Saturday, 29 January 2011

Buy MMRCA now, Gen-5 fighter later: US report


A new report by Ashley Tellis on India's decision-making on the medium fighter praises the IAF's impartial evaluation but points out that it will now be a political decision


by Ajai Shukla
Business Standard, 29th Jan 11

With two US fighters--- Lockheed Martin’s F-16IN Super Viper; and Boeing’s F/A-18 Super Hornet --- apparently trailing in the six-way, US $10 billion race to sell India 126 medium multi-role combat aircraft (MMRCA), a new report by a top US-based analyst suggests that India buys the MMRCA as an economical, stop-gap measure, before buying a cutting-edge, fifth generation, US-built stealth fighter for the Indian Air Force.

Recommending that the IAF buys “the least expensive, mature, combat-proven fourth-generation fighter… as a bridge toward procuring more advanced stealth aircraft in the future”, the report urges Washington to “assure India access to fifth-generation US combat aircraft, and provide strong support for India’s strategic ambitions”.

The US currently has just one 5th generation fighter, the F-22, which Washington has not shared with any country. Also nearing completion is the F-35 Joint Strike Fighter, which Lockheed Martin is building in partnership with several other countries.

The report, “Dogfight! India’s Medium Multi-Role Combat Aircraft Decision”, is authored by Ashley Tellis of the Carnegie Endowment, a globally respected analyst who has worked closely with the US government and the US Air Force. Admitting that the European fighters in the fray --- which include the Eurofighter Typhoon; the French Rafale; and the Swedish Gripen NG --- are “technically superb”, Tellis calls the two US fighters “ best buys”, suggesting that they are ideal choices as stop-gap fighters.

Tellis’ report comes just before Aero India 2011, India’s premier air show at Bangalore from 9th to 13th February, where the MMRCA contest will grab international headlines. Indian commentary, including in the Business Standard, has discussed the merits of buying the in-development, 5th generation F-35, rather than the 4th generation MMRCA contenders. Tellis’ report, however, goes a step further, suggesting the procurement of the MMRCA for now, as well as a 5th generation fighter in the future.

That idea was reinforced by Ashton Carter, US Undersecretary of State for Defence, while speaking at a function to release Tellis' report. "There is nothing on our side, no principle which bars that on our side, Indian participation in the Joint Strike Fighter. Right now, they're focused on these aircraft which are top-of-the-line fourth-gen fighters," Carter said.

Defense News reports that Pentagon spokesperson Cheryl Irwin reinforced this message, stating in an email message that, "If, at some point down the road, India were interested in purchasing JSF from us, then we would engage the Indians in an open, transparent manner at that time. But this would obviously be something that the Indian government would have to decide it wanted or needed."

Highlighting the need to quickly boost the IAF’s fighter numbers, Tellis points out that since 1971, “India’s defense (sic) strategy has relied on maintaining superior airpower relative to both China and Pakistan. In the event of a regional conflict, Indian air power would serve as the country’s critical war-fighting instrument of first resort.”

However, due to procurement delays, accidents and obsolescence, the IAF’s authorised force level of 39.5 fighter squadrons has diminished to an unprecedented 29 squadrons. Even without delays in the ongoing procurements, it is unlikely to be made up before 2017.


Indian planners have noted the first test flight of the Chinese 5th generation J-20 fighter last fortnight. IAF experts, however, say that the J-20 is unlikely to enter service before another 7-8 years of development. The US-built F-35, in contrast, is nearing completion: it is likely to be in operational service by 2014.

Interestingly, Tellis heaps kudos on the IAF for its “scrupulously transparent and extraordinarily neutral” handling of the complex MMRCA flight trials. The report depicts the trials as a rarity: a multi-billion dollar contest, involving six aircraft and eight countries, in which every vendor is satisfied that the IAF has fairly evaluated his fighter.

But with the IAF having submitted its report --- which Tellis praises as “impartial to the point of appearing disinterested” --- to the Ministry of Defence (MoD), political factors will now shape the decision.

Tellis points out that, “In choosing the winning platform, Indian policymakers will seek to: minimize the country’s vulnerability to supply cutoffs in wartime, improve its larger military capacity through a substantial technology infusion, and forge new transformative geopolitical partnerships that promise to accelerate the growth of Indian power globally.”

The report cautions that, with pressure mounting from the governments that have a horse in this race, Indian security interests could be undermined by a political compromise like splitting the deal between two countries. This would “needlessly saddle the IAF with multiple airframes in return for meagre political gains.”

Tuesday, 25 January 2011

Er… by the way, Tibet!















by Ajai Shukla
Business Standard, 25th Jan 11

China has unquestionably boxed India into a corner in their boundary dispute. Hardening its position on the status of J&K, Beijing now treats that state as a part of Pakistan until determined otherwise. It is time for India to recalibrate its Tibet policy based on a harder-nosed appreciation of happenings in the Land of the Snows.

That New Delhi is already willing to play the Tibet card was signalled by foreign minister SM Krishna on a visit to Beijing last November, when he compared India’s sensitivities over Kashmir with China’s over Tibet and Taiwan. The foreign ministry also claims to have been blunt while raising the issue with Wen Jiabao during the Chinese premier’s visit to Delhi last month.

While a tactical Beijing may proffer cosmetic concessions, India’s key concern --- the boundary dispute --- will probably remain ignored. China simply has no incentive to settle that problem. Indian policymakers ascribe Beijing’s indifference to its calculation that a better border deal lies further down the superpower road, but more sophisticated China watchers discern another reason. With China’s leaders obsessively aware of their failure in suppressing Tibetan nationalism, they fear that delineating the border might see Indian influencing radiating into Tibet.

The Chinese logic is simple and elegant: keep New Delhi’s attention on Aksai Chin and Arunachal Pradesh to prevent it from focusing on Tibet.

