EY India's quarterly defence news letter

1. Eye on Defence
Dear readers,
The import of combat/armored platforms constituted around 12% of total
imports of defence equipment that India procured from other countries in the
last 15 years (1999-2014). It is worth approximately INR292 billion (US$4.87
billion) and mainly imported from Russia/Soviet Union. As the Indian land forces
expand their scope of operations and profile, there is a steep increase in the
requirement of armored and specialty vehicles across the board. The focal point
of the Indian Army’s modernization plan revolves around the acquisition of new
and advanced combat/armored platforms. It is expected that the Army will be spending approximately
INR 6,000 billion (US$100 billion) over the next 15 years or so on various weaponries/systems.
While significant interest has been generated around the land systems program, the private sector
has mostly adopted a wait and watch policy in setting up facilities. Now with the slew of procurement
programs including the FICV, FRCV etc., and upgrade program including BMP upgrade, there is a host
of opportunities for the private sector in manufacturing and services. The current publication explores
various ongoing projects in the land systems domain and tries to outline a timeline for these. It also
gives a perspective of private sector capabilities and opportunities.
The revision of the Defence Procurement Procedures (DPP) is a biannual exercise resulting from
stakeholder discussions, industry feedback and experiential learning. The Government had set up
a 10-member committee to review DPP-13 in its endeavor to enhance transparency and ease of
procedures within defence procurement. This is in-line with the Government’s efforts to facilitate its
“Make in India” initiative for the defence and aerospace industry. The committee, in September, released
a comprehensive report on the current state of the Indian defence industry and the recommendations
to shape the procurement policy. In the current issue of the Eye on Defence we have included, the key
issues highlighted in this report and their implications on the overall policy environment and “Make in
India” campaign in the context of the defence industry.
Among the regular sections, we have industrial license applicants, RFIs/RFPs released, new projects and
investments, joint ventures and alliances, country-level deals and the latest buzz in the industry.
I hope you find this issue useful. It has been our constant endeavor to make this publication increasingly
relevant to you, and we will appreciate your comments and suggestions in this regard.
K. Ganesh Raj
Partner and Leader
Aerospace and Defence practice
Combat vehicles: creating
indigenous capabilities
Expert committee
recommendations: impact
assessment
Request for Information
Request for Proposals
List of Industrial Licenses
(ILs) filed
New projects/investments/
contracts
JVs and alliances
Country level deals and
initiatives
Industry buzz
Contents
September 2015

2. 2 | Eye on Defence
The combat/armored fighting vehicles (AFVs) are the front
line of our defence and play an important role in any war
scenario, particularly, the main battle tank (MBTs) and
infantry combat vehicles (ICVs) being the highly survivable
and lethal combat vehicle, play as a game-changer in
conflict situations worldwide. The mechanized forces
comprise armored regiments (AFVs) and mechanized
infantry battalions (ICVs) with a role to cause “shock &
awe” effect on the enemy and to overrun the intended
objectives with overwhelming fire power, armor protection
and blistering mobility. In the absence of strong indigenous
design, development and manufacturing base we have been
dependent on foreign procurements, compromising our
own strategic doctrines. The import of combat/armored
platforms constituted around 12% of the total imports of
defence equipment that India procured from abroad in the
last 15 years (1999–2014), worth approximately INR292
billion (US$4.87 billion) mainly from Russia/Soviet Union.
The inventory and age profile of combat platforms — MBTs,
ICVs and other specialized vehicles have a high average age
leading to capability gap. The table and figure depicts the
shelf life of the major combat/armored platforms with the
Indian Army.
Air 66%
Air Defence
Systems 2%
Armoured
Vehicle 12%
Artillery 1%
Missile 9%
Others 8%
Ships 2%
Indian Imports of Major Platforms
1994-2014 (in percentage)
Source: Sipri and Compiled by Q-Tech
Combat vehicles: Creating indigenous
capabilities
Inventory and age profile of AFV
No of
platforms
(approx.)
Variants Age Profile Remarks
0–10 10–20 20+
Tanks
(3240)
T-90S 600 700 --- 1100+
Tanks are
above 30
years
Arjun 124 --- ---
T-72/
T-72M1
--- 600 1220
ICVs
(2200)
BMP-2 200 1300 700 600+
ICVs are
above 30
years
Source: Sipri and Compiled by Q-Tech
The average design life of most of the major combat/
armored vessels is 25–30 years. However, around 35%
of the combat platforms are above 20+ years. Out of
the inventory of approximately 3,240+ tanks, consisting
primarily of T-72 battle tanks and T-90 tanks, around 1,100
tanks are obsolete or near obsolescence. On the other hand
ICVs, the BMP-I have already been phased out and out
of the inventory of approx. 2,200 ICVs around 600+ are
already obsolete or near obsolescence and require urgent
replacement or upgrade. Considering their shelf life, these
needs to be replaced in the next five to ten years. By 2020,
the total requirement of AFVs & ICVs will be approximately
4,200 and 2,800 respectively, if all mechanized units are
kitted to its full authorization.
Planned acquisitions
As the Indian land forces expand their scope of operations
and profile, there is a steep increase in the requirement for
armored and specialty vehicles across the board. Vehicles
for the Army and paramilitary forces cover the entire gamut
of offensive, patrolling, intelligence gathering, battlefield
reconnaissance and weapon deployment missions. Some of
the major programs are:
Future Ready Combat Vehicle (FRCV): The Indian Army
issued an RFI on 8 June 2015 for design of an “FRCV,”’
which is planned to enter service in the Indian Army
by 2030. The aim is to identify and seek willingness of
established tank designers, design bureaus and agencies

3. 3Eye on Defence |
from India and abroad to participate in a design competition.
The design agency and developing agency can be separate
entities. The best design will be chosen and given to the
nominated development agency for prototype production.
The selected prototype will be given to the production
agency or agencies for bulk production. The Army wants
FRCV to be developed on a modular concept with a high
degree of flexibility in a manner that as a tank platform,
it can address varying requirements of different terrain
configurations. In August 2015, the Indian Army stated that
it is planning to incorporate DRDO as a technological partner
in the proposed FRCV project for expert inputs.
The cost of each FRCV is expected to be around INR330
million (US$5.5 million) indicating a market of more than
INR720 billion (US$12 billion) for 2,000 units.
The challenge the project may face is how to integrate
various technologies onto a common platform. All of the
systems capabilities firepower, survivability, mobility and
vetronics are competing for space and weight. An AFV has
size and weight limits as it needs to maneuver in certain
terrain or to meet certain transport requirements.
Timeline: The FRCV will be a design and development project, to be executed in three major stages — design stage, prototype
development stage and production stage. According to the probable timeline, the contract is likely to be inked by 2026–27
and the induction may begin by 2028 onwards, if no further delay is imposed.
Expected timeline of the project
EOI
2015
Design
2016-18
Prototype
Dev. Stage
2019-21
Trial &
Evalution
2022-25
Production
Stage
2028 onwards
Contract
2026-27
Future Infantry Combat Vehicle (FICV): The Ministry of
Defence (MoD) has also issued an Expression of Interest
(EoI) recently, asking for proposals to build a FICV under the
“Make” category, with estimated cost of INR500 billion. The
EoIs have been issued to Mahindra, Bharat Forge, Larsen &
Toubro (L&T), Punj Lloyd, Tata Power, Tata Motors, Pipavav
Defence, Rolta India, Titagarh Wagons and the Ordnance
Factory Board (OFB). They have been given 90 days to
respond to the EoI with detailed proposals, which will involve
forming consortia with Indian and foreign vendors and
proposing the design of an FICV that is likely to best suit
the army’s requirements. Most likely two vendors will be
shortlisted, and they will then evolve and submit a detailed
project report (DPR), comprising a detailed technical and
financial proposal. Even if 50% indigenization is achieved it
still opens an INR300–360 billion (US$5–6 billion) market
over 15–20 years for the Indian industry.
The better design will be chosen by an “Integrated Project
Management Team” (IPMT), comprising experts from
various defence ministry departments. In their responses to
the EoI, the companies will spell out details of technology
tie-ups, which will bid for the contract. These companies are
free to select foreign partners for design, technology and
funding.
The EoI issued under Defence Procurement Procedure of
2008 (DPP-2008) talks about selection of the development
agencies (DA) on the basis of “proven excellence with
capability to contribute due to their technical, managerial
and financial strengths.” The vendor responses will be

