Feroz Alam Khan
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http://www.makeinindia.com/sector/defence-manufacturing
all Indian forum members ... your assistance and help is desired, thanks. Calling all country mates....
@proud_indian @SrNair @Water Car Engineer @PARIKRAMA @OrionHunter @Abingdonboy @katarabhumi @Kathin_Singh @Rajaraja Chola @John Reese @ranjeet @Itachi @itachii @Royal Blue007 @Stephen Cohen @bhutjolokia @4GTejasBVR
______________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________
Indigenous Production Of Defence Equipments In INDIA
As India is moving towards transformation from a regional power to a global power, the defence sector is increasingly occupying even bigger space in the country’s long term strategic planning. As India is gaining power it is increasing its purchasing power as well with several high-end defence deals either in the pipeline or being envisioned to strengthen India’s force structure. Estimates show that the Indian Air Force will have more than 1000 fighter jets and around 60 squadrons by 2030. India will be spending more than USD 80 billion on capital acquisitions in the 2010-2015 timeframe.
The Indian government is very clear and focused in its vision for its defence sector - indigenization of the industry and acquiring advanced technologies which will in turn help to reduce dependence on imports from other countries around the world. In nitty-gritty, it would create a ripple effect that the government is hoping to initiate in this sector. In this evolving Defence value chain it would be unfair to ignore the role that human resource skills, Research and Development (R&D) and the long standing small and Medium Enterprises (SME) Defence Public Sector Units (DPSUs) suppliers and ordinance boards are going to play.
As an emerging economic superpower, India’s spending on defence is on a rapid upward trajectory. The main driver appears to be emerging rivalry with China – especially as Beijing seeks to increase its presence in the Indian Ocean. However, traditional rivalry with Pakistan as well as increasing internal security issues are also factors.
A Brief About The INDIAN Defence Sector
The opening up of the Indian economy during the early nineties heralded an era of unprecedented industrial growth in India. The growth rates matched those of the fastest growing economies. A confident and resurgent Indian Defence Industry is making forays into almost all the sectors of manufacturing. Lately, the huge opportunities for growth within the domestic and global defence and aerospace industries have attracted the attention of Indian industry.
India which is the world’s fourth largest fighting has the strength of defence equipments with regards to ‘State of the Art’, ‘Matured’ and ‘Obsolescent’ equipment is 15, 35 and 50 percent respectively. This suggests that the Government will have to make serious efforts towards upgrading its defence resources either by developing or procuring defence equipment and systems. Moreover, modernization, up-gradation and maintenance of the existing equipment will also provide immense opportunities to the industry. India is one of the largest global military spenders too. The defence budget for 2009-10 has increased by 34.19 percent over the previous year’s budget estimate (BE) of INR 1,056 Bn.
The Department of Defence Production of the Ministry of Defence is responsible for the indigenous production of equipment used by the Indian Armed Forces. It comprises the 41 Indian Ordnance Factories under control of the Ordnance Factories Board and 8 Defence PSUs namely, HAL, BEL, BEML, BDL, MDL, GSL, GRSE and Midhani.
The Indian Armed Forces are currently the world's largest arms and ammunitions importer, with Russia, Israel, and to some extent, France and United States being the primary foreign suppliers of military equipment. The history and development of Indian ordinance factories is directly linked with the British reign in India. The East India Company considered military hardware to be a vital element for securing their economic interest in India and increasing their political power. In 1775 British authorities accepted the establishment of the Board of Ordnance at Fort William, Calcutta. This marks the official beginning of the Army Ordnance in India.
In 1787 a gunpowder factory was established at Ichapore; it began production in 1791, and the site was later used as a rifle factory beginning in 1904. In 1801, Gun Carriage Agency (now known as Gun & Shell Factory, Cossipore) was established at Cossipore, Calcutta, and production began on 18 March 1802. This is the oldest ordinance factory in India still in existence.
The Indian manufacturing industry has been a significant contributor to India’s GDP and has displayed impressive growth in the last ten years. However, the sector’s 16 percent share in GDP is among the lowest compared to other the rapidly growing developing economies and recently released National Manufacturing Policy has articulated an inspirational objective to increase this share to 25 percent over next ten years.
A vibrant domestic defence manufacturing sector can be a vital nail to help realize to fulfill the vision of becoming a super power in the defence sector. The Defence Production Policy 2011 has reiterated the strategic and economic importance of self–reliance in the area of defence. Developing a strong defence manufacturing sector enhances security as it reduces reliance on foreign suppliers, provides opportunity to create IP and domestic technologies and capabilities which often have significant civil applications, provide a platform to tap export markets. Most importantly it has a potential to create over one million jobs.
