Employees stand in front of the Indian Navy's first Scorpene submarine in a shipbuilding yard in Mumbai

'Make in India' campaign faltering as $15bn in defence tenders lapse

Roughly $15bn worth of tenders aimed at India’s domestic arms industry have lapsed in a major blow to Prime Minister Narendra Modi’s ‘Make in India’ campaign.

India is the world’s biggest arms importer, getting 70 per cent of its arms from abroad, and Modi had hoped tenders to make a range of military equipment from air-defence guns to surface-to-air missiles to transport planes would help catalyse the development of an advanced domestic defence industry.

He has ring-fenced $100bn worth of defence deals for domestic companies over the next decade, under which they can build on their own or with foreign partners.

But almost a year since Modi took office not one large domestic weapons project has been awarded and Defence Ministry officials have told Reuters the total value of lapsed tenders since early 2013 has hit $15bn.

"'Make in India' is a laudable aim, but it's moving rather slowly. It's not a switch you can press and everything will fall into place," said Vivek Rae, head of procurement at the Defence Ministry from 2010-2012.

Experts said a major problem is that the Indian military wants capabilities only available from providers in the west, and so unrealistic quality demands have made domestic firms reluctant to bid for projects.

Retired vice admiral Premvir Das added that to expect Indian companies to manufacture major defence platforms in the foreseeable future is to "live in a dreamland".

"The armed forces are reluctant to accept hardware that doesn't have a record in operational conditions. Indian companies have no track record," said Bharat Karnad at the Centre for Policy Research in New Delhi.

Last year the government asked several domestic firms to bid on a project to replace 1960s-era Swedish air-defence guns worth an an estimated $1.7bn, but according to one of the Defence Ministry officials, only one said it could meet the requirements.

The head of one firm that turned down the project, who declined to be identified because of the sensitivity of defence issues, said the military laid down "impossible" requirements by insisting on technology that only foreign manufacturers had.

Over the past 18 months, 41 requests for expressions of interest for naval projects alone fell through because of problems relating to manufacturing requirements, the Defence Ministry official added.

New defence production policies aimed at dealing with the main concerns of manufacturers – opaque procedures, unrealistic quality requirements and slow decision-making – will be unveiled this month, according to Defence Minister Manohar Parrikar.

"We're trying to simplify procedures, create a level playing field, but still there are many cases of zero participation in tenders," said G Mohan Kumar, the defence production secretary leading the localisation drive.

The military declined to comment, referring queries to the Defence Ministry, which controls procurement.

In February, the government finally approved an $8bn proposal to build warships in India that had been awaiting cabinet sign-off since 2012 as they try to move projects along, and it has also ordered an accelerated local programme to build six diesel-electric submarines, in addition to six similar vessels that French firm DCNS is assembling in Mumbai port.

A Defence Ministry committee submitted a report last month identifying five private and state-run shipyards where the submarines could be built with a foreign partner. It will now invite expressions of interest for the $8.5bn project.

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