The ‘Make In India’ Show Goes On!

The ‘Make In India’ Show Goes On!

The 2015 Show was a big one: more than 700 companies from 49 countries participated. The big players such as Israel, Russia, France and the United States had come to Bengaluru with impressive armadas of equipment and staff

Though the Show is over (its doors closed on February 21), the outcome of the Aero India 2015, organised at Yelahanka Airport in Bengaluru on the theme ‘Make in India’, may take a few years to materialise. However, it is now clear that the Modi government has decided to radically change the stakes in the fields of aerospace, defence, civil aviation and defence manufacturing. First and foremost, the NDA government is determined to ‘Make in India’. The 2015 Show was a big one: more than 700 companies from 49 countries participated. The big players such as Israel, Russia, France and the United States had come to Bengaluru with impressive armadas of equipment and staff.

It was so big that some thought of shifting the biennial fair to another venue. When a rumor naming Goa, started to spread, Manohar Parrikar, the Indian Defence Minister immediately denied the move. He was not interested to have the Show in his constituency. He simply advised the organisers to plan better the available space in Yelahanka.

The tremendous interest in the Indian defence industry can be illustrated by a small detail. As I was walking through the stands, a French exhibitor told how impressed he was by India. He said: “Do you know in France, we have only a couple of publications devoted to aviation/defence, I am surprised to see so many here.” I tried to enumerate a few and reached nearly 10. Later I enquired with a retired Air Marshal of the Indian Air Force, he smiled and told me “you are wrong, we have 37 publications”.

During the Air Show, some of them published a daily update of several pages, edited at night between Bengaluru and Delhi and printed in the IT City for free distribution the next morning at 9 am.

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Not only this shows the extraordinary vitality of the defence sector in India, but the theme ‘Make in India’ too, which was particularly exciting for the professionals. Foreign exhibitors and possible participants to the new Modi’s scheme had understood that the government was serious when in August 2014 , Delhi notified an increase in foreign direct investment (FDI) limit to 49 per cent. The move was aimed at boosting India’s domestic industry and creating confidence amongst eventual investors.

The Economic Times then wrote: “FDI ceiling in the sensitive defence sector has been hiked from current 26 per cent, with the condition that the company seeking permission of the government for FDI up to 49 per cent should be an Indian company owned and controlled by Indians.”

The Department of Industrial Policy and Promotion had issued a communiqué explaining: “Foreign direct investment proposals above 49 per cent will have to seek the approval of the Cabinet Committee on Security on case to case basis…it is likely to result in access to modern and state-of-the-art technology in the country.”

The Prime Minister’s visit to Bengaluru was important because he had the opportunity to clarify that India is ready to “build an industry that will have room for everyone—public sector, private sector and foreign firms.”

This is a major change of direction which will probably make the scheme work. “I am confident that India will emerge as a major global centre for defence industry. We want to develop an industry that is dynamic. It should constantly stay at the cutting edge of the global industry…We must involve our scientists, soldiers, academia, industry and independent experts more closely in research and development,” said the Prime Minister.

But there is a long, long way to go!

Though ‘Make in India’ was the central theme of the five-day fair, observers questioned: ‘Can Modi make it in India?’ Take a small indicator of the present level of ‘Make in India’; the media received a ‘press kit’ prepared by the organisers. The badges and other papers were stacked in a nice black bag; when I opened it, I immediately saw a ‘Made in China’ label. When asked why we were given ‘Chinese’ bags, an organiser sheepishly answered: “Sorry, Sir, we have a certain budget, and this bag is 4 times cheaper that an Indian equivalent. What can we do, Sir?” How and what to ‘Make in India’ is a major issue to be solved for the Modi government.

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The bag was not an isolated case, but a general one: while passing the mega Israeli stand, I saw some good looking badges with the Indian and Israeli flags, and guess what? ‘Made it China’!

The distance to be travelled is long, and it was not about badges or bags that the Prime Minister was talking when he said that he wanted to end India’s status as the world’s number one defence importer. He wanted eventually to have 70 per cent (from the current 40 per cent) of hardware manufactured domestically by 2020. Mr. Modi explained: “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 here. But this is one area where we would not like to be number one, we are reforming our defence procurement policies and there will be a clear preference for the equipment manufactured in India.”

The Rafale deal was of course the talk of the Air Show. The long-delayed $20-billion deal to supply 126 Medium Multi-Role Combat Aircrafts (MMRCA) to India, had come in the news with the rumour that the deal might be scrapped. In January 2012, Dassault Aviation of France had won the right ‘for exclusive negotiations’ with the Ministry of Defence for the supply of these combat aircrafts.

During his press conference, Defence Minister Manohar Parrikar clarified that he was expecting a report from the contract negotiation committee (CNC) before the end of February or latest during the first week of March. A decision would then be taken. “I have asked the CNC to speed up the process of completion of the report for us to take a decision on the acquisition of Rafale,” he told in a press conference. There was no question of cancelling the deal, the Minister just said: “The CNC is reviewing the long-term costs or the life-cycle costs, incurred over the life of the fighter.”

14-03-2015The next day, Air Chief Marshall Arup Raha said that out of 4 sub-committees, 3 had already completed their jobs (for determining the offsets, the maintenance support and the technology transfer to HAL to produce the Rafales), only the last sub-committee, (the Cost Negotiation Committee) was to give back its copy.

Some difficulties seem to have arisen due to some lack of clarity in the Procurement Policy and the fact that the currency exchange rate has tremendously changed during the last 3 years. An issue not easy to solve!

Air Chief Arup Raha also said that there was no plan ‘B’ for the time being, as the IAF was keen on the MMRCAs; he clarified that the Su-30s was not a substitute for the MMRCA requirement: “They are different types of aircraft and cannot replace each other; they only complement each other,” he added. The Air Chief also admitted that the IAF had to make up for its depleting fleet. Fighters like MiG-21s and MiG-27s will be retired in five-six years, it was, therefore, vital for the IAF to acquire new platforms to maintain a force level of 42 fighter squadrons.

14-03-2015As in the Egyptian deal for 24 Rafales, the negotiations have to move to the political level where each side will have to do some compromises to find a solution acceptable by both parties. A ‘political’ decision has obviously to be reached between the French and Indian governments (as we are writing these lines, France’s defence minister, Jean-Yves Le Drian has already reached Delhi to iron out the differences). To come back to the central theme of the Air Show 2015, it is clear that the time has come for the Indian private sector to bring its dynamism in the play and gives a boost to Mr Modi to realise his ‘Make in India’ dream.

After all, Lockheed-Martin, Dassault, Boeing, Rafael and others foreign players are private companies working closely with their governments to take care of their country’s respective defence requirements and export their products. The presence of Mr. Anil Ambani, Mr. Ratan Tata and others industrialists at the Air Show proves that the ‘big ones’ are ready to take on the challenge. It is a positive sign for India, but the battle is far from being won.

 

By Claude Arpi from Bengaluru

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