India Needs a Liberal FDI Policy for its Defence Industry

Laxman Kumar Behera, India Strategic, January 2009

In early October 2008, the Foreign Investment Promotion Board (FIPB) of the Ministry of Finance (MoF) rejected a proposal of the Mahindra Defence Systems (MDS) – a special division of Mahindra and Mahindra (M&M) – to form a Joint Venture (JV) company in India with the UK’s largest and world’s fourth largest defence company, BAE Systems. The JV proposal, based on equity ownership of 51 per cent for MDS and 49 per cent for its British partner, was to “develop, manufacture and provide through life services support for Land Systems defence equipment” and reportedly envisaged a capital in.ow of over Rs. 55 crore.

The decision of the MoF can be termed unfortunate for several reasons.

Gorshkov Deal: India’s Helplessness with Russia*

By Laxman Kumar Behera

The Gorshkov deal between India and Russia has run into controversy over the price and cost overruns of the planned induction of the 44,500 tonne aircraft carrier into the Indian Navy. The Russian failure to adhere by contractual agreements also reveals India’s helplessness in regard to Russian military hardware. This article discusses key developments in the Gorshkov deal and the reasons for its being against India’s interests.

The deal goes back to 20 January 2004, when India signed the Contract and Supplementary Agreements worth US$974 million for inducting the Admiral Gorshkov into the Indian Navy. The agreements related to repair and re-equipment, logistics support, shore infrastructure, training of ship’s crew, repair and technical documents. The delivery of the carrier was scheduled for August 2008. However, as time elapsed, questions were raised over its timely delivery. But, the Indian establishment was assured that the ship would be delivered on the contractual terms.