Earlier this month, India and the Philippines signed the “Implementing Arrangement” for “procurement of defense material and equipment procurement”. This agreement lays the groundwork for sales of defence systems such as the highly anticipated export of the BrahMos cruise missile, through the government-to-government route.
[wptelegram-join-channel link=”https://t.me/s/upsctree” text=”Join @upsctree on Telegram”]
Features of the system
Research and development of the BrahMos cruise missile systems began in the late 1990s. Manufactured by BrahMos Aerospace Limited, a joint venture between the Defence Research and Development Organisation and the joint stock company Military Industrial Consortium NPO Mashinostroyenia (earlier known as the Federal State Unitary Enterprise NPOM of Russia), this is the first supersonic cruise missile to enter service. Capable of attaining a speed of Mach 2.8 (almost three times the speed of sound), it has a range of at least 290 km (a new version can reach up to 400km).
Travelling with such velocity means that it would be difficult for air defence systems utilising surface-to-air missiles to intercept the BrahMos while making it easier for it to target and neutralise advanced fighter jets. Even so, efforts to increase the speed and range of the missile in its next iterations are underway, with a goal of achieving hypersonic speeds (at or above Mach 5) and a maximum range of 1,500 km.
Early naval and land variants of the BrahMos were inducted into service by the Indian Navy in 2005 and the Indian Army in 2007. Subsequently, an air-launched variant was successfully tested in November 2017 by the Indian Air Force from its Sukhoi-30MKI fighter jet, giving the missile a dominating presence in all three domains.
Export as a goal
These advanced and powerful capabilities of the BrahMos not only augment the strength of the Indian military but make it a highly desirable product for other countries to procure as well. Exporting the system, hence, has been on the agenda for more than a decade.
Doing so would boost the credibility of India as a defence exporter, help it meet the target of $5 billion in defence exports by 2025, and elevate its stature as a regional superpower. Countries such as Vietnam, the Philippines, Indonesia, the United Arab Emirates, Argentina, Brazil, and South Africa have so far shown an interest in acquiring the systems.
Geo-political impact
The implications of the Philippines becoming the first country to import the BrahMos would be wide-ranging and consequential in the Indo-Pacific. To begin with, it would caution China, with whom the Philippines has been engaged in a territorial conflict in the South China Sea, and act as a deterrent to Beijing’s aggressive posturing.
Indeed, this is why China has been wary of the Association of Southeast Asian Nations (ASEAN) countries acquiring defence systems such as the BrahMos. Further, taking lessons, other nations threatened by Chinese belligerence may come forward to induct the BrahMos into their arsenal, thereby boosting India’s economic, soft, and hard power profile in the region and providing the Indo-Pacific with a strong and dependable anchor with which they can protect their sovereignty and territory.
Possible hurdles
The Government of India has prioritised making the country ‘Atmanirbhar’ in the defence manufacturing sector and establishing itself as a major defence exporter. The Philippines, on the other hand, has decided to buy the BrahMos out of geopolitical and strategic necessities. Nonetheless, two major roadblocks still remain in the Manila deal.
The first is the Countering America’s Adversaries Through Sanctions Act (CAATSA), which aims to sanction individuals and entities who engage in a “significant transaction” with a listed entity. So far, Turkey and China have been penalised under CAATSA for purchasing the S-400 Triumf air defense systems from Russia.
NPO Mashinostroyenia is one of the listed Russian entities. And since 65% of the components, including the ramjet engine and radar seeker used in the BrahMos, are reportedly provided by NPO Mashinostroyenia, the export of the missile systems may attract sanctions.
Remarkably, the United States, of which India is a major defence partner, has maintained ambiguity over whether it will introduce sanctions over India’s acquisition of the S-400, licensed production of the AK-203 assault rifle, and export of the BrahMos. Hesitant of being sanctioned themselves, countries may shy away from purchasing the BrahMos. However, there is an excellent case for India to receive a waiver from CAATSA, especially vis-à-vis the BrahMos that can help contain a confrontational China.
The second issue pertains to financing. A regiment of the BrahMos, including a mobile command post, four missile-launcher vehicles, several missile carriers, and 90 missiles, reportedly costs around $275.77 million (₹2,000 crore).
