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Delays Plague Indian Army Comm Program

April 25, 2015 (Photo Credit: ROUF BHAT/AFP/Getty Images)

NEW DELHI — Procedural disputes are delaying development of the Indian Army's Tactical Communication System (TCS), the first weapon project slated for the "Make in India" category, said a Ministry of Defence source.

Two development agencies (DAs) were tapped to compete for TCS. The first is a consortium composed of private sector defense companies, and the other is state-owned Bharat Electronics Ltd. (BEL). The private company consortium said it would not proceed with development of a TCS prototype until it receives the same tax incentives as are given to BEL, and insists that the intellectual property rights of the system be vested with the developer and not the Ministry of Defence.

Since the selection of the DAs in early 2014, no headway has been made in the development of a TCS prototype, the source added.

The private sector DA includes Larsen & Toubro, Tata Power SED and HCL Ltd., which have formed a special purpose vehicle based on an equity-sharing basis.

Under the "Make in India" category, each DA will develop two TCS prototypes at a cost of $100 million each. The government will finance 80 percent of the costs for the prototypes, which will then be evaluated, tested on the ground and one will be shortlisted for production. The process is expected to take about 36 months.

The Army will use TCS to provide a dedicated mobile communication system with anti-jamming and electronic countermeasures capabilities.

Demanding a level playing field, an executive with the private sector DA said, "The Indian government has already created facilities in BEL which would be utilized by them free of cost, whereas the private sector consortium would have to make investments that would be loaded on our offer. Ideally, the depreciation and interest of the MoD-funded facilities should at least be loaded on BEL to ensure a level playing field. This is still an issue to be resolved."

In addition, because BEL is state-owned, it gets special tax incentives on the import of technologies that are not imparted to private sector companies.

An executive from another company in the private- sector DA said, "The major problem is legal as the special purpose vehicle formed by private consortia is not yet recognized by MoD. However, in their efforts to move forward, the qualitative requirements have been shared by the user [Indian Army] for DAs to respond with their costs for the prototype. That discussion is on currently. However, even if this is cleared, the legal clearance has to happen prior to disbursement of funding by MoD."

Since TCS would be a dedicated strategic project, the Army will want to ensure the technologies built into the prototype and the final system are "sanitized," an Indian Army official said, meaning the technologies are developed exclusively for the Army and will not be shared.

Uncertainty exists among the DAs about how the Army will ensure the technologies, whether homegrown or imported, are sanitized.

"I hope this process of sanitization does not become too much of an interference in the development," said the first executive.

"The DAs have to take an undertaking from the overseas equipment manufacturers for unrestricted use of the imported technologies. The norms for checks on technologies would be uniform for both DAs," the executive added.

TCS was conceived in 2000 but was delayed because the MoD was unable to decide in which category the TCS should be built. Initially, the plan was to build the project on a "Buy and Make" basis, which would involve overseas companies. But later, BEL urged the MoD to give it the contract since it involved a strategic project.

In 2012, the MoD decided to build the project in the "Make in India" category and in early 2014 shortlisted the two DAs.

The Army needs TCS as quickly as possible, an Army official said, expressing concern the procedural dispute will cause further delays. "Even Pakistan has developed its own TCS kind of project, and further delays of the Indian project will affect the combat worthiness of the Indian Army," the official added.

Email: vraghuvanshi@defensenews.com

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