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Defence Wrap - Week of 10‐ 16 April, 2017.

Discussion in 'Defence Wrap' started by PARIKRAMA, Apr 17, 2017.


    PARIKRAMA Captain IDF NewBie

    Mar 24, 2016
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    Defence Wrap - Week of 10‐ 16 April, 2017.

    Political Developments

    • UK ready for Weapons technology transfer to India
    • India‐Australia to strengthen Defense & Security partnership ties
    • Indian delegation in U.S. for technology talks

    Industry Developments

    • Huge opportunity for BPJ’s and Protective Gears
    • IA seeks ~18,000 additional security personnel
    • Indian companies to receive Sukhoi‐30MKI technology

    Source - India Nivesh

    Political Developments:

    UK ready for Weapons technology transfer to India

    • British Defense Secretary, Mr. Michael Fallon is on a 4‐day visit to India to enhance Security & Defense ties.
    • As part of his India visit, Mr. Fallon has insisted on
      • (1) strengthening co‐operation to effectively deal with terrorism and extremism,
      • (2) boost Cyber Security co‐operation to protect youths from radicalism and extremism, and
      • (3) offered technology transfer (under the government‐togovernment framework) to produce/ co‐produce Military platforms and Weapon Systems and export them to other countries.
    • The Defense Secretary also conveyed that in addition to passing on their experience, he is keen to study the requirements of the Indian Armed Forces.
    • Sources indicate that the UK Defense Secretary is pushing for the sale of
      • (1) ‘Advanced Hawk’ Trainer Aircraft (jointly manufactured by UK’s BAE and HAL; unveiled in Feb‐2017), and
      • (2) Eurofighter Typhoon to the Indian Forces.
    Our View:
    • Currently, we do not see strong case for Indian Armed Forces procuring ‘Advanced Hawk’ Trainer Aircraft as IAF has already expressed its reservations that it is looking for Intermediate Jet Trainer and not an Advanced version.
    • Also reservations on the 2005 alleged bribery case on Rolls Royce (Advanced Hawk uses their engines) have led IAF remain very cautious in dealing with them.
    • Even IN does not intend to place any order for ‘Advanced Hawk’ Trainer Aircraft.
    • Typhoon story is also a non starter.
    • On a whole, even though initiative to produce/ co‐produce Military platforms and Weapon Systems and export them to other countries is in positive direction, unless legacy issues
      • (1) unethical practices by British Arms manufacturer’s, and
      • (2) closure of high profile Defense corruption cases emanating from London are resolved, we do not see material developments shaping‐up at the Indo‐UK Defense partnership.

    India‐Australia to strengthen Defense & Security partnership ties

    • On Apr‐10, Australian PM Mr. Malcolm Turnball arrived India on his maiden 4‐day visit.
    • He met his Indian counter‐part and had discussions on areas like, Defense, Security, Energy and Trade.
    • Both the countries in a Joint statement said that they remain committed to the breadth of their Defense ties including the ongoing annual staff talks for IA, IN and IAF.
    • Both countries will hold their First Joint Army exercise in 2018.
    • AUSINDEX (held for first time in Bay of Bengal in 2015) would be held at Western Australia in 2018.
    • In order to strengthen the Strategic Partnership, Defense secretaries/ Ministers and Foreign Affairs jointly will hold dialogue with their counterparts under the ‘2+2’ format.
    • Both sides, signed 2 MoU’s on Co‐operation in Combating International Terrorism and Transnational
    • Organized Crime.

    Indian delegation in U.S. for technology talks

    • 6‐member teams led by Vice‐Admiral from Tri‐Services Integrated Defence Staff (IDS) along with Service and Ministry members were on 3‐day visit to USA to discuss entire range of cooperation under the Defence Technology and Trade Initiative (DTTI).
    • 9 Working Groups have been set‐up with an aim to promote co‐development & co‐production of Military Technologies for use by both countries.
    • Last one to be set‐up is on Naval Systems (such as Sonars and Sonobuoys).
    • Earlier on Mar‐1, Navies of the 2 countries had signed Terms of Reference at their first meeting of new Naval Systems Joint Working Group in Washington DC.

    Our View:
    • We view these meeting to be of utmost importance and in positive direction.
    • India is still awaiting some clarity on the appointments for these meetings with Pentagon.
    • We expect it would take some more time for any fruitful outcome of the delegates visit.
    • Groups meet on Naval Systems is of utmost importance as India currently is in the process of augmenting its capabilities in Underwater Surveillance (includes Sonars and sonobuoys) and access of niche technologies from USA would be of great help.
    • Also, it would help both USA and India keep a close tab of China’s maritime movement in the Indian Ocean.

    Industry Developments:

