Modi’s advisers have vowed to change that, insisting on transfer of technology so that critical military equipment are designed and manufactured in India.
Benjamin Schwartz, USIBC’s director for defense and aerospace, said the new Indian policy offered a roadmap for establishing partnerships between US and Indian companies, but it raised some questions for the firms.
He said he was not in a position to name those companies concerned by the Indian policy, but there was a “general desire to see increased clarity” on several aspects, including the control of proprietary technologies.
Quality Issues
The USIBC also opposed a clause in the new rules that held foreign firms jointly responsible for the quality of the platforms provided to the military, saying legal liability is a significant factor in business decisions.
“We recommend the MoD (Ministry of Defence) affirm that foreign OEMs will not be liable for defects outside their company’s control,” the USIBC said.
Lockheed did not respond to a request for comment. Boeing, which is bidding for a separate contract to sell its F/A-18 Super Hornets for India’s aircraft carrier fleet, declined to comment on the USIBC letter, but the company’s India president, Pratyush Kumar, said there were concerns about Indian private firms’ lack of experience in the aerospace sector.
Only state-run Hindustan Aeronautics Ltd had made planes under licence, while some private players were starting from scratch, having never built even an aircraft component. Kumar said he could not find a single example worldwide of a private enterprise with limited experience building out a plane under transfer of technology.
“Look at Turkey, look at Japan, look at Brazil - look at multiple countries. In all cases there is a fine balancing act of co-opting the capabilities of both public and private enterprise,” he said.
India’s defence ministry offered no response to the concerns expressed by the trade lobbying group on the strategic partnership model, which will also apply to building submarines and helicopters as part of a $150 billion modernisation drive.
But an official, referring to sensitive technology, said the government has made clear in the past that foreign firms can be allowed to increase their stake beyond 49% if the technology they bring in is state-of-the art.
“It can be done on a case-to-case basis,” the official said.
Mukesh Aghi, president of the US-India Strategic Partnership Forum, said that despite the starting problems, defence manufacturing looked set to be a breakthrough area in ties between India and the United States.
“It’s the next big thing. There is strong support from the (US President Donald) Trump administration to take this forward.”