The Defense Research and Development Organization (DRDO), conducted a test of the Interceptor Missile in the endo-atmospheric regime (up to 30 kilometers) at an altitude of 15 kilometers, off the Integrated Test Range (ITR) at the resort town of Chandipur-on-sea in Orissa on Monday. The single-stage missile, fitted with a directional warhead and other ‘advanced systems’ neutralized the target, said a statement issued by the Ministry of Defense.

The target ballistic ‘enemy’ missile was launched from Launch Complex – III at the ITR, with the Interceptor Missile launched from Wheeler Island. The interceptor was tracked by radars, destroying the target missile and breaking it into fragments.

The Federation of Indian Chambers of Commerce and Industry (FICCI) has published a paper in response to the solicitation of views by the Department of Industrial Policy and Promotion (DIPP), arguing for conditional increase, if at all, in the limits to investment by foreign players in Indian defense industry beyond the current limit of 26 per cent, to 49 per cent. The DIPP, in its discussion paper, was considering hiking FDI limit up to 74 per cent, and even 100 per cent in some cases.

The Indian Ministry of Commerce allowed the participation of the private sector in the defense industry in May 2001, permitting 100 per cent equity with a maximum of 26 per cent of FDI, subject to licensing. Under the Defense Procurement Procedure (DPP) 2008, limit was raised to 49 per cent FDI on a case-by-case basis. But the Foreign Investment Promotion Board (FIPB) has not, so far, approved the formation of a venture with a 49 per cent FDI component.

FICCI sees little reason to permit FDI above 26 per cent, considering the existing FDI into the Indian defense sector, saying in a statement, “The 26% FDI cap in the defense sector has already attracted top overseas defense OEMs like BAe, EADS, Sikorsky, Lockheed Martin, Electtronica Defence Systems, etc to hugely invest in India’s defense sector. Therefore, any increase in FDI Cap in a strategic sector like defense will require careful thinking and analysis.”

The statement says, “Globally, there are restrictions on allowing foreign capital in strategic sectors like defense for safeguarding of national security interests,” adding that, “FDI & transfer of technology are not always directly proportional, so raising FDI is no guarantee for true transfer of technology. The fact is that leveraging latest technologies from overseas suppliers would be difficult even if the FDI ceiling were raised as the OEMs exercise no control over the release of technology which is exclusively under their government’s control.”

“FICCI strongly believes that India would continue to attract OEMs for co-development and JVs at the existing FDI ceiling of 26%. This is so because India and China are only two countries where the spending on new defense platforms and systems will continue to grow in the post–global economic crisis period. In western countries, firstly, the defense markets are more or less saturated and secondly, the defense budgets have already started declining in the post economic crises period. For example in USA even a program like F-22 was capped and their exports to Japan have been prohibited though Japan wanted to import F-22. Thus India is undoubtedly a promising destination for the foreign defense players,” said the federation on Monday.

The statement cited the ‘significant involvement of OEMs (Original Equipment Manufacturers) in the Indian defense sector at the existing 26% FDI Cap’ and ‘recent global trends of a measured approach on FDI in defense’ to explain the reasons for this stance, pointing out, “Countries like Germany, China, South Korea, and Canada have recently revised their FDI policies in defense, post September 11, 2001 (9/11), making the policies much more stringent. They have inducted methodologies to punitively scrutinize FDI inflows in this sensitive and strategic sector.”

According to FICCI, an increase of the limit of FDI to 49 per cent should conditional upon ‘linkage with the full platforms being produced’, ‘a minimum capitalization of US$100 million’ and induction of proprietary technology content in the JV as per the requirement of the country and should form ‘the basis of further indigenous technological development’.

FICCI also prescribes other conditions for raising the FDI limit, saying the joint venture should provide an undertaking to source between 50 per cent to 70 per cent of their ‘components/subsystems by value, indigenously, by nurturing tier-ised Indian vendor industries’, export obligations worth ten times the equity should be committed by the OEM within ten years of entering into the contract, technology received should have no restrictions on its global exploitations once cleared by the government of the home country.

