Friday, 25 September 2020

India invites Israeli firms to cooperate in meeting $130 billion weapons need

MoD target: 70 per cent self-reliance in weaponry by 2027


By Ajai Shukla

Business Standard, 25th Sep 20


India and Israel have been traditionally secretive about defence and security cooperation between their respective governments and industry. On Thursday, however, senior ministry of defence (MoD) officials revealed that, of the $4.9 billion in annual trade between the two countries (2019-20), defence purchases from Israel account for over a billion dollars each year. 


Sanjay Jaju, the MoD’s interface with the defence industry, also disclosed that India and Israel are collaborating on research and development (R&D) in nine focus areas, including big data analytics and cyber security.


He was speaking at a webinar on India-Israel defence cooperation, co-organised by the MoD, SIBAT (the International Cooperation Directorate of Israel’s MoD) and by the Society of Indian Defence Manufacturers (SIDM). 


Israeli companies have brought $200 million worth of foreign direct investment (FDI) into defence production in India since April 2000, revealed Jaju. The total FDI in defence during this period has been Rs 3,454 crore, the MoD told Parliament on Monday.


The MoD said there were rich opportunities for Israel-India defence cooperation, with the former offering skill and experience in developing high-technology weaponry and the latter offering scale in demand.


Underlining the opportunities for Israel, Jaju said New Delhi would spend US $130 billion on modernising the military over the next 7-8 years. He said India’s requirements were available in the 15-year Long Term Integrated Perspective Plan (LTIPP) for the period 2012-2027.


Jaju specifically mentioned India’s requirement for 1,580 towed artillery guns, 100 tracked guns, 180 wheeled and self-propelled guns and 145 ultra-light howitzers being procured under the Field Artillery Rationalisation Plan. He also mentioned India’s need for 110 multi-role fighter aircraft and 111 helicopters.


In the field of defence production, Jaju said nine Indian companies have signed 23 contracts with four Israeli defence vendors, including Israeli Aerospace Industries, Rafael Advanced Systems, Elbit Systems and Elta Systems.


In addition, Israeli firms have set up seven joint ventures with Indian partners, including Kalyani Rafael Advanced Systems, Astra Rafael Communications, HBL Elta Avionics, Adani Elbit Advanced Systems, Kalyani Group Elbit Systems, HALBIT Avionics and Punj Lloyd – Israeli Weapons Industries.


The MoD also disclosed for the first time an indigenisation target for India’s military, stipulating a “70 per cent self-reliance target by 2027.”


According to Jaju, India was producing only 30 per cent of its arms requirements in 1992-93. That had risen to 40-45 per cent in 2014-15, at the time the “Make in India” initiative was launched. Now, with 101 defence items placed on an import-ban list, which officials have announced would be expanded shortly, the MoD is targeting the 70 per cent figure within seven years.


Additionally, the government has created a separate budget head, with an outlay of US $7 billion (Rs 52,000 crore) for domestic capital procurement in the current financial year.


In detailing where India’s defence production currently stands, Jaju stated that the eight defence public sector undertakings (DPSUs) and 41 ordnance factories (OFs) delivered $9 billion worth of defence equipment in 2019-20 – a year-on-year rise of 6 per cent over the preceding two years.


To enhance this, the MoD proposes to position the DPSUs as system integrators, said Jaju. Several DPSUs are currently undergoing disinvestment. Last week, a Group of Ministers was constituted to oversee the corporatisation of the OFs.


Meanwhile private defence firms, to whom the MoD has issued 490 production licences so far, delivered $2.2 billion dollars worth of defence equipment in 2019-20.


Jaju said private sector micro, small and medium enterprises (MSMEs) would be at the forefront of increasing this figure. He said the MoD would designate 5,000 defence items to be indigenised by 2025. Most of these would then be produced by MSMES.


Categorising aerospace and defence MSMEs as “the rising stars”, the MoD stated that their numbers would double to 16,000 over the next five years as they became integrated into global supply chains.


As if on cue, Bengaluru-based aerospace company, Dynamatic Technologies Ltd, announced on Thursday a prestigious contract for building parts for the T-7A Red Hawk trainer – one of the world’s largest and most sophisticated aircraft programmes, being developed by Boeing and Saab.


Jaju said the rise of MSMEs was being facilitated by reservations mandated in the new Defence Acquisition Policy of 2020; by entitling them to 90 per cent reimbursement of the cost of development of equipment under the Make procedure; entitling them to advances from DPSUs and OFs, and the permission to use their testing infrastructure at government rates.