Defence spending in India has grown at about 17 percent in the past years, and with this India has came forth as one of the largest arms importer in the world. By 2014, it is expected that India would become the third largest defence spender after the US and China. Despite this huge market, the current policies and structure of the industry has constrained the domestic defence production with only 30 percent of the demand being met internally. The participation of private sector is even lower at about 10 percent that too mostly from Tier II or III suppliers.
Historically, India has always favoured the public sector over the private in the areas of defence production. India’s first industrial–policy resolution in 1948 made it clear that a major portion of industrial capacity was to be reserved for the public sector including all arms production. When this document was revised in 1956, it placed the munitions, aircraft and shipbuilding industries in public sector under central Government control, preventing private sector production.
Major Public & Private Sector Undertakings In Defence Sector
In this planning stage and transformed settings the country enjoys advantages like availability of investible capital, accessibility to earlier denied dual technologies, willingness for cooperation and collaboration by defence production giants - particularly from the West in the wake of the economic downturn. India today has a scientific community that is globally competitive and a pool of skilled manpower with long years of experience and knowledge relating to Defence industries.
There is also a new enthusiasm in India’s public sector enterprises. For acquiring self reliance – cutting across the barriers of public and private sectors, the Indian Defence Ministry can perhaps take a leaf from the experience of ISRO which outsources components, hardware and sub-systems for its launch vehicles and satellites from the Indian industrial units, both in the private and public sectors.
Vision, convergence, speed and de-bureaucratization of defence production and technology development should be the guiding Mantra of India in the coming decades.
Private defence firms keen on Make in India
Imports contribute 75% of India’s defence equipment needs; the domestic private sector’s share is just 5%
P.R. Sanjai
The Akash missile was displayed during the Make in India Week in Mumbai in February. Photo: Abhijit Bhatlekar/Mint
Mumbai: Domestic telecom equipment maker Himachal Futuristic Communications Ltd (HFCL) is known for two things: in the late 1990s, it made outrageous bids for telecom licences and later on it had its share of run-ins with the capital markets regulator for its suspected involvement in rigging share prices in a case dating back to 1999-2001.
But that’s the past and it’s makeover time as the company, with revenue of Rs.2,553 crore in 2014-15, has won government licences to design, develop and manufacture aircraft and unmanned aerial vehicles.
HFCL is just one of the private firms eyeing defence projects. Between January 2001 and February 2016, the commerce ministry has granted 333 industrial licences to private firms for defence manufacturing, according to data on the department of industrial policy and promotion (DIPP) website.
They include Micronel Global Engineers Pvt. Ltd, Marine Electrical (I) Pvt. Ltd, Defsys Solutions Pvt. Ltd, Naistoco India Pvt. Ltd, Comint Systems and Solutions Pvt. Ltd, Ananth Technologies Ltd, DCX Cable Assemblies Pvt. Ltd and OIS Advanced Technology Pvt. Ltd.
There are more familiar names too: Tebma Shipyards Ltd, Premier Explosives Ltd, Titagarh Wagons Ltd, Taneja Aerospace and Aviation Ltd, Punj Lloyd Aviation Ltd, Dynamatic Technologies Ltd, Bharati Shipyard Ltd, Ashok Leyland Defence Systems Ltd and AMW Motors Ltd.
And then there are big, established ones such as Bharat Forge Ltd (BFL), Reliance Industries Ltd (RIL), Tata group, Larsen and Toubro Ltd (L&T), Godrej Group and the Mahindra Group.
Anil Ambani’s Reliance Group and the Adani Group’s Adani Defence Systems and Technologies Ltd are the latest to enter the race.
So, why is there a rush to be part of the defence sector?
It is partly the result of Prime Minister Narendra Modi’s emphasis on defence equipment as part of his Make in India campaign.
This government thrust for defence too has a reason. India is the world’s largest importer of defence equipment and spends around $24 billion a year, according to Stockholm International Peace Research Institute. And this means import substitution and indigenization.
Domestic private firms have a significant opportunity, says Kabir Bogra, associate partner at New Delhi-based law firm Khaitan and Co. “The serious players in the space have been investing for the past decade or more (Tata group, BFL, L&T) and have built a portfolio in electronics, land systems, aerospace products and short-range missiles. Most of these are either in talks or have already concluded framework arrangements with foreign original equipment manufacturers (OEMs), therefore to a large extent, the preparatory work is completed or in progress,” he said.
For instance, BFL has tied up with Israel defence tech firm Rafael Advanced Defense Systems Ltd and Elbit Systems Ltd and UK-based Rolls-Royce Corp. Similarly, Tata group has tied up with US-based firms Sikorsky Aircraft Corp., Lockheed Martin Corp. and Boeing Co.
