Tuesday, 8 January 2008

India to spell out list of defence products

by Ajai Shukla
Business Standard, 8th Jan 08

Despite extensive foreign trade regulations that cover most aspects of commerce, India has, in a remarkable omission, never yet officially enumerated or listed what it considers to be a defence product. Every other country with a significant defence industry has such a list. In India, a listing of defence products is required to determine where manufacturing licenses are required, where foreign participation is restricted to 26%, and the applicability of customs duties and exemptions.

Now, the Ministry of Defence (MoD) is plugging this major loophole. A committee under Additional Secretary of Defence, Mr PK Rastogi, will soon release a “Munitions List” that will constitute India’s official list of defence products. Confirming this to Business Standard just before retiring on 31st December 2007, former Secretary of Defence Production, Mr KP Singh, explained that since defence manufacture had always been done by the public sector for government forces, there had been no need for such a list. Now, with the entry of the private sector into defence, a “Munitions List” had become essential.

This need has been reinforced by the MoD’s defence offsets policy of 2006, which mandates that foreign military vendors must offset every contract by investing 30% of the contract value into the manufacture in India of military equipment. A comprehensive “Munitions List” will be a reference list of what foreign vendors can manufacture, in order to discharge their offsets obligations.

India has moved incrementally towards clarifying its lists of sensitive items. In 2004, the Director General of Foreign Trade, under the Ministry of Commerce, had published what is termed the Special Chemicals, Organisms, Materials, Equipment and Technologies (SCOMET) List. This includes sensitive items relating to nuclear, biological and chemical (NBC) warfare, special materials, stealth technologies, aeronautics and rocket materials.

The SCOMET List contains seven categories (e.g. Category 0: Nuclear materials, Category 1: Toxic chemicals, etc). But Category 6 has so far remained blank, and listed as “Reserved”. The “Munitions List” that the MoD is finalising will now form Category 6 of the SCOMET List. The Ministry of Commerce will notify the list as soon as the MoD forwards it to them.

Interestingly, the list of nuclear materials --- Category 0, the most comprehensive part of the SCOMET List --- was only updated in July 2005, after India passed its Weapons of Mass Destruction and their Delivery Systems (Prohibition of Unlawful Activities Act), 2005, in order to conform to non-proliferation concerns over nuclear commerce. This was one of the pre-conditions laid down by Washington in order to take forward negotiations on the US-India nuclear deal.

Senior MoD officials point out that India’s new “Munitions List” is also modelled on an international non-proliferation structure --- the Wassenaar Arrangement, a multilateral agreement between over forty countries. While India is not a member of the Wassenaar Arrangement, participating states seek, through national policies (such as the new MoD initiative to update the SCOMET list) to bring about greater transparency in the international transfer of military and dual-use goods.

The Wassenaar Arrangement has a comprehensive Munitions List, which has 22 main entries that include “small arms and light weapons and ammunition”; “tanks and other military armed vehicles”; “combat vessels”; and “armoured/protective equipment”.

1 comment:

Abhiman said...

Mr. Shukla, the following is a comment by Mr. Tata at the launch of the Nano. It appeared in the Economic Times, and was posted on bharat-rakshak forum :-

As Mr Tata says, we have had a history in India of being licensed manufacturers. “Knowhow came from somewhere. We produced the product, badged it ourselves or put the foreign badges, put it in the market and, in some cases, Indian companies were free to enhance that product. Some didn’t have the right to touch that product from what it was.”

Manufacturing firms learnt from systems that foreign partners brought or the techniques that already existed. The normal tendency for any Indian manufacturer was to look for a foreign JV partner or simply rely on reverse engineering.

“We never really, except in the pharma area, tried to venture out on our own.” No one was willing to throw down the gauntlet and challenge the existing norms. “And it ought to be the kind of challenge which somebody says can’t be done because then it really becomes the engine of innovation.” Add to that dream a few wheels, and you can then drive off in a Nano.


The above which true for the civilian automotive industry is also true for the military aviation and tank industry, as after all, these are all machines meant for varying uses only.

As we discussed earlier in the case of HAL, Alpha and HBL which have prospective JVs with foreign companies, it shall ensue the operation of foreign manufacturing equipment only and non-critical local input other than labour and raw materials.
It is hoped by sections in the media (and by your articles), that these local companies "pick up the reins" by reverse engineering/copying the imported products being manufactured at their locations and building upon it to release their own products. They can even "build upon" that knowledge to further advance upon it in the long-term.

In the short-term however, this offsets policy is nothing but a means to garner the facility of "playing middleman" for these local firms, and hence accumulate illicit commissions.
All this is totally ignored amidst such "lofty" ideas and headlines like, 'private partnerships', "Indian private defence players now come of age" etc.

The fact is that DRDO lags behind sensor technologies only, which is why it has proposed JVs with western firms for all forthcoming missile projects henceforth. In all other areas like propulsion, most radar types, guidance, telemetry etc, it is at par with the west.

The "real tussle" is between the DRDO and the western private firms to sell techniques to nascent private firms, most of which were essentially distributors and are now testers and assemblers also. It is extremely unfortunate, that the government is inviting foreign firms to exclusively distribute their products via these small firms, whereas Dr. Natarajan still complains of poor R&D funding at the Indian Science Congress, on 5 Jan 2008.

This offsets policy is another way of keeping the services "hooked" to imported weaponry only.

Thank you.


Reference :-

DRDO in dire need of research funds
http://www.deccanherald.com/Content/Jan52008/national2008010545000.asp