Progress and Challenges Related to the Indo-US Civil Nuclear Deal

Dr Vijay K. Sazawal

Introduction

This paper seeks to address factors that led to the Indo-US civil nuclear deal, initial expectations, how those expectations evolved over time, policy drivers that keep the two parties from reaching a rapid closure on the issue, and what it will take to make this deal a success.

Background

The subject of granting “various rights and privileges available to signatories of the Nuclear Non-Proliferation Treaty (NPT) even though India would remain a non signatory” has come up in bilateral discussions between the U.S. and India ever since the U.S. lifted partial sanctions that were imposed following Indian nuclear tests in May 1998. In fact, a “non-paper” on the subject was passed by Jaswant Singh to his interlocutor Strobe Talbot during a meeting in London following the re-election of the NDA Government led by Vajpayee in 1999. Nothing came of it then as Democrats in charge of the U.S. government knew that it would be nearly impossible for them to deliver a deal that very few, if any, in their party would support. Furthermore, Mr. Talbot and his colleagues believed that if India was given such privileges so should Pakistan as the rivalry between the two would otherwise intensify to the detriment of regional security.

The subject resurfaced during the Bush Administration that followed Mr. Clinton in 2001. Mr. Robert Blackwill, who served as a foreign policy advisor to President Bush during the 2000 election campaign as a member of the “Vulcans” (foreign policy advisory group led by Dr. Condoleezza Rice, who subsequently became the National Security Advisor to the new President), was made the Ambassador to India. Ambassador Blackwill saw a strategic value in creating a special friendship between the U.S. and India, and knowing India’s desire to re-engage in nuclear commerce, strongly advocated support for such a deal. However, his resignation as the Ambassador in 2003, followed by the Indian election in 2004, put the deal on a relative backburner until Dr. Rice became the U.S. Secretary of State in 2005.

As much as the Indian Foreign Service officials and the then foreign minister, Mr. Natwar Singh, wanted to push for such a deal, the political leaders in New Delhi were not so sure. Dr. Rice made the nuclear deal the centerpiece of the U.S. effort to build a fundamentally different relationship with India, hoping it would lead to some bilateral nuclear commerce that would benefit American companies but she saw its importance mainly in creating a friendly environment for selling U.S. military hardware to India, the country being among the largest importer of arms in the world. Prime Minister Manmohan Singh and the Congress Party leader, Sonia Gandhi, however led a fractious group of diverse political parties – from communists to regional heavyweights – and both were unsure if the deal would be approved by the Indian Parliament. Within India’s nuclear and security community, many saw the deal as a game changer, while an equal number of policy experts saw it as constraining the Indian “Swadeshi 3-stage nuclear program” intended to exploit to energy value of India’s abundant thorium, or infringing on Indian sovereignty and national security. The deal was eventually signed during Prime Minister Singh’s visit to Washington on July 18, 2005.

When the U.S. Administration made the deal public, it raised a lot of hue and cry among the American politicians as well. In particular, Congressman Henry Hyde, the powerful Chairman of the House Foreign Affairs Committee, was incensed that the Bush administration will make such an exception for India. He called Dr. Rice to his chambers, and once the anger subsided, the Congressman asked how many jobs the deal would create in the U.S. nuclear industry as that information would be his rationale for seeking endorsement of the deal from fellow Congressmen in the Committee and in the full House. Dr. Rice, and her supporting team in the U.S. Department of State, had not assessed the value of deal beyond its strategic implications, and therefore did not have such information. The request was passed on to the U.S. Department of Energy (DOE), but no such data existed there either. In fact, outside of some classified data related to India’s weapons program, there was only sketchy information available about India’s nuclear power program among the scientific community in the U.S. Perhaps because India was under rigorous sanctions until then, no effort had been made to collect such data.

In February 2006, Mr. David Garman, the DOE Under Secretary, attended a meeting at the U.S. India Business Council (USIBC) in Washington where he asked if the U.S. industry had any data indicating how many jobs will be created by a possible nuclear deal with India. But the industry was equally ignorant, and I being the only nuclear specialist on the USIBC team was requested by Ron Somers, head of the USIBC, to prepare such a report.

India’s Nuclear Power Programme

I knew it was not going to be easy to explain the unique Indian nuclear power program and its future prospects to an audience unfamiliar with the rationale and progress of the nuclear program in India. The general expectation in the U.S. is that since India is a developing country with surging growth rates, it would require insatiable amounts of energy, including nuclear power, to meet growing demands in electricity. However, India’s nuclear power program is not geared to match immediate power needs of the country. India has an exquisitely planned 3-stage nuclear program which would result in nuclear contributing 25% or more electricity to the national electric grid by 2040 and beyond, utilizing indigenously designed and built nuclear reactors using India’s abundant thorium fuel supply. The overarching program is currently in stage 1 for power production (and deeply engaged in research and development of stages 2 & 3), which is contributing miniscule amounts of power, about 2.5% of the total electricity demand to the national grid, produced mainly from indigenously designed and built pressurized heavy water reactors (PHWR’s). Any near-term expansion of the stage-1 program would happen only if it technically supported the 3-stage program in order to ensure an optimum balance in fuel supply, reprocessed fuel, nuclear waste, and cost.

Indeed, technical experts in the Indian nuclear program had concluded by the mid-1990’s that eight (8) imported light water reactors (LWR’s) would be required during the stage 1 to supplement the planned construction of indigenous PHWR’s in order to generate sufficient spent fuel for reprocessing and subsequent use in fast reactors (stage 2) and thorium reactors (stage 3). Subsequently, the Union Cabinet approved purchase of eight imported reactors by the Department of Atomic Energy (DAE).

When I wrote the paper for the USIBC in February 2006, I made it clear that the Government of India had given clearance to DAE to enter into contracts for up to eight foreign reactors, two of which were already under construction at Kudankulam, two additional imported reactors were planned to be built at the same site, and India was in serious negotiations with the French to procure two reactors to be sited at Jaitapur. Since six out of the eight imported reactors were already accounted for, that left open the possibility that India could buy two reactors from the U.S.

My report caused great consternation among the corporate community in the U.S. who were expecting huge reactor orders from India. Numbers like $100 billion in projected reactor sales were being tossed around in the USIBC and my report was unceremoniously shelved.

