Saab’s Make In India Gambit
Swedish arms company Saab has announced its intention to set up a manufacturing facility in India for the iconic Carl-Gustaf shoulder-fired rocket system, which is used as an anti-tank and bunker-busting weapon by leading armies across the world.
Saab has sought permission of the Indian government for 100 per cent foreign direct investment (FDI) in setting up this facility, where it plans to start production of the latest version of the Carl-Gustaf M4 in 2024. An Indian subsidiary, Saab FFV, is currently under registration for this purpose.
For the company which once owned Bofors, this is a big step in aligning itself with the Make in India agenda.
“It is a natural step to set up a production facility for Carl-Gustaf M4 in India given the long and close association we have with the Indian Army as one of the foremost users of the system. We are glad to be able to contribute to the Government of India’s goals of developing a world- class defence industry and proud to offer the Indian armed forces our Carl-Gustaf M4 made in India,” Gorgen Johansson, Head, Business Area Dynamics, Saab announced in New Delhi on September 27.
100 per cent FDI sought
“We want 100 per cent FDI but could settle for 74 per cent (under the automatic route). We’re open,” Johansson said.
The progress of this Saab venture will be closely monitored by the global arms bazaar as a test of India’s avowed policy of being ownership agnostic with respect to defence manufacturing facilities as long as the Make in India and Aatmanirbhar Bharat (self-reliant India) agenda is being furthered.
Outcomes will provide clarity on whether local companies with foreign original equipment manufacturers (OEMs) ownership or subsidiaries of foreign entities will be treated as Indian for defence procurements reserved for Indian companies. Progressively, India is shutting down import of defence equipment with an overwhelming ‘Make in India’ emphasis.
There’s been tepid response so far to India’s policy of allowing 74 per cent FDI for defence manufacturing through the automatic route and 100 per cent through government permission in proposals which advance cutting-edge capability.
While welcoming the move, industry watchers cautioned that the Defence Acquisition Procedure (DAP) prescribes an FDI limit of 49 per cent on Indian companies bidding for defence contracts under procurement categories like Buy (Indian – indigenously designed, developed and manufactured), Buy Indian and Make-2, which makes the policy of allowing 74 per cent FDI in defence manufacturing through the automatic route infructuous with respect to a large proportion of procurements.
Limits on FDI questioned
“Saab’s move is a welcome one. We’ve been importing such weapon systems. FDI should be encouraged. But limiting FDI to 49 per cent in important procurement categories dilutes the objective of attracting foreign investment in defence and incentivising freer transfer of technology. There are many in industry who feel that these limitations should be removed,” says Rajiv Chib, India Partner of Insighteon Consulting. Analysts like him advocate ownership agnosticism in Indian companies to boost activity in defence industry.
There are some who question Saab’s move to get into a segment in which indigenous technologies are on the verge of maturing, for instance, the DRDO’s VSHORAD. But Chib feels that competition to home-grown technology will make it better.
An earlier version of the Carl-Gustaf, the M3, is being manufactured in India by the Advanced Weapons and Equipment India Limited (AWEIL), which was earlier a unit of the Ordnance Factory Board, in partnership with Saab. Ammunition for the M3, which is in the inventory of the Indian Army, is also made in India by Munitions India (MIL) under a similar arrangement. The Swedish company said it would continue the existing partnerships while charting the course for the future with its own manufacturing facility.
India Army’s longstanding supplier
“Saab will continue its partnership with MIL and AWEIL to manufacture the Carl-Gustaf weapon and its ammunition,” Johansson said. The Carl-Gustaf system has been in use with the Indian Army since the first agreement for production in India was signed in 1976. With a wide variety of ammunition, Carl-Gustaf has established itself as the main shoulder-launched weapon used by the Indian armed forces.
However, the new types of ammunition for the Indian-made M4 version will be imported from Sweden, Johansson clarified. Technologies for the launcher will be transferred to the Indian subsidiary. The M4 is used as a platoon anti-tank weapon with a kill range of 1,500 metres. At 7 kg, the M4 is significantly lighter than the earlier variants, can be carried loaded and has a contemporary red ball site which is compatible with night vision clip-ons.
“Saab FFV India will deploy complex technologies including the latest sighting technology and apply advanced manufacturing techniques like carbon fibre winding for the Carl Gustaf system including the latest M4 weapon,” a Saab statement elaborated.