“Post the transfer no retrospective law should be applicable to restrict the technology exploitation. All these should be in writing from by the home country government of the OEM/defence major. (Since there are dual use technology restrictions and a technology denial regime in many developed countries),” says FICCI in its statement, adding, “The companies cleared with more than 26% FDI should not be eligible for ‘Make’ funding.”

FICCI also warns against further dilution of 51 per cent Indian ownership, saying management should remain Indian with transparency of transaction between shareholders. “All requests for up to 49% FDI must be linked with the fact that these companies will qualify for participation in the “Buy & Make Indian” category projects. Therefore, they must be mandated to at least 20% extra indigenous content in their products than the currently stipulated 50% limit applicable for all other Indian companies within 26% FDI limits,” the statement adds.

This comes after a report published in May by another industry body, the Confederation of Indian Industry (CII), which too argued for easing of limits on Foreign Direct Investment (FDI) up to 49 per cent in this sector. The CII report said, “More than 50 percent of the CII members had a view that increasing the FDI limit to 49 percent would be beneficial.”

The CII report cited conditions for allowing such an increase in FDI limits, saying, the existing 26 per cent FDI in this segment may be increased subject to the following:

1. JV should also be engaged in R&D (Research and Development) and the IPR (Intellectual Property Rights) should rest with JV.
2. Foreign partner should ensure JV access to the global market (subject to government approval).
3. Foreign partner should bring high level specialized technology that is not easily available.

The report said, “The FDI issue is driven by a number of factors comprising: sovereignty concerns in respect to the ownership of core strategic industries like defence; Government’s desire rapidly to acquire more advanced technologies; the assistance foreign players can provide to SMEs (Small and Medium Enterprises); and the concerns of the larger players, both private and DPSUs (Defense Public Sector Units), that greater foreign involvement would be at the expense of their own businesses.”

CII had also pointed out that ‘Restricting the limit of FDI to 26 per cent has been challenged by certain foreign companies as they believe that it acts as an inhibiting factor towards their entry into the Indian defence market’. “Despite the attractive pipeline of projects issuing from the Ministry of Defense, certain foreign vendors feel that, where ToT is involved, the returns likely to be generated on the basis of current FDI regulations, coupled with the lack of control they would have over the technologies and know‐how they are being asked to provide, makes entry in to the Indian market an unattractive proposition,” said CII in its report, adding, “The result has been limited FDI inflows to India, with a total of only INR 7 Mn between April 2000 and February 2009 (As per the DIPP FDI Statistics, February 2009).”

According to CII, “The case against increasing the limits for FDI is founded primarily in Indian sovereignty. It is believed that allowing greater levels of FDI, even below 49 per cent level, would increase the amount of control exercised by foreign partners and this in turn would reduce the actual level of indigenisation and maintain the reliance on foreign suppliers. Also, it is believed that that the level of technology required by the country can be achieved within the existing FDI limits and it is for the domestic industry players to rise to the challenge and ensure that they capture the ‘know‐why’ along with the “know‐how” of manufacturing techniques, technology and efficiency.”

But the report also says, “One of the arguments put forward for increasing the FDI cap from 26 per cent to 49 per cent is that there is no significant difference in the control over a business between these levels. Opponents argue that a company’s board with 49 percent foreign members is significantly different in terms of influence, culture and management approach to one with 26 percent. Policy makers argue that an increase to 49 per cent would be largely ineffectual in achieving India’s main aim of technology enhancement, as foreign vendors will not transfer critical technologies without ownership and management control of the Indian venture. Several foreign vendors have themselves pointed out that an increase in FDI levels to 49 per cent would not be a panacea. The debate, they argue, should focus whether the FDI cap should remain at 26 per cent or be increased to 51 per cent or above. The clear expectation is that the FDI cap will be increased above 26 per cent. Despite the on‐going uncertainty as to whether the permissible FDI levels will be raised, many of the large foreign OEMs are already setting up joint ventures (JVs) in India, within the existing investment limits, but in the stated expectation that FDI limits will soon be increased.”

