1. Eye on defence
April 2012
Dear readers,
• Indian defence budget 2012-2013: The first quarter of the New Year has witnessed some significant
an analysis 02
developments in the Indian defence sector.
• DOFA: a single window mechanism 08
Recently the 7th Defence Expo was held in Delhi in the last week
• Alenia: C-27J ‘SPARTAN’ Tier 1’s 13 of March. There was certainly some reduction in the fanfare and
glamor, which was expected following the MMRCA decision. The
• Request for Information (RFIs) 15
coinciding of the Defexpo with the financial year closing also had an
• Request for Proposal (RFPs) 16 impact with most senior level representatives of Indian companies
• List of industrial licenses (ILs) filed being present only for selected periods of time.
from 01/01/2012 TO 29/02/2012 17
The Union Budget was also presented in the Parliament on 16 March 2012. Keeping with
• New projects/investments/contracts 18 the trend the defence budget was increased by double-digit percentage points (17.6%) over
the previous year. With the MMRCA now almost certain to be signed within this fiscal, the
• Joint ventures and alliances 21
adequacy of the defence budget is likely to be tested.
• Country-level deals and initiatives 23
Last but not the least, there were a flurry of articles in all major news-papers and the
• Industry buzz 24 internet about the amendments to the Offset policy. Noticeably these amendments
• Sources 28 permitted ToT as offsets and also intro duced the concept of multipliers. However there
has been no official statement or release or document uploaded on the MoD website to this
effect.
In our current issue, we have analyzed the latest defence budget; proposed certain
methods of imple-menting the recent changes to the offset policy (official announcement
awaited) and described the Tier-1’s of Alenia Aermacchi’s C-27J “SPARTAN” platform,
which is in contention for multiple programs in In-dia.
We hope you enjoy reading this issue of the Eye on Defence. It has been our constant
endeavor to make this publication more relevant to you and would appreciate your
comments and suggestions in this re-gard.
K. Ganesh Raj
Partner and Leader
Aerospace and Defence Practice
2. Indian defence budget
2012–13: an analysis
The Government of India (GoI) in its Union Budget 2012-13 has earmarked INR1,934 billion
(US$42.97 billion) for defence, increasing it by 17.6% as compared defence allocation of
INR1,644 billion (US$36.536 billion) in 2011–12. The defence budget 2012–13 accounts
for 12.97% of the total government expenditure and 1.9% of GDP. INR795.79 billion
(US$17.68 billion) has been allocated for capital expenditure and INR1,138.28 billion
(US$25.29 billion) has been allocated for revenue expenditure. The attached diagram
shows the defence budget allocations (including capital and revenue) in the last three years:
Defence budget = Capital + Revenue
50
42.97
45
Amount in USD billlion
36.75
40 32.74
35
30 25.29
25 21.38
19.41
20
15
10 17.68
13.33 15.37
5
0
2010 - 2011 2011 - 2012 2012 - 2013
Capital Revenue Total defence budget
Share of services
In 2012–13, the Army with an approximate budget of INR969.43 billion (US$21.54
billion) accounts for the highest share of around 50%; at a distance followed by the Air
Force with INR475.59 billion (US$10.56 billion), which accounts for 25% of the defence
budget and the Navy, with an approximate budget of INR217.58 billion (US$4.83 billion),
which accounts for 19% of the total defence budget. Defence Research and Development
Organization (DRDO) with INR106.35 billion (US$2.36 billion) allocation, and ordnance
factories (OFs) with INR4 billion (US$0.088 billion) allocation together account for 6% of the
total budget. The pie diagram depicted below gives us the percentage shared by defence
services in Defence Budget 2012–13:
Eye on defence | 2
3. Share of defence services in defence budget 2012–13
Indian Air Force Indian Navy
24% 19%
OF+DRDO
6%
Indian Army
Miscellaneous
50%
1%
Capital expenditure
The capital expenditure, which is meant for acquiring new weapon systems and platforms
has been scaled up to INR795.79 billion (US$17.68 billion), a 15.7% hike from last
year’s capital allocation of INR691.99 billion (US$15 billion). However, the actual capital
expenditure (revised estimates) was INR661.43 billion in 2011–12, which will mean that
actual hike is around 20%. In other words, this year the MoD surrendered INR30.56 billion
(4.41%) as unspent from its capital head. But, the overall share of capital expenditure as
a part of total defence expenditure has actually fallen to 41.11% from 42.09% from the
previous financial year.
Share of capital: Revenue 2011-12 Share of capital: Revenue 2012-13
Capital expenditure Capital expenditure
42% 41%
Revenue expenditure Revenue expenditure
58% 58%
Eye on defence | 3
4. Currently, all the three segments of the Armed Forces, the Army, the Navy and the Air
Force, are on a transformation drive to acquire platforms and weapons with cutting-edge
technology, which are expected to be finalized in 2012–13. The graph given below shows
the sub allocations and percentage share, out of the total capital outlay allocated to the
different services:
Capital expenditure 2012–13: Service wise The capital acquisitions allocations has
to cater for committed liabilities for the
Miscellaneous year from the orders signed previous
2%
Naval Fleet years and are likely to be incurred on
17% IA account of the fresh schemes, during the
24%
financial year. The committed liabilities
OFB as on date are around 65%–70% of the
1%
total capital outlay, thus leaving around
DRDO 30%–35% only for new schemes. Under
6% the capital head, of the INR795.79 billion
IN (US$17.68 billion) nearly 70% or around
IAF 12% INR550 billion (US$12.22 billion) will
38%
be for committed liabilities, thus leaving
around INR250 billion (US$5.55 billion)
for fresh purchases. With the impending
IA: Indian Army; IN: Indian Navy; IAF: Indian Air Force; defence acquisitions, the ability of
DRDO: Defence Research & Development Organization; the GoI to complete new purchases is
OFB: Ordnance Factory Board
comparatively more limited than before.
