Lapsed tenders hurt PM Modi's 'Make in India' defence industry push

NEW DELHI (REUTERS) - Indian firms have spurned some US$15 billion worth of government tenders to make a range of weapons since 2013, Defence Ministry officials say, in a blow to Prime Minister Narendra Modi and his drive to wean the country off imported arms.

Executives cited unrealistic quality demands from a military short of planes, tanks and guns as a key reason for their reluctance to bid for projects. Complicating things further, the military doesn't want weapons from Indian firms with no track record in defence manufacturing, experts said.

Irked by India's status as the world's biggest arms importer, Mr Modi wants to build an advanced defence industry but almost a year into his "Make in India" campaign, which aims to turn the country into a manufacturing powerhouse, not one large domestic weapons project has been awarded.

Tenders for anything from air defence guns to surface-to-air missiles to transport planes have lapsed, Defence Ministry officials told Reuters. The tenders total around US$15 billion according to a Reuters compilation of offers since early 2013.

"'Make in India' is a laudable aim, but it's moving rather slowly. It's not a switch you can press and everything will fall into place," said Vivek Rae, head of procurement at the Defence Ministry from 2010-2012.

Anil Ambani, the billionaire chairman of the Reliance Group, recounted at a recent conference how Mr Modi asked him if he knew India didn't make tear gas shells. "Even the tears we shed are foreign," Mr Ambani quoted the nationalist leader, who took office last May, as saying.

Mr Modi wants to build a strong military after years of neglect that military planners say has left India vulnerable should rivals China and Pakistan ever launch a combined attack, although experts say this is highly unlikely. India is being challenged, however, in its Indian Ocean backyard, where China's more modernised navy is starting to assert itself.

Defence Minister Manohar Parrikar has said new defence production policies will be unveiled this month to address the concerns of private firms: opaque procedures, unrealistic quality requirements and slow decision-making. "We're trying to simplify procedures, create a level-playing field but still there are many cases of zero participation in tenders," said G. Mohan Kumar, the defence production secretary leading the localisation drive.

The military declined to comment, referring queries to the Defence Ministry, which controls procurement.