The Indian Secretary, Defense Production, RK Singh, said at the Eurosatory 2010 exhibition in Paris last month that the Ministry of Defense is in favor of continuing with the FDI limit of 26 percent, while releasing the CII-Deloitte report, Prospects for Global Defence Industry in the Indian defense market.

The Indian Army has issued a Request For Information (RFI) for towed artillery guns, effectively canceling the previous process for procurement of these weapons systems, in which BAE Systems was fielding the FH77 B05, (an upgraded version of the FH77 B02 in service with the army) against Singapore Technologies (ST) Kinetics’ iFH 2000.

The army, which had issued the RFI on Thursday, gave much cause for confusion, by initially alluding to ‘A Self Propelled Gun System mounted on a vehicle chassis such as CEASER 155 mm Self propelled Gun’. The line was deleted on Friday evening, to remove any doubts about the earlier tender process being canceled.

During the day, on Friday, sources in the Ministry of Defense confirmed that the RFI, indeed, indicated a fresh tender for 155 mm/52 caliber Towed Artillery Guns. The reason the ministry gave for this decision was the creation of a single-vendor situation due to the non-appearance of the ST Kinetics’ gun at the trials. The Defense Procurement Procedure (DPP) does not allow procurement if only a single vendor survives the tender process. ST Kinetics had earlier asked for a delay in the trials because the unit it planned to demonstrate in India was damaged in transit. Sources representing ST Kinetics, however, insisted the weapon had been brought to India and was at the Pokhran firing range in Rajasthan, along with the competing BAE Systems’ weapon, awaiting range time for the trials.

Ministry sources did not include as a reason, or allude to, the blacklisting of ST Kinetics in June last year on allegations of corruption and a letter reported to have been sent by the Central Bureau of Investigation (CBI) to the ministry, earlier this month, asking for the firm to be blacklisted, besides five others. In the interests of the army’s procurement process, the ministry had waived the blacklisting of ST Kinetics last December for the purpose of proceeding with trials for the tender process, subject to the final report submitted by the CBI.

Curiously, ST Kinetics had in January denied it had been blacklisted by the ministry.

The canceled tender was for 1580 units, of which 400 were to be purchased off the shelf and the rest 1180, to be license-produced in India by the Ordnance Factory Board (OFB) after transfer of technology. The Defense Acquisitions Council (DAC) had approved procurement on December 13, 2007 and a Request For Proposal (RFP) was issued on March 26, 2008. The Technical Evaluation Committee (TEC) shortlisted the weapons of two firms BAE Systems and ST Kinetics and scheduled the trials to commence from February 27, 2010. This is has not happened so far.

The army is also looking for other types of artillery, albeit in much smaller numbers.

The DAC had approved procurement of 145 units of 155 mm/39 Caliber Ultra Light Howitzers on June 19, 2006 and an RFP was issued to ten global vendors on January 14, 2008. ST Kinetics was the only one to submit a Technical and Commercial Offer for its Pegasus Light Weight Howitzer, on June 30, 2008. The TEC report was submitted to the Director General (Acquisitions) in the Ministry of Defense on March 23, 2009. Since this was, again, a single-vendor situation, the process was put on hold, around the time the company was first blacklisted.

The army has also tried to initiate procurement of light guns through a direct Foreign Military Sale (FMS), with a Letter of Request issued by the ministry on May 19, 2009, for BAE Systems M777 lightweight howitzer. An Indian Army technical delegation visited the US between January 09 and 16 this year for demonstrations of the weapons. The US government has proposed the provisioning of two units for trials and has requested 84 rounds of Indian ammunition for the purpose.A draft Letter of Request is under formulation by the Ministry of Defense for this purpose.