Among the deals in the final stages for
which the capital expenditure is likely to be spent upon include 126 fighter jets for US$20
billion, six mid-air refuelling aircraft for US$2 billion, 75 trainer aircraft for US$1 billion,
US$647 for 145 Ultra Light Howitzers (ULH), 197 utility helicopters for US$750 million, 22
attack choppers valued at US$600 million and GE F414-INS6 engines for indigenous Light
Combat Aircraft (LCA) Tejas and Harpoon anti-ship missiles estimated at US$170 million.
Besides, a US$1.18 billion deal to procure 490 MICA missiles for Mirage 2000H multi role
fighters, 42 additional upgraded Sukhoi-30 MKI aircraft, around 40 warship of the Navy,
including refurbishment of an aircraft carrier and nuclear-powered submarine, are under
construction at home and abroad.
Revenue expenditure
Revenue expenditure 2012–13: Service wise In the budget for 2012–13, the
revenue expenditure, which caters to
DRDO
5% the everyday “operating” expenditure
IN of the three services has been raised
11% IAF to INR1,138.28 billion (US$25.29
16%
billion) as compared with last year’s
revenue allocation of INR1,035 billion
(US$23.62 billion).
IA
68%
IA: Indian Army; IN: Indian Navy; IAF: Indian Air Force;
DRDO: Defence Research & Development Organization;
OFB: Ordnance Factory Board
Eye on defence | 4
5. Defence budget 2012–13: key statistics
The defence budget for 2012–13 has been increased by 17.6% over the previous year’s
allocation. The increase in the defence budget has the following impact on almost all
key components (see Table). On the positive side, however, the ratio between revenue
expenditure and capital expenditure has improved toward the former.
Comparison defence budgets, 2010-11, 2011-2012 and 2012-13
2010–11 2011–12 2012–13
Defence budget ($ in billions) $32.74 $36.75 $42.97
Growth of defence budget (%) over 3.98% 11.59% 17.63%
Previous year
Revenue expenditure ($ in billions) $19.03 $23.62 $25.20
Share of revenue expenditure in 60% 58% 59%
defence budget (%)
Capital expenditure ($ in billions) $11.95 $13 $17.29
Share of capital expenditure in defence 40% 42% 41%
Budget (%)
Growth of capital expenditure (%) 25.40% 15.33% 15.70%
Revenue vs. capital expenditure
The percentage share of capital allocation in the defence budget as compared to revenue
allocation has seen a decline this time. This growth has, however, been driven primarily
because of the increase in pay and allowance of the armed forces, which has increased by
27% to INR631.82 billion (US$14.04 billion), accounting for around 46% growth of the total
defence budget.
Budget utilization
The defence budget for 2011–12 has been revised upward by INR65.21 billion (US$1.44
billion) to INR1,709.36 billion. However, unlike the revised estimate for 2010–11, in which
both the revenue expenditure and capital expenditure were higher than their respective
budget estimates, the revised esti-mate for 2011–12 shows an increase in revenue
expenditure (by INR9,576.32 million or 10.06%) and decline in capital expenditure by
INR3,056 million (or 4.41%). Thus, this year the MoD has returned about INR30.56 billion
(US$0.67 billion) but fresh major purchases in 2012 are expected to be executed in 2013,
which gives an impression that the next revised capital budget may even exceed the
earmarked INR800 billion (US$17.77 billion) in 2012–13. Returning of unspent capital
funds shows a lack of planning, as is evident from the past.
Utilization of allotted capital budget (amount in USD billion)
2007-2008 2008-2009 2009-2010 2010-2011 2011-2012
$=45 INR BE RE BE RE BE RE BE RE BE RE
CE 9.32 8.38 10.67 9.11 12.18 10.63 13.33 13.52 15.38 14.7
BE-RE 0.94 1.56 1.56 -0.19 0.67
CE-Capital Expenditure BE-Budget Estimate RE-Revised Estimate
Eye on defence | 5
6. Capital budget: Spending
18
16 - 4.5%
1%
Amount in USD billion
14
- 13%
12 - 15 %
10 -10%
8
6
4
9.316 10.67 12.18 13.33 15.38
2
0
2007 - 2008 2008 - 2009 2009 - 2010 2010 - 2011 2011 - 2012
Budget estimate Budget unspent Budget over-spent
It is to be noted that the procurement process has thus picked up and the allocations have
been fully committed as against surrender earlier as shown in the table and figure above.
The revised estimate for 2011–12 also shows only marginal surrender of around 4%.
Impact analysis
India has an annual capital expenditure of around US$15 billion, and is the world’s biggest
importer of defence equipment, accounting for 10% of global arms imports between 2007
and 2011. While India’s defence imports are officially put at 70%, the actual figure is
considerably high and is likely to be around 85%, if imports made quietly by defence public
sector corporations (DPSUs) are included.
Although India’s defence spending has more than doubled in the last five years — from
INR960 billion to INR1,934.07 billion — but the military establishment still feels that the
financial outlay should be further increased to beef up capabilities. In real terms, this
increase amounts to INR289.92 billion (US$6.44 bil-lion) in the total outlay for defence
for 2012–13 compared to the defence budget for the previous year (2011–12). However,
if we take the revised estimates of the budget 2011–12 then this budgeted estimate has
seen an increase of 13.1 % from the previous year’s revised estimate of INR1,709.36 billion
(US$37.98 billion) in 2011–12. The GoI’s fine balancing of resources, rising inflation and
the exchange rate variations (ERV) leading to sharp devaluation of the Indian rupee against
the US dollar, have caused the defence service’s modernization budget to be effectively
reduced for the first time in decades.
The share of this year’s defence budget, which accounts for only 12.97% (approx.) of
the total Central Government’s expenditure for the year 2012–13 has seen a decline
as compared to last year. Also, the money allocated for defence is below 2% of the
GDP where as a healthy defence budget is expected to be between 2.5% and 3% of the
country’s GDP. This year, the defence budget constitutes 1.90% of the GDP (estimated to
be INR101598.84 billion (US$2257.75 billion). It was 1.83% of the GDP in 2011–12 and
was 2.2% in 2010–11. What is significant is that it is the second successive year when the
defence budget was less than 2% of the GDP. The figure given below shows the decline in
GDP in defence budget.