Talking up “start-up firms” as a key driver of defence industry, the MoD stated there are 20,000 start-ups in India, with a valuation of $50 billion. The average age of the founders is just 28 years and 9 per cent of them are women. Backing these start-ups are over 200 incubators/accelerators, which have provided $172 billion in funding since 2016.


Jaju also stated that the MoD’s eco-system for innovations by start-ups, termed the Innovations for Defence Excellence (iDEX) scheme, had already sanctioned $5.4 million in funding, and signed contracts with 33 innovators.



India-Israeli defence cooperation




Annual India-Israel trade

$4.9 billion

Annual Israeli defence sales to India

> $1 billion

Israeli FDI in Indian defence 

$200 million since 2000

Industry partnership so far

·      9 Indian companies signed 23 contracts with 4 Israeli vendors

·      7 India-Israel defence JVs formed



Indian defence industry




India’s defence market

$130 billion over 7-8 years

India’s indigenization target

70% self reliant by 2027

DPSU/OF production

$9 billion annually

Private sector production

$2.2 annually

MSME opportunities

5,000 items to be indigenised by 2025

MSME expansion

Numbers double to 16,000 by 2025

Start-ups in India

20,000 start-ups worth $50 billion

iDEX by start-ups

·      $5.4 million funding sanctioned

·      Contracts with 33 innovators


Tuesday, 22 September 2020

China links troop pull back with Indian withdrawal from Kailash Range

Joint statement issued after talks makes no mention of "troop pull back" or "status quo ante"


By Ajai Shukla

Business Standard, 23rd Sept 20


Late on Tuesday evening, a full day after the conclusion of the 6th round of talks between Indian and Chinese military commanders, the two sides issued a joint statement that agreed to “earnestly implement the important consensus reached by the leaders of the two countries, strengthen communication on the ground, avoid misunderstandings, stop sending more troops to the frontline, refrain from unilaterally changing the situation on the ground and avoid taking any action that might complicate the situation.”


Notably, the statement made no mention of any of India’s core concerns: a troop pull-back by China and a reversion to the status quo ante of April.


Senior government sources say that, during Monday’s talks, China’s People’s Liberation Army (PLA) hardened its stance, conveying to the Indian Army that it must vacate 5-6 tactically dominating heights it occupied south of the Pangong Tso lake. Only after that would the PLA consider any further withdrawal from areas that the Chinese have occupied.


On August 30, after the PLA began expanding its territorial hold south of the Pangong Tso, the Indian Army occupied “blocking positions” on the Kailash Range on Aug 30, in its first offensive action since the PLA trespassed across the Line of Actual Control (LAC) in May.


These mountaintops are strung out, north-to-south, on the Kailash Range. They include the tactically vital Point 5167, Bump, Magar Hill, Rezang La, Reching La and Mukhpari.


By occupying these features, the Indian Army can observe Chinese activities across Pangong Lake, in the Spanggur Gap and on PLA-held features such as Helmet and Black Top. Indian control of these heights makes it difficult for the PLA to consider any westward advance into the India-held Chushul Bowl.


Indian military officers in Monday’s talks, including the outgoing commander of the Leh corps, Lieutenant General Harinder Singh, and his designated successor, Lieutenant General PGK Menon, flatly refused to withdraw from their advantageous positions, pointing out that these heights were all on territory that India had traditionally controlled and patrolled.


The Indian delegation, which also included the Ministry of External Affairs’ official in charge of the China desk, demanded the PLA withdraw from points of intrusion such as Pangong Tso, Gogra-Hot Springs and the approaches to Chushul. It is unclear whether the Indian side has also demanded a Chinese withdrawal from Depsang, where PLA troops have penetrated about 15 kilometres into India – the deepest point of intrusion.


Given this disagreement, the PLA delegation led by the South Xinjiang Military District chief, Major General Liu Lin, declined to discuss any pull back by Chinese troops.


With that, there remains little to show for the apparent consensus between the two foreign ministers – S Jaishankar and Wang Yi – who met in Moscow on September 10. In a five-point joint statement they agreed “the current situation in the border areas is not in the interests of either side… [and] that the border troops of both sides should continue their dialogue, quickly disengage, maintain proper distance and ease tensions.”


Instead of disengagement, the two sides have deployed an estimated 35,000 to 40,000 soldiers each along the LAC. 


