A Boeing Chinook helicopter, which India is considering for replacing its Russian Mi-26 heavy lifters, carries an underslung load in a high altitude area
By Ajai Shukla
Business Standard, 15th Feb 2010
If there is a global economic slowdown or a recession, no signs of it are visible at the Pragati Maidan exhibition grounds where Defexpo 2010 will be held from 15-18th Feb 2010. Some 650 exhibitors, ranging from global defence giants to Indian Small Scale Industries (SSIs), have worked almost around the clock over the last week to put together displays that would do justice to the capital city of the world’s biggest buyer of weaponry.
A sneak preview by this correspondent on the eve of the show revealed a glitzy array of stalls that included eye-catching laser displays, high-tech weaponry, functioning aircraft simulators and the array of attractively attired female counter assistants that are the hallmark of defence expos all over the world.
Defexpo 2010 is ready for business, a feat of organisation considering that, two months ago, it was still being decided whether Pragati Maidan would be available for the exhibition or placed under renovation for the Commonwealth Games. On 7th Dec Pragati Maidan was handed over to the Defence Exhibition Organisation, which hosts each Defexpo. Meanwhile, the CII, which had been the event manager for Defexpo 2008, pulled out saying that it had incurred a loss last time.
Despite these handicaps, especially the short time available, the lure of the Indian defence market has ensured that practically every global defence major will be here for the exhibition. Attendance is up 50% over last year; more than 250 foreign companies will be here. There are 30,200 square metres of display stalls, almost double that of Defexpo 2008, the last exhibition, which sold 17,000 square metres of display space. If one were to include the outdoor displays, this year’s figure goes up to 40,000 square metres.
India’s first major defence exhibition was an air show, Aero India 1998, while the first land and naval systems exhibition --- the first of the Defexpo series --- took place in 1999. Encouraged by their success, the MoD decided to hold a Defexpo and an Aero India air show every two years. The Defexpo --- this one is the 6th --- is held on even years, while the Aero India show is held on odd years, both of them in the month of February.
The biggest exhibitor this year, India’s Defence R&D Organisation, or DRDO plans to use Defexpo 2010 to establish linkages with prospective technology partners across the globe. The DRDO has rented 1400 square metres of display area for which it has shelled out more than Rs 1.5 crores. Close on its heels is Israel, with 1200 square metres of display space for its defence companies; since foreign exhibitors pay almost thrice as much as Indian companies, Israel has paid Rs 3.5 crores for that space.
The Defence Exhibition Organisation’s stated aim is to promote Indian defence industry. That translates not just into cheaper display space for Indian companies, but also extra discounts for Small and Medium Enterprises (SMEs) and Small Scale Industries (SSIs), many of which work at the cutting edge of military technology.
But foreign defence companies are hardly complaining about the expense. For them Defexpo 2010 is an important opportunity for winning a share of the Indian defence market, which a recently released CII-KPMG report estimates would be worth some US $100 billion (Rs 4,50,000 crores) between now and 2022. Besides this, India will spend US $9.7 billion (Rs 44,000 crores) by 2016 on homeland security. The CII-KPMG report’s estimation could be conservative, given that India already spends more than US $11 billion (Rs 50,000 crores) annually on foreign military supplies and the defence budget is likely to continue its steady rise.
Currently, international defence majors supply almost 70% of India’s requirements of capital acquisitions. The Indian government has declared, without setting a timeframe, that it will source 70% of its defence needs from Indian suppliers. The global majors are, therefore, scurrying to partner Indian defence producers in order to become a part of the Indian defence business. Right now, there is a Foreign Direct Investment cap of 26% in the field of defence, but the government has already signalled, in its Economic Survey for 2009, that this could be raised to 49%.
Tie-ups with Indian companies are also being driven by foreign vendors’ need to discharge offsets liabilities accruing from recent and future sales to India. The MoD’s offset regulations impose a minimum offset of 30% of the contract value for all contracts above Rs 300 crores. In practice, the offset liability has been set as high as 50% in the contract for multi-role combat aircraft. This has to be discharged through the purchase of products or services from Indian defence companies; or through investments into the industrial infrastructure of Indian defence JVs; or through investment into Indian R&D organisations. In all three cases, the foreign vendor must identify an Indian partner through which it will discharge its obligations. Defexpo 2010 provides defence companies with a platform for meeting prospective offset partners.
To facilitate the creation of these linkages, Defexpo 2010, for the first time in an Indian defence exhibition, is providing facilities for Business-to-Business (B2B) meetings between vendors. Vendors have also scheduled a host of product launches during this exhibition.
Another highlight of Defexpo 2010, particularly for vendors who want more clarity on Government of India policy, will be a series of seminars that have been scheduled during the exhibition. One of the most keenly anticipated will be the seminar on “The Indian Army next generation systems, an evolution”, which will include key officials like the Secretary Defence Production; the Vice Chief of the Indian Army; and the directors of every key arm including the armoured corps, infantry, artillery and air defence.
Defence companies with interests in maritime production will also look forward to the seminar on “Leveraging offsets for naval self-reliance”, which will be addressed by the chief of the Indian Navy and by key naval procurement officials.
The success of any defence exhibition is eventually determined by the amount of business that is done. Measured in those terms, Defexpo 2010 may not generate an enormous amount of actual signing. But while Indian defence procurement follows its own slow cycle, the growing churn in India’s defence production environment will be enough to make this Delhi visit a crucial date in the diaries of most global, and Indian, defence companies.