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Indian Vehicle Program Hits Hurdle Over Company Selections

January 30, 2016 (Photo Credit: Noah Seelam/AFP/Getty Images)




NEW DELHI — India's $11 billion Future Infantry Combat Vehicle (FICV) program faces hurdles after private domestic companies objected to the Defence Ministry's nomination of state-owned Ordnance Factory Board as one of the program's Development Agencies (DA). 

The other DA's will be selected from among more than half a dozen competing private companies, and the MoD has extended the date of filing their bids to Feb. 16.

Under the Make India category, two DA's would be selected and the government would fund up to 80 percent of the prototypes. After trials, one of the DA's would be asked to produce the FICV.

When asked if the private companies endorse the nomination of OFB, Rajinder Bhatia, CEO of Bharat Forge, one of the competitors, said, "No comment. We hope this one-time exception and nomination would be discontinued as promised by the MoD."

However, an executive of another competitor openly disapproved of MoD's decision to nominate state-owned companies.

"The new players would contest that this short-listing of one vendor was announced after the expression of interest [EOI] was published, which did not have this qualification criteria. This constitutes a change, more like an after-thought. This ground is sufficient for retraction of the EOI," said an executive of Tata Group.

Another senior executive of a private company, also in the race, said there is confusion whether OFB will be a third DA in addition to two DA's to be selected from competing private companies.

Bhatia said the impression being given to industry and EOI recipients is that OFB will be the third DA.

In addition, selection of OFB by nomination goes against the purpose of the Make India policy, which proposes to boost the domestic defense company.

The EOIs were issued to domestic private major Mahindra; Bharat Forge; Larsen & Toubro; Punj Lloyd; Tata Power; Tata Motors; Pipavav Defence; Rolta India; and Titagarh Wagons. The second DA will now have to be selected from these private sector companies.

The FICV project has struggled since it was conceived nearly seven years ago and may not ever take off in the Make India category, said an Indian Army official.

The Army requires the FICV to have a life span of 32 years. The vehicle should be tracked and have amphibious capability with full combat load. It will ultimately replace existing Russian-made BMP-2 infantry combat vehicles.

Questions Over Selection of the DA 

"The basis of selection of a DA from among the private sector defense companies remains questionable as there is no strict yardstick to select the DA," said Nitin Mehta, a defense analyst here.

The commercial strength of the defense company is given priority over technical ability, according to the criteria formulated by the MoD.

"“Too much emphasis in the assessment of DAs has been laid on commercial and technical criteria, which should have already been taken into account during the feasibility study conducted for short-listing companies as potential DAs," said Khutub Hai, retired Indian Army brigadier general and managing director of Firmbase Consulting.

"Repeating the same criteria for final selection is a faulty method and only places emphasis on size of the company and the defense contracts executed earlier, even if such contracts have little in common with the FICV.”

Since commercial and technical criteria account for more than 60 percent of the assessment, Hai said, "only two or three large companies will qualify all the time.”

Meantime, the Army has pressed to upgrade existing BMP-2 infantry combat vehicles, ensuring against the delayed FICV project. The Army wants to upgrade these vehicles so they can remain in operation post-2017.





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