However, my report did draw the attention of Dr. Rice, who found it perfect for the article she wrote to “sell” the U.S.-India deal to the U.S. public and the U.S. Congress. Writing an op-ed piece in the Washington Post on March 13, 2006, she stated that, “…. Third, our agreement is good for American jobs, because it opens the door to civilian nuclear trade and cooperation between our nations. India plans to import eight nuclear reactors by 2012. If U.S. companies win just two of those reactor contracts, it will mean thousands of new jobs for American workers.”

As much as Dr. Rice saw the future of the new bilateral relationship with India mostly in strategic terms tied to defence sales, intelligence sharing, and a balancing act against the Chinese, the U.S. nuclear vendors began to express their unhappiness at the deal and wanted India to purchase additional foreign reactors. This was the time when the U.S. Congress had to approve a measure to grant an exception to India in order for the two countries to sign the civil nuclear “123” Agreement. There was a great degree of diplomatic and commercial pressure put on India to “come through” on its pledges and commit to purchase of additional reactors since the U.S. was single-handedly helping India to re-enter the global civil nuclear commerce.

The relief came in terms of a new analysis completed by the DAE in the summer of 2008, which was made public at the IAEA General Conference in Vienna in September 2008. The new analysis indicated that without additional LWR imports, India will have a deficit of 412 GWe by 2050 even after all other fuel sources like coal, hydroelectric, renewables, hydrocarbons, etc. are accounted for. But if 40 GWe in LWR’s are imported immediately (by 2020), it would have a “multiplier effect” of providing sufficient reprocessed fuel for stages 2 and 3 of the nuclear program and would wipe out the entire deficit predicted without imports in 2050. It seemed more like an empirical analysis given that the country lacked capacity building to ensure such mammoth expansion of nuclear power in just 12 years, but it provided the logic for subsequent planning within DAE.

Based on the new DAE analysis, and following the exception granted to India by the Nuclear Suppliers Group (NSG) on September 6, 2008, the Indian government sent a letter to the U.S. government (at the urging of then U.S. Ambassador, David Mulford) on September 10, 2008, affirming following key points:

• India will offer two nuclear plant sites to American reactor vendors without any global tendering allowing them to build nuclear plants in India amounting to 10GWe or more, provided technical and commercial terms are acceptable to both parties and result in affordable power
• India will complete the separation of its civil and military nuclear programs as per the agreed schedule, and implement the India-specific Additional Protocol as agreed with the IAEA on August 1, 2008
• India will develop its nuclear liability regime consistent with the Convention on Supplementary Compensation (CSC) for nuclear damage

This letter, unfortunately, created unintended consequences.

American vendors, noting that India had committed to buy U.S. reactors without competition, reacted differently than what India’s nuclear operator, National Power Corporation (NPCIL) had hoped for. Neither of the two vendors paid attention to the requirement that the tariff generated from the plant had to meet specific guidelines of the Central Electricity Board. Indeed, it is for that very reason NPCIL has created a business model where the plant designer/technology provider enters into an open “teaming arrangement” (as against a “prime-subcontractor” relationship) with NPCIL to work jointly, allowing NPCIL to bring its experience in value engineering, reforming supply chain efficiencies, reducing contingencies with discrete fixed-cost subsystem packages, etc., to be incorporated in the foreign designed plant to be built in India. But one of the U.S. vendors insisted on using its own business model which gave NPCIL diminished capability to explore ways and means of streamlining hardware and management costs quoted by the vendor. The second nuclear vendor decided to market in India its first-of-a-kind reactor, contrary to the Indian practice of requiring a foreign plant be licensed by the home country’s nuclear regulator and be already constructed or in substantial stages of completion elsewhere before it can be built in India. I am not sure how such a plant will be judged for establishing a viable tariff regime.

On the other end, India failed to fully comprehend the overwhelming influence of litigation and legal judgments that shape American business decisions. The commitment to pursue the CSC liability regime was made, in my view, without a full understanding of American sensitivities. In hindsight, it would have been easier for India to have signed to the Vienna Convention as Indian lawmakers are familiar with a long-standing Indian association with the IAEA, and such an approval would have received Parliamentary approval with minimal review. CSC could have been considered at some later stage in the future. There are presently two global nuclear liability regimes supported by the IAEA. The European law (“Joint Protocol”) is inconsistent with the U.S. domestic liability law called the Price-Anderson Act, whereas the U.S. law is consistent with the CSC. The U.S. has initiated a large diplomatic offensive to sign countries without a liability law to the CSC, and its insistence on the CSC is not directed only at India.

India passed a historic civil nuclear liability law in 2010, and Rules for implementing the Act were published in 2011. The U.S. government and American vendors deemed the law unsatisfactory and have been seeking a change in the law. India contends that the law is consistent with the CSC since Article XII.2 of the CSC allows harmonization of the CSC with domestic laws under certain conditions. The Indian government has repeatedly stated that it is willing to work with U.S. vendors “to develop mutually acceptable solutions to this issue within the four corners of its domestic liability law.” There is currently an impasse in this matter, and continuing discussions between the two sides have failed to resolve this matter until now. Meanwhile, one of the two U.S. nuclear vendors still does not meet Indian statutory requirements to sell its proposed Generation III+ reactor in India.

Delays in reaching a closure on the liability issue is also affecting other contiguous issues dealing with Administrative Arrangements under the 123 Agreement, and on a related issue dealing with the determination by the National Nuclear Security Administration (NNSA) to place India in an authorization category for a case-by-case approval for nuclear “810” technology transfer to India. Experience with a scant few “810” technology transfer approvals for India indicates that the process is laborious and time consuming. Establishing even a limited design and hardware supply chain in India for U.S. nuclear vendors is mostly impossible at this time.

India has completed its obligations under the Separation Plan ahead of the December 2014 deadline, and ratified the IAEA India-specific Additional Protocol in June 2014.

There are, however, new perspectives evolving within the U.S. Government in regards to the liability issue. Recent thinking within the U.S. Government was mentioned by the Assistant U.S. Secretary of State for South Asian Affairs, in testimony in the U.S. Senate Foreign Affairs Committee on July 16, 2014 when she stated that, “While we have not yet had detailed discussions with the new government in New Delhi on the way forward on civil nuclear cooperation, we believe that there may be an opening to address nuclear liability issues either through a legal framework or through other frameworks that can help create more surety on what the application of liability might be, so that it is not unlimited liability as the companies are rightly concerned.”