4. 4 | Eye on Defence
graded into four categories, each having a certain weightage
— commercial assessment, technical capability assessment,
critical technology assessment and technical specification
assessment.
This is the second time the FICV project has been launched
under the ”Make” category of the DPP-2008. Previously, an
EoI issued in 2010 to four vendors (L&T, Tata, Mahindra and
OFB) evoked responses, but was cancelled in 2012 because
the MoD could not decide on the parameters for short-
listing the two winning vendors. With the ministry taking
three years to re-issue the EoI, the FICV project has lost five
years already. The army has to procure at least 2,600 such
vehicles.
Emerging Grouping: FICV is restricted to domestic
companies as DA to develop and build the FICV under
”Make in India” initiative, although collaboration with
overseas companies will be needed in several areas. The
likely strategic/sub system technology partners for FICV
development will be required in the technology domain
of engine, final drive, transmission, tracks, gun and
ammunition, ATGM, fire control system, sighting systems,
battle field management system, identification of friend and
foe, communication, ergonomics and protection system etc.
It is mandatory for the DA to take an undertaking, from the
proposed suppliers of critical technology sub-systems of the
FICV, for transfer of technology (ToT), manufacturing rights,
unhindered supply, full usage/exploitation, and upgrade in
technology and export permission to the DA concerned and
the MoD. However, with the current restrictive conditions in
the EoI citing DPP-2008, OFB and a couple of older players
in the defence sector are likely to qualify. The likely DAs
from the private sector could be TATA Motors, L&T and
M&M, which have already done substantial spade work in
tieing up during previous EoI. The other likely partner will be
Bharat Forge, which has a tie-up with Israeli electronics firm,
Rafael, which would supply the FICVs missile, night vision
and sighting systems and active protection systems. The
remaining companies are likely to participate as part of the
consortium.
The point of concern among defence companies is MoD’s
decision to vest intellectual property rights (IPR) with
themselves. The fact that mere reissuance of the EoI has
taken such a long time, there is some apprehension whether
subsequent stages will adhere to the anticipated schedule.
The fact that neither DRDO nor the production agency has
any experience in designing the infantry combat vehicle,
to put this program at a time when the existing inventory
will need replacement 10 years down the line, is somewhat
ambitious.
Timeline: According to the probable timeline planned in 2009 for the induction of FICV, the contract was to be inked by
2019–20 so that induction could begin by 2022–23 to have a replacement for the flogged BMP II (over 40 years), which was
inducted in early eighties. However, this project has been delayed by more than six years, and the contract now is likely to be
inked by 2025–26 and the induction may begin by 2027 onward, if no further delay is imposed. This delay will be crucial for
the Army, since the BMPII is likely to have become obsolete by then.
EOI
2015
DPR
2016-18
D&D
2020-22
Trial
2023-24
LSP
2027 onwards
Contract
2025-26

5. 5Eye on Defence |
Upgrade of BMP ICVs: Recently, a new RFI has been issued
to two Indian companies for the upgrade of approximately
1, 500 (+363 new) BMP-2s, to enhance their offensive
capabilities on three counts at an estimated cost of
approximately INR127 billion (US$2.1 billion):
Armament upgrade costing more than INR 63.5 billion
(US$1.1 billion) with following capabilities:
• Two twin-missile launchers on each side
• IInd generation plus anti-tank guided missiles (ATGMs)
• 30-mm automatic grenade launchers
• The thermal-imaging fire-control systems are expected to
increase the accuracy of weapon systems and panoramic
sights for the commanders to be able to look in all
directions. So far 950 BMPs have already been fitted with
thermal-imaging modules, which will now be equipped
with advanced “TISK” systems that integrate ATGMs,
auto-canons and PKT machine guns to ensure they can be
fired accurately at night.
• 1,780 Thermal Imaging (TI)-cum-day sights at a cost
of approximately INR1 billion (US$18.81 million) have
been approved for integration.
• The power pack will also be upgraded to 380 HP at a
cost of approximately INR 47billion (US$ 780 million).
Currently, it has Russian-origin UTD-20 engines, which
provide 285 HP. It is the original engine of the BMP-1 ICV,
whereas the BMP-2 is heavier by 1,000 kg than the BMP-
1. A more powerful engine is required to make the BMP-2
more efficient in cross-country mobility, floatation and
gradient negotiating, apart from providing it the ability
to take more add-on systems and weapons. The army is
looking for a power pack with a minimum 380hp.
Timeline: According to the probable timeline the upgrade schedule should take around seven to eight years for completion.
Moreover, it is anticipated that the phasing out of the BMP-2s will begin by 2025.
Up Gradation
BMP 2
RFP
2015-16
Trial &
Contract
2018-20
Completed
2021-22
onwards
Phasing Out
2025 onwards
Expected timeline of the project
Engineering and specialized/support vehicles
The Indian Army is equipped with a variety of specialized
vehicles, both indigenous and acquired ex-import. The
Government of India (GoI) has initiated efforts to modernize
the current fleet with several Indian programs in this
category such as light strike vehicles (LSV), light armored
multi-purpose vehicle (LAM), light specialist vehicles (LSV),
light bullet proof vehicles (LBPVs), vehicle-based mine
scattering system (VBMSS), all-terrain vehicles (ATV),
wheeled APC WZT-3 armored recovery vehicle (ARV).
The growing Naxalite attacks on security personnel in the
interiors of the country have necessitated the use of such
protective vehicles even during peace time thereby, opening
up a large market for such vehicles. The Indian private
players looking to introduce better technology in order to
capture the market will offer potential tie-ups. It is estimated
that there is requirement of 300–400 mine-protected
vehicles annually by various security agencies including
police and paramilitary forces.

6. 6 | Eye on Defence
The summary of various on-going and future AFVs programs of the Indian Army is listed out in the table.
Platform Variants Qty Cost Remarks
Tanks T-90S 235 INR60
billion
To be produced by Indian under license
from Russia by 2020
FRCV 2,000 INR 720
billion
Induction to commence from 2030
onwards.
Arjun Tank 118 INR66
billion
Under production
ICVs FICV 2,600 INR500
billion
Mahindra, Bharat Forge, Larsen & Toubro,
Punj Lloyd, Tata Power, Tata Motors,
Pipavav Defence, Rolta India, Titagarh
Wagons, and OFB.
Induction to commence from 2027
onwards.
Overhaul of BMP – II 1,000
approx.
INR 127
billion
Heavy Vehicle Factory, OF Medak, BEML,
CVRDE, TATA, L&T, Mahindra Defence
Special Vehicles/
Engineering Combat
Vehicles
Light Support Vehicles:
• Light Strike Vehicles
• Light Armored Multi-Purpose
Vehicle
• Light Specialist Vehicles
• Light Bullet Proof Vehicles
• All-Terrain Vehicles
• Wheeled
• APC
3,000 INR15
billion
Indian Companies: Tata Motors, Force
Motors, Ashok Leyland, Mahindra, Punj
Lloyd, Alpha, Bharat Forge, L&T, Shri
Lakshmi Defence, Pipavav Offshore and
Defence, DRDO, BEML
Foreign Companies for Technology:
BAE Systems, General Dynamics,
Rosoboronexport, Krauss-
MaffeiWegmann, Ukrainexport, Bumar
Vehicle Based Mine Scattering
System (VBMSS)
More
than
120
--- ---
Source: EY analysis and compilation from public sources
combat/armored platforms accounting of 25% of the total
land systems is the major segment that is bound to see
substantial growth in coming years due to the current
depleting and aging fleet. The Indian Army is anticipated
to spend on combat/armored/tanks and upgrades, which
is likely to cost around INR1,527 billion (US$25.45 billion)
during this period.
Market and resource projection
The focal point of the Indian Army’s modernization plan
revolves around the acquisition of new and advanced
combat/armored platforms. It is expected that the Army
will be spending approximately INR6,000 billion (US$100
billion) over the next 15 years or so on various weaponries/
systems. Among all the land systems submarkets, the

