Monthly Archives: March 2012

Defexpo 2012 Opens Today in New Delhi, India

Defexpo India 2012, the country’s biggest-ever land, naval and homeland security systems exhibition, will open today in New Delhi. The biennial event has grown since 2010 and will host 567 exhibitors, up from 425 in 2010. All major public sector companies (PSU and domestic shipyards) are here, along with hundreds of large and small private sector companies – 335 Indian exhibitors in total. The exhibitors will include 232 foreign companies from 32 countries, grouped in several national pavilions; the largest are those of the US, Russia, France, Israel, the UK and Germany.

India is the world’s largest importer of defense systems. The annual Indian defense budget is currently set at $16 billion, and, with projected annual growth of 15 percent, the total capital market for defense could reach over 100 billion.

Some of the companies exhibiting here announced new products for the show. Few of these items are included below.

Among the major exhibitors at the show are the Russian arms export agency Rosoboronexport, launching here a modernization package for the T-90S tank. Another Russian exhibitor KBP is displaying the Kornet-EM guided missile offered in a new low-signature vehicular version, firing anti-tank or thermobaric missiles at ranges of up to 10 km.

BAE Systems is displaying a range of land systems, including the CV90 light tank and M777 ultra-lightweight howitzer. Both are addressing ongoing procurement programs for a new armored combat vehicle and lightweight artillery systems. The company also displays the BvS10 armored all-terrain vehicle, which can meet evolving requirements for improved mobility of military units deployed along the northeast frontier and the Himalayan range.

Mk54 torpedo dropped from a Boeing/US Navy P-8I on a recent weapon test. Photo: US Navy

Raytheon is displaying a range of weapon systems for military and homeland defense. Javelin and the SMAW II Serpent shoulder-launched weapon system are two of the representative systems awaiting procurement decision at the Indian MOD. Raytheon is also discussing the Mk-54 lightweight torpedo as an optional weapon for the Indian Navy P-8I.  The Italian torpedo maker WASS is displaying here a new light torpedo dubbed ‘Flash Black’, offering extended range and speed and better precision over previous models. The new torpedo has a range of 12-mile range and a tops speed of 57-mph speed. The company launched the new development late last year and is expecting to complete development in 30 months time. WAAS’ new torpedo is headed to compete directly with Raytheon’s MK54.

Elbit Debut the LongView CR portable target acquisition system at Defexpo. Photo: Elbit Systems

Sagem DS, one of the leading French defense contractors is promoting the Hammer precision-guided weapon, providing the primary land attack weapon on the Rafale, recently selected for the Indian MMRCA. Available in 1000, 500 and 250 weight classes, Hammer can be fitted with GPS, Laser-GPS or IR-GPS guidance. The company is also promoting here the Felin infantry combat suite, along with the different components, including Sword weapon sights and viewers, as well as display systems.

Elbit Systems’ ElOp is launching the LongView CR long-range observation and target acquisition system. This high-end system combines a continuous zoom FLIR, telescopic daylight cameras, integral eyesafe laser range finder, GPS and magnetic compass. The system weighs only 12.5 kg and mounts on a compact electronic goniometer enabling highly accurate reading of azimuth and elevation data.

Meprolight displays the latest member of the NOA family of thermal weapon sights – NOA NYX uncooled thermal weapon sight for assault rifles.

The NOA NYX sight mounted on a Tavor light machine-gun. Photo: Meprolight

The sight weighs less than 1 Kg, and uses high-resolution microbolometer technology to provide clear and consistent view of targets at an effective combat range. The unit can be used as a hand-held monocular device or fitted to light machine guns, assault rifles, and submachine guns. NOANYX can be fitted on long-range weapons including sharpshooter rifles, detecting man-sized targets at up to 900m. Output can be fed to a remote screen or recording equipment via its “video out” feed. The system stores up to 3 user-configured sighting reticules and requiring a warm-up time of less than 5 seconds, the NOA NYX can operate continuously for 7 hours using 4 “AA” batteries.