The army is currently holding trials, supposed to have begun on April 27, 2010, for 180 units of 155 mm/52 Caliber Wheeled Self Propelled Guns, which was approved by the DAC on June 19, 2006. The RFP for the weapons was issued on February 04, 2008 and Technical and Commercial Offers were received on June 23, 2008. Konstruckta Defence of Slovakia and Rheinmetall Defence of Germany were shortlisted for trials. Rheinmetall Defence is one of the six firms reported to have been recommended for blacklisting by the CBI earlier this month.

The army had been issued an RFP on August 29, 2008 for 100 units of 155 mm/52 Caliber Tracked Self Propelled Guns, which had been approved by the DAC on February 26, 2008. Eleven vendors had responded to the RFP, but only Rheinmetall Defence submitted a Technical and Commercial Offer, leading to a single-vendor situation, following which the process was canceled. The army then amended its parameters or General Staff Qualitative Requirements (GSQR) and issued a fresh RFP.

The Indian Army’s artillery procurement and modernization process has been jinxed since the controversy over the corruption scandal involving Bofors towed artillery procurement in the 1980s with corruption allegations and delays becoming the norm.

The first spurts of information on the results of the trials conducted by the Indian Air Force (IAF) for its 126 Medium Multi Role Combat Aircraft (MMRCA) tender are starting to trickle out.

A confident Bernhard Gerwart, Chief Executive Officer (CEO) of Military Air Systems at EADS Defence & Security, mingled with reporters in an informal chat with reporters in New Delhi on Tuesday and told them, “I believe we are compliant with all the requests that they have made. Yesterday, I had some meetings with representatives of the IAF and the MoD (Ministry of Defense) and, personally, I left with the impression that we had done well in the flight trials.”

But Herr Gerwert did offer a caveat, saying, “Mind you it’s just a feeling,” while pointing out the IAF had made no official statement to him.

At any rate he confirmed separately to StratPost, he would be sleeping easier after getting these vibes. While this is hardly definitive confirmation of the Eurofighter Typhoon having performed well in the trials from the perspective of the IAF, it is perhaps indicative of the feedback given by the IAF to representatives of the company.

And while Gerwert didn’t know if the IAF would come up with a short list or a ‘long list’, the issue of a down select remains open to question. It remains unclear whether any possible shortlist issued by the IAF would merely be an indication of preference or would actually result in the elimination of any of the contestants.

German Ambassador to India, Thomas Matussek, too, weighed in. “We have to see this in the geo-strategic context. Your security is our security,” he said. Did he think that if the MMRCA comes down to being a political decision, the four-European nations backing EADS would have the political capital to compete with the US? “The simple answer is ‘yes’. We’re easily on the same par as the United States,” he said.

The IAF is expected to submit its report on its evaluation of the six aircraft imminently, and industry watchers have been actively trying to get a sense of how it will play out. With the IAF enforcing a robust lockdown on any seepage of information so long as the report remains in their domain, defense journalists have been reduced to speculation on the play-out of the tender process.

Not surprisingly, reporters are straining their eyes trying to read between the lines of the statements issued by personalities such as Herr Gerwert and cryptic comments of IAF officers in private conversation, in the absence of any official indications.

There are some who argue that it would be in the interest of the IAF to indicate the results of the trials and its preferences, to make sure their views are not deviated from when the matter is laid before the Ministry of Defense. There are others who think this would be irrelevant, anticipating the IAF to indicate no clear preference one way or the other. Boeing’s F/A-18 Super Hornet, Lockheed Martin’s F-16, Saab’s Gripen IN, Dassault’s Rafale and the MiG-35 are the other aircraft competing in the tender.

But IAF officials admit to being eminently aware of the possibility of the conclusions of the report becoming public, once it is submitted to the ministry. And all concerned agree, some interesting times lie ahead, when that happens.

This blog has been modified from the originally published version, with a different quote attributed to Bernhard Gerwart.

The Indian armed forces have built up a regular routine for scandal. The latest, involving the Engineer-in-Chief of the Indian Army, Lieutenant General AK Nanda who has been accused of attempting sexual misconduct with the wife of his Technical Secretary, Colonel CPS Pasricha, comes after the expose of Commodore Sukhjinder Singh, in which case a CD emerged containing over a hundred photographs of the naval officer in various sartorial states with an unknown woman of apparently foreign origin.

