US embassy cable - 05NEWDELHI8255

C O N F I D E N T I A L SECTION 01 OF 02 NEW DELHI 008255 
 
SIPDIS 
 
STATE FOR SA/INS 
 
E.O. 12958: DECL: 10/24/2015 
TAGS: PREL, ECON, MARR, MASS, IN, External Political Relations 
SUBJECT: U/S BURNS MEETS AMCHAM (INDIA) ON DEFENSE SALES 
OBSTACLES 
 
Classified By: AMBASSADOR DAVID C. MULFORD FOR REASONS 1.4 (B, D) 
 
1. (C) Warning, Contains Business Proprietary Information. 
Please protect accordingly. 
 
2. (C) SUMMARY: In U/S Burns' meeting with AMCHAM (India) on 
October 22, U.S. defense company representatives suggested 
that there needs to be a breakthrough in the U.S. procurement 
cycle and sales approach starting from the top down to change 
-- in a more sales-oriented fashion -- the USG licensing and 
technology information procedures related to defense sales to 
India. "Pentagon officials tell us they still have not seen 
any new directives that change the previous approval policy 
and procedure," the representatives said.  They underscored 
some incompatibilities in U.S. approval and Indian 
procurement regulations, and said there is a need to 
sensitize GOI officials to life-cycle cost evaluations and 
offset procedures. END SUMMARY. 
 
3. (C) U/S Nicholas Burns met with AMCHAM (India) members 
from defense-related companies to discuss U.S. defense sales 
to India, following a brief tour of the Convergys call-center 
operations in Gurgaon outside of New Delhi.  U/S Burns noted: 
converging U.S.-India bilateral interests and views of global 
problems; strong U.S. bi-partisan support for stronger 
U.S.-India relations; USG confidence that over the next 25 
years India will emerge as one of the three or four most 
important countries for U.S. interests; and USG efforts to 
reduce barriers to trade and investment in India, which has 
enormous potential. 
 
4. (C) Ambassador Mulford expressed strong concern that the 
USG commitment to military sales to India is weak and that, 
as a result, we are failing to grasp huge opportunities to 
sell military equipment. U/S Burns agreed that in our 
engagement with India, we urgently need to de-bureaucratize 
the approval process and beef up our marketing and sales 
efforts. 
 
5. (C) SPEED OF LICENSING AND TECHNOLOGY RELEASE PROCEDURES: 
AMCHAM representatives reported that U.S. defense companies 
are not getting a large share of India's annual USD 5 billion 
defense procurement budget, due in part to licensing issues. 
Boeing's representative said that, although U.S. defense 
companies are excited about the new developments U.S India 
relations, there is a disconnect between USG defense sales 
policy pronouncements and USG implementation of sales policy. 
 Companies have not yet seen any significant day-to-day 
changes in procedures for export licensing and technology 
release.  Companies are concerned they will not see new USG 
licensing regulations before the February 2006 window of 
opportunity closes for India's annual defense procurement 
cycle.  Concerning  U.S. technology release, platforms might 
be approved, but there are often problems with approving 
parts of the platform, such as radar and computer systems 
technology.  U.S. companies are thereby disadvantaged in 
responding to GOI deadlines on requests for proposals (RFP). 
U/S Burns responded they were right to raise these issues, 
noting that the USG is very protective of U.S. technology and 
is even tough on the UK and other NATO allies in licensing 
sales of defense technology. 
 
6. (C) USG SALES APPROVING AUTHORITIES: The Lockheed Martin 
representative noted that U.S. Lt Gen Kohler is doing a good 
job of trying to expedite approval of defense sales to India, 
but suggested he needed stronger and more positive 
bureaucratic support from DOD and the State Department.  U/S 
Burns noted the recent appointment of U/S Eric Edelman, who 
will be leading the defense sales talks with GOI together 
with a new U/S of Defense. 
 