New Delhi must counter that strategy with a fundamental shift in the way it views the border dispute: as an India-Tibet-China issue, rather than as a purely Sino-Indian one. Tibet has long been the elephant in the room when New Delhi talks to Beijing; that presence must be unambiguously placed on the table. Beijing’s road to Lhasa, it must be made clear, runs through New Delhi.

This will harmonise many of the dissonances that afflict India’s China policy. The first of these is the uncomfortable political paradox of pretending that the Tibet issue does not exist, even while providing asylum to a hundred thousand Tibetan refugees, an entire eco-system of Tibetan Buddhism, the Tibetan government-in-exile and the Dalai Lama himself.

New Delhi also faces an ethical disconnect between its morality in providing that sanctuary on the one hand; and its grubby realism in neutering Tibetan interests for fear of offending Beijing on the other. In emphasising the latter, India unwisely relinquishes the opportunity to generate and coalesce around itself global moral opinion on Tibet. This is especially surprising, given that India’s conciliation on Tibet has only emboldened China further.

Finally, the greatest inconsistency in New Delhi’s approach is the deep divide between its placatory, softly-softly approach towards China --- itself born of the harsh lesson of 1962 --- and the Indian citizen’s more robust suspicion of China’s motives and actions on the other. This gulf will ensure that any back-room settlement that is hammered out with China --- in the unlikely event that one is --- will simply not fly in this country. Indian officials must frankly reflect the national belief that China, after illegitimately occupying Tibet, occupies and covets Indian soil.

Zhongnanhai (the Beijing headquarters of the communist party and the executive government) can be expected to react with anger, given its deep insecurities about Tibet. But it will then have a motive to talk seriously about the boundary question.

New Delhi must note that top Chinese administrators in Lhasa already accuse India of malevolence in Tibet. Lao Daku, the chief of the feared Tibet Autonomous Region Public Security Bureau (TARPSB), declares in a Tibetan language internet article published in his name after his ground tour of Tibetan areas from July to September 2010: “The collusion between the Dalai Clique, splittist forces, internal and external, and hostile foreign forces is stronger than before…. India, our large neighbour and a developing country, is getting closer to the West day by day, and poses a new threat to our country’s security. India’s indulgence and harbouring of the Dalai Clique is undermining Tibet’s stability and development.”

As the common Indian would put it: “Munni to vaise bhi badnaam ho gayi.”

Even considering that Lao, a regional security chief, might paint a bleak picture of security in order to extract more resources from Beijing, his article vividly illustrates the historical Chinese paranoia about the empire crumbling from the fringes. Railing against the melding of separatism in Tibet, Xinjiang and Taiwan, Lao warns, “We can see how, with Western support, the [supporters of] Tibet independence, Xinjiang independence and Taiwan independence are acting crazy. If it is like that, there is a danger that these three causes will be combined.”

While Taiwan encompasses a different set of dynamics, Beijing regards Tibet as a far bigger problem than Xinjiang. This belief was reinforced by the 2008 uprising that sprang from Amdo, one of traditional Tibet’s three provinces that now lies outside the Tibet Autonomous Region (TAR), mainly in Qinghai province, and which demographic transfers have converted into a Han-majority area. If even a “pacified” Amdo could erupt in rebellion, argue the mandarins in Zhongnanhai, how do we deal with the remote reaches of Tibet that border on India? In contrast, the borders of Xinjiang have been effectively sealed through agreements with Pakistan and the Central Asian Republics, all of who function as Rottweilers for Beijing.

And so Beijing heaps greater repression upon Tibet, increasing Tibetan hostility. This is overlooked in New Delhi, where border policy is guided by the assumption of perpetual weakness. Beijing realises that its dramatic infrastructure development programme in Tibet, and the lightening march of People’s Liberation Army divisions to the Indian border all rest on very shaky foundations. It is time for Indian diplomats to treat Tibet as an asset, rather than as an embarrassment.

Friday, 14 January 2011

Defence Production Policy aims to bring in pvt sector


Defence Minister, AK Antony, releases the new Defence Production Policy, flanked by his deputy, MM Pallam Raju and the Secretary for Defence Production, RK Singh.


by Ajai Shukla
Business Standard, 14th Jan 11

Defence Minister A K Antony unveiled a Defence Production Policy that, in an implicit admission of public sector inadequacy, seeks “to build up a robust indigenous defence industrial base by proactively encouraging larger involvement of the Indian private sector”.

The policy aims at achieving “substantive self-reliance in the design, development and production of (equipment) required for defence in as early a time frame as possible” by creating “an ecosystem conducive for the private industry to take an active role, particularly for small and medium enterprises (SMEs).”

The Ministry of Defence (MoD) — which traditionally shelters its public sector units from private sector competition — has long feared labour union protests against any level playing field to the private sector. The tightrope that Antony is now walking was evident from his remarks today: “We will give more space to the private sector (since) the nine PSUs and 50-odd Ordnance Factories cannot meet the needs of the services. We will protect the PSUs, strengthen them, and at the same time bring in the private sector by reducing the space for foreign suppliers.”
But when asked by Business Standard about whether protection for the PSUs meant the private sector would not get a level playing field, Antony avoided a direct answer: “More and more, we are offering a level playing field to the private sector. It is a process. Without creating much imbalance or shakes (sic) in the system, we are trying to go ahead. You know what I am saying.”

The MoD is also challenged in having to balance the Defence Production Policy between its key objectives of indigenisation on the one hand; and on the other, having to keep the forces supplied with high-tech weaponry, little of which is produced in India.

“Preference will be given to indigenous design, development and manufacture of defence equipment,” states the policy. But, “wherever the Indian industry is not in a position to make and deliver the equipment as per the required specifications, within the required timelines, procurement from foreign sources would be resorted to.”

