Expressing their desire to co-produce and co-develop in India, Israeli defence majors such as Rafael, Elbit and IAI on Tuesday said there were many challenges that needed to be addressed in the defence sector.
“How to ‘Make in India’ remains a big challenge,” said Uzi Melamed, Corporate Offset and Industrial Cooperation Director, Rafael. He was speaking at an international seminar on Strategic Defence Co-operation between India and Israel, organised by industry chamber FICCI.
India accounted for 7 per cent of Rafael’s global orders in 2014, and Melamed was “optimistic” about taking this to 20-25 per cent in the future, but pointed to “difficult areas” such as technology and lack of infrastructure, problems in quality standards, operational performance such as getting industrial licences etc, apart from tax issues.
“India is the most difficult to do business, which is not in favour of India or Indian industry,” he said, adding that recent changes to ‘ease of doing business’ were in the right direction, “but there’s a lot more to do”.
Josef Betsalel, Vice-President and General Manager, Israel Aerospace Industries, said “maintenance of systems” will be huge issue in India going forward.
“We are still hesitating about the kind of agreements for joint ventures, as taking care of systems is not an easy task under the offset obligations,” he said, adding that he hoped the “servicing” issue is addressed in the new offset policy being worked out by the Narendra Modi-led government.
Offset policy
According to India’s existing defence offset policy, foreign companies are required to discharge offsets of at least 30 per cent of the total value of the contract, either through transfer of technology, direct local sourcing of components and systems, or by creating manufacturing facilities and investing in skill development.
Ori Magal, Corporate Offset Manager, Elbit, drew similarities of India’s Defence Procurement Procedure (DPP) with the situation faced by ‘Alice in Wonderland’. Referring to his company as “Alice in DPP land” he said it seemed to lean in favour of public sector undertakings, not even Indian private firms.
Calling upon Indian private industry to push for easier norms in the DPP for co-production and co-development to achieve the Prime Minister’s Make in India mission, the Israeli defence majors said millions of dollars of investment were waiting to enter the sector.
Mukesh Bhargava, Vice-President, Special Projects, Larsen & Toubro, said he was hopeful that the new DPP policy would address some of the concerns, especially on private enterprises holding industrial licences as well as strategic partnerships for defence production.
