Friday, 27 February 2015

Tata, BEL consortia get Rs 40k-crore “battlefield management system”


 By Ajai Shukla
Business Standard, 27th Feb 14

The National Democratic Alliance (NDA) government has signalled its intention to provide a defence boost to “Make in India” by asking two Indian consortia --- led respectively by Tata Power (Strategic Engineering Division) and Bharat Electronics Ltd (BEL) --- to develop a “Battlefield Management System” (BMS). This could generate Rs 40,000-50,000 crore worth of procurement for the army.

On Wednesday, the ministry of defence (MoD) informed BEL and Tata Power SED in writing that the consortia they respectively led had been selected out of four consortia that had given proposals in response to the MoD’s tender.

Business Standard had first reported this impending award (February 11, “L&T, BEL consortia set to get Rs 40,000 crore project”)

The MoD has instructed the consortia --- one consisting of BEL and Rolta India, and the other comprising of Tata Power SED and Larsen & Toubro (L&T) --- to register “special purpose companies” (SPCs) for this project.

Each of these “development agencies”, will separately develop a working BMS. The MoD will reimburse them 80 per cent of the development cost.

The Defence Procurement Policy of 2013 (DPP-2013), which governs this “Make” project, mandates that a MoD “integrated project management team” (IPMT) will select the better prototype. Both consortia will share the contract to mass-produce the BMS for the army, with more production going to the consortium whose prototype has been chosen.

The BMS consists of a wireless network that links digital devices carried by combat soldiers, interlinking them, their commanders and a range of battlefield sensors. This provides a common battle picture to each individual.

“In [the] next 5-7 years, when BMS will be deployed by the army, it will cover more than 70 per cent of soldiers while digitising the tactical battlefield and creating a secure IoT (Internet of Things) for the army,” said Tata Power SED in a press release on Thursday that announced this development.

The MoD has moved unusually fast in the BMS contract, which industry sees as evidence of Defence Minister Manohar Parrikar’s seriousness in pushing indigenisation. The MoD issued a tender --- or expression of interest --- in November 2013, to which four consortia responded in April 2014. Since then, it has taken only 10 months to select the winners.

“My compliments to MoD and army for the speedy decision… It demonstrates our commitment to “Make in India”, stated Rahul Chaudhry, the chief of Tata Power SED.

Tata Power SED and L&T are both emerging as leading private sector defence firms, having also been selected (along with HCL) in the first “Make” category project, a Rs 10,000 crore Tactical Communications System (TCS). This will be a high-bandwidth, mobile, data and voice network that can be rolled out, even in enemy territory during war.

The public sector BEL, too, has been selected as a “development agency” in both these “Make” acquisitions.

The current “Make” procedure mandates that 30 per cent of the BMS must be indigenous. Parrikar has publicly expressed dissatisfaction with this percentage, stating that a new “Make” procedure would stipulate greater indigenisation. It is unclear whether that could be retroactively applied to this “Make” project.

The MoD has called in representatives of the two consortia to discuss this project on March 4, 2015 with the IPMT. 

Sunday, 22 February 2015

Participation in Aero India rises, sales yet to pick up


by Ajai Shukla
Yelahanka, Bengaluru
Business Standard, 22nd February 15

Driving on Saturday to Yelahanka along Bengaluru’s notoriously crowded roads, one has no doubt that Aero India 2015 has finished its “business phase” and is open to the public. Instead of black Audis and Mercedes conveying sharply dressed foreigners in lightweight business suits, the highway is a melee of small cars, crammed with families headed for a day at the air show.

Inside Yelahanka Air Force Base, the tarmac is abuzz with some 50,000 visitors calling out excitedly as a Sukhoi-30, a Tejas fighter, a F-16 and a Dassault Rafale in turn scream through the skies. The display halls are packed with local visitors, jostling for freebies like caps and keychains and for getting their photos clicked with airplane models.

Going by the babel on the public days, Aero India 2015 is the world’s premier air show. If one were to measure its success in terms of business done or sales announced, there is far less cause for satisfaction.

The claim of the show organisers --- the Defence Exhibitions Organisation (DEO) --- to have masterminded yet another success is based on rising participating. The DEO says 328 foreign companies participated this year, up from 212 in Aero India 2013; Indian participation rose even more steeply --- from 156 companies to 266.