While the primary U.S. reactor vendors are insistent on a legislative fix, a flexible approach such as proposed by the U.S. Department of State opens possibilities for other options especially for sub-tier suppliers who, based on a case-by-case risk-benefit analysis, may find non-legislatives fixes to the equally effective in ensuring proper indemnification for their products and services with a broader appeal to serve the growing Indian nuclear market in addition to primary American nuclear vendors. However, creation of a sound nuclear liability insurance program by India is absolutely important in that case.

Finally, nuclear power is capital intensive and hence very expensive. Some countries are reconsidering whether to buy nuclear reactors or look at alternatives. The low price of electricity (and in India the price is among the lowest) puts additional pressure on nuclear vendors to reshape their business models and marketing strategies to meet customer needs. The traditional American business model used by American utilities and reactor vendors cannot and will not serve new and developing markets overseas. The mantra of “affordable power” places a burden on both owner-operator and nuclear vendors to demonstrate their collective ability/plans to meet consumer expectations on tariff, because without a customer there is no sale – whether or not the vendor selection is made competitively or by invitation. India has an envious record of being among the three countries (along with South Korea and China) that can put up a domestic nuclear plant at a much lower than average global overnight construction price. It would be unwise for the U.S. nuclear vendors not to adjust their business model in India, and for the U.S. government not to create an India specific “810” technology transfer regime that will maximize the use of local manufacturing supply chain, intellectually bright manpower, and access to other quality resources.

In closing, I am reminded of the brief statement that the Prime Minister made during his maiden visit to the Bhabha Atomic Research Centre (BARC) on July 21, 2014, stating that “Growing international nuclear cooperation is a welcome development, provided such projects can be timely, meet techno-economic viability and safety standards, and such partnerships result in substantial technology transfer.” I believe the two sides can reach a satisfactory closure with a better understanding of the situation and by being flexible to accommodate each other’s redlines.

In the end, there is no reason why the Indo-U.S. nuclear deal cannot be a shining example of successful cooperation between the two great nations.

APPENDIX


Timeline - Indian Three Stage Civil Nuclear Program and the Indo-U.S. Nuclear Deal

Prime Minister’s visit to BARC on 21^st July:

• Three-fold increase in nuclear power at the end of 13^th 5-yr plan, as planned
• Growing international cooperation is a welcome development, provided such projects can be timely, meet techno-economic viability and safety standards, and such partnerships result in substantial technology transfer
• Not to ignore self-reliance in the nuclear fuel cycle and proceed full steam with commercial utilization of thorium

India’s “Swadeshi nuclear fuel cycle”- The amazing vision of Dr. Homi Bhabha:

• 1939: Bhabha denied re-entry into U.K.; plans for harnessing the power of atom without government (British colonial power) support
• 1948: Free India constituted the Atomic Energy Commission (AEC), Bhabha selected as its first Chairman reporting directly to the PM
• 1954: India announced its plan to harness the power of atom by maximizing utilization of its abundant thorium reserves; the program is directly at odds with key elements of the U.S. President’s speech at the UNGA on 8^th December 1953
• 1955: Unfettered access to the PM ensured that the Indian 3-stage indigenous nuclear development program is viewed synonymous with Indian leadership of NAM; Bhabha chaired the Geneva Conference preceding the formation of IAEA
• 1956: India co-opted in the “Washington Group” to canvass for IAEA membership in NAM; India successfully argued against the creation of a uranium cartel and the centralized storage of plutonium to enhance IAEA membership
• 1965: India joined the ENAC to propose principles for the NPT being considered
• 1968: India announced in UNGA that it will not sign the NPT
• 1970: NPT comes in force; India excluded from the 1971 Zangger Committee

India’s 3-stage program is thorium-centric and program’s scope and schedule has been affected by many challenges in implementing the first-of-its-kind approach:

• 1965: Stage 1, which started with RAPP-1 operations, is initially hampered by limited uranium resources and Zangger/NSG restrictions, is now paced by capacity building and need for additional and accelerated plutonium stockpile based on cutting edge research and modelling in thorium fuel cycle by BARC
• 1985: Stage 2 phase was initiated with operation of 40 MW Fast Breeder Test Reactor; 500 MW Prototypic Fast Breeder Reactor (PFBR) is expected to begin operations in 2014 (after a 2-year delay)
• 1996: Stage 3 phase initiated with operation of world’s only 30 kW U-233 (derived from thorium) fuelled reactor; design of 300 MW Advanced Heavy Water Reactor (AHWR) completed and site selection is underway
• 1998: Import of foreign light water reactors (LWR) planned to shorten Stage 1 period; initial research indicated that 8 imported LWR’s are needed and received approval from the Cabinet, a reassessment indicates it could be as many as 40
• 2025: Domestic LWR program operational to supplement or replace purchase of imported LWR’s to provide needed spent fuel quantity for generating reprocessed reactor fuel for Stages 2 and 3 programs
• 2035: Technological challenges indicate that Stage 3, utilizing India’s abundant thorium, will not be fully commercialized until at least until 2035 or beyond. With proper planning for capacity building, fully indigenous Stage 3 may meet about 25% to 50% of electricity demand, resulting in a dramatic reduction in greenhouse gases, and high reliability in assured fuel supply and energy security

Advent of Indo-U.S. nuclear cooperation:

• 1954: USA promoted “nuclear diplomacy” as part of the Cold War; India was a leading beneficiary, and the first Indo-U.S. “123 Agreement” was signed in 1956
• 1963: Indo-U.S. agreement for “turnkey” construction of Tarapur 1&2 reactors (TAPS) signed; U.S. contractually required India to buy only U.S. nuclear fuel and put the plant under IAEA safeguards; TAPS connected to electricity grid in 1969
• 1974: Indian nuclear test triggered U.S. sanctions, including stoppage of TAPS fuel supply; NSG was set up in a secret meeting in London in April
• 1975 to shut out India from global nuclear commerce
• 1978: The U.S. NNPA came into force; All prior 123 Agreements required renegotiation of bilateral civil nuclear agreements that are now very restrictive

A new chapter begins in the Indo-U.S. nuclear cooperation:

• 2005: U.S. announced plans to grant “full” civil nuclear energy cooperation
• 2006: U.S. Congress granted India exception from NNPA; new 123 negotiated
• 2008: India agreed to buy U.S. reactors without global tendering, PROVIDED the mutually acceptable terms and conditions would result in a viable tariff regime for electricity generated
• 2008: India Specific IAEA Safeguards finalized; NSG exception for India granted; New Indo-U.S. 123 Agreement finalized
• 2009: India announced two nuclear sites for American nuclear vendors in Chhayamithi Virdi in Gujarat and Kovvada in Andhra Pradesh
• 2010: Nuclear Liability Law passed by the Indian Parliament
• 2011: Rules pertaining to the new liability law submitted to the Indian Parliament and published in the official Gazette
• 2013: Westinghouse and NPCIL signed an “Early Works Agreement” prior to the visit of PM to the U.S.
• 2014: Westinghouse completed initial tasks under the EWA and is reimbursed for its services by NPCIL
• 2014: U.S. Government shows flexibility in resolving the liability issue, U.S. nuclear vendors however adamant; lost in the fog of corporate media buzz: the price of electricity to Indian consumers

(The author is an atomic industry expert. The author presented this paper at a talk by him at the VIF on Progress and Challenges Related to India’s nuclear deal, on August 8, 2014)

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Published Date: 24^th September 2014, Image source: https://prabaharan.files.wordpress.com

(Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the official policy or position of the Vivekananda International Foundation)

Urgent Defence Reforms including CDS Need of the Hour

Brig (Retd) Vinod Anand, 

Senior Fellow, VIF

Higher defence management has continued to remain the focus of the politico-military establishment for last several years without much progress having been made in the key areas of defence reforms that have been underway since the Kargil conflict. A 14-member Naresh Chandra Task Force (NCTF) had reviewed the gaps in defence reforms and submitted a report to the government in August 2012.

In early April 2013, the National Security Council chaired by the Prime Minister discussed the recommendations by the NCTF on National Security. However, some of the contentious proposals were referred to yet another body for further scrutiny. The government instructed the Strategic Policy Group (SPG), chaired by National Security Advisor (NSA) Shivshankar Menon and Cabinet Secretary, to examine the contentious proposals, including those connected to the defence ministry and armed forces. They were expected to take a view on a host of proposals ranging from a permanent Chairman of the Chiefs of Staff Committee (COSC), cross- posting of Service officers to MOD, and the creation of Advanced Projects Agency (APA) to undertake futuristic military R&D and review of the practice of blacklisting armament companies.

The Ministry of Defence while reviewing the NCTF’s recommendations has stuck to its old narrative and has not been in favour of even creating a permanent Chairman Chiefs of Staff Committee which is a much diluted version of the Chief of Defence Staff recommended by the Group of Ministers’ Report of 2001 which was again based on inputs provided by Kargil Review Committee.

The MOD, true to its bureaucratic traditions has not approved of many of the other recommendations like cross-posting of officers and some other suggestions of the Task Force on defence reforms. Jaswant Singh, a former Defence Minister in his book ‘Defending India’(Bangalore: Macmillan India, 1999,p.109) had remarked that "-the Defence Ministry, in effect becomes the principal destroyer of the cutting edge of the military's morale; ironic considering that very reverse of it is their responsibility. The sword arm of the State gets blunted by the state itself." In July 2013, the MOD in its recommendations to the National Security Council Secretariat cited several reasons for its negative views on NCTF proposals.

MOD Rejects ‘Permanent Chairman of COSC’ Proposal

The 2001 GOM Report’s main recommendations regarding management of defence included creation of Chief of Defence Staff (CDS) with a designated defence staff with a view to establish synergy and promote jointness among the armed forces. It is also true that the concept of CDS however does not evoke an unequivocal and positive response from the three Services. The apprehension from smaller Services being that their interests may be disregarded and perhaps the status of single Services Chiefs lowered. Though, these apprehensions need to be allayed by a providing careful balance on vesting centralised responsibility and power to CDS, the absence of CDS on the other hand leaves the field open to the civil servant to become the 'decider' instead of a uniformed person for inter-Service issues. Recommendation for CDS based on GOM Report 2001 could not be realized because the government threw in a googly in the shape of obtaining political consensus from respective political parties; little or no efforts were made to obtain consensus. A letter to the political parties was written and that was the end of it.

While negating the NCTF proposal for a permanent Chairman of COSC, the MOD in its recommendations to the NSCS has given the reasons in June this year as lack of consensus amongst the three services on the issue. According to the MOD submissions to the NSCS, only the Navy supports the proposal for permanent Chairman COSC, the Army is against the proposal and the Air Force’s concurrence is conditional. Further, the MOD says that the present system of the three Service chiefs and the collegiate COSC briefing the Defence Minister has been functioning well.

And to ward off further criticism of MOD’s attitude, the stock reply given is that in any case the Government has as yet not decided on the issue since the NCTF proposals would be considered by the Cabinet Committee on Security. It appears that the government would continue to stall the issue in keeping with its erstwhile policy on the matter. Apparently, there was also some pressure on the members of the NCTF to not to give such a recommendation. However, wisdom prevailed and the proposal was included in the report.

However, turf battles between services have been part and parcel of even the militaries of advanced nations like the U.S. before their services were forced to move towards integration and jointness through legislative measures. The U.S. forces were brought together under one umbrella through Goldwater Nichols Act of 1986. When the need for creating the institution of CDS/Permanent Chairman COSC has been felt and approved by expert groups consisting of strategists, politicians and bureaucrats and endorsed many times by Parliament’s Standing Committee on Defence, it is only political will that would be instrumental in fructification of this vital reform.

Not only this, a simple measure like cross-posting of officers between the MOD and Service HQs to bridge the civil-military disconnect has also been rejected for some flimsy reasons. Cross-posting of officers would have generated synergies in functioning of the MOD and without this the integration would remain ‘cosmetic’ even while the MOD claims that the present system has been functioning well. Many reports of the Parliament’s Standing Committee on Defence have been urging the MOD to implement this recommendation of the GOM Report and the same has been endorsed by the NCTF but the bureaucrats have been adamant on not executing an already approved recommendation.

Unless there is a CDS with some degree of authority vested in him to promote interoperability, jointness and integration, the armed forces would not be able to efficiently pursue their missions in the wars of knowledge age. CDS is also necessary for commanding eventually the Integrated Theatre Commands which are inescapable for adopting a unified approach in envisaged theatre of military operations. Differences in the respective services on their approaches to a single point military advisor for the government have also enabled the bureaucrats to stymie the unification and integration of the defence services. Further, in our despondency on the government’s approach to the institution of CDS, we should not accept the half-baked idea of the permanent Chairman, COSC.

