Sunday, 30 June 2019

HAL pushes building civilian Dhruv chopper in private firm

By Ajai Shukla
Business Standard, 30th June 19

Hindustan Aeronautics Ltd (HAL) is planning to create a second production line in the private sector to build a civilian version of the Dhruv advanced light helicopter (ALH). The public sector aerospace firm’s helicopter production line already full for the next three years in building Dhruv ALH for the military, 

On Saturday, HAL brought together Indian private defence firms in Bengaluru to discuss manufacturing the civilian Dhruv ALH, with transfer of technology (ToT) from HAL. Dr Ajay Kumar, Defence Production Secretary, chaired the meeting, which was also attended by HAL chairman, R Madhavan.

Madhavan assessed that 600 civilian Dhruv helicopters were required for Indian customers, including state governments. An upbeat Kumar tweet before the meeting: “India has about 100 civil helicopters. Mexico has ~1000, South Africa has ~1500 and Brazil ~2000. Time to change that!! Discussion today to pave way!”

The biggest concern of private firms, which Kumar sought to addresss at the meeting, was whether sufficient production volumes existed to justify a new production line.

“Under this deal, the selected Indian Partner would also be required to provide support to the customers throughout the life of the product (20 years) thereby ensuring long term business relationship”, said HAL on Saturday.

Before manufacturing begins, the Directorate General of Civil Aviation (DGCA) is required to certify the helicopter for civilian operations. In 2003, the DGCA certified the Dhruv Mark I for civilian operations. However, since the Dhruv has evolved into a Mark III version, fresh certification will be required.

HAL sources say that, rather than the time-consuming certification of a whole new helicopter, DGCA will certify only the seven major changes made to the Mark 1. These include a glass digital cockpit and the powerful new Shakti engine.

The current Dhruv Mark 1 civilian helicopter is in use with law enforcement agencies, anti-Naxalite forces, the Border Security Force, government of Jharkhand, Pawan Hans Helicopters Ltd and the Geographical Survey of India.

HAL has already built and delivered 159 Dhruvs for the IAF and army. It is currently building another 72 Dhruvs for all three services and the Coast Guard. Given HAL’sproduction capacity of 24 Dhruvs per annum, its production line is busy till 2022-23.

Consequently, in February 2018, HAL put out an Expression of Interest (EOI) seeking private sector participation for building the civilian Dhruv Mark III. It is learned that Adani Group, Bharat Forge, Reliance Defence, Lakshmi Machine Works, AK Birla and CK Birla groups, Nash Industries Bangalore, and Bharat Earth Movers Ltd (BEML) responded. After evaluating responses, HAL ruled out BEML and Nash. 

Seeking to expand participation, HAL identified 21 companies and spoke to them in December 2018. After answering questions, HAL issued a Request for Quotations in April 2019. This is currently being processed.

The export market is also being explored for the Dhruv. HAL pilots and marketing teams have given presentations in Indonesia, Myanmar, Vietnam and Nigeria, it has been learnt. The Indian Air Force’s Sarang helicopter aerobatics team, which flies the Dhruv, participated in the Bahrain Air Show, as well as Aero India 2019.

A large Dhruv order could significantly boost Indian defence exports. These have grown from Rs 1,940 crore in 2014-15 to Rs 10,745 crore in 2018-19.

Tuesday, 25 June 2019

Boots on the ground need bucks in the wallet

By Ajai Shukla
Business Standard, 25th June 19

The Union Budget for 2019-20 next week will trigger the predictable chorus of criticism that the capital allocation is inadequate for modernising the military’s warfighting arsenal – such as tanks, artillery guns, warships and combat aircraft – that should at minimum match, or ideally outclass, what our likely enemies will pit against us in war. This concern, while valid, misses a greater shortcoming: the government’s continuing failure to financially provision for the 100,000 new troops it has sanctioned, but has still to adequately fund.

A dozen years of steady manpower growth, in which the army’s payroll has risen six-fold, have seen no commensurate rise in the revenue budget. This has grown only in the mid single digits – just enough to cover inflation, but not an expanding force. Military planners worry they are close to a financial implosion, caused by a double whammy: a growing force alongside growing pay and pension. Compounding this is the increased cost of equipment due to the Goods and Services Tax (GST), and the imposition of customs duties on defence imports, even of essential weaponry. None of these burdens are compensated for in recent budgets.