Eye on defence | 6
7. Share of defence budget in GDP
2.5
2
In percentage
1.5
1
0.5
0
2008-2009 2009-2010 2010-2011 2011-2012 2012-2013
The armed forces, and even the Parliament, have been asking for an allocation of 3% of the
nation’s GDP to defence for a long time but the projected GDP of this year falls short. It is
to be seen that if our economy grows at around 8% per annum, it will not be difficult for the
GoI to allocate around 3% of GDP for National defence.
A closer look at the growth of the capital budget for 2012–13 would reveal that the
focus is entirely driven by the Navy, which has got a 72% hike (to INR241.51 billion) in its
modernization budget. The Air Force’s modernization budget has increased marginally
(by 0.5%) to INR285.03 billion, while the Army’s has declined by 3% to INR138.04 billion.
Trends in service-wise allocations, especially in capital budgets, suggest that India’s current
military modernization is weighted heavily in favor of the Air Force and the Navy, which
together account for INR540 billion approximately (US$12 billion). This conforms to a
larger defence landscape where the aerospace as well as maritime domains are likely
to play a critical role in future. However, what is of concern is the increasing revenue
allocation for the Army at the cost of capital acquisitions. The Army’s modernization has
already been hit by cancellation of major purchases, especially in artillery, armored and
soldier modernization and combat helicopter equipment. The obsolete air defence systems,
shortage of tank ammunition and deficiencies in night-fighting capabilities has adversely
affected the Army’s capabilities. Unless the MoD catches up with at least replenishment
requirements, the Army is likely to lag behind in overall modernization, which in turn will
cause more problems.
Notwithstanding above, the strategic shift in the threat perception from conventional war
to asymmetrical challenges have to be kept in mind during resource allocation besides
maintaining a fine balance be-tween defence and development. The eventual objective of
war is to break down the adversary’s economic prowess by neutralizing strategic assets.
Our endeavor should be to focus on those areas as well. The defence forces will do well in
case they rationalize the tooth-to-tail ratio. Time has come to discard the baggage, which
are not required in the present operational environment.
Note: The conversation rate for $: INR has been kept at 1:45 for sake of uniformity and standardization with
the previous figures.
Eye on defence | 7
8. DOFA: a single window
mechanism
Background
India is probably the only country in the world that has an institutionalized mechanism for
facilitation of Offsets. The MoD clearly lists out the nuances of the policy, its procedures;
etc. Yes there is scope for improvement, but the transparency shown by the MoD cannot
be overlooked.
The first DPP that included Offsets implementation was promulgated in 2005 but the first
effective DPP in this regard is always regarded as DPP 2006, wherein detailed guidelines
for implementation of offsets discharge was incorporated as part of DPP 2006. At that
time it was envisioned, most appropriately, that there is a need for a government agency
that is likely to act as a facilitator for foreign OEMs and Indian industry alike. Here was a
government that included consultancy‖ per se as one of the functions to take this great
―
initiative forwards. The thinking within the government then was to create a vibrant
structure, yet provide the OEMs with all possible assistance to ensure the success of
implementation in Offsets. If one observed the functions and scope of work assigned
to the DOFA then, it is evident that this single organization was intended to work hard,
collect and disseminate information, provide Advisory services to the industry as well
as to the government arms in this business, provide for an e-solution by creating and
sustaining a dynamic web site, be the front end for facilitation and yet remain in the
background to aid in the decision-making process of the acquisition under consideration.
Eye on defence | 8
9. How it all started
Soon after the promulgation of the DPP 2006, DOFA was founded and was established
as part of the DDP. A small organization was put in place headed by the Joint Secretary
(Exports). Soon after, a web-site was also launched, which included the extract of the DPP,
the procedure for implementation of offset guidelines, list of companies that required an
industrial licence and a few interactive features for queries. DOFA was a single window
advisory for the Indian defence industry and the various associations such as CII, FICCI,
ASSOCHAM and foreign OEMs.
DOFA, in its envisioned form (of having members from the industry associations, and other
stake holders as a multi-disciplinary organization), existed for not more than three months
or so when all the members as indicated in the policy were invited for DOFA meetings. Most
probably two such meetings were held after which it felt that such an extended body was
not was really required. DOFA really meant the Chairperson, who headed the organization
and the PO (CAP) under the Director P&C, who was assigned the additional responsibility of
Offsets as well. This lean organization was effective in the formative years and provided the
single point advice to the Services (TOEC), the MoD(CNC) and the industry.
The effectiveness came about from the singular focus that DOFA maintained till then, To ―
be a credible Advisory and Facilitate in implementation, unmindful of authority. The name
‖
DOFA is self-explanatory, it is a facilitation agency, and strives to provide service, provide
information and advice to all the stakeholders.
Lost focus
The years 2006, 2007 and early part of 2008 witnessed fructification of some major deals
such as the Naval Fleet Tanker, the Maritime Reconnaissance and Surveillance aircrafts,
upgrades to the Mig 29 and procurement of Helicopters among others. These were about
eight or nine in number and accounted for more than a couple of billion dollars in offsets
alone. Despite such major programs having been finalized and many more under process,
DOFA was never strengthened to effectively take on the increased work-load. Revisions to
DPP 2006 were at the behest of some very sound feedback from the environment, which
included a procedure for Banking of Offsets credits and removal of the compulsory licensing
condition to establish the eligibility of the Indian Offset partner. At this juncture, instead of
strengthening the DOFA, it was felt more prudent to introduce yet another organization in
the DDP (someone called Director S1, hitherto looking after supplies wing under the Joint
Secretary (Supplies), in the DDP) to be made responsible for banking of offsets.
Due to this new structure, several banking proposals that are in the queue, only two have
been approved even after four years of introduction. The crux of this matter can possible
be traced to the diluted responsibilities in the new structure and as a result, one of the
most important tools to be introduced in the offset policy is yet to truly play its role in offset
discharge.
Eye on defence | 9
10. What is needed?
A sharp focus is expected of DOFA to enable the organization to discharge its functions.
