In a Bid for Defense Exports, India is Giving Contracts to the Private Sector

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The Indian government has signed a sizable contract with Reliance Defense and Engineering Ltd (RDEL) a company promoted by Reliance Infrastructure, in a major boost for private defense manufacturing. The company claimed that it has signed a contract with India’s Ministry of Defense for the design and construction of fourteen (14) Fast Patrol Vessels (‘FPVs’) for the Indian Coast Guard; the value of the deal is $137.68 million.

Reliance Defense and Engineering emerged as the winner through a competitive bidding process undertaken by the Defense Ministry. Almost all the private sector and public sector shipyards: L&T, Cochin Shipyard Limited, Goa Shipyard Limited, Garden Reach Shipbuilders & Engineers Ltd had participated.

“This is the first time a private sector shipyard has been awarded a contract to design and build such a class of ships for the Indian Armed Forces. RDEL will be developing the design in-house. Reliance Shipyard, which features the largest dry-dock in the country, has successfully mastered the block-construction technique through unique ‘modular construction technology’ for building large ships for both commercial usage and the Navy,” claims the first private sector company in India to obtain a license and contract to build warships.

This could prove to be a landmark decision in a bid to achieve India’s $2 billion defense export target as all the state-owned companies are burdened with domestic orders and left with little or no space for export assignments.

“The combined R&D expenditure of the government-owned companies is a mere five per cent of their turnover, in comparison of 20% for some global companies. Given such a poor focus on R&D, it is not surprising that they have designed and developed very few products. The average labor productivity of public sector defense undertakings is less than one-fifth that of that of major global defense companies. Exports, a measure of international competitiveness, account for a meager five per cent of their sales, whereas many international companies generate over 70 per cent of their revenues from international customers,” says Laxman Kumar Behera, a Delhi based expert in defense industry and military spending.

Government sources said that in order to build India’s first homemade 155mm/52-caliber towed artillery gun, it can also go to private sector’s kitty as well. The Indian Army has a requirement of more than 3000 artillery guns expected to be inducted in next decade.

Recently, the Indian government has also taken major decision to privatize government owned defense company BEML in order to boost productivity and focus on exports.

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