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__________________________________________________Suraj wrote: As for FDI in defence, I'm probably one of the silent many who ask 'WHAT is that ?' Serious question onlee. Can someone start a thread in Mil Forum and explain:
* What is the current issue set ?
* Where is expertise needed ?
* What precisely is 'FDI in defence' ?
* How does the need of the foreign investor align with our need ?
There's an ongoing discussion in the Indian Economy thread about FDI in retail. I explained there how retail FDI doesn't necessarily align with what matters to us. The discussion has been quite fruitful, with others like muraliravi, Theo, amit et al weighing in. It would really help to have a thread in Mil Forum for FDI in Defence, or any topic aligned with the imperatives of the current government, so BRF can understand and debate details knowledgeably.
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__________________________________________________Shonu wrote:Most people here are not factoring in some basic rules in defence production:Karan M wrote:Technically yes, but it all depends on intent and the nature of the program itself. I mean, if we look at MRO - financially viable, useful employment generator - but not as complex as actual aircraft assembly, which in turn is not as complex as being vertically integrated..
A- Companies that invest want profit, they will take 100% of this profit home. This is the case with every company all over the world. They are not in your country to make you developed or help you grow or give your countrymen jobs. They are here to make money and make money they will.
B- Defence is a "national security" issue the world over. No company will develop/manufacture/enhance the latest tech in another country. Period. Do you think the US govt will let LM manufacture tech that will be used in the F35? Or perhaps you think the anti-radar coating will be made in india? The US won't even let the F22 take part in a war-game with india, what to speak of building it elsewhere? The only bits and pieces that will get build/developed in india would be cheap and dirty stuff which (if lost) will not put the host country's security in jeopardy.
Lilo posted this in another thread - it is for Boeing:
What do you notice? Outside the US, they don't make anything that can be termed as "high tech" or "critical" in the real sense. Where are the engines made? Where are the computers that run the plane made? And this isn't even a military plane. Also notice the job distribution - jobs outside the US don't even make up a fraction of those in the US. Further, they are just importing this stuff with no investment outside the US.
You expect them to invest in india AND make critical stuff????
Lets be honest here, given the incentive, I am sure indian companies can make every single thing in that image that is sourced from outside the US - or learn to make it within 1-2 years. This is not rocket science. What indian companies will struggle with is real high tech stuff like engines, fan blades, ECUs, software that runs the system etc.. This can only be developed in india with proper investment and R&D and incentive from the govt. DRDO can't do it on its own and neither should it.
What these companies will build in india are stuff that anyone can do, but these companies will gain from cheap labour, lax environmental laws, corrupt bureaucracy etc.. If an indian company develops something and starts to grow, these companies will buy it out and take the IP back to the host nation. Indians will have nothing but more paper money that has been printed at a US mint.
Speaking of which, india cannot even make the paper it uses for its currency, why isn't de la rue opening shop india with 100% FDI to make that paper in india? I guess even paper used for currency is "high tech" which has national security repercussions!
Let me help you there:SBajwa wrote:FDI in 100% for things like
1. Night vision goggles for all forces (police + defense) for both export (to approved countries) and in house.
2. All type of small guns and military guns and their ammunition for both export and in house.
3. Tents, water bottles, uniforms, boots, running shoes, hats, hand held GPS, GPS for vehicles, etc.
4. Small boats, etc.
lot of this stuff is used by sportsmen, hikers, etc.. so it is used with both Defense and civilians.
and off course! Indian companies should be given some tax breaks for defense items, while levying a tariff on foreign companies.
1- UK has europes only company that makes CCDs. Again, this is fab/clean room based stuff which india torpedoed back in 2008 (when intel wanted to open up a plant in AP, but weren't provided tax benefits so they built it in israel instead). India has little or no knowledge about running huge cleanrooms which make this sort of thing. NV requires CCDs for converting light into images (the kind used in NV/TV etc). I can assure you, that this company that makes CCDs in the UK will NEVER, let me say that again NEVER, transfer this tech over to india or any other country. It has been built over 60years of R&D and billions of $$s so they ain't gonna set up shop in india.