Any policy, however well it is intentioned, and however well it is drafted, can fail, if the
original goals are lost down the road.
• A single-window approach, for the industry to seek guidance and the necessary
support in their endeavors to be able to efficiently exploit this opportunity provided by
the offset policy
• Integrate the strengths of the government and incorporate a holistic approach
• Strategize the concepts in implementation before promulgating yet another policy and
structures
Implementation strategy
One of the questions that emerge is, should DOFA remain a facilitation agency or does it
―
have some merit in upgrading itself onto an authority of sorts?
‖
Considering the enormous amount of money involved in the procurement process and
subsequently in offsets, many analysts have put the figure of offsets at US$5 billion in
the next three years, the numbers involved are of the highest magnitude, wresting all the
control of Offsets in a single hand could be potentially fraught with danger. All this money
is through industrial participation guided by the avenues for discharge as enunciated by the
DPP, in the chapter, Procedure for implementing off-sets’ provisions.
― ‖
Considering the avenues for discharge and the subsequent process for approvals, it can be
seen that there is no single agency that is completely responsible for approvals. This has
advantages as well as disadvantages. The pros are that, distributed responsibility does not
concentrate power in one hand and divergent views are expected to be freely aired without
being afraid of consequences. The greatest disadvantage this has is that there is no time-
bound solution. The process can be indefinitely delayed and the blame can be passed from
one to another.
Eye on defence | 10
11. A single-window mechanism is expected to resolve most of the issues and will expedite the
decision-making process. The industry, both domestic and foreign, will not have to keep
running from one office to another, in an effort to resolve their queries and problems.
DOFA needs to be focused on facilitation and be dedicated to this cause. This is an
important cause, though without any powers assigned to it. The entire industry, research
analysts and world forums seek to attribute many reasons to why implementation of
offsets in India will not succeed, both from an angle of poor implementation by the MoD
as well as the lack of capability within the Indian industry. While the capability has indeed
come a long way and will only enhance in the coming years, both through organic and
inorganic methods, focus on effective
implementation is an immediate need. The
MoD must decidedly uphold the original
cause for facilitation and encourage the
industry to exploit this important forum.
The clarifications provided by DOFA
must, in most cases, be binding on the
government while processing the cases at
a later date. This will encourage OEMs to
seek necessary advance clarification prior
to structuring their proposals.
This means, the new single window
organization, which the government
is in the process of establishing, must
incorporate a sound facilitation arm
and retain a sound Advisory inside the
government, both for internal purposes
to educate various stake holders. This
facilitation arm can create and sustain
an institutional memory and refresh
the annals of MoD and the industry in a
periodic manner. This facilitation arm can
also act as the knowledge partner to the
single window offset authority. The MoD
can do well to outsource this task to the
industry on a PPP model.
In order to be an apostle of knowledge,
the facilitation arm must have intimate interaction with the industry, both domestic and
foreign. There is also a requirement of an in-depth understanding of technology as it relates
to defence preparedness of the country. Toward this end, the facilitation arm must also
incorporate experts in the field of education, technologists and have access to knowledge
that resides in the various research institutions in the country.
Eye on defence | 11
12. The new and vibrant Offset Authority that is in the process of being formed needs to be a
single-window agency that incorporates a facilitation arm, which is also a knowledge arm,
and a separate execution arm. The Execution Arm must necessarily synergize the strengths
available in the government to form a formidable authority.
So what are the strengths available within the MoD?
DRDO is the Technology Arm of the MoD and has inherent strengths to provide for back-
bone resilience. Intimate association with the DRDO is an inescapable requirement. A
detailed knowledge of the technologies being harnessed across various laboratories, the
requirements of the Armed Forces, technologies in vogue across the Armed Forces of the
world, need to be studied and gaps identified. The new Offset Authority may not do the
entire processing, yet it needs to have a good hold on the subject for effective exploitation.
The Armed Forces do incorporate and use new technologies and have a fair idea of what
they need in combat, they must be integrated in a sound manner in this process. Thus,
Services, The Integrated Defence Staff, DRDO should be integrated into the decision-making
process.
The new Offset Authority must integrate all activities of facilitation, banking, processing and
evaluations, approvals, monitoring (for banking and post-contract monitoring), and cover
all the activities associated with offsets. This will ensure accountability and effectiveness in
implementation. The integration with the acquisition process must be full and total, leaving
no room for any delays in the acquisitions due to the lethargy of the Offset Authority.
It is time for MoD to strategize the concepts for implementation prior to promulgating
yet another policy or organization. The drawbacks of the previous organization must be
studied and analyzed threadbare and then effective counter measures must be taken and
implemented in the new structures. This will augur well both for the MoD and the industry.
Conclusion
The new offset authority being conceived by the MoD must be robust, well
staffed both in terms of quality and quantity and incorporate the best practices in
governance. From the highest to the lowest level, the staff must be dedicated. May be
at levels higher than this, multi-tasking could be permitted. DRDO must necessarily
play a dominant role in acquiring technology and be able to fill in gaps so identified as
also aggressively find the route to production.
Eye on defence | 12
13. Alenia: C-27J ‘SPARTAN’
Tier 1’s
The C-27J is a medium category transport aircraft and shares many of its systems (Rolls
Royce engines) with the C-130J which India currently posses. The C-27J is currently
looking at participating in multiple tenders that have been floated by the Central
paramilitary and armed forces. The aircraft is capable of taking off from unprepared strips
less than 500 meters long with a maximum takeoff weight of 30,500 kg. The aircraft is
designed to operate in remote areas like those in Jammu and Kashmir and the North-East
from gravel or sand as besides the twin-engines, it has an auxiliary power unit (APU) that
provides electricity and maintains pressure without the need to keep the engines running
when the aircraft is on ground.
At present, besides the US, the C-27 J has been ordered by the air forces of Italy, Greece,
Bulgaria, Lithuania, Romania, Morocco. Slovakia has also selected the aircraft.