    Huge opportunity for BPJ’s and Protective Gears

    • After long wait, in recent times, we have seen some action on the procurement of Bullet Proof Jackets (BPJs) and Protective Gears for IA.
    • As per Indian Army plan of 2009, IA needs 353,765 BPJ’s. Of this ~186,000 were to be procured in 11th Five‐year plan (2007‐12) and another ~167,000 in 12th Five‐year plan (2007‐12).
    • DAC accorded AoN in Oct‐2009 to procure 353,765 BPJs, including 186,138 of them to be procured in the 11th Plan.
    • 3 times the tenders had to be cancelled at the trials stage, as samples submitted by the vendors did not meet the quality criterions mentioned in the RFP documents.
    • RFP was first issued to 36 vendors on Mar 3, 2011, to be later retracted to Dec 8, 2011.
    • Again this process was started in Dec‐2012 and 39 vendors were invited to participate.
    • And lastly, in Oct‐2015, all the 6 vendors failed to clear the trials.
    • As one‐time exception, IA decided to procure 50,000 BPJs for Rs 1.4bn in Mar‐2016 from TATA Advanced Materials Ltd under revenue route.
    • In Apr‐2016, MoD issued fresh RFP of 186,138 BPJs under capital route (under Buy‐Indian category). Currently the procurement of these BPJ’s is at trial stages.
    • IA is awaiting its first delivery of the Ballistic Helmet’s in Aug‐2017 ordered to MKU Industries, a Kanpur based firm. IA had selected MKU to supply 158,279 of the futuristic protective gear in the form of Ballistic Helmet’s. This $26.4mn (~Rs 1.7bn) contract was awarded after a 2‐decade wait, under capital route.
    • Deliveries would be made in 3 years from the date of signing the contract (in Dec‐2016).
    • These new bulletproof Helmets would replace the standard indigenous 1974 Model / Israelimade OR‐201 Helmet. IA’s 1974 Model Helmet is made of Composite fiberglass material, which is not bullet resistant. IA's OR‐201 Helmet (used by Parachute Regiment) is made of GRP (Glass Reinforced Plastic). These lightweight helmets can stop a 9 mm round at close range.
    • The newly ordered Helmet’s can withstand the impact of a 9 mm round fired from 20 meters away (also stop some shell fragments). They give better protection and have radio sets (some of them and not all) attached for better communication amongst soldiers.
    • Considering Indian Army’s active strength of 1.2mn, we view the award of 158,279 Helmets and 186,138 BPJs is just the beginning. We expect more tendering in the pipeline, as the upgraded BPJ and Protective Gears are very much required for the safety.

    IA seeks ~18,000 additional security personnel

    • IA has asked MoD to approve raising 370 new platoons (~18,000 personnel) of the Defense Security Corps (DSC). Each platoon will be equipped with at least 2 Light Machine Guns, 4‐5 AK‐ 47 Assault Rifles, 2.5tn Light Vehicle and BPJ’s. The initial cost for raising 370 platoons will be ~Rs 13mn.
    • DSC with 31,000 personnel provides security and protection of designated Defence Installations like Ordinance Factories, DRDO establishments.
    • This comes after Lt. Gen. Philip Campose Committee submitted its recommendations in May‐ 2016.
    • Some of their key recommendations include:
      • Upgrade the Security Infra with tech‐based access control, Perimeter security‐cum intrusion detection systems.
      • Arm the troops & sentries guarding Defense Installations with better Weapons, BPJ’s, and Night‐vision Devices.
      • Create system of QRT commando platoons in all the military establishments
      • Create commando‐trained Territorial Army companies to cover gaps in extra vulnerable installations

    Our View:
    • This is a much required development waiting for long‐period as well equipped personnel are needed to safeguard the Defense Installations around the country.
    • DSC was set‐up in Feb‐1947 and has been raised as a Defense Department Constabulary.
    • Currently, the DSC team is not trained and well equipped to handle heavily‐armed terrorist attacks.
    • Even though initial cost is pegged at Rs 13mn, we expect the recurring costs like, manpower costs, equipment maintenance costs, to be incurred, going forward.

    Indian companies to receive Sukhoi‐30MKI technology
    • At the recently held Indo‐Russia Military‐Industrial Conference, MoD introduced 20 Indian companies to OEM’s of Sukhoi‐30MKI for exploring the transfer of technology possibility.
    • A total of 485 lines have been identified for this transfer of technology (ToT) to support the Su‐ 30 MKI fleet.
    • As part of this proposal Russian OEM’s can establish Joint Ventures (JVs) or any means of localization with Indian players to manufacture the spare parts.
    • This development comes after HAL signed an agreement with Russian OEMs (United Aircraft Corporation and United Engine Corporation) on Mar 17‐18, 2017 for long‐term supply of spares, render technical assistance for 5 years (and does not involve technology transfers).
    • As part of this agreement, HAL would procure spares as per price quoted on the catalogue form from the OEM’s of Su‐30MKI.
    • This would improve the after sales service by reducing the lead time in their procurement.
    • In another development it has been noticed that least 18 of the new Sukhoi‐30MKI Aircrafts had been fitted with already‐used and second‐hand engines.
    • AL 31FP engines fitted in these Aircrafts were in Cat‐2 (Category B) condition at the time of inspection/ delivery to IAF.
    • This fitment was done at HAL’s Nasik facility without MoD approval.
    • Also 1 Aircraft has been accepted with one new and one old engine by IAF and Directorate General of Aeronautical Quality Assurance (DGAQA).

    Our View:
    • HAL’s 5‐year agreement with Russian OEM’s would address near‐to‐mid‐term spare requirements of Sukhoi‐30MKI Aircrafts.
    • With 20 private players participating in the ToT drive, we expect the long‐term (over 5‐years) spares supply issue to be addressed.
    • Given that the majority of the fleet of Sukhoi‐30MKI is more than a decade old, we expect increase in wear‐and‐tear, going forward.
    • Accordingly, we expect dependency on spares to increase.
    • In such a scenario, with spares manufacturing done in India, MoD could see some cost savings.
    • Also, Indian government is discussing with Asian countries, like Malaysia to supply Sukhoi spare parts through the local production in India.
    • On a whole we see this to be positive development from MoD’s point of view.
    • Also, this initiative encourages private sector participation in the Indian Defense manufacturing.
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