2- Instead of learning and developing from INSAS you want FDI to build a plant to make parts and assemble them for the army? Guess where the R&D team for this company will be? I'll give you a clue, not india!
3- Sure, you want even the simple stuff to be over run by non-desi companies. nice!
4- really?
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__________________________________________________Karan M wrote: 100% FDI in defence is a retarded move and Modi & co have no clue of what they are doing if they permit this, swooning on the rhetoric of creating mass manufacturing jobs. Instead of this, they should be working with Tata et al to create domestic chaebols or conglomerates who can compete with the world, not create a situation wherein whatever we have is now up for sale.
Idiots if they implement this. A lot of folks are into all this 100% business because its been lobbied hard & the import gang pushed for this when it became clear India was asking for more and more TOT as time went on. When the MMRCA contest TOT requirements became known, the lobbying became frantic.
Even simpler programs have been stuck up because all the great providers from abroad want is our money, and show off random assembly shops set up with their involvement as TOT.
In contrast programs such as seeker transfer to BEL as quid pro quo for a much larger program already in implementation never took off. Taking that lesson to heart. DPSUs with less persistent leadership have quickly jumped on to the put sticker, call Indian wagon. Private firms do that with even more savvy, and call their stickers "value addition".
BTW, there are enough idiots on the domestic fence who are willing to sing for 100% FDI, makes their life easier to import subsystems, put a swadeshi sticker on it, and call it a successful program, which some of our DPSUs are already adept at doing.
The few folks who have seen the manner in which this "Easy way to succeed" method screws up long term indigenization goals are already fed up.
Kiss goodbye to the Indian SME sector as well if this happens. MOD will stand by with mouth open as MNCs with warchests that dwarf entire R&D spend, use a days worth of operations money to purchase firms which make all the crucial gizmos that go into our missiles etc. And when India wants to move ahead, this time around approval has to come from Washington, or Paris.
What a stupid idea and all said and done, AK had the sagacity to at least prevent this, even though he did a lot of damage elsewhere with his selfish desire to protect himself.
In this case, the BJP and Modi & co, are completely clueless of the ramifications of what they are doing, as their so called think tanks are full of rtd colonel blimps who made a career out of ambling around Vienna, Paris, Moscow with shopping lists while always complaining indigenous was not worth it.
Now those same fools are busy advising the BJP that buying from aboard can be supplanted by 100% FDI without a single fcking clue of how the industry works and the amount of control the parent nations and their security structure have in these decisions.
Morons are handing over the entire key to the local MIC to the firms abroad. Congratulations. Time was when USAF knew more about IAF bases than average Indian citizen. And now time is firms abroad will know exact range of Agni by virtue of owning its subsystem suppliers while BRF bickers about how great it is, and all so secret.
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__________________________________________________Karan M wrote:Brahmos BTW is an interesting discussion - almost entirely Indian funded using up the funds we "owed" Russia as their part of the financing..
Uses Indian tech for all the ground eqpt - FCS, carriers/TELs, command and control. "Core" - ie the missile - dominated by Russian expertise on the Yakhont program - only few key avionics items like navigation system, onboard comp derived from Prithvi.
Now - as a program - 100% success in meeting service requirements etc.
However, success bred complacency and the folks did not move on indigenizing the seeker/propulsion until a salvo from Unkil's Harpoon program almost sunk the programs Army procurement on cost grounds. Now they are doing it.
Russia of course, showed us the finger in a sense and exported its own variant, the Yakhont since all the stuff in it was from Russia (and why should they subsidize the Indian MIC).
IMHO - Brahmos shows the pros (rapid development/deployment) and cons (limited indigenization/control/cost) of JVs. They have to be constantly monitored and program objectives changed over time, as conditions change.
Other great hope was (is?) Barak-NG aka LRSAM for the IAF/IN. Seems to be finally moving. Time will tell if we got a good deal.
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__________________________________________________Karan M wrote:Problem is they are..ravi_g wrote:But this does not mean that the foreigner MIC owners (not the goddamned MNC owners) are playing games of subverting the MIC of others and buying up good ideas.
