Rs 50,000 crore contest to build future combat vehicle kicks off today

The US Army's Stryker combat vehicle. The ICV would serve the same purpose, as a tracked vehicle

By Ajai Shukla

Business Standard, 15th Feb 16

On Monday, ten Indian companies will submit proposals to the defence ministry for designing, developing and manufacturing a “future infantry combat vehicle” (FICV)  --- an armoured, tracked vehicle that will carry soldiers into battle.

A ministry team will choose the two best proposals, while the public sector Ordnance Factory Board (OFB) gets a free pass, being a defence ministry entity. These three development agencies (DAs) will each develop an FICV prototype, with the defence ministry paying 80 per cent of the cost. The best will be chosen and 2,600 FICVs built to that design to replace the army’s ageing BMP-II ICV fleet.

The FICV is required to be amphibious, and transportable in the air force’s IL-76 and C-17 aircraft. It must fire missiles that destroy enemy tanks at ranges of 4,000 metres.

The ten firms that received Expressions of Interest from the defence ministry on July 16, 2015 are --- Larsen & Toubro (L&T); Tata Power (Strategic Engineering Division); Tata Motors; Mahindra & Mahindra; Bharat Forge; Pipavav Defence; Rolta India; Punj Lloyd; Titagarh Wagons and the OFB.

Business Standard learns these companies have formed consortia between themselves, and tied up technology partnerships with foreign vendors. In selecting the DAs, the defence ministry would evaluate three parameters in their bid, namely technology levels; financial strength and indigenisation capability. The selection process is likely to take about 12 months.

The major tie-ups between companies are enumerated below.

The Tatas are not bidding as a group, although Tata Group headquarters wanted Tata Motors to bid in partnership with Tata Power (SED). However, after the defence ministry ruled that Tata Motors’ overseas income from Jaguar Land Rover (JLR) would not be countable towards the financial strength of the company, Tata Power (SED) concluded that partnering Tata Motors would hamstring its own bid.

Now Tata Motors is bidding in consortium with Bharat Forge; and they have co-opted US major, General Dynamics (GD), as a technology partner. Over the years, GD has built highly successful armoured vehicles, including the US Army’s M-1 Abrams tank; and the Stryker ICV.

Meanwhile, Tata Power (SED) is going it alone, having gained confidence from being selected as a DA in both the “Make” projects already awarded --- the Tactical Communications System, and the Battlefield Management System. In both these bids, it was in consortium with L&T.

Tata Power (SED)’s strength lies in systems integration. It will also benefit from its on-going collaboration with Korean firm, Dusan, in a separate tender for building an armoured vehicle for a mobile air defence system to replace the Russian Tangushka.

At the time of going to press, L&T was still in negotiations with the Mahindras, trying to hammer out a joint bid, which will incorporate technology from UK-based BAE Systems. L&T is already partnering Korean firm, Samsung Heavy Engineering, for building the K-7 Thunder, self-propelled artillery gun, which will provide it access to armoured vehicle technologies. L&T also has experience in designing the NAMICA (Nag missile carrier) for the Defence R&D Organisation (DRDO).

The OFB, which has been granted automatic nomination as a DA, has never designed an armoured vehicle. It has built the T-90 and Arjun tanks, and the BMP-II, but only based on transferred technology and manufacturing blueprints. Industry rumours indicate that several Israeli firms have approached OFB and offered to entirely design the FICV, which the OFB can then assemble at its factory in Medak.

The nine private firms are protesting this favoured treatment, despite repeated defence ministry promises of a level playing field. Private firms say the OFB’s assembly line at Medak should being made available to the winning DA on a “government owned company operated” (GOCO) basis. Instead of incurring the expenditure of a brand new assembly line, the winning DA can pay to build the FICV at Medak.

It is learnt that the OFB had earlier explored cooperation with Russia’s military export agency, Rosoboronexport, but the army told OFB it “did not want a BMP-III”.

Each DA will spend an estimated Rs 1,000 crore in developing their prototype. Manufacturing 2,600 FICVs over about a decade would cost another Rs 50,000 crore.

This “Make” project is being processed under the Defence Procurement Policy of 2008. To be eligible, DPP-2008 mandates that a company should have been registered for at least 10 years; have capital assets in India of at least Rs 100 crore and a turnover greater than Rs 1,000 crore for each of the preceding three years, and a minimum credit rating equivalent to CRISIL/ICRA “A”.