Purchases of machinery for defense industry complex are given to Rosteh. The task is to help Russian machine building industry win back the domestic market

26 July 2013

Source: Research and information web portal IMPERIA

At a meeting on the development of Russian machine tool industry, the prime minister approved the idea of ​​transferring the exclusive right to supply equipment for the defense industry complex to the State Corporation Rosteh. In the coming years, up to 80% of purchases of machine tool industry products may fall on the defense industry, in connection with an ambitious program of re-equipment of the Russian armed forces. This situation actually makes Rosteh a monopolist in this market segment.

All supplies will be made through the company Stankoprom, which is part of Rosteh. Simultaneously, it is planned to unite all the machine-building capacities of Rosteh on the basis of Stankoprom. These solutions will provide Stankoprom with cash inflow of 500 billion rubles by 2020.

Moreover, such a measure is intended to improve the condition of the machine tool industry in Russia. Today the share of this industry in Russia’s GDP is only 0.03%, while the share of machine tool industry in total GDP of the leaders of this market sector – China, Japan and Germany – amounts to 1%. As a result, the Russian machine builders cover only 10% of the needs of the internal market in this sector. The remaining 90% are owned by foreign suppliers.

The authorities are concerned with the fact that most part of imported high-tech machines purchased by Russia are totally controlled by the manufacturer. In addition, it is usually forbidden to disassemble the equipment, its location can be tracked via GPS. The supplier theoretically can receive data about the use and status of the machine in real-time mode or to stop its operation remotely at any time. According to the Prime Minister of the Russian Federation, “we depend on the decisions taken in other countries”.

Steps to remedy the situation in the Russian machine tool industry have already been made. Earlier, the government forbade the enterprises related to the defense industry complex to purchase equipment for budgetary funds from foreign companies if its analogues are produced in Russia. To date, there is a federal program “Development of domestic machine tool industry for 2011-2016” with funding in the amount of 26.5 billion rubles. According to the Ministry of Industry and Trade, the program shall increase the level of production in this area.

First of all, future increase in supply from domestic machine builders shall happen thanks to the combined state orders under the federal program “Development of the military -industrial complex of the Russian Federation in 2007-2010 and for the period until 2015”, said the head of the Ministry of Industry and Trade Denis Manturov. This leaves open the question of criteria under which it will be determined if orders of such state holdings as “United Aircraft Corporation”, “Uralvagonzavod” and “United Shipbuilding Corporation” are defense or civil.

Volumes of production of machine-building industry in the USSR and Russia has been steadily declining for many years since 1985, when the issue of machines in the USSR amounted to about 100,000 units. After the collapse of the USSR about 60% of the machine-tool capacities remained in Russia. In 2012, production of machines in Russia, although increased compared with 2011, nevertheless, barely amounted to 5,000.