Land of the giants
India has a large number of defence manufacturing companies with cutting-edge technology. but orders take their own sweet time to come
by jayashree mendes
There’s been a burgeoning demand from Indian defence establishments for aeronautics and defence electronics and that has buoyed Indian manufacturers to take on design-led manufacturing. Indian defence manufacturers are emulating the great strides made by information and engineering technology to come up with an ecosystem to compete globally.
But some of the questions that continue to prevail in the minds of defence components manufacturing companies are: Are the orders coming in? Are they being awarded or not? How keenly is the Ministry of Defence pursuing the policy to ensure that more Indian companies bag orders for defence?
Supporting the decision of the government to Make in India, Pranav Parashar (Retd), GM, naval projects, Thyssenkrupp Marine Systems India, says, “The Make in India by the Prime Minister is a brilliant idea. I still recall the time a couple of years ago when India wanted to go in for sourcing six submarines. The government came out with an LoI which was a global intent. Worldwide companies applied for the Euro 12 billion order. The Navy decides the equipment they want to put on it based on the threat perception. It was initially decided that of the six, four would be Made in India. And then the PM entered the picture and announced that all six would be made in India. This is the kind of single-minded thought we need from the government.”
Say no to global
For long, the Indian defence manufacturing has been under the firm control of ordinance factories and DPSUs (Defence Public Sector Undertakings), supported by research arms like DRDO (Defence Research and Development Organisation), CSIR (Council of Scientific and Industrial Research), and other leading educational institutes. What makes it tiring for the manufacturing companies is the long gestation periods of the contracts and the lead times they need to acquire the raw materials. Also, critical technologies were not easily accessible and the government had to step in and push forward the process. In the last few years, India’s aeronautics and defence demands have increased as there was need for procuring products off-the-shelf where licensing and upgradations were in the hands of the supplier.
Kaustubh Shukla, chief operating officer, industrial products group, Godrej & Boyce, says, “With the government’s Make in India initiative the manufacturing sector as a whole expects a boost. Encouraging involvement of private sector in defence manufacturing is a big welcome step. The Defence Acquisition Council (DAC) has approved changes to its Defence Procurement Procedures (DPP) to introduce a new category for indigenously made products. The intent of promoting indigenously designed, developed and manufactured products is a noble one. We hope the policy changes announced by the ministry of defence will be proven constructive and pave the way to inducting and encouraging Indian manufacturers in the defence sector.”
A high-ranking personnel from a defence company also adds that Make in India is a good focus for the industry. With new types of contracts being announced, most Indian companies will now take lead and one can expect a lot of Indian content emerging from various states. Most of them will also start creating programmes in that direction. Of course, they will wait to ensure that they have sizeable orders and only then consider investment for future business. Small contracts will imply a lack of initiative to consider investment, and thus losing out on business, and procurement, thus leading to popularity of OEMs.
The bottom line is that larger contracts must be handed out to Indian companies thus elevating defence manufacturing in the country.
Role of smes
Interestingly, one of the least of the sectors that was hitherto confined and is now in the limelight are the SMEs. They are crucial for the Indian defence sector due to their flexibility, diversity, low cost inputs, etc. The Make in India programme will provide greater opportunities for SMEs, who have been an integral part of the manufacturing ecosystem and are considered valuable partners. Large enterprises have joined hands with the SMEs for development of new technologies in the context of the Indian defence system and thus SME sector can look forward to even a more vibrant outlook going forward. SMEs that can build a strong technological base and an international business outlook will be able to benefit tremendously.
The changes made in the Offsets Policy encourage the SME sector to leverage the opportunities presented by the Offsets Policy.
For a long time, Ashok Leyland was manufacturing only buses, trucks and off-road vehicles. Sudhir Sharma, head defence light & tracked vehicles, Ashok Leyland, says, “We were not making much headway into off-highway kind of applications. That space was occupied by Scania, Mercedes Benz, Daimler, etc. We wanted to create a change to that direction. Otherwise we knew that we won’t see growth. We decided to change tracks by going into assembles and sub-assemblies that would be more specific and bring about qualitative improvement to be able to deliver that much.” Soon after, the company entered into making defence vehicles and Ashok Leyland has been the largest logistics supplier to the military. “We send out 3,000 vehicles every year. In the last two years we have got contracts for different kinds of vehicles that were earlier imported,” he adds.
A couple of months ago, the government decided to allow 100% FDI through automatic route in defence. Therefore, FDI, when it was being brought at a higher level, when it comes with technology, should involve modern technology. Secondly, the government has abolished even CCS approval in defence. However, the process of approval itself will include the Defence Ministry and the Ministry of Home Affairs, both of whom will go into all the details which will have to be looked at from the point of view of the defence of the nation, internal security and every other matter which relates to the national security.
Support systems are very much required in the defence industry. However, a matter that irks the industry, besides the long gestation period, is that by the time when the product is inducted it gets obsolete. “India needs to look into design-led manufacturing where we should have system level understanding of the process,” said the personnel from the defence manufacturing company. The full-life cycle of a defence product is 15 to 20 years and for this process to sustain one needs a design-led manufacturing. India should have a collaborative IP development programme. A classic example of this project is Akash missile system where DRDO, DPSUs and a cluster of private firms participated.
Shukla of Godrej & Boyce, says, “The domestic defence and aerospace manufacturing presents a great outlook for the future and we are very enthusiastic about the emerging opportunities and possibilities of sustained growth in the coming years.”
To benefit from this, Godrej & Boyce have in place the required building blocks – required infrastructure, technologies, competencies, people & qualifications and approvals. It also has purchase orders/contracts for long term supplies and is expanding its reach to newer customers and geographies.
Parashar of Thyssenkrupp Marine, says that the threats at sea are numerous. One could be attacked from any side. And to counter that, the warship develops around itself various anti-submarine, anti-surface, anti-air defences and all these have to be smart. There are electronic counter measures to protect the warship and this counter measure can have a buffer of up to 32 times. “Speaking of manufacturing, defence manufacturing in India has been largely restricted to PSUs because of the secretive nature of the contracts. That is changing, and mainly because the costs our people have to incur at sea or the border is huge. We cannot afford to continue giving the contracts to foreign companies. Hence, design-led manufacturing must happen in India,” he adds.
The caveat, he adds, is that even the US Naval warships are not completely made in the US. Components are outsourced from several parts of the world. Cost is not of much concern there.
Indian companies must learn not to go by the L1 tenders that we are used to seeing. Instead, when we come to the cost factor, it is life versus cost. There is also the question of how much the government is willing to spend on giving out defence contracts to Indian companies.