Weekly Defence News Review (WDNR) - November 16-22, 2009

NATIONAL

• Indian may buy an advanced aircraft carrier from Britain

Reports noted that India has “lodged a firm expression of interest” to buy an advanced 65,000 tonne aircraft carrier worth £2 billion from the UK (see right for an artistic impression of the carrier under construction; source: Guardian). The BAE Systems of the UK, the second largest defence contractor in the world, is presently building two carriers– HMS Queen Elizabeth and HMS Prince of Wales – for the Royal Navy. The £4 billion carrier programme, which has been delayed by two years, is facing threat of government’s cost cutting plans. According to officials, "selling a carrier is one very serious option," although, a formal decision in this regard has so far been not taken by the UK MoD. If India succeeds in buying the aircraft, it is unlikely to handover to its Navy before 2018, when the second carrier is due for launch. The first carrier, as per the current schedule, would join Royal Navy in 2016.

At present India has only one carrier, INS Viraat, against the Navy’s desire of having three carriers so as to enable it to have two operational carriers at any given time. To fill the void India has signed in 2004 a contract with Russia to buy a 44,500 tonne carrier, Gorshkov. Besides, India is constructing a 37,500 tonne carrier, Air Defence Ship (ADS) at Cochin Shipyard Ltd.

• ASSOCHAM reiterates its demand for 49% FDI in defence, finds support in US and IAF Vice Chief

The Associated Chambers of Commerce and Industry of India (ASSOCHAM), has reiterated its demand for enhancing FDI limit in defence production from present 26 per cent to 49 per cent. In a statement the industry representative observed that higher FDI limit would help India’s self-reliance in defence production to grow with “faster adoption of latest technology transfer.” Presently India imports most of its defence equipments (valued over $6 billion in 2008), although the government had a long time ago set a target to produce indigenously 70 per cent of its requirements. To shed the import dependence, it said the government could accelerate the FDI limit which, along with the offset policy, would help Indian industry to develop its technological and manufacturing capabilities. It also said the private companies will be the main catalyst for increasing country’s self-reliance in future.

In the meantime, a top official from the Obama Administration asked India to raise FDI in defence to 49 per cent. Talking to reporters the Assistant Secretary of State for South and Central Asia, Robert Blak said “the Indian government could do would be to lift the cap on foreign equity in Indian defence firms, from 26 per cent to 49 per cent."

In a similar demand, the Indian Air Force’s (IAF’s) Vice Chief Air Marshal P K Barbora also stressed the need for higher FDI in defence industry. Talking in a conference organised by Confederation of Indian Industry (CII), he said "we need to be bold enough to invite Foreign Direct Investment (FDI), more so into defence use."

• Indian Defence Offsets touches Rs. 8,000 crore; Private sector gets upper hand

Reports noted that Indian MoD has so far signed nearly Rs. 8,000 crore worth of offsets, of which 94 per cent are in aerospace sector, and the rest 6 per cent in the naval domain. Between the state-owned defence enterprises – Defence Public Sector Undertakings (DPSUs) and Ordnance Factories (OFs) – and the private sector, the latter has got more offsets, with a total share of 60 per cent. In the private sector, big companies account for 33 per cent of total offsets and the small and medium enterprises 27 per cent.

• Thales wins IAF Radar Contract

Reports noted that French multinational Thales has won a contract from the Indian Air Force to supply 19 low-level transportable radar systems. The radar system is based on Ground Smarter (GS) 100 sensor, which can detect and track targets in the range of 180 km. The contract involves technology transfer, under which Thales will build six radars and the rest 13 by India’s Bharat Electronics Ltd (BEL), a defence public sector undertaking under the MoD.

INTERNATIONAL

• Russia pumps $33.8 billion into its Defence Industry in 2009

To counter the negative fallout on its defence industry, Russia has provided an “unprecedented” $33.8 billion worth of aid to its defence industry in 2009, said the PM Vladimir Putin. The aid, which is in the form of low interest loans, guarantees, and direct subsidies, has helped the industry to grow at 3.8 per cent since the beginning of the year. Russia has ambitious modernisation plan, which is based on equipping its armed forces with nearly 70-80 per cent of ‘modern and promising’ equipments by 2020.

The Great Indian Arms Bazaar*

By Laxman Kumar Behera

The DefExpo 2008, the fifth biennial defence exhibition on land and maritime systems held recently in New Delhi, conveyed most emphatically India's growing clout in the international arms bazaar, albeit mostly as a buyer. The exhibition, which saw a record 475 participants, including 273 foreign companies from over 30 countries, was in full swing for four days and had global biggies showcase the comparative advantages of their products. With India emerging as a major customer with considerable financial power, the global companies left no stone unturned to make India a partner in their ventures to access its huge arms bazaar.

Gone are the days when India, constrained by limited resources and Cold War politics, depended significantly on the single-source, 'cheap' Soviet-era weaponry for its armoury. With the end of Cold War and the global political realignment, especially post-9/11, Indian security requirements are no longer viewed adversely by the West. The impressive growth story of the Indian economy and its global character have favourably moulded the West's perception of India, which increasingly sees its security interests broadening as the economy goes global. Indian policy makers, for the first time, feel an urgency to protect the country's economic interests through a concomitant enhancement of its military might. This is reflected by the continuous upward movement in recent years of India's defence and more importantly modernisation expenditure on its armed forces. The modernization drive of the security infrastructure, backed by the country's ability to pay, has seen India spending more than Rs. 80,000 crore on procurement of defence items in the last three years. Besides, if all future plans materialize then the total procurement budget would amount to a whopping Rs. 1,88,000 crore in the next five years. The huge potential of the Indian arms market is what makes it attractive to global companies who are constrained by shrinking defence spending in their domestic markets.