There has been a huge lobbying effort underway now for several years on the following tacks:
1. DRDO/DPSU complex/entire Indian MIC - drop it entirely. Constant attempt and expect it to continue. DRDO in particular is considered a big pain by many folks because they run India's strat programs, and folks are worried about tech transfer between programs. Also because they are the originators of many of the critical ideas such as offsets, stringent TOT restrictions (as versus screwdriver giri etc).
2. Kill current high profile programs and buy foreign equivalents. G vs LCA. Luckily, IAF went for all out capability, and that was skipped. Has succeeded for T-90 vs Arjun, as much as we may crib.
3. Kill the offsets program and TOT programs both. Offsets are being targeted via the argument it raises costs of the program (nevermind + impact on industry itself) and TOT via citing the inefficiently run earlier TOT programs which were shoddily drafted and poorly executed.
There is a famous saying - when a lot of folks turn up in opposition, you are doing something right.. much the same here.
The usual suspects - arms traders and their media pimps - have been baying a lot on 1-3. It'll continue. This FDI stuff is another in a long line of such attempts.
The acqiuisition of foreign tech is no big thing BTW. The offsets proposals mean the foreign firm will have to grow its Indian partner to get its work done.
They did it for the Chinese, now its our turn.
Ditto if TOT is open to pvt and public both, see the results.
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__________________________________________________Karan M wrote:BTW, offsets are intended to allow the defence industry to scale up. There was a lot of hue and cry from the same quarters (think tanks, rtd blimps etc) that offsets would benefit only the DPSUs. Reality - largest chunk of the offset contracts went to pvt SMEs.
Thankfully, even the MMRCA Offsets contract clause was not relaxed.
That was the first "battle" won.
Next of course is this second round, wherein the SMEs themselves are being targeted, and notes being prepared to state that 100% FDI will do the trick and nothing else.
Its blatant really. Nobody wants to transfer TOT or provide technology for offsets to India, but are being forced to via the strict DPP - so this latest "wild card entry" to somehow let 100% subsidiaries in India do the trick.
Sure..
As matter of fact, if the offsets contracts are strictly enforced, that itself will lead to boomtime in Indian industry - private especially.
The onus is on the winning contractor to get the job done, identify an Indian partner and have things sorted out within a fixed deadline. Some leakage is inevitable, but even if half the contracts fructify, we will be seeing a rapid change for the better.
What is holding up the entire movement, simply put, is the lack of decision making at both the MOD level & the shambolic movement at the Defence Offsets Mgmt agency - even so contracts have been put in place and orders are in delivery.
But if we had better movement, such trojan horses of 100% FDI would have been dismissed with contempt earlier on itself.
The biggest farce is the Arty Upgrade program. Thousands of guns required, Indian companies willing to invest, yet no movement.
__________________________________________________Karan M wrote:Sorry but those SMEs are delivering products on a commercial scale. We are talking of preventing these commercially viable SMEs from being transferred lock, stock and barrel to the benevolent folks at Dassault, who charge an arm and a leg for their patented technology & will then claim ownership of long term support as well.Cosmo_R wrote:The problem is that until these SMEs get started and deliver products on a commercial scale, we'll be importing. It is THAT import stream that would be very useful to target. Example, allow Dassault to invest 100% in the supply chain in India on the condition their India employees are 95% Indian. There will a spinoff of know how at the individual level and after a few years a significant number will start their own parts and sub assembly businesses which can then benefit from grants and so on.
What good is 100% local ownership of OFBs that import everything and screw it together (with OEM screwdrivers)? Its neither fish nor fowl. My take is that with 100% FDI: the investors take the risks without any guaranteed contract from the GoI. Right now, many of our OFBs are an employment scheme based on an import stream.
Irrelevant, because we are speaking of SMEs and those pvt firms which do make items inhouse and supply it to the OFBs, and not the OFBs themselves. As matter of fact, the DPSUs have outsourced a lot of the work they should be doing to the SMEs.