Earlier this year saw three generals being hauled up over alleged improprieties in a land transfer adjacent to a military station, with a fourth being rumored to be involved as well.

And this is just 2010.

On Thursday, the Ministry of Defense admitted being clueless of l’affaire de l’general, saying no information could be found regarding the travel of the delegation headed by the Engineer-in-Chief to Israel last month or the alleged incident in question. “No file, no paper – this is an issue about which they are not aware,” said one mandarin at the ministry.

Glued to television sets and constantly answering telephone inquiries from journalists about the issue, army officers, in damage control mode, predictably denied any resignation, a la Sukhna.

While conceding that there were allegations against a person and the army said, “It has been found on preliminary investigation that there are a number of loopholes in the account of the allegations,” and that General Nanda remains the Engineer-in-Chief, having not, so far, put in his papers.

The general’s wife, Neerja Nanda, who was also in Israel during the visit, was interviewed by Vishal Thapar at NewsX, who asked her if the general met Mrs. Pasricha there. “What do you mean ‘meet’?” was the question in response.

It is also significant that senior army officers said there were ‘interested parties’ and ‘rumor-mongering’ in this matter, without elaborating further. It appears that a premature departure from office can make a succession to the chair in question uncertain, allowing perhaps, a wildcard entry.

With such a predicament possibly accruing benefits to brother officers, it was hinted that scandals can be motivated and that promotion to the top ranks of the army can also be secured by leaking scandals and precipitating sensation.

Most journalists covering the defense ministry predict a repeat play-out of the Sukhna scandal, with initial abject denials with a slow trickle of information over a month or so, confirming the news reports in question.

In contrast, when the scandal over the impropriety committed by Commodore Sukhjinder Singh broke, the Indian Navy calmly admitted everything there was to admit (although this might have been a result of the fact that CDs with photographs of the officer were already in possession of journalists). The result was the news was confirmed and carried, and the navy, being seen to be taking the appropriate action in the matter, came out looking good.

One journalist ended up hoping the Indian Air Force (IAF) was zipped up.

Indian governmental institutions remain unmoved by the disclosures on Tuesday of the large-scale penetration of Indian computer systems and the theft of data, including classified, restricted and secret.

The Ministry of External Affairs had nothing to say in reaction to details in the report, Shadows in the Cloud, published by a collaboration between the Information Warfare Monitor and the Shadowserver Foundation, outlining data theft and system penetration in Indian embassies. The Ministry of Defense was similarly quiet, with no response forthcoming, to questions posed by news reporters.

But privately, sources in the Defense Ministry and the armed forces appeared merely satisfied that most of the data stolen was already in the public domain. “Institutions like the Institute for Defense Studies and Analyses (IDSA) and the National Maritime Foundation (NMF) work mainly with data that’s in the open,” said one officer. A source at the NMF, who declined to be identified for the purpose of this report, too said the same, but admitted, “In spite of the nature of our data, it is troubling that our systems are so vulnerable and open to attacks. Clearly we need to take a hard look at our system security.”

Sources that StratPost spoke to at the National Defense College (NDC), who again declined to be identified for this report, admitted a larger problem. “It is clear that this is an issue of national security and affects assets that are strategic in nature. But so far we have failed to put together a unified approach in dealing with the problem. While the armed forces and the intelligence agencies do have their own initiatives for cyber security, nobody seems to be talking to each other. Naturally, this leads to duplication and a lack of focus,” said one source at the NDC.

Another officer at the Ministry of Defense, also blamed the defensive mindset that prevails in the Indian security establishment. “Strategy is by nature offensive. If we want to achieve a robust cyber policy, we need to establish cyber deterrence, on the lines of nuclear deterrence, at least at some level. This requires us to take an offensive posture and demonstrate our potential. After all, cyber operations can be used as weapons against strategic targets too,” he said.

