With the announcement of Make in India policy by the newly elected government of Prime Minister Narendra Modi in May 2014, Russia was one of the first countries to positively react and had expected to actively participate in various projects along the line of BrahMos JV (Joint Venture), accepted as the role model for the defence cooperation extending beyond the “buyer-seller” relationship in arms trade. Several officials of the Russian military industrial complex (MIC) had pointed at Moscow’s rich experience in cooperation with New Delhi in making cutting-edge defence platforms for decades including MiG-21, MiG-27, Sukhoi Su-30MKI fighters, BMP armoured personnel carriers and T-90S main battle tanks (MBT). However, due to various political, changing strategic perceptions and financial considerations it takes too long to implement the projects even agreed upon at the highest political level as the bureaucracies in both countries run at their own pace.
During his New Delhi visit for the annual summit in December 2014, Russian President Vladimir Putin announced his country’s readiness to manufacture Kamov Ka-226T multi-role utility helicopters for the Indian Armed Forces through a joint venture along the lines of BrahMos Aerospace. An inter-governmental agreement (IGA) on supply of 200 Ka-226T helicopters to replace ageing fleet of Chetaks and Cheetahs was signed on December 24, 2015 during Prime Minister Modi’s Moscow visit for the Kremlin summit. Russia was to supply 60 helicopters in flyaway condition and 140 rotorcraft were to be built in India through a JV between Hindustan Aeronautics Limited (HAL), Russian Helicopters and Rosoboronexport.
At Goa summit in October 2016 in the presence of PM Modi and President Putin, the three entities signed an agreement to setup a joint venture, which as private limited company was registered with HQ in Bangalore on May 2, 2017. The capital of the joint venture is estimated to be at Rs 30 crore, with HAL holding shares up to 50.5 per cent, 42.5 per cent of shares will be held Russian Helicopters and the rest by Rosoboronexport. It is noteworthy that both Russian Helicopters and Rosoboronexport are part of the Rostec State Corporation controlled by the Government of Russian Federation. Five years after the initial offer nothing much has happened on the ground even as Russian Helicopters have added a new assembly line for Ka-226T choppers at its plant in Ulan-Ude in Buryat Republic in Siberia. Sources say that initial delay was caused due to India’s desire to reduce the number of flyaway machines to 40 instead of 60 and increasing the share of indigenous components through high level of localisation from the very beginning.
However, Russian Helicopters are reported to be ready to involve Indian private and public sector companies in the supply chain for Ka-226T choppers, but till date the Defence Ministry has not placed the firm order and opened the financing of 40 helicopters to be supplied in flyaway condition. To meet the 70 per cent localisation target at the earliest Russian Helicopters signed memorandum of understanding with Indian companies for the production of assemblies components for the Ka-226Ts in India. The MoU was signed with India’s Elcom, Valdel Advanced Technologies, Dynamatic Technologies, Integrated Helicopter Services and Bharat Forge, for components such as fuselage, blades, onboard radio station and landing gear.
In a rare demarche by a Russian arms exporter, on the sidelines of Dubai Airshow CEO of Russian Helicopters Andrei Boginsky declared that India was delaying the signing of a firm agreement for purchasing 140 helicopters despite providing all information. “We can’t understand the reasons for the delay,” Mr Boginsky was quoted as saying by the Russian media covering Dubai Airshow in November last.
Some Russian defence industry observers are inclined to believe that Mr Boginsky’s wading into the Indian Navy’s tender for 111 light utility helicopters might have complicated the issue. He gave the argument that once the JV would already be making them in India in partnership with HAL there was no need to look anywhere. Probably, the Indian Navy might be considering another helicopter for its stable.
Later, the CEO of Rosoboron-export Mr Mikheev, who on November 6, 2019 was present at the annual (19th) India-Russia Inter-Governmental Commission on Military and Military Technical Cooperation session co-chaired by Defence Minister Rajnath Singh and his Russian counterpart General Sergei Shoigu, declared that Ka-226T helicopter deal will be signed in May, 2020 (in new financial year).
During his Vladivostok visit in September last, Prime Minister Narendra Modi urged Russia to setup an industrial park in India for the production of spares and components for the military platforms. As a follow up representatives of 52 Indian defence firms, looking to tie up deals with Russian OEMs had gone to Moscow for the bilateral military-industrial conference on November 5 that was presided over by Defence Minister Rajnath Singh and Russian Minister for Industry and Trade Mr Denis Manturov. The Indian delegation included large companies like Adani group and Mahindra Aerospace, as well as a host of micro, small and medium enterprises that manufacture defence and aerospace components. Defence Secretary Ajay Kumar told the gathering to target setting up 50 Indo-Russian joint ventures in the next four-to-five years for building spares and components in India.
However, for many reasons based on past experience and allegedly ongoing “information war” with the aim to oust Russia from the Indian arms bazaar, the new smaller but crucial OEMs are scared of entering into manufacturing in India as New Delhi has already walked out of two inter-government agreements for the joint production of multi-role transport aircraft (MTA) and fifth generation fighter aircraft (FGFA).
There are two main fears holding the Russian defence OEMs from setting shop in India, besides their own internal regulations and arms control regime.
The Indo Russian Rifles Private Limited (IRRPL) at Korwa in Uttar Pradesh for production of AK 203 assault rifles is such an example. This is also an example how an understanding reached between the top political leadership of the two countries can speed up the projects for the armed forces. In less than a month after signing of IGA in February 2019, Prime Minister Narendra Modi dedicated it to the nation on March 3, 2019. It is a joint venture between Ordnance Factories Board (OFB) on the Indian side and Rosoboronexport plus Concern Kalashnikov on the Russian side. The OFB owns 50.5 per cent equity and Russian side the remaining 49.5 per cent. Serving Major General Sanjeev Senger of the Indian Army has been appointed CEO of the JV which is in process of filing its response to the RfP floated by the Ministry of Defence (MoD) for supply of 6.71 lakh rifles. The rifles’ JV also has plans to export its produce to “friendly” countries.
On its part, Russia is now well aware about the problems faced by the Indian and other foreign armies with regards to availability of spares and after sales service of Russian equipment. In his year-end meeting in December with the top defence industries officials, President Putin underscored that without streamlined system of MRO and spares supply they cannot hope to boost arms exports. According to sources, Prime Minister Dmitry Medvedev has ordered to draft a report on what military production could be relocated to other countries without any risk for the Russian security.
Long Shadow of US CAATSA on India – Russia Defence Trade
Although Russia claims that it is not afraid of US Countering America’s Adversaries Through Sanctions Act (CAATSA) against it, but both Moscow and New Delhi are feeling its heat. In spite of signing the multi-billion dollar S-400 deal for the purchase of five squadrons of advanced air defence system the first problem was of payment of advance money in US dollars to Rosoboronexport as it is in the sanctions list along with the S-400 manufacturer Almaz-Antei. The two countries claim to have resolved the issue by using national currencies. The volatility of Indian rupee, however, can and is already posing problems in closing many pending projects, including acquisition of 48 Mi-17-V-5 transport helicopters, four Admiral Grigarovich class (advanced Talwar class) stealth frigates involving technology transfer.
Russian experts believe that the main reason of walking out of the FGFA agreement was New Delhi’s fear of CAATSA sanctions. Privately speaking to this author several Indian officials privy to defence cooperation with Russia conceded that for some time New Delhi could balance its ties with Washington by ordering expensive hardware. But it will leave it high and dry, as Russia still is and will remain source of cutting-edge defence technologies like nuclear submarines and much more that is not visible on the surface.
– The author is a Moscow-based independent analyst. Views are personal.