Take the growing cost of manpower: Since 2008, the addition of almost 100,000 combat soldiers have taken the army’s numbers up to 1.26 million; while the air force has grown to 155,000 and the navy to 83,500 -- making up a one-and-a-half million-strong military. Starting in 2008-09, the army added two mountain divisions (some 50,000 soldiers) to boost border defences in Arunachal Pradesh. Then, in 2011-12, the United Progressive Alliance (UPA) government unwisely consented to the army’s plea to raise a new “mountain strike corps” (MSC), comprising two more divisions and another 70,000 soldiers. The two defensive divisions are raised and deployed, as is the first of the MSC’s two divisions. For now, the National Democratic Alliance (NDA) government has placed the second division on hold. But the troops already raised, including supporting artillery, engineers, signals and logistics units, must be paid, trained, equipped and maintained. The army has set up several new military stations where these formations are located. Where is that money coming from? Since the government has not allocated extra money, the army is forced to generate it from within.

The government sanction letters (GSLs) that green-lighted these four additional divisions, as well as two tank brigades raised along with them, committed extra funding and specified the stages at which payments would be made. That commitment remains on paper with the army still to receive any budgetary increments. Until the government makes good on what the GSL promised, the army must sustain the new units by diverting resources from existing formations. This is naturally hollowing out the army.

In previous instances of large-scale new raisings – such as after the 1962 debacle or, to a lesser extent, after the 1999 Kargil conflict – the defence revenue budget allocations showed a sharp upward rise, caused by the additional expenditure of those raisings. Since 2005, however, allocations have risen evenly by an annual 6-8 per cent, with the exception of a sharp jump in 2008 after the 6thCentral Pay Commission (6thCPC) awarded a major salary boost. Even the salary raise of the 7thCPC in 2016 was not accompanied by a corresponding rise in the revenue allocations. So the famously adaptive Indian army “makes do” by sharing its already meagre resources within a larger pool.

Adding to the military’s manpower costs is the government’s implementation of One Rank One Pension (OROP) in 2015-16. However, with pensions allocated under a separate budget head, the government has no choice but to make available the amount that is disbursed.

Another crushing budgetary burden the military faces is the imposition of high rates of GST. Procurement of “stores”, a high-volumes category that includes ammunition, tentage, clothing, etc, is taxed at 18 per cent, while the military pays a whopping 28 per cent GST on each vehicle it buys. Since GST was imposed on the military without provision for reimbursement, and without allocating additional funds, the finance ministry effectively takes back a large percentage of the funds it allocates to defence. This affects the military not just at apex procurement levels but down to the smallest units, which can now buy much less with their already limited training and contingency grants.

Further, the government has imposed customs duties on the import of defence equipment, which was earlier exempt from taxes. This eats into capital procurements and the purchases of spares for foreign equipment, both of which have significant import components. While the laudable aim of customs duties is to promote indigenization, it has significantly reduced the military’s buying power. Besides, with army stores and equipment taxed at 10 per cent compared to the 3 per cent rate imposed on aerospace components, there is an inverse logic at play: the items that comprise the bulk of imports and most need to be produced in India, are taxed at the lower rate. 

The pernicious practice of conjuring up achievements without actually funding them is gaining currency. As a part of the officially denied Cold Start doctrine, numerous military units were moved in preceding years to new locations closer to the border, in order to allow them to be launched into combat without lengthy and give-away movements up to their launch pads. Little money was made available for this: it was left to the army to scrape and scrounge and get existing units to share accommodation. Similarly, after a spate of terrorist attacks on military unitsthe defence ministry sanctioned in 2016-17 a project for walling vulnerable cantonments and installing CCTV cameras and a central monitoring facility. Predictably, no budgetary allocation was provided. Consequently, not a brick has been laid, nor a rupee spent.

Similarly, seeking to address damaging reports that the military was so short of ammunition that it could not fight beyond a few days, the defence ministry announced with fanfare the grant of financial powers to senior military commanders to purchase ammunition for up to ten days of intense combat – the so-called “10-I stocks”. However, with no additional funding line allocated, the procurement power was unsupported by financial resources. Any purchases of ammunition must be made from the already stressed army budget.

Given this track record, it would be unwise to expect that next week’s defence allocations will be based on a holistic evaluation of national security threats, the wherewithal needed to deter or counter them and the funding that is required. Instead, successive governments have taken their cue from bodies like the Finance Commissions, which have recommended that defence expenditure be progressively reduced as a percentage of Gross Domestic Product (GDP). In a step forward, the 14thFinance Commission, which made recommendations on the disbursement of central government finances for 2015-2020, recommended that defence revenue expenditure be pegged to the GDP. Though the GDP figure itself remains disputed, it would be safe to anticipate that the rise in defence allocations would remain in the mid single digits. 