While the US Pentagon is already actively discussing the setting up of a doctrine for cyber operations, which would provide solutions for the determination of the nature of cyber operations and, for instance, when and whether they constitute an act of war. India has no such initiative at present, with only some individual services, forces and agencies arriving at their own independent opinions on the matter.

Cyber security analyst Subimal Bhattacharjee, who also heads a multinational defense corporation in India, thinks the penetrations were more of a show of strength, considering the public nature of most of the documents stolen. But he also thinks India needs a national approach. “Indian institutions are working hard to secure their systems and the effort is sincere. But all of this is not adding up to a national strategic plan.”

For starters, he recommends a major audit of all critical networks and then the creation of a national cyber security plan to lead to a national apparatus for cyber security. “The government should quickly enact a national critical infrastructure protection policy which will cover intelligence, defensive and offensive functions. All the islands of cyber defence activities in the defence forces, research labs, academic institutions and in the corporate sectors should be integrated into a common entity so that coordinated responses can be attained,” says Bhattacharjee.

Gulshan Luthra, editor of India Strategic, one of the defense news publications that was penetrated, is hiking security measures. “While much of the data is in the public domain, often we do have sensitive information like contact details of subscribers, background information for exclusive stories and data gathered from closed-door seminars. Being a media organization, we cannot eschew the internet. But we realize the security imperatives and to start with, we have decided to move all such sensitive information to stand-alone computers,” he says.

Luthra, who is a member of the Governing Body of the Institute for Defense Studies and Analyses (IDSA), an institution that was also reported by the study to have been penetrated, also thinks cyber security is not taken very seriously by officials in the government. Talking from experience, he says “Often senior officers use personal assistants to access emails and other information on computers, adding to the number of people with access and knowledge of what could be sensitive information. This is because most of them have no idea about computer systems and have a mindset which is not security conscious.”

Ankit Fadia, author of The Unofficial Guide to Ethical Hacking, thinks creating skilled manpower in India is a real problem, and says there is a dearth of institutions for training individuals in cyber operations. “Where is the talent going to come from?” he asks. Not surprised by the penetrations, he says, “We tend to wait for something to happen before we do anything.”

The annual report released by the Indian Ministry of Defense for the year 2009-’10, in which it has expressed its ‘concern with the worsening security situation in Pakistan’, has published figures on terrorist infiltration into Jammu and Kashmir that appear considerably more conservative in comparison to the assessments made by the state police and the Ministry of Home Affairs, India’s internal security ministry.

Although the ministry quoted from the report, in a statement released late on Monday entitled India Expresses Concern Over Continuing Infiltration in Jammu and Kashmir, saying, “The continued infiltrations across the LoC (Line of Control) and the existence of terrorist camps across the India-Pak border (however), demonstrate the continuing ambivalence of Pakistan in its actions against terrorist organizations,” it also said, “All parameters of proxy war are at an all time low and the current situation indicated a shift towards normalcy and peace… the ceasefire on the borders / LoC is holding out with a few minor aberrations.”

The ministry report said that during the period between April 01, 2009 to February 28, 2010, 213 terrorists were killed and 68 apprehended in encounters with the Armed Forces. Interestingly, the report also cites 33 infiltration bids with 50 dead terrorists in the same period, a figure that appears substantially more sober in comparison to the figures attributed to the Ministry of Home Affairs and the Jammu and Kashmir State Police.

A report entitled Jammu and Kashmir Assessment – Year 2010, compiled by the New Delhi-based Institute for Conflict Management-run South Asia Terrorism Portal (SATP) says, “The MHA’s year-end review (data till November) stated that, during 2009, 473 infiltration bids were attempted, out of which 367 were foiled. According to infiltration figures compiled by the Multi-Agency Center (MAC), the nodal agency for all terrorism-related intelligence under the Union Home Ministry, while 93 terrorists were intercepted and neutralized during the 473 infiltration attempts, and 227 retreated into Pakistan on being intercepted, 110 terrorists managed to give the border forces a slip.”