Ask the exhibitors, however, and the complaints pour forth, though in a business where so much depends on government favour, few will speak on the record. Most exhibitors, foreign and Indian, complain Aero India is run as a profit-making venture rather than as an opportunity to bring potential partners together.

Even in dollar terms, Aero India has become an extremely expensive show. Foreign exhibitors pay the equivalent of Rs 50,000 per square metre for display stands. Indian companies pay about Rs 35,000.

The bitterest complaints stem from the micro, small and medium enterprises (MSMEs). They ask why they must pay so exorbitantly to be present at this event, when the government claims to support them in defence production.

CGKD Nair, the founding chairman of the Society for Indian Aerospace and Technology Industry (SIATI), points out Aero India is a significant opportunity for MSMEs, who cannot afford to display in foreign air shows.

“Aero India 2015 must showcase Indian defence capability, much of which lies in the MSME sector. Foreign vendors would like to tie up with many of these small units, but the MSMEs get priced out because the DEO’s emphasis is on profit, not business”, says Nair.
“What use is this tiny space that I can ill afford? If the aim is to promote MSMEs, why are we not being showcased before foreign vendors?” demands the owner of a small precision engineering firm, who has paid lakhs for his tiny stall.

Why then is there such a substantial turnout? Most exhibitors say they are there in the expectation of future business. Visibility is important, they say.

“The ‘Make in India’ buzz has brought us to Aero India 2015. We were hoping the prime minister would announce substantive measures to promote our business”, says the owner of a medium-sized software engineering firm.

Ask whether those expectations have been met, and there is a mixed response. While the prime minister gladdened many hearts by publicly recognising the problems faced by the defence industry, he had no solutions to offer. The defence minister, Manohar Parrikar, continues to grapple with procurement reform.

Aerospace expert, Pushpindar Singh, notes the almost complete absence of high profile signings and deals. “There was practically nothing in the $100 million region. The air shows at Farnborough and Paris see deals being struck that are in billions”, he says.

Singh admits that many of the really high value deals are in civil aviation, since defence contracting follows a negotiation cycle that is unlinked to air shows. Aero India has almost no participation from civil aviation, since former civil aviation minister, Praful Patel, began a separate biennial civil air show in Hyderabad --- India Aviation --- supposedly because he was not treated with enough respect at Aero India.

The bulk of the deal-making saw companies positioning themselves for military contracts. Foreign vendors, conscious of the implications of “Make in India”, continue talking to multiple Indian companies, selecting suitable partners for building in India under technology transfer.

Yet, many Indian majors are watching and waiting. The high profile “CEOs’ Forum”, which met Parrikar, featured only two high-profile chieftains --- Kalyani Group’s Baba Kalyani and Reliance Group’s Anil Ambani. Others such as Larsen & Toubro’s AM Naik and the Tata Group’s Cyrus Mistry remain watching from the sidelines. 

Saturday, 21 February 2015

US: Decision-making on India insulated from bureaucracy


By Ajai Shukla
Yelahanka, Bengaluru
Business Standard, 21st Feb 2015

The United States of America is the largest foreign presence at the Aero India 2015 exhibition in Bengaluru, with 64 US companies --- including the world’s biggest defence contractors --- seeking tie-ups with Indian companies under the “Make in India” initiative.

With both governments keen on driving defence industry together, companies hope to benefit from the Defence Technology and Trade Initiative (DTTI), a body Washington and New Delhi have established to remove obstacles --- such as bureaucratic objections to the release of technology to India.

Senior US officials, briefing the media in Bengaluru, say President Barack Obama’s White House is nurturing defence ties with India so carefully that no Washington bureaucrat below the rank of deputy assistant secretary of state or defence can reject the release of technology to India.

That rank is theoretically equivalent to an Indian additional secretary, but in discretion and responsibility is significantly more powerful.

“All decisions on defence regulatory matters related to India… are going to be raised up to my level at a minimum. The idea is to ensure that every decision is given the right amount of strategic and policy attention”, said US Deputy Assistant Secretary of State Kenneth B Handelman.

