02-28-2010, 11:09 PM
[url="http://www.defensenews.com/story.php?i=4518235&c=FEA&s=SPE"][size="6"]Bureaucracy Remains Hurdle To Rapid Arms Procurement[/size][/url]
Quote:NEW DELHI - India plans to buy weapons and equipment worth $100 billion by 2022 as nearly 50 percent of its military gear is obsolete. But defense officers and analysts here are divided on how fast purchases can be made given the traditional slow pace of the Defence Ministry bureaucracy.
"Unless the Indian Defence Ministry devises a quicker method of weapon procurement," it is unlikely the military will be able to buy modern equipment and also replace obsolete weapons in the next 15 years, said Mahindra Singh, a retired Indian Army major general.
India, the second-largest weapon importer after China, fills 70 percent of its requirements from overseas. Indian defense planners want to flip that percentage and meet 70 percent of its weapon and equipment needs from domestic supplies, but despite the state-owned Defence Research and Development Organisation (DRDO) and 39 state-owned military equipment factories, India remains dependent on imports.
DEFENSE SECTOR OPENS UP
The Indian defense sector was opened up to private-sector investments in 2001, but nearly a decade later private companies account for less than $800 million in defense sales, compared with $4.5 billion for state-owned companies.
In 2002, Indian planners introduced the Defence Procurement Procedures (DPP), which are reviewed annually.
However, no major joint venture has emerged between domestic and foreign defense companies. The law limiting investment by foreign companies in the defense sector to 26 percent is largely blamed for the lukewarm response of overseas companies to tie up with Indian entities, said a country manager of a European defense company.
The new DPP are aimed at giving room to private-sector companies, said another senior Defence Ministry official, adding that the defense offset market itself will be worth about $10 billion in the next five to seven years, offering another venue for private-sector companies.
However, some private-sector players say most of the talk is lip service.
"Government is only talking. The new DPP does not aim at any technology transfer. This will only add value in pure manufacturing domain with no long-term capability being built in the country. Government has not looked at the fundamental issue of in-house capability building," said the CEO of a private Indian defense company.
PRIVATE-SECTOR PARTICIPATION
Overseas companies have have remained the military's largest source of equipment.
After the opening of the defense sector in 2001, major industrial houses like the Tata Group, Mahindra Group, the Kirloskar brothers, Larsen & Toubro and Ashok Leyland diversified into defense. Nearly half a dozen more medium-sized industrial firms have joined them.
However, the private-sector companies still are not able to compete with the large state-owned companies, which have been established for more than five decades.
The only major contract that has been won by a private company is the $260 million order for the modernization of Indian Air Force air fields by Tata Power SED. However, even that contract has still to be awarded because Selex of Italy has challenged the selection.
MARKET
In the decade since the 1999 Kargil conflict with Pakistan, India has inked deals worth more than $50 billion. These include eight Boeing P-8I planes for $2.1 billion, six C-130J Super Hercules aircraft for $962 million, the amphibious warship the USS Trenton, worth $460 million, and weapon-locating radars worth more than $150 million from the United States.
Other major deals include acquisition of six Scorpene submarines from France worth $3.9 billion, the purchase and license production of 230 Sukhoi aircraft worth $8.5 billion, a $2.2 billion deal with Israel to jointly develop a medium-range surface-to-air missile system, the purchase from Israel of three Phalcon AWACS for $1.1 billion and a $1.7 billion deal with France to upgrade Mirage aircraft that is still pending.
ROAD AHEAD
Future big-ticket projects include purchase of 126 medium multirole combat aircraft worth $10 billion, purchase of a variety of 155mm/52-caliber guns for another $10 billion, new-generation submarines worth $5 billion, purchase of a variety of helicopters worth $4 billion and acquisition of network-centric warfare platforms worth another $5 billion.
The acquisition list gets lengthier with purchases for homeland security worth $10 billion.
But given the slow pace of procurement, planners are now considering the government-to-government Foreign Military Sales (FMS) route as a quicker and cheaper option.
The FMS route will become more dependable for quick acquisitions in the future, Singh said. ââÂ