The SATP report also says the Jammu and Kashmir Director General of Police put the infiltration-bid figure at 433, up by 91 from 2008. “According to J&K Police figures 342 infiltration attempts were made from across the border in 2008, while 2007 and 2006 reported 535 and 573 such attempts respectively along the LoC and International Border (IB) in J&K,” says the SATP in its report, also adding, “Army Chief General Deepak Kapoor, on January 14, said the infiltration level had increased, with 110 terrorists managing to sneak in, till November, in 2009, as compared to 57 in 2008.”

The Singapore-based arms firm, ST (Singapore Technologies) Kinetics, which was earlier reported to have been blacklisted, has questioned such a description of itself and has offered its books up for scrutiny by Indian agencies.

The Indian Ministry of Defense had blacklisted ST Kinetics besides six other companies in June last year for alleged involvement in the deals tainted by corruption discovered with the arrest of the former Director General of Ordinance Factories, Sudipta Ghosh.

ST Kinetics was cleared to proceed for trials of its products last December, subject to the report submitted by the CBI (Central Bureau of Investigation), which is investigating the allegations of corruption.

Brigadier General Patrick Choy, Executive Vice President at Singapore Technologies Engineering stressed his company hasn’t been blacklisted and that the CBI has written a letter to the Indian Ministry of External Affairs, a few months ago, clarifying that the company had not been blacklisted. “We haven’t committed any misdemeanors,” said Choy.

According to him, ST Kinetics decided to pitch its products to India with local partners to establish a base here and cater to any offset requirements that may come up. They offered their assault rifle to the OFB (Ordinance Factories Board), which was tested and approved by both the OFB as well as the Ministry of Home Affairs. The company then applied to the Ministry of Defense for a collaboration with the OFB on May 15 last year, but two days later, an FIR (First Information Report) was lodged against the OFB Director General Sudipta Ghosh by the CBI alleging corruption, which put a stop to the process and all operations with the company were put on hold the following month.

General Choy said the company had written to the Indian government, offering full cooperation with the CBI. “We met the CBI in October and some senior officials of the CBI in Singapore in November-end. We have answered all the questions the CBI asked. But until today the company is not clear as to exactly what the issues are. We have not been told specifically about any allegations,” he said.

“We have made an offer to the CBI to open our books. The CBI can send a team to audit our books. We have very strict corporate governance rules, with limits to the usage of cash and due diligence,” stressed Choy.

The Indian Army is to conduct trials of the iFH 2000 Towed Howitzer next month. ST Kinetics is also offering India its 155 mm 39 Caliber Pegasus Light Weight Howitzer, its SAR 21 assault rifle, as well as its Spider Light Strike Vehicle. However, the Indian Chief of Army Staff (COAS) General Deepak Kapoor indicated on Thursday that the government was also looking looking at the Foreign Military Sales (FMS) route to acquire light guns, in case the it was unable for any reason to procure them through an open tender process. The Telegraph had reported earlier this month that India would be looking to purchase light guns through FMS from the US.

The Indian Defense Ministry today allowed multi-vendor user-trials for five categories of weapons systems to go ahead, after they were held up following allegations of corruption against two vendors, ST (Singapore Technologies) Kinetics and Israel Military Industries (IMI).

But while trials are to go ahead, any further progress and decisions with regard to the tenders will be subject to the report submitted by the CBI (Central Bureau of Investigation), which has been investigating allegations of corruption.

This comes after ST Kinetics and IMI were blacklisted by the Ministry of Defense in June for alleged involvement in the tenders that were tainted by corruption discovered after the arrest of the former Director General Ordinance Factories and Chairman of the Ordinance Factory Board (OFB), Sudipta Ghosh.

Seven companies were blacklisted by the Ministry of Defense at that time, including the two listed above.

Singapore Technologies was in the running for a US $ 650 million deal for 155 mm towed artillery guns to be supplied to the Indian Army. A subsidiary of Singapore Technologies, ST Kinetics was bidding to sell 145 units to the army. IMI was contracted at the end of March by the OFB to build five artillery munition factories in the Indian state of Bihar at a cost of $ 240 million, over a three-year period. The factories were also to have produced shells for Bofors artillery guns.