Tacitly acknowledging that the US bureaucracy has not entirely understood the importance of the US-India relationship, Handelman explained: “There are dedicated and patriotic American civil servants working in the regulatory system, but sometimes they don’t see every strategic level aspects of every initiative.”

Also briefing the media was Alan Shaffer, Principal Deputy Assistant Secretary of Defense, who said processes were being galvanized. “Time in both our bureaucracies is usually measured in years. In DTTI, time is measured in weeks and months. The progress we are making is truly remarkable.

During Obama’s Republic Day visit four “pathfinder projects” had been identified for co-development under the DTTI. These include: (a) next-generation Cheel micro-drones; (b) roll-on, roll-off kits (changeable aircraft interiors) for US-supplied C-130J Super Hercules aircraft; (c) a mobile electric power source; and (d) Uniform Integrated Protection Ensemble Increment II, or protective clothing for nuclear, chemical or biologically contaminated battlefields.

The two countries simultaneously created a “working group” for cooperation in two high-tech areas: aircraft carrier technology, and gas turbine engine technology.

Now, acknowledging the limits of DTTI, Schaffer indicated that the high-tech projects faced significant hurdles. “The ask in both aircraft carrier technology and gas turbine development is fairly advanced technology. We have to work through a whole myriad of issues: what technology we can offer, how much it will cost, will the government of India be willing to pay the cost of some of these. Because some of our weapons systems are very expensive. How will we provide something that may be part way --- that may meet India’s needs but not be at full cost. The working groups will have to grind through these issues.”

After several years of silence on this issue, the officials renewed a push from Washington for New Delhi to sign three “foundational agreements” of defence cooperation --- the Communications Interoperability and Security Memorandum of Agreement (CISMOA); Basic Exchange and Cooperation Agreement for Geo-spatial Cooperation (BECA); and a Logistic Support Agreement (LSA).

The foundational agreements are extremely important. So far, the fact that they have not been signed has not really been an impediment… But there will come a point as our relationship matures… that those agreements are going to become very serious issues in moving forward to the next step, either in a particular project, or in the broader expansion of our defence relationship”, said Handelman.

Underlining the momentum behind DTTI, Shaffer pointed out that the US co-chair of DTTI, Assistant Secretary of Defense Frank Kendall, had already made three visits to Delhi in the last six months, and would be here again next week.

The US has sponsored a series of workshops with the Defence Research and Development Organisation on futuristic defence topics like: autonomous systems, cognitive systems, and directed energy weapons.

“Out of these workshops come specific proposals that will lead to actual work in co-development and co-production between the two countries”, said Shaffer.

The DTTI was established in 2012, by then Pentagon chief Leon Panetta and his deputy, Ashton Carter (now US Secretary of Defence) as a communication channel to prevent the broader strategic relationship from being stalled by bureaucratic red tape. The DTTI has now been galvanized as a principal motor of defence cooperation.

Friday, 20 February 2015

Top officials at Aero India provide glimpse of future air force


By Ajai Shukla
Yelahanka, Bengaluru
Business Standard, 20th Feb 15

The first two days of each Aero India show are normally packed with press conferences by key government and military officials. At Aero India 2015 in Bengaluru today, the heads of the Indian Air Force (IAF), Hindustan Aeronautics Ltd (HAL), and the Defence R&D Organisation (DRDO) aerospace chief talked about the air force of the future.

IAF chief, Air Chief Marshal Arup Raha, stated that, even in the best case, the air force would take 16-17 years to achieve its sanctioned strength of 42 squadrons. This too only if the contract for 126 Rafale fighters was quickly inked, the Indo-Russian Fifth Generation Fighter Aircraft (FGFA) developed without further delay, and the smooth development of DRDO’s fifth generation Advanced Medium Combat Aircraft (AMCA).

“It is very difficult to give an exact time-line for these aircraft, but it should take four-five years beyond the 14th Plan [2022-2027] to build up the strength of the IAF to the authorized level of 42 squadrons”, said the IAF chief.

The IAF currently has 35 operational fighter squadrons, and another 11 would retire by 2018. Neither the AMCA nor the FGFA are likely to appear in squadron service before the mid-2020s, and the Tejas Mark II would also be operationalized only by the start of the next decade, Raha explained.