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Israel’s TOP 3 Financial Reports Reflect Solid in Defense Business for 2011

The financial reports published in the recent week by Israel’s top three defense companies reflect a solid year in defense business, despite the slow-down in global economy and the ‘soft’ European market. The combined sales of IAI, Elbit Systems and Rafael Advanced Defense Systems to the defense market were $7.296 Billion, representing 6% growth over the combined sales of $6,871 in 2010.

The total backlog accumulated by Israel’s top three companies has exceeded $17 billion at the end of last year, securing almost two years of operation. Both IAI and Elbit Systems were hit by the cancellation of a sale of an advanced intelligence gathering system to Turkey, following the decision of Israel’s Ministry of Defense to block the delivery of certain sensitive technologies to Ankara. The decision caused both companies to withdraw about $150 million from their fourth quarter books and backlogs.

Elbit Systems remains the largest defense company in Israel, reporting $2,817 in sales in the past year, followed by IAI, reporting $2.5 billion in defense sales and RAFAEL in third place, with $1,979 million in sales for 2011. With commercial aviation activity added to IAI’s report, the company is still positioned as Israel’s largest Aerospace & Defense group, with sales of $3,436 million in 2011, up from 3,148 in the previous year.

In terms of net profit, RAFAEL is surprisingly positioned well ahead, reporting $111 million for 2011. This profit was $70 million lower than 2010, which included RAFAEL’s share of the sale of an affiliated non-defense company. The net profit of publicly traded Elbit Systems was $90 million – slashed by half compared to 2010, with IAI’s net profit reported at $83 million, slightly lower the $94 million reported in 2010.

The backlog reported by the companies shows a modest increase, despite the slow down in the world market. IAI’s order backlog includes aviation and defense related contract amounting to $8.7 billion, 87% of which relate to export orders. Rafael, reported an order backlog of $3,465 million, including over one billion US$ in domestic orders. Rafael is relying increasingly on domestic contracts delivering the Iron Dome counter-rocket systems, Trophy active protection systems and various guided weapons to Israel Defense Forces. Elbit Systems also reported an increase in backlog, $5,528 million, compared to $5,446 in 2010. About $1.3 billion of Elbit Systems order book represent business received in Israel.

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The Maini Group Launches the Israeli TOMCAR Off-Road Vehicle in India

TOMCAR is already operated by military and low enforcement forces.

The Indian Maini Group acquired a majority stake in TOMCAR, a company based in Israel engaged in design and manufacture of high performance off road vehicles. At Defexpo 2012 the Indian automotive group is launching the TOMCAR in India. “With the Indian Defence, Paramilitary and Homeland Security scouting aggressively for All Terrain Vehicles, we intend to promote TOMCAR amongst them as part of their modernization drive.” Said Sandeep Maini, Chairman of Maini Group. The Maini Group has created a manufacturing facility in Bangalore to cater for both domestic and overseas customers.

Designed in Israel and built in Israel and the USA, TOMCAR is a military grade, high-performance all-terrain vehicle designed for military, order patrol and first responder use. TOMCAR is deployed by the Israeli Military, the US Customs and Border Patrol and supports the British Army in Afghanistan as a combat support and replenishment vehicle. The Israeli military has also deployed the vehicle on border patrol missions, in an unmanned configuration known as Guardium.

TOMCAR has been customized for special operations, recce and surveillance, military and border forces. In the light strike version TOMCAR can carry Heavy Machine Gun, Anti-Tank guided missile launcher, or Automatic Grenade Launcher. It can also be fitted with a winch for self-recovery. TOMCAR has an option of being customized for both armored and unmanned versions. The vehicle is also air transportable and para-droppable.

TOMCAR all- terrain vehicles feature strong, fully-welded steel tube chassis and heavy duty four-wheel independent suspension. These vehicles are designed to be safe, rugged and extremely dependable.

The Maini Group is engaged in high precision and innovative engineering products for the last four decades and has a strong presence in diverse industry segments. Core capabilities of Maini Group include high precision components for Aerospace and Automative applications, Materials Handling Equipments, Electric Buggies for People and Cargo Movement, Storage and Shelving Systems and Plastics and Composites.