“Self-reliance is still a distant dream,” admitted Antony at the release function. “But this large-scale dependence on foreign sources is unacceptable for a country like India.”

The Defence Production Policy implicitly admits that successive Defence Procurement Policies (DPPs) — there have been seven versions since 2002 — have failed to galvanise domestic defence industry.

The new policy pledges to simplify the “Make” category of the DPP, which makes Indian companies/consortiums compete against each other to develop complex defence systems. So far the ‘Make’ category has seen just one project launched: to indigenously build a Future Infantry Combat Vehicle (FICV) for the army. A second ‘Make’ project, to build a Tactical Communications System, is now on the anvil.

Private industry is cautious about the new policy. Says Khutab Hai, who heads Mahindra Defence Systems, “As a statement of intent, the new policy is a welcome step. But the government must create an effective framework that will clearly facilitate the private sector in developing and manufacturing defence equipment. The first test case that will define the new policy will be the FICV project.”

Industry body, Ficci, while welcoming the new policy, said it was “concerned about the implementation of the policy on the ground, because even the existing policies have not been implemented. Ficci further hopes that MoD will take this initiative forward by also providing a level playing field to the private sector by eliminating any price preference for Defence PSUs and doing away with the practice of nomination.”

Next, the new policy institutes a long-awaited “Defence Technology Fund”, for financing defence R&D by private companies, particularly in the SME sector. So far, however, the details of the Defence Technology Fund are still to be finalised. Said Antony, at the release function, “These are only policy guidelines. We will discuss with the finance ministry… the idea is to have a reasonable corpus.”

The Defence Production Policy mandates an “annual review of self-reliance”, that will be held by the defence minister. There are, however, no empirical targets for self-reliance in the policy.

“Unless an annual target is laid down, what will the defence minister review at this so-called annual review?” asks the CEO of a private defence company. “The MoD has been talking for years about reducing our import dependency for defence equipment from 70 per cent to 30 per cent. Now some firm targets must be set.”



THE PRIVATE SECTOR REACTS

“The new DProP augurs well for private defence companies, encouraging them to identify global partners who can provide cutting-edge technology. The policy strengthens the Indian private defence industry and will boost indigenisation of technology.”
(Puneet Kaura, Executive Director, Samtel Display Systems)

“Given the technological maturity of Indian private companies, we must target indigenous development of defence equipment that is required 5-6 years from now, not 10 years. Defence equipment becomes obsolescent in 5-8 years, even quicker in the case of electronics/ICT sub-systems.”
(Rajiv Kumar, Director General, FICCI)

“As a statement of intent, the new policy is a welcome step. But the government must create an effective framework that will clearly facilitate the private sector in developing and manufacturing defence equipment. The first test case that will define the new policy will be the FICV project.”
(Khutab Hai, Mahindra Defence Systems)

“We appreciate MOD’s initiative to formulate the first ever Defence Production Policy, which acknowledges that private sector would have to play a larger role in defence production. We anticipate that an implementation road map with benchmarks would be announced soon.”
(Gurpal Singh, DDG, CII)

“We need to wait and see how effectively the government works with the private sector to develop indigenous platforms and systems, given the limitations of time and technology that may be available in the country.”
(Nidhi Goyal, Director, Deloitte)

Wednesday, 12 January 2011

China's new fighter sends sonic boom through region


















by Ajai Shukla
Business Standard, 12th Jan 2011
Hong Kong


China’s massive military lead over India has never been starker. Yesterday, amidst fanfare, Defence Minister A K Antony travelled to Bangalore for a milestone in the development of India’s ‘Tejas’ Light Combat Aircraft (LCA), a fourth-generation fighter that is still two years away from full service. The same day, an advanced, fifth-generation stealth fighter — so far only speculated about, as the J-20 — made its first flight in China, heralding the arrival of what could become the world’s most advanced fighter.

The timing of the test is vintage China. It was conducted on the day that US Defence Secretary Robert Gates arrived in Beijing to discuss the resumption of defence ties, which a furious China had broken off last January after America sold $5.4 billion worth of advanced weapons to “the renegade province” of Taiwan.

While Beijing has not acknowledged the test, on-line accounts and photographs from Chengdu, the capital of Sichuan province, indicate an advanced stealth fighter took off yesterday from the airfield of the Chengdu Aircraft Corporation at 1250 hours and landing successfully an hour later.

Global experts have hailed the J-20 as significantly superior to the F-35 Joint Strike Fighter (JSF), America’s next fifth-generation fighter that is nearing completion. Experts say the Chinese J-20 has a stealthier design, which will make the fighter more difficult to detect by radar; larger fuel tanks that will allow it to fly almost 2,000 kilometres without refuelling; and the ability to carry more weapons, enabling it to hit long-range targets more destructively.

Says Carlo Kopp, an aviation expert with think tank, Air Power Australia: “The stealth shaping is, without doubt, considerably better than that seen in the Russian T-50 PAK-FA (fifth-generation fighter) prototypes and, even more so, than that seen in the intended production configuration of the F-35 Joint Strike Fighter. Any notion that an F-35 Joint Strike Fighter or F/A-18E/F Super Hornet will be capable of competing against [the J-20] in air combat, let alone penetrate airspace defended by this fighter, would be simply absurd.”

The Deputy Chief of Air Staff of the Chinese Air Force (or PLA-AF), General He Weirong, had declared in 2009 that the J-20 would obtain its Initial Operational Service (IOC) between 2017 and 2019.

Robert Gates knows that the J-20 has been designed by China specifically to target the US Navy aircraft carrier task forces that currently dominate the Pacific Ocean, off China. The US Navy’s presence, close to China’s coastline, has become a running irritant for the Chinese leadership. Last summer, after tension between Beijing and Tokyo, and between the two Koreas, China warned the US Navy not to enter the East China Sea to demonstrate support for Tokyo and Seoul. Washington rejected that warning.