Defence Planning

HQ IDS has prepared Technology Perspective Capability Roadmap 2013 which is somewhat of a modified version of TPCR-2010. This document identifies the military technologies needed by the armed forces in consonance with its 15 Years Long Term Integrated Perspective Plan (LTIPP). This is an unclassified document that provides information to the defence industry (both private and public sector undertakings) as to what kind of capabilities armed forces would be looking for in the next 15 years period. According to the Defence Minister Mr. AK Antony, the objective is “to establish a level playing field for the Indian defence industry, both public sector and private sector.” Regular interaction between the defence industry and the MOD would help in developing ‘contemporary and future technologies as well productionising equipment required by the armed forces’.

As is well known, a major modernisation programme of the armed forces is under way and it is expected that a capital budget of 150 billion US dollars is expected to be spent over the next decade or so. The question remains whether our Defence Procurement Procedures are up to the mark despite many upgrades. And what can our indigenous defence industry offer us?

Firstly, the problem of perspective plans remaining an amalgam of the individual service plans has not been overcome as yet. This is mainly because there is no CDS or permanent Chairman, COS with the necessary mandate (i.e. budgetary control) to ensure that Five Year Defence Plans (FYPD) and consequently 15 years LTIPP are in fact not integrated.

Secondly, it is rare that FYPD and LTIPP are approved by the government in time. While the Defence Acquisition Council headed by the Defence Minister approved the 12th FYDP (2012-2017) in April 2012, the same continues to await approval by the Ministry of Finance and CCS. The LTIPP (2012-2027) was also approved in principle by the MOD but continues to await the government’s nod. The approval of the two vital documents by the MOD is of no consequence unless the same are approved by the government. Thus, even after introduction of the defence reforms in 2001, the defence planning process continues to suffer from inadequacies which can be surmounted if there is a political will.

Problems of defence preparedness are further compounded by the defence acquisition woes. While the Defence Procurement Procedure (DPP) has undergone a series of modifications and iterations, the evidence on the ground does not indicate that the acquisition process has acquired any momentum. The latest version is of 2013 vintage which is said to be based on experience gained on DPP of 2002, 2003, 2005, 2006, 2008, 2009 and 2011. The saga of acquisition of 126 Medium Multi-role Combat Aircraft still continues without any aircraft being inducted so far; the defence budget is also facing cuts again in the financial year 2013-2014 due to the economic downtrend. Similarly, though a deal for import of 145 Ultra-Light 155mm was concluded with the U.S. through the Foreign Military Sales (FMS) route some years ago, it has not fructified. Meanwhile, not only the U.S. has revised its prices for the guns, the Rupee has also depreciated against the dollar thus further compounding our budgetary problems. But then these are recurring problems which our politico-bureaucratic decision-makers have been unable to address.

Another factor which needs to be paid attention is the fast rate of obsolescence of technology which has made the operational life cycle of equipment shorter. The technology upgradations would be required in 10 years or so compared with much longer period in the earlier years. It is also being said that India has already missed two technology cycles and in the bargain two acquisition cycles. And therefore, the critical gaps in our armed forces’ capabilities are widening which needs urgent attention.

Thus, the much required institution of CDS that was diluted by the NCTF to the concept of permanent Chairman COSC has also not found acceptability with our MOD mandarins. But then as mentioned earlier, there is no point in accepting any watered down version of the CDS. The Parliamentary Standing Committee on Defence which had been a strong votary of the concept of CDS has omitted to take any views on the subject in the last few reports submitted to the government. Given the trend and views of politico-bureaucratic class it would be no surprise if the Naresh Chandra Task Force proposal is finally rejected by the CCS. The adhocism in our defence planning process and its concomitant adverse impact on the modernization programme of the Armed Forces continues. This has been so despite the cautions given by the previous and current Army chiefs as also by the Air Force and Naval Chiefs. The critical hollowness and gaps in our capabilities are widening tempting our known adversaries to take advantage of our vulnerabilities. The Parliamentary Standing Committee on Defence has been pointing out to the various ills connected with our defence planning and procurement processes and mechanisms without the same being addressed meaningfully by the government.

There are many useful recommendations made by the NCTF but they are likely to meet the same fate as earlier reports. Further, optimal utilization of resources cannot be achieved unless greater emphasis and attention is given to the process of budget formulation and implementation including forecasting, monitoring and control of defence planning processes. While Technology Capability Perspective Roadmap 2013 has been made yet there are many imponderables attached with it. Our politico-bureaucratic and military leadership needs to move fast in ushering in the recommended defence reforms to meet the security challenges from our assertive adversaries.

Prime Minister’s Visit to Russia and China: New Equations in a Fast Changing Global Order

Kanwal Sibal, 

Dean, Centre for International Relations and Diplomacy, VIF

Prime Minister Manmohan Singh’s back to back visits to Russia and China from October 20 to 24 reflect the evolution of India’s external relations in a world with shifting power balances and the challenges faced in consolidating relations with tried and trusted friends with declining power and forging understanding with adversaries with rising influence who seek to advance their interests through tactical overtures of friendship.

Russia

Russia remains a vital strategic partner of India. The long term geopolitical interests of both are compatible. Russia is not interfering in sub-continental affairs where it recognises India’s primacy. On principles that should govern international relations such as respect for sovereignty and non-interference in the internal affairs of countries, combating international terrorism without double standards and opposition to regime change policies, India and Russia have shared views.

Russia is India’s principal defence partner, offering over the years platforms and technologies that have fortified our defence capabilites, whether it is the aircraft carrier Vikramaditya, the leased nuclear propelled submarine Chakra, technical assistance for Arihant, licensed manufacture of front-line combat equipment such as the Sukhoi 30 MKI aircraft and T90 tanks, the joint development of the potent supersonic missile Brahmos, besides participation in co-developing the fifth generation fighter aircraft as well as a multi-role transport aircraft.

Russia’s politically significant role in India’s civilan nuclear sector is epitomised by the construction of two 1000 MW nuclear power plants at Kudankulam, honouring a commitment made prior to its Nuclear Suppliers Group (NSG) membership. The techno-commercial negotiations for building two additional reactors at Kudankulam have been completed, but the contract’s finalisation awaits resolution of issues raised by India’s nuclear liability legislation.

