India's defence sector: from 'buy global' to 'go slow'

The Indian defence sector, forever beset with procedural delays and long trial periods in testing new equipment is now starting at further slowdown in decision-making following the AgustaWestland helicopter controversy last week, officers in the ministry of defence and the three service headquarters say.

Recent cuts in both its capital and revenue budget (capital budget is for buying new platforms and weapons and revenue budget funds service the recurring needs) running into Rs 14000 crore has put the defence ministry in a tight spot.

The new controversy in which middlemen are alleged to have pocketed up to 51 m Euros in the AgustaWestland deal to supply 12VVIP helicopters to the Indian Air Force, India's plans to replace its 1970s and 80s era equipment used by its three armed forces with modern arms sourced from wide ranging suppliers as against its over-reliance on the erstwhile Soviet Union and now Russian manufacturers has only serve to magnify Indian defence sector woes.

Defence Minister AK Antony warned on Tuesday morning: "Don't raise a doubt for every purchase. India has a volatile neighbourhood and the Indian military needs to modernize fast." But sources say the CBI probe ordered by the government in the AgustaWestland helicopter issue has turned India's acquisition process from "buy global," into  a "go-slow," mode. If AgustaWestland gets blacklisted or banned following the probe, many planned purchases would be in trouble.

The Indian Navy, among the biggest spenders on Defence acquisitions in the past five years is likely to be the hardest hit, sources say. Navy is in the price negotiation stage to acquire 16 Multi-role helicopters--MRHs under a plan to spen about 2 billion dollars on their acquisition.

In contention are Sikorsky and NATO Helicopter Industries (NHI), a consortium of AgustaWestland and Eurocopter among others. If Agusta gets blacklisted, then the 13-year old process will have to begin again. These helicopters are supposed to replace the 1990s vintage Sea King helicopters. These MRHs were to be deployed on different ships. Assigned to carry out multiple tasks, including the crucial anti-submarine role, these helicopters are to be used on the new ships that are either being built in India or imported from Russia. Without them even the latest ships are protection less.

Its not just the acquisition of multi-role helicopters that would be hit. The Indian Navy's has plans to buy 56 new Naval light utility helicopters and Agusta Westland was supposed to be competing for this tender.

Then there is the Army's requirement for 197 light utility helicopters hanging fire for the past five years

According to an estimate, India is planning to spend over 100 billion dollars in buying new weapons from the across the globe over the next decade.

India's original defence budget for fiscal 2012-13 was pegged at 36 billion dollars before Finance Minister P. Chidambaram forced a cut of 2.5 to 3 billion dollars owing to a huge funds crunch. Yet, by 2020, India's defence budget is estimated to climb to about 65 billion dollars.

But with at least four international firms from as diverse nations as Singapore, South Africa, Germany and Israel  having been banned for one wrong doing or the other, Indian Defence Ministry is fast running out of options to source its equipment from.

Although Defence Minister AK Antony lamented: "I am sad, in spite of taking all precautions ... we blacklisted 6 companies for bribery. I thought that will be a warning to everyone. Still, greedy people are working around the world," the grim reality is defence manufacturers across the globe have concluded that in India no contract can be won without paying bribes.