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Samsung Techwin, Larsen & Turbo Formalize Partnership Addressing Indian SPG

The South Korean Samsung Techwin (STW) and its Indian partner Larsen & Turbo Ltd. (L&T) announced today a teaming agreement addressing the development and production of the ‘K9 Thunder’ self-propelled artillery system (SPG) in India. According to the announcement, the K-9 is ready to enter the Indian Army’s User Evaluation trials expected to commence shortly. L&T is  displaying the Korean ‘K9 Thunder’ this week at DefExpo 2012.

Samsung Techwin is the OEM for the South Korean ‘K9 Thunder’ Self Propelled Howitzer, considered the largest, most successful 155/52 Calibre Self Propelled Artillery Systems currently in production. As part of the co-operation agreement between the two companies, STW will provide key technologies to L&T for the localization of the ‘K9 Thunder’.

During the production phase of the Indian tracked artillery program, the joint offering would have over 50% indigenous content including components like fire control system, communication system, NBC & AC, APU, life support system, etc which have already been used in India. This phase will also include significant localization of hull and turret structures and major subsystems. L&T plans to set up the integration and testing facility at its existing facility in Talegaon, near Pune.

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Indian Offset Policy on a Crossroad

Production delays and cost overruns have slowed down India’s defense preparedness considerably. More importantly, despite decades of effort and several specialized design and development organizations, gas turbine research establishment and aeronautical development establishment, India still does not have the capacity to research and design, prototype, produce, service and upgrade aircraft without depending on imports of components, major sub-assemblies and significant number of complete aircraft.

Therefore there is a pressing need to build green field capability to widen the base of India’s aerospace industry and attain higher efficiencies, cost cutback and faster outputs. Public sector capability requires to be complemented by new private sector, both foreign and domestic contribution, involving joint ventures and co-production, to guarantee higher levels of technology transfer and to substantially improve the level and cost of after-sales support. This will not only take India’s technological competence to an even higher plane, but will also have a positive spin-off on our civil aerospace needs.

India’s venerable obsession with equity caps has yielded very little in foreign direct investment flows since 2002. If India can purchase entire equipment manufactured by a wholly foreign-owned company located in another country, why cannot India receive the same from that company’s wholly owned Indian subsidiary? Allowing majority foreign ownership in high-technology field will also in part reduce convoluted issues associated with intellectual property rights and export-control regimes.

India should establish a level playing field for a vibrant national defense sector, whether public or private. Many private sector companies are by now playing a consequential role in India’s defense manufacturing and are waiting for an opportunity to contribute more, on their own or through collaboration with foreign companies.

In it’s current form India’s defense offset procedure is below an optimum level. It is designed mainly as countertrade to augment exports of PSU products related to defense and civilian aerospace and internal security.

This offset policy lacks the essential focus to link acquisitions to collaborative models involving joint production, technology transfer and manufacturing capacity that develops self-reliance. Countertrade is the least meaningful element of defense offsets. Transfer of technology (ToT) is the most valuable. While it is debatable whether such huge (50%) offsets can even be fulfilled — not least because of the lack of product capacity of India’s Public Sector Units (PSU) or the existing aviation industry — it is more than likely that this requirement will inevitably increase costs. Surely that outcome cannot be justified.

A more realistic approach would be to renovate India’s present offset policy to facilitate the entrée of high-technology aerospace manufacturing and services through a multi-tiered vendor base. This can be incentivized by offering flexible share-holding options for the setting up of local manufacturing units by foreign companies linked to proposed acquisitions under the umbrella of the primary supplier. Offsets should provide for the progressive localization of sub-assembly manufacturing by vendors under a phased manufacturing programme. This would mean transparently designating cutting edge technology vendors as long-term suppliers without obliging them to tender for every subsequent order. That is the only way to ensure that the risks and costs of rapid technological development are shared. An inclusive new offset policy that reduces costs and at the same time strengthens defense capability deserves consideration.

India needs to leverage its current and future defense aerospace purchases to create an indigenous high-technology aerospace industrial base that will underpin its national security and economic strength. For this to happen, the need for structural and regulatory reforms of this sector cannot be exaggerated.