In the north, in the Depsang area, Indian planners say there are about 5,000 soldiers on the Indian side of the LAC, backed by another 5,000 on the Chinese side, equipped with tanks and air defence guns. Over time, the PLA has built roads and tracks to supply the troops that have crossed the LAC.


To the south of Depsang, the PLA has pulled out of the Galwan River valley but remains poised on the LAC with an estimated 8,000-9,000 soldiers along India’s Patrolling Point (PP) 14, PP 15, PP-17 and PP-17A (Gogra Post). 


Another 2,000-3,000 Chinese soldiers are deployed across the LAC from PP-18 to PP-23 in the Ane Le area.


South of Ane La, on the north bank of Pangong Tso, where the PLA has pushed the LAC westwards by about eight kilometres, Indian officials estimate there are about 2,500 Chinese soldiers on the north bank and another 10,000 on the south bank, facing off against Indian soldiers on the Ladakh Range.


Finally, there is a major build up of about 250 tanks and other armoured vehicles in the Spanggur Lake area.


In a worrying development for the Indian Air Force (IAF), Indian planners are evaluating the veracity of reports that the PLA has already deployed a regiment of state-of-the-art S-400 air defence missiles opposite the Chumar area; and another regiment is being moved into the Depsang sector.


The Russian S-400 missile regiments, which can accurately strike Indian aircraft at ranges out to 400 kilometres, would allow the PLA to substantially neutralize the IAF’s advantage in air power.


The joint statement left the path for dialogue open, mentioning that the two sides agreed to hold the 7th round of Military Commander-Level Meetings as soon as possible.” No date has been fixed for the talks.

Sunday, 20 September 2020

Industry relieved by restrictions in new defence FDI policy

By Ajai Shukla

Business Standard, 19th Sept 20


In May, Finance Minister Nirmala Sitharaman, while announcing a Rs 20 lakh crore (Rs 20 trillion) stimulus for the coronavirus-hit economy, said a decision had been taken to raise the foreign direct investment (FDI) cap in defence production from the existing 49 per cent (under the automatic route) to 74 per cent.


On Thursday, the Department for Promotion of Industry and Internal Trade (DPIIT) issued Press Note No. 4 (2020 series), which stated: “FDI up to 74 per cent under automatic route shall be permitted for companies seeking new industrial licenses.”


The raised FDI cap is not on offer to companies that already have government approval for 49 per cent FDI in a joint venture (JV). “Proposals for raising FDI beyond 49 per cent from such companies will require government approval”, said the note.


If an overseas defence vendor (referred to as a foreign original equipment manufacturer, or FOEM) who already has government approval for FDI wishes to raise its stake to 49 per cent, the FOEM is only required to file a declaration with the Ministry of Defence (MoD) within 30 days of the change in equity/shareholding pattern.


Setting up a JV with 74 per cent FDI is contingent on the FOEM bringing in end-to-end technological capability. “Investee company should be structured to be self-sufficient in the areas of product design and development. The investee/JV company along with the manufacturing facility, should also have maintenance and life cycle support facility of the product being manufactured in India,” states the press note.


Business Standard learns the Swadeshi Jagran Manch (SJM) pressured the government to mandate the inflow and retention of intellectual property (IP) in defence technologies. “This will be implemented strictly, to avoid a domestic backlash,” said a source close to the SJM. 


The government’s dual objective in permitting higher FDI in defence is to boost manufacture and facilitate the inflow of high technology. On March 4, the MoD told Parliament: “By allowing higher FDI in the defence sector, the global companies having high-end technologies can be encouraged to set up their manufacturing base in India in collaboration with Indian companies, thereby resulting in creation of employment opportunities, saving of foreign exchange and increasing indigenisation.”


Many Indian defence company executives are relieved the liberalised FDI caps come with these restrictive conditionalities. “Allowing FOEMs 74 per cent FDI through the automatic route, and treating them as Indian companies and thus eligible to participate in the “Make in India” categories of procurement – such as “Buy – Indian Designed, Developed and Manufactured”, “Buy (Indian)” and “Make” categories of procurement would have been disastrous for the fledgling Indian defence industry. The FOEMs have the deep pockets needed to wipe out the truly indigenous defence firms,” says Jayant Patil, Larsen & Toubro’s defence chief.


Other executives disagree. Rahul Chaudhry, former chief of Tata Power (Strategic Engineering Division), who now heads his own consultancy, points out that the decision to liberalise FDI is in line with the General Financial Rules (GFR) changes announced in May 2017. “The new rules mandate that an indigenous product is not defined by the equity structure of the manufacturer, but by domestic value addition of at least 50 per cent. 


