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TUESDAY, 8 JUNE 2010
New MoD policy to boost Indian arms industry

Production of Airbus airliner doors at Hindustan Aeronautics. HAL has not been able to move up the technology chain, even after years of supplying items like doors.


By Ajai Shukla
Business Standard, 8th June 10

Facing sustained criticism for its continuing dependence on foreign weaponry, the Ministry of Defence (MoD) is finalising an ambitious new policy for building up India’s defence industry, both public and private.

The MoD’s Secretary for Defence Production, RK Singh, has told Business Standard that the country’s first-ever Defence Production Policy mandates that weaponry and military systems will be identified several years into the future, to allow Indian companies the time needed to develop and manufacture them. The identified systems will be allocated to specific Indian defence companies as development projects. The MoD will lay down clear time targets and provide 80% of the cost that will be incurred.

“We have consulted the army, navy, air force, the Defence R&D Organisation (DRDO), academia, FICCI, CII and ASSOCHAM… and noted their comments”, says RK Singh. “The new policy will come up before the Defence Procurement Board (DPB) for consideration on 11th June. Then the Defence Acquisition Council (the MoD’s apex body on equipment acquisition) will clear it. Within two to three months, the new policy will be implemented.”

The current rulebook for defence procurement --- the Defence Procurement Policy of 2008 (DPP-2008) --- already lays down a “Make” procedure, which allows the MoD to allocate and fund projects through Indian industry. However, this has not yet led to any domestic orders for defence equipment, partly because equipment requirements have never been identified in advance, to give Indian industry the lead-time to develop them.

Pointed to this fact, the Secretary for Defence Production asserted, “But now it is going to happen. We have to make it happen…. because now our industry has the strength. It is interested. We will ensure that the ‘Make’ procedure becomes very friendly. More and more equipment will now come into the ‘Make’ procedure.”

Explaining the working of the new policy, Secretary RK Singh says that Indian defence companies will be encouraged to register their technological capabilities in a MoD databank. When a need is anticipated for the army, e.g. a futuristic Main Battle Tank, the MoD will survey the industry and identify at least two major companies, to which it will award development contracts. These two prime contractors, working with a tailor-made consortium of companies, will develop a separate tank prototype and the MoD will select one, or even both, for mass production.

A similar system of competitive development contracts is followed by the US defence establishment.

The new Defence Production Policy is rooted in the MoD’s realisation that its longstanding acquisition model of building weaponry in India, through Transfer of Technology (ToT), has failed to generate indigenisation. Real indigenisation, the MoD now believes, comes from designing weaponry, not just manufacturing foreign designs.

“Look at what has happened historically”, says RK Singh. “The (Indian defence) industries which came up, with some exceptions, are manufacturing products that were designed abroad, not here. Our industry has been in the habit of taking transfer of technology and building on license until the product dies a technological death. There is no expenditure on R&D and no technology absorption. And since the most important components come from abroad, the vendor can turn off the switch any time. If India wants to emerge as a world power, we have to start developing our own products. That is what our industry will have to learn in partnership with the MoD.”

It remains unclear how large a foreign component will be allowed in defence systems developed under the new Defence Production Policy. While the current “Make” procedure allows 70% foreign component, Business Standard learns from MoD sources that the current thinking is to bring this down to “less than 50%”, along with the proviso that the Intellectual Property Rights of the foreign component must reside in India.

Indian private companies are treating the new policy with some scepticism. “The MoD has always manipulated policy to favour the defence PSUs, which are the main beneficiaries of the old ToT practice”, points out the CEO of a private Indian company that is active in defence. “Throwing out ToT and demanding real R&D will leave the DPSUs in the cold. Then we’ll see whether the policy stays or goes.”

http://www.hindustantimes.com/News-Feed ... 29002.aspx
Army officers running guns: Govt
Several serving and former army officers are involved in illegal sale of prohibited weapons and imported arms to criminals. Some arms dealers and Rajasthan government officials in the border districts of the state are also party to gun-running. In an affidavit filed in the Supreme Court, the

defence ministry said the court of inquiry (CoI) into the circumstances under which some serving/retired army personnel sold/purchased arms and ammunition of various calibres had been finalised. Necessary follow-up action was being taken against the delinquents, it said.
The CoI was ordered three days after the Hindustan Times reported on September 5, 2007 that army officers were selling their personal weapons in the grey market with the help of a cartel of ammunition dealers in Rajasthan’s border districts.

The ministry, however, said, “All the cases of sale of weapons, except a few, involved only two districts of Rajasthan — Bikaner and Sriganganagar.”

The affidavit was in response to a public interest petition filed in 2007 by advocate Arvind Kumar Sharma, who had sought a CBI probe into the racket.

Prohibited/non-service pattern bore weapons obtained from army personnel were being sold to general public and criminals, Sharma said.

Earlier, the Rajasthan government admitted before the court that hundreds of illegal arms licences were issued to criminals, including those from Punjab, in Sriganganagar with the connivance of state officials.

In an affidavit filed in the court in March 2009, the state government admitted that irregularities were found in 325 cases, of which 227 licences were cancelled and 98 were being looked into.

The Sriganganagar police had registered seven cases. Two additional district magistrates and employees of the district collector’s office were made accused and the CID (CB) probed the matter. But chargesheets had not been filed in three of these cases as the accused remained absconding, Rajasthan had said.

In at least 41 cases, arms licences were illegally issued to persons with a criminal background from Punjab.

A bench headed by Chief Justice of India K.G. Balakrishnan is likely to hear the petition on Monday.