Eye on defence | 13
14. No. Description No. Description
3 Ailerons (L&R) 1 Centre Wing
4 Spoilers (L&R) 2 Outer Wing (L&R)
5 Outboard Flaps (L&R) 7 Horizontal Stabilizer (L&R)
6 Inboard Flaps (L&R) 8 Elevators (L&R)
14 Nose Landing Gear Doors (L&R) 9 Vertical Stabilizer
16 Radome 10 Rudder
18 Main Landing Gear Fairings (L&R) 11 Upr Rear emergency Hatch
22 Centre Wing Airfoil Underside Door 12 Paratroop foors (L&R)
23 Outer Wing Airfoil Underside Door 13 Upr Fwd emergency hatch
24 Wing to Fuse Fairing 15 Side mergency door
25 Forward Fuselage 17 Fwd crew door
26 Centre Fuselage 19 Loading ramp
27 Fwd/Rear Fuselage 20 Loading door
28 Aft/Rear Fuselage 21 Upr ctr emergency hatch
30 Pipes 29 Nacelle (L&R)
Eye on defence | 14
31 Wires 32 Propellers
Alenia (In House fabrication and
assemble)
Subcontracted
15. Request for Information (RFIs)
January 2012 – 15 April 2012
Date of issue RFI details Response date Issued by Service
6 Jan 2012 RFI and Interaction with 11 Jan 2012 MGO/EM/GS&C Army
Manufacturers of Operating Room No 206
Theatre Shelter Inflatable
6 Jan 2012 General Purpose Machine Gun 20 Jan 2012 Director General of Infantry Army
for PARA (SF) Infantry - 7
6 Jan 2012 Spares, Repair and Over-haul of 23 Jan 2012 Directorate General Of EME Army
Missile Test Station (Electronics)
Master General of Ordnance
Branch
22 Feb 2012 Unmanned Aerial vehicle (UAV) 22 Mar 2012 Directorate General Of Artillery 5 Army
mission simulator for UAV crew
21 Feb 2012 Full Body Truck Scanners 13 Mar 2012 MI Dte Army
22 Feb 2012 Night Sight for Carbine 10 Mar 2012 Inf Dte Army
23 Feb 2012 Optical Theodolite Instrument 15 Mar 2012 Directorate General of Artillery 5 Army
23 Feb 2012 Electro Optical Instrument 30 Mar 2012 Directorate General of Artillery 5 Army
15 Mar 2012 Specialist Vehicle 15 April 2012 Inf Dte Army
19 Mar 2012 New power pack with minimum 30 April 2012 DGMF Army
360 horse power engine
including running gear and
suspension for Infantry Combat
Vehicle (ICV) BMP-2/2K
13 Jan 2012 Technical And Commercial 6 Feb 2012 Joint Director of Naval Signals Indian Navy
Information For A WIMAX (Networking)
System Directorate of Naval Signals
3 April 2012 Diver Navigation System 20 April 2012 Directorate of Spe-cial Ops & Indian Navy
Diving
1 April 2012 Surveillance Radar 23 April 2012 HQ CAC Indian Air Force
Bamrauli
Allahabad
20 Mar 2012 Deep Search Metal Mine 2 April 2012 CRPF CRPF
Detector(DSMD)
1 April 2012 Surveillance Radar 23 April 2012 HQ CAC Indian Air Force
Bamrauli
Allahabad
9 April 2012 Comjam And Sigint Aircraft 24 May 2012 PD ASR (Room No 460) Indian Air Force
Air HQ (Vayu Bhawan),
Rafi Marg
11 Apr 30 mm or more AD Gun 30 Apr 2012 DGWE(WE-9) Indian Air Force
General staff branch
Room no 208g, south block
Integrated hq mod (army)
Dhq po, New Delhi-110011
Eye on defence | 15
16. Request for Proposal (RFPs)
January 2012 – 15 April 2012
Date of issue RFP details/equipment Response date Issued by Remarks
19 Jan 2012 GPS for Aviation Navigation 19 March 2012 Army Commander Special For Army
Financial Power Cell Northern
Command
7 Feb 2012 Counter Terrorism Operations 14 April 2012 WARDEC For Army
Planning Tool and Wargaming
System
7 Mar 2012 Light Weight BP Jacket 12 Mar 2012 INS Abhimanyu For Navy, Qty: 48
11 Jan 2012 Portable air supply & 30 Jan 2012 Commander For Navy
communication system Operations Officer
24 Feb 2012 Expression of Interest for 21 Mar 2012 Director General For Navy
Technical Consultancy Services Project Seabird
for Phase IIA of Project Seabird,
New Delhi
23 Jan 2012 Hand Held LED Torches with 13 Feb 2012 SO PROVOST For Indian Air Force
Accessories HQ WAC IAF
21 Feb 2012 Repair overhaul of Russian origin 3 Apr 2012 D Eng TI For Indian Air force
aggregates of Illushin aircraft Air HQ (VB)
of IAF
27 Jan 2012 Supply And Installation Of CCTV 27 Feb 2012 Wing Commander For Indian Air Force
Surveillance System Units Logistics Section Qty: 12 Nos.
Training Command
30 Jan 2012 FUZE T AND P DA NO 213 P-MK- 28 Feb 2012 Ordnance Factory Dehuroad, For OFB
5(M-2) Pune Qty: 10190
15 Feb 2012 Smokeless Pyroxylene 20 Mar 2012 Ordnance Factory Khamaria For OFB
Propellant Powder for 14.5 MM JabalPur
Ammn.
15 Feb 2012 Smokeless Pyroxylene 20 Mar 2012 Ordnance Factory For OFB
Propellant Powder for 14.5 MM Khamaria JabalPur
Ammn.
3 Mar 2012 Power Unit Part No.1155261, 10 April 2012 Joint General Man-ager For OFB
complete as per BOM and Drg. Gun Carraige Fac-tory Qty: 06
Attached as Annexure-I for 155
mm FH Gun
14 Feb 2012 Image Intensifier Tube 18mm 20 Mar 2012 Ordnance factory For OFB
AVG Glass I/P Dehradun Qty: 352 units
Jan 2012 Explosive Detection Kit 15 Feb 2012 Deputy Inspector For CRPF
General of Police, Qty: 10 Nos.
