Monday, 22 October 2012

Setback for private defence industry

MoD might re-tender ambitious Future Infantry Combat Vehicle project, 2 years after calling for and getting bids

The private sector’s much tom-tommed opening into defence production, via the Future Infantry Combat Vehicle (FICV), intended to replace the army’s 2,600 BMP-2s at an estimated cost of Rs 50,000 crore, faces an uncertain future. The defence ministry (MoD) is contemplating scrapping the current tender and restarting anew. This comes after sitting for two years on the FICV proposals from three private sector consortia and one public sector entity.

In early 2010, MoD invited Tata Motors, the Mahindra Group, Larsen & Toubro and the MoD-owned Ordnance Factory Board (OFB) to give proposals to develop an FICV, a lightly armoured vehicle that carries infantry into battle alongside tank columns. After evaluating the four proposals, MoD was to select two “development partners”, who would then compete to develop a prototype each. The better of the two would be selected for the army.

But the MoD’s acquisitions wing, which must make the shortlist, now complains the tender (called an Expression of Interest, or EoI) did not define the criteria by which the winners would be selected. It wants a fresh EoI to be issued, with the criteria specified.
The wing cites the Defence Procurement Procedure (DPP) of 2008, where Para 22 of the “Make” category, covering the FICV project, says: “The EoI should also lay down the broad parameters of the evaluation process and acceptance criterion for the system under development.”

However, the MoD brass realises that cancelling the EoI (drawn up in the ministry) and going back to 2010 would involve a serious loss of credibility. Besides, the “Make” category itself outlines the acceptance criteria, specifying that, “the contribution of the Indian industry in the critical technology areas should be the key criterion in assessment of various proposals”.

The three private sector companies worry that restarting afresh would result in the loss of at least 18 months to two years as MoD prepares a new EoI and then goes through a fresh evaluation process. Meanwhile, the project teams the proposed vendors have set up for the project would continue to bleed money.

“We have already spent about Rs 28 crore on the FICV project. Now, we will have to evaluate our options to see how this programme is going to roll out. It has already been delayed by two years and we foresee at least another year’s delay,” says Brigadier (retired) Khutab Hai, who heads the Mahindra Group’s defence business.

The “Make” category of the DPP lays down the procedure for Indian industry to develop “high technology, complex systems”, to “ensure indigenous research, design, development and production of capabilities sought by the armed forces”. It also mandates that MoD will fund 80 per cent of the cost of developing each of the two FICV prototypes, while the shortlisted vendors will pay 20 per cent each. While the cost of developing and manufacturing 2,600 FICVs can only be roughly estimated, senior executives from two of the competing companies estimate the bill would add to about Rs 50,000 crore. This makes it India’s biggest-ever indigenous project.

According to the EoI, reviewed by Business Standard, FICV has been conceived as a multi-role platform that must perform three roles. First, it must be a battle-taxi providing “mobility in battle for infantry, so that it can keep pace with armour”. Second, it must “provide fire-support to the assaulting/dismounted infantry”, i.e. spray the enemy with machine gun and cannon fire as the dismounted infantrymen charge at them. Third, and most ambitious, FICV should hold its own on the mechanised battlefield, even against much more heavily armed tanks. The specifications say FICV should “destroy enemy tanks, infantry or fortifications in conjunction with armour or independently”.

The FICV must also have “adequate amphibious capability for crossing of water obstacles like canals, rivers and stretches of sea”; and be “air portable” (i.e. in a transport aircraft’s cargo hold, or slung under a helicopter with chains). Its firepower must include a “fire-and-forget” third-generation missile, a cannon and machine guns, operated through a “digital, fully integrated, fire control system, with state of the art sensors and all-weather surveillance devices”.

This would allow the FICV to destroy enemy tanks more than four km away, well before the tank can engage the FICV with its main gun. The EoI also demands the capability to destroy “attack helicopters and low-flying, fixed wing aircraft”.

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