Tuesday, 18 June 2019

“Export or perish”, MoD warns private defence firms

MoD official, Sanjay Jaju, frankly told the private sector to focus on exports since "We cannot support so many of you"

By Ajai Shukla
Business Standard, 18th June 19

The ministry of defence (MoD) on Monday issued a blunt warning to private sector defence firms that they must find customers overseas for the weapons and equipment they produce, rather than relying on the government for orders.

Addressing a Ficci seminar in Delhi on “Defence Exports Promotion”, Sanjay Jaju, who handles the MoD’s interface with industry, warned that the limited capital budget had to cater for committed liabilities (instalments payable for equipment purchased in previous years), purchases from the defence public sector undertakings (DPSUs) and ordnance factories (OFs), as well as the private sector.

“The capital budget is currently about one lakh crores. There are certain committed liabilities. Of what remains, a major share goes to the public sector. A small share of the pie goes to the private sector… Not all of you will get orders. We cannot support so many of you”, said Jaju.

He also appeared to be talking down the possibility of any significant raise in the defence capital allocations in the budget next month, from Rs 1,08,133 crore that was allocated in the February budget.

The seminar was organized to explore ways to raise defence exports from the current annual level of Rs 11,000 crore to the US $5 billion (Rs 35,000) crore that the Defence Production Policy of 2018 (DPrP-2018) targets by 2025.

Exports are also essential for meeting the DPrP-2018 target of taking India into the top five defence producers, with an annual turnover of US $26 billion (Rs 180,000 crore). The current defence production turnover is Rs 90,000 crore.

“Exports not just improve our foreign exchange position and enhance our strategic leverage. They are also essential for galvanizing defence industry”, said Jaju. In fact, exports also create economy of scale, bringing down prices of defence products and making them competitive in the global market.

Jaju listed out a series of measures the MoD had taken, or was planning to take, to create an enabling environment for defence exports. The first was to gain Indian entry into three of the four global export control regimes: the Missile Technology Control Regime, the Wassenaar Arrangement and the Australia Group. New Delhi was actively lobbying for entry into the fourth: the Nuclear Suppliers Group.

“We are committing to certain obligations under these regimes so that our industry enjoys a global reputation of being responsible exporters”, he said.

Next, the MoD was streamlining processes to be more responsive to export requests. “The processes we had ourselves created became into stumbling blocks for our exporters. Permissions took up to four months, and our exporters lost opportunities. Now time taken for clearances is just 20-25 days. For export of components, permissions are granted in a week”, said Jaju.

Jaju announced the creation of a “Defence Export-Import Portal”, that he urged all private sector defence exporters to regularly visit. “We will post export opportunity leads that our sources have obtained, which exporters can follow up and translate into business”, he said.

The sources that will be feeding back leads include the defence attaches to Indian embassies across the globe. These officers are being given the responsibility, and sizeable budgets, initially amounting to almost Rs 17 crore, to track export opportunities in their countries of posting.

Private firms that attended overseas defence exhibitions were urged to be a part of “India Pavilions” that the MoD would organize. This would create “synergy and weight” and enable business-to-business interactions under the “overarching umbrella” of an official business delegation.

Jaju urged firms to diversify their bouquet of export products, which currently consisted mainly of components. Urging companies to export full-fledged defence platforms, he said that DPSUs were being given export targets of 25 per cent of their turnover.

On the question of feasibility of tripling defence exports from Rs 11,000 crore to Rs 35,000 crore in just six years, Jaju pointed out that the current level includes only those items that are recognised as defence products. By adding aerospace components produced and exported for civilian aircraft, the current figure is actually larger, he said.

Saturday, 15 June 2019

Navy finds defects in Scorpene submarine; one more year of delay

The navy insists on the removal of 36 defects in INS Khanderi before it will commission the submarine

By Ajai Shukla
Business Standard, 15th June 19

Project-75, which involves building six Scorpene submarines in Mazagon Dock Ltd, Mumbai (MDL), was already running five years late by the time the first one, INS Kalvari, was commissioned on December 14, 2017.

With the navy reporting a host of problems in the second vessel, INS Khanderi, Project 75 has now slipped by at least one more year. The navy has refused to commission the Khanderi into service until all its defects and deficiencies are fully rectified.

The defence ministry has fully supported the navy’s insistence that MDL and its technology partner, French warship builder Naval Group, must deliver a fully seaworthy and battle-worthy vessel. 

