By N. C. Bipindra

New Delhi: India signing a deal for 93,895 Close Quarter Battle carbines will be a key milestone for United Arab Emirates‘ CARACAL to invest 49 per cent in a Joint Venture with a domestic manufacturer with full technology transfer, the company’s top executive has said.

The pitch under the ‘Make in India‘ programme is the Emirati company’s bid to save the Indian Army carbine contract — a deal that has been hanging fire for the last two years and one that will mark CARACAL’s entry into the Indian market for the long term.

“A joint venture in India will be the best option for CARACAL to provide full technology transfer and to protect its Intellectual Property,” the company’s Chief Executive Officer Hamad Salem Al Ameri said in an interview through an international video conferencing on Oct. 15.

“The option we have and prefer is the 49 per cent that we can own and 51 per cent from the Indian side. It will depend on the partners. We would have preferred 50:50 share. But 49 per cent (Foreign Direct Investment) seems to be the best option, and will depend on what each partner brings to the table such as land and machinery, and from our side, the technology.”

The ‘Make in India’ programme seems an attractive option for the Emirati company, as the Indian Army has a huge requirement for another 350,000 Close Quarter Battle carbines, which the Government of India wants to be procured from local sources.

Indian Partnership

CARACAL has already held discussions with several Indian majors for establishing the joint venture for manufacturing the Emirati company’s portfolio of 14 products, covering the entire range of small arms that can find market from both the Indian armed forces and the law enforcement agencies, Al Ameri said.

He refused to divulge the names of the prospective Indian partners at this “very sensitive” stage of the procurement programme, but said the future plans of CARACAL in India depended on the carbine deal being signed soon.

“It is very sensitive. We have discussed with several partners. We will down select the partner,” he said.

“From CARACAL’s point of view, for the big plans to move to India, this (carbine) contract plays a big role, as a starting point for the business plans to move. We have to wait and see the outcome of this contract. The big milestone for the plans is the carbine contract signing. From there, we will announce the plans — on which company to partner and which state to go to for manufacturing the product.”

Al Ameri said CARACAL would be doing a 100 per cent Transfer of Technology to the Indian partner to fulfill the requirement of supplying the 93,895 carbines within a year of signing the contract.

“Yes, this means the entire production line would be set up here in India and this is the best way to control costs and to protect the Intellectual Property, and to meet all legalities, from our experience of doing subsidiaries in other countries where we have done technology transfer. That is why the joint venture is the best way forward.”

To meet its promise of ‘Make in India’ for its entire portfolio of small arms, CARACAL went about scouting for possible Indian suppliers for its CAR 816 carbine and has certified them to do supplies for the global market already.

“There are suppliers from different parts of India for close quarter battle carbine. We have 20 per cent supplies (for the carbine) already happening from India. We can do this not only for the carbine but the entire portfolio of products for the global market. CARACAL has the entire small arms line and the entire portfolio will be available for ‘Make in India’.”

Al Ameri said the company has huge expansion plans for India, including setting up of sales offices, doing recruitment and investments. “The expansion plans will be rolled out after the carbine contract signing.”

Two-Year Silence

The Indian Army had floated the present tender for buying the 93,895 carbines through a fast-track procurement process in view of the urgency to arm the soldiers with a modern weapon, as the legacy 9-mm Sterling carbines are already obsolete.

After going through the technical evaluation under the tender, the Indian Army had chosen the CARACAL’s CAR 816 to arm the Indian soldiers, after it emerged as the lowest bidder when commercial bids were opened on Oct. 4, 2018.

The next day, the Emirati company was handed over a draft contract, and since then, there has been no word from the Indian Ministry of Defence, despite the company writing several letters seeking a day and time to finally sign the contract, according to Al Ameri.

In the recent months, media reports in India suggested that the deal itself is now in trouble, after a meeting chaired by Defence Secretary Dr Ajay Kumar reportedly decided that the fast-track procurement of the carbines are to be shelved and the programme is to be pursued under the ‘Make in India’ procurement route.