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Buy Indian, Make Indian

With India planning to invest over US$80 billion in defense procurement in upcoming years, the majority of the spending – 65-70 percent will be directed to imports. “We have to reverse this trend.” Shri A.K, Antony, Indian Defense Minister, said, “Our aim is to have a strong defense industrial base in India, because a country like India cannot indefinitely depend on foreign suppliers for majority of our equipment.” While support for Defense Public Sector Units (DPSU) continues, the government realizes the public sector will not be able to transform the industrial base on its own. A point in case is the Indian Navy procurement, for which Antony outlined a new strategy. “We are formulating a new policy, where both public sector shipyards will have to compete with the Indian private shipyards to get projects for the Indian Navy.” Antony explained, adding that in future, the Indian navy will be from ‘Buy Indian, Make Indian’, where public sector ad private sector shipyards compete on naval shipbuilding rather than Indian shipbuilders competing against foreign suppliers. According to Antony, ‘Buy Indian and Make Indian’ is going to be the major component of our procurement policy.

Offsets were introduced with the Defense Procurement Procedure (DPP) of 2005, requiring manufacturers in the category of ‘Buy’ and ‘Make and Buy’ for acquisitions over and above Rs. 300 crore, (US$60 million) to invest 30 per cent of the estimated cost in indigenous defense industries.

Three years later, the government further tightened its offset demands, reflected in DPP 2008, that restricted foreign procurement of locally produced goods related only to defense and aerospace products as applicable for offset investments. These requirements encountered increasing objection among foreign suppliers, raising concern within the administration, about the validity of the entire system, since the local market could not produce enough goods to fulfill the huge offset requirements derived from the growing defense imports.

DPP 2011 introduced significant changes in this offsets policy, making civil aviation, internal security and training products and services eligible for defense offsets. In 2012 commercial shipbuilding is expected to be added to the approved industries eligible for offset transactions. Moreover, it has also relaxed insistence on foreign direct investment (FDI) only in domestic defense industries. It also recognized offsets accrued by through investment into defense JVs set up in India; or through investment into Indian R&D organizations. Against these relaxed rules, India is expected to increase the level of offset to 40 or most major acquisitions and even 60 percent on certain acquisitions such as shipbuilding, where Indian suppliers are well positioned to act as major subcontractors.

Additional concessions are also being evaluated, including the recognition of technology transfer and introducing ‘offset multipliers’ for investments in priority fields, including investments in small and medium enterprises (SME).

The new offset policy provides more opportunities for foreign enterprises doing business in India while preventing cash outflows by mandating foreign firms that bag major defense contracts in India to reinvest a part of the total contract value, by entering into local tie-ups in the local defense industry, developing local human resources and skills, technology and infrastructure. The new DPP includes training services or equipment like simulators that were not part of the previous DPP. This change is significant with India embarking on large-scale acquisition, including the 126 Medium Multi Role Combat Aircraft, military jet and helicopter trainers and tank upgrading programs, where simulators are becoming an important component.

The Minister of State for Defence Dr. M Pallam Raju has stated that the scope and potential of the Indian defense industry has significantly increased due to reforms in the Defense Offset Policy. Dr. Pallam Raju has announced that the Indian defense offsets contracts worth US$3.3 billion have been signed and more such deals worth $10 billion are in the pipeline.

The policy change is likely to give a huge fillip to these two sectors as investments worth billions of dollars are expected to be made in view of the large number of offsets deals to be signed in the near future as India looks to spend over $ 80 billion for defense acquisitions.

The introduction of the “Buy and Make (Indian)” category in the defense acquisition process aims to increase participation by the Indian Industry for meeting India’s requirements for state-of-the-art defense systems and platforms. The procedure will enable Indian defense sector firms to get into tie-ups with technology providers through the mode of technology transfer and joint ventures.

According to defense industry analysts, India’s private sector in aerospace and defense sector needs to become more effective and may currently lack the scope and scale. However, entering into foreign collaboration will result in greater innovation. The defense offsets policy is a powerful tool to ensure that large purchases from foreign vendors are matched by investments domestically, thereby enabling the private sector to boost its capabilities. It also charts out innovative ways of doing business, leading to partnerships and joint development plan. The defense offset policy aims to enable the Indian defense sector to build long-term capability.