But once the J-20 enters service, China’s strike power would be greatly enhanced. Experts say the size and speed of the new fighter would enable it to dominate areas far out to sea. China, which had claimed overlordship out to “The First Island Chain” — a stretch of the East China Sea, the Yellow Sea and South China Sea that extends out to the Kurile Islands; Japan; the Ryukyu Islands; the Phillippines, and Indonesia — has now embraced the doctrine of “offshore defence”. Beijing now sees its exclusive preserve extend 3,000 kilometres into the Pacific, to the “Second Island Chain”, which runs along the line of Japan, the Bonins, the Marianas, and the Carolines, to Indonesia.

Within this area, the J-20 would cripple a US Navy fleet by destroying its airborne control aircraft (AWACS); tanker aircraft for airborne refuelling; and electronic warfare aircraft like the F/A-18G Growler. Attacks by waves of J-20s from airbases on the Chinese mainland would also shut down the US Air Force airbases in the region.

While the J-20 strikes US Navy aircraft and US Air Force bases, the People’s Liberation Army would employ another new “game-changer” weapon — anti-ship ballistic missiles — to sink American aircraft carriers, Washington’s key tool for power projection across the oceans.

Given the flexibility that fighter aircraft provide as a weapons system, Beijing will easily be able to operate its J-20 fleet against India as well, by merely switching these to airfields in Tibet. Given the current capabilities of the IAF fleet, this would pose a major threat to Indian forces in Ladakh, Sikkim or Arunachal Pradesh.

Tuesday, 11 January 2011

Defence on ground, not castles in air


The National Flight Test Centre (NFTC) team with the DRDO chief, on 10th Jan 2011, after the accordance of Initial Operational Clearance to the Tejas Light Combat Aircraft


by Ajai Shukla
Business Standard, 11th Jan 11

On the 13th of January, the Ministry of Defence (MoD) intends to promulgate its first-ever Defence Production Policy that, officials say, will ease the way for private Indian companies to compete for an impending flood of lucrative contracts for arms for India’s defence forces. But India’s private sector is not holding its breath; over the last decade, starry-eyed CEOs, who had believed that their technological skills and entrepreneurial dynamism would translate quickly into weaponry for the military and profits for them, have moulted into jaded cynics who perk up only while complaining (justifiably) about South Block’s unwillingness to walk the talk.

They point, most recently, to the just-announced Defence Procurement Policy of 2011 (DPP-2011), which has India’s private defence industry reeling. With foreign arms vendors now allowed to canalise offsets into the easy byways of civil aviation instead of the tightly regulated defence industry, the Indian defence industry correctly points out that the aim of the defence offset policy — never clearly enunciated, but generally believed to be the catalysing of domestic defence production — has been effectively undermined.

In these circumstances, snort these disillusioned CEOs, it is foolish to hope that the Defence Production Policy (let’s shorten this to DProP, since DPP is already the acronym for Defence Procurement Policy) might display flashes of enlightenment.

That may be overly pessimistic. From the grapevine chatter that has accompanied the DProP’s formulation, it seems likely to include several welcome initiatives. The first of these is unambiguously mandating that in-country defence contracts be awarded by competitive tendering, rather than by nominating one of the defence public sector undertakings (DPSUs) or an ordnance factory (OF), which the MoD has tended to do since it owns the entire lot of 9 DPSUs and 49 OFs.

Next, the DProP is likely to detail procedures for compiling, organising and maintaining data banks of the Indian defence industry so that, when a particular technology, industrial capability or equipment is needed, the MoD knows where to go. Furthermore, outlining procedures for self-registry would be a welcome relief for companies that aspire to enter defence production. Currently, they are at the mercy of touts who claim to have connections with key bureaucrats and procurement managers.

The DProP will also lay down procedures for short-listing companies that will be eligible to bid for specific contracts. With the MoD having turned down the Kelkar Committee’s recommendation to nominate a group of Raksha Udyog Ratnas (RuRs), or champions of industry — private companies with demonstrated capability, capacity and financial depth to participate in the capital and technology-intensive business of developing complex defence platforms — a transparent process for short-listing candidates is badly needed.

Cynical private sector CEOs will undoubtedly argue that they’ve heard all this before. The DPP-2011 already mandates that, for each “Make” procurement (i.e. in which the product is developed indigenously), a sectoral multi-disciplinary indigenisation committee (SMDIC) must short-list companies/consortia that possess the structure and know-how to develop that product. But the DProP can reinforce that message and detail a set of procedures that will help MoD procurement managers to internalise it.

The DProP is also likely to elaborate guidelines and procedures for allocating MoD funding for development projects that are undertaken by private companies or consortia under the “Make” procedure of DPP-2011. The DProP could also formalise the operation of a Rs 100-crore “defence technology fund”, which will fund specific cutting-edge R&D projects by small- and medium-scale private sector companies. While cutting-edge defence technology has historically emerged from small and medium companies (defence biggies tend to be systems integrators rather than developers of technology), the small companies lack financial muscle and require R&D funding from the government.

These laudable initiatives notwithstanding, it is the DProP’s fine print and the attitude with which the MoD implements its provisions that will determine whether the policy succeeds or fails. In the 20th century, the ministry has regarded private companies as useful ancillary suppliers to the public sector; this last decade, as private companies began to confidently challenge the DPSUs and OFs, the MoD establishment switched to an astonishing new argument: since the DPSUs and OFs produce only about 30 per cent of India’s defence requirements — much of that relatively low-tech — India’s private sector should focus on biting into the high-end 70 per cent that was being supplied by foreign vendors.