7. 7Eye on Defence |
Land Systems Breakdown (2012-2027)
Tanks & Tanks
Upgrade 25%
Missiles &
Missile
Systems 17%
Communication
Systems 14%
Raising of
Mountain Strike
Corps 13%
Artillery 7%
Arms for
Infantry 4%
Helicopters 1%
UAVs 1%
Miscellaneous
Gear 18%
Source: Compiled by Q-tech Synergy
Capital projects planned of land systems
(2012–2027)
Resources
projections
(in INR billion)
Artillery 360
Missiles and missile systems 950
Arms for Infantry 220
Combat/ Armored platforms and
upgrades
1,400
Aerospace platforms, helicopters, UAVs 120
Communication systems 750
Miscellaneous gear 1,000
Raising of mountain strike corps (MSC) 700
Total 5,500
Private sector participation
Till date there has been no private sector company
participating in the manufacturing of the tanks/armored
vehicles. Recent initiative under the “Make in India”
category the EoIs for two major programs, namely, the
FRCV and FICV, are expected to be game changers for
private industries. Moreover, the LSVs program under the
buy-make (Indian) category has already been approved for
3,000 LSVs at a cost of INR16 billion (US$272 million) for
the Army.
Seizing the market opportunity, the leading players in this
segment, which include Tata Motors, L&T, Mahindra, Ashok
Leyland have initiated with the manufacturing/offering
variety of AFVCs, MPVs, specialist vehicles, on their own
or together with foreign players. For example Tata has
collaborated with DRDO and has come out with specialist
vehicles such as Tata micro bullet-proof vehicle (MBPV),
Tata 12x12 Prahaar missile carrier and Tata LSV quick
deployment mobile communication terminal (QDMCT),
which have been offered to the Army. Shri Lakshmi Cotsyn
Ltd. (SLCL) has launched armored vehicles, which includes
“DHRUV – ATC” (Armored troop career) and ”DRONA –
MPV” (blast and mine protection vehicle).
However, the issuance of Army’s EoI for FRCV and FICV
has raised several questions — Is our industry capable of
affecting a turnaround and seeing the program through
to completion? Are the production facilities capable of
meeting the demands of large-scale deployment? Do they
have the resources to sort out teething troubles with new
technologies quickly and roll out fixes across the entire
fleet? It is tough to be optimistic with the past experience,
success will be determined not so much by its design
specifications, but more by the industry’s ability to perform
and deliver a working product on time and within a limited
budget. On the other hand, all design and development
projects seem highly optimistic at the initial stage. The
FICV project is no different. Whether or not it is technically
feasible and cost-effective will depend on the response to
the EoI and we must be optimistic, since there is no reason
why it should not take off.
Notwithstanding the above, these projects will help India in
inching toward the goal of self- reliance, besides giving the
user a sense of pride from a ”Make in India” technology.
These project will be a huge boost to the Indian defence
industry in R&D, manufacture, and in developing Tier-1
and Tier-2 suppliers from the small and medium sector
industries and will create an ecosystem of suppliers
extending far beyond the winner of the contract. The
success of the project will boost the confidence of foreign
investors and defence companies in partnering with the
Indian industry in keeping with the ”Make in India” vision.
References:
• “Army invites proposals for building FRCV tanks”, Economic Times
website, http://economictimes.indiatimes.com/news/defence/
army-invites-proposals-for-building-frcv-tanks-drdo-surprised/
articleshow/47830259.cms, accessed on 26 June 2015
• “Tender issued in Rs 50,000-cr Future Infantry Combat Vehicle
project”, Business-standard website, http://www.business-
standard.com/article/economy-policy/after-5-year-delay-
tender-issued-in-rs-50-000-cr-future-infantry-combat-vehicle-
project-115071601515_1.html, accessed on 16 July 2015
• “Rs 12,700-crore Army fleet upgrade project”, Economic Times
website, http://economictimes.indiatimes.com/news/defence/private-
sector-cries-foul-over-rs-12700-crore-army-fleet-upgrade-project/
articleshow/48979625.cms, accessed on 16 Sep 2015

8. 8 | Eye on Defence
Expert committee recommendations: Impact
assessment
A major shift is required in the acquisition procedures, due
to the complexities associated with almost every aspect of
defence procurement in India, despite several amendments
in 2003, 2005, 2006, 2008, 2009, 2011 and 2013. In
the past, the MoD had also set up few committees headed
by Dr. Kelkar, Mr. Probir Sen Gupta, Mr. Ravindra Gupta and
Mr. Vinod Mishra to mention a few. Although the MoD has
received several inputs in these past few years, despite their
best efforts, the procurement procedure needs to become
more dynamic to transform the Indian defence sector.
In the recent past a committee with representatives, mostly
former bureaucrats from the MoD, under the Chairmanship
of former Home Secretary Shri Dhirendra Singh, who had a
tenure as Additional Secretary, Defence Production earlier
was mandated to give recommendations on the two terms
of references, mainly facilitating “Make in India” as well as
removing bottlenecks and simplifying procurement. The
report was presented to the MoD on 23 July 2015. The
generic recommendation which stand out is for recognizing
defence procurement as “strategic” and different from
routine government purchases. The report emphasizes
that the special nature of defence procurement needs to
be undertaken separately and not as a routine government
procurement, as the General Financial Regulations (GFR), is
for routine purchases, whereas defence acquisitions are far
more complex. The other important recommendations are
as follows:
Facilitating ‘Make in India’
Sharing Technology Perspective Capability Roadmap
(TPCR) and road map with Indian industry: Publication
of TPCR with its content made specific with respect to
the nature of systems will be required during the next 15
years. Schemes amenable for “Make” procedure will be
shared with the industry. The details of other schemes to be
included in 5 years Services Capital Acquisition Plan (SCAP)
will be shared with the industry.
In addition to laying down the Defence Production Policy,
the MoD should also promulgate a 10-year road map
for the Indian defence industry, with measurable targets
both in terms of revenue as percentage of defence capital
expenditure as well as in terms of indigenous content value.
Strategic Partnership Model (SPM): There is need
to nominate private defence companies as “strategic
partners”, to manage complex projects at par with defence
public sector undertakings (DPSUs) and ordnance factories
(OFs). SPM needs to be created on a long-term basis for
creating capacity in the private sector, over and above the
capacity and infrastructure that exists in public sector units
(PSUs). A Task Force has been constituted to lay down the
criteria in detail for selection of strategic partners in the
following six segments:
• Aircraft — fighter, transport and helicopters and their
major systems
• Warships of stated displacements and submarines and
their major systems
• Armored fighting vehicles and their major systems/
weapons
• Complex weapons, which rely on guidance systems, to
achieve precision hits, which may include anti-ship, air
defence, air-to-air, air-to-surface, anti-submarine, land
attack
• Command, Control, Communication and Computers,
Intelligence, Surveillance, Target acquisition and
Reconnaissance (C4ISTR)
• Critical material (titanium alloys, aluminum alloys, carbon
composites, nickel/cobalt alloys etc.)
The task force will interact with representatives from the
industry, armed forces, MoD, banking sector, credit rating
agency, specialized consultancy etc., and will submit

9. 9Eye on Defence |
detailed criteria at the earliest for incorporation into the new
defence procurement policy being planned by the Ministry.
The criteria to qualify as strategic partners are likely to be
critical for the future of major private players venturing into
defence manufacturing.
Identifying and selecting private sector firms as “strategic
partners,” to play central roles in developing “complex and
strategic systems” within the country is an important facet.
However, it will be interesting to see how this committee
adds value, as the Kelkar Committee had already proposed
in 2005-06 to empower large private sector companies as
“Raksha Udyog Ratnas” (RURs), or “industry champions,”
and the same was also incorporated in DPP 2008 at Para
22, though later shelved apparently due to resistance from
DPSU and OFs trade unions. We already have this report,
which in detail gives out the rules for nominating strategic
partners. Moreover, surprisingly even before the committee
meeting, the bogey of emerging conglomerate monopolies
of the private sector strategic partners are being talked are
indicative that the new Committee recommendations may
meet the same fate as Kelkar Committee recommendation
on RUR, resultantly continuance of public sector monopoly
and import.
Scope of “Make” category: It also articulates a clear
strategy to promote indigenous defence industry and
proposes that “Make in India” (should) not become
“assemble in India” with no IPR or design controls and
thereby, perpetuating our dependence on the foreign
supplier. The scope under the “Make” category needs to
be broad based and progressive increase in indigenous
contents with the following sub-categories:
• Make (large projects) with DPSU/private industry as the
lead developer with support from the DRDO
• Make (large projects) with DRDO as the lead developer
with support from the industry as co-producer
• Make (components and sub-systems or spares) by the
industry
• Make (components and sub-systems) by the DPSU/OFB
• Make (components, sub-systems or spares) by the service
workshops/repair depot
Indigenous content (IC): There is a need to create adequate
mechanism in defence production so that such provisions of
IC as outlined in DPP can be effectively assessed, monitored
as well as enforced. Minimum IC threshold for “Buy (Indian)”
and “Buy & Make (Indian)” categories should be revised to
40% and 60%, respectively. For “Make” category, minimum
IC for prototype stage should also be revised to 40%. The
Categorisation Committee, will be empowered to give
specific recommendations for reduced or increased IC
threshold for the total contract value.
ToT: The provisions for ToT to strategic partners in the
specific segments as mentioned at para 4.15.05 need
to be made in DPP, after promulgation of relevant policy
guidelines.
Eligibility criteria for selection of PA (from among the
private Indian industry) to receive ToT in case of “Buy &
Make” category schemes and Indian entity to receive ToT
for maintenance in case of “Buy(Global)” category schemes
need to be devised and promulgated. Existing technical
arrangements, if any, of the foreign OEMs with the Indian
industry be taken cognizance of, while selecting an Indian
entity to receive ToT for maintenance in “Buy (Global)”
category schemes. Provisions for keeping the option of
negotiating ToT at a date after signing of main contract may
be reviewed. In case such provisions have not been made
use of, since their incorporation in DPP, these may even be
removed.
Incentive to private Industry including MSMEs: The
Defence Production Policy may be reviewed to facilitate and