Chaudhry says it is incorrect that technology will flow to Indian defence JVs by permitting foreign ownership above 51 per cent. “Defence technology flows are regulated by governments, not by companies. A foreign government would control the IP flowing to a 100 per cent-owned subsidiary in India as rigorously as it would to an Indian subsidiary in which it owns a much smaller stake,” says Chaudhry. 


There has been only limited success in attracting foreign investment into defence since it was first permitted in 2001. In March, the MoD told Parliament that, between 2001 and the end of 2019, Rs 1,834 crore in FDI had flowed to 79 Indian aerospace and defence companies. By June this year, investment has risen to Rs 3,454 crore, the MoD told Parliament on Monday. 


FDI in defence was first permitted in May 2001, when defence manufacture, earlier reserved for the public sector, was opened up to 100 per cent for Indian private sector participation, with Foreign Direct Investment (FDI) up to 26 per cent permitted, both subject to licensing.


In 2016, Press Note No. 5 (2016 Series) permitted FDI up to 49 per cent under the automatic route, and above 49 per cent through the government route, provided it was likely to result in access to modern technology or for other reasons to be recorded. 


FDI in defence is also subject to licensing under the Industries (Development & Regulation) Act, 1951. The manufacture of small arms and ammunition is regulated under the Arms Act, 1959. 


In addition, foreign investment in the sector is subject to security clearance by the Ministry of Home Affairs, with guidelines issued by the MoD. “Government reserves the right to review any foreign investment in the Defence Sector that affects or may affect national security,” says the new policy

Saturday, 19 September 2020

Modi, Xi and six years of battle for the psychological high ground


By Ajai Shukla

The Wire, 17th Sept 20


Precisely six years ago, on September 17, 2014, Ahmedabad and New Delhi were abuzz with the visit of Chinese president, Xi Jinping and his wife, folk singer Peng Liyuan. Television channels played an extended video loop of Prime Minister Narendra Modi sitting on a swing with Xi on a bank of the Sabarmati River, while excited anchors foretold an era of Sino-Indian peace, forged between the two strongmen who had come to power within two years of each other.


Six years later, the Modi-Xi relationship lies in tatters, as do ties between New Delhi and Beijing. With Chinese soldiers of the People’s Liberation Army (PLA) having marched across the Line of Actual Control (LAC) in May and occupied territory that the Indian army has traditionally controlled and patrolled, many Indians now see Xi and China as not just adversaries, but as implacable foes.


For the ruling Bharatiya Janata Party (BJP), Modi’s failure to befriend Xi, or to achieve the holy grail of a border settlement, constitutes a huge political embarrassment. There has been no movement on a boundary settlement since 2005, when China consented to sign off on a set of “political parameters” that would govern the final solution. Now the opposition is painting Modi as a trusting simpleton who has been duped by the cunning Chinese leader.


The optimism around Xi’s visit was, in fact, quite evidently misplaced. Even as Modi poured tea for Xi in Ahmedabad, Beijing was testing the Indian PM by sending 1,000 troops across the LAC in Chumar, in Southern Ladakh.


According to India’s foreign ministry, Modi sternly told Xi that such incidents would inevitably affect the larger relationship. With the PLA’s withdrawal from Chumar, the Indian PM continued believing his parity with Xi could result in the resolution of Sino-Indian disharmony.


In May 2015, during his three-day visit to China, Modi pressed Xi again on the border question when they met in Xi’an. Officials familiar with the conversation say Xi did not even respond. Instead, in Beijing the next day, Chinese Premier Li Keqiang delivered Modi a lecture featuring Beijing’s boilerplate formulation that the border question was a “complex issue left over from history” and that solving it required “patience.”


Through 2015 and 2016, Modi was preoccupied with his growing embrace of the US. In January 2015, President Barack Obama and Modi signed a “Joint Strategic Vision for the Asia-Pacific and Indian Ocean Region”. Taking the US-India partnership beyond the 2014 Vision Statement and 2015 Declaration of Friendship, Modi and Obama “resolved that the United States and India should look to each other as priority partners in the Asia-Pacific and the Indian Ocean region.”


