Indian companies are competing globally to bag orders for A&D oems. and how.
by Team MT
A multi-billion dollar sector, the Indian aerospace and defence (A&D) sector is a focus market for many global A&D companies. The Indian market is also attractive for domestic components manufacturers aspiring to achieve non-linear growth via positions in the A&D value chain across platforms.
In 2001, the government opened this sector to private and foreign investment. Over the years, it has sought to build a domestic industrial base and has set itself a challenging target of achieving 70% indigenisation. To broad base the target, the government has made transparent global bidding guidelines in the Defence Procurement Procedure (DPP), which is revised annually.
To India’s advantage, the country has emerged as a global R&D hub with 150 of the Fortune 500 setting up R&D labs in India. This is necessary because the aerospace sector demands perhaps the highest degree of fail-proof quality standards. This combined with unpredictable demand, lumpy orders and extreme pressure on pricing makes the risk of aerospace business significantly high. Aerospace manufacturing for the defence sector is even tougher given that there’s only one ultimate client per country – the Ministry of Defence (MoD); the orders are even more unpredictable and lumpy; and the negotiations, approvals and payments can be test one’s patience.
Defence spending is consistently growing and is reaching levels of Rs 3 lakh crore.
However, despite the challenges, the Ministry in recent times has ensured that the A&D sector gets its share of indigenisation. The Centre has reiterated its resolve that India will achieve a status of net security provider in the Indian Ocean region by aggressively focusing on higher level of indigenisation especially in the defence and aerospace sector. The ministry has taken key policy steps to position India as an emerging defence manufacturing hub and to be one amongst the five top producers of defence products and achieve export target of Rs 35,000 crore by 2025.
At a recent Conclave, Union Minister of State for Defence Dr Subhash Bhamre said that defence spending is consistently growing and is reaching levels of Rs 3 lakh crore. He informed that in last one month alone the Defence Acquisition Council has approved procurement of equipment and systems totaling about Rs 60,000 crore with most of these being planned from within the country.
However, lead times from placing the order to manufacturing can be unduly long. Aravind Melligeri, CEO and chairman of Aequs, says, “Lead time for new structural parts is based on the complexity of these parts. For a simple to medium complex part, the lead time could be 15-16 weeks. For highly complex actuation parts, the time taken from order placement to manufacturing is 18-20 weeks. This includes ordering of raw material, process planning, programming, fixture design and manufacturing and, finally, FAI (First Article Inspection).”
make it big
Indian companies catering to global and local A&D OEMs are bagging large critical orders. Recently, Cyient Solutions & Systems, a joint venture between Cyient Ltd and BlueBird Aero Systems, Israel, received its first supply order from the Indian Army for SpyLite mini
A&D components manufacturing needs much investment, which few can afford.
Unmanned Arial Vehicle (UAV) systems for high altitude aerial surveillance. NJ Joseph, MD & CEO, Cyient Solutions & Systems, said defence and security forces around the world have come to rely on the SpyLite’s exceptional performance. “These systems will complement the surveillance capabilities of our armed forces on the nation’s borders. During trials, the SpyLite emerged as a mature system, incorporating unique capabilities and delivering superior performance as compared to systems in the mini-UAV class,” he added.
Similarly, Alpha Design Technologies has opened a new facility to export defence electronic devices to Israel-based Elbit Systems valued at $14.5 million (Rs 103 crore). The new facility is a joint venture company named Alpha-Elsec Defence and Aerospace Systems between Alpha Design Technologies and Elbit. Col. HS Shankar, CMD, Alpha Design Technologies, said, “We are expecting additional orders worth $100 million (Rs 700 crore) for exports and $150 million (Rs 1,050 crore) worth orders from Indian market over the next three years. The joint venture company’s new facility allows testing, assembly and integration for production of thermal imager based fire control systems, eye safe lasers, laser target designators and high-end unmanned aerial vehicles (UAVs) or drones.”
Expertise sharing in A&D is another aspect that most components makers are looking at. Most of it is for design, development, engineering and manufacturing. It’s with similar intent that Bharat Electronics Limited (BEL) and Larsen & Toubro signed an MoU to share their expertise across the four segments and develop and produce products and systems to meet the requirement of the defence services as well as for export markets. MV Gowtama, CMD, BEL, says, ” As a Tier-1 supply chain partner to aerospace OEMs, we conduct design reviews and project reviews with the OEMs regularly. OEMs evaluate the processes in BEL and sometimes with Directorate General Quality Assurance (DGQA) so that the required quality level is achieved. The OEMs handhold BEL for onboard integration and evaluation of the Line Replaceable Units (LRUs) of BEL.”
He believes that it’s important to have accreditations like AeroSpace Quality Standard (AS 9100) and Quality Standards (ISO 9001, etc), to become a supplier in the aerospace and defence segment. Also, one should be able to supply initial prototypes on no cost no commitment basis for evaluation.