10. 10 | Eye on Defence
incentivize private industry including MSMEs to move toward
“Make in India”. Likewise, modifications will be required in
other policies such as Skill Development and Export Policy.
Following initiatives are recommended:
• MoD is likely to have regular and structured interactions
with the industry.
• The Indian private industries have highlighted various
factors that impact their competitiveness as compared
to DPSUs, foreign OEMs and other sectors. There is,
therefore, a need to review such related policies to provide
a level playing field and encourage their participation.
• Companies, which have industrial license for a product,
must be issued RFP for the same.
• Government facilities for R&D, Qualification Testing and
Proof Firing Ranges should be shared with the private
industry and MSMEs.
• A single window system for clearance of project proposals
in the defence sector to meet “Buy (Indian)” and “Buy and
Make (Indian)” regulatory and compliance requirements
for commencement of business operations should be
created.
• A part of the proposed Technology Development Fund
(TDF) may be reserved for funding development projects
and limited production from the MSME sector. Whenever,
MSME is granted TDF, 30% advance is extended. Based
on the success of such funding, the portfolio may be
increased in subsequent years. The Defence industry,
particularly for the MSME, should be brought under
priority sector lending norms.
• An independent body should be created to ensure
expeditious single window clearance for defence exports.
• Deemed export for offset contracts in “Buy (Global)” cases
benefits can be considered with preference for direct
purchases from the Indian Industry.
• A defence manufacturing sector skill council is set up with
the support of the government and industry. Defence
internship programs should be launched.
• MoD should suggest to the Ministry of MSME setting a few
tool rooms around defence clusters exclusively aligned to
the needs of the defence sector.
• Skill development should be clearly allowed for defence
offsets for all current and future offset contracts.
• The Committee fully supports the proposal to grant ERV
protection to Indian vendors.
• Trial infrastructure should be made available to the
industry for any equipment developed by them on their
own initiative, based on capability requirements projected
through LTIPP or TPCR on payment basis.
• A suitable process should be instituted to maintain an up-
to-date “Competency Map” of the Indian industry.
Shipyards: The committee recommends that the four
shipyards within the MoD fold be merged into one corporate
entity, retaining yard facilities in their current geographical
locations but working under one single management.
Removing bottlenecks and simplifying procurement
Services qualitative requirements (SQRs): Minor
deviations, typographical errors or minor omissions that do
not materially alter the character of RFP should be approved
by the DPB.
Categories for capital acquisitions: Attributes of
categories for capital acquisitions should be defined and
these should be incorporated in the DPP.
Acceptance of necessity (AoN):

11. 11Eye on Defence |
• Period of validity of AoN for “Buy (Indian),” “Buy & Make”
and “Buy (Global)” categories should be reduced to six
months from the existing one year.
• The authorities, which are empowered to approve issue
of RFP may also be delegated the authority to accord
extension of validity period of AoN for a further eight
weeks, provided that conditions of original decision and
categorization will not be changed.
• A registry of the Indian defence industry needs to be
published annually by the DDP.
Technical evaluation:
• In a single vendor situation, post technical evaluation by
TEC, retraction of RFP may be resorted to as an exception
rather than a rule.
• Existing authorities for acceptance of TEC report may be
reviewed. It should be carried out entirely at SHQs
Field evaluation trials and staff evaluation:
• Scope of field trials should be optimized to cover all
“essential” operational parameters.
• Emphasis on environmental tests, maintainability
trials, EMI/EMC trials etc., needs to be weighed against
certification.
• Trial methodology given in the RFP should be
comprehensive and unambiguous.
• In case of “multiple vendor single equipment” situation in
“Buy & Make (Indian)” cases only one joint trial should be
carried out.
• Approval of staff evaluation report may be done entirely
in service headquarters.
Technical oversight:
• Defence Secretary or DPB may be brought under the
purview of TOC.
• The charter of TOC should be enhanced to review and
bring out the status of complaints, if any.
Contract negotiations:
• CNC may be constituted on acceptance of the Staff
Evaluation Report, with the caveat that opening of
commercial bids and negotiations with the vendor would
not be done till acceptance of TOC Report.
• In a multi-vendor situation, at CNC stage, benchmarking
and price negotiation with the L1 vendor should not be
required.
• Services of experts/consultants could be utilized for
benchmarking.
Bid evaluation criteria:
• “L1” method of bid evaluation, as is prevalent now, may
be continued with.
• “L1-T1”concept should be taken up, on experimental
basis, for some specific cases in which the number of
parameters to be weighted are manageable (say five or
less) and their effect clearly quantifiable.
Single vendor situations:
• The DPP provisions regarding “ab-initio” single vendor
situations should, in addition to DPSUs, also cover
equipment/systems produced by Indian private industry
under “Make,” “Buy and Make (Indian)” or “Buy and Make”
categories and those being produced under ToT from
DRDO.
• A provision to consider a single vendor situation at bid
submission stage needs to be made where there may
not be scope for review of SQRs or other vendors may
have abstained from submitting their bids due to own
inabilities.
• Single vendor situation at technical evaluation stage in
all categories of acquisition should be included under the
scope of para 70 of DPP2013. “Single vendor, multiple
bids” and “multiple vendors, single product” are likely to
emerge in “Buy & Make (Indian)”or “Buy & Make” category
cases be also included.
Offset guidelines: It has recommended to fine-tune the
present policy to make it more easily implementable and
suggested measures for improvements in the future policy
and addressing certain procedural concerns. There is need
to leverage offsets into indigenization strategy, once Indian
defence vendors start functioning more actively, “directed
offsets” should be used to obtain critical technologies from
foreign vendors.
The recommendations on existing offset contracts and those
in pipeline (Under DPP 2013) are given in para 4.18.07 and
recommendations on the proposed offset policy are given in
para 4.18.10. Currently, the defence offset procurement is
projected to be around INR1,800 billion (US$30 billion) and
Indian defence imports could be INR560-600 billion (US$8-
10 billion) in the next 5 to 10 years.
Innovative funding mechanism: A suggestion was made

12. 12 | Eye on Defence
that could indirectly increase FDI flow through a SEBI-
registered, privately managed venture capital (VC) fund.
Foreign OEMs with offsets obligations, who have contracts
with MoD, could subscribe to such a fund. Thereafter,
the fund, in consultations with foreign OEMs, invests in
to production units, which are expected to be mostly
MSMEs. That investment should lead to actual output
of defence products. The formula for meeting defence
offsets obligations under this dispensation should be 50%
for VC investment in production units and 50% on actual
output of defence products. The administrative and legal
aspects of such provisions may be examined by the MoD, in
consultation with other concerned ministries.
Guidelines for putting on hold, suspension and
debarment of entities: The premise that misdeeds of
an entity or its employees should not be visited on the
equipment/system or platform is concurred. Amendments
suggested are:
• Other contracts involving such entity shall continue till a
decision to the contrary is taken by the government on a
case to case basis.
• In case there are only two bidders, one being suspended/
debarred entity, the procurement will be progressed
according to provisions of DPP without this being treated
as a single vendor at TEC stage.
Agents/marketing intermediaries: There should be
uniformity in the text of the relevant clauses pertaining
to agents/marketing Intermediaries throughout the DPP
and thus the text of all these sections are made uniform,
harmonious and not prone to differing interpretations.
Integrity Pact (IP): Industry has drawn attention to the
unworkable sweeping ambit of Clause (ix) of Para 10 of the
IP Committee agrees that such a clause is unworkable and
recommends that this clause be discontinued.
Standard Contract Document: The Committee has taken
note of the suggestions of stakeholders for modifications to
the standard contract document for removal of uncertainty.
It is recommended that these issues may be examined
further by MoD.
Payment Terms for Indian vendors under capital
acquisition, Category ‘Buy (Global)’: All expenses
connected with the establishment of Letter of Credit (LoC)
in India should be borne by the buyer and the seller in equal
proportion. The submissions of the industry regarding
royalty/fee on technical services and income tax incidence
on foreign supplier in G-2-G contracts to be examined by
MoD to remove existing uncertainty in tax regime.
Recently, the MoD has amended its procurement rules
to allow exchange rate variation (ERV) for all rupee
contracts that have an import content for Indian companies
participating in the “Buy Indian” and “Buy and Make Indian”
route.
Procedure for “Make” category: The following features be
incorporated in the draft “Make” procedure prepared by
DDP:
• Eligibility criteria, for participation at EoI stage, may be
reviewed. Its linkage to D&E cost, rather than total cost
of scheme at AoN stage, may be considered. Minimum
net worth equivalent to 40% of estimated D&E cost and
credit rating equivalent to CRISIL/ICRA — “B++” should
be considered adequate for most of the schemes. A
provision to consider higher net worth and/or credit rating
may be provided based on outcome of feasibility study
or assessment of Integrated Project Management Team
(IPMT) at the time of seeking AoN.
• The requirement of minimum 40% indigenous content, on
cost basis, as defined in Appendix-F of Chapter I of DPP
2013, may be stipulated. Reduced or increased threshold
could be considered by SCAPCHC/DPB/DAC for each
scheme.
• List of “Make” projects as drawn from LTIPP, AoN
for which is to be taken up during the next 2-3 years
(envisaged fructification of scheme during next 5-8 years)
should be shared with the industry. There should be a
separate three-year roll on plan for “Make” schemes. This
should be reviewed each year and updated.
• Process flow charts for category of schemes in Part B and
Part C can also be included in the procedure, as has been
done in the case of schemes in Part A (i.e. Appendix-J) to
bring in improved clarity.
• The industry participating in “Make” schemes of MoD
may be given tax incentives by way of categorizing
their contribution (i.e. 20% of the development cost of
the scheme) as being qualified for treatment as R&D
expenditure.
• Furthermore, 300% weighted tax deduction of such
development cost in defence schemes should be
considered against 200% given by Department of Science
& Technology.

