http://www.reuters.com/article/idUSSGE61E0F220100216?type=marketsNews
NEW DELHI, Feb 16 (Reuters) - At a four-day defence fair in New Delhi this week, India's government is pushing its private defence sector with new policies making it mandatory for foreign firms to make the bulk of arms sold to India locally sourced.
More than 650 companies are taking part in New Delhi's DefExpo 2010 which began on Monday, touting their fighters, missiles and cutting-edge surveillance systems to one of the world's biggest emerging arms importers.
The stakes are high for domestic and foreign firms, with the government estimating the Indian defence market to be worth $100 billion over 10 years despite a history of red tape and graft scandals slowing efforts to modernise the sector.
The government last year introduced a new rule that made it mandatory for foreign defence firms to buy 30 percent of equipment from local firms, but is now looking at gradually raising that figure to a 70 percent target within a decade.
"We are looking to make most of the equipment locally to boost the private industry. This will not only benefit the private industry but also make it much cheaper for us," R.K. Singh, the Defence Ministry's secretary for production, told Reuters.
"We are changing our policy, hoping that it will speed up procurement and improve standards of local companies."
On Monday, Mahindra and Mahindra (MAHM.BO), India's top utility vehicles maker, trumpeted a joint venture with BAE Systems (BAES.L) to build armoured vehicles worth an initial investment of $21.25 million over three years.
"I think this is something which has huge potential," Anand Mahindra, the vice chairman of Mahindra & Mahindra, told reporters on Monday.
"I believe the government understands that there is a very strong Indian industry competence that is built up over the last 20-25 years."
India wants to upgrade its largely Soviet-era arsenal to be more in sync with its economic rise, growing diplomatic clout, and closer ties with Washington, especially given its uneasy relations with neighbours Pakistan and China.
But government bureaucracy and high-profile bribery scandals have put the brakes on India's drive to modernise its armed forces for decades.
"The involvement of the private sector is highly desirable, as the public sector has a glass ceiling in terms of becoming more efficient," said Uday Bhaskar, head of New Delhi-based strategic affairs think-tank National Maritime Foundation.
LOOKING AT THE LONG TERM
The new policy will provide more opportunities to Indian companies such as Tata Motors (TAMO.BO), Ashok Leyland (ASOK.BO) and Larsen and Toubro (LART.BO), defence experts and officials said.
New Delhi sees domestic private companies undergoing a major shift to becoming key players in their own right. Tie-ups with foreign players would boost their know-how through shared expertise and technology transfers, officials said.
Most foreign companies say they accept India's growing focus on domestic firms. U.S. major players Boeing (BA.N) and Lockheed Martin (LMT.N) have already begun sourcing equipment worth $950 million from local companies to sell to India.
But not everybody is as optimistic.
"The private sector cannot do it on their own, they need a lot of foreign collaboration as they do not have great expertise. Indian companies have to improve a lot," retired Major General Ashok Mehta said.
A top U.S. aircraft manufacturing company official told Reuters, "it is a great idea to push the local industry, but it remains to be seen how the local companies grow."
India is holding field trials for the world's biggest arms deal in play, for buying 126 multi-role fighters in a $10.4 billion deal.
But despite such eye-catching deals in the works, the Indian government is still struggling with a slow pace of procurement, often at the expense of foreign players.
Only last month, the Indian government cancelled a $2 billion order with Airbus for air tankers at the last minute, saying the planes were overpriced. It has now floated a new tender.
In 2007, India cancelled advanced talks amid corruption charges with Eurocopter to supply military helicopters worth $600 million after complaints over the bidding process, and last year put on hold deals worth $2 billion.
"If we're going to do business in India, then it is a necessity that we have Indian partners," Walter Doran, Asia president of Raytheon International Inc, told Reuters.