Significantly, given the dark clouds that Business Standard has reported over the proposed purchase of the Dassault Rafale (February 15, Rafale proposal “effectively dead” as MoD discovers Dassault bid not cheapest) Raha declared for the first time that it did not matter which MMRCA was procured.

Besides the French Rafale, built by Dassault, the other MMRCA that the IAF had found suitable for procurement is the Typhoon, built by European consortium, Eurofighter GmbH.

The DRDO’s aeronautics chief, Dr K Tamilmani, described the AMCA programme, which the DRDO will spearhead after guiding the Tejas Mark I to squadron service.

Revealing that the basic design of the AMCA had already been frozen, Tamilmani claimed the DRDO already had the basic technologies needed, but these needed to be adapted to higher performance requirements.

“We have to introduce three technologies on AMCA that are not there on LCA: stealth; thrust vectoring engines; and supercruise (the capability to fly at supersonic speeds without engine afterburners. We are working on all three areas already.”

Two of these three capabilities --- thrust vectoring and supercruise --- depend upon high-performance engines, and the DRDO will import the AMCA’s engine.

Says Tamilmani: “By late-2019, I will need an engine to be integrated onto the AMCA. We are discussing with multiple engine vendors --- Rolls-Royce, GE, Snecma. We could by an upgraded version of an existing engine, with its output enhanced to 110KiloNewtons. The vendors need three years to develop that.”

Current engines --- including the American GE F-414, which India is already buying for the Tejas Mark II fighter --- have thrust ratings of 90-95 KiloNewtons. That means the AMCA engines would require significant uprating.

Tamilmani opines that buying an American engine provides a trouble-free route, given the experience of the Tejas project.

“With the government-to-government route with the US now open, we would be happy to use the GE F-414 engine. We have been working with the smaller GE F-404 on the Tejas for a long time and have seen no problems”, he said.

The DRDO aerospace chief spelt out detailed time lines for the AMCA. By next year, he would arrive at a budgetary requirement. This is being formulated with care, “because we cannot keep going back for funding again and again”, he said.

By late-2019, the aircraft would require to be mated with an engine, and the first flight planned for early 2020.

“I will need four years from that date for flight testing, with four prototypes testing the new technologies we have developed. In 2024, I should be able to develop and freeze the AMCA design, and then we can start production,” said Tamilmani.

Meanwhile HAL would co-develop the FGFA with Sukhoi of Russia, in a partnership that is bogged down in foot-dragging by India. Meanwhile Russia is going ahead with the project alone, and is already test flying the fighter.

For the first time, the IAF chief revealed delays in the Russian programme, stating: “The FGFA was supposed to start production in 2018-19, but there are some delays.”

HAL has argued that the skills obtained in the FGFA co-development would help in building the AMCA, but Tamilmani downplayed that benefit. Illustrating the gulf between development agencies, he said, “DRDO is playing a minimal role in the FGFA project”.

Thursday, 19 February 2015

Parrikar sticks to “terror boat” story



By Ajai Shukla
Yelahanka, Bengaluru
Business Standard, 19th February 2015

A Pakistani boat that the Indian Coast Guard intercepted 365 kilometres off Porbandar on the night of the New Year, and which sank without trace or survivors after four “terrorists” on board apparently set it on fire, has come back to haunt the ministry of defence (MoD), which had backed the coast guard’s account of having warded off a terror strike in the making.

Defence Minister Manohar Parrikar had personally endorsed the coast guard’s account, stating in a television interview that the surest proof of the boat crew’s malevolent intent lay in the fact that they had committed suicide when they were intercepted.

Now, a senior coast guard officer, Deputy Inspector General (DIG) BK Loshali, has been videotaped boasting to an audience in Surat that he had ordered that the boat be “blown off”.

“I hope you remember 31st December. We blew off the Pakistan… we have blown them off. I was at Gandhinagar and I told at night we don’t want to serve them biryani”, Loshali says in the video.

Several media reports, including a “news analysis” piece in this newspaper (January 5, “Terror boat”: Questions linger) had placed question marks over the coast guard’s story. It was unclear why a fast-moving coast guard ship pursued a slow-moving fishing boat for an hour before intercepting it; the coast guard’s account of the crew blowing up their own boat; why photographs of the burning boat showed no signs of explosives; and why there were no bodies or debris could be recovered.