__________________________________________________Karan M wrote:So, are you Modi? Have a reality check please. Modi is a PM. Do you think he has the time to understand or even contemplate the pros and cons of each issue beyond a point? That is why he has ministers or even advisers. The debate here tends to be more detailed...last I remembered, nobody here talks in bullet points either. Your comment was pompous.Supratik wrote:@karanM,
Modi wants all-India projects to be explained in 10 slides. Anything longer is a rant or rambling.
If you are unable to communicate politely, it will be taken personally. Simply put, the issue is at your end. You seem to think I owe you detailed explanations and with nice soundbytes wherein you sit & decide what to accept and what not to, and you are entitled to it. This for a topic that is so detailed that it takes hours to even move past the first look. Sure!You shouldn't take it personally.
Concrete examples?Anyway, unless you are working inside DRDO or other orgs and unless there are concrete examples I will still call it CT.
Why are you even debating this issue when by your own admission you don't particularly understand or even follow the military forum?
There are threads there which have tracked specific examples of glaring malfeasance and you want to be spoonfed information when told explicitly that it is not in Indian interests to debate specific manners in which specific Indian programs can be harmed by these actions and also, that by naming the organizations responsible for having committed dodgy stuff in the past (some of which are active), there are wider repercussions.
Boss, go do some reading, talk to people, step out of your own cocoon, in whatever field you are, but are completely unaware of the dirt, or the elbow grease that percolates or makes the Indian defence sector, where there are hard won successes as well. One doesn't even have to be in the field directly to be aware of the details of many of the things being discussed.
I am not going to spend any more time making nice "Ten minute presentations" for you either..
Ah, so now you get the point in bold. That is all, zimble. Nothing more.However, your argument about protecting Indian innovation, technology and companies is correct and I am in agreement with it. If I am not mistaken most countries with MIC don't allow their companies to be bought. As regarding corruption in India you wouldn't be able to do even your morning Pakistan if you worry about corruption because even the best policies are corruptible. Having said that there are two things a) I don't think the 100% FDI is automatic so India will have control over what comes in, b) we haven't seen the fine print yet so we don't know what the terms and conditions are. If a foreign company wants to set-up an Indian subsidiary and sell stuff I don't see any problem in that. The picture will be clearer as we go along.
Regarding corruption, the amount of corruption in India dwarfs that in other countries which is what makes laws and relying on them infeasible. That is the point. You were saying laws will do the trick, when coupled with policy relaxation, as they will hedge the risks - but practise tells us they wont.
You need to retain current policy of not allowing foreign acquisitions instead and stick to it.
Instead of making complex laws which you can't enforce anyhow. Try arm twisting the French when your privates are in their hands thanks to the Mirage/Rafale/Milan etc. A few months delay in spares and our serviceability will go from 80% to 40%, and so does our warmaking potential, and India can't replace $130 Mn aircraft either.. such is the way of the arms trade.
__________________________________________________Karan M wrote:BTW, you want rapid advances in Indian industry? Set up clusters in each sector with DRDO, pvt industry, services & DPSUs. Indian ownership, Indian control, accountability (user involved from day 1). Also, services to be told to ramp up engineering capability in terms of manpower and program management personnel. Our EXISTING budget alone is sufficient to sustain a huge amount of movement. But its not done. Its not rocket science to conclude there was a gravy train in imports being run from RGs era when the prince figured out foreign exchange via imports could easily be tapped using the emotive national security angle and hence even projects like the OFB (expanded after '71 when foreign powers refused to even give us basic ammo) became vehicles for getting such nice contracts in.
Heres another recent example. Army runs short of FSAPDS. Existing DRDO program abandoned, citing its "behind", never mind, long term promise & requirements, IMI tapped, that completely fails, MOD then blacklists it for corruption, India runs to Russia for new FSAPDs at reportedly 3-4X the actual cost (UOR- Urgent Operational Requirement) and guess what, since that "new FSAPDS" is actually a decade old, Army also wants tens of thousands of million $s of worth of missiles imported and "license made" at BDL. The same missiles which failed earlier in trials. DRDO program only restarted much later, with movement/impetus lost, further delays baked in to the program via tardy approvals
Who benefits? Cui Bono?
