BJP to welcome foreign defence investment

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(Reuters) - The nationalist Bharatiya
Janata Party (BJP) would welcome more
foreign direct investment in defence, if
elected, but would delay opening up the
country's market of more than 1.2
billion people to international retail
chains like Wal-Mart (WMT.N ).
The country's main opposition party,
which surveys show is on course to win
the most seats in an election starting on
April 7, would also introduce a general
sales tax and overhaul the financial
sector, its manifesto will say.
Party sources told Reuters these concrete
steps form the core of a pitch to voters
that sets ambitious goals of creating 250
million jobs over the next decade,
building up to 100 'smart' cities and
constructing a high-speed rail network.
"The manifesto's priorities, in this order,
are jobs, investment, manufacturing and
infrastructure," one BJP official involved
in drafting the document revealed to
Reuters before its publication next week.
He declined to be identified due to the
sensitivity of the topic.
The BJP's candidate for prime minister,
Narendra Modi, is campaigning on his
economic record in running his home
state, Gujarat, where the party trumpets
an unemployment rate of less than a
third of the national average.
By contrast the incumbent Congress
party, which unveiled its manifesto on
Wednesday, is appealing to its core
constituency of poorer voters who it says
should be given the chance to participate
in "inclusive" growth.
"Growth by itself is not sufficient," Prime
Minister Manmohan Singh told an event
at which Congress president Sonia
Gandhi made a rare public appearance
to support her son Rahul's leadership of
the party's flagging campaign.
While the BJP platform seeks to tap into
the hopes of 100 million first-time voters
whose job prospects have been hurt by a
slowdown in economic growth, the tenets
of 'Modinomics' remain nebulous beyond
a broad focus on supply-side reforms.
"Most of these proposals have been
discussed by other parties too," said
Shumita Sharma Deveshwar, a director
at Trusted Sources, a policy advisory
firm. "The key is implementation of
these policies. That is the bigger
challenge."
CAUTIOUS OPENING
The BJP's policy platform takes a
cautious stance towards opening up the
Indian economy, Asia's third largest, to
foreign direct investment.
There will be no quick move to allow the
likes of Wal-Mart Stores Inc. or Tesco
(TSCO.L ) easier entry into so-called
'multi-brand' retail, which would pose
an existential threat to small traders
who form a key BJP constituency.
"The domestic retail industry needs to be
first made competitive before allowing
foreign investment," a second BJP source
said.
However, the BJP would propose raising
a cap on foreign ownership of Indian
defence industry enterprises to 49
percent from 26 percent now.
Although India spends only a third as
much as China on defence, it is the
world's largest market for arms exports -
reflecting a failure of past governments
to turn around the state-dominated
domestic defence industry.
The legacy of dependence on the Soviet
security umbrella has been prolonged by
corruption scandals that have held up
deals with foreign partners that would
have moved production to India.
"We can save huge foreign exchange by
producing defence equipment at home,"
the source said.
"(We would) raise the FDI cap, (and)
allow Indian companies to enter into
joint ventures with foreign companies. It
could be an arrangement where Indian
partners hold the majority stake, say 51
percent."
Elsewhere, the BJP is expected to propose
a national general sales tax - key to
getting rid of a hodge-podge of existing
levies. More broadly, it will seek to
improve tax collection by lowering rates
and closing loopholes.
A "broad consensus" exists to overhaul
the financial sector to turn India into an
international hub, the source said.
Analysts caution that the BJP and its
allies, which polls show falling around 40
seats short of a majority, may end up
having to strike a series of compromises
to cobble together a parliamentary
majority.
"A lot of this is theoretical and open to
question right now," said Deveshwar.
"Let's see what kind of coalition is
formed after the election."
(Additional reporting by Sruthi Gottipati
and Frank Jack Daniel; Writing by
Douglas Busvine; Editing by Mark
Trevelyan)

BJP to welcome foreign defence investment, keep out big retailers| Reuters

 

[Rajaraja Chola]

Well Its a double edged sword. It private companies can learn something from this, then fine and good.

 

[Abingdonboy]

Good this is very much needed for Pvt entities to break the monopoly of the PSUs.

 

[NKVD]

Good this is very much needed for Pvt entities to break the monopoly of the PSUs.