Yet, Parrikar continues to stand by the coast guard’s version, which was put out in a MoD release on January 1. "The Defence Ministry had given a very clear statement. We stand by it”, said Parrikar to the media at Aero India 2015 in Bengaluru today.

When it was pointed out that DIG Loshali had himself confessed that the coast guard had “blown them off”, Parrikar hinted that disciplinary action might be taken against him, and that he might be a disgruntled officer.

"At the most if you prove that he has made statement, you are making a case of taking action against him. It does not change ground reality," he said.

Asked by Business Standard why Parrikar had not fulfilled his promise, made in a television interview, to release video footage that would prove that the coast guard vessel had not shot at the boat and set it on fire, Parrikar denied ever having promised to release video.

“I said I would release proof, not video”, he said.

The television footage in which Parrikar promised in early January to release video proof “within two or three days” was played out on television on Wednesday night.

After the Indian Express reported on Wednesday morning that DIG Loshali had boasted about blowing off the Pakistani boat, Loshali denied having made any such statement. Later on Wednesday, the Indian Express released video footage of Loshali’s speech, which corroborated the newspaper report.

This incident was first played as a major coastal security success, in which the National Technical Research Organisation intercepted satellite phone messages that suggested a Pakistani boat that had sailed from Karachi would tranship explosives to an Indian receiver, who would bring it ashore. According to the account, a coast guard vessel then intercepted the boat, which was then sunk by terrorists on board.

This story, questioned from the start, now lies in tatters. 

Prime minister urges defence firms to lead “Make in India” charge


 By Ajai Shukla
Yelahanka, Bengaluru
Business Standard, 19th Feb 15

“We have the reputation as the largest importer of defence equipment in the world. That may be music to the ears of some of you [foreign defence vendors] here. But, this is one area where we would not like to be Number One!” quipped Prime Minister Narendra Modi in Bengaluru on Wednesday, while inaugurating Aero India 2015, India’s premier aerospace exhibition.

In a major policy speech that placed defence manufacture at “the heart of our Make in India programme”, the PM said he was “developing India’s defence industry with a sense of mission.”

Repeating the familiar lament that 60 per cent of India’s defence requirements are still imported, Modi stated, “There are studies that show that even a 20 to 25% reduction in imports could directly create an additional 100,000 to 120,000 highly skilled jobs in India. If we could raise the percentage of domestic procurement from 40 per cent to 70 per cent in the next five years, we would double the output in our defence industry.”

The PM then delivered a brutally honest appraisal of what would allow the private sector to play a major role in defence manufacture.

While claiming credit for raised the permitted level of Foreign Direct Investment (FDI) in defence from 26 to 49 per cent (with up to 100 per cent permissible in cases where a vendor is bringing in state-of-the art technology); permitting investments up to 24% by Foreign Institutional Investors (FIIs); and drastically pruning down the list of products for which defence licences are required, Modi declared that much more needed to be done.

The measures the PM listed have been repeatedly projected by industry bodies to the defence ministry. Now there was visible satisfaction and delight amongst private industry CEOs on hearing their recommendations being played back to them by the PM.

“We have introduced significant reforms in our offsets policy. I am acutely aware that it still needs a lot of improvements. We will pursue them in consultation with domestic industry and our foreign partners”, said Modi.

Defence industry has repeatedly argued that the offsets policy --- which requires foreign vendors to plough back into Indian industry at least 30 per cent of the value of all contracts over Rs 300 crore --- lacks clear direction. Now here was the PM enunciating a clear aim: “I want our offsets policy not as a means to export low-end products, but to acquire state-of-the art technology and skills in core areas of priority”.

In an industry-friendly laundry list of measures, Modi said the government urgently needed to support research & development (R&D), including by “scientists, soldiers, academia, industry and independent experts”; to launch a technology development fund from which technology entrepreneurs could be funded; give assurances to vendors that equipment they developed would be bought by the military; and formulate export policies that are “clearer, simpler and predictable”.

Stressing on the need to reform defence acquisition, the PM endorsed the private sector’s repeated pleas for “a clear roadmap of our future [defence] needs.” Private firms have argued that knowing what equipment the military would require fifteen years ahead would provide the lead time needed for developing technologically complex equipment.