How did this entire chain of comedy of errors begin? Why was the local FSAPDS program not kickstarted in between? Why is it that we need to import over expensive missiles which are vulnerable to countermeasures as a backup to main gun rounds which may be obsolete in a decades time (and they are already obsolete against western tanks).
These games of ARTIFICIAL SCARCITY are then used to portray the line that a) Imports are the only solution B ) Only FDI etc can solve the issue with benevolent providers from abroad fixing the issue.
Nobody ever asks why is it that FSAPDS manufacture was not opened up to L&T or TATA (say) to work with DRDO and not just OFB. Why is it that we never worked with the Germans for FSAPDS tech or any one else who are willing to work with even the Poles (who are spending peanuts in comparison). If NATO is an issue, why is it that we are buying obsolete ammo for a flawed platform, the T-90 from the Russians? How it is that Russia would work with us for Brahmos but not FSAPDS? And even in Brahmos, why is that great success of a program only now looking at full scale or major indigenization of the missile propulsion and seeker itself, so late? If the Russians agreed to it now, why not earlier?
Instead, we are told that opening up the defence sector to FDI is the solution. Govt can wash its hands off the investments. Yeah right..
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Karan M wrote:When you dismiss opinions about a topic you clearly know nothing or little about as rants, expect to be called out on it. Your rejoinder about not making personal attacks or whatever would have had some grounds to stand upon if you had not made such a patronizing post to begin with.Supratik wrote: You don't need to make personal attacks. I am highly qualified in my field.
I would not have responded forcefully either. You could have merely asked me to elucidate further on the points you didn't grok/agree with.
But lets proceed to the facts and keep personal acrimony (which is useless and counter productive) off the table.
You have not understood what I am saying.From what I could gather from what you wrote I have already said that Indian IPR should be protected and for that we need laws if they already don't exist.
It is not about IPR alone. This IPR stuff is money is the be-all, everything that can be catalogued should be sort of attitude which is completely orthogonal to security considerations.
Lets get to that later.
First, lets not have the notion that it is new laws which will make a difference, when
a) existing policy can get the job done without having to depend on more laws and
b) relying on laws as a primary driver is dangerous when current laws are being violated left right and center without lack of adequate enforcement
c) it is policy (e.g. DRDO deliberately reaching out to MSMEs from Kalams time) and now even DPSUs - which is working
Again, see how the offset policy was violated (Ajai Shukla has an article on that too as I recall) to do all sorts of dubious stuff. Even the AW deal for which a bunch of bigwigs were caught out, used offset laws to do money laundering.
This BTW is the offset policy which HAS done good and IS necessary. Its the one good thing that came out of the UPA. Its been revised year after year and was still misused.
The misuse was tacitly agreed to by the import starved services and egged on by all the administrators who greased the wheels for their personal benefit. So what does that tell us?
It means laws alone in a notoriously creaky edifice such as India's are of limited use. The spirit of the law will be completely misconstrued and every sort of loophole found and misused.
So if tomorrow the policy/law is completely misused, who will bell the cat, when we don't even handle the issue when existing agreements are violated openly? We dont have the strength to tackle any foreign Govt on existing deals for the most part.
Instead, a good policy which does not tinker with existing laws and strengthens them, as versus replacing them, is the need of the hour. Good policy in that we develop our own capabilities, forcing foreign firms to work with us, for our market and they can't stop our own growth either.
If no Indian SMEs are open for acquisition, if Indian imports for complex platforms which cannot be built only from local resources remain open, and that policy states Indian participation is critical, everyone from aunt jemima to victoria homme will send their execs to India to work with Indian partners to get a share of the defence pie. China did this.
Next - the claim that its all about "IPR". No its not!!
We DONT want or NEED any foreign entity to:
a) Know intricate levels of our current technology across the spectrum
b) Have access to our current ecosystem
c) Own any part of our current ecosystem
We need a firewalled industry which operates on ITS own terms, accesses technology paid for by the Indian taxpayer to India's benefit and gets whatever it can gain from the WW industry.
That is what the US does. The French do. The Russians do. The Chinese do.
