The expected hike in defence outlay in the 1998-99 Union budget has opened up a market for defence components in excess of Rs 2,400 crore.
The exit of a major source of supply, the US, in the wake of sanctions imposed against India for last weeks nuclear tests, has led to a rush of European, Israeli, Russian and South African armaments companies to bag defence deals in India. The cake is expected to become larger while the number of people to share it has fallen, said an excited executive of a foreign defence company.
The Indian defence market will boom thanks to a security-conscious BJP government.
The defence ministry purchases components, spares, and sub-systems for its aircraft, ships, field guns and several other weapons and vehicles from assorted foreign companies every year. This is in addition to major capital expenditure. Official sources said the purchases run into over Rs 2,000 crore and this year the purchase of components and equipment is likely to accelerate, with the ministry clearing upgradation and spares purchase plans.
US firms, considered the market leaders in defence components and technology, used to be the preferred suppliers for a wide range of equipment.
However with the sanctions putting a hold on over $500 million in pending sales and stopping all new sales, India will have to turn to firms from other countries.
Said a defence source, Many US suppliers like Lockheed Martin, Texas Instruments and others were number one in their respective fields; we preferred the number one company but now that this option is out, we have to look for alternatives.
French, British, Israeli and South African companies, which have Western technology and joint ventures with US firms, are expected to benefit the most. In fact, US companies may use this route for sales to India.
Russian companies are usually not favoured to supply components for Western-made equipment. Instead, Israeli companies are preferred for even Russian equipment.
Even in the case of indigenously-made weapons like the INS Delhi class battleship, major sub-systems are sourced from US companies. So the sanctions would hit even some indigenous hardware.
The sources said the sanctions would force defence sources to develop indigenous sources of components by giving technology to Indian companies.
Such an attempt was made three years ago after the break-up of the Soviet Union, when Indian defence forces had faced a crippling spares shortage of Russian-made hardware. However, the industry was not very enthused as the orders were for very small quantities.
