Indian Military

The process leading up to the decision by the Indian Ministry of Defense to issue invitations to eliminate four of the six companies in the contest to win the Indian Air Force (IAF) tender for 126 Medium Multi Role Combat Aircraft (MMRCA) has large holes in its standard of diligence.

Only the the French Dassault’s Rafale and the European Eurofighter Typhoon were invited to extend their commercial bids, with the Russian MiG-35, the Swedish SAAB’s Gripen, Boeing’s F/A-18 Super Hornet and Lockheed Martin’s F-16, all left out of the contest.

While much has been written about this decision, the news of which was first broken by StratPost, questions have surfaced in the subsequent two weeks, that show crucial gaps in the diligence of the process followed by the ministry. Many of the issues arising from these questions have been earlier reported and analyzed by StratPost.

The tender process entailed the examination of the aircraft on offer on three key aspects. Firstly, the IAF was required to conduct a technical evaluation of the six aircraft, the report for which it submitted after completion last July.

The Federation of Indian Chambers of Commerce and Industry (FICCI) has published a paper in response to the solicitation of views by the Department of Industrial Policy and Promotion (DIPP), arguing for conditional increase, if at all, in the limits to investment by foreign players in Indian defense industry beyond the current limit of 26 per cent, to 49 per cent. The DIPP, in its discussion paper, was considering hiking FDI limit up to 74 per cent, and even 100 per cent in some cases.

The Indian Ministry of Commerce allowed the participation of the private sector in the defense industry in May 2001, permitting 100 per cent equity with a maximum of 26 per cent of FDI, subject to licensing. Under the Defense Procurement Procedure (DPP) 2008, limit was raised to 49 per cent FDI on a case-by-case basis. But the Foreign Investment Promotion Board (FIPB) has not, so far, approved the formation of a venture with a 49 per cent FDI component.

FICCI sees little reason to permit FDI above 26 per cent, considering the existing FDI into the Indian defense sector, saying in a statement, “The 26% FDI cap in the defense sector has already attracted top overseas defense OEMs like BAe, EADS, Sikorsky, Lockheed Martin, Electtronica Defence Systems, etc to hugely invest in India’s defense sector.