Meanwhile defence ministers, Manohar Parrikar and his US counterpart, Ashton Carter, kicked off a US-India Maritime Security Dialogue and signed the Defence Technology and Trade Agreement (DTTI) and a long-delayed Logistics Exchange Memorandum of Agreement (LEMOA) and Communications Compatibility And Security Agreement (COMCASA). Washington also designated India a Major Defence Partner, opening the doors for selling India high-technology military hardware.


Washington also strongly backed New Delhi’s entry into the four global non-proliferation agreements: the Missile Technology Control Regime, the Australia Group, the Wassenaar Arrangement and the Nuclear Suppliers Group (NSG).


A fuming Beijing signalled its displeasure. China blocked India’s candidature for NSG membership and placed a “technical hold” on the designation of Pakistan-based Jaish-e-Mohammed leader Masood Azhar as a global terrorist in the United Nations. The estrangement gathered momentum with New Delhi’s refusal in 2017 to participate in the Belt and Road Initiative (BRI) – China’s flagship infrastructure building project.


The subterranean tussle between Modi and Xi came to a head in Doklam in 2017, when Indian troops intervened in territory that is disputed between China and Bhutan to block China’s road building for 73 tense days. The exceptionally aggressive messaging from China during the crisis suggests that Xi himself assumed control of events at some stage of the confrontation. A mutual pull-back was negotiated, but China eventually got its way by re-entering the disputed Doklam bowl later, which India did not contest.


“That was a clear message from China’s top leader,” says a top official, now retired, who served in the Prime Minister’s Office (PMO). “Xi was telling Modi that you cannot prevent China from taking what we think is ours.”


Modi got the message and did a truce at Wuhan in April 2018. Following that, New Delhi implemented measures to placate Xi, including reining in the Tibetan diaspora. Modi spoke in June 2018 at the Shangri La Dialogue in Singapore, echoing Beijing in appealing against a “return to the age of great power rivalries” in the Indo-Pacific – effectively stating that the US had no place the region.


A former foreign secretary, speaking on condition of anonymity, believes that this evidence of Modi’s weakness only whetted Xi’s appetite. The Chinese leader concluded that he was succeeding in establishing psychological dominance over the Indian PM. And Xi wanted to consolidate that pre-eminence.


The Chinese leader perceived a perfect opportunity in the circumstances that prevailed in April: a raging Covid-19 pandemic, New Delhi’s weakened position in the sub-continent, India’s unprecedented economic slowdown and America’s inward preoccupation with the bruising 2020 election battle.


“Besides affirming his paramountcy over Modi, Xi would also have aimed to show Washington that its putative regional partner could not even safeguard its territory from China. Finally, Xi also wanted to show regional countries India’s subordinate place,” says the former PMO official.


That Modi is confused and browbeaten became evident after the killing of 20 Indian soldiers in June, when he denied any Chinese intrusions into Indian territory. His statement implied that none of the territory the PLA had occupied belonged to India, and also that the Indian soldiers were killed on Chinese territory.


The Chinese media quickly picked up this theme. “Modi’s remarks will be very helpful to ease the tensions because, as the Prime Minister of India, he has removed the moral basis for hardliners to further accuse China” wrote Global Times, quoting Lin Minwang of Fudan University.


There was similar policy incoherence in Defence Minister Rajnath Singh’s statement in Parliament on Tuesday, when he stated that peace and tranquillity would prevail if the Chinese disengaged. That implied that India’s claim over Aksai Chin was no longer crucial.


Even more startling was Rajnath’s omission of Depsang from the list of places where the PLA had trespassed into Indian claimed territory. “If Modi was more in control, I would have thought that signalled a package deal that involved making concessions in Depsang in exchange for Chinese concessions elsewhere. But, given Modi’s lack of visible leadership in a national crisis, Xi seems to have won,” said a former foreign secretary who did not want to be named.

Wednesday, 16 September 2020

Rajnath Singh tells Parliament: "We are prepared for all outcomes to ensure India's sovereignty"


By Ajai Shukla

Business Standard, 16th Sept 20


Seeking to portray a strong government in control of a major national security challenge, Defence Minister Rajnath Singh made a statement on Tuesday in Parliament on China’s incursions across the Line of Actual Control (LAC), vowing to react forcefully to any threat to India’s sovereignty and territorial integrity.


“I want to inform this august House, and through it the entire nation, that we are prepared for all outcomes to ensure that India's sovereignty is maintained,” he said.


The statement, which traced the history of the boundary dispute from the 1950s to the present, was the government’s response to the opposition parties’ demand for a discussion on how troops of the People’s Liberation Army (PLA) were allowed to trespass into Indian territory.


