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Thursday, 31 July 2008

From Today's Papers - 31 Jul

Pakistan expects same nuclear deal with US as with India: Gilani



Wed, 30 Jul 2008:

Washington, July 30 (ANI): Visiting Pakistan Prime Minister Yousuf Raza Gilani has said that Pakistan expects from United States a similar kind of nuclear deal that Washington has made with India.

"There should be no discrimination. If they want to give such nuclear status to India, we expect the same foPakistan," Gilani said in a conversation with Richard N.

Haass, the President of Council on Foreign Relations at a meeting jointly organized with the Middle East Institute here.

Gilani also spoke at length on a variety of issues, including terrorism and extremism, Pak-US relations, economy and the scope of democracy in the country.

He said his government wanted to have cordial relations with all neighbours, including India and Afghanistan, as this would ensure peace in Asia.

"With India, we want to resolve all issues, including the core issue of Kashmir," he said when asked about that relationship.

According to The News and the Dawn newspapers, Gilani also said that his government was striving for the autonomy of the Constitution and the independence of judiciary and added that only political reconciliation could help meet the several challenges before the administration.

Addressing the Pakistan community here, he said the government remained firm on its promise relating to the independence of judiciary.

He described Islam as a religion of peace and stressed on improving the image of Pakistan in the eyes of the world.

He urged the Pakistani community living in US to play their role in this regard.

Gilani also declared that he was opposed to any unilateral U.S. military attacks in Pakistan.

"We can do it ourselves," Gilani said Tuesday night after a speech.

He added, however, that Pakistan wanted better cooperation with the United States to share intelligence about foreign militants.

"We are not able to control them, and you are not able to control them," he said.

"We are fighting to save the soul of our homeland," he said.

Obama said at a fundraising luncheon Tuesday that he told Gilani in their meeting that "the only way we're going to be successful in the long term in defeating extremists ... is if we are giving people opportunities. If people have a chance for a better life, then they are not as likely to turn to the ideologies of violence and despair." (ANI)

Pak Army imposes curfew in Swat valley following clashes



Wed, 30 Jul 2008:

Peshawar, July 30 (ANI): The Pakistan Army has imposed curfew across the Swat region for an indefinite period after its troops exchanged fire with militants in some areas of the valley.

So far, at least 30 Taliban have been reported killed in the Matta region of the Swat Valley. The Taliban, however, sa that only five of their comrades had died.

The clashes followed renewed violence in the area in which three Pakistani officials were killed and up to 30 security forces kidnapped by militants.

The violence has delivered a serious blow to a peace deal signed with the militants in Swat two months ago.

The Army has taken over the control of the Matta police station area. The attack on the Taliban was carried out in retaliation for the attack on the Venai check post.

The Taliban have also accepted the responsibility for bombing an armoured vehicle, the Pakistan Tourism Development Corporation hotel at Malamjabba and the Army rest house, while a girls' school at Golibagh and three bridges at Gora, Roniyal and Seej Banter were destroyed by detonating explosives. (ANI)

Dad’s army versus terror


New Delhi, July 30: The National Technical Research Organisation, an ambitious initiative to use technology to watch terror groups and pre-empt strikes, has turned into a pensioners’ club.

Nearly a dozen retired officials hold key positions in the organisation set up in 2004 to monitor phone calls and emails, track the flow of funds on the Internet, and be the repository of the country’s technical intelligence assets, including spy planes and satellites.

The idea was it would keep an eye on terror groups and Left-wing extremists and prevent Kargil-like intrusions.

The NTRO, which counts national security adviser M.K. Narayanan among its enthusiastic backers, should have been just the organisation to help prevent the serial blasts and the Line of Control violation in Kashmir.

Instead, it is facing calls for closure. “The NTRO experiment has been a failure, the government should wind it up,” an official who was part of the organisation said.

At least three officials, heading crucial units, have recently opted for repatriation to their parent organisations complaining of “suffocating and unprofessional working conditions”.

“Last year, too, six officials holding key positions had withdrawn from the organisation. With so many superannuated people coming in, the NTRO is becoming more like a pensioners’ club than the professional intelligence outfit it is meant to be. A critical post of cyber applications and research is yet to be filled,” a top government source said.

Former IPS officers and former Intelligence Bureau and RAW sleuths now people the NTRO. “There are some scientists too. In fact, the biggest grouse outgoing officials have is that it is headed by a scientist, K.V.S.S. Prasad Rao,” an official said.

