Inking of the three foundational pacts is crucial for the transfer of technology between India and the US, said Ben Schwartz, Director – Defence and Aerospace, US-India Business Council (USIBC). In an interview with BusinessLine , Schwartz said the FDI policy on defence is ambiguous. Excerpts:

The US, it seems, is keen to ink the three foundational agreements — Logistics Support Agreement, Communications and Information Security Memorandum of Agreement and Basic Exchange and Cooperation Agreement — with India during the visit of US Defence Secretary Ashton Carter. But New Dlhi seems quite apprehensive…

There are several misconceptions on the foundational agreements, which strongly appear to be politically motivated. In reality, these are very basic agreements and in no way give the US access to sensitive information of other countries or obligate India to support US military operations.

However, there is a thinking within the government that this might risk sensitive information regarding India’s defence and strategic sectors…

These agreements basically allow greater transfer of technology and promote more trade and joint collaborations and military exercises. They enable, but do not force, the US and India to collaborate more closely in the defence sector. India’s biggest advocates in America will be disappointed if there is no progress.

What if India refuses to sign this during the upcoming visit of Secretary Carter next week?

Military ties between India and the US will remain robust even without these pacts. But the desired technology transfer and military cooperation will remain below potential.

What is the importance of US-India Defence Technology and Partnership Act that was passed last month by the American government?

This is the most important pro-India legislation since the civil-nuclear deal, by the US. If it becomes law, it will give India a coveted status that is provided only to America’s closest partners in strategic and military affairs. Lot of countries have asked for this and have been denied, even those whose soldiers fight alongside the US military.

How will it benefit the Indian armed forces?

The legislation will help lock-in the US government’s unprecedented prioritisation of US-India defence cooperation by articulating support for things such as the Department of Defence’s ‘India Rapid Reaction Cell’. No other country has a ‘rapid reaction’ office in the Pentagon. The legislation also clearly articulates the actions required by both the US and Indian governments to allow cooperation to reach its high potential, such as increased technology transfer, private sector partnerships, expedited licensing, and mutually acceptable procedures to verify the security of US-origin equipment.

Do you believe the US-India Defence Technology and Trade Initiative (DTTI) has lived up to its expectations?

We have seen some success in government-government DTTI projects. We would now like to see successful DTTI in private industrial co-production/co-development projects. I hope to someday see combined military planning for operations of mutual interest, such as humanitarian assistance and disaster response, maritime domain awareness missions, and counter piracy.

Of late, a number of international defence firms have expressed their concern on the foreign direct investment (FDI) policy, although it allows 100 per cent FDI on a case-to-case basis. What is the view of US defence entities?

The FDI policy is unnecessarily ambiguous. Increased clarity on issues such as the requirements for exceeding the 49-per cent FDI threshold would spur more foreign investment.

Although the government has sent a very positive signal by expressing the possibility of 100 per cent FDI, companies want to understand better what is required to get there. A specific roadmap that facilitates proper planning would spur investment.

What is the feedback from the American defence industry on the new Defence Procurement Procedure (DPP) 2016?

The DPP, as written, does leave questions unanswered. Governments sometimes like ambiguity because that provides flexibility, but private industry likes clarity, which reduces uncertainly and minimises risk. How the DPP will be implemented is not entirely clear. For example, the chapter on Strategic Partners is not yet complete.

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