Yeah mate i visited Defence expo Some of the Products From Indian companies Like Tata,Mahindra, L&T were Really eye catching like Kestrel, L&T Howitzer etc

 

[Reviewer21]

I think govt should make it compulsory to partner with an Indian firm to setup any foreign defence firm in India. Like they did in auto industry in 90s. See because of it we have awesome and innovative auto industry now.

 

[Abingdonboy]

I think govt should make it compulsory to partner with an Indian firm to setup any foreign defence firm in India. Like they did in auto industry in 90s. See because of it we have awesome and innovative auto industry now.

There already is this rule- no foreign entity can own more than 26% of a defence firm in India right now.

 

[Reviewer21]

Yeah and guess that is the reason why not much interest has been shown by foreign player, guess increasing the cap as claimed by bjp to 49% would surely attract foreign investors. Let's hope for the best

There already is this rule- no foreign entity can own more than 26% of a defence firm in India right now.

 

[MilSpec]

Very interesting, Under BJP:
Does that mean Indian Private companies can apply for licences to manufacture small arms, Ammunition, Injection molded magazines, spares or is this too reserved only for reliance and tata? Can a small Indian firm do ToT with say an austrian company to manufacture say a simple blowback pistol or a pistol caliber carbine to offer it to defence and law enforcement agencies, can the same company also manufacture NPB small arms in accordance to Indian civilian firearms ownership laws and offer it to common public with the same set of existing laws.

the reality is that under current set of laws , Even Indians are not allowed to participate in any defence related startup unless you have a distinguished surname.

 

[Abingdonboy]

Yeah and guess that is the reason why not much interest has been shown by foreign player, guess increasing the cap as claimed by bjp to 49% would surely attract foreign investors. Let's hope for the best

Exactly. Every interview i have seen by foreign entities involved in JVs in India wrt defence, have said if the cap was raised to 49% and 51% in special cases (would have to be approved by the GoI in those cases) it would attract untold billions to the very attractive Indian defence market.


Of course, for a strategically critical sector like defence, it is vital to keep Indian control over the industry and not to allow control of this market to foreign players- no way hose.

 

[Reviewer21]

Agreed This is what need of the hour is and the only option remaining.

Exactly. Every interview i have seen by foreign entities involved in JVs in India wrt defence, have said if the cap was raised to 49% and 51% in special cases (would have to be approved by the GoI in those cases) it would attract untold billions to the very attractive Indian defence market.


Of course, for a strategically critical sector like defence, it is vital to keep Indian control over the industry and not to allow control of this market to foreign players- no way hose.

 

[Tshering22]

I think govt should make it compulsory to partner with an Indian firm to setup any foreign defence firm in India. Like they did in auto industry in 90s. See because of it we have awesome and innovative auto industry now.

But making compulsory partnering with Indian firms is always applicable with PRIVATE firms. TATA, Mahindra all were private and we saw the fantastic results of that. Partnering with stupid PSUs and sarkari agencies will mean that foreign firms will terminate partnerships out of pure frustration of the lethargy, inefficiency and bureaucracy that defines the sarkari establishments.

For that, first thing we need to do is, open DRDO, HAL, ADA etc into joint stock companies with holding in the hands of Indian citizens only. Only Indian citizens must be allowed to buy its shares and the annual board meeting must be directly answerable to stock holders that WANT return for their money. This will be in stark contrast to the bottomless pit these stupid agencies with their bureaucrat managers and heads are going currently.

Until MOD releases the artificial pressure on private firms, things will continue to go the same way for Indian defence industry.

Put HAL under direct IAF management with no say from any civilian bureaucrat. Let an Air Marshal head the organization with direct accountability to the Minister of Finance and secondary accountability to MOD.

Similarly, put CSL, GRSE and MDL directly under Naval command with a Vice Admiral heading the firm. Name the umbrella as National Shipbuilding Ltd. This Admiral must be answerable only to the Navy Chief, the Minister of Finance and secondarily to the DM.

For Army, Put the DRDO directly under a Major General. Same way as the ones above.

And then see how shit changes.
The current structure is so useless that idiotic incompetent politicians actually decide what to buy and the tri-services who actually are supposed to use those weapons, can only suggest.

 

[pt1982]

I think GOI have already allowed 100% in defense with some logical riders. Till 26% the proposal has to be cleared by FIPB and beyond that it should be approved by CCS.

Even if it is raised to 49% how come that would be attractive for the foreign/pvt. players. They will have to invest another 23% and still wont be having controlling stake!!

If the proposal would have been for 51% then, that can definitely attract foreign players. Otherwise, this 49% is nothing. So, do not jump around to make it look like Gujrat Shining.