Rao took over in 2005 after retiring from the Defence Research and Development Organisation, where he was responsible for missiles and strategic systems.

The NTRO “should have been able to monitor phone calls and trace emails. The organisation was envisaged as an expert in cyber security and tracking global satellite mobile (GSM) systems as also high-frequency (HF) communications”, said the official who has worked there.

“We have money, resources and technology but we don’t have the vision and the will to create an effective intelligence sharing mechanism.”

The NTRO, set up on the recommendation of the Kargil Review Committee as a nodal agency for technical intelligence along the lines of the US National Security Agency, reports to the national security adviser. Part of the cabinet secretariat, like external spy agency RAW, it has an annual budget of Rs 700 crore.

Its problem, sources said, is lack of initiative. “As a member of the Kargil Review Committee’s technical task force on intelligence, M.K. Narayanan was one of the most enthusiastic proponents of the idea of a technical intelligence organisation. Today, he seems either unwilling to or unable to get the agency off the ground,” the official said.

Some of the responsibilities handed to the NTRO were earlier being performed by RAW, including air surveillance by its Aviation Research Centre. “RAW has been stonewalling attempts to let go of the ARC, which also snoops on nuclear tests and missile launches in the neighbourhood… So, the government now receives airborne intelligence from RAW and satellite imagery from the NTRO, going against the very logic of having a single agency for technical intelligence,” said the senior government officer.

Pak guns boom again, tension heightens


New Delhi, July 30: Pakistani soldiers opened fire on an Indian post across the Line of Control this afternoon, a day after defence minister A.K. Antony said “India was showing maximum restraint” despite repeated violations of the ceasefire agreement, Indian Army sources said today.

Pakistan’s first response has been to deny that there was any ceasefire violation today. But reports reaching Indian Army headquarters in New Delhi said Pakistani soldiers opened fire in two bursts — at 11.40am and at 12.30pm with a light machine gun and light mortars — on the Nariya post that is manned by the Border Security Force.

The Nariya post is within kilometers of the Eagle post at Naugam in the Kupwara sector where the two armies traded fire for nearly 16 hours on Monday and Tuesday.

Today’s firing marks an escalation of the tension, from small arms to light artillery.

A senior defence ministry official, asked for his opinion on why shooting across the LoC was increasing in frequency, said: “We cannot speak for the Pakistanis but we can understand that the Pakistan Army needs to prove it is relevant despite a civil administration being elected.

“We also see that there is pressure on Pakistan from the US to show evidence that it is chasing the Taliban on its western border (with Afghanistan).”

In India, the increase in the frequency of ceasefire violations coincides with terror attacks in Bangalore and Ahmedabad and the bomb scare in Surat. Army officials say the Pakistan Army abets infiltration of militants into Kashmir by opening fire on Indian positions.

If defence minister Antony’s contention yesterday that Pakistan had violated the ceasefire 19 times since January this year is true, today’s incident is the 20th time that the Indian Army has borne the brunt of Pakistani firing without retaliating.

But pressure is mounting on the government and in army headquarters to respond to the violations. In the months before the November 2003 ceasefire agreement, the Indian Army used to respond with multiple volleys of artillery fire to shooting from the Pakistan Army in what it said was “punitive action”.

“The defence minister has already warned (Pakistan),” said Lt General Raj Kadyan, retired deputy chief of army staff. “But if such violations carry on and then we start retaliatory action, the ceasefire is over. The defence minister’s warning can be said to be in preparation for that.”

Reports reaching army headquarters in Delhi said the Pakistani soldiers of a unit identified as “21 PoK” opened fire shortly before noon.

“Our field commander talked to his counterpart over hotline and told him to stop firing lest the situation escalates. We told him that we are observing restraint and we may have no choice but to retaliate in case they again resorted to firing,” defence spokesperson Lt Colonel A.K. Mathur said in Srinagar. He added that there were no casualties.

The same Pakistani unit was involved in the firing on Monday-Tuesday after objecting to Indian soldiers reconstructing a forward observation post that Islamabad claimed was on its territory. An Indian soldier was killed.

Security agencies in Jammu and Kashmir are worried that the situation is going back to the pre-2003 ceasefire era when exchange of fire was a routine affair.

An officer feared that this might again lead to migration of people living near the LoC. “Both ceasefire violations took place in Naugam where there is no habitation close by. But if it spreads to other sectors, many people will have no option but to flee,” a police officer said.