While the government agreed to issue a detailed statement, it did not accept the opposition’s demand for a full discussion on the ongoing crisis.


Rather than fielding Prime Minister Narendra Modi, who has earlier denied any violations of the LAC or PLA transgressions into India, or Home Minister Amit Shah who was admitted into hospital on Monday night, the government fielded the defence minister who has gained stature over this crisis as a credible voice and a steady hand.


Rajnath took the safe, nationalist path by appealing to the opposition and to the country to stand by their brave soldiers in this hour of crisis. “Ham apne jawaanon ke saath, kadam se kadam mila kar chalengen (We will support our soldiers, marching in lock step with them),” he said.


Recounting the crisis, Rajnath said that, since April, it became apparent that the PLA was on the Eastern Ladakh border in larger numbers and with extra armaments. In early May, the PLA began interdicting India’s traditional patrolling patterns in the Galwan Valley. China also attempted LAC transgressions at several other places, including Kongka La, Gogra and the north bank of the Pangong Lake.


Avoiding any mention of Chinese occupation of Indian-claimed territory, Rajnath said: “Our troops observed these attempts and took counter measures.”


“We have informed China through diplomatic and military channels that such activities constitute a unilateral attempt to change the status quo, which is on no account acceptable to India,” he added.


Referring to the clash of June 15, in which 20 Indian soldiers died, the defence minister cloaked the actual events in nationalist rhetoric. “Where there was a need for patience, our soldiers displayed patience and where there was a need for bravery, they displayed bravery,” he said.


“We want to resolve the current situation through dialogue and we have ongoing diplomatic and military engagement with the Chinese.”


Rajnath spelt out three principles that he said guided the Indian side in discussions: “First, both sides must respect the LAC; second, neither side must disturb the status quo; and third, both sides must adhere to the agreements and understanding arrived at over the years.”


Describing the events of last week, Rajnath said that, while discussions were under way, China undertook “provocative military actions” on the night of August 29/30 and attempted to change the status quo on the south bank of Pangong Tso. This attempt, he said, was foiled by our alert soldiers.


He said this highlights China’s disregard for the agreements arrived at between the two sides. Indian soldiers respect the 1993 and 1996 agreements, while the Chinese do not, he said.


At present, the Chinese have mobilized in large numbers along the LAC and there are many “friction areas” in the areas of Kongka La, Gogra and the north and south banks of Pangong Lake. We have implemented a “counter deployment” to “safeguard India’s security interests in these areas.”


He said that the swift Indian counter deployment, at a time when Covid-19 was rampant, was possible because our border network of roads had been greatly improved.


Choosing not to get into details, Rajnath stated: “There are sensitive operational issues around the current situation, so I cannot reveal too many details, even if I wanted to.”


Seeking to simplify a complex dispute, Rajnath presented to Parliament a detailed summary of the unresolved boundary question. He said China had usurped 38,000 square kilometres of Indian territory in Ladakh; while, in 1963, Pakistan gifted China with 5,180 square kilometres of territory in Pakistan Occupied Kashmir (POK). He said China also claims 90,000 square kilometres of Indian territory in Arunachal Pradesh.


“China does not accept the customary and traditional alignment of the boundary,” he said. Both countries discussed the boundary from 1950-1960, but could not arrive at a mutually acceptable solution.


Rajnath said the two countries had agreed that the boundary dispute was a complex issue that required patience and that a “fair, reasonable and mutually acceptable solution needed to be arrived at through peaceful dialogue,” with an atmosphere of “peace and tranquility” on the border. India believed that any violation of the atmosphere on the LAC would inevitably affect bilateral relations.


He said “there is no commonly delineated LAC along the border” and that the two countries had different perceptions about where the LAC ran. Attempts were made from 1990 to 2003 to arrive at a common understanding of the LAC but then China decided to discontinue this. Consequently, there are overlapping perceptions of the LAC in several places.


Both New Delhi and Beijing have blamed successive boundary confrontations on these “overlapping perceptions” of the LAC, which require patrols from both sides to cross into territory claimed by the other.


The government's statement comes at a time of stepped up tension in Eastern Ladakh, with Indian and Chinese troops confronting each other directly as they occupy tactically advantageous heights to the south of Pangong Lake.

