re: 100% FDI in Defence: Understanding Pros and Cons

Post by Vayutuvan »

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. :)
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