13. 13Eye on Defence |
Procedure for Defence shipbuilding:
• The procedure for regular capacity assessment of Indian
shipyards by IHQ MoD (N) should be streamlined and
promulgated.
• Timelines for shipbuilding cases should also be drawn up
and included in Chapter III of DPP.
• Model contract documents for shipbuilding, both for
Section ‘A’ as well as Section ‘B’ cases may be drawn up
and promulgated as guideline document for clarity as well
as consistency. The issue of “Builders Risk Insurance” of
platforms under construction in private shipyards should
also be considered for inclusion in the ship-building
contracts.
• “Strategic partners” should be involved fully during
the evaluation/selection of the design and subsequent
negotiations for design consultancy or ToT.
• Suitable provisions need to be made in the contract to
cater for cost escalations attributable to items sourced
from OFB.
Way forward
The expert committee’s recommendations are in the open
domain for feedback from the public. The committee
has tried to iron out some lacunae in the current DPP as
well as included some of the industries’ demands. These
recommendations will be further deliberated upon by
almost every concerned department of the MoD and based
on consensus, will be added to the new DPP, which is likely
to take time. It is encouraging to note that the MoD has
already begun work on proceeding with the ‘Strategic
Partner’ model in addition to a few more incremental
changes.
It is expected that the ongoing initiative of the MoD in
defence procurement and acquisition policy is likely to
bring more synergy among the various departments of the
Ministry. This is expected to make the entire system more
efficient and thereby, resolve several existing issues and
make impact on the defence manufacturing sector. We all
look forward to the change; and hope that this time some
progress is made on the ground.
As on date most of the Indian private industries business
is confined to component or sub-system supplies though
lately, a few of them are awarded low-to-medium technology
projects such as rocket launchers, military transport aircraft,
warships construction, TCS, BMS, FICV etc., but the fact
is they have very limited defence industrial experience.
There is a need to create a capacity to absorb technology
in the private sector due to their agility, innovation and
modern management practices. One will, therefore, have to
create an avenue for selection and nurturing of a strategic
partner on a long-term basis. Our defence industries need to
become part of global defence industry, focusing on quality,
competitiveness and innovation, failing which it will only be
a peripheral player.

14. 14 | Eye on Defence
Assessment on key recommendations based
on the report
Procurement Stages Impact on OEMs
Services Qualitative Requirements (SQRs)
— deviations/error/ omissions
• More flexibility and Better clarity on expectations of user
• Opens the door for user to accept and implement feedback from the
competitors and reduces the chances of ‘Single Vendor’ situations being
developed.
Acceptance of Necessity (AoN)
– time period, categorization process
• With defined timelines, better planning for OEMs leading to faster
acquisitions
• Large strategic programs have a clear window to access the G2G route.
Solicitation of Offers (Request for
Information) — Indian domestic market
assessment
• More projects will be primed by Indian companies
• The OEM will have to move towards tying up with the right domestic partners
• The OEM will have to ensure their capabilities and product lines are
adequately known to the domestic industry so as to have partnership options
Solicitation of offers (indigenous content)
— norms regarding indigenous content
• Greater chance for Indian SME’s to participate in domestic programs
• Potentially more investments in developing domestic supply chains
• OEMs compelled to look at manufacturing sub-systems in India through ToT.
Technical evaluation — single vendor
situation, bid timelines
• Save time and implicit costs on retendering
• May display the functionalities of their equipment that makes it unique
Technical oversight — addressing
complaints
• Formal process driven redressal mechanism
• Quicker resolution, as no need to approach the highest governing body
• Better control over the process
Commercial Negotiations — rules regarding
L1
• The OEMs may present equipment as is used in their home country without
reducing functionality
• Upfront declaration of requirements with the force thus saving surprises
later during project execution
• Efficient pricing and better discovery

15. 15Eye on Defence |
Request for Information (July-September 2015)
Date of Issue RFI Details Response Date Issued By Remarks
10 September 2015 Aluminised Fire Proximity Suit;
Quantity: 1000+
5 October 2015 Directorate of NBCD For IN
4 September 2015 Light Weight Man Portable High
Frequency sets
3 October 2015 DTE Of Plans For IAF
1 September 2015 Mine Counter Measure Vessels
(MCMV)
29 September 2015 Goa Shipyard Limited
(GSL)
Issued By GSL
28 August 2015 Development of Handheld CAM
Simulator
17 September 2015 DRDO Issued By
DRDO
25 August 2015 VHF Radio Sets for Pechora Fleet 5 October 2015 DTE of plans For IAF
18 August 2015 Air Defence Gun (Successor) with
Ammunition
13 September 2015 DG of Army Air
Defence
For IA
12 August 2015 Mini UAV 9 September 2015 DG of Infantry -5 For IA
10 August 2015 Night Sight for 84mm RL (TI) 10 September 2015 Infantry Directorate/
INF-8
For IA

16. 16 | Eye on Defence
Request for Proposal (July-September 2015)
Date of Issue RFI Details Response Date Issued By Remarks
11 September 2015 Bullet Proof Jacket; Qty:
3475 Nos.
16 October 2015 Directorate General of Naval
Armament
For IN
9 September 2015 Bullet Proof Jacket (Cover
With Harness Shoulder
Pad); Qty: 2849 Nos.
15 October 2015 Inspector General, BSF For BSF
7 September 2015 X-Band PXI based Portable
Radar Target Echo
Simulator
13 October 2015 Research Centre Imarat Issued By
DRDO
4 September 2015 Tactical Combat Vest; Qty:
550 Nos.
28 September 2015 GSO 1 AAD For IA
1 September 2015 Thermal Imager 6 October 2015 Laser Science & Technology
Centre
Issued By
DRDO
31 August 2015 Turnkey Project for
Real Time Surveillance
of Specific Locations
Along the West Coast of
Andaman and Nicobar
Islands
28 September 2015 Commander in Chief, Andaman
and Nicobar Island
For IA
31 August 2015 Fin Stabilized Armor
Piercing Discarding Sabot
(FSAPDS)
1 October 2015 Armament Research &
Development Establishment
Issued By
DRDO
28 August 2015 Detonator Percussion N5
MK-II
15 October 2015 Directorate General of Naval
Armament
For IN
25 August 2015 Coalescer Cartridge and
Septemberrator Cartridge
15 September 2015 7 Wing, Air Force,Air Force
Station
For IAF
24 August 2015 Ballistic Protection
Goggles; Qty: 30 Nos.
5 September 2015 Station Commander Airmen
Training School
For IAF
18 August 2015 Firing Attachment Blank
Ammunition for Rifle
5.56mm INSAS
3 September 2015 Rifle Factory Ishapore Issued By OFB
17 August 2015 Small Arms Components 7 September 2015 FTR HQ BSF Jalandhar For BSF
17 August 2015 Boat for Sagar Parikrama 14 September 2015 --- For IN
14 August 2015 Light Weight Bullet Proof
Jackets; Qty: 3475 Nos.
12 October 2015 Directorate General of Naval
Armament
For IN
14 August 2015 I STAT ABG cartridges 15 September 2015 Defence Institute of Physiology
& Allied Sciences
Issued By
DRDO
14 August 2015 Small Rotorcraft 25 August 2015 Defence Laboratory Issued By
DRDO

