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DEFENCE COOPERATION: EMERGING TREND

The Strategic Partnership with foreign countries would assist India to improve its relationships - diplomatically and politically, additionally, it will facilitate Indian companies to become a part of global supply chain.

India has been the leading global arms importer in recent years. The major portion of import procurements includes aerospace platforms, missiles, armoured vehicles and other defence equipment. India over the years has relied on the Western countries mainly US, Russia, France, Germany and UK etc. for the supply of defence equipment.

Russia supplied 68 percent of arms import to India. The government now has started focusing on other regions, including some Eastern partners such as Japan, Korea etc. In Indo-Japan agreement signed on December 12, 2015 for Defence Equipment and Technology Cooperation is a big step that will further consolidate India-Japan strategic ties. The other emerging East partner is Korea. It has entered into a number of contracts with Indian defence as well as Indian origin company to manufacture defence products in India. Some of them are discussed below.

Indo-Japan Defence Co-operation

Both India and Japan have signed an agreement in December, 2015 to transfer of Defence Equipment and Technology Co-operation. The agreement aims to enhance availability of each other to support in defence, security co-operation, and technology necessary to implement joint research, development and production. India is planning to buy Utility Seaplane Mark 2 (US-2i) amphibious aircraft from ShinMaywa. The project cost is around $1.65 billion. For this, the ShinMaywa Company has already negotiated with the Indian companies such as

Mahindra Defence, Hindustan Aeronautics, Tata Aerospace, L&T and Pipavav to assemble aircraft in India. Two aircraft will be delivered by ShinMaywa and the balance ten will be assembled in India. Both the countries have signed another deal over security measures to protect each other in time of need.

India-Korean Defence Co-operation

In the recent time, Korea has extended its support to co-operate with India in the defence sector. The Inter-governmental Memorandum of Understanding (MoU) for defence industry cooperation in ship building was signed by, Secretary Defence Production from India and Minister of Defence Acquisition and Programme Administration (DAPA), South Korea. The MoU, was conceived under the overall umbrella of the 'Special Strategic Partnership' between both sides as declared in the Joint Statement of the Prime Minister of India and the President of South Korea in May 2015, the MoU explained that the cooperation is part of the 'Make in India' policy, under which warships will be built at domestic shipyards with South Korea's help.

India has already nominated Hindustan Shipyard Limited (HSL), Visakhapatnam while South Korea will designate their shipyard soon. The MoU with two sides will identify specific projects to work on and this cooperation is expected to enable HSL to upgrade and modernise its facilities. HSL and the nominated shipyard by South Korea will "identify and develop indigenous sources/vendors for the supply of majority of the material and equipment" for warship building. HSL has teamed with Hyundai Heavy Industries of South Korea to build fleet-support ships costing about $1.5 billion as well as two strategic operating vessels, or midgets, costing about $448 million.

GSL and Kanagam Corporation

Goa Shipyard Limited (GSL) has signed a agreement with South Korea's Kanagam Corporation for a major shipbuilding project, which will help GSL to build 12 Mine Sweeper Vessels for worth more than $5.5billion. Kangnam Corporation will provide consultancy, design and technological assistance to the Indian shipyard for $1 billion. The project will be implemented from 2018-2025.  GSL and Indian industries are looking at partnering with Korean shipbuilding industry in bringing world class technology to maritime sector of the country and this initiative will go a long way in the making of the Mine Counter Measure Vessel (MCMV) project.

Reliance and LIG Nex1

Reliance Defence Ltd has entered into a strategic partnership with a leading South Korean defence major LIG Nex1 to jointly manufactures military hardware for India's armed forces. As part of the agreement both Reliance Infra promoted RDL and LIG Nex1, will explore opportunities for developing a range of defence products such as air defence, surveillance radar, sensors and missiles. LIG Nex1 is a leader in manufacture of smart heavy weapons in categories of anti ship missiles, anti tank guided missiles (ATGM), and guided rockets. Currently, there are multiple programmes for the Indian Armed Forces that the two companies plan to address together. This potentially includes improvements to the existing weapon systems which are part of LIG Nex1 portfolio to meet the specific requirements of the Indian Armed Forces. The two companies have initially identified air defence & surveillance radar for production in India. They will also work on performance enhancement for various systems and platforms to meet the specific requirements of the Indian Armed Forces. Skills developed and the experience gained through this collaboration will further add to Reliance Group's capabilities and establish leadership in the long run. The defence sector will be the largest business area for this group in the next few years, considering opportunities worth Rs. 1 lakh crore per annum in acquisitions for the armed forces.

L&T and Hanwha

Larsen & Toubro and South Korean Hanwha Techwin have an agreement to manufacture the K9 Vajra-T, a 155mm, 52-caliber self-propelled howitzer for the Indian Army. The K9 artillery system has already been shortlisted by the Indian Army in a global competition and the deal has been signed. L&T had jointly bid with Samsung Techwin for howitzer order. The Hanwha group had acquired Samsung's stake in Samsung Techwin in November 2014.

L&T and Hanwha Techwin (HTW) will jointly manufacture over 100 self-propelled howitzers for Indian Army at a cost of nearly Rs 4,500 crore. The entire supply will be made within a span of 42 months. While 10 guns will be directly brought from South Korea, 90 will be manufactured in L&T's Strategic Systems Complex in Talegaon near Pune and the remaining at Gujarat. This contract will mark an important milestone in L&T's defense business journey and relationship with Hanwha Techwin. It will create synergies not only for this program but also for upcoming Indian and global programs. L&T will not only manufacture K9 VAJRA-T in India, with over 50% indigenous content but also provide life support to the army with the weapon.

Conclusion

It is fact, that the various platforms procured from the OEMs so far or licenced produced by DPSU or OFB under ToT, the expertise were only limited to built to print. ToT was never meant to provide know how to replicate an indigenous version of the imported product. There was no “Know why” and “know how” and resultantly Indian defence inventory is facing maintenance issues due to lack of spares.

By allowing the private sectors and foreign companies in manufacturing of defence equipments, the avenues for defence co-operation, Joint ventures and Transfer of Technology has increased considerably. Although such JV/ ToT will not automatically translate into domestic companies learning all the hows & whys of sub system design and manufacture. ToT works on military-industrial cooperation with value-addition. The value addition by a licenced-producer of sub-systems comes from 'buy-back' arrangements under which Indian companies become part of the global supply chain. Indian vendors will build & supply to their Suppliers in Value chain for all platforms integrated by the OEM for India as well as World over. Hence ToT need to have some buy-back arrangements for sub-systems. The Make in India focus is to create technical capabilities and self reliance. The 'strategic partnership' with the other country will improve India's relation diplomatically and politically as well also establish 'Make India's objectives.

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