“The liability of delivering a fully functioning submarine is that of Naval Group. If we accept the boat with shortcomings, the liability would be on us”, said a senior admiral.

The most worrying problem the navy discovered during the Khanderi’s sea trials was a killer defect for a submarine: Its engines and propellers were emitting an unduly high level of noise.

A submarine’s effectiveness in battle, and its very survival, depends upon it remaining undetected. Enemy sonar detectors – mounted on aircraft, warships and submarines – search relentlessly for sounds emitted by enemy submarines. Once detected, a submarine is easy meat for enemy depth charges or torpedoes.

Khanderi’s noisiness is not its only problem; the navy has pointed out 35 other defects and has demanded they be rectified before it commissions the vessel. 

Nor can these problems be addressed quickly, since 29 of them require to be tested when the sea is absolutely calm – or in what is termed “Sea State – 1”. With the monsoon imminent, calm seas are unlikely before September.

Another four issues require the submarine to be docked in a navy dockyard for testing. This runs up against an existing docking schedule that dockyards have already issued, involving numerous other warships.

Meanwhile, the third Project-75 submarine, INS Karanj, has just begun trials. It is unclear whether there will be as many problems as with the Khanderi.

The Indian Navy and MDL both declined to comment for this article. However, neither denied the existence of numerous defects in the Khanderi.

For the navy, which is making do with just 14 conventional submarines against a requirement of 24, the INS Khanderi delay extends a dangerous operational void. Over recent years, both the navy’s nuclear submarines, the indigenous INS Arihant and the Russia-leased INS Chakra, have been out of action for extended spells after accidents stemming from poor seamanship. In the case of the former, seawater entered the submarine from a hatch carelessly left open; the latter scraped its sonar dome against the seabed.

Project 75 kicked off in 2005, when the navy signed a Rs 18,798 crore contract for MDL to build six conventional submarines, with technology transferred by Franco-Spanish consortium, Armaris. All six Scorpenes were to be delivered between 2012-2015, but the sixth will only be delivered now by 2022. 

Meanwhile, Armariswas taken over by France’s Direction des Constructions Navales Services(DCNS), and its cost went up to Rs 23,562 crore. In 2017, DCNS changed its name to Naval Group.

Besides INS Kalvari, the navy’s 14 conventional submarines include four 20-30 year-old, German-origin HDW 877 EKM boats (called the Shishumar-class); and nine 10-20 year-old, Russian-origin Kilo class Type 209 vessels (called the Sindhughosh-class).

In addition to five more Scorpenes, six more conventional submarines are planned to be built under Project 75-I, by an Indian firm in partnership with a foreign vendor. Tendering for that is still to begin.

Thursday, 13 June 2019

Missile test moves DRDO a step closer to hypersonic flight

A mock-up model of the DRDO's hypersonic test development vehicle (HSTDV) that flew on Wednesday

By Ajai Shukla
Business Standard, 13th June 19

The Defence Research and Development Organisation (DRDO) took a step towards the coveted technological goal of achieving hypersonic flight with the launch of a technology validation mission on Wednesday.

“DRDO today launched a Technology Demonstrator Vehicle to prove a number of critical technologies for future missions from Dr Abdul Kalam Island off the coast of Odisha… The data has been collected and will be analysed to validate the critical technologies”, announced the DRDO.

Rockets have long travelled at hypersonic speeds, but they have the advantage of carrying their own oxygen along with their fuel. Achieving hypersonic flight with an air-breathing engine is the greater challenge. Only Americans, French, Chinese and Australians have managed 10-second hypersonic flights. The DRDO has targeted a 20-second flight.

Hypersonic flight involves travelling at speeds above Mach 5, or 1,500 metres/second. An airliner travelling at hypersonic speed would reach from New York to Tokyo in a couple of hours.

Hypersonic flight also achieves military objectives, such as carrying larger payloads than conventional rockets. Since a hypersonic missile does not have to carry oxygen – it uses the oxygen freely available in the ambient air – that allows it to save weight, and carry a larger payload. This is called having a larger “payload fraction”.

The key challenge in hypersonic flight is to develop an engine that can remain alight even when the air it breathes is being rammed the combustion chamber at a velocity of 6.5 Mach. That is why it is called a “supersonic combustion ramjet”, or “scramjet” engine. 

While the Wednesday mission was not intended to achieve hypersonic flight, it had the aim of validating key technologies essential for hypersonic flight.