 

[sancho]

Put HAL under direct IAF management with no say from any civilian bureaucrat. Let an Air Marshal head the organization with direct accountability to the Minister of Finance and secondary accountability to MOD.

Similarly, put CSL, GRSE and MDL directly under Naval command with a Vice Admiral heading the firm. Name the umbrella as National Shipbuilding Ltd. This Admiral must be answerable only to the Navy Chief, the Minister of Finance and secondarily to the DM.

For Army, Put the DRDO directly under a Major General. Same way as the ones above.

That would force the next set of trouble from the start, because HAL is not only developing aircrafts for IAF, just like the naval industry is not only producing vessels for IN and DRDO obviously is not only working for IA. So we would directly see beef between the forces about preferences, requirements...Can you imagine what IN would do if an IAF head would be responsible for the development of a carrier fighter?
Apart from that, it's not needed that the forces are directly involved in the PSUs, but the PSUs must be forced to more interoperability with the forces and their requirements and that's where MoD has to focus on. Today they are mainly working for their reputation and not for what is needed to defend the country and that's a major problem!
That however would be the same with private firms, since they look only on their financial benefit and not on the defence of the nation. Best example is the licence production of the Avro replacement, where no Indian private firm is ready to do it, unless the order is increased till they get a profit margin that is acceptable for them. If MoD on the other side would simply give it to HAL, the profit margin would not play a role, since they would have to do anyhow, just like they must licence produce the Pilatus trainers if MoD divert the production to them too, but then we complain again that everything is given only to PSUs.

Imo MoD did a good job in the recent years to invite Indian and foreign private firms to the defence market (without the global financial crisis the FDI would be far higher), the problem was mainly the free hand they gave the PSUs, but that had changed in the recent years with Antony kicking some a... in DRDO and HAL. This way should be followed, by opening up for private companies on the one side, but also more accountability of PSUs on the other side. It's not about private or government companies, but how to get the best out of all of them!

 

[Tshering22]

That would force the next set of trouble from the start, because HAL is not only developing aircrafts for IAF, just like the naval industry is not only producing vessels for IN and DRDO obviously is not only working for IA. So we would directly see beef between the forces about preferences, requirements...Can you imagine what IN would do if an IAF head would be responsible for the development of a carrier fighter?

I was just citing an example. There are better ways of managing. What I am trying to say is that let working-level military officials be responsible for heading these divisions (it could be one from each services like a top authority). A joint tri-service working officers panel will ensure that the three branches are in sync with what they want. Each one of them can take sole responsibility for the platform respective to their own category of service arms.

Apart from that, it's not needed that the forces are directly involved in the PSUs, but the PSUs must be forced to more interoperability with the forces and their requirements and that's where MoD has to focus on. Today they are mainly working for their reputation and not for what is needed to defend the country and that's a major problem!

Hardly. If it was their reputation they were working for, they would have delivered things ahead of time rather then delaying by decades. NONE of the PSUs deliver anything on time except for one or two shipyards or electronics divisions.

The best measure is to make them public joint stock companies, forcing them to be accountable to their stockholders so that there is some level of accountability and therefore any incompetence can be either suspended or shifted to less-critical areas (since you cannot fire anyone in government). Defence is not an area for them.

Also if they start making money, they don't need to give it to the government as they can retain it for further company development. This would ensure that defence infrastructure for production of weapons is made on time because of money and not waiting for CCS or any damn bureaucrat to sign.

We are talking about building efficiency here.

That however would be the same with private firms, since they look only on their financial benefit and not on the defence of the nation. Best example is the licence production of the Avro replacement, where no Indian private firm is ready to do it, unless the order is increased till they get a profit margin that is acceptable for them. If MoD on the other side would simply give it to HAL, the profit margin would not play a role, since they would have to do anyhow, just like they must licence produce the Pilatus trainers if MoD divert the production to them too, but then we complain again that everything is given only to PSUs.

Naturally. Private firms don't have endless cash like lazy PSUs in the government sector have. They perform because there is financial incentive and their profits is what that will allow them more research.

DRDO, HAL, ADA, NAL all these are simply bottomless pits that once in a while throw some miracles out that a person of a specific generation gets to see once like some fcking shooting star.

How long can you survive on license production?

Why is it that no bloody project moves to prototype in time? Why are bureaucrats allowed to decide for defence?