With China our territorial disputes endure. China has strenghtened its military infrastructure on our frontiers, forcing India to belatedly raise additional forces and allocate enhanced infrastructure expenditure on its side. China seeks substantial territorial concessions by India, not simply an agreement on border adjustment, which makes settlement a distant prospect. The confidence building border measures that China backs are intended to prevent military incidents that would distract it from dealing with far bigger challenges in the east presented by US and Japan constraining China’s regional dominance and its naval power expansion.

China

China interferes actively in our region, feeding fears of Indian hegemony amongst our smaller neighbours and preventing India from raising its global profile by consolidating its regional base. Pakistan, which has been fully complicit in this, receives Chinese political and military backing for pursuing its confrontational policies towards India. China is Pakistan’s principal defence partner. By transferring nuclear weapon and missile technology to Pakistan, China has profoundly damaged India’s security.

In the civilian nuclear field, as a counter to India-Russia nuclear ties, before joining the NSG, China “grandfathered” its supposed commitment to supply two nuclear reactors to Pakistan. It then decided to supply two additional reactors on the same pretext, this time as a riposte to the India-US nuclear deal. China is aiding in the construction of plutonium reactors in Pakistan to enable it to build smaller warheads for tactical nuclear weapons.

Despite political closeness, India’s economic relationship with Russia remains modest, with two-way bilateral trade at only $11 billion plus last year. The target of $20 billion by 2015 seems unachievable. Several business promotion efforts have failed to boost economic exchanges. India is proposing Russian investments in the Delhi-Mumbai industrial corridor, while the expanded energy partnership with Russia that India has long sought remains unrealised.

In contrast, despite serious political differences, India-China trade relations have flourished, expanding to nearly $ 70 billion in 2012, making China India’s largest trading partner in goods despite the damage done to our manufacturing sector in the process and security concerns emanating from China’s huge penetration of our power and telecom sectors. However, the $100 billion target set for 2015 is unlikely to be achieved because the trade deficit- likely to reach $40 billion this year- is becoming unsustainable.

Strategy

Improved India-US ties impact our relations with both Russia and China. Russia’s primary concern would be the erosion of its dominant position as our defence partner as we increase our acquisitions of US defence equipment, as this affects political equations. India will need to continually re-assure Russia concretely that its expanded strategic ties with the US would not be at Russia’s expense.

China closely monitors US arms sales to India, viewing them as integral to the American strategy to create a security ring around China. With China under an arms embargo by the West, Russia has been China’s principal arms supplier, with the potential sale of Russia’s Su 35 combat aircraft to China under discussion. Russia’s concerns about Chinese reverse engineering are pitted against its need to export to sustain its domestic defence industry, besides solidifying strategic understandings with China as a consequence of western geopolitical and economic pressures on it. Russia has also supplied RD-93 engines to power the JF-17 fighter aircraft, a China-Pakistan joint venture. Our triple challenge is to avoid entanglement in Russia-US tensions, manage to our advantage US-China strategic competition and attenuate the negatives for us of increased Russia-China collaboration.

PM’s Moscow visit for the 14th summit meeting would be successful if it delivers the Kudankulam 3 and 4 contract. The deliverable from the China visit would be the Border Defence Cooperation Agreement, valuable for avoiding incidents, not solving their cause.

Our challenge then is to build a larger edifice of relations with Russia on existing strong political and security foundations, whereas with China it is ensuring the safety of the impressive edifice that is rising on foundations that are not only weak but can shift.

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Sino Indian Standoff in Ladakh: Implications and Options

Amb Satish Chandra, 

Dean, Centre for National Security and Strategic Studies

On April 15^th around 50 PLA soldiers intruded about 10 Km inside Indian territory in eastern Ladakh and erected a tented post there. Efforts to get the area vacated through flag meetings, activation of the bilateral joint secretary level mechanism set up to address such situations, and intervention of our Foreign Secretary with the Chinese Ambassador have so far failed. As a result, the Indo-Tibetan Border Police has established a camp 300 meters from that set up by the PLA troops leading to an eyeball to eyeball confrontation.

The problem has arisen because the 4057 Km long Sino Indian border is disputed and because a common perception about the course of the Line of Actual Control (LAC) is lacking. This has led each country, with a view to bolstering its territorial claims, to undertake patrolling in areas perceived by the other to be on its side of the LAC. While such activity on our part has been relatively modest China has each year engaged in hundreds of incursions into Indian territory. Such decades long activity is not risk free as anything can happen when the armed personnel of two contending parties are in close proximity in a disputed area. Accordingly, we should have been much more proactive in seeking to resolve the border dispute or, at least, arriving at a common perception of the LAC.

The current incident is much more serious than earlier ones because it is the first occasion in decades when the Chinese are adamant about not vacating the area. Clearly China has decided to up the ante and this move constitutes yet another provocation which we need to appropriately address. 

Unfortunately, India has placed too much faith on the innumerable affirmations committing both countries to maintain peace and tranquility along their borders and to resolve their border related differences peacefully as well as in the multi tiered mechanisms to ensure that the channels of communication remain open at all times.

Such faith is misplaced as China has shown no desire to resolve our border related differences. As recently as March 2013, President Xi Jinping in response to questions from the media asserted that “the boundary question is a complex issue”, resolving it “will not be easy” and pending settlement we should not let it affect “the all-round development in ties.” China, obviously, does not want to work on the early resolution of the boundary issue with a view to keeping India off balance, to destabilize us and to choose the time and manner in which it would act against us.

The foregoing coupled with China’s rapid military modernization are naturally worrisome given its inimical approach towards India which is borne out by the following:

1. Rapid upgradation of infrastructure and force levels in Tibet along with India specific military exercises;
2. Ratcheting up of claims to Arunachal Pradesh;
3. Non grant of visas to residents of Arunachal Pradesh on Indian passports;
4. PLA presence in Pakistan Occupied Kashmir;
5. Claims that Sino Indian border is only 2000 Km thus questioning the legality of our possession of the Ladakh sector;
6. Use of Pakistan as a proxy through grant to it of nuclear weapons related technology as well as conventional weapons;
7. Pursuance of a string of pearls strategy to strangulate India.
8. Opposition to India’s efforts to secure permanent membership of the UN Security Council and of various multilateral non proliferation related export control regimes like the Nuclear Suppliers Group, the Australia Group etc.