Amongst these technologies was a launch vehicle – a modified Agni-1 missile to launch the technology demonstrator vehicle and boost its velocity – the guidance systems, and heat shields for protection during re-entry.

In the actual hypersonic flight demonstration, which the DRDO intends to carry out within a year, the Agni-1 booster would release the hypersonic vehicle after re-entry, which would then ignite its kerosene fuelled scramjet engine and fly for a significant duration of time.

A key challenge is developing the super-materials that can withstand the extreme temperatures and pressures of hypersonic combustion. This includes Niobium alloy, Hafnium and Nickel-based superalloys.

Last month, speaking at the Institute for Defence Studies and Analyses, the DRDO chairman mentioned hypersonics as one of the key areas for future wars.

“We are confident of achieving hypersonic flight for a significant period of time within the next four years”, states a senior DRDO manager.

Wednesday, 12 June 2019

AN-32 wreckage found by IAF in Arunachal Pradesh, no signs of survivors

Disastrous year for IAF, ten aircraft lost already, killing 23 persons

By Ajai Shukla
Business Standard, 12th Jun 19

After eight days of gruelling, and often hazardous, air and ground search, an Indian Air Force (IAF) helicopter on Tuesday located the wreckage of an AN-32 transport aircraft that went missing on June 3 while on a routine maintenance sortie in Arunachal Pradesh.

“The wreckage of the aircraft was spotted today 16 Kms North of Lipo, North East of Tato at an approximate elevation of 12,000 ft by the IAF Mi-17 Helicopter undertaking search in the expanded search zone. Efforts are now continuing to establish the status of occupants and establish survivors”, stated the IAF on Tuesday.

Mountaineering teams with IAF, army and civilian members are being formed and will be inducted on Wednesday through helicopters to look for the 13 crewmembers and passengers who were on board the ill-fated aircraft. Crash survivors would have faced the daunting challenges of high-altitude, cold and rainy weather, wild animals and no food. 

The AN-32 crashed while on a supply ferry from Jorhat in Assam, to the advanced landing ground (ALG) in Mechuka, some 40 kilometres from the Line of Actual Control (LAC) with China. The IAF supplies army soldiers deployed on the LAC with food, ammunition and equipment, for which the army pays from its budget.

However, the IAF faces the dangers of flying in the treacherous Himalayan terrain and often pays a tragic cost in lives and aircraft.

Almost exactly a decade ago, in a similar crash, 13 military personnel were killed in June 2009, when an AN-32 crashed soon after taking off from Mechuka.

In July 22 2016, an AN-32 with 29 personnel on board vanished into the Bay of Bengal while flying from Chennai to Port Blair in the Andaman & Nicobar Islands. No wreckage or bodies have ever been located.

Fearing a similar uncertain outcome, the IAF announced an unprecedented cash reward of Rs 5 lakhs for information about the missing aircraft. It is unclear whether the money will be paid out.

This was the first time also that a navy reconnaissance aircraft, the P-8I Poseidon, was pressed into service on the Himalayan border, in the hope that its powerful radar and electro-optical sensors might locate the AN-32 through the heavily forested terrain.

Questions remain over why the AN-32’s emergency locator beacon failed to broadcast a signal that directs rescue teams to home in on the crash site.

The crash also underlines the years of delay in completing the upgrade of the IAF’s AN-32 fleet. After a $400 million contract was signed with Ukraine to modernise the IAF’s 103 AN-32s, only 55 aircraft have actually been upgraded. In 2014, Russia and Ukraine snapped defence ties after the former annexed the Crimean Peninsula. With essential Russian components for the AN-32 upgrade unavailable, the upgrade ground to a halt. Now Ukraine, after indigenously developing the parts earlier sourced from Russia, is resuming upgrade of the remaining 47 aircraft. The aircraft that crashed last week had not been upgraded.

2019 is already the IAF’s worst year in a decade, with ten aircraft crashes in the first six months. These include a Mirage 2000 crash in Bengaluru in February, in which two pilots lost their lives. Days later, rehearsing for the Aero India 2019 show, two Hawk aircraft of the Surya Kiran aerobatics team collided in mid-air, killing a pilot. Later that month, a Mi-17V5 helicopter was shot down near Srinagar in what appears to be a “friendly fire” incident, killing seven persons, including one on the ground.

