Indian Military

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.

The acquisition process for 126 Medium Multi Role Combat Aircraft (MMRCA) for the Indian Air Force (IAF) is facing delays due to uncertainties about offset policy and with vendors facing the prospect of having to redo their homework.

The IAF had submitted its report on the technical evaluation of the six aircraft competing to win the tender last summer. After this submission, the Ministry of Defense had to evaluate the offset proposals submitted by the six vendors and also compare the respective proposals for transfer of technology.

Last September, the respective vendors were invited to a review of their offset proposals by ministry officials, when they were all told that the proposals submitted by them failed to comply with the parameters set by the ministry. They were also informed at the time that in the case of offsets for third party suppliers, all vendors would need to have Memoranda of Understanding (MoU) in place with their suppliers’ suppliers as well, and that a letter to this effect would be issued shortly, which would also list out discrepancies in the offset proposals of the respective vendors.

The matter of the blacklisting of Singapore Technologies by the Indian Ministry of Defense just gets curiouser and curiouser. The arms company has contradicted the basis of the report, tabled by the Comptroller and Auditor General (CAG) of India in Parliament, on the special audit it conducted at the request of the Ministry of Defense, into the facts and circumstances that gave rise to the corruption case against the former Director General of Ordnance Factories and Chairman of the Ordnance Factory Board (OFB), Sudipta Ghosh.

The arms company had been recommended for blacklisting by the Central Bureau of Investigation (CBI) in June last year, after Sudipta Ghosh was implicated in a corruption case. A decision to blacklist was held in abeyance last December to allow trials of artillery howitzers and other weapons systems to be conducted, subject to the investigations agency’s final report.

But in January the company claimed this was not the case and that it had not, in fact, been blacklisted.