Central Reserve
Police Force
30 Jan 2012 Hand Held Thermal Imagers and 14 Mar 2012 Directorate-General, CRPF For CRFP
Accessories Qty: 100
23 Feb 2012 Global Positioning System 17 Mar 2012 CRPF CRPF, Qty: 77
4 April 2012 Ammunition for Shooting 18 May 2012 Directorate General, Border For BSF , Qty: 882400 Rounds
competition Security Force
4 April 2012 Doppler radar system for 29 May 2012 Indian Ordnance Factories For OFB
velocity measurement of sub- AMMUNITION FACTORY,
sonic and super-sonic projectiles KHADKI
2 April 2012 Rubberized inflatable Boats with 15 May 2012 Directorate General, Border For BSF, Qty 75 No’s.
25 HP OBM Security Force
Eye on defence | 16
17. List of industrial licenses (ILs) filed from
01/01/2012 TO 29/02/2012
Application no. and date Name of the applicant Item of manufacture
1: 5/1/2012 Mistral Solution Pvt. Ltd. Defence electronics hardware boards
2: 6/1/2012 Tata Advanced Materials Ltd. Manufacture of parts and accessories N.E.C. for aircraft or space
craft
3: 31/01/2012 Vinyas Innovative Technologies Pvt. Ltd. Electronic printed card board, assemblies/electronic
subassemblies/military wire harnesses for defence and
aerospace application
4: 31/01/2012 Elcome marine services Pvt. Ltd. System integration for electronics including design and
production of customized hardware and software (GUI / API
based, as well as embedded) (NIA 620)
5: 7/2/2012 Tara Aerospace Systems Ltd. Components kits / accessories for aircraft ( rotor crafts and fixed
wing aircraft )
6: 13/02/2012 Navanidhi Electronics (P) Ltd. Antennas, HF/VHF/UHF/RF power amplifiers, electro Mechanical
masts, security jammers, mo-bile Jammers & cell phone
jammers, microwave systems and components for EW equipment,
V/UHF, l-band Digitally tuneable filters, active night vision and fog
vision equipment
7: 22/02/2012 Pipavav Defence and Offshore Manufacture of tanks (armored fighting vehicles) gun Turrets (land
Engineering Co. Ltd. and sea), artillery systems (including upgrades and overhaul)
8: 22/02/2012 Unique Instruments & Mfrs-Pvt. Ltd. Manufacture of aircraft and engine parts, ac-cessories and sub-
assemblies
9: 23/02/2012 Sri Lakshmi Explo Chemicals Soldering of fuse head unto insulated twin wires of precut lengths,
sleeving and tagging
10: 29/02/2012 Ashok Leyland Defence Systems Ltd. Design development, manufacture assembly, overhaul, repair
and upgrade of defence equipment to include armored fghting
vehicles, other armored combat vehicles, unmanned ground/
aerial vehicles, armor protected vehicles, specialist vehicles etc.
Eye on defence | 17
18. New projects/investments/contracts
Name of entity Project details Value
Bharat Dynamics • BDL plans to set up a surface-to-air missile unit in Hyderabad with a capacity to INR300 billion
Ltd. (BDL) produce an estimated 6,000 sophisticated medium-range missiles.
• The plant spread over 630 acres is expected to be operational by 2016 and create
employment for 700 people directly and 2,000 indirectly.
Indian Air Force • GOI has signed contracts with M/s Thales, France and M/s Dassault Aviation, France, Contract with M/s
as well as M/s Hindustan Aero-nautics Limited (HAL), India to upgrade the Mirage Thales and M/s Dassault
►
2000 aircraft of the Indian Air Force (IAF), scheduled to be completed by 2021. Aviation: INR101.66
billion
• Another contract has been signed with M/s MBDA, France, for procurement of air-
Contract with M/s HAL:
to-air missiles for the Mirage 2000 aircraft. The delivery of missiles is scheduled
INR20.2 billion
between 2015 and 2019.
Contract for pro-
curement of the missiles:
INR66.25 billion
Pawan Hans • Indian government-owned Pawan Hans has submitted a proposal to four central INR100.30 billion
ministries seeking the purchase of 249 helicopters and 10 sea planes and the
►
construction of 180 helipads across India.
• The aircraft and helipads will improve aerial surveillance, law-and-order monitoring
and India’s response to medical emergencies and natural disasters. This is also likely
to make at least 30% of India’s districts and many remote areas more accessible.
Defence public • Four defence public sector units are setting up nine manufacturing units in Andhra INR70 billion
sector units Pradesh that is expected to create 10,000 jobs in the state.
► • This includes Bharat Dynamics Ltd. (three units), Bharat Electronics Ltd. (3 units),
Electronics Corporation of India Ltd. (2 units) and Mishra Dhatu Nigam Ltd.
(MIDHANI) (one unit).
Government of • The Russian Akula-II class submarine “K-152 Nerpa” was commissioned into INR46.67 billion
India the Indian Navy as “INS Chakra” on a 10-year lease agreement. INS Chakra,
commissioned at the Primorye region in far southeastern Russia will soon be sent to
►
India.
• With this, India has become the world’s sixth country after the US, Russia, France,
the UK and China to operate nuclear powered submarines.
Government of • The GoI is purchasing 75 Pilatus trainer aircraft from Switzerland. Deliveries of the INR18.50 billion
India aircraft are expected to begin in 2013.
► • The Pilatus aircraft is likely to replace the earlier HPT-32 trainers that were
grounded after a fatal accident in 2009.
Poland • Bumar, Polish-based supplier of armaments and defence signed an export contract INR15.56 billion
for armored units to the Indian army.
►
• It also signed an agreement with BEML stipulating co-operation on projects,
including sales to third-party markets.
Eye on defence | 18
19. Name of entity Project details Value
Pratt & Whitney • Pratt & Whitney, unit of United Technologies, is exploring to set up an MRO INR7.78 billion
(maintenance, repair and overhaul) unit, an aircraft engine components facility and
►
a training center in India.