Ravaged by the COVID-19 pandemic, many countries which are interested in the BrahMos would find it difficult to purchase it. The cost of the systems has been a major hurdle in moving forward to reach a deal with the Philippines. To remedy this, India has offered a $100 million line of credit, and the Philippines is thinking of purchasing just one battery of the BrahMos, consisting of three missile launchers with two to three missile tubes each.
With India determined to develop itself as a hub of defence manufacturing, how it handles the sale of the BrahMos would be an important factor in its potential emergence as a net provider of regional security in the Indo-Pacific.
Receive Daily Updates
Recent Posts
Petrol in India is cheaper than in countries like Hong Kong, Germany and the UK but costlier than in China, Brazil, Japan, the US, Russia, Pakistan and Sri Lanka, a Bank of Baroda Economics Research report showed.
Rising fuel prices in India have led to considerable debate on which government, state or central, should be lowering their taxes to keep prices under control.
The rise in fuel prices is mainly due to the global price of crude oil (raw material for making petrol and diesel) going up. Further, a stronger dollar has added to the cost of crude oil.
Amongst comparable countries (per capita wise), prices in India are higher than those in Vietnam, Kenya, Ukraine, Bangladesh, Nepal, Pakistan, Sri Lanka, and Venezuela. Countries that are major oil producers have much lower prices.
In the report, the Philippines has a comparable petrol price but has a per capita income higher than India by over 50 per cent.
Countries which have a lower per capita income like Kenya, Bangladesh, Nepal, Pakistan, and Venezuela have much lower prices of petrol and hence are impacted less than India.
“Therefore there is still a strong case for the government to consider lowering the taxes on fuel to protect the interest of the people,” the report argued.
India is the world’s third-biggest oil consuming and importing nation. It imports 85 per cent of its oil needs and so prices retail fuel at import parity rates.
With the global surge in energy prices, the cost of producing petrol, diesel and other petroleum products also went up for oil companies in India.
They raised petrol and diesel prices by Rs 10 a litre in just over a fortnight beginning March 22 but hit a pause button soon after as the move faced criticism and the opposition parties asked the government to cut taxes instead.
India imports most of its oil from a group of countries called the ‘OPEC +’ (i.e, Iran, Iraq, Saudi Arabia, Venezuela, Kuwait, United Arab Emirates, Russia, etc), which produces 40% of the world’s crude oil.
As they have the power to dictate fuel supply and prices, their decision of limiting the global supply reduces supply in India, thus raising prices
The government charges about 167% tax (excise) on petrol and 129% on diesel as compared to US (20%), UK (62%), Italy and Germany (65%).
The abominable excise duty is 2/3rd of the cost, and the base price, dealer commission and freight form the rest.
Here is an approximate break-up (in Rs):
a)Base Price | 39 |
b)Freight | 0.34 |
c) Price Charged to Dealers = (a+b) | 39.34 |
d) Excise Duty | 40.17 |
e) Dealer Commission | 4.68 |
f) VAT | 25.35 |
g) Retail Selling Price | 109.54 |
Looked closely, much of the cost of petrol and diesel is due to higher tax rate by govt, specifically excise duty.
So the question is why government is not reducing the prices ?
India, being a developing country, it does require gigantic amount of funding for its infrastructure projects as well as welfare schemes.
However, we as a society is yet to be tax-compliant. Many people evade the direct tax and that’s the reason why govt’s hands are tied. Govt. needs the money to fund various programs and at the same time it is not generating enough revenue from direct taxes.
That’s the reason why, govt is bumping up its revenue through higher indirect taxes such as GST or excise duty as in the case of petrol and diesel.
Direct taxes are progressive as it taxes according to an individuals’ income however indirect tax such as excise duty or GST are regressive in the sense that the poorest of the poor and richest of the rich have to pay the same amount.
Does not matter, if you are an auto-driver or owner of a Mercedes, end of the day both pay the same price for petrol/diesel-that’s why it is regressive in nature.
But unlike direct tax where tax evasion is rampant, indirect tax can not be evaded due to their very nature and as long as huge no of Indians keep evading direct taxes, indirect tax such as excise duty will be difficult for the govt to reduce, because it may reduce the revenue and hamper may programs of the govt.