By Ajai Shukla
Business Standard, 25th Sep 20
India and Israel have been traditionally secretive about defence and security cooperation between their respective governments and industry. On Thursday, however, senior ministry of defence (MoD) officials revealed that, of the $4.9 billion in annual trade between the two countries (2019-20), defence purchases from Israel account for over a billion dollars each year.
Sanjay Jaju, the MoD’s interface with the defence industry, also disclosed that India and Israel are collaborating on research and development (R&D) in nine focus areas, including big data analytics and cyber security.
He was speaking at a webinar on India-Israel defence cooperation, co-organised by the MoD, SIBAT (the International Cooperation Directorate of Israel’s MoD) and by the Society of Indian Defence Manufacturers (SIDM).
Israeli companies have brought $200 million worth of foreign direct investment (FDI) into defence production in India since April 2000, revealed Jaju. The total FDI in defence during this period has been Rs 3,454 crore, the MoD told Parliament on Monday.
The MoD said there were rich opportunities for Israel-India defence cooperation, with the former offering skill and experience in developing high-technology weaponry and the latter offering scale in demand.
Underlining the opportunities for Israel, Jaju said New Delhi would spend US $130 billion on modernising the military over the next 7-8 years. He said India’s requirements were available in the 15-year Long Term Integrated Perspective Plan (LTIPP) for the period 2012-2027.
Jaju specifically mentioned India’s requirement for 1,580 towed artillery guns, 100 tracked guns, 180 wheeled and self-propelled guns and 145 ultra-light howitzers being procured under the Field Artillery Rationalisation Plan. He also mentioned India’s need for 110 multi-role fighter aircraft and 111 helicopters.
In the field of defence production, Jaju said nine Indian companies have signed 23 contracts with four Israeli defence vendors, including Israeli Aerospace Industries, Rafael Advanced Systems, Elbit Systems and Elta Systems.
In addition, Israeli firms have set up seven joint ventures with Indian partners, including Kalyani Rafael Advanced Systems, Astra Rafael Communications, HBL Elta Avionics, Adani Elbit Advanced Systems, Kalyani Group Elbit Systems, HALBIT Avionics and Punj Lloyd – Israeli Weapons Industries.
The MoD also disclosed for the first time an indigenisation target for India’s military, stipulating a “70 per cent self-reliance target by 2027.”
According to Jaju, India was producing only 30 per cent of its arms requirements in 1992-93. That had risen to 40-45 per cent in 2014-15, at the time the “Make in India” initiative was launched. Now, with 101 defence items placed on an import-ban list, which officials have announced would be expanded shortly, the MoD is targeting the 70 per cent figure within seven years.
Additionally, the government has created a separate budget head, with an outlay of US $7 billion (Rs 52,000 crore) for domestic capital procurement in the current financial year.
In detailing where India’s defence production currently stands, Jaju stated that the eight defence public sector undertakings (DPSUs) and 41 ordnance factories (OFs) delivered $9 billion worth of defence equipment in 2019-20 – a year-on-year rise of 6 per cent over the preceding two years.
To enhance this, the MoD proposes to position the DPSUs as system integrators, said Jaju. Several DPSUs are currently undergoing disinvestment. Last week, a Group of Ministers was constituted to oversee the corporatisation of the OFs.
Meanwhile private defence firms, to whom the MoD has issued 490 production licences so far, delivered $2.2 billion dollars worth of defence equipment in 2019-20.
Jaju said private sector micro, small and medium enterprises (MSMEs) would be at the forefront of increasing this figure. He said the MoD would designate 5,000 defence items to be indigenised by 2025. Most of these would then be produced by MSMES.
Categorising aerospace and defence MSMEs as “the rising stars”, the MoD stated that their numbers would double to 16,000 over the next five years as they became integrated into global supply chains.
As if on cue, Bengaluru-based aerospace company, Dynamatic Technologies Ltd, announced on Thursday a prestigious contract for building parts for the T-7A Red Hawk trainer – one of the world’s largest and most sophisticated aircraft programmes, being developed by Boeing and Saab.
Jaju said the rise of MSMEs was being facilitated by reservations mandated in the new Defence Acquisition Policy of 2020; by entitling them to 90 per cent reimbursement of the cost of development of equipment under the Make procedure; entitling them to advances from DPSUs and OFs, and the permission to use their testing infrastructure at government rates.
Talking up “start-up firms” as a key driver of defence industry, the MoD stated there are 20,000 start-ups in India, with a valuation of $50 billion. The average age of the founders is just 28 years and 9 per cent of them are women. Backing these start-ups are over 200 incubators/accelerators, which have provided $172 billion in funding since 2016.
Jaju also stated that the MoD’s eco-system for innovations by start-ups, termed the Innovations for Defence Excellence (iDEX) scheme, had already sanctioned $5.4 million in funding, and signed contracts with 33 innovators.
India-Israeli defence cooperation | |
Annual India-Israel trade | $4.9 billion |
Annual Israeli defence sales to India | > $1 billion |
Israeli FDI in Indian defence | $200 million since 2000 |
Industry partnership so far | · 9 Indian companies signed 23 contracts with 4 Israeli vendors · 7 India-Israel defence JVs formed |
Indian defence industry | |
India’s defence market | $130 billion over 7-8 years |
India’s indigenization target | 70% self reliant by 2027 |
DPSU/OF production | $9 billion annually |
Private sector production | $2.2 annually |
MSME opportunities | 5,000 items to be indigenised by 2025 |
MSME expansion | Numbers double to 16,000 by 2025 |
Start-ups in India | 20,000 start-ups worth $50 billion |
iDEX by start-ups | · $5.4 million funding sanctioned · Contracts with 33 innovators |
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