Boeing, Lockheed Martin, Raytheon, Cobham, Nexter, Gulfstream etc are all private firms.

And they are the world's largest in what they do.

There is your theory of 'greed and profit'. Down the drain.

Either you don't understand economics of a nation, or you do not know what is defence industry supposed to be working like.

Imo MoD did a good job in the recent years to invite Indian and foreign private firms to the defence market (without the global financial crisis the FDI would be far higher), the problem was mainly the free hand they gave the PSUs, but that had changed in the recent years with Antony kicking some a... in DRDO and HAL. This way should be followed, by opening up for private companies on the one side, but also more accountability of PSUs on the other side. It's not about private or government companies, but how to get the best out of all of them!

PSUs will never perform the way a TATA would perform if given the technical capability and clearance.

Take it in written from me.

The world and humans want incentives to perform. The only incentive government gives is that your job is guaranteed but pays pittance to the scientists and researchers who develop these things. They are also humans with families and children to educate.

That ship you're talking about has sailed long back.

Privatization with Government monitoring of security and safety is the way to go forward if we have to become a superpower.

Otherwise we simply shut down PSUs and continue importing. At least all the money going waste in them will be saved.

 

[sancho]

There are better ways of managing.

Definitely! The management of DRDO in the recent years caused the most pain in the a... for India, but I don't see how ex forces personell can change that, without the necessary experience and knowledge to manage a company? They surely will bring more operational know how and the developments could be focused more to what the forces needs, but that's not all a manager has to do!
You can add more personell of the forces in important roles of certain projects, but the company itself must be lead from people that knows about the company, about how it works and about what is necessary to improve it.

Hardly. If it was their reputation they were working for, they would have delivered things ahead of time rather then delaying by decades. NONE of the PSUs deliver anything on time except for one or two shipyards or electronics divisions.

Delivering something is one thing, claiming that they are able to develop it is the other and DRDO is "only" claiming but fail to deliver. They wanted to show them as a world class company, but in reality they are far away from that and sadly HAL follows that way as it seems.

The best measure is to make them public joint stock companies, forcing them to be accountable to their stockholders so that there is some level of accountability and therefore any incompetence can be either suspended or shifted to less-critical areas (since you cannot fire anyone in government). Defence is not an area for them.

That's not how it works! A stock company is dependent on financial success, not on good products for the forces. The Dhruv for example is highly important for India and it's forces, the export success however is limited, therefor it is not beneficiary from the point of view of shareholders. So should we fire the project managers for not creating enough benefits, or should we support them to keep developing varients of the Dhruv that will help to secure India?

I agree that accountability is the biggest issue of the PSUs, but privat companies or privatizing PSUs is not the solution, since accountability for them is different and aimed at financial success only!
We need MoD to take a stronger stand on the PSU heads and to guide them propperly, that's what Antony did in the recent years and what caused obvious improvements in the LCA project for example.

Also if they start making money, they don't need to give it to the government as they can retain it for further company development. This would ensure that defence infrastructure for production of weapons is made on time because of money and not waiting for CCS or any damn bureaucrat to sign.

I have no problem that these companies makes money, I even want them to build stuff for foreign countries too like HAL is building parts for various aero partners. But I don't want them to divert their focus only on fields where they can create the maximum money, but to remain focused on what is needed for the defence of India!
The defence of the country must have priority for the PSUs, exports and financial success can only be secondary targets.

Why is it that no bloody project moves to prototype in time? Why are bureaucrats allowed to decide for defence?

Boeing, Lockheed Martin, Raytheon, Cobham, Nexter, Gulfstream etc are all private firms.

And they are the world's largest in what they do.

There is your theory of 'greed and profit'. Down the drain.

Not really, it just proves it! The US weapon lobby is the most greedy and powerfull in the world and they use their power to make financial success in first place! Same goes for Airbus, Thales, BAE..., that's why Airbus wanted less government share now. The problem is only, without the orders of their governments, they can't survive either, that's why BAE is in trouble now and why the US industries are hit by the budget cuts too.
India has privat industry and should keep inviting them to take a higher stack in the defence industry, but the PSUs must remain under government control, to provide India with what is needed and not with what sells the best.

PSUs will never perform the way a TATA would perform if given the technical capability and clearance.

Take it in written from me.

Maybe, but they don't have to be equally good, they only have to deliver what is needed. Currently they aren't delivering at all and that is the problem, not if they are as good as TATA.