Friday, 11 September 2020

Ordnance Factories corporatisation: MoD pushes ahead, workers push back

Half built tanks at the Ordnance Factory Board's factory outside Chennai


By Ajai Shukla

Business Standard, 11th Sept 20


Moving ahead with a longstanding proposal to corporatise the Ordnance Factory Board (OFB) and its 41 factories dotted around the country, the Ministry of Defence (MoD) on Thursday announced the appointment of private sector consultants that would advise the government on how to proceed.


“The department has selected KPMG Advisory Services Pvt Ltd (Lead Consortium Member) with Khaitan & Co Ltd as consortium member, as the consultancy agency for the project,” the MoD announced on Thursday.


“The contract with the consultancy agency would be signed shortly,” it said, after which work would begin on corporatising the OFB.


The move is being strongly resisted by the OFB’s 82,000 workers, who have called an indefinite strike from October 12.


Since independence, the OFB and its factories have been wholly owned by the MoD. They manufacture defence equipment to meet indents placed by the three services, which pay them on a “cost plus” basis.


The military has often complained, and the MoD has agreed, that the OFB’s cost of production is too high because its production value per employee is too low.


Corporatisation involves switching from this model to the defence public sector undertaking (DPSU) model. DPSUs are not owned by the MoD, but they sign a Memorandum of Understanding (MoU) with the ministry every year, which commits them to achieve a set pf negotiated production targets.


The proposal to corporatize the OFB has been heavily contested by its employees since the Vijay Kelkar Committee mooted it in 2005-06. At that time, the proposal was shelved after OFB employee unions threatened to strike.


It was taken up again by the Bharatiya Janata Party (BJP)-led government in 2014, but faced strong resistance again from the OFB’s 80,000 workers and 1,500 officers.


The Indian Ordnance Factory Service (IOFS) Association has written multiple letters to the defence minister, arguing that the OFB was not created to function on a commercial basis, but to provide a strategic surge capacity for wartime, when its large number of workers could produce the large volumes of arms, ammunition and warlike stores that the military would suddenly need.


The IOFS points out that the OFB model involves identifying a requirement, concluding a tender for transfer of technology (ToT) to the OFB and then manufacturing the equipment to fulfil tenders placed by the military.


However, if the military does not place tenders, the OFB’s production capacity remains under-utilised for reasons over which it has no control.


OFB officials cite the example of OF Korwa, which was set up to manufacture Close Quarter Battle (CQB) Carbines but remains without orders. The cost of the establishment, however, is paid by the MoD.


In 2018-19, when the government resumed pushing OFB corporatisation, the OFB workers’ unions threatened a strike from August 20, 2019. On Aug 16, 2019, the MoD told Parliament it had met and negotiated with OFB unions and that there was no move to privatise the OFB. The MoD said it would “keep the process of dialogue open to arrive at a mutual understanding.”


On May 16, Finance Minister Nirmala Sitharaman again announced corporatisation of OFB amongst a series of measures to galvanise defence industry. This would “improve the autonomy, accountability and efficiency of ordnance supplies,” she said.


On Aug 27, Prime Minister Narendra Modi himself committed to corporatizing the OFB. “For decades, Ordnance Factories were run like government departments… Now we are moving towards corporatising these factories.”

Thursday, 10 September 2020

Rafale induction: Five new birds fly into the Golden Arrows’ quiver

The first five Rafales en route to India from France in July, escorted by two IAF Sukhoi-30MKI fighters


By Ajai Shukla

Business Standard, 10th Sept 20


With much of the Indian Air Force (IAF) deployed for possible combat against the People’s Liberation Army (PLA) following its intrusions into Ladakh, the IAF will on Thursday see the addition of a significant new arrow in its quiver.


Four years after the IAF signed a contract with French company, Dassault Aviation, for 36 Rafale fighters, the IAF will formally induct the first five into service. These aircraft, along with the next 13 that will arrive in batches over the next eight months, will join the IAF’s 17 Squadron, also called the Golden Arrows, stationed in Ambala. 


The Golden Arrows came into being at Air Force Station, Ambala on Oct 1, 1951 and has many firsts to its credit. In 1955 it became the IAF’s first squadron that flew jet fighters, the legendary De Havilland Vampire. In Aug 1957, the Squadron became the first to convert on to a swept wing fighter, the Hawker Hunter. Its last aircraft, which was retired in 2016, was the MiG-21, which it flew with distinction in the 1999 Kargil War.


Signalling how important the Rafale deal is for India and France, both countries’ defence ministers – Rajnath Singh and Florence Parly – will be chief guests for the event. Also in attendance will be Chief of Defence Staff General Bipin Rawat, IAF chief, Air Chief Marshal RKS Bhadauria, Defence Secretary Ajay Kumar and Secretary of Defence R&D, Satheesh Reddy.