The five weapons systems for which user-trials are to go ahead are:

155 mm towed howitzers

Light Strike Vehicle (for paratroops and Special Forces)

Lightweight Assault Rifles

High zone Bi-modular System

Armored Fighting Vehicle Protection System

While the multi-vendor trials for the first three systems were held up because of the blacklisting of ST Kinetics, the trials for the last two systems were frozen because of the blacklisting of IMI.

But the army has been pushing for trials to take place to prevent amplification of delays in defense acquisition. Their logic is that even if the blacklisted companies don’t make it through the trials process, some other company could be selected and delays in the procurement process could be prevented. If, however, they do make it through the trials, the case would still be subject to the CBI investigation report.

The army has been plagued by delays in defense procurement which has made its modernization process an obstacle course. The army has not been able to buy any artillery guns since the Bofors howitzers bought in the mid-1980s. The blacklisting of vendors for wrongdoing has also been especially to the detriment of artillery acquisition, with Bofors and Denel both being considered out of the running for acquisition of artillery guns.

The armed forces have often complained that the blacklisting of even a single company on charges of corruption often freezes multiple tender processes for a variety of different weapons systems, simply because that particular company has bid for all those tenders. They also point out that freezing trials and tender processes leaves the armed forces interminably bereft of new equipment, even though the products of other, non-blacklisted vendors are available as options. This can also result in the raising of prices by non-blacklisted vendors who are still in the running, in the absence of a competitor.

Interestingly, some officials at the Ministry of Defense have noted the coincidence between the recent, frequent exchange of visits between military officials of Israel and India and the green light to user-trials, which also include the participation of IMI.

The Director General of the Israeli Ministry of Defense, Brigadier General Pinchas Buchris is to arrive in India to hold meetings on Tuesday, with officials from the Indian Ministry of Defense and security establishment.

General Buchris, a retired army officer who is roughly equivalent to the Indian Defense Secretary, is expected to meet the Defense Minister AK Antony, Defense Secretary Pradeep Kumar, National Security Adviser MK Narayanan and the three service chiefs, General Deepak Kapoor, Admiral Nirmal Verma and Air Chief Marshal PV Naik.

The agenda of his meetings is reported by sources to be related to the Indo-Israeli Joint Working Groups on Counter-Terrorism and Defense Cooperation respectively, amongst other issues.

Significantly, this visit comes only two weeks after the visit to India of Lieutenant General Gabi Ashkenazi, the Chief of General Staff of the Israel Defense Forces. The Chief of Staff of the Indian Army, General Deepak Kapoor had also visited Israel in November, just a month before General Ashkenazi’s visit.

India and Israel have seen a substantial strengthening of ties in the field of defense cooperation and trade. Israel has become the single largest supplier of defense materiel to India. Besides specialized small arms and night vision devices, Israel is supplying India with Phalcon radars for AWACS platforms, Barak and Spyder missile systems and Unmanned Aerial Vehicles (UAVs). The two countries are also jointly developing Medium Range Surface-to-Air-Missile (MRSAM) systems and are closely cooperating in space, with India having launched an advanced Israeli spy satellite last year and Israel selling India a similar such satellite, which was launched last March.

An emphasis on intelligence-sharing and counter-terrorism efforts between the two countries has also been noticed, especially after the 26/11 Mumbai attacks which, notably, also targeted Israeli citizens. India is a much-favored destination for Israeli tourists and coming to India has become something of a rite of passage for Israelis, after completing their compulsory military service. Israel, along with other countries, issued urgent warnings of terror attacks on India a few months back.

This third official exchange in a span of a little more than a month indicates Indo-Israeli cooperation to be gathering even greater momentum.

Readers may also be interested to know that the General Buchris has resigned his position and is expected to leave office in mid-January, according to the Jerusalem Post.