Indefensible Defence - Implosion: India's Tryst with Reality - page 233

in 2012, but it was typical of the Ambani style and it could be a success because Reli-
ance has ample cash reserves for investment. Mukesh Ambani also has proven strengths in
government lobbying, though they are not as all-enveloping as they used to be. The group
is strong in engineering, albeit in building oil refineries and petrochemical plants, not ad-
vanced mechanical engineering products like aircraft. The proposed deal inevitably upset
Hindustan Aeronautics, which had assumed it would automatically be the main manufac-
turing partner, as it has always been in the past for foreign aircraft. That Dassault thought
otherwise - the company said it was not prepared to be responsible for the quality of HAL's
work - was an indication of HAL's declining reputation and of problems that other foreign
manufacturers have had with its poor performance.
Foreign Equity
It became evident during these years that big foreign defence companies were not willing
to commit advanced designs, management time and money in joint ventures when they
could only have a 26 per cent equity stake. There have been many link-ups between major
international companies from the US, UK, Israel and elsewhere with Indian defence, engin-
eering and software companies, but these are more concerned with meeting requirements
on the 'offset clauses', and laying the foundations for later possible developments, than for
any significant current technology and manufacturing transfers.
In June 2010 and again in 2013, the commerce ministry proposed a much higher foreign
equity level of up to 100 per cent. Many Indian companies and industry federations wanted
49 per cent so that they could attract foreign investors and know-how, while maintaining
control of their companies and avoiding the risk of new partners dominating boardrooms
and changing management styles and cultures. Against this, there were understandable con-
cerns that, even with the high equity levels, foreign governments could block technology
transfers on an item-by-item basis. That would have meant that foreign companies had the
benefit of higher equity stakes without having to hand over technology. On balance, the in-
dustry mood was for the 26 per cent to be raised to 49 per cent on a case-by-case basis, with
safeguards against some countries, presumably China, together with other security-related
restrictions including an ability to block takeovers. 51 This was resisted by Antony and the
defence establishment, but the government eventually announced in July 2013 that the ex-
isting case-by-case rule for more than 26 per cent limit would be relaxed up to 49 per cent
for what was called 'state-of-the-art' technology. 52 This looked significant at first glance,
but it was so unspecific that it gave the defence establishment ample opportunity to block
most applications and was unlikely to attract any significant foreign response.
Another whiff of reforms had come in 2011 with a revised defence purchasing procedure
(known as DPP-2011). This picked up an idea broached in 2006 for a range of 'buy and