In view of China’s overwhelming military superiority and inimical disposition towards India we have the following policy options:

1. Business as Usual Approach: characterized by a casual military modernization programme, timidity towards China calculated to avoid ruffling its feathers and a hedging strategy in our relationship with other major players in the region. This option is based on the hope that in the absence of any “provocative” steps by India, China will not take any aggressive steps against us. Such an approach smacks of appeasement and as history has shown will only encourage further Chinese adventurism.
2. Reciprocal Military Build Up Coupled with Business as Usual Approach: This would entail a focused China centric military buildup while continuing to appease it. While superior to a pure ‘Business as Usual Approach’ it will invoke China’s ire without causing it to renounce its inimical policies vis a vis India. This is apparent from the fact that China is reported to have indicated that it will only vacate its recent incursion if India dismantles its fortifications along its borders.
3. Firm Self Respecting Policy: This should be our preferred approach and comprise the following elements:

a. Rapid military buildup designed to inflict pain on China in the event of an attack on India; such an attack should invoke counter attacks on China’s vulnerable points and its lines of communication both on land and sea. Our nuclear forces should be appropriately upgraded particularly the submarine vector. Specific attention must be paid to neutralization of Chinese military superiority through asymmetric warfare and guerilla tactics.

b. Linkages with countries which are similarly threatened by China should be openly pursued and plans discreetly developed for reciprocal assistance in the event of Chinese aggression.

c. Inimical moves by China should not be brushed under the carpet and must be responded to firmly. In the instant case we should set up camps in areas regarded by China as being on its side of the LAC but are in India as per our perception. Grant of stapled visas for those from Arunachal should not merely be the object of protest but cause us to issue stapled visas for Chinese from Sinkiang and Tibet.

d. We must play the Tibet card by allowing the Dalai Lama and the Kalon Tripa greater access to our leadership, ceasing to reiterate that Tibet is a part of China, being more supportive of human rights in Tibet and in Sinkiang at international fora, instigating moves in the UN for Tibetan independence, projecting that Tibet is the water tower of Asia and its mismanagement by China threatens the entire region etc. 

e. While welcoming increased Sino Indian economic ties we must ensure that trade is more balanced and China does not use it as a means to damage Indian industry and enter into sensitive sectors like telecommunications.

Adoption of such a policy will, of course, provoke painful Chinese countermeasures but it will in the long term make India stronger. A prerequisite for the adoption of such a policy is, of course, the need to clean up our act at home by providing better governance and ensuring rapid economic development.         

Let’s not Get too Relaxed on China

Kanwal Sibal, Dean, 

Centre for International Relations and Diplomacy, VIF

Reports of Chinese soldiers intruding 10 kilometres into Ladakh challenge once again our assumptions about the stability of the situation on the unsettled India-China border. Our expanding relationship with China has encouraged thinking that the border issue is no longer central to the future of the relationship and can await resolution as and when possible. We have adjusted ourselves to China’s India strategy. We downplay such incursions.

Hopeless

The low priority attached by the Chinese leadership to the resolution of the border dispute is ignored by us. President Xi Jinping has lost no time in telling us that the border issue is not easy to resolve, reiterating former Chinese premier Wen Jiabao’s remarks in Delhi in 2010. He has scotched any hope of changed thinking in Beijing on an issue that generates distrust and apprehensions about China’s longer term intentions. In effect, President Xi has closed the doors to a settlement for the next ten years when he will be in power. We have not reacted.

President Xi’s five point proposal for conducting relations with India is self-serving, as it is calculated to play to China’s strenghts and side step India’s concerns.

After ruling out a border settlement, the Chinese President proposes that the two countries cooperate to maintain peace and tranquillity. This is singularly unimaginative as the two are maintaining peace and tranquillity for the last two decades, following the relevant agreements of 1993 and 1996.

When President Xi proposes that border differences shoud not affect the overall relationship, he is only nodding at existing realities. The bilateral relationship has progressed tremendously despite Chinese periodic provocations, such as those laying claim to Arunachal Pradesh and describing it as “South Tibet”, protesting the visits of our political leaders there, shortening the length of the Sino-Indian border in a bid to question India’s territorial sovereignty in the eastern and western sectors, giving Kashmir-linked stapled visas etc.

These provocations have been one-sided. Notwithstanding them, our Prime Minister has met China’s leaders oftener than others; we have a strategic dialogue with China at political, economic and defence levels; our armed forces now conduct joint exercises, albeit limited. The two countries engage with each other in the Russia-India-China format, that of BRICS and G-20, apart from collaborating in WTO and climate change negotiations. Now China has proposed a dialogue with us on Afghanistan, which we have welcomed.

In proposing that differences over the border should not affect the overall relationship, President Xi wants to preserve the freedom to continue provoking us and undermining our interests in our neighbourhood, as the latest strategic decision to take over Gwadar demonstrates. His proposal that India should maintain close strategic communication in order to keep bilateral relations on the right track excludes any explanation from China about its strategic ties with Pakistan, its continuing assistance in building Pakistan’s nuclear capability, its opposition to our joining the Nuclear Suppliers Group and our permanent membership of the Security Council, etc.

Telecom

President Xi calls for harnessing each other’s comparative strengths and expand mutually beneficial cooperation in infrastructure, investment etc. India has comparative strength in Information Technology and pharmaceuticals for instance, but it faces hurdles in accessing the Chinese domestic market. China, on the other hand, has become India’s largest trading partner in goods despite our unsustainable trade deficit with it. Chinese telecommunication and power companies have bagged huge contracts in India despite serious cybersecurity concerns. China would like to have a share of the $1 trillion we intend investing in upgrading our infrastructure in the next 5 years, especially when it has huge unutilized capacities in this sector and opportunities abroad are declining because of a global slow down. It can use its financial strength to advantage in countries like India if the politics can be managed. Unsurprisingly with the border issue “effectively controlled”, the People’s Daily advocates more focus on trade and multilateral issues with India.

President Xi’s emphasis on strenghtening cultural ties is unobjectionable. Enhancing cooperation in multilateral forums to safeguard the legitimate rights and interests of developing countries in tackling global challenges- another point that President Xi makes- is desirable although China has hardly championed the rights of developing countries in the past, though today its hunger for natural resources and markets accounts for a different stance.

Concerns

When the Chinese President says that the two countries should accommodate each other’s core concerns, the hard kernel of his message becomes evident. India has never identified its core concerns to the international community or to China bilaterally. Consequently, President Xi is not talking about China accommodating India’s stated core concerns. In any case, whether in the case of transferring nuclear and missile technologies to Pakistan, undermining our position in our neighbourhood, whether in Nepal, Sri Lanka, Maldives or Bangladesh, China disregards our obvious core concerns.