After years of requests from the private sector for access to cheap finance (western vendors enjoy finance at three to four per cent, while Indian industry pays 13-14 per cent), the PM called for “a financing system suited to the special needs of this industry. It is a market where buyers are mainly governments, the capital investments are large and the risks are high.”

Calling for a reform of the current system of taxes and duties that make it cheaper to import than to manufacture in India, Mr Modi summed up, “We need great infrastructure, sound business climate, clear investment policies, ease of doing business, stable and predictable tax regime, and easy access to inputs.”

“This was music to our ears, because we have been saying exactly this for years”, said the CEO of a private defence company, speaking anonymously. “But the proof of the pudding is in the eating. We are waiting for implementation.”

That will be the responsibility of Defence Minister Manohar Parrikar, who told a press conference later on Wednesday that a revamped and simplified defence production policy (DPP) was currently being formulated and would be promulgated by April or May.

Answering a question from Business Standard, Parrikar declared his intention to have a separate “Make in India” policy, in addition to the DPP, which already governs apparently similar procurement categories like “Make Indian”, “Make” and “Buy & Make (India)”.

Adding that the defence ministry was working on a new policy framework that would benefit micro, small and medium enterprises (MSMEs) in defence production, Parrikar said, “I have got the gist of the problem. We are working on it and will come out with a policy in a couple of months.”

Wednesday, 18 February 2015

Cabinet clears Rs 50,000 cr project to build seven warships



By Ajai Shukla
Yelahanka, Bengaluru
Business Standard, 18th Feb 15

The Cabinet Committee on Security on Tuesday sanctioned the country’s biggest-ever naval project, the construction of seven stealth frigates for Rs 45,381 crore. Mazagon Dock Ltd, Mumbai (MDL) will build four of these, while Garden Reach Shipbuilders & Engineers, Kolkata (GRSE), simultaneously builds the other three.

This project, dubbed Project 17A, follows on from the earlier Project 17, in which MDL built three 5,600-tonne frigates: INS Shivalik, Satpura and Sahyadri. The first of these, the Shivalik, entered service in 2009, followed by the other two.

The time line for Project 17A allows each shipyard a preparatory period of two years, in which they will prepare for construction and place orders for long-lead items like engines and transmission. Then they will actually build the warship over five years. The first two frigates would be delivered by MDL and GRSE in 2022, with the rest coming in pairs at one-year intervals.

The Project 17A frigates, while superficially similar to those build under Project 17, will pack significantly more punch with more advanced weaponry. The new vessels will be fitted with Brahmos cruise missiles for land attack, and the new Indo-Israeli Long Range Surface-to-Air Missile (LR-SAM) that can shoot down incoming anti-ship missiles.

The main advance in Project 17A will be the “modular” method with which the frigates will be constructed. Traditional shipbuilding involved welding a hull together and launching it into water, after which swarms of craftsmen painstakingly work in the warship’s cramped compartments, installing propulsion gear, electrically equipment, weapons, sensors and hundreds of kilometres of pipes and wiring.

In contrast, modular construction is like a giant Lego game. The ship is built in convenient 300-ton blocks that are then assembled together into a complete warship. Each block is fabricated in a well-lit, ventilated workshop with multi-level access, and is pre-fitted with the piping, electrical wiring and fitments that run through a ship. Giant cranes then bring the massive blocks together, each one dovetailing precisely with its neighbouring block, every wire, pipe and compartment coming together in perfect alignment.

Modular construction results in better build quality and is expected to bring down the build time from 72 to just 60 months.

This method, being new, has required a foreign design partner. It has also required an extensive renovation of both MDL and GRSE, with each shipyard spending Rs 800-1,000 crore on modular workshops, with Goliath cranes, and workshops with sliding roofs from where 300-tonne blocks can be lifted out.

Project 17A is vital for executing the navy’s Maritime Capability Perspective Plan (MCPP), which envisions a 160-ship navy, with 90 capital warships, i.e. aircraft carriers, destroyers, frigates and corvettes. The navy is currently 20 vessels short of this target, with major shortfalls in destroyers and frigates.