Tuesday, 11 June 2019

IAF block on indigenous HTT-40 trainer aircraft keeps door open for Swiss trainers

Even as the indigenous HTT-40 (above) moves towards final clearance, the IAF continues to block its induction into service

By Ajai Shukla
Business Standard, 11th June 19

The Indian Air Force has refused to issue a Request for Proposals (RFP) for the Hindustan Turbo Trainer - 40 (HTT-40) basic trainer aircraft. An RFP is essential for Hindustan Aeronautics Ltd (HAL) to release money to develop the engine that will power the Indian-designed trainer.

HAL has to pay Rs 180 crore to US firm Honeywell, to upgrade its TPE-331-12B engine that will power 106 HTT-40 trainers needed by the Indian military. HAL is willing to pay, but the company’s board insists that the money be disbursed only after the IAF demonstrates its intention to procure the HTT-40 – through an RFP, which is the first stage of a purchase.

But the IAF says it will only issue an RFP after the HTT-40 completes spin trials. In this critical trial, the test pilot deliberately throws his aircraft into a spin. After it has spun six times around its axis, he must recover the aircraft into level flight.

Since its first flight in 2015, the HTT-40 has consistently surpassed IAF performance benchmarks in flight-testing. In on-going spin trials the trainer has incrementally demonstrated the ability to recover from three spins. 

At a high-level meeting in the MoD, chaired by the defence production secretary (Secretary DP) and attended by top IAF officers, HAL presented videos of the trainer recovering from three spins. The project managers pointed out that recovering from six spins is a matter of incremental testing.

The IAF had initially committed to issuing the RFP after the HTT-40’s first flight. When it flew in 2015, the IAF set a new benchmark of stall testing. When that was completed in 2017, the benchmark was changed to the first spin test. In late 2018, after the HTT-40 demonstrated it could recover from a spin, the IAF said it would issue an RFP only after the HTT-40 demonstrated it could recover from six spins.

HAL is concerned about production delays that could arise. An immediate RFP would allow HAL to pay Honeywell to begin the two-year process of replacing the TPE-331-12B engine’s old “electronic engine controller” (EEC) with a “full authority digital engine controller” (FADEC). Delaying payment would result in the FADEC-equipped engine being unavailable when the HTT-40 goes into production.

A senior HAL official points out they have asked the IAF neither for payment, nor a contract. An RFP amounts to only an IAF statement of interest, without financial liabilities. But it is essential for the HAL board to clear payments to Honeywell.

With the HTT-40 programme thus mired, the IAF is demanding that 38 Pilatus PC-7 Mark II trainer aircraft be imported from Switzerland, to supplement 75 Pilatus trainers contracted in 2012 in a deal that was clouded by controversy. 

Contacted for comments, the IAF states: “The [HTT-40] has just entered the spin phase of trials… As per DPP an RFP can be issued only after design and development completion/certification by HAL followed by IAF flight trials.” The air force points out that there was an audit objection when an RFP was issued for the Intermediate Jet Trainer (IJT) before spin trials were completed.

In fact, in the IJT case, the IAF went far beyond placing an RFP. It contracted for and actually paid HAL for constructing a significant number of IJTs. HAL points out that placing an RFP for the HTT-40 involves no financial liability.

Furthermore, in December 2017, the IAF placed an RFP for the Tejas Mark 1A. This is an advanced version of the current fighter that exists only on the drawing board and is nowhere near flight-testing or completion.

The IAF has relentlessly opposed the HTT-40 since the start of the programme, opting instead for importing the Swiss Pilatus. Business Standard reported (July 29, 2013, “Indian Air Force at war with Hindustan Aeronautics; wants to import, not build, a trainer”) that the IAF chief wrote a personal letter to the defence minister, incorrectly attributing an unduly high price to the HTT-40, compared to the Swiss trainer. The defence minister allowed the indigenous programme to continue.

In 2009, when a global tender was floated to buy 75 trainer aircraft, the IAF diluted the existing performance benchmarks, allowing the Pilatus PC-7 Mark II trainer into the contract (July 30, 2013, “Air Force diluted at least twelve benchmarks for trainer aircraft, allowing Pilatus into the contract”).

But the HTT-40 still stands in the way of import. The defence procurement procedure (DPP) mandates the highest procurement priority for “Indian designed, developed and manufactured (IDDM)” equipment – a category the HTT-40 falls in. The MoD and HAL remain committed to backing the HTT-40, which is likely to complete testing by December, according to HAL officials. 

Currently, approval exists for buying 106 HTT-40 trainers. If the IAF is permitted to import 38 Pilatus trainers, the number of indigenous trainers will fall to 68 aircraft.

