New Delhi: Raytheon Company, a US military contractor, is vying for a pie of India’s potential $80 billion defence market in the next ten years. The company is trying to hardsell the controversial Silient Guardian Protection System, the Javelin and the Patriot missile systems and is involved in the coastal surveillance project being carried out by the coast guard. Mint caught up with William. L. Blair, the incoming CEO of Raytheon India.
Raytheon has said that it is looking to sell India, the Silent Guardian Protection System, a controversial, directed energy weapon, which has been withdrawn by the US military in its operations in Afghanistan, following allegations of human rights abuse. Don’t you think it would therefore be a futile exercise trying to sell such a weapon to India?
We don’t believe the reports are accurate. We need to verify them. This is a brand new technology. I am not sure if it has even been offered to the US military. Weapons that use the directed energy capability are not necessarily a part of the Silient Guardian Protection System. The system provides a capability that can deal with threats in a non-lethal manner. That means, it provides a level of directed energy, which you would want to get away from, if you are standing in its way. I would actually say that its somewhat more humane than even the water cannon used for crowd dispersal. It does not have any adverse impact on the person, be it on their eyes or their skin. So, the idea is whether such technology can be devised which can meet the requirements of the security infrastructure while not necessarily having a lethal impact on the people that you are trying to address. With respect to whether it fits in the India context, believe that as India further expands its infrastructure, we think it does have a potential.
Which other governments have you sold the system so far?
We would not be able to comment on that.
Hypothetically assuming if India were to buy the Silent Guardian Protection System, what is the business potential you are looking at from such a sale?
We haven’t quantified that till now. Frankly, at this point its a technology that yet needs to be brought to the market. So we haven’t yet put a number to it.
India has consistently declined to sign the contentious Communication Interoperability & Security Memorandum of Agreement (CISMOA) with the US. Because of this, in the reacquisition of the C-130Js, critical equipment including KV-119 IFF Digital Transponder could not be put on the C-130J. Is the impasse over CISMOA not a major inhibitor for companies like yours who want to do business with India?
I think, I would look at it as the inverse. Obviously, CISMOA is an engagement and a discussion that is between the US and India at the highest government levels. I believe if the two countries were to progress on CISMOA then it would create an environment and a framework in which it is easier for the US companies to bring the best technologies. It would bring a kind of tailwind as opposed to a headwind, as is the case now, as we bring technologies into India, just as we have in the global market.
What possibility do you see that India will sign the CISMOA, considering that the Indian Air Force (IAF) chief Air Chief Marshal P. V. Naik has said that India not signing the CISMOA will not impact the IAF’s operational capability by very much?
I can appreciate that. I believe it is up to the Indian government as to how to proceed on this. I can’t say what the probability of that would be. But there would be an ongoing dialogue as to the merit relevance and the value of this type of a government-to-government agreement.
In July 2010 it was reported that Raytheon had sent a formal complaint to the Cabinet secretary, the National Security Advisor and the Chief Vigilance Commissioner, regarding a deal to fit two business jets of the Aviation Research Centre (ARC) with surveillance systems payload. This was potentially a $250 million deal. The complaint was reportedly against Israel’s Elta. What happened of that complaint?
I don’t think it is necessarily something we should be commenting on.
Ever so often, media reports keep surfacing about India’s intent to procure the Javelin and the Patriot missile systems. Could you please put the record straight and clarify at what stage the talks are? With India developing its own system, how likely is it that the country would seek to import such systems from aother country?
Its a government to government engagement. Its working through the US government process to determine what we can provide to India by way of technology transfer. The systems are unparalleled in terms of their technical capabilities. We believe that there will be continuing dialogue for that potential procurement. As for India developing its own missile defence system, I can say that there are layers that constitute a systems capability. Its clear that India is developing its own capabilities. Our approach is not just to import weapons into India. Our approach is to figure out what weapons we can co-develop with India.
Are you therefore suggesting any future possibility of co-development with the Indian defence establishment?
Yes, subject to approvals of the US government. With the Indo-strategic dialogue going on, this relationship is improving. The November visit to India by President Obama and the removal of the Defence Research and Development Organization (DRDO) and the Indian Space Research Organization (ISRO) from the restricted entities list, the opportunity for collaboration is far greater than before.
There had been some media reports that said that Raytheon had shared some classified data regarding these programs with the Indian government. Can you confirm or deny those reports?
We cannot comment on that.
The Pentagon budget for 2011-12 has proposed budget cuts, which will reportedly result in the termination of your Surface-Launched Advanced Medium-Range Air-to-Air Missile (SLAMRAAM) program, as also that of an advanced version of the Standard Missile-2 Block IIIB ship-defense system. How much of a financial hit would that translate into? Will the termination of such programs not impact your other programs adversely?
Since this pertains to our global business, we cannot comment on that.
Last quarter, your revenue from international sales was up by 11-12%. However, from domestic US sales, which still constitute nearly 77% of your total business, the revenue growth was a mere 1%. What is the main reason behind such a dismal domestic show? Is this not a constraining factor?
Since this pertains to our global business, we cannot comment on that.
In what capacity is Raytheon likely to be involved in the coastal surveillance project? Can you put a figure to the kind of business you might generate out of the project?
We are looking to be involved in coastal surveillance through Bharat Electronics Ltd (BEL). We have an offer to provide our command and control capabilities for that coast surveillance solution. We are also looking more broadly at maritime security solution and are working with the ministry of home affairs (MHA) and various state governments, for that. We cannot however put a figure to it.
Since Raytheon sells high end critical technology, how big a deterrence are India’s current defence offsets and transfer of technology (ToT) regimes and the country’s defence FDI policy with a 26% cap?
From the defence offsets perspective, I think India’s defence offsets policy has come a long way. Recently with the defence procurement policy (DPP) 2011 expanding the aperture of the purview of offset fulfillment to include the civil sector, the security environment and training, in addition to the direct defence offsets, creates a win-win opportunity for both the Indian government, as well as the companies looking to business in India. Before the DPP-2011, the introduction of the offset banking clause was a significant step. That incentivized companies such as Raytheon to improvise and develop projects that involve sourcing training and collaboration in a way we can start ahead of say the MMRCA contract, even before we know where it will go. If India can extend the offset clause to other areas and extend the banking capability, that will be a step forward. As for the FDI, I believe that the limit does not preclude us from joint ventures and from being very competitive on campaigns such as the MMRCA. What I would say positively is that if there is a movement from 26% to 49% in the FDI limit, I think it will greater incentivise global companies to look at how can forge a broader relationship with Indian companies.
In February 2007 Raytheon had announced that it would focus on India as a strategic market and seek technology partnership with Indian companies. Can you comment on what has happened since then? Which Indian companies have you tied up with since then and specifically for what?
Since that time we have established relationships with companies such as the Tatas, Godrej, Larsen & Tubro (L&T) and many different Indian companies in the public and private sector to create at least a context in how we can operate. We have also established some pilot projects with some of those partners, where we are actually working on some manufacturing specific to what we will be delivering under the MMRCA, should a platform with our content be selected. We are working very actively with L&T on the T-72 upgrade and with Tata Power Stretegic Electronics Division (SED) for upgrading the infrastructure of the IAF.
In money terms, how much business do you potentially hope to generate out of India, say in the next 5 years?
We cannot comment on that.