Officials from France will include Dassault chief, Eric Trappier, and Eric Beranger, the chief of MBDA, which is supplying the weaponry for the Rafale.


The ceremonies at Ambala will include a ceremonial unveiling of the Rafale, a traditional Sarva Dharma Puja (all-faith service), flying displays by the Rafale and Tejas fighters and by the Sarang helicopter display team that flies three indigenous Dhruv helicopters. Afterwards, a traditional water cannon salute will be given to the Rafale aircraft.


The purchase of 36 Rafales was concluded in September 2016, when the IAF signed a Euro 7.8 billion contract with French aerospace firm Dassault for 36 Rafale fighters, with delivery to commence in September 2019. With the first five Rafale’s arriving from Franch in July, the delivery began nine months late. 


However, with the IAF pressing Dassault to deliver fighters at an accelerated rate to make up for lost time, one-to-two more Rafales are expected to join the fleet every month. At that rate, both Rafale squadrons could be delivered and operational by late 2022.


The contract includes Euro 3.3 billion for the “bare bones” aircraft, Euro 1.7 billion for India-specific enhancements (a set of additional capabilities demanded by the IAF to enhance the fighter’s combat capability) Euro 1.8 billion for spare parts, Euro 700 million for the weaponry the fighter will carry, and Euro 350 million for a “performance based logistics” guarantee that 75 per cent of the Rafale fleet will be operationally available at all times.


However, Dassault is delivering the Rafale without its so-called “India specific enhancements”. These include helmet-mounted sights, radar warning receiver, radio altimeter, Doppler radar and the ability to start up the fighter without assistance in extremely cold areas such as Ladakh. These capability enhancements, which Dassault is still developing, will be retro-fitted onto the IAF’s Rafale fleet later.


The weapons that give the Rafale its combat edge over all other fighters in the region have already been delivered by MBDA, ahead of the arrival of the fighters.


These include the Meteor beyond visual range (BVR), air-to-air missile, regarded as the world’s most formidable. With a range estimated at over 120 kilometres, the Meteor allows a Rafale pilot to shoot down an adversary before coming into the range of the enemy’s missiles. 


The IAF’s Rafales also carry the shorter-range MICA missile, which is the world’s only air-to-air missile that features two interoperable seekers (active radar and imaging infrared). This allows the MICA to be used in close-in, fighter-to-fighter dogfights as well as in the BVR role. 


The MICA’s most deadly feature is its ability, while engaging a target in BVR mode, to approach the enemy aircraft in passive mode, i.e. without radiating radar waves, which alert the adversary. When it approaches the target, the seeker starts radiating only in the final stages when the target has little time to deploy countermeasures. 


The IAF’s Rafales will also carry the French SCALP deep-strike cruise missile against ground targets. This can strike hardened and protected targets deep inside hostile territory from stand-off ranges, i.e. without requiring the Rafale to enter hostile airspace that would be heavily defended with air defence missiles. The SCALP’s immense destructive ability comes from a powerful tandem warhead and multiple detonation modes.


More Rafale fighters could follow the 36 already contracted. Last November, the Supreme Court dismissed a bunch of petitions against the Rafale contract, clearing the decks for Dassault to compete with other global vendors in a separate Indian tender for the purchase of 114 more medium fighters. Industry analysts believe that, having already sold 36 fighters, paid for the development of India-specific enhancements and created the infrastructure for supporting the Rafale, Dassault would be at an advantage in any future competitive tender.


The IAF’s 114-fighter procurement follows the cancellation in 2015 of its 2007 tender for 126 Medium Multi-Role Combat Aircraft (MMRCA), which was won by the Rafale but never executed. With its fighter numbers depleted, the IAF has launched the procurement of 114 medium fighters in an exercise that closely mirrors the MMRCA tender.


The fighter manufacturers that appear likely to compete include: Boeing with its twin-engined F-15EX; Lockheed Martin, with its single-engined F-21; Saab with its single-engined Gripen E/F, Eurofighter GmbH with its twin-engined Typhoon; Russia with two twin-engined fighters, RAC MiG-35 and Sukhoi Su-35, and Dassault with the Rafale.


Dassault is also likely to offer the Rafale in response to a separate Request for Information, or RFI, the Indian Navy has floated for 57 fighters, to be flown off its aircraft carriers.