Thursday, 6 June 2019

Assocham proposes raising defence FDI cap to 51%

Global defence majors wary of investment in India, have invested just Rs 1.26 crore since 2014

By Ajai Shukla
Business Standard, 6th June 19

A study, released by Assocham on Wednesday, recommends that foreign defence firms be allowed a majority stake in joint ventures (JVs) that they set up in India.

In 2016, the prevailing 26 per cent cap for foreign direct investment (FDI) in defence was raised to 49 per cent through the automatic route. Further, FDI above 49 per cent became permissible through case-by-case government sanction “wherever it is likely to result in access to modern technology or for other reasons to be recorded.”

That has failed to spur investment. The defence sector has received a total of US$ 0.18 million (Rs 1.26 crore) in FDI from April 2014 to December 2017, the defence ministry told Parliament on March 7, 2018.

The Assocham study, conducted in partnership with UK consultancy firm BDO, now suggests: “The government should allow a minimum of 51 per cent FDI in defence sector without any riders to linkages with ‘modern technology’, so as to enable international defence companies to exercise adequate control over joint venture companies, intellectual property rights (IPR) and product quality.”

“The increase in FDI limit will bring in the capital for establishing new facilities and scaling up current facilities while benefitting India through large scale job creation,” noted the Assocham-BDO study titled, “Indian aerospace manufacturing ecosystem”.

The report targets a larger role for Indian industry in the $838 billion global aerospace manufacturing arena. India’s share currently stands at under 1 per cent.

The defence industry remains constrained by a complex industrial licensing regime, governed by the Industries (Development & Regulation) Act, 1951, the Arms Act, 1959 and Arms Rules, 2016. Licensing applications undergo security vetting by the defence and home ministries before the Department of Industrial Policy & Promotion (DIPP) clears them.

The report recommends that government must restore tax incentives for research and development (R&D), to encourage investments in high-technology micro, small and medium enterprises (MSMEs). “This will encourage foreign defence companies to bring best practices and technology to create domestic R&D partners and contribute towards a robust aerospace ecosystem”, said the report.

“In addition, to boost foreign investments in aerospace R&D, it should be made as an eligible activity for discharging offset obligations,” it states.

In May 2018, the defence ministry had proposed modifications to the Defence Offset Guidelines, allowing vendors to discharge offsets through investment in SEBI-regulated funds dedicated for the development of start-ups and MSMEs. That policy remains in the pipeline.

Raising the FDI cap in defence has always been politically sensitive. It is opposed by trade unions of defence public sector undertakings (DPSUs) and Ordnance Factories (OFs). Several private sector defence majors have also been wary of the entry into India of global defence and aerospace giants.

The United Progressive Alliance government from 2009-14, as also the National Democratic Alliance from 2014-19, considered raising the defence FDI cap to 74 per cent through the automatic route. However, no government has yet bitten the bullet.

Tuesday, 4 June 2019

13 feared dead in air force crash, AN-32 overhaul languishes after Ukraine-Russia spat

AN-32 takes off from Mechuka, a heavily used landing ground for supplying army troops on the Sino-India border

By Ajai Shukla
Business Standard, 4th June 19

In a harsh reminder of the unforgiving terrain the Indian Air Force (IAF) AN-32 transport aircraft operate in, one of these IAF workhorses crashed in Arunachal Pradesh on Monday. There were 13 military personnel on board. 

The aircraft was flying from Jorhat, over high, densely forested mountains, to the advanced landing ground (ALG) at Mechuka, close to the Line of Actual Control (LAC) with China. AN-32s carry supplies that sustain army troops on the LAC.

“No wreckage has been sighted so far. IAF is coordinating with Indian Army as well as various government and civil agencies to locate the missing aircraft,” stated the IAF.

The crash was an eerie echo of another one almost exactly a decade ago, when 13 personnel were killed in June 2009, when an AN-32 crashed soon after taking off from Mechuka.

In another incident that remains a mystery, an AN-32 with 29 personnel on board disappeared from radar screens on July 22, 2016, when flying from Chennai to Port Blair in the Andaman & Nicobar Islands. No wreckage or bodies have ever been located.

Soon after the 2009 crash, the IAF signed a $400 million contract with Antonov, the Ukrainian firm that built the AN-32, for modernizing the 103 aircraft-strong fleet with improved avionics for flying in difficult conditions. The modernization was also intended to add ten years to the AN-32’s service life.