• The company is holding talks to set-up a JV with Tatas and L&T and the proposed
unit is expected at Bangalore or Hyderabad.
Bharat Earth • BEML initiated the process of setting up an Aerospace manufacturing division near INR4.45 billion
Movers Limited Bangalore airport. The facility will be spread over 3,00,000 sq ft and is expected to
(BEML) be ready by September 2012.
► • This Aerospace Facility will be capable of manufacturing aerospace components and
parts, assembling of aircraft and helicopter up to 21 meters height.
Tata Motors • Tata Motors Ltd. will invest to build a factory subject to supply order of 2,000 INR3 billion
infantry combat vehicles to the Indian Army.
►
• The company submitted a bid two years ago to supply the infantry vehicles.
Hind High • ► Hind High Vacuum (HHV), a vacuum technology major that supplies equipment for INR2-3 billion
Vacuum satellite and aircraft projects to ISRO, Hindustan Aeronautics, DRDO etc. has stated
plans to set-up a third plant near Bangalore focusing on the defence and aerospace
►
business.
►
• HHV is open to a foreign equity stake or an investor in its existing plant.
• The company wants to increase its presence globally and aims to more than double
its turnover to INR5 billion by 2014 (from nearly INR2 billion this fiscal year).
Indian Central • Smiths Detection, part of the UK-based global technology business Smiths Group, INR1.04 billion
Board of Excise has won a contract to supply the Indian customs authorities with high-energy, X-ray
and Customs screening systems.
► • Smiths Detection will work in partnership with Bharat Electronics Limited and will
deliver the systems to the ports of Chennai, Tuticorin, Kandla and Mumbai over the
next two to three years.
Kalyani Group • Kalyani Group, a diversified Indian conglomerate will invest INR1 billion to develop a INR1 billion
towed artillery gun to meet the future needs of the country’s armed forces.
►
• It is developing the gun on its own with a technology partner and has hired 60
experts for its development.
Ministry of • The defence ministry is purchasing six Mi-17 V-5 helicop-ters from Russia to be used NA
Defence by the Union Home Ministry to assist the forces in internal security duties.
► • These helicopters are being built by Russian Helicopters’ Kazan Helicopter Factory
(KVZ) subsidiary.
Hindustan • A new unit of HAL at Seethangoli, Kerala was inaugurated in February. The unit NA
Aeronautics Ltd. will prepare indigenous designs and assemble components purchased from abroad
(HAL) for the armed forces aircraft and choppers and state-of-the-art communication
equipment, radio altimeter used in radar devices and navigation radar computers.
Eye on defence | 19
20. Name of entity Project details Value
Bharat • The Coast Guard has selected Bharat Electronics (BEL) to provide turnkey NA
Electronics (BEL) surveillance solution.
► • BEL has also given a contract to Obzerv Technologies to supply it with 46 ARGC-
2400 cameras.
►
• This program is the first phase of the Indian coastal surveillance project designed to
cover the entire coast.
Russian • Russian airplane-building corporation (RAC)-MiG completed supply of ship borne NA
airplane-building fighters MiG-29K/KUB in-tended for aircraft-carrier Vikramaditya to the navy of
corporation India in late 2011.
(RAC)-MiG
• The contract on supply of 16 combat airplanes in the single-seat version K (ship
► borne) and double-seat version KUB (ship borne combat training) was signed in
2004.
►
• The company has already started production of the next batch of 29 such fighters in
accordance with the additional contract signed with India in March 2010.
Indian Rotorcraft • Indian Rotorcraft, a JV company of Tata Sons and Agusta Westland, has proposed NA
to set up an assembly line for helicopters in Hyderbad on a 10-acre site. The JV will
►
commence production from June 2013 and will initially produce the eight-seater
AW119Ke light helicopter.
• The facility will be capable of producing up to 30 helicopters per annum.
Tata Power • New Zealand-based Radiola Aerospace Limited has won a four-year contract NA
Strategic to undertake flight inspections of new navigation aids at 30 military airfields
Electronics throughout India.
Division (SED)
• The contract is awarded by TATA Power SED. Tata Power SED holds a prime contract
► with the Indian MoD to modernize the facilities at airfields operated by the Indian Air
Force.
*The values of the deals have been converted to Indian Rupees using Oanda currency conversion tool
1US$ = INR51.8521 (Values as on 31 March 2012)
Eye on defence | 20
21. Joint ventures and alliances
Name of entities Nature of transaction Value
DCNS and SEC • ► DCNS, a French naval defence company signed a contract (through DCNS India) with INR3.1 bil-lion
Indus-tries Hyderabad-based SEC Industries for the local manufacturing of equipment for the
P75 Scorpene submarines.
►
• SEC will manufacture equipment under a TOT provided by DCNS India and they will
be delivered to its customer, Mazagon Dock Limited (MDL).
Larsen & Toubro • The electrical and automation business division of L&T acquired Thalest, UK-based INR240 million
and Thalest Ltd. provider of ship control and automation systems. ►
► • The acquisition is aimed at expanding the automation offerings for ships.
Industria • ► Spanish manufacturer of turbines for aircraft engines, Industria de Turbo INR165.98 million
de Turbo Propulsores (ITP), in alliance with British firm Reginson Engineering Ltd. and Indian
Propulsores firm Raghu Vamsi have set up a plant in India with an objective of ex-pansion and
and Reginson diversification.
Engineering Ltd.
• The agreement was signed by ITP’s subsidiary Tuberias Aeronauticas with the local
and Raghu Vamsi
firms.
• The production output is planned to double in 2014 whereas the number of
employees will be more than 100 people.
Reliance • Reliance Industries Ltd. (RIL) and French Dassault Aviation SA have signed a NA
Industries Ltd. preliminary agreement to explore defence projects in alliance.
and Dassault
• The two companies are yet to identify areas where they can collectively work.
TTI, Inc. and • ► TTI entered an agreement with Radiant Corporation to supply interconnects, NA
Radiant Corp electromechanical, and passive (IP&E) components.