Consider the logic of this argument: if, even after half a century on the learning curve, the DPSUs and OFs seemed incapable of developing high-tech defence equipment, leave them in peace to paddle around ineffectually in the shallow end of the pool. Instead, throw the private sector into the deep end, asking them to build high-tech defence systems right off the bat… without funding them in any way!

Just a year ago, Minister of State for Defence M M Pallam Raju told me in an interview that this newspaper published in February 2010: “(The private sector) should play a complementary role, not try to compete in those areas where the public sector is already present… . But they should look at what the country needs. We don’t need low-tech, we need high-tech. And that is where I feel that the private sector should focus.”

That Mr Raju would probably be embarrassed to repeat that statement today says much about how the minister has grown in his job. It is to be hoped that his ministry, too, evolves in its thinking.

Monday, 10 January 2011

Q&A: M M Pallam Raju, Minister of State for Defence


Minister of State for Defence, MM Pallam Raju, tells Business Standard that the defence offsets policy could be merged into the national offsets policy some day


by Ajai Shukla
Business Standard, 10th Jan 11
Hyderabad

Minister of State for Defence M M Pallam Raju talks to Ajai Shukla about the Ministry of Defence’s (MoD’s) new Defence Procurement Procedure of 2011 (DPP-2011), released on Thursday, which now permits arms vendors to discharge defence offset liabilities through investment in civil aviation and internal security. Edited excerpts:

Q. Given that defence offsets were specifically aimed at stimulating Indian defence industry, why dilute that aim by permitting arms vendors to discharge their offset liabilities in non-defence fields like civil aviation?

No, no, I don’t think there is any dilution at all. There is a lot of overlap in technologies and components between civil aviation and military needs. So (civil aviation) has been opened up so that defence offset requirements can be fulfilled.

Q. And defence offsets can now be discharged through setting up training simulators for civil airliner pilots?

I think training is a very vital aspect and it is a justifiable area for inclusion in offsets. I think there is a shortage of training facilities. We have clarified that it is only simulation equipment and not for the infrastructure that offset credits will be given.

Q. According to DPP-2011, even the design of civil airliner components and engines, which Indian IT engineering companies are already doing will now be counted as defence offsets?

I think these are critical aspects and there is a huge overlap in these areas between civil and military needs and I think it is justified.

Q. Given that the Ministry of Civil Aviation has its own offset requirements connected with the purchase of airliners, there will now be two parallel sets of offsets running in the sphere of civil aviation. Given that the defence offsets policy is no longer confined to defence production, have you thought about merging defence offsets into the national offsets policy?

The purchases (of civil airliners) have been huge and, therefore, offsets on those purchases are also justified. But I don’t think we can say that indirect offsets have been allowed. Merging the defence offsets into the national offset policy requires some more thought.

Q. So, the possibility of merging the defence offsets policy into the national offsets policy remains on the table?

Yes, of course.

Q. DPP-2011 is silent on several key amendments that are being considered to the offset policy, including permitting transfer of technology (ToT) as an offset, incorporating offset multipliers, and allowing vendors to bank offsets for a greater period of time. Instead, the MoD has referred these issues to an internal committee.

Like every year, we are revisiting the offsets policy and a high-level committee has been formed and they are taking inputs from the industry. We are waiting for results (of earlier offset contracts) to appear and be analysed. We don’t want to be too anxious for change, but we will definitely tweak the offset policy wherever necessary to include best practices in offsets.

Q. There remains a major unresolved debate within the MoD, about whether the Department of Defence Production should handle offsets, or the Acquisitions Wing. Each of them wants to pass offsets to the other, apparently because of apprehension about the policy. Who will manage offsets within the MoD?

We set up the Defence Offsets Facilitation Agency (DOFA) under the Department of Defence Production, but that was to facilitate vendors. The question is who should actually manage the offsets. I think it depends upon the area of responsibility that you are entrusting to these two wings. I think the inputs from both these departments are needed.

Q. A new Defence Production Policy is also being released, we believe, on the 13th of January?

The Defence Production Policy will be coming out very shortly. There is a lot of clarity in this policy about a large number of issues that the private sector has been asking for.

Q. Has the MoD completely killed off the Kelkar Committee proposal to identify Raksha Udyog Ratnas (RuRs) from within the private sectors, which could compete for defence contracts on equal terms with the defence PSUs (DPSUs)?

It is under examination. But whether you call private companies as RuRs or not, the will to bring the private sector into defence production is certainly there. The objection to nominating RuRs from within the private sector was that smaller companies projected that the nomination of RuRs should not be based on the size of the company, but on the capability of the company. We did not want to exclude the smaller companies.

Q. Has the MoD conclusively rejected the enhancement of FDI in general from 26 to 49 per cent, or to 74 per cent as recommended by the Ministry of Commerce & Industry? Foreign arms vendors argue that giving them greater stakes in the company will allow them to bring in more advanced technology.

For now the FDI cap will remain at 26 per cent. But we do not believe that the level of FDI permitted should not be confused with the level of technology that is being brought into the country. The intention is to bring in a higher level of technology, and I think the percentage of FDI is irrelevant.

Q. And what about the IPR? Would it have to remain with India?

I wouldn’t be too worried about the IPR. Of course, I would like it to remain with India, but if the vendor is charging a royalty and he is limiting his FDI, that should suit his purpose

New offset rules rile Indian defence firms


Ajai Shukla
Business Standard, 10th Jan 11
Hyderabad

The ministry of defence has ignored private Indian defence companies by announcing that global arms vendors can channel offsets into the fields of civil aerospace and internal security, instead of exclusively into the defence industry. Meanwhile, several other potentially far-reaching changes to the offset policy have been referred to an internal ministry committee.

The ministry’s apex defence acquisition council decided at a meeting on December 15 that the committee, headed by the director-general of acquisitions, would submit recommendations on: Whether transfer of technology should be eligible for offsets; whether offset multipliers could be introduced allowing vendors to claim enhanced credits for investment in earmarked areas; arrangements the ministry needs to institutionalise to evaluate, monitor and audit anticipated offsets; and whether the current time validity of banked offsets needs to be changed.

