Foreign defence firms eye billion-dollar 'made-in-India' deals

Delhi luring companies to manufacture in the country with long-term defence contracts

NEW DELHI • Delhi has drawn up a shopping list for tens of billions of dollars' worth of foreign fighter jets, armoured vehicles, submarines and helicopters, but it will sign the cheques only if they are made in India.

The world's largest defence importer has announced a new policy inviting foreign defence manufacturers to set up shop as minority partners in India. It initiated the bidding process for submarines last month. Such deals would boost job creation and bring key defence technologies into India.

Foreign companies say the opportunity is too good to miss.

Europe's Airbus Group, angling to sell its Panther helicopters, has said that if it wins a contract worth several billion dollars and expected to span at least a decade, it would make India its global hub for the multi-purpose helicopters.

The company currently builds them in France.

Lockheed Martin says if its F-16 fighter jets are selected - it will likely compete with Saab for that order of close to US$15 billion (S$20.5 billion) - it will "support the advancement of Indian manufacturing expertise".

Germany's ThyssenKrupp Marine Systems and France's Naval Group are eager to compete for a contract of up to US$10 billion to build submarines there.

Luring foreign defence companies to build in India would be a major and much-needed boost to the economy.

Prime Minister Narendra Modi, with less than two years to national elections, is under intense pressure to create more jobs for the hundreds of thousands of people joining the workforce every month.

India is seeking to follow other countries which created defence sectors by backing a few big players with long-term defence orders and allowing smaller businesses to develop around them.

The country currently imports at least 90 per cent of its defence equipment, including parts for assembly. It is banking on foreign firms to bring in new technology.

For the Indian companies, which would hold the majority stake, it is a big win, says aerospace and defence specialist Dhiraj Mathur.

The lowest bid is one key selection criterion that worries some of the competitors.

"We'd like to see the Indian government work with the US government to ensure that these acquisition policies don't disadvantage US companies just because we can't get the lowest price," said Ms Cara Abercrombie, former US deputy assistant secretary of defence for South-east Asia.

The other hurdle in the policy is that transferring defence technology requires government approval.

In a strategy similar to one followed by the United States, India puts the onus on the foreign partners to get the green light from their respective governments, a challenging task for them.


A version of this article appeared in the print edition of The Straits Times on August 21, 2017, with the headline 'Foreign defence firms eye billion-dollar 'made-in-India' deals'. Print Edition | Subscribe