The case for defence
Skill-sets and technology Indian companies have. What they need is a wider collaboration that would allow them to sustain and grow.
by jayashree kini-mendes
The Indian aerospace And defence is faced with a conundrum. At a time when there are more than 3,000 (large and small, public and private) companies who have invested money and resources to manufacture components for this sector, is there is a good reason to continue importing equipment? At last count, imports contribute 75% of India’s defence equipment needs, of which the domestic private sector contributes only 5%.
It was only in December that the Ministry of Defence (MoD) began encouraging the private sector to manufacture ammunition such as the shell or the fuse.
Since independence, defence production was the exclusive prerogative of the state; private sector participation was viewed with suspicion. On the other hand, the aerospace industry was largely confined to MNCs and handing manufacturing contracts to Indian companies was unheard of.
Vested interests ensured that India continued to remain an importer of arms, thus draining India of precious foreign exchange. It was only recently that the Modi government took the bull by the horns and announced the Make in India campaign while ensuring that defence production too got its fair share of buoyancy. Aerospace and defence production soon became a national and strategic priority. Prime Minister Modi and then Defence Minister Manohar Parrikar went one step further. It was decided that this sector would also be opened to private participation, thereby setting up a stage where India could emerge as a major defence-industrial hub.
Ashwinder Bhel, director, Delta Automation, says, “One must praise the initiative taken by Parrikar. It was the Ministry’s decision to stop issuing tenders to foreign companies. “Instead he was convinced that tenders should be issued only to Indian companies and then the Indian companies could rope in the MNC for advice and technology, if need be,” he added.
A recent report by Deloitte says the global aerospace and defence (A&D) sector is likely to experience stronger growth in 2017. Following multiple years of positive, but subdued rate of growth, the report forecasts the sector revenues will likely grow by about 2% in 2017. The global A&D sector revenue rebound is attributed to a number of factors in both the commercial aerospace sub-sector and the defense sub-sector. Brigadier SM Sharma (Retd.), CEO, Continental Defence Solutions, says, “While we are confident of an increasing order book in the coming year, what more Indian companies need to do is invest in niche technologies, which will be relevant for a longer time to come, and be a requirement worldwide. India has the ability to construct world-class equipment for the aerospace and defence industry. In fact, we should look at becoming a global supply-chain to companies abroad.”
In terms of the aerospace industry alone, several years of above average order intake has resulted in commercial aircraft backlog being at an all-time high of 13,500 aircraft units. If one were to calculate this based on production cycles time, it represents more than nine and a half years of current annual production. However, with the strong demand for next-generation aircraft, growing airline passenger traffic and a slight improvement in global airline profits, primarily on account of lower fuel costs, is likely to drive increased large commercial aircraft production and in turn commercial aerospace revenues in 2017 and 2018.
Naresh Ummat, MD, Barracuda Camouflage, a SAAB Group company, says, “While there is more business coming to India now, the government should set up training centres so that aerospace and defence components companies can quickly employ trained people. Currently, we spend about 3-6 months training new staff and most Indian companies do not have the wherewithal to invest in setting up training centres.”
Bhel of Delta Automation says that Indian companies are treated with a certain kind of suspicion when it comes to awarding contracts. “Most companies start as SMEs and grow only on the basis of business. If one has met the OEMs approval, then there is little need to restrict business. There was this rule earlier that private companies develop a product in conjunction with the PSU. However, Indian PSUs have a different mind-set and working with them only increases the gestation period.”
Interestingly, Indian companies are also vying for contracts in the testing space in a solutions-based approach. A spokesperson from Keysight Technologies said that with the defence and aerospace market set to grow rapidly, his company is seeking to provide end-to-end solutions right from design, development and testing. “There are a large number of defence and space set-ups in Hyderabad and Bengaluru alone. We have been working with them right from the early stages of product development through completion,” he added. Keysight Technologies has a large R&D centre in Manesar which has more than 700 associates, sales offices in Hyderabad, Bengaluru, Delhi, Mumbai and over a dozen channel partners, and the company is now consolidating its India presence. The nature and scope of engagements are also getting bigger covering not just defence, but also surveillance, intelligence and signalling. In addition to defence and aerospace, communications testing is one big opportunity.
In a rapidly changing world, where ‘disruption’ has become the key word, Indian companies manufacturing for the aerospace and defence industries are putting strong strategies in place to sustain, and grow. Brig. Sharma says that manufacturing for this sector requires one to focus on getting digital and moving away from conventional solutions and technologies. “Precision is the key. This sector calls for high investments and most of our investments are in testing equipment. Since we cater mainly to the PSUs, certain technologies are niche and OEMs are unwilling to part with them. The private sector has deep pockets and they must invest in such technologies for the Indian aerospace and defence sector to get competitive.”
It is not that Indian companies lack the required skill-sets or technology innovations. Companies like Boeing, Airbus, and TAL Manufacturing Solutions conduct nation-wide training, not only within their units, but also to their Tier I and Tier II suppliers. Ummat of Barracuda Camouflage says that most manufacturing companies in this sector readily source engineering and diploma holders who have the basis knowledge in place. “It is only when it comes to seeking people with specialised skills that we fumble. Certain jobs at the plant require a high degree of skill-sets and one cannot afford to have attrition here,” he adds.
Rakesh Juneja, senior VP, offset management, Elcom Innovations, a company that offers complete repertoire of indigenously developed products, technology platforms, manufacturing, testing and services in the field of electronics, says, “Over the last few years, we have created a strong R&D team and have developed a list of application-oriented research work in the field of defence communication, soft switching and inter-operating platforms. We hold design patent for MIL Grade communication device and have interface approval from Ministry of Communications & IT for the IPV6 switching platform.” Elcom also has manufacturing facilities at Mohali, which is a state-of-the-art facility offering avionics grade electronic manufacturing services, test labs equipped with environmental, vibrational and EMI/EMC tests and QA processes to produce the best in class products.
The Indian expertise for this sector mainly lies in tooling, testing, and certification. Recently, Kaman Aerospace Group, Inc. increased its stake in its Indian manufacturing joint venture Kineco Kaman Composites India. The Goa based company manufactures advanced composite structures for aerospace, imaging/medical, and other industries for customers including BAE Systems, Hindustan Aeronautics Limited, and Vikram Sarabhai Space Centre. At its composites plant in Goa, the operation produces complex composite structures utilising the latest carbon material and autoclave curing technology. In 2015, the JV completed the delivery of 20 composite mission consoles to BAE Systems to be used in the manufacturing of P-8 maritime patrol aircraft.
Ready to work
Unlike the public sector companies, the Make in India emphasis has focussed the limelight on private sector companies. Most of them are hungry for orders and willing to work to bag them. They have a well-trained staff and smart facilities, but importantly, a private sector corporate culture is their greatest asset. Most companies start small, but they grow rapidly. Entry-level companies are prone to set up a small number of CNC machines to produce small and simple components. After garnering trust from the OEM, they move on to setting up complex machining centres for sophisticated components. These could be in the form of airframes, engines, landing gears, and the like.
Currently, no Indian company is able to manufacture a full-fledged military aircraft of its own design. That would need capabilities like prime contractorship and systems integration to do that. It is the reason why the government looks abroad to source them. An alternative here is to enter the maintenance, repair and operations (MRO) business for aircraft engines.
A wider collaboration is needed if the Indian manufacturing sector is to grow. It is imperative that the government restricts from offering mere lip-service and looks at helping the SMEs and MSMEs with training and investments, so that they can fly.