Defence companies have $20-b deals in their sights

Mega defence contracts are up for grabs with the government likely to approve long-pending deals worth around $20 billion by December 31. These contracts will operate under the government’s ‘Make in India’ programme.

During a meeting last week, Defence Minister Nirmala Sitharaman and Defence Secretary Sanjay Mitra are believed to have assured the industry of clearing the deals by the year-end.

These defence programmes include the Futuristic Infantry Combat Vehicle (FICV), the Tactical Communication System (TCS) and the Battlefield Management System (BMS), all of which have been under discussions for almost a decade now. Once approved, these programmes will enable the Indian Army to take a quantum leap in modern warfare systems.

Sitharaman has guaranteed the industry that decisions on these three projects will be expedited and approved in a time-bound manner by the Cabinet Committee on Security (CCS) chaired by Prime Minister Narendra Modi, sources told BusinessLine.

Some of these mega projects have been stuck due to placement of development orders. However, it seems the government will now identify the manufacturers, who will be asked to produce a prototype for a final approval, sources said.

Inordinate delays in getting these projects off the ground had been a major cause of concern for the Indian defence firms as well as for international technology providers who have established joint ventures, and signed memorandums of understanding (MoU) for producing critical technologies.

Although Expressions of Interest (EOI) for these three mega projects were issued in 2010 and 2013, till date there has been no progress in developing phase orders.

Even if the companies are selected by December 31, the actual purchase will happen before 7-8years from now, said a top executive of an Indian defence firm who was present at the meeting.

Under the $12-billion FICV project the government aims to purchase over 2,300 units of such vehicles for the Army. Firms that have been vying for the deal are L&T, Tata Motors, Reliance, Mahindra and Tata Power SED-Titagarh Wagons. The Ordnance Factory Board (OFB) has also been nominated for the deal.

Globally, firms that have queued up for the FICV project are General Dynamics, Lockheed Martin, BAE Systems and Rheinmetall.

The TCS and BMS programmes are now undergoing yet another round of valuation by the Army. Together these programmes, that will enable the Army to take a quantum leap in sophisticated warfare, are worth around $8 billion.

While the BMS seeks to integrate all the combat units of the Army such as artillery, infantry battalions, armoured and others, the TCS is meant for offensive operations.

For the BMS, some of the global OEMs queuing up for these projects are Israel Aerospace Industries, Rafael and Elbit of Israel; Thales and Nexter of France; Rhode & Schwartz of Germany; BAE Systems of the UK; Lockheed Martin, Raytheon and General Dynamics of the US; and, Selex of Italy.

 thehindubusinessline