The Chinese leader is expecting India, in a one-sided proposition, to accommodate China’s core concerns, evidently in South China Sea and Tibet, as Taiwan and Sinkiang are not contentious issues with us. China wants its sovereignty over these areas to be respected, while using Tibet to claim Indian territory and expanding its presence in territory under Pakistan’s illegal occupation in J&K.

We have chosen to interpret President Xi’s remarks positively. We possibly believe that we are in control of our relations with China, that China is reaching out to us and we must therefore seize this opportunity to explore the potential of the bilateral relationship. We are disregarding hard realities and confusing China’s tactical moves with its strategic intent. President Xi has signalled that China will not compromise on territorial issues, whether today in the east with others and tomorrow in the west with us.

Arms and The Country

Kanwal Sibal
Member Advisory Board, VIF

European nations compete for defence ties with India

When listing India’s defence partners Europe is mentioned, but it would be more accurate to speak of individual European countries as partners. Europe is unified economically but not in the defence domain. Unlike on economic issues, on defence issues India deals with individual capitals and not Brussels.

Some points are pertinent to our defence ties with European countries. One, these countries compete even more intensely with one another for defence contracts abroad than they do for commercial ones, as the former are fewer in number, the margins are bigger and the supply of spare parts and periodic upgrades provide large long-term returns. European countries compete with one another as zealously in India as they do with Russia, Israel or the United States of America, our other major defence partners.

Two, defence ties have a much more pronounced political element than commercial exchanges. Countries with serious political differences can have extensive economic ties, as is the case of the US and Japan with China. However, for defence ties, some geo-political understanding has to exist. The country supplying arms acquires a degree of political leverage over the recipient country. At critical moments, spare parts or ordnance could be denied because of sanctions. These considerations are important for India because of our past experience and potential concerns for the future. In this respect, France is considered more reliable than other European countries because it has eschewed sanctions on India, even for our 1998 decision to go nuclear. The United Kingdom’s record is tainted while Germany has been squeamish about defence trade for humanitarian or conflict-prevention reasons. The sanctions issue has, however, lost its previous edge because of the lifting of nuclear sanctions on India by the US and the Nuclear Suppliers Group, the deterioration of US/Nato-Pakistan relations and the receding of the Kashmir issue from the forefront of Western concerns.

Ultra Light Howitzers

Three, defence manufacturing is a high-cost industry as very advanced technologies and huge outlays on research and development are required. Exports help to achieve economies of scale and amortize development costs. European countries are maintaining large defence industries in spite of the absence of any real external military threat and dwindling domestic orders because of reduced defence budgets. Exports therefore become vital. We have so far failed to extract the maximum advantage for ourselves from this compulsion they have by way of obtaining genuine transfers of technology. This is in large part because all European countries adhere rather strictly to technology denial regimes individually, and some intra-European coordination exists on this score. In general, on issues of technology transfer, all of them are restrictive, with the latest generation technologies made almost impossible of access. We have also not used our bargaining power effectively enough because of systemic deficiencies which prevent us from integrating the opportunities we provide to European countries in diverse domains with a view to wresting concessions through cross-bargaining.

Four, the bigger European entities are habituated to wielding power internationally — such has been their domination of world affairs in previous centuries. Their big power status is intimately linked to the possession of a large defence industry. Its existence enables them to discharge their dominant role in maintaining international peace and security, whether through the Security Council, the North Atlantic Treaty Organization or a “coalition of the willing”. In the race for technological innovation, the civilian off-shoots of defence technologies are an important factor too, for retaining a large defence manufacturing base. This may not be a material factor in bilateral defence ties, but is relevant in the larger context of global power equations.

Five, rivalry with the US, which is both an ally and a competitor, is a powerful reason for major European countries to maintain a sizable, independent defence manufacturing base. This allows a degree of independence in foreign policy making and avoids complete subservience to the US. This rivalry with the US is being sharpened in relation to India because of improving India-US defence ties and the US success in bagging major defence contracts. In fact, the foreign military sales route is giving the US an edge as it excludes middlemen and, consequently, the problem of allegations of corruption that hobble acquisition decisions is avoided.

Six, it is important to note the increasingly ‘multinational’ nature of the European defence industry resulting from its consolidation through mergers and acquisitions on account of high costs of production, reduced domestic orders, the need for economies of scale and international competition. Various European countries have been forced to pool defence requirements and jointly fund production programmes. It is not only that complex defence products are now seldom purely ‘national’, but also that European products are likely to contain even US-made components.

Of European companies active in India, the European Aeronautics, Defence and Space company, for instance, combines some leading French, German and Spanish companies. Its missile branch was merged with the UK’s BAE systems and Italy’s Finmeccanica to form the MBDA. The Eurofighter is jointly produced by Germany, Britain, Italy and Spain. Dassault, whose Rafale has been selected in preference to the Eurofighter, is owned by the Dassault Group (50.55 per cent) and the EADS (46.33 per cent), the manufacturer of the Eurofighter. Thales, another French company involved in major Indian defence programmes, is tied up with the US’s Raytheon and the UK’s BAE which, in turn, is the manufacturer of the Hawk trainer aircraft sold to India and will supply Ultra Light Howitzers to India through the FMS route on account of its several American acquisitions. In view of these links between European defence companies — and this sector has been largely privatized — the reality of dealing with ‘individual’ European countries gets diluted, although at the political level the commitment of individual governments to forging defence ties with India in depth can be differentiated.

That India should be the world’s largest importer of arms is a serious indictment of the state of indigenous defence manufacturing. India should have built domestic capability on an accelerated basis in view of the enduring combined threat from China and Pakistan and Western technology denial regimes applied to us. India cannot have genuine strategic autonomy without possessing an independent defence production base. We have, unfortunately, not been able to leverage our large-scale imports for obtaining the level of transfers of technology needed by us. Fortunately, the size of the Indian market has persuaded countries like France and Germany to reduce their defence supplies to Pakistan.

With the lifting of the nuclear sanctions on us and Western support for our membership of key technology denial regimes, meaningful technology transfers to us are now more possible in principle. The offsets policy can enlarge our domestic manufacturing base with participation by European companies, but unless the present 26 per cent ceiling on foreign direct investment is increased to at least 49 per cent, it would be on a sub-contractual basis, with serious technology transfers remaining elusive.