17. 17Eye on Defence |
13 August 2015 Round 20mm SAP HEI 6 November 2015 DDG PPO For IA
12 August 2015 NBC Filter FPT-200M 5528
TY and 5531 PC
16 September 2015 Ordnance Factory Medak. Issued By OFB
10 August 2015 GPS Receiver; Qty: 06 Nos. 31 August2015 Senior Logistics Officer -
Jamnagar
For IAF
7 August 2015 BAZ Operator Simulator 3 September 2015 AF Station, Makarpura,
Vadodara
For IAF
4 August 2015 CFD Simulator (Academic
Research Version 16.0)
26 August 2015 Indian Naval Academy Ezhimala For IN
4 August 2015 UWACS MICRO System And
Accessories; Qty: 2 Sets
19 August 2015 Naval Physical Oceanographic
Laboratory
Issued By
DRDO
3 August 2015 Binoculars Terrestrial
Telescope; Qty: 08
26 August 2015 Air Force Station Tambaram For IAF
1 August 2015 Through Wall Radars; Qty:
40 (20+20)
27 August 2015 Chairman TPC HQ Northern
Comd (EME)
For IA
1 Aug 2015 Night Sight for 5.56 mm
Galil Assault Rifle; Qty: 50
Nos.
14 Sep 2015 GOC-in-C, HQ Northern
Command
For IA
30 July 2015 Diving Set, Qty 19 Nos. 20 Aug 2015 Coast Guard National Stadium
Complex
For ICG
27 July 2015 Battle Field Surveillance
Radar (BFSR)
-- Commandant (Ord) HQ DG BSF,
Prov Dte (Ord Sec)
For BSF
24 July 2015 Data Link Signal Simulator 21 Aug 2015 Research Centre Imarat Issued By
DRDO
21July 2015 Multipurpose Binocular;
Qty: 200
31 Aug 2015 Army Commander Special
Financial Powers
For IA
21 July 2015 Night Vision Device
(Thermal)
-- HQ DG, BSF, Prov Dte For BSF
21 July 2015 Night Vision Weapon Sight
(Thermal)
-- HQ DG BSF, Prov Dte For BSF
17 July 2015 Tactical Vest; Qty: 15,000
+ 1,115 Nos.
14 Aug 2015 GOC-in-C, Northern Command For IA
17 July 2015 Binocular -- HQ DG BSF, Prov Dte For BSF
17 July 2015 Life Jackets and Life Buoys 12 Aug 2015 DG BSF For BSF
15 July 15 Supply of S Band Air
Surveillance 3D Radar at
INS Baaz, Port Blair
14 Aug 2015 Material organization For IN

18. 18 | Eye on Defence
10 July 2015 Micro Unmanned Aerial
Vehicle; Qty: 11 Nos.
19 Aug 2015 DG BSF For BSF
9 July 2015 Life Rafts 20 Men Capacity
on Two Bid System
17 Aug 2015 Controlerate of procurement
material organization
For IN
8 July 2015 Coalescar and Separator
Cartridge Type M For
Aircraft Refuellers
16 July 2015 7 Wing, Air Force - Air Force
Station
For IAF
7 July 2015 TGET Based Fuze 6 Aug 2015 ARDE Issued By
DRDO
6 July 2015 Radar Simulator Scanner
Test Set-Up
31 July 2015 Research Centre Imarat Issued By
DRDO
4 July 2015 4 KL Aircraft Refueller
Fully Built; Qty: 20
13 Aug 2015 ACAS (Procurement) For IAF

19. 19Eye on Defence |
List of Industrial Licenses (ILs) filed for
(July–August 2015)
Application no. and date Name of the applicant Item of manufacture
81
31/08/2015
M/s Vem Technologies Pvt. Ltd. Airplanes
80
31/08/2015
M/s IDL Explosives Limited Bulk non explosives emulsion matrix
79
31/08/2015
M/s IDL Explosives Limited Bulk non explosives emulsion matrix
78
31/08/2015
M/s IDL Explosives Ltd. Detonators
77
27/08/2015
M/s Micronel Global Engineers Pvt. Ltd. General engineering works, aero systems parts,
items of aircraft, helicopter, UAV and services
76
19/08/2015
M/s Gulf Oil Corporation Limited Ammunition and allied items for defence use
including safing and arming devices and fuses
75
19/08/2015
M/s Gulf Oil Corporation Limited Penta Erythritol Nitrate(PETN)
74
19/08/2015
M/s Vem Technologies Pvt. Ltd. Helicopters
73
19/08/2015
M/s Marine Electricals (I) Pvt. Ltd. Electronic equipment used for ECM,ECCM,
surveillance CMS, command and control systems,
integrated bridges etc.
72
07/08/2015
M/s Hyderabad Precision MFGCO. Pvt.
Ltd.
Parts and accessories of arms and ammunition
and allied items of defence equipment; parts and
accessories
71
04/08/2015
M/s Aviohelitronics InfosystemsPvt. Ltd. Development and manufacture of data link
70
30/07/2015
M/s ALDST Limited Tanks and other armored fighting vehicles
69
30/07/2015
M/s AADST Limited Defence aircraft helicopters, unmanned aerial
vehicles, space, craft and parts thereof
68
30/07/2015
M/s Adani Defence Systems &
Technologies Ltd.
Warships of all kinds
67
30/07/2015
M/s ALDST Limited Arms and ammunition and allied items of defence
equipment, part and accessories thereof
66
30/07/2015
M/s Vem Technologies Pvt. Ltd. Artillery guns
65
27/07/2015
M/s Continental Defence Solutions Pvt.
Ltd.
Manufacture of weapon and ammunition, armored
vehicle upgrade
64
21/07/2015
WW Defsys Pvt. Ltd. Armored and image processing equipment

20. 20 | Eye on Defence
63
02/07/2015
M/S NN Detonators Pvt. Ltd. Slurry, emulsion explosive, detonators, detonating
fuse, PETN, pentalite booster
62
02/07/2015
M/S BF Premier Energy Systems Pvt. Ltd. Ammunition of 30mm and above calibre including
BMCS, for manufacturing and integration of all
type of missiles and rockets, to manufacture mines,
bombs and torpedoes of all type
61
02/07/2015
M/S Ananth Technologies Ltd. Night vision sights

21. 21Eye on Defence |
New projects/investments/contracts
Name of entity Project details Value*
Defence Acquisition
Council (DAC)
• ►DAC has approved the purchase of eight indigenous Chetak helicopters, nine
tugs, four large survey vessels, electronic warfare systems and upgrade of
weapon and sensor suit for the Indian Navy.
• It has also cleared the purchase of seven squadrons of Akash short range
surface-to-air missiles for the Indian Air Force (IAF).
• Furthermore, it has cleared the purchase of 428 new anti-aircraft gun,
electronic warfare system, 14,000 units of multi-spectrum camouflage net
and 120 Anti-Tank Trawls for the Indian Army.
INR450 billion
► IAF • IAF plans to acquire three Boeing C-17 transport aircraft. The proposal is yet
to be cleared by the DAC.
INR81 billion
IAF and Kazan
Helicopters (Russia)
• ► The IAF will purchase 48 Mi-17 military helicopters to be deployed to patrol
Indian borders with difficult-terrain areas.
INR70 billion
DAC and Boeing • ► DAC cleared the proposal to purchase four Boeing P81 aircraft for the Indian
Navy.
• The P81 aircraft is based on the Boeing 737 airframe and is equipped with
foreign and indigenous sensors for maritime reconnaissance, anti-submarine
operations and electronic intelligence missions.
INR43.8 billion
IAF and Israel
Aerospace Industries
(IAI)
• ► IAF will purchase 10 missile drones from IAI to improve cross border military
strike capabilities.
INR24 billion
DAC and Larsen and
Toubro (L&T)
• ► L&T won a contract from DAC to manufacture 102 short span bridges to be
used for movement of armed forces and disaster management.
INR5.3 billion
Aequs Aerospace • ► Aequs Aerospace is setting up an aerospace machining facility at Belgavi,
Karnataka, to supply components to Airbus for manufacturing military and
commercial aircraft.
INR3 billon
Indian Navy and
Raytheon
• ► Raytheon has won a contract to deliver MK 54 Lightweight Torpedo (LWT)
kits to the Indian Navy.
• The contract includes manufacture, delivery and MRO services of LWT kits.
• The US Department of Defence (DoD) has approved the contract and all the
deliveries are expected to be completed by end of September 2017.
INR 1.8 billion

22. 22 | Eye on Defence
IAF and Textron • ► IAF plans to purchase Textron’s AirLand Scorpion light-attack and intelligence,
surveillance, and reconnaissance (ISR) aircraft that can also be used as
Intermediate Jet Trainers (IJT).
• Due to delays in delivery by Hindustan Aeronautics Ltd. (HAL), the IAF is in
dire need of IJTs.
• The deal is expected to be discussed during the visit of PM Narendra Modi to
the US in September 2015.
NA
Defence Research
and Development
Organisation (DRDO)
and L&T
• ►L&T will manufacture a digital version of Lakshya, pilotless target system, for
the Indian Army. It will get the required technology from DRDO.
• L&T will be the primary supplier of upgraded digital version of Lakshya and
it can also export the system to foreign countries with prior government
approval.
NA
Indian Army and LH
Aviation
• ► LH Aviation, a French light aircraft manufacturer, will produce 100 low-cost
drones for the Indian Army at its manufacturing facility in Bengaluru, which is
jointly owned by LH Aviation and Offset Indian Solutions (OIS) group.
NA
*The values of the deals have been converted to Indian Rupees using Oanda currency conversion tool. 1US$ = INR60.
Sources:
1. “Government clears defence proposals worth Rs 30,000 crore, to buy four P81 maritime patrol aircraft,” The Economic Times, 15 July 2015, via
Factiva, © 2015 Bennett, Coleman & Co. Ltd.
2. “IAF clears proposal to buy three C 17; Boeing says only one plane left to sell,” The Economic Times, 17 August 2015, via Q-tech Synergy
Newsletter.
3. “India Approves $1.1 Billion Helicopter Contract for Additional Russian Mi-17s,” The Diplomat, 4 September 2015, via Factiva.
4. Ankit Panda, ”India Will Purchase 4 More US Maritime Surveillance Aircraft,” The Diplomat, 16 July 2015, via Factiva.
5. “Government approves $400-million plan to procure armed Heron TP drones from Israel,” The Economic Times, 11 September 2015, via Q-tech
Synergy Newsletter.
6. Manu Pubby, “L&T set to bag Rs 530 crore project for army bridges,” The Economic Times, 13 August 2015, via Factiva, © 2015 The Times of
India Group.
7. “Aequs Aerospace opens up the largest aerospace machining facility in India,”Aequs Company Website, via Q-tech synergy Newsletter.
8. “Raytheon To Provide MK 54 Lightweight Torpedo Kits To Indian Navy,” SyndiGate Media Inc., 2 September 2015, via Factiva.
9. “IAF keen on US Scorpion aircraft offer,” The Financial Express, 4 September 2015, via Q-tech Synergy Newsletter.
10. “L&T to make Lakshya for India’s military, gets technology from DRDO,” Business Standard, 7 August 2015, via Q-tech Synergy Newsletter.
11. “LH Aviation to produce 100 low-cost drones for Indian arm,” French Collection, 3 July 2015, via Factiva, © 2015 All Data Processing Ltd.