In view of above policy changes, it is imperative for Indian companies from Defense sector to engage with Indian PSU as well as international firms interested to invest in India.

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The Indian Navy is Pressing for Foreign Construction of Next Generation Submarines

Bowed to pressure from the Navy, India’s ministry of defense (MoD) has ruled that foreign and government owned shipyards will be allowed to compete for the construction of new Project 75I submarines. In contrast to previous policy, MoD determined that no private sector shipyard in the country has the infrastructure and capability required for building the next generation conventional submarines that the Indian Navy wants. As a result, the long-delayed plan to build six conventional submarines for an estimated Rs 30,000-35,000 crore (about US$6 billion) will be divided between foreign shipyards and the defense public sector.

According to Secretary of Defence for Production, Shekhar Agarwal, two Project 75I submarines will be built abroad by the foreign vendor that wins the MoD contract with the follow-on four vessels to be constructed in India, by the Mazagon Dock Limited, Mumbai (MDL) and Hindustan Shipyard Ltd, Visakhapatnam (HSL).

This decision is a blow to the private sector shipyards. Larsen & Turbo (L&T) shipyard. The company is playing a major role in building the Arihant-class nuclear submarines. ABG Shipyard and Pipavav Shipyard have also invested on infrastructure in preparation for major defense contracts. According to the long-term Submarine Construction Plan introduced in 1999, Indian shipyards would build 24 conventional submarines by 2030. The latest MoD decision to build two submarines abroad runs contrary to this plan.

The Indian Navy insists that the lead Project 75I submarines will be built abroad, preventing the delays it is experiencing with its current Project 75 (Scorpene) class. Project 75 involves the construction of six Scorpene submarines in MDL, in partnership with Franco-Spanish consortium DCNS. The first Scorpene, which was to be delivered this year, will only be completed in 2015. With P75 subs delayed, the next Project 75I project is still in RFI phase, with both French (AIP Scorpene) and the Russian (Amur 1650 class) being considered though the massive technology transfer expected to deliver through the current phase will make Scorpene significantly more competitive in a future competition.

In 2005 India and French firm DCNS have signed the contract for the construction of the six submarines and transfer of technology from DCNS. The cost of the program is worth over project Rs 23,000 crore ($4.6 billion).

The program encountered significant delays in qualifying local subcontractors and suppliers to deliver parts for the submarines. Last month, seven years after the contract was signed DCNS has announced the supply of the first lot of India-made equipment to MDL, for installation on these Scorpene submarines. The equipment was manufactured by Indian firm Flash Forge India Pvt Ltd based out of Vishakhapatnam. “We are providing know-how and technical assistance to our Indian partners, and with MDL, we are qualifying suitable companies which are meeting the specifications needed for the submarines” explained Bernard Buisson, Managing Director of DCNS India. He acknowledged that due to delays in procurement of MDL-purchased items, the delivery schedule of the Scorpenes has been adversely affected and the first of it is commissioned only in 2015.

The Scorpene is a 1,700-tonne submarine that can remain at sea for 40-50 days. India has an option to install Air Independent Propulsion (AIP) systems in the last two Scorpenes that MDL builds, and then retrofit AIP into the other four Scorpenes as well.

The submarine designer, the French company DCNS is displaying at Defexpo 2012 two new technologies addressing this submarine – the SUBTICS integrated combat system and the MESMA – an Autonomous Submarine Energy Module (also referred to as AIP).

SUBTICS combines long-range capabilities in all navigation conditions with powerful weapons (torpedoes, anti-ship missile, counter-measures, land-attack capability). As a fully-integrated system, all functions are operated from Multifunction Common Consoles and its open architecture and modularity guarantee that the system can be adapted to every type of submarines and configured according to operational requirements. It can also be upgraded during its lifetime to fulfill new missions and keep its operational superiority.

The MESMA is an electrical energy production module designed specifically for conventional submarines. As well as supplying electricity to the vessel and to the propulsion system, it can also be used to recharge the batteries without the need to surface. Together with a MESMA section, a Scorpene will be able to carry out extended missions with an over 3 weeks submerged endurance. The 10 meters’ MESMA module can be considered as a new-build option or installed during an upgrade.

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