With Rajnath in Moscow, 52 Indian private defence firms seek joint manufacture - Broadsword by Ajai Shukla - Strategy. Economics. Defence.

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Monday 11 November 2019

With Rajnath in Moscow, 52 Indian private defence firms seek joint manufacture

Defence secretary targets 50 Indo-Russian joint ventures in four-to-five years

By Ajai Shukla
Business Standard, 7th Nov 19

Defence Minister Rajnath Singh, who is visiting Moscow and St Petersburg for the annual dialogue between the two countries’ defence ministers held talks with his Russian counterpart, General Sergei Shoigu, on Wednesday.

On India’s agenda for the 19th India-Russia Inter-Governmental Commission on Military and Military Technical Cooperation (IRIGC-M&MTC) is a concerted thrust to attract Russian “original equipment manufacturers” (OEMs) to outsource the building of defence equipment components and assemblies to Indian firms.

Accompanying Rajnath Singh to Russia are representatives from 52 Indian defence firms, looking to tie up deals with Russian OEMs. The Indian delegation includes large companies like the Adani Group and Mahindra Aerospace, as well as a host of micro, small and medium enterprises (MSMEs) that manufacture defence and aerospace components.

To this end, the Indian defence minister’s first order of business in Russia was to address chief executives of Russian OEMs at an “India-Russia Defence Industry Cooperation Conference” on Tuesday, and urge them to build in India.

Defence Secretary Ajay Kumar told the gathering to target setting up 50 Indo-Russian joint ventures in the next four-to-five years for building spares and components in India.

The Tuesday conference was also attended by Russia’s Minister of Industry and Trade, Denis Manturov.

While the US defence and aerospace industry, and to a lesser extent European industry, have begun shifting production to small, private manufacturers in India, the Russian defence industry has preferred to co-produce with large defence public sector undertakings (DPSUs) and ordnance factories (OFs), to meet indigenisation requirements in multi-billion dollar contracts, such as the ones for building Sukhoi-30MKI fighters, and T-72M1 and T-90S tanks in India.

Unlike the US, Russia has been tardy in developing business-to-business relations with Indian industry. Meanwhile, private Indian defence firms too have preferred to do business with the west. Speaking off the record, Indian CEOs say they encounter difficulties in obtaining full and timely payment from Russian partners.

With little production beyond the assembly of large platforms like fighter aircraft and tanks, the Indian military is still reliant on Moscow for spare parts and components required to keep its vast, Russia-origin arsenal going.

Nudging Moscow to remedy this dependency was a key objective of the 20thannual summit between the Indian and Russian leaders in Vladivostok on September 4. The joint statement issued by Prime Minister Narendra Modi and President Vladimir Putin called for action to “improve the after-sales service” of Russian equipment and “to encourage joint manufacturing in India of spare parts, components, aggregates and other products for maintenance of Russian-origin arms… through transfer of technology and setting up of joint ventures.”

On Tuesday night, Rajnath Singh tweeted: “We will soon share with the Russian side the list of spares and items, proposed to be manufactured in India. I hope that the Russian side will identify the OEMs in the next few months who can partner in production of these spares.”

Besides spares and components, Russia has several other opportunities to step up manufacturing in India. An inter-government agreement (IGA) to manufacture about 200 Kamov-226T helicopters in India, in partnership with Hindustan Aeronautics Ltd (HAL), has stringent indigenisation conditions that Russia cannot meet without intensified partnership with Indian private industry.

Moscow and New Delhi have also signed an IGA for manufacturing AK-203 assault rifles in India, with Russian firm Kalashnikov in a joint venture with the Ordnance Factory Board. After discussing this, Rajnath Singh tweeted: “I also welcome the strong Russian support for early operationalisation of Kalashnikov joint venture.”

Also discussed was co-operation in submarine manufacture, with Russia contending strongly for Project 75-I, which involves building six submarines, with “air independent propulsion” (AIP) in India. Moscow wants its Amur-class submarines to be selected without competition through an IGI. However, New Delhi insists on proceeding with an on-going competitive procurement, for which Moscow must compete with three European submarine OEMs that have offered their submarines.

From Moscow, the Indian defence minister will travel to St Petersburg on Thursday, which is a major hub of Russian warship building.

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