With inputs from Muzaffar Raina in Srinagar

Judicious offset obligation policy can add arsenal to India's defence

31 Jul, 2008, 0224 hrs IST,

By Dhiraj Mathur

The government is scheduled to announce a new (and delayed) defence procurement policy (DPP 2008) in the next couple of days. From Indian industry’s perspective, the defence offset policy is a key element of the DPP. The existing version (DPP 2006) stipulates that 30% (or more) of the value of a defence purchase from a foreign vendor for a contract exceeding Rs 300 crore has to be ploughed back into the country via a defence offset obligation.

Broadly, this obligation can be fulfilled by one of several methods — purchase from or exports on behalf of Indian defence industries of good or services produced or supplied by them, foreign direct investment (FDI) into Indian defence industries, investments in defence R&D etc.

The Indian government has launched a $100 billion capital investment plan over the 2007-12 period, with the objective of modernising and upgrading ancient defence equipment of the Indian armed forces. In fact, military expenditure in India has grown steadily over the last few years with the annual budget for the year 2008-09 set at $26.4 billion. DPP thus presents a great opportunity to kick start the transfer of sophisticated technology and manufacturing in the defence sector in India.

For various historical reasons, India has been denied access to these technologies, particularly, the dual use technologies (those that have both civil and military application). As a result, we have not been able to develop domestic capability in this sector, and have been relying largely on Russian supplies to meet our defence needs.

India’s signing the 123 agreement should open doors to technology hitherto denied to India. Moreover, a $100 billion purchase programme represents an offset obligation of $30 billion that would flow through investments and purchases from the Indian defence industry (both public and private).

This could translate into the creation of a large number of high-skilled jobs in manufacturing and R&D with spill over benefits to the economy. However, in the absence of a coherent policy regime, India is likely to miss out on fully exploiting the potential of the offset programme. It is hoped that DPP 2008 would address these issues.

Manufacture of defence equipment is permitted only upon obtaining an industrial licence from the government. However, there is no clear definition of what constitutes defence equipment because of which investors are left to the whims of bureaucratic interpretation to know whether or not a product would be subject to compulsory licensing. For instance, would air conditioners supplied to the army come under the category of defence equipment and be subject to industrial licensing even though their manufacture is otherwise freely permitted with 100% FDI on the automatic route?

The existing FDI policy restricts foreign equity in the manufacture of defence equipment to 26%. If one were to assume that approximately $10 billion of the offset obligation would be discharged through investment in manufacturing, the existing policy would require a domestic equity contribution of almost about $30 billion (Rs 1,20,000 crore).

Since the offset policy requires that the obligation be discharged during the tenure of the defence equipment supply agreement, this quantum of domestic equity would need to be raised over a 2-5 year period in the defence sector alone, a target that seems quite impossible to achieve. Second and equally important, original equipment manufacturers (OEMs) aggressively guard their intellectual property and would be loathe providing cutting edge technology to a joint venture in which they own only 26% equity.

There is no economic or strategic rationale for this cap on foreign equity. For those who say that defence is a strategic sector in which we cannot have 100% foreign equity, I have only this to say — for the last 50 years, we have been buying equipment from companies that have no assets or even operations in India and over which we have no control. What great security threat would a company pose that would be incorporated in India, be subject to Indian laws and regulations with physical assets in India? The cap of 26% on the FDI thus works against fully exploiting the potential benefits of the offset policy.

DPP 2006 provides only for ‘direct’ offsets i.e. through investments/ purchases exclusively in the defence sector. Given the nascent state of the Indian defence industry, it is doubtful whether domestic defence industry has the capacity to absorb such large offset obligations. It would be more prudent to permit ‘indirect’ offsets through investment in priority sectors like infrastructure and manufacturing. Another possibility is to allow foreign vendors to invest in an infrastructure/manufacturing fund that can be used to finance investments in priority sectors.

The award of defence contracts is a long drawn and complex process that can take several years. We have enough examples in the recent past of defence contracts that have been cancelled after years of negotiation (for example, the Eurocopter deal). If we want to encourage OEM’s, tier 1 and 2 suppliers to set up manufacturing operations in India, we must allow them the facility of ‘banking’ offset credits that can be utilised in case they win a contract. Such a facility is allowed in most countries the world over and would provide both incentives and insurance to defence manufacturers.

It is important that DPP 2008 provide clarity and resolution to these issues. In the absence of a coherent and synergistic policy framework, India may not be able to fully absorb the potential benefits of offset obligations and may end up with only a portion of the low hanging fruit of the defence technology value chain.

The author is executive director, PricewaterhouseCoopers

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