India hands out defence contracts

By Subir Bhaumik
BBC correspondent in Calcutta

Eight Indian companies have been given contracts to produce equipment for the country's armed forces.

It's the first time that private Indian firms have been allowed to make military goods since the government relaxed restrictions in 1999.

The value of the contracts is not known

Until now, all defence equipment produced in India were made by state-owned firms.

Senior defence ministry officials told the BBC that the eight firms were chosen from a list of 15 bidders.

They will produce a range of equipment from bullet-proof jackets to sophisticated avionics for combat aircraft.

Some of the big names in Indian industry like Mahindra & Mahindra and Larsen & Toubro have been granted licences for producing defence equipment.

The value of the contracts or the production schedule are not yet known.

But Indian military's procurement budget for the current financial year is about 140 billion rupees (nearly $3bn).

Defence exports

The defence production officials, who are in Calcutta, say besides producing for the Indian military the companies could also sell their products to foreign buyers.

But they would have to furnish the details of their exports to the government.

India's defence exports, consisting of mainly small arms like the 5.56 INSAS assault rifles, have risen to $140m this year and is likely to rise further.

They are produced by state-owned ordnance factories, mostly producing improved versions of old Soviet designed weapons.

But in recent arms shows outside the country, smaller nations from Africa and even Latin America have shown interest in a wide range of Indian defence products including combat aircraft.

Analysts say the private companies may start tie-ups with foreign companies for production in India which will bring down the cost of production.

Already some of these companies have started negotiations with Israeli companies for producing small war technologies like border surveillance equipment.