7. (C) GOI EVALUATION OF COSTS: The GE representative 
suggested the need for increased USG and company efforts to 
educate the Indian military establishment regarding 
procedures and regulations related to military sales.  When 
evaluating costs of defense systems alternatives, the Indian 
military is more accustomed to Russian technology and tends 
to  focus solely on installed costs, rather than on 20-30 
year life-cycle costs.  He proposed more extensive briefings 
for the GOI on ways of evaluating costs of competing systems 
and on influencing Indian Requests For Proposals to better 
reflect life-cycle costing issues. 
 
8. (C) OFFSETS: The Raytheon representative said the Indian 
side in general did not understand U.S. procedures for 
"offsets" for military sales.  How can we, on an 
industry-wide basis, educate the Indian military on offsets 
and get more of their military sales decision makers to the 
United States to help them better understand?  Ambassador 
Mulford noted Embassy discussions with the GOI Ministry of 
External Affairs (MEA) on how to better educate the GOI on 
offset procedures for purchasing U.S. defense systems.  The 
Ambassador further suggested that other avenues for promoting 
change be explored that do not represent simply the narrow 
commercial interests of any particular company.  U/S Burns 
argued that offsets play a crucial role in winning defense 
contracts and promised to take a fresh look at ways to 
enhance our competitiveness through improved sales efforts 
and strategic offset packages. 
 
9. (C) GOI CONCERNS ABOUT USG RELIABILITY:  Bell Helicopter 
representative said many GOI officials dealing with 
helicopter procurement remain doubtful about the United 
States as a long term supplier, given the past history of 
sanctions.  Many GOI counterparts express concern that if 
they buy from a U.S. company, the political winds may change 
and leave them without needed support and replacement 
supplies.  U/S Burns underscored the depth of bi-partisan 
support for the strategic improvement of U.S.-Indian 
relations -- in the U.S. Congress and the Bush 
administration, as well as during the last few years of the 
former Clinton administration -- as evidence that this policy 
will continue irrespective of the U.S. political make-up 
after the 2008 elections. 
 
10. (C) USG and GOI PROCEDURAL COMPATIBILITY:  Bell 
Helicopter said there is a lack of U.S. sensitivity to Indian 
procurement procedures and compatibility with USG Foreign 
Military Sales requirements. For example, when U.S. 
companies, complying with USG procedures, ask the Indian side 
for a "Letter of Request" (LOR), the Indians are put in a 
difficult position in that GOI procedure (apparently) 
obligates them to send out any such request for proposals or 
information to all potential suppliers. 
 
11. (SBU) USG Participants: 
-- U/S Nicholas Burns 
-- Ambassador David C. Mulford 
-- John Rood, Senior Director, NSC 
-- Don Camp, DAS, South Asia Bureau 
-- Tobin Bradley, P Special Assistant 
-- Lee Brudvig, Economic Counselor, USEmbassy 
-- Notetaker: Eric Anthony Jones, USEmbassy, ECON 
 
AMCHAM-India Participants: 
-- Amrit Kiran Singh, AMCHAM (India) Chairman; Area Director, 
Brown-Forman 
-- Ramesh Baijpai, AMCHAM (India) 
-- B.S. Singh Deo, Bell Helicopter India, Director 
-- Sanjeev Kakkar, GE Aviation, Director Military Sales 
-- Anil Shrikhande, Boeing, Managing Director 
-- Dr. Vivek Lall, Boeing-India, Managing Director, 
Commercial Airplanes 
-- Srinivas Duuvvuri, Pratt & Whitney, UTIC, South Asia Area 
Director 
-- Royce L. Caplinder, Lockheed Martin (India), Managing 
Director 
-- Prachees Mathur, Raytheon International, Managing Director 
-- Mike Jackson, Convergys India Services, Vice President and 
Country Director 
 
12. (SBU)  U/S Burns' delegation did not review this cable 
for clearance. 
MULFORD