Investment Restrictions, Lack of Local Expertise in Defence Hinder 'Make in India'

Israeli defence companies, IAI, Elbit and Rafael, are eyeing joint ventures with Indian companies for manufacturing UAVs, missiles, radars and other defence equipment.

“India is a key market and several projects are lined up under the Make in India initiative,” representatives from frontline Israeli defence companies said during a Indo-Israeli industry meeting organized by the Federation of Indian Chambers of Commerce and Industry (FICCI) in Delhi yesterday.

However, the major constraints are restrictions on foreign direct investments and stringent offsets policy, the representatives added.

"We want to establish JVs. We are not sure if it will involve equity but we are in the process of locating partners in the areas of UAVs, missile systems and loitering weapons and radars and communication," Joseph Betsalel, vice-president at IAI, said.

Moreover, lack of manufacturing expertise, quality standards, operational performance and risk management in Indian entities hampers the partnership expansion. "There is challenge of local content. There are no Indian made electronics, sensors, airborne quality metals, high quality castings. So it will only be 50 per cent Make in India," said Uzi Melamed, industrial cooperation director of Rafael.

Israeli companies are also expecting a series of changes in Indian procurement rules, like the inclusion of services and maintenance of systems as valid offsets, to improve ease of business.

"In the coming years maintenance will be a major area and we hope the defence procurement policy will allow maintenance for offsets,"  Betsalel of IAI added.