To add numbers quickly, the navy had pressed for building the first two vessels of Project 17A abroad in the technology partners’ shipyard. The United Progressive Alliance (UPA) government overruled this.

Bengaluru Aero India show readies to receive Modi



By Ajai Shukla
Yelahanka, Bengaluru
Business Standard, 18th Feb 15

If such a thing is possible, Aero India 2015 is poised to be even more spectacular than previous editions of this biennial air show. The reasons are two-fold: First, international vendors continue flocking to India, which remains the biggest buyer of defence equipment in the international arms bazaar. Second, Prime Minister Narendra Modi promoting his “Make in India” project.

The Bengaluru airport terminal is festooned with massive hoardings, with Mr Modi looking out at arriving passengers. The billboards continue as one drives to the Yelahanka Air Force Station that traditionally hosts the show. They claim Aero India is “Asia’s Premier Air Show”, something that will be contested hotly by Dubai, Langkawi (Malaysia) and Zhuhai, where China last year debuted its Shenyang FC-31 stealth fighter.

The Aero India show has never been about spectacular cutting-edge aircraft. For foreign arms vendors, it has been an opportunity to suss out the mouth-watering Indian arms market and to talk face-to-face with Indian defence decision-makers who are normally cloistered out of reach in South Block, New Delhi. For Indian companies, Aero India has been a forum for striking up partnerships with foreign companies looking for offset partners.

This time there is a buzz of anticipation that the prime minister’s presence --- for the first time ever in an Aero India exhibition --- could ease the manifold barriers to doing defence business in India. Mr Modi is spending three hours at the air show and is expected to go around the exhibits and interact with Indian and foreign defence vendors.

Defence companies, both foreign and Indian, are waiting to find out how the PM’s “Make in India” drive plays out in defence production.  To be sure, licensing norms have been eased and the foreign direct investment (FDI) cap raised from 26 to 49 per cent, but this has not so far significantly shifted defence manufacture to India. For that, according to Indian defence companies, taxes and duties must be rationalised, protection be provided from foreign exchange rate variation, and access be provided to cheaper finance.

“Let us see whether the PM has substantive solutions to these key issues. Without addressing these, ‘Make in India’ will remain just a slogan”, says the CEO of a private sector company with interests in defence.

So far, the National Democratic Alliance (NDA) government has moved purposefully to mandate defence production in India. On Tuesday, on the eve of Aero India, the Cabinet Committee on Security (CCS) cleared the building in India of seven stealth frigates under Project 17A for Rs 50,000 crore.

On August 29, 2014, the defence ministry scrapped a tender for purchasing 197 light helicopters from the global market, ordering instead that they be built in India. On October 25, 2014, the ministry ordered that six submarines planned for procurement under Project 75I be built entirely in India, rejecting the navy’s request to build the first two abroad.

Indian defence company CEOs in Bangalore for Aero India 2015 say there is little use in the government ordering that equipment being procured by India be built here, if those production lines are shut down after the Indian order is met. The challenge for a “Make in India” programme is to create conditions in which vendors continue manufacturing in India, making their Indian facilities a part of their global supply chains even after meeting the Indian order.

“So far, the MoD has not shown a clear understanding of this structural issue”, says the defence company CEO.

These weighty issues will be discussed in a “CEOs Forum” that Defence Minister Manohar Parrikar will interact with in Bengaluru on Wednesday. But before that, there will be a spectacular opening ceremony for the PM, with an Indian Air Force flypast and an thrilling aerobatics display by the Tejas light combat aircraft and the Sarang aerobatics team that performs in the Dhruv advanced light helicopter.

Three Rafale fighters from the French military are at Aero India 2015 for daily aerobatics displays. However, with the Rafale deal spiralling into the ground, there is little of the excitement of 2011 when five fighters enthralled the visitors with competitive aerobatics, as vendors vied to impress spectators and buyers. This time, attention will focus on four world-acclaimed aerobatics teams: the Breitling Wingwalkers (US), Scandinavian Air Show, Flying Bulls from Czech Republic, and the British Yakovlevs formation display team.


A total of 328 foreign companies and 266 Indian companies will be participating in Aero India 2015, which is organised by the Defence Exhibition Organisation (DEO), a defence ministry wing.