By 2014, 45 AN-32s were modernized in Ukraine, and then 10 more in the IAF base repair depot in Kanpur. But the programme then stalled when Russia annexed Ukraine’s Crimean Peninsula. Kiev cut ties with Moscow and essential Russian components for the AN-32 upgrade became unavailable.

Monday’s crash again underscores the urgent need to resume the long-overdue modernization and overhaul of the AN-32 fleet that has been flying since the late 1980s. The aircraft that crashed was high in priority for overhaul.

Ukrainian sources say the development of AN-32 parts to replace those earlier provided by Russia is almost complete. Meanwhile, Ukraine has sourced some AN-32 components from the global market and resumed work in Kanpur. 

Modernization of the remaining 47 AN-32s can pick up pace only when Ukrainian components start flowing. 

The AN-32 carries up to 6 tonnes of cargo or 50 passengers. It operates from small ALGs like Mechuka, and also provides a ferry service for local residents.

Sunday, 2 June 2019

After Trump’s GSP snub, US talks up ties on defence with India

Acting Defence Secretary Pat Shanahan (above) talked up defence ties with India at the Shangri-La Dialogue

By Ajai Shukla
Business Standard, 2nd June 19

On Saturday morning, New Delhi was served a reminder about how close strategic partnership with Washington went hand in hand with intense competition on trade and commerce.

Late on Friday evening (Washington time) President Donald Trump terminated India’s preferential designation as as “a beneficiary developing country for purposes of the Generalized System of Preferences (GSP)”, which had provided Indian exports withi duty exemptions since November 24, 1975.

“I have determined that India has not assured the United States that India will provide equitable and reasonable access to its markets. Accordingly, it is appropriate to terminate India's designation as a beneficiary developing country effective June 5, 2019”, announced a statement signed by Trump.

Just hours later, Trump’s acting defense secretary, Pat Shanahan, speaking at the Shangri-La Dialogue in Singapore, declared that America was “increasing the scope, complexity and frequency of its military engagements with India” in maintaining a free and open Indo-Pacific.”

Shanahan avoided naming China as a common adversary, but his hard line speech left little to the imagination. “Some in our region are choosing to act contrary to the principles and norms that have benefited us all," he said, citing a “toolkit of coercion” being used to militarise disputed territories, and interference in countries’ domestic politics through hybrid influence operations.

Following Shanahan’s speech, the Pentagon released an Indo-Pacific Strategy Report (IPSR-2019) entitled “Preparedness, Partnerships and Promoting a Networked Region” that heavily emphasized the importance of the US-India strategic partnership.

Citing “shared interests, democratic values, and strong people-to-people ties”, the IPSR-2019 said “US and India continue to use their deepening relationship to build new partnerships within and beyond the Indo-Pacific.” 

The report pointed out that the US had designated India a “major defence partner” in June 2016, “seek[ing] to elevate the US defense partnership with India to a level commensurate with that of the US’ closest allies and partners.”

It also cited the institution in September 2018 of the US-India 2+2 dialogue, where both countries foreign and defence ministers together discuss strategic cooperation.

“The signing of the Communications, Compatibility and Security Agreement (COMCASA) in 2018 represents a significant development in our military-to-military relationship, facilitating greater interoperability and real-time secure information-sharing. DoD and the Indian Ministry of Defence are increasing the scope, complexity, and frequency of our military exercises. Later this year, the United States and India will conduct our first tri-service exercise”, stated IPSR-2019.

Rebutting criticism within the region that America was not putting enough military force needed to counter an expanding China, Shanahan revealed that the US Indo-Pacific Command (USINDOPACOM), the geographic combatant command responsible for the region, has 200 combat ships and four times the military assets of any other American combatant command.

Citing approximately $16 billion that India has spent on US weaponry since 2008, the report cited the Defence Technology and Trade Initiative (DTTI), through which “we are increasing cooperation in defense technology, building industry-to- industry ties, and identifying opportunities for the co-development and co-production of defense systems for the sustainment and modernization of military forces.” 

The prestigious Shangri-La Dialogue, traditionally attended by defence ministers of major powers as a forum to criticize China, is being attended for only the second time by China’s defence minister, General Wei Fenghe, who will speak in a solo plenary session on Sunday, at par in protocol with Shanahan, who spoke on Saturday.

In last year’s Shangri-La Dialogue, Prime Minister Narendra Modi had delivered the keynote address. Reflecting on the Indo-Pacific, he had observed that “…rules and norms should be based on the consent of all, not on the power of the few.” 

This year, due to the election and formation of a new government, India has no high-level representation at the Shangri-La Dialogue.