Confirming this to Business Standard, Minister of State for Defence M M Pallam Raju said, “A high-level committee has been formed and it is taking inputs from industry. We will definitely tweak the offset policy wherever necessary to include best practices. It is learned that the committee has been asked to submit its findings in three months.
The defence ministry has written to industry bodies Ficci, CII and Assocham, as well as major private companies in defence, informing them that their views would be sought while revising the offset guidelines. Business Standard has reviewed a copy of this letter, dated December 23.

But there is deep disquiet within private industry over the ministry’s rejection of their “repeated suggestions” not to allow defence offsets in civil aviation. “The ministry of defence only asks us for our views to provide a façade of consultative decision-making. Evidently, it had decided beforehand to allow offsets in civil aviation. Now, it is going through the motions of consulting with us again,” said a senior Ficci official.

Defence Minister A K Antony’s signed introduction to the Defence Procurement Policy (DPP)-2011 states that the new rules were “based on the experience of procurement agencies and feedback from the defence industry, both Indian and foreign”.

But the Indian defence industry’s feedback was apparently ignored. “Global vendors told the defence ministry that the Indian defence industry cannot absorb the huge amount of offsets that would be coming into India; we were confident that we can. But the ministry chose to listen to foreign industry,” said the CEO of a major private company that was counting on investments through offsets.

“This illustrates our low levels of self-confidence as a country today,” said Rahul Chaudhry, CEO of Tata Power’s strategic electronics division, which has aggressively pushed into the defence business.

Foreign arms vendors, who have openly lobbied for offsets in non-defence fields (for indirect offsets) on the grounds that the Indian defence industry does not have the capability to absorb billions of dollars worth of offsets, have welcomed the liberalised policy.

Vivek Lall, Boeing’s vice-president in charge of defence, space & security business in India, said: “The government’s release of the (DPP-2011) is a very progressive step. We welcome the new revisions on broadening the aperture of offset credit to include civil aviation and internal security. The synergy of these areas will directly benefit the indigenisation of the aerospace and defence industry.”

The new policy, which was posted on the Internet on Thursday night, allows foreign vendors to discharge offset obligations in the fields of “civil aerospace, internal security and training”. This is a significant climb down for the defence ministry, which has insisted on keeping the defence offset policy separate from the national offset policy with the specific aim of channelling offsets into India’s nascent defence industry.

“Take a look at the easy opportunities the civil aviation sector offers for offsets. Now, very few foreign vendors are going to discharge their offset obligations in the defence industry,” said Rajinder Bhatia, Bharat Forge’s executive vice-president for defence & aerospace.

DPP-2011, which will come into effect from January 1, 2011, is the seventh modification of procurement rules this decade. Private industry was allowed into defence production in 2001.

Sunday, 9 January 2011

Kabul diaries: notes from my recent trip to Afghanistan







by Ajai Shukla
Business Standard, 8th Jan 11

Steeped in forbidding history, soaked in blood, but with arms wide open in the traditional Afghan welcome, Kabul is surely the world’s most surreal capital city. Every corner chronicles a tale: here is the sports stadium that was given over to public executions, the Taliban herding in terrified spectators for the casual gunning down of convicts; here is the zoo where hungry mujahideen fighters shot an elephant to eat; here is the corner where former President Najibullah’s body was hung by the Taliban after he was tortured to death.

My own introduction to Kabul was an education in the bizarre rhythms of that city’s dusty, brown dreamscape. Entering alongside the Northern Alliance forces, on the heels of the fleeing Taliban in November 2001, I wanted only to grab one of the bungalows vacated the previous night by Al Qaeda and Taliban fighters. After nearly two months of rough living on the fringes of battle, arranging for my comfort was my prime concern.

Before long, a friend, freelance cameraperson Peter Jouvenal, chanced upon an empty house on Passport Lane, next to the abandoned Indian Embassy. Who had lived here, we asked the watchman. His off-hand answer: Sheikh Osama’s fourth wife, his favourite. The Sheikh, he recounted, was an almost nightly visitor!

Even as we verified that information from the house owner, the watchman and his family were spirited off to America: the CIA had given them 30-minutes’ notice to pack their belongings. For the next two months, a stream of journalists filed stories on our new residence (including a memorable one on Osama’s underwear, based on a pair of oversized boxer shorts that we found hanging on the clothesline). I sometimes lay in my bed wondering when the world’s most wanted man had last occupied it.

“Osama House”, as our residence was dubbed, is now the Gandamack Lodge, an expensive guesthouse named after the Afghan hilltop where the retreating British army was massacred in 1842. The enterprising Jouvenal runs it, one among many expatriate-oriented restaurants and guesthouses across Kabul where la dolce vita so unexpectedly flourishes. A fistful of dollars will get you a handsome room, liquor and no-guarantees protection by AK-47-toting fighters, many of them hired from rabidly anti-Western militant commanders.

Here is just one of Afghanistan’s ironies: warlords protect nightclubbing foreigners in Kabul to gather the resources needed to kill them on other Afghan battlegrounds. That is because the anti-Western campaign goes hand-in-hand with a parallel jehad: the making of money. Ideology is useful, but money is crucial, translating into guns and the wherewithal that empower local satraps.

Other innovations in jehad have transformed Kabul architecturally. The city’s current look — it could well be called Blast Deco — is a response to the iconic weapon of this era, the suicide truck bomb.Today, concrete walls and barriers obscure entire neighbourhoods, especially in the tony diplomatic enclave of Wazir Akbar Khan. A whole new vocabulary centres on concrete blast protection: Jersey barriers; Texas barriers; Alaska barriers; Bremer walls. Then there is the ubiquitous HESCO barrier, a collapsible wire-mesh container which becomes a thick bulletproof cube when filled with mud. A row of HESCO barriers is called a bastion; piled atop one another, two or three bastions high, they form the ramparts that protect attractive Taliban targets like the US embassy, the headquarters of the International Security Assistance Force and the presidential palace that houses Hamid Karzai.