“However, for them to deliver on their potential, the government needs to be commercially sensitive and a few large contracts need to be commissioned. Most notably, NUH (naval utility helicopter) tender needs to be taken on priority along with artillery products to send a clear signal to the domestic industry that things are moving. The ministry of defence needs to commit itself to time frames for concluding these,” Bogra said.
The tender to buy NUH was scrapped in 2014 after years of process or inviting proposals and tenders. But now things are different as the government aims to revive the private sector. According to A.K. Gupta, secretary, department of defence production, ministry of defence, the private sector now has the opportunity to pick up a 25% share of defence production.
“Around 25% of the defence PSU (public sector undertaking) turnover can be off-loaded to the private sector, and the ministry has already de-licensed 60-70% of the production,” he said earlier this month in Mumbai.
Public sector undertakings in defence sector have a cumulative turnover of about Rs.50,000 crore, he said.
Last week, Tata group said it expects defence and aerospace business to increase its revenue by 7.5% to Rs.2,650 crore in the year to 31 March.
Defence and aerospace are important growth drivers identified by Tata group chairman Cyrus Mistry and significant investments will be made in these areas, said Mukund Rajan, member, group executive council, and the brand custodian of Tata Sons Ltd.
Tata group companies engaged in the defence and aerospace sector include Tata Advanced Systems Ltd (TAS) and its subsidiaries, Tata Advanced Materials, Tata Motors Ltd, Tata Power Strategic Engineering Division, TAL Manufacturing Solutions, Tata Technologies, Tata Consultancy Services Ltd, Tata Steel Ltd, and Tata Elxsi Ltd.
Defence has the potential to contribute 15% to Tata Motors’ revenue from the current 3% if it wins the order to make Future Infantry Combat Vehicles or FICVs, for the Indian Army, said Vernon Noronha, vice-president of defence and government business at Tata Motors.
The contenders for the FICV contract include L&T, Mahindra and Mahindra, Reliance Defence and Engineering Ltd (formerly Pipavav Defence) and Titagarh Wagons Ltd. The order could be worth about Rs.60,000 crore over the next few years, according to defence ministry officials.
Currently, the order book of Tata Advanced Systems (TAS), the aerospace and defence arm of Tata group, stands atRs.4,500 crore. A majority of it are export orders, said Sukaran Singh, chief executive of TAS.
It expects to get more orders in the domestic market, he said. TAS is working on projects, including missiles, radars, aerospace and unmanned aerial vehicles and counts companies such as Lockheed Martin Corp., Sikorsky Aircraft Corp., Boeing Co., Pilatus Aircraft Ltd, Cobham, RUAG and Rolls-Royce as its customers.
In November, TAS formed a joint venture with Boeing to make aerostructures for aircraft, deliveries for which will start from 2018.
Tata Motors, in partnership with the state-run Defence Research and Development Organisation, has also designed and developed India’s first amphibious infantry combat vehicle Kestrel.
Last week, the auto maker tied up with BFL and General Dynamics Land Systems to develop FICVs for the Indian armed forces.
Tata Motors has supplied over 100,000 vehicles to the Indian military and paramilitary forces, so far, and expects its future growth to come from combat vehicles, the group’s executives said.
Tata Power SED, another group company, is planning to invest Rs.700 crore to set up a defence equipment manufacturing plant in Karnataka, Tata executives said on Wednesday. It plans to double investments at this plant over the next two to three years.
To be sure, currently imports contribute almost 75% of the defence equipment needs; public sector and domestic private sector players contribute only 20% and 5%, respectively.
A January report of domestic brokerage ICICI Securities Ltd said it is difficult to track any other industry with similar import-substitution opportunity all through the history of independent India.
“While the growth of the defence sector will follow along its strategic and technological requirements, the domestic defence industry is still in its infancy—which translates into a huge opportunity for investors and Indian enterprises,” ICICI Securities said.
The brokerage firm also foresees hurdles for private enterprises. “Across platforms, indigenization has more or less trailed the intended goals, with imports inevitably making up for the shortfalls. Further, execution of platforms has faced the typical headwinds of higher book-to-bill ratios for defence PSUs. While DPP (defence procurement procedures), 2013, has created excitement along with Make in India projects, it may take significant time to fructify. Over the next five years, we see limited prospects of meaningful indigenization barring radars and missiles,” the report noted.
all Indian forum members ... your assistance and help is desired, thanks. Calling all country mates....
@proud_indian @SrNair @Water Car Engineer @PARIKRAMA @OrionHunter @Abingdonboy @katarabhumi @Kathin_Singh @Rajaraja Chola @John Reese @ranjeet @Itachi @itachii @Royal Blue007 @Stephen Cohen @bhutjolokia @4GTejasBVR
- @Stephen Cohen, @Joe Shearer @gslv mk32 @rishav @IndianArmy @indguru2016 @