But the ray of hope for CARACAL on the carbines deal is that this decision by the panel headed by Dr Ajay Kumar is yet to be ratified by the Defence Acquisition Council, the defence ministry’s highest decision-making body on capital procurement for the armed forces chaired by Minister of Defence Rajnath Singh.

In January 2018, the current fast-track procurement of the 93,895 carbines had been approved for tendering by the Defence Acquisition Council, in a deal that was said to be worth at least Rs 2,000 crore ($270 million in today’s currency conversion).

So Far, So Bad

India’s shaky defence procurement processes are now quite notorious globally. And the carbine procurement case is no different. The present fast-track procurement tender for the carbines is the second attempt to arm the Indian Army soldiers with the much-needed weapon in 10 years.

The Indian Army had projected the requirement and made an effort to acquire at least 44,600 close quarter battle carbines for the first time in 2010 through a commercial tender. That tender had to be retracted in 2016 following a long six-year procurement process that finally resulted in what is called the ‘single vendor’ situation.

While 28 global firms had shown interest in the 2010 tender, carbines from only two vendors — Israel Weapon Industry and Italian Beretta (Fabbrica d’Armi Pietro Beretta S.p.A.) — were selected for field trials. Beretta’s ARX160 model was rejected by Directorate General of Quality Assurance because a safety measure on its laser sight was found unsuitable. The Israeli firm was the only vendor left after the technical evaluations.

Under the then existing Defence Procurement Procedure, a ‘single vendor’ situation is a ‘no go’ under capital acquisitions for Indian armed forces, as it denies the government the benefit of competitive pricing. The ‘single vendor’ procurement cases need special sanction from the competent authority, who in such cases is the defence minister, before the acquisition can be seen through with the justification that there are no other options left.

But defence procurement in India are quite sensitive and are seen as a minefield, because it provides plenty of ammunition (the pun intended) for the opposition parties to target the government. This is obviously a reason why the competent authorities do not want to take a positive call on such ‘single vendor’ arms deals.

In the present case of carbine procurement under the fast-track process, though, India had successfully overcome the single vendor situation, and had identified CARACAL as the lowest bidder after down-selecting two vendors under the 2018 tender.

India Priority

Notwithstanding the current impasse over the carbine deal, Al Ameri said India will be a top priority destination for CARACAL in view of the large market size and the huge scope for business. He was unable to put his finger on the market size for small arms in India, even though he identified both the defence and the paramilitary-cum-police forces in the country as prospective customers for the entire line of CARACAL products.

“India is a top priority for CARACAL for its business growth. Its priority is only next to our home market, and India is not a ‘one contract’ market. Our products can be supplied to not only the Indian Army, but also to other defence forces and law enforcement agencies. This is not the first time CARACAL is entering a new market to establish business there.”

With his experience of scouting for suppliers for the CAR 816 carbines, Al Ameri said he found India had “an amazing industrial base” and CARACAL had “lots of options” for suppliers to make parts with “right quality and quantity”. “India is becoming the industrial base for the entire world in several sectors, including for defence.”

Prior to his assignment at CARACAL, Al Ameri was a Special Forces officer in the Emirati Presidential Guard and has two decades of experience in the defence industry, having previously served as the Business Development Director at the Emirates Defence Industries Company.

CARACAL, a part of United Arab Emirates’ EDGE Group, is a high-performance small arms company that designs, engineers, innovates and manufactures battlefield-proven firearms for law enforcement, security and military forces, boasting a production legacy spanning more than 15 years. Its product portfolio includes pistols, submachine guns, assault rifles and sniper rifles across a range of calibres.

EDGE is an advanced technology group that develops disruptive solutions for defence and beyond. Consolidating over 25 entities and employing more than 12,000, EDGE offers expertise in five core clusters: Platforms and Systems, Missiles and Weapons, Cyber Defence, Electronic Warfare and Intelligence and Mission Support.

NOTE: Defence.Capital is available on Telegram. Please click here to subscribe