23. 23Eye on Defence |
JVs and alliances
Name of the entities Nature of transaction Value
Pipavav Defence and
Offshore Engineering
Company and JSC Ship
Repairing Centre
• ► Pipavav Defence and Russia-based JSC Ship Repairing Centre entered a
51:49 JV for medium refits and life certification of 877 EKM submarines
in India.
• JSC will provide complete technical assistance and support, including for
the enhancement of infrastructure at the PDOC facilities and training of
engineers to the JV.
INR110 billion
Reliance Defence and
Aerospace and Komov
• ►Reliance Defence and Russia-based Komov signed a 51:49 JV for
manufacturing 200 Komov 226T choppers in India.
• Komov will transfer the required technology to Reliance while more than
50% of the helicopter parts will be manufactured indigenously.
INR60 billion
Astra Microwave Products
Ltd. and Rafael Advanced
Defence Systems Ltd.
• ► Astral Microwave formed a 51:49 JV with Israel-based Rafael Advanced
System to focus on building tactical radio communication systems,
electronic warfare systems and signal intelligence systems in India.
INR1.2 billion
DRDO and Bharat Dynamics
Limited (BDL)
• ► DRDO and BDL have signed an MoU for joint development of third
generation Man-Portable Anti-Tank Guided Missiles (MPATGM) for the
Indian Army.
NA
HAL and Bharat Electronics
Ltd. (BEL)
• ► HAL and BEL signed an agreement to share their competencies in
manufacturing advanced airborne communication systems (avionics) for
the armed forces.
NA
HAL and Turbomeca • ► HAL and France-based Turbomeca, has signed an MoU to establish a JV
to provide maintenance, repair and overhaul of the Shakti engine and for
the Turbomeca TM333 engine installed on HAL’s helicopters.
NA
Mahindra Defence Systems
and Airbus Helicopters
• ► Mahindra and Airbus helicopters have signed an in-principle agreement
to set up a JV to manufacture helicopters in India for the IAF.
NA
Mahindra Defence and Ultra
Electronics
• ► Mahindra Defence System and UK-based Ultra Electronics have signed
an MoU to manufacture and supply specialized underwater warfare
equipment for the Indian Navy and technologically advanced radios for
the Indian Army.
NA
Mahindra Defence and US
Telephonics Corp.
• ► US Telephonics has increased its stake to 49% from 26% in its JV
Mahindra Telephonics with Mahindra Defence.
• US Telephonics is the first company to increase the stake after the
Government raised the FDI limit and is expected to invest INR600 million
(US$10 million) in India in the next one year.
NA

24. 24
Reliance Unmanned Systems
and Augur Overseas
Operation (Singapore)
• ► Reliance Unmanned Systems has entered a 51: 49 JV with Augur
Overseas Operation for development, production, sales, modification and
life support for different sizes of aerostats and airships for the Indian as
well as the global market.
NA
Tata Advanced Systems Ltd.
(TASL) and Boeing
• ► Tata Advanced Systems Ltd. and Boeing signed a framework agreement
for collaborating in manufacturing defence equipment including
unmanned aerial vehicles, in India.
NA
Sources:
1. “Pipavav Defence inks pact with Russian firm,” The Hindu, 21 July 2015, via Q-tech Synergy Newsletter.
2. “Make in India: Russia ties up with Reliance Defence to manufacture Kamov 226T choppers,” The Economic Times, 28 August 2015, via Q-tech
Synergy Newsletter.
3. “Hyderabad’s Astra, Israel’s Rafael tie up for defence communication production,” Live Mint, 24 August 2015, via Q-tech Synergy Newsletter.
4. “BDL inks MoU with DRDO for missiles development,” United News of India, 28 August 2015, via Factiva.
5. “HAL, BEL to share expertise in avionics,” Indo-Asian News Service, 5 June 2015, via Factiva.
6. “HAL, Turbomeca sign MoU for joint venture in India,” Dion Global Solutions Ltd., 18 June 2015, via Factiva.
7. P.R. Sanjai, “Mahindra, Airbus Helicopters sign pact for chopper venture,” Live Mint, 3 July 2015, via Factiva, © 2015 HT Media Ltd.
8. “Mahindra, Ultra Electronics tie-up for defence play,” The Hindu, 6 July 2015, via Factiva
9. “US Telephonics Corporation to hike stake in Mahindra defence JV to 49 per cent,” The Economic Times, 4 September 2015, Q-tech Synergy
Newsletter.
10. “Anil Ambani group signs pact with Singapore defence firm,” Deccan Herald, 23 July 2015, via Q-tech Synergy Newsletter.
11. “Defence ‘Make in India’ on a roll: Boeing & Tata announce manufacturing partnership including drones,” The Economic Times, 15 July 2015, via
Factiva, © 2015 Bennett, Coleman & Co., Ltd.

25. 25
Country-level deals and initiatives
Country Nature of transaction Additional details
Australia ► The Indian Minister for External Affairs, Ms. Sushma Swaraj,
and the Defence Minister of Australia, Kevin Andrews, held a
meeting to discuss the negotiations and early implementation
of the bilateral nuclear deal between the two countries.
The two parties also discussed about
joint production of defence equipment
in India, as part of the Indian Prime
Minister’s “Make in India” initiative.
Australia ► India and Australia started their first bilateral naval exercise
“AUSINDEX-15” focused on anti-submarine warfare.
NA
Kazakhstan ► India and Kazakhstan signed an MoU to ensure defence
cooperation between the two countries including regular
visits, consultations, training of military personnel, technical
cooperation, joint exercises, special forces exchanges and
cooperation in UN peacekeeping operations.
NA
The UK ► IAF and the UK’s Royal Air Force completed a 10-day air and
ground exercise, Indradhanush, to enhance mutual operational
understanding and to facilitate exchange of ideas between the
two Air Forces.
NA
The US ► India and the US signed a ten-year defence framework
agreement for joint development and manufacture of defence
equipment and technology.
Additionally, both countries agreed to
discuss about the design, construction
and jet engines of aircraft carriers.
The US ► Officials from the US navy and the Indian Navy held a joint
working committee to consider cooperation for aircraft carrier
manufacturing during 12–14 August.
The two parties discussed
various aspects of aircraft carrier
manufacturing, including design,
integration, test, evaluation,
management and oversight of carrier
construction‎.
Sources:
1. “India Pushes for Early Implementation of Nuke Deal With Australia,” NDTV.com, 2 September 2015
2. Jugal R Purohit, “India and Oz to showcase naval might,” Mail Today, 12 September 2015, via Factiva, © Copyright 2015 Living Media India Ltd.
3. “Rafale Fighter Jet Deal Takes Big Step Forward,” NDTV.com, 1 September 2015
4. ”Government approves $400-million plan to procure armed Heron TP drones from Israel,” The Economic Times, 11 September 2015, via Factiva,
© 2015 Bennett & Coleman & Co. Ltd.
5. “India, Kazakhstan sign five key agreements,” The Hindu, 8 July 2015, via Factiva
6. Craig Hoyle,“Indian Su-30s start joint exercise with RAF Typhoons,” Flight International, 22 July 2015, via Factiva, © Copyright 2015 Reed
Business Information Limited
7. “India collaborates with USA for building aircraft carriers,” Dion Global Solutions, 11 August 2015, via Factiva
8. “U.S.-India Joint Working Group for Aircraft Carrier Technology Cooperation holds first meeting,” US Embassy, 15 August 2015, via Q-tech
Synergy Newsletter