"When you're dealing with India...you have to be in it for the long term. You cannot allow yourself to get frustrated by any single pursuit," he said. (Editing by Alistair Scrutton and Jerry Norton)
NEW DELHI, Feb 16 (Reuters) - At a four-day defence fair in New Delhi this week, India's government is pushing its private defence sector with new policies making it mandatory for foreign firms to make the bulk of arms sold to India locally sourced.
More than 650 companies are taking part in New Delhi's DefExpo 2010 which began on Monday, touting their fighters, missiles and cutting-edge surveillance systems to one of the world's biggest emerging arms importers.
The stakes are high for domestic and foreign firms, with the government estimating the Indian defence market to be worth $100 billion over 10 years despite a history of red tape and graft scandals slowing efforts to modernise the sector.
The government last year introduced a new rule that made it mandatory for foreign defence firms to buy 30 percent of equipment from local firms, but is now looking at gradually raising that figure to a 70 percent target within a decade.
"We are looking to make most of the equipment locally to boost the private industry. This will not only benefit the private industry but also make it much cheaper for us," R.K. Singh, the Defence Ministry's secretary for production, told Reuters.
"We are changing our policy, hoping that it will speed up procurement and improve standards of local companies."
On Monday, Mahindra and Mahindra (MAHM.BO), India's top utility vehicles maker, trumpeted a joint venture with BAE Systems (BAES.L) to build armoured vehicles worth an initial investment of $21.25 million over three years.
"I think this is something which has huge potential," Anand Mahindra, the vice chairman of Mahindra & Mahindra, told reporters on Monday.
"I believe the government understands that there is a very strong Indian industry competence that is built up over the last 20-25 years."
India wants to upgrade its largely Soviet-era arsenal to be more in sync with its economic rise, growing diplomatic clout, and closer ties with Washington, especially given its uneasy relations with neighbours Pakistan and China.
But government bureaucracy and high-profile bribery scandals have put the brakes on India's drive to modernise its armed forces for decades.
"The involvement of the private sector is highly desirable, as the public sector has a glass ceiling in terms of becoming more efficient," said Uday Bhaskar, head of New Delhi-based strategic affairs think-tank National Maritime Foundation.
LOOKING AT THE LONG TERM
The new policy will provide more opportunities to Indian companies such as Tata Motors (TAMO.BO), Ashok Leyland (ASOK.BO) and Larsen and Toubro (LART.BO), defence experts and officials said.
New Delhi sees domestic private companies undergoing a major shift to becoming key players in their own right. Tie-ups with foreign players would boost their know-how through shared expertise and technology transfers, officials said.
Most foreign companies say they accept India's growing focus on domestic firms. U.S. major players Boeing (BA.N) and Lockheed Martin (LMT.N) have already begun sourcing equipment worth $950 million from local companies to sell to India.
But not everybody is as optimistic.
"The private sector cannot do it on their own, they need a lot of foreign collaboration as they do not have great expertise. Indian companies have to improve a lot," retired Major General Ashok Mehta said.
A top U.S. aircraft manufacturing company official told Reuters, "it is a great idea to push the local industry, but it remains to be seen how the local companies grow."
India is holding field trials for the world's biggest arms deal in play, for buying 126 multi-role fighters in a $10.4 billion deal.
But despite such eye-catching deals in the works, the Indian government is still struggling with a slow pace of procurement, often at the expense of foreign players.
Only last month, the Indian government cancelled a $2 billion order with Airbus for air tankers at the last minute, saying the planes were overpriced. It has now floated a new tender.
In 2007, India cancelled advanced talks amid corruption charges with Eurocopter to supply military helicopters worth $600 million after complaints over the bidding process, and last year put on hold deals worth $2 billion.
"If we're going to do business in India, then it is a necessity that we have Indian partners," Walter Doran, Asia president of Raytheon International Inc, told Reuters.
"When you're dealing with India...you have to be in it for the long term. You cannot allow yourself to get frustrated by any single pursuit," he said. (Editing by Alistair Scrutton and Jerry Norton)
