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Arms not allowed in private hands?

The Foreign Investment Promotion Board’s (FIPB) latest year-end decision to summarily reject the joint venture proposal of Mahindra & Mahindra, one of India’s most reputable technology companies, with Israel’s Rafael Advanced Defense Systems Ltd to manufacture high-tech defence equipment in the country, without assigning a good reason, is not only shocking, but also exposes the government’s age-old mindset against the domestic private sector playing a key role in state-of-the-art arms and security equipment manufacture. With the union government in Delhi hardly functional, it may be interesting to find out who or what got the M&M joint venture (JV) proposal spiked? The inexplicable FIPB action, once again, mocks at the government’s so-called avowed policy to improve the domestic capability in defence manufacture through private participation.

Rafael Advanced Defence Systems (RADS) is one of the world’s top defence manufacturers. Outside Israel, it has joint venture collaboration with only a few top defence equipment firms such as Raytheon, Northrop Grumman and the Defence Science and Technology Agency of the government of Singapore. If Raytheon, the global missile giant and a major arms exporter to India, can tie up with RADS, why can’t M&M? Israeli companies are extremely choosy about their foreign technology partners. M&M, an autos-to-software conglomerate, and the government of India, would have considered themselves lucky for getting the opportunity to access some of RADS’ front ranking technologies in armament and security equipment with majority management control in Indian hands. According to reports, the two companies were to invest about one billion rupees to develop and manufacture naval systems.

Among RADS’ world famous naval systems are: (a) Popeye, an air-to-ground missile system. Popeye Turbo SLCM is believed to be a nuclear-tipped submarine-launched cruise missile; and (b) Protector USV (unmanned surface vehicle) – the world’s first operational autonomous naval combat system.

Suffice to say that RADS is one of the world’s top defence manufacturers. Outside Israel, it has joint venture collaboration with only a few top defence equipment firms. The company’s product range includes such lethal weapon systems as Shafrir (renamed Python), Spike, Iron Dome and Trophy. Python is one of the most successful air-to-air missile ever made (during the 1973 Yom Kippur War, the Israel Air Force launched 176 Shafrir 2 missiles, destroying as many as 89 enemy aircraft). Spike is a fourth generation fire-and-forget anti-tank guided missile. Iron Dome is considered as the world’s first operational air defence system to intercept short-range rockets and artillery shells. Trophy is said to be the world’s second operational (countermeasure) active protection system. The Russian Drozd and Arena are the first.

The question, naturally, rises why is India letting such opportunities go wasted? M&M, Larsen & Toubro, Tatas and Reliance are among a few large Indian private sector conglomerates keen on diversifying into high-tech military equipment and systems in collaboration with global leaders in armament industry as joint venture partners in accordance with the government policy allowing up to 49 per cent FDI participation, ensuring the ultimate management control with local partners. Most global arms majors are now willing to set up joint ventures in the country to minimise bureaucratic and political hurdles which exist in foreign arms supply deals with India.

According to defence analysts, such joint ventures could help end the so-called ‘India fatigue’ that has set in especially among American companies after failing to make it to the shortlist of the country’s biggest military contract, worth Rs. 42,000 crore, to acquire 126 medium multi-role combat aircraft for the Indian Air Force.

Reliance Industries, India’s most valued company, is said to be in ‘advanced talks’ with American defence giant Raytheon to create a joint venture that will pursue opportunities in homeland security in India and abroad. The $8-billion Indian homeland security industry is expected to grow to $14 billion in the next three years and to $16 billion by 2016. A joint venture with Raytheon – maker of famous Patriot missiles used in the first Iraq War and a strategic partner of the US government on key homeland security programmes – is expected to give Reliance access to high-end security products and engineering solutions. It will also help RIL innovate and develop key security-related technologies for India.

Raytheon Co., the world’s largest missile maker, is also in talks with Tata Motors to mount the Javelin anti-tank weapon system on an infantry vehicle that India’s largest truck-maker may manufacture. This could be one of India’s solutions to covering the full spectrum of combat equipment challenges in the region, according to a senior Raytheon executive. Tata Motors, Ashok Leyland and Mahindra & Mahindra Ltd. are trying to expand their military equipment manufacturing capability after India opened defense production to private players in 2001.

Mahindra formed a joint venture with BAE Systems in 2009. BAE was the world’s No. 1 arms trader in 2011-12. Global arms dealers spend at least US$ 500 million annually to grab defence contracts from India alone, the world’s largest importer of defence and security equipment. Some of it are spent on lobbying, in both India and bidder’s host country, and others on agents, middle-man and, of course, in bribing. For almost two decades, India has been talking about building a high-tech defence manufacturing industry in the country with both the public and private participation, encouraging joint ventures with global armament technology leaders.

But, little has been done to implement the policy prescription to promote world class defence manufacturing enterprises to meet the country’s present and future needs. Defence imports are rising year after year as also Indian military’s dependence on foreign supplies despite bribery or corrupt practices attached to most defence deals. Global defence manufacturers are notoriously known for their corrupt practices. The latter, obviously, suits a powerful section of dishonest import-happy military brass, bureaucrats and politicians. (IPA)
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