► • Radiant manufactures its own requirements of composite cables and recently
entered the field of aviation grade cable looms and wiring harnesses to participate in
the growing offset business generated as a result of aircraft supply contracts to the
Indian Armed Forces.
Mahindra and • Mahindra & Mahindra announced its JV with Rafael that will focus on development NA
Mahindra and and manufacturing of products such as Torpedo Defence Systems, Electronic
Rafael Warfare Systems, Advanced Armour Solutions and Remotely Operated Weapon
Stations for Futuristic Infantry Combat Vehicles (FICV).
►
• A manufacturing facility is expected to be set up in Pune. Mahindra will own a 74%
stake in the JV with Rafael and is expecting a turnover of US$500 million in the next
10 years.
Larsen & Tubro • Larsen & Tubro signed an agreement with French defence products company Nexter NA
and Nexter to jointly bid for the Indian army’s artillery gun programs.
► • Nexter is expected to transfer technology for its towed and mounted gun systems to
L&T. The Indian company plans to assemble Nexter’s Caesar and Trajan guns in India.
Eye on defence | 21
22. Name of entities Nature of transaction Value
Larsen & Toubro • ► Larsen & Toubro Ltd. entered an agreement with South Korean defence products NA
and Samsung company Samsung Techwin Co. to make howitzer guns in India.
Techwin Co.
• The companies have already submitted a bid to supply up to 100 guns to the Indian
► army.
Selex Galileo and • ► Selex Galileo and Data Patterns (India) Pvt. Ltd. will seek approval from the GoI to NA
Data Patterns form a JV to make defence electronics products. The two companies will establish a
Pvt. Ltd. new facility at Chennai.
► • Selex Galileo will hold a 26% stake in the planned joint ven-ture (JV) and plans to
employ 100 people initially.
ITT Exelis and • ITT Exelis and Tata Advanced Systems Limited have formed a strategic alliance to NA
Tata Advanced support Generation (Gen) 3 night vision requirements in India.
Systems (TASL)
• ITT Exelis will provide TASL with the technology to build night vision devices in
► India, which will be followed by manufacture of high precision components and sub-
assemblies of the devices by TASL.
DHS Systems • ► DHS Systems International, manufacturer of shelters entered Indian market, NA
and Bharat through a long term deal with Bharat Electronics Limited’s Navi Mumbai unit.
Electronics
• DHS Systems International aims to generate revenue of INR1billion in the next
► three years from the defence and health care sectors in India and also set up a
manufactur-ing facility by 2015.
DCNS and IIT • ► Naval Defence Company, DCNS entered an agreement with IIT Bombay for NA
Bombay education and research programs in naval defence and energy.
► • According to the MoU, R&D programs will be carried out jointly by IIT Bombay and
DCNS Research teams while training of DCNS personnel will be conducted by IIT
Bombay.
Eye on defence | 22
23. Country-level deals and initiatives
Country Nature of transaction Additional details
US For the first time in Indo-US war games, the Americans Apart from fielding three tanks, the US will also deploy
will deploy their tanks in the company-level Exercise around 200 men accompanied by armored personnel
Yudhabhyas scheduled to be held in the Mahajan field carriers for the war games.
firing ranges in the Rajasthan desert in March.
India will file its Russian-origin BMPs along with tanks for
the war game.
Russia The MoD plans to purchase six Mi-17 V-5 heli-copters Through the purchase, the Ministry will assist its forces
from Russia to be used by the Union Home Ministry. engaged in internal security duties. These helicopters
are being built by Russian Helicopters’ Kazan Helicopter
Factory (KVZ) subsidiary.
Currently, the defence ministry is negotiating purchase of
59 Mi-17 s after its first order of 80 such helicopters to
the Russian company.
Brazil The talks between the Defence ministers of India and Other key areas on the agenda included talks on
(Defence talks) Brazil were held in India in February 2012. partnerships between Brazilian and Indian armies to
establish research centers for development of defence
Topics of discussion revolved around cooperation in the
equipment that meet the future needs such as the
naval sector to build aircraft carriers and submarines of
Border Monitoring System (Sisfron), talks related to their
the Scorpene class, expansion of the existing vacancies
respective air forces, exchanges between schools of
for exchange of military officers, and courses of higher
pilots, aerospace medicine, search and rescue operations
education offered by the military schools of both
and parachuting.
countries.
Australia The Society of Indian Aerospace and Technol-ogies The agreement has signaled a new level of cooperation
(SIATI) and Aviation Aerospace Australia (AAA) have and the collaboration is likely to help both the
forayed into a long-term pact to jointly develop the organizations to share knowledge, develop domain
aerospace industry in both the countries. expertise and transfer skills.
Singapore Air Chief Marshal NAK Browne, Chief of the Air Staff, The discussion issues revolved around the ongoing
went on a four day Defence Cooperation visit to defence cooperation between the two countries toward
Singapore. expanding the already robust bilateral military-to-military
ties and also a visit the Singapore Air Show.
Sri Lanka Inaugural defence dialog has taken place be-tween the Regional security situation including issues of maritime
Defence Secretaries of India and Sri Lanka. security in the Indian Ocean region were the key themes
at the inaugural annual defence dialog.
Japan Japanese delegation led by Admiral Hisayasu Suzuki, The five-day visit, was in pursuance of the Memorandum
the Commandant, Japan Coast Guard (JCG), for the XI of Cooperation (MoC), signed between the two Coast
High Level Meeting and Combined Exercises met with the Guards on 24 November 2006, which stipulates that the
Indian Coast Guard (ICG). heads of the two organizations meet alternately in India
and Japan, to discuss maritime issues of mutual concerns
and formulate a cooperative approach to address these.
Saudi Arabia The Indian and Saudi armed forces are likely to conduct The joint committee will also prepare a draft agreement
joint exercises involving Saudi and Indian ship visits from that will be endorsed by both sides in the field of
both sides and to work closely to combat sea piracy. hydography. The two sides intend to discuss the details of
their future defence cooperation, including the details of
an agreement in the defence sector.
Eye on defence | 23
