On March 04, Swedish defence major Saab announced that it had started construction of new Carl-Gustaf® manufacturing facility in India with a ground breaking ceremony.
Saab outlined the process of production in India wherein Saab FFVO India Pvt Ltd was established after receiving approval of 100 % foreign direct investment in defence in India.
“I am proud to start constructing our first facility outside Sweden for Carl-Gustaf, a product that has a long history with the Indian Armed Forces. We look forward to starting production of our excellent product, now engineered and made in India”, Görgen Johansson, Senior
Vice President and Head of Saab’s business area Dynamics was quoted in the press release.
Importantly Saab FFVO India factory will be the first foreign fully-owned defence production facility in India. It is a testament to the strong bilateral relationship between our countries says Håkan Jevrell, State Secretary for Foreign Trade, Sweden.
For success of the enterprise, Saab seeks to partner with Indian suppliers thereby meeting the requirements of “Make in India” for the systems manufactured in the facility.
Amongst the technologies being deployed at the factory, “latest sighting technology and advanced carbon fibre winding to manufacture Carl-Gustaf M4,” will be considered by Saab.
Saab’s success in establishing the first foreign enterprise to commence production provides important lessons for other such companies who are seeking to establish their footprint in India. Here are six pointers –
Firstly, Saab had a product – the 84 mm Rocket Launcher Carl Gustaf which has been in service in the Indian Army since 1976.
This is a virtually battle winning weapon system which has proved as a platoon fire support system with multiple options. There has been no suitable alternative that has been seen while the Soviet era RPG 7 V is one option that is not reliable and lacks the versatility in ammunition as the Carl Gustaf.
Thus, sustained demand from the user needs to be established.
Secondly meeting the conditions for 100 % FDI is essential. 100 % FDI has been approved vide Government vide Press Note No. 4(2020 Series) dated 17.09.2020 Issued by Department for Promotion of Industry and Internal Trade (DPIIT), Ministry of Commerce and Industry. The FDI proposal is valued at under ₹500 crore.
This is for defence industry subject to Industrial license under the Industries (Development & Regulation) Act, 1951 and Manufacturing of small arms and ammunition under the Arms Act, 1959.
The condition for 100 % FDI however is if the same is likely to result in access to modern technology or for other reasons to be recorded.
Other conditionalities envisaged are security clearance by the Ministry of Home Affairs and as per guidelines of the Ministry of Defence.
Thirdly willingness to deploy latest technologies at the factory is essential. Saab is placing latest sighting technology and advanced carbon fibre winding to manufacture Carl-Gustaf M4 in India.
Fourthly the investee company should be structured to be self-sufficient in the areas of product design and development.
The investee/joint venture company along with the manufacturing facility, should also have maintenance and life cycle support facility of the product being manufactured in India.
Foreign Investments in the Defence Sector are also subject to scrutiny on grounds of National Security and Government reserves the right to review any foreign investment in the Defence Sector that affects or may affect national security.
Fifthly partnering with Indian public and private sector companies is important. Saab has partnered with Indian companies to make parts or components for Saab’s products on the global market. Saab said it will continue its partnership with Munitions India Limited (MIL) and Advanced Weapons and Equipment India Limited (AWEIL) to manufacture the Carl-Gustaf weapon and its ammunition the release stated.
Sixthly, potential for exports would be another factor which has turned the tide in favour of Saab.
The Carl Gustaf is being used by several armed forces in the world. In a recent press release SAAB announced that it has received an order of 300 systems from Japan Self-Defense Forces, JGSDF, “for the supply of the man-portable, multi-role weapon system Carl-Gustaf®. The order includes over 300 systems and deliveries will take place in 2025”.
The rocket launcher is a popular weapons system across the World with at least over 45 armies across the World using the same.
The Haryana factory could form a global export hub for the system as well as components, fulfilling India’s quest to be a leading defence exporter.
Conclusion
The challenge for obtaining approvals for 100 % FDI in defence sector in India is daunting, but apparently SAAB has cleared the gauntlet.
Setting up of the plant in Haryana is a win win for the Indian armed forces, defence Industry as well as the Swedish company SAAB.
A manufacturing base within the country will overcome any supply chain constraints which are evident with multiple conflicting ongoing with India’s core military technical partners Russia and Israel.
The six point model followed by Saab can well be adopted by other companies to establish manufacturing plants in India with 100 % FDI for mutual benefit.