For instance, Indian firms cannot procure Thales. France will say get lost.
India need not be some model of globalization or capitalism that allows its vendors to be bought out so that next time, any ambitious program is launched, the Indian SME says "sorry sir, we made x widget for you, and x+1, but now, y is not available unless Shri Duckbottom who sits in Foggy Dum can clear it." And by approaching Foggy Dum for clearance, we - in India -
a) Inform everyone about what we lack (so that going forward they can continue to work on it)
b ) Are now dependent on FD for a long while to come
c) Any attempt to replace FD with a local Indian vendor can be similarly torpedoed when that vendor is bought out.
d) DRDOs entire budget is at the$1-2 Bn level. Its peanuts. Using those peanuts they have developed Rs 1 Cr - 2Cr SMEs across the spectrum. Those firms can be bought out for trifling amounts by the MNC groups which spend 10x that amount on protective patents.
e) By allowing access to these firms we also open up ALL our systems to foreign intervention. It does not take magic to figure out that system A runs on X OS sourced from the open source community. That it uses Y chip. However, if you pair that knowledge with actual implementation details, the hardware details, access details, suddenly you have enough data to cripple the entire system. See Stuxnet and how it was used. That is btw an infrastructure attack. To develop systems targeting tactical systems would be childs play in comparison.
f) Usual excuse is hey we import anyways, so e) shouldn't be an issue. Guess what, we have STILL managed to overcome e in a substantial fashion using the SME base. However we now risk that!
If a L&T purchases a SME and L&T remains Indian, good!! If a foreign firm purchases an Indian SME or a L&T defence SBU - should not be allowed period.
We are NOT an ally or a client state of ANY of the other powers, other nations and their joined at the hip stuff is hence not something we should be replicating.
The alternative? We import those systems, and become dependent while our systems are swadeshi outside, videshi inside.
If your own sector is not defence oriented, its success or not is not directly applicable to Indian defence sector which has severely different constraints and risks.I am not an expert in the field of defense (I don't contribute to the mil forum although I read it) but in my field FDI has enormously benefited India. There are companies mushrooming all over India some of whom are doing cutting edge stuff unthinkable even 10 yrs back. Many of these are run by Indians previously working for MNCs. Since you are an expert on this subject I will also be interested for my own GK to know specific examples from the Indian defense sector where Indian companies have been bought up bending rules, their IPR taken over and have intentionally or inadvertantly disrupted Indian programs.
Further, I am not giving specific examples or even specific names for a reason which is why I prefer this discussion remain in GD.
A) By telling which firms are particularly critical , its painting a bulls eye on them. Similarly, the firms which have been targeted in the past & talking about how it affected us, is similarly openly admitting those tactics worked. Why would I mention those specifics so that those who used those methods knew which worked and which didn't, so that they could replicate them?
By telling which firms are acknowledged by some to have gamed the system (hint: check out who pushed for all these rule relaxations), I open up the forum to legal challenges from these packs of predatory animals.
c) One of the big problems that has happened and which makes the no acquisitions policy critical is to benefit from the offsets policy many MSMEs and others have widely publicized their capabilities. This was done with the tacit understanding that they would still remain within the gamut of Indian control. This retarded move to allow 100% FDI and acquistion now torpedoes that intent as now sufficient information exists to determine which companies are working on specific programs.
d) Worst part is the amount of leverage foreign firms have, they can easily swamp our entire sector with a blanket purchase policy. We can do nothing to stop it as our inability to even police our current system is thoroughly inefficient.
e)Last but not least, I point out this quote about how keenly our setup is scrutinized. One DRDO personal - "whatever we wanted to import they would not give us, when we developed it, it would be available". This is a consistent policy followed by the entire arms cartel when it comes to India - west or east. Only when we started making offers they couldn't refuse ($$) they started giving us stuff we really wanted. Even there, they want to do it on their terms.
We shouldn't be playing their game. They should be playing ours, sir!!
I am not going to openly discuss these topics on an open forum, thanks much.I think RahulM has a good suggestion to take it to the mil forum where there are many experts on defense and there the pros and cons can be better discussed.