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June 8, 2002 | 1221 IST
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Indian defence suppliers see no spurt in orders

Indian companies that supply equipment to the country's armed forces are reporting no upsurge in orders even as the dispute with rival Pakistan over the Himalayan region of Kashmir threatens to erupt into war.

India and Pakistan -- both nuclear powers -- have massed a million soldiers along their tense frontier and have traded artillery and gunfire daily for the last three weeks, threatening a fourth war since liberation from British rule in 1947.

But rising military activity has not translated into higher orders for companies.

"The delivery of vehicles is happening according to a schedule drawn up in advance, when the purchase orders were placed. There has been no unusual rise in demand," said a spokesman for Ashok Leyland, India's second-largest truck maker.

The Chennai-based company supplies its Stallion trucks to the Indian armed forces in basic form for assembly at the Army's vehicle factory in Jabalpur, Madhya Pradesh.

Only one Indian company, which declined to be named, said there was "frenzied buying" taking place by the armed forces after they swung into high alert after a militant strike at an Indian military camp.

India, which is estimated to spend Rs 650 billion, or 14 per cent of the government budget, on defence in the year to March 2003, relies mostly on imports and supplies from state-owned firms to keep its war machinery running.

India's military, the world's fourth largest, relies heavily on arms and equipment from Russia, a country with which it has had deep military ties. Around 75 per cent of its 750-plus combat fighters are Russian-made, mostly MiGs.

The reliance on domestic private companies is usually restricted to dual-use items, like vehicles.

DOMESTIC SUPPLIERS

There are currently 39 ordnance factories making arms and ammunition spread across the country and eight state-owned companies manufacturing equipment and stores for the Indian Army, Air Force and Navy.

Together, these agencies sold defence goods valued at Rs 135.8 billion to the armed forces in the past year to March.

"Over 50 per cent of these goods could be coming from private companies, through outsourcing," said an industry official, who declined to be named.

Most defence units outsource a large number of parts and spares from small private companies.

Only a handful of large listed companies supply equipment directly, including the country's largest truck maker Tata Engineering and Locomotive Co Ltd and utility vehicle maker Mahindra & Mahindra Ltd.

Leading engineering firm Larsen and Toubro Ltd carries out fabrication work for the Indian Navy and makes launch systems for the Indian Army.

An L&T official said these items were made to order, had long delivery schedules and were relatively shielded from short-term increases in border tensions.

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