What needs to be done
It goes without saying that as a supplier in this sector, it is necessary to be have AS9100 certification. Melligeri says, “Aequs is presently AS9100:2016 Rev D certified, the latest in the industry. Customers also choose a supplier on the basis of cost competitiveness, possession of required technology, associated skills to manufacture a particular part, process qualifications as per prevailing standards. In the present scenario, OEMs are under pressure to cut costs while increasing production volume to clear huge backlogs. Therefore, cost-competitive suppliers that possess the capacity and infrastructure are favoured over established players and provided full support to ensure that they develop skills and acquire technology to deliver quality parts on time.”
There’s a general consensus that in order to achieve global manufacturing leadership, the private sector has to become cost & quality competitive.
It is the reason why when awarding a package, OEMs assess the suppliers’ current capabilities to identify possible gaps and the supplier is required to come up with a qualification plan collaboratively. If there are areas where support is needed, the OEMs depute their experts to train and help qualify. They also support by providing case studies of earlier learnings/best practices so that the supplier is able to get it right the first time. This helps keep costs down too. OEMs approach the supplier for cost effective sourcing and that can only happen with rapid industrialisation.
Last month, Lockheed Martin hosted an A&D Start-up Supplier Conference in Bengaluru, with nine start-ups and six university teams in attendance for the very first time. Tier 1 Lockheed Martin suppliers interacted with aerospace and defence start-ups, government officials, and university students to discuss global partnership opportunities and India Innovation Growth Program (IIGP) initiatives. “This conference has been a wonderful forum for relevant IIGP start-ups to interact with Aerospace and Defence Tier 1 suppliers to create market access opportunities”, said Vivek Lall, VP of strategy and business development, Lockheed Martin Aeronautics, adding, “Strengthening public-private partnerships in India is a key priority for us.”
To ensure that ‘Make in India’ becomes a real success, the government must offer equal opportunity to the private sector and ensure an environment of open competition. To have the results reach the actual beneficiaries, i.e. the Tier-II/ Tier-III suppliers, India needs to have the orders pass down the supply chain. Make in India can only progress with active participation of both DPSUs and the private industry. To make the Make in India initiative a real success, there is a need to offer equal opportunities to the private sector, especially MSMEs, in an environment of open competition.
There’s a general consensus in the industry that in order to achieve global manufacturing leadership, the private sector has to become cost & quality competitive – which is a Catch22 situation. Business growth is dependent upon cost-competitiveness achieved via economies of scale, which can only be achieved if critical mass is attained through more orders. So this becomes a challenge. Moreover, the Indian manufacturing industry needs to keep pace with the increasingly high use of technology across the design lifecycle. For this, the foreign companies need to transfer critical cutting-edge technologies to Indian players in the defence sector – which has its own challenges. Still India has managed this over the years, and growth is a by-product of India’s own R&D, supplemented by support from partners.
For instance, global enterprise cloud software specialist Ramco Systems has teamed up with Airbus Helicopters SAS to develop an MIS Data Pack Connector – a product feature that automates Airbus’ fleet management data, with Airbus systems. Ramco, one of the only four vendors shortlisted for the initiative, will build a Management Information System (MIS) data pack connector for Airbus Helicopters, which will be bundled with Ramco’s own Aviation Software for fleet maintenance and engineering (M&E). With the MIS connector, Ramco clients who use or plan to buy Airbus Helicopters can import each aircraft’s specific configuration data and maintenance programs to their Ramco enterprise system in a matter of days, compared to more than a month required by traditional ERP systems. Such innovations are quite frequent in India.
Puneet Kaura, MD & CEO, Samtel Avionics, had said earlier that public and private sector should go hand-in-hand. “Our JV with HAL is a proof how public-private partnerships can bring out the best in each other. To bolster such partnerships, we need further structural reform in encouraging public sector to partner with private enterprises. PSUs like HAL are already integrating private sector in their supply chain by making use of their proven indigenous manufacturing capabilities. Such models should be encouraged.”
Such integrations of DPSUs and private sector will translate into a win-win for both DPSUs and SMEs as both would be able to devote time and resources to improving scale and productivity, which would lead to an improvement in the overall quality of products. Samtel is again a very good example of how Defence Research and Development Organisation (DRDO) can partner with private industry for R&D. “In fact, we took our first footsteps in defence avionics through partnership with DARE (DRDO) for ruggedisation of critical technology to make multifunction displays which are currently flying on Su-30 MKIs. Such models should be encouraged and replicated,” he added.
If going by reports seems rights, then most Indian states are looking at allocating land for the manufacture of A&D components. Earlier, the Centre had announced to invest nearly Rs 30 billion in the proposed Bundelkhand Defence Corridor. The central investment will be made towards creating necessary infrastructure such as ammunition blast testing centre to facilitate ‘plug and play’ model by the private companies in setting up their facilities.
Considering that Indian engineers seem to find A&D a novelty, it would only be right if the government spruces up policies and set them on the right path.