The joint statement released at the conclusion of Prime Minister Narendra Modi’s state visit to the United States of America, held from June 21 to 24, portrays the defense partnership between the two nations as a “pillar of global peace and security” and a “partnership of democracies, envisioning the 21st century with hope, ambition, and confidence.”
Within this multifaceted engagement, defense cooperation has experienced an upward trend since the establishment of the Framework for US-India Defense Relationship in 2005, as well as the signing of the 123 Agreement, commonly referred to as the India-US Civil Nuclear Agreement, in 2006 despite significant challenges. The 10-year Defense Framework Agreement was subsequently renewed in 2015, and in the following year, the US designated India as a “Major Defense Partner (MDP),” an exclusive status bestowed upon India, placing it in a similar standing as the closest allies of the United States.
The relationship has progressed along various avenues, including the signing of mutual umbrella agreements and the establishment of high-level consultative mechanisms such as the “2+2” ministerial dialogue, Defense Technology and Trade Initiative (DTTI), Initiative for Critical and Emerging Technologies (iCET), and joint military exercises like YudhAbhyas, VajraPrahar, and Tiger Triumph.
Over the years, India and the US have entered into four “foundational agreements.” These agreements include the General Security of Military Information Agreement (GSOMIA) in 2002, facilitating the sharing of military intelligence; the Logistics Exchange Memorandum of Agreement (LEMOA) in 2016, enabling both countries to utilise each other’s military bases for repairs and resupply; the Communications Compatibility and Security Agreement (COMCASA) in 2018, enabling secure communication exchange during training exercises and operations; and the Basic Exchange and Cooperation Agreement (BECA) in 2020, through which the US shares geospatial intelligence with India.
Undoubtedly, defense cooperation stands as one of the most significant elements upon which the India-US strategic partnership is constructed, considering the importance of these agreements. However, it is worth noting that a substantial portion of this relationship relies on India’s direct purchase of military equipment from the US, primarily through the Foreign Military Sales (FMS) program administered by the US Department of Defense. This is evident from the exponential growth in the aggregate value of India’s defense purchases from nearly zero in 2002 to over $20 billion in 2020, with estimates now reaching approximately $25 billion and continuing to rise.
India has acquired several key platforms from the US, including Boeing’s P-8I Poseidon maritime patrol and reconnaissance aircraft, AH-64 Apache twin-turboshaft attack helicopters, CH-47 Chinook heavy-lift helicopters, and C-17 Globemaster transport aircraft. Additionally, India has procured Lockheed Martin’s C-130J Super Hercules turboprop military transport aircraft, Sig Sauer assault rifles, and BAE Systems’ M777 towed howitzers. Consequently, this gradual shift in the Indian armed forces’ inventory from Russian/Soviet-origin equipment to US (and European) origin equipment is altering its profile.
There have also been some instances of reverse trade, largely due to the obligations of US companies under the defense offset policy. This policy mandates that foreign companies executing defense contracts above Rs 2,000 crore must reinvest at least 30% of the contract value in the Indian defense sector. While various avenues exist to fulfill these obligations, official reports indicate that most companies opted to do so by purchasing eligible defense products from Indian companies. This approach may have bolstered exports, but it has not significantly advanced the cause of self-reliance in defense production.
It is worth noting that offsets are no longer a factor in procurements under inter-governmental agreements, including the FMS program, as they fall outside the scope of the offset policy. Nevertheless, neither the offset policy nor direct purchases from the US have resulted in the transfer of manufacturing technology to India, with the exception of the assembly of 120 howitzers by Mahindra Defense at their production facility in Faridabad, which involved technology transfer from the original equipment manufacturer (OEM). Furthermore, the signing of an Industrial Security Agreement (ISA) in 2019, aimed at establishing a framework for exchanging and safeguarding classified military information between the defense industries of both countries, has not significantly facilitated the transfer of state-of-the-art manufacturing technology.
This heavy reliance on imports contradicts the “Make in India” policy pursued diligently by the government since 2014 when Prime Minister Modi called for India to become a manufacturing hub in his Independence Day address that year. As previously mentioned, the transfer of manufacturing technology from the US, in particular, has been negligible, if it has occurred at all. However, the situation is expected to change with the two prospective deals announced during Prime Minister Modi’s recent visit to Washington.
The first deal involves the transfer of jet engine manufacturing technology to India. A Memorandum of Understanding has been signed between General Electric and Hindustan Aeronautics Limited (HAL) for the production of GE F-414 jet engines in India, specifically for HAL’s Light Combat Aircraft Mk2. The joint statement highlights this groundbreaking initiative as an opportunity for greater transfer of US jet engine technology than ever before.
This deal will not only assist the Indian Air Force in replenishing its fighter squadrons but also enable India to make a substantial impact in the global export market with an efficient and reasonably priced fighter aircraft. However, it is important to note that while General Electric is expected to transfer approximately 80% of the manufacturing technology to HAL, it is unlikely that the most critical engine technologies will be included in this deal, as it is categorized as a “co-production” rather than a “co-development, co-production” project. Consequently, HAL will continue to depend on General Electric for future engine manufacturing, which does not align with genuine self-reliance.
The defence cooperation will face challenges due to the absence of established protocols or templates for such endeavours. Acknowledging this concern, both leaders have committed their governments to collaborate and expedite the advancement of this unprecedented co-production and technology transfer proposal. However, the task ahead is not without difficulties.
The Defence Acquisition Procedure 2020 merely provides instructions that projects for co-development or co-production of futuristic equipment or platforms, involving transformative, unique, or niche technology, can be pursued under inter-governmental or project-specific agreements based on estimated project costs. These instructions lack specificity and fail to instil confidence in the bureaucracy, which often relies on precedents. Without a clear policy on how to undertake such projects, negotiations can linger, potentially resulting in suboptimal agreements.
On a separate note, French defence major Safran has offered to collaborate on the design, development, testing, manufacturing, and certification of an engine for India’s twin-engine Advanced Multirole Combat Aircraft and a deck-based fighter for aircraft carriers. The outcome of this proposal will likely be known during Prime Minister Modi’s visit to France. However, the lack of clarity regarding the execution of “co-development, co-production” projects could overshadow Safran’s offer.
President Biden has also welcomed India’s plans to acquire General Atomics MQ-9B HALE UAVs, which will be assembled in India, potentially by a private sector entity. These UAVs will enhance the intelligence, surveillance, and reconnaissance capabilities of India’s armed forces across various domains. As part of this plan, General Atomics will establish a Comprehensive Global MRO facility in India to support India’s long-term goal of bolstering indigenous defence capabilities.
While this prospective deal involves a relatively low level of indigenisation, ranging from 5-20% depending on negotiation outcomes, it may not promote self-reliance in defence production. However, the establishment of the MRO facility by General Atomics has the potential to position India as a major MRO hub for the region. It is a pragmatic move, provided that both sides can navigate the details of the deal without getting entangled in unresolved issues such as pricing, the extent and manner of indigenisation, ownership of the MRO facility, and other related matters. These issues have hindered numerous acquisition proposals in the past, and yet, surprisingly, not much attention has been given in India to streamline the procedural challenges that impede collaborative projects and to professionalise the workforce involved in defence acquisitions.
– The writer is a Ex-Financial Advisor (Acquisition), Ministry of Defence
–The writer is a former Financial Advisor (Acquisition), Ministry of Defence. The views expressed are personal and do not necessarily reflect the views of Raksha Anirveda