Entry into these enclaves is a white-knuckle experience even for those who work inside. As the heavily-armoured SUV in which they travel crawls up to the barrier, rifles are levelled from sandbagged pillboxes. In a typically Kabuli procedure, the driver lowers his sunshade, flashing to the guards a special number plate tied onto the flap. Displaying that number plate openly would invite a Taliban street attack. The guards then open each door to search the vehicle, hawk eyes peering in over AK-47s.

I run the gauntlet of several such checkpoints when I go to dine with Gautam Mukhopadhyaya, India’s ambassador to Afghanistan, who features near the top of any Taliban hit list. Mukhopadhyaya, a soft-spoken, cool-eyed customer with a wicked sense of humour, stands for all that is good in the Indian Foreign Service. He was the diplomat who re-opened the Indian chancery in 2001 after five years of closure during the Taliban rule. Many Afghans consider his reappearance as ambassador a personal statement of loyalty and friendship.

Chatting with Afghan opinion-makers over dinner, one could not miss the foreboding over Pakistan’s growing influence. In conversation here, as in most gatherings across Afghanistan, ethnic fault lines are starkly evident between the Pashtun community, on the one hand, and the minority Tajiks, Uzbeks and Hazaras, on the other. Fahim Dashty, the swashbuckling Tajik who edits Kabul Weekly, echoes the sense of loss that still shadows the non-Pashtun groups nine years after the 2001 assassination of Ahmed Shah Masood, the legendary guerrilla commander of the Northern Alliance, who fought the Taliban to a standstill. Says Dashty, “If Commander Masood were alive today the whole of Afghanistan, including the Pashtuns, would have rallied behind him. Karzai [a Pashtun] just does not have the charisma that Masood had…even the Pashtuns do not support him.”

The Pashtun community, though, is less enthusiastic about the charismatic Masood. Says Saghar Chopen, a striking-looking Pashtun girl, the daughter of Afghan émigrés to Germany who has returned to Kabul to work for the Afghan government: “I feel dismayed when I see posters of Masood plastered all over Kabul. He was just another warlord, one of the men who have reduced Afghanistan to where we are today. Why can’t we idealise men of peace instead… for example, the Frontier Gandhi [Abdul Ghaffar Khan]?”

For now, though, only the return of the Taliban would see the pulling down of Masood’s posters that are ubiquitous in Tajik-dominated Kabul. A particularly handsome image of the Lion of Panjsher is plastered on the rear window of the Kabul taxi that takes me down to Chicken Street, which, along with Flower Street, is the first port of call for quickie buyers of Afghan carpets and handicrafts… and for seekers of the more immediate pleasures of clandestine liquor and “Afghan”, the gold standard for high quality, black hashish.

Here is where I had come the day the Taliban abandoned Kabul, desperately seeking alcohol to put an end to my extended deprivation. “Sharaab,” I had croaked to the first likely looking shopkeeper I saw.

With rapid-fired instructions in Pashtu, he sent forth his son, a lad of about 12, who soon returned brandishing a bottle of Beefeater Gin.

“One hundred and fifty dollars,” the shopkeeper demanded in Urdu, holding out the bottle to me. “I’ve hidden this bottle from the Taliban for the last five years.”

I paid without bargaining. The same shopkeeper extracted twice that amount from another journalist for a bottle of Scotch that day.

That incomparable Afghan business acumen is evident in every carpet shop in Kabul. As the carpets roll open one by one, every shopkeeper seems to scan his customers, picking up the slightest glimmer of interest. He then quotes double the real price, before eventually bringing it down by 40 per cent through extended, and always courteous, bargaining over several cups of tea.

I still managed to get a bargain, riding on my status as an Indian. After insisting on a $50 dosti discount, I paid $600, or Rs 27,000, for a stunning, 9 x 6 foot, pure wool Afghan carpet from the legendary carpet weavers of Maimana! Who could complain?

My next port of call is a short drive across town: the Central Market is the single most buzzing place in Kabul. The approach to the massive, old, tin-roofed building is picketed by a swarm of beggars, mainly women in the traditional blue Afghan burkha, each one accompanied by several cherubic-looking children. Any resemblance to angels is purely coincidental; a loosely clutched purse is swiftly snatched, while an open wallet attracts dozens of fingers well ahead of the owner’s.

It is hard to be irritated given the obvious desperation of these families. Many have been driven out of their homes by successive waves of fighting. Living in makeshift shanties through the bitter Kabul winter, they must rely on the generosity of strangers to avoid death from starvation or freezing.

Inside the market, I thread my way through a gaggle of pushcarts and pavement vendors loudly hawking cheap apparel. At the end of a tiny alley, I enter Prince’s Market, Kabul’s currency exchange, which epitomises free market enterprise amidst adversity. Even when the Taliban had closed down Afghanistan’s banking system as un-Islamic, Prince’s Market had remained a jostling bedlam.

Currency traders, crammed cheek-by-jowl, call out exchange rates, stock market fashion. Bundles of currency worth thousands of dollars are tossed between the trading floor and a first floor balcony that overlooks it from all four sides. Ironically, given its recent misfortunes, the Pakistani rupee (two of these equal one Afghani) is regarded as a stable currency.

