Defence Trade and Technology Initiative (DTTI) , if implemented in true spirit, will add a new dimension to India-US defence relations as it has the potentials of turning the buyer seller relationship into co-producer and co–developer of weapons systems.
But the US defence industry is concerned with roadblocks enunciated in Indian FDI policy announced just on the day of US Defence Secretary Chuck Hagel’s arrival in New Delhi. This was pointed out during the Hagel- Jaitley meeting and publicly raised by Hagel during the ORF public lecture, as he sought clarifications from India on the 49 percent FDI limit in joint ventures.
However, the US defence industry is enthused by its emergence of top supplier of weapon systems and platforms to India during the last three years surpassing Russia, France and Israel which were the top three defence suppliers in recent years. Since the Indian armed forces are likely to acquire defence systems worth over US$ 100 billion in the next decade, the US defence industry is eager to grab a big chunk of possible acquisitions.
However, since Indian defence ministry has in recent years introduced a policy of indigenization in arms industry through the offset limits of over 30 to 50 percent for weapon acquisitions worth over US$ 300 million, the multinational arms companies are gradually adjusting their defence exports policy to India in order to win multi- billion dollar deals.
The DTTI was first chalked out in February 2012 but lying dormant since then because of limitations in FDI policy. Defence industry experts point out that any multinational defence company would not be willing to transfer technology purely as a goodwill gesture. The US arms industry is not owned by Pentagon; hence any decision by US companies would be dictated purely on commercial terms. They would need something equivalent in return.
Hence, even though the India MoD and Pentagon have nominated their points person to conduct negotiations on way to move forward, the two sides are likely to indulge in some symbolic exchanges and may take up a few systems for joint development, but on the back of this the US arms industry would cajole Indian side to acquire the presently developed and in use weapon systems with US armed forces on Foreign Military Sales policy.
The two governments have proposed and exchanged areas of cooperation to operationalize the DTTI as outlined in the Ministry of Defence Technology Perspective and capability roadmap. In the official statement after the Hagel-Jaitley meeting it was said “With co-development and co-production of defence products in mind, India and the United States today agreed to take the Defense Technology and Trade Initiative (DTTI) forward”.
India has nominated the Secretary of Defence Production as the Indian nodal officer whereas the US side will be represented by Frank Kendall who is the Undersecretary for acquisition, technology and licensing at the Pentagon. The decision to nominate Indian defence production secretary is considered very significant as he is well empowered to take sensitive decisions considering the fact that he will only be reporting to the Defence Minister Jaitley. The DTTI was earlier headed by US Deputy Secretary of Defence Ashton Carter and Indian National Security Advisor Shiv Shankar Menon who incidentally are both out of office.
Defence industry insiders point out that at the most the US defence industry can agree to manufacture their systems in India but only on the conditions of providing majority stakes in the joint venture companies to be set up in India. Till now the US companies have been able to sell most of their weapon systems on Foreign Military Sales (FMS) terms, and the Indian MoD was more than happy to oblige, as it has never generated any controversy of kickbacks or any irregularities.
Banking on this confidence level, the US industry has achieved the status of top arms supplier to India in the last three years. According to the data released by the Defence Minister Jailey in Parliament out of total sum of Rs 83,458 crores spent on defence imports by Indian armed forces the US bagged the maximum order worth Rs 32,615 crores , which was followed by Russia (Rs 25,364 crores) and France (Rs 12, 047 crores) , Israel (Rs 3,389 crores).
Emboldened by this confidence shown on US defence companies by the Indian armed forces the US side is trying to lure Indian MoD with DTTI , which has once again been revived by the Pentagon with the hope that the new Indian defence establishment will move forward and deepen defence cooperation with US. The DTTI was followed up by an India-US joint declaration on defence cooperation when Prime Minister Manmohan Singh visited Washington in September 2009. However all these remained dormant because of pause in overall strategic relations between the two countries.
Interestingly the two sides have also agreed to extend the ten year India-US defence framework, the first term of which will last till middle of 2015. Under this umbrella the two countries hope to further expand the scope of defence cooperation with India.
The Pentagon was quick to grab the opportunity of interacting with the new Indian defence establishment under Arun Jaitley who is known to have pro US leanings. The US side had only a week ago organized the fifth strategic dialogue under the co-chairmanship of US Secretary of State John Kerry and Indian External Affairs Minister Sushma Swaraj. This was followed up immediately by the visit of Mr Chuck Hagel, the defence secretary.
The ball has clearly kicked in motion, which will be further lobbed in Indian court when Indian Prime Minister Narendra Modi visits Washington in the last week of September. Modi by that time will have to show some concrete decisions on his defence acquisition policy.
The US has been trying to get closer to Indian defence establishment since early nineties when lieutenant General Kickleighter was sent to India, the head of US Pacific Command , to restart a new era of defence cooperation with India. This led to the commencement of first bilateral Malabar Naval exercises between the two navies in 1992 and which was followed by the first visit of US Defence Secretary William Cohen in 1995 , which led to the setting up of Defence Policy Group and the signing of New Framework Agreement (NFA). To further deepen defence exchanges between the two countries set up Defence Joint Working Group, Defence Procurement and Production Group, Senior Technology Security Group , the Joint technical Group, the Joint Steering Committees between the two armed forces etc.
However, the relation was affected post India’s nuclear test which could only be revived in 2002. The first US export to Indian Army worth US$ 240 million was the Weapon Locating Radars in 2004 and since then the US side has moved very fast to the consternation of Indian traditional partners like Russia and France.
The US side had even offered India the BMD systems, which surprised many considering the still evolving level of defence relations between the two nations. To win Indian defence contracts the Pentagon even waived conditions of CISMOA, LSA, BECA to be able to obtain US defence systems. Pentagon claimed that US has signed these agreements with over 80 countries. India did sign CISMOA for the USS Trenton (INS Jalashwa) but the hue and cry over this in India compelled Indian defence establishment to sign future deals without this clause, otherwise the US companies had to forego Indian defence contracts.
Under the DTTI the two sides may start working on the advanced version of anti tank Javelin missiles. Indian side had earlier negotiated for the present version of Javelin missiles but the deal has not yet materialized. Hence it is very obvious that the Javelin joint development program can only be operationalized if India will give the nod for acquiring a few hundred Javelins off the shelf.
Quoting Modi after his meeting with Chuck Hagel, a PMO release said, “The prime minister underlined the importance of defence relations in the overall strategic partnership between the two countries and indicated his desire to see progress in defence relations, including in defence manufacturing in India, technology transfer in defence, exercises and higher studies in the field of defence”.
However, to what extent the US would be able to transform its agreed intent in real projects at the ground level remains to be seen. But the US defence industry seems optimistic. Immediately after the Hagel-Jaitley meeting in Delhi, Frank Kendall met his counterpart the Indian defence production secretary and later the USIBC held a meeting during which the USIBC acting President Diane Farrell said ,”Secretary Hagel’s visit marks an exciting new chapter in not only our bilateral strategic relationship, but in laying the foundation for greater defense industrial cooperation “.
The net benefit of the DTTI will be felt on both sides, with American companies eager to partner more closely with Indian industry while harnessing India’s vast manufacturing, research, engineering, and knowledge base.