26. 26 | Eye on Defence
Indian Army plans to roll out new combat vehicle contract to
Indian companies
The Indian Army is expected to float a contract to Indian
companies for a new combat vehicle project, worth INR1,000
billion. For design and manufacturing of the combat vehicle,
leading Indian players such as Tata Power, Tata Motors, Larsen
& Toubro, Mahindra, Rolta, Pipavav, Bharat Forge, OFB, Punj
Lloyd and Titagarh Wagons are approaching global majors for a
strategic partnership or a JV.
(“Indian firms reach out to foreign cos for combat vehicle tie-up,” The
Financial Express, 1 September 2015, via Factiva, © 2015 Indian Express
Online Media Pvt. Ltd.)
Private players plan to manufacture ammunition for Indian
Army
The MoD has approved a proposal to allow private manufacturers
to produce special ammunition worth around INR8 billion for
the army. Ordnance Factory Board’s (OFB) have failed to supply
the sufficient quantity of ammunition to the army, leading to a
shortfall of up to 73%. The MoD’s decision came as an attempt
to minimize the mismatch of supply-demand. Seven types of
ammunition have been identified for procurement from private
players including specialized ammunition for tanks and artillery
guns, GRAD BM-21 charges and electronic fuses.
(Source: “Defence Ministry to ask pvt players to produce specialist
ammunition,” The Indian Express, 3 September 2015, via Q-tech Synergy
Newsletter)
INS Vikramaditya plans to undergo maintenance and repair
INS Vikramaditya, India’s largest naval warship, will be refitted
in 2016 by Pipavav Defence for approximately INR2 billion. The
aircraft carrier will undergo maintenance and repair at Gujrat.
Russian state-owned agencies will provide technology support
and training to Pipavav for handling the complicated warship and
executing the maintenance work.
(Source: “In a first, 44,500-ton aircraft carrier to be refitted in India,” The
Economic Times, 13 August 2015, via Q-tech Synergy Newsletter)
Industry buzz

27. 27Eye on Defence |
HAL completes successful trials of LCH
HAL successfully carried out “hot and high” altitude trials of
the indigenous light combat helicopter (LCH) at Leh. In “hot
and high” conditions, a helicopter operates under 15–27˚C
temperatures at extreme altitudes of more than 15,000
feet. In these conditions, oxygen in the air is depleted not
just by the altitude, but also by the expansion of air due
to high temperatures. The seasonal tests are part of the
certification process and “cold” trials were completed in
February.
(Source: “HAL completes hot & high altitude trials of LCH at Leh,” SP’s
MAI, 4 September 2015, via Factiva, © 2015 SP Guide Publications Pvt.
Ltd.)
BARAK-8 slated to undergo trials in October
BARAK-8, the long range surface to air missile (LRSAM)
under development by DRDO and Israel Aerospace
Industries, will undergo testing in Israel in October 2015.
The testing in Israel will be followed by an Indian testing and
commencement of commercial production of the missile.
The BARAK-8 LRSAM is a missile interceptor and can also be
deployed against aircraft and helicopters.
(Source: “Surface-to-air missile to be tested in Israel,” The Hindu, 29
July 2015, via Factiva, © 2015 Kasturi & Sons Ltd.)
MoD sets up task force to select private companies for
defence projects
The MoD has set up a task force, led by former DRDO Chief
V.K. Aatre, to decide the parameters or selection criteria
to select Indian private companies for key defence projects
such as aircraft manufacturing, warship production,
command and control networks, armored fighting vehicle
complex missile system and critical material. Only one or
two private players will be selected for each type of project.
(Source: “Defence Ministry sets up task force to select Indian private
companies for mega projects,” The Economic Times, 9 September 2015,
via Q-tech Synergy Newsletter)
MoD eases export norms for private players
The MoD has eased the regulations for exporting defence
equipment. Under new regulations the no objection
certificate for defence export will be provided within two
to four weeks from the date of application. Moreover, the
“ultimate-end user certificate” will not be required for
exports, only “immediate-user” certificate will be required.
Furthermore, the MoD has removed restrictions on private
players for exporting 16 categories of ammunition including
warships, tanks, armored vehicles, ammunition, rifles and
small arms, bombs and torpedoes. The move is in line with
the “Make in India” campaign and is expected to boost
India’s military trades.
(Source: “Arms exports to get a boost as Ministry of Defence okays 16
broad categories of products,” The Economic Times, 18 August 2015,
via Q-tech Synergy Newsletter)
Large defence orders to boost local manufacturing
The Government of India (GoI) is expected to spend
INR7,800 billion (US$130 billion) on defence forces and
INR6,600 billion (US$110 billion) on homeland security
by 2022. The orders will provide significant opportunity
to the private Indian defence manufacturers with the GoI’s
increasing focus on indigenization.
(Source: “Govt. places Rs 2 lakh crore Defence order under Make in
India,” The Indian Express, 9 September 2015, via Q-tech Synergy
Newsletter)
Global A&D giants are likely to set up manufacturing
plant in Andhra Pradesh
Global companies such as Airbus, Essel Infra and Srei
Infra, have shown interest in setting up large defence and
aerospace parks in Andhra Pradesh, which could lead to
investments of INR200 billion in the state over the next
five years. The State Government has started earmarking
land in favor of nodal agency Andhra Pradesh Industrial
Infrastructure Corporation (APIIC) for allotment to French
aircraft manufacturer Airbus. It hopes to attract both
domestic and foreign companies to the southern parts of
the state given its proximity to Bengaluru.
(“Andhra Pradesh looks to attract Rs 20,000 crore in defence, aerospace
parks,” The Economic Times, 26 August 2015, via Factiva, © 2015 The
Times of India Group)

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28 | Eye on Defence

29. Why choose Team EY?
Unique Team Experience Offset Structuring Industrial Connects End to End Solutions
• Team member
was a part of the
team that wrote
the Indian Defence
Offset policy in
2006.
• Team member
founded the DOFA.
• Team member has
written a complete
book on Offsets with
the CII.
• Offset Structuring
worth US$ 3.7
Bn executed
successfully.
• Total experience of
66 man years in the
Armed Forces.
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14 man years.
• Team has members
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practice-India’s
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Unparalleled Support & Advantage for OEM’s & Indian Companies
29Eye on Defence |

30. 30 | Eye on Defence
Complete Suite of Service Offering -
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• Review the clauses of RFP
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highlight the clauses/terms
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the company along with
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clauses, if necessary, to
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India
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regime in India
• Back End Support in
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the modification of tax
and regulatory clauses in
the RFP. The aim of such
back end support would be
to assist the company in
executing a contract which
contains optimum tax and
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responsibilities for such
business activities
• Responding to queries
pertaining to any tax or
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may arise during the
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business model and
assistance in set up
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structuring
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perspective
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opportunities
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tax compliance
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an identified Indian Offset
Partner (IOP)
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Promotion Board (FIPB)
& Industrial License
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detection services
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Contracting Process
SupportateverystageImportanceServicesOffering
Pre bid stage Post contract
signing support
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and Advisory
Contract negotiation
stage

31. 31Eye on Defence |
Complete Suite of Service Offering -
Defence Offsets
• Offset process
• Help evolve an
understanding of the
offset process and
stakeholders
• Indian offset
partners(IOPs)
• Identification of IOPs
(M&A / JV / Licensed
Manufacture / Sourcing)
• Due diligence of IOPs
from a regulatory and
business standpoint
• Clarification from DIPP/
FIPB/MoD regarding
their regulatory status
• Special services
• Industrial Licensing for
IOPs
• Joint venture structuring
• Evolve understanding of
offset process between
the core team for optimal
planning
• Identification of eligible and
viable IOPs who can sustain
through the duration of the
offset program
• To ensure a suitable
Technical and commercial
offset plan prepared with
no loose ends (legally and
regulatory perspective)
for a smooth acquisition
process
• Support in getting the
technical offset proposal
approved in time so that
it does not obstruct main
contract signing
• Continued support for
offset execution to avoid
penalties and loss of faith
with the MoD
• Offset Proposal
• Identification of
methods of offset
discharge
• Structuring/vetting
of Technical and
commercial offset
proposals
• Phasing of the offset
program
• Indian offset
partners(IOPs)
• Structuring contractual
arrangements with IOPs
• Valuation of offset
attributable
• Continuous support
through on call advisory
• Support in preparation of
appropriate responses to
MoD queries
• Identification of stand by
IOPs in case of removal of
existing ones
• Support in getting the
offset proposal accepted
• Support in compiling
documentation required for
offset discharge
• Support in preparation
of quarterly reports
on fulfillment of offset
obligations
• Identification of stand by
IOPs in case of removal of
existing ones
Contracting Process
SupportateverystageImportanceServicesOffering
Pre bid stage
• Planning for submission
• Identifying the
right partners and
methodologies
• Getting the optimum
economic value for
offsets
• Documentation for offset
and execution support
• Getting the documents
right for submission
• Building an optimal
offset program
Post contract signing
support
Other Compliance and
Advisory
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stage

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