Pushing my way out of Prince’s Market I enter a labyrinth of alleyways, lined with enormous mounds of the dry fruits that Afghanistan is justifiably famous for. The prices are remarkably low, since Pakistan won’t let local producers transport their dry fruits out of the country. Alongside stacks of raisins, almonds and pine nuts (chilgozas), I find heaps of dried mulberries which taste especially delicious with walnut kernels. Heaped on pushcarts outside these shops are the blood red Kandahari pomegranates that used to be carried to Delhi for the tables of the Mughal emperors and, later, the British viceroys.

We head back home, past the beautiful blue dome of the Pul-e-Khisti (bridge of boats) mosque, past the Bagh-e-Babur (the mausoleum of the first Mughal emperor, who insisted on being buried in his beloved Kabul). The December sun is dipping below the hills surrounding the city. The mercury quickly plummets from its balmy daytime high of about 10 degrees to freezing point; during the night, it will drop to about 5 degrees below zero. It is another Afghan winter night and for most of Kabul’s residents it remains, as it was before the West came calling, a cold, difficult, unforgiving city.

Monday, 3 January 2011

Antony to inaugurate warship design hub in Kozhikode


Defence Minister AK Antony at the foundation stone laying of the National Institute for Research and Development in Defence Shipbuilding, Kozhikode



Right: INS Chennai, the 3rd destroyer of the Kolkata class (Project 15A), being launched into the Arabian Sea at Mazagon Dock on 1st April 2010


by Ajai Shukla
Business Standard, 4th Jan 11

For years India’s warship building community has urged the Ministry of Defence (MoD) to create the infrastructure needed for making India a major global hub for building warships. Today, as a first step towards this, Defence Minister AK Antony will lay the foundation stone of the National Institute for Research and Development in Defence Shipbuilding (NIRDESH) at Chaliyam, in Kozhikode district of Kerala.

With the Indian Navy expanding rapidly, the workload on the Directorate of Naval Design (DND) has overwhelmed its tiny establishment. With the DND already busy with five major programmes for building surface warships --- for the Indigenous Aircraft Carrier; Project 15A and 15B destroyers; Project 17A frigates; and Project 28 anti-submarine corvettes --- design capacity has become a serious roadblock to further projects.

The shortage of design and construction capacity in defence shipyards had forced the Indian Navy to order warships abroad at inflated prices. Currently three frigates are being built in Russia, while an Italian shipyard is delivering two logistic support vessels to India.

This has occurred despite the demonstrated ability of Indian defence shipyards to build quality warships competently and cheaply. Mazagon Dock Limited (MDL), Mumbai, is completing the INS Kolkata, a 6800-tonne guided missile destroyer, for a cost of Rs 3800 crores ($850 million). In contrast, Spanish shipyard, Navantia, is selling comparable destroyers to the Australian Navy --- the 6250-tonne Hobart class, which Navantia calls the F-100 frigate --- for 11,850 crores ($2.65 billion) each, more than thrice the cost of INS Kolkata.

The need for NIRDESH became even more urgent as warship building capacity has grown, sharply outstripping design capacity. In 2010, the three defence shipyards --- MDL, Mumbai; Garden Reach Shipbuilders and Engineers, Kolkata (GRSE); and Goa Shipyard Ltd (GSL) --- have been supplemented by a fourth, Hindustan Shipyard Ltd, Visakhapatnam (HSL), which the MoD bought from the Ministry of Shipping. There is also Cochin Shipyard Ltd (CSL), a central PSU, which is building the Indigenous Aircraft Carrier for the MoD. Now a new trio of state-of-the-art private sector shipyards --- L&T, Pipavav, and ABG Shipyard --- is also demanding orders for building warships.

“I am extremely happy with the setting up of NIRDESH”, says Nikhil Gandhi, Chairman of Pipavav Shipyard near Bhavnagar, Gujarat. “This will provide us design capability at affordable prices, rather than forcing us to set up expensive facilities, or to look abroad for warship designs. Pipavav welcomes and will support NIRDESH.”

NIRDESH, an autonomous body under the Registration of Societies Act 1860, will function under the MoD’s Department of Defence Production. Set up with a corpus of about Rs 40 crores, NIRDESH was funded by the MoD and the four defence shipyards. Once operative, it is expected to be self-sustaining, charging both public and private sector shipyards for design and consultancy work that it provides to them.

According to the head of one of the defence shipyards, NIRDESH would function as a “national design centre”, bringing together designers from within the country and abroad, in order to take on the challenging tasks of integrating weapons systems from various global suppliers, and propulsion systems. It will also work in the futuristic area of developing advanced hull forms.

It is understood that NIRDESH will have the financial autonomy to pay top dollar to its personnel, retaining them and providing continuity in design and support. In contrast, the naval designers in the DND can be paid only at mandated government rates. Therefore, they tend to move on to more lucrative jobs.

Currently, only three establishments --- IIT Kharagpur, IIT Chennai and the Cochin University of Science and Technology (CUSAT) --- run courses in naval architecture, graduating about 60 architects each year. The actual requirement is estimated at about 200 architects per year.

While NIRDESH will enhance the number of white-collar naval designers and architects, industry insiders say that the real problem is the acute shortage of skilled blue-collar workers who actually build warships.

Rear Admiral MK Badhwar, who recently retired as the Indian Navy’s chief warship designer, points out, “India’s warship building industry desperately needs a full-scale training establishment that can churn out not just white collar warship designers, but also sufficient numbers of blue collar tradesmen --- welders, platers, electricians, pipe-fitters, crane operators, etc… who are in short supply today.”

In the absence of a MoD initiative to train tradesmen, shipyards are tackling that problem at a local level. The newest defence shipyard, Pipavav, has adopted two local Industrial Training Institutes (ITIs), in which the shipyard guarantees employment for certain categories of tradespersons.

Saturday, 1 January 2011

A very happy New Year to all visitors to Broadsword!


From my recent trip to Kabul: a photograph of my wife and I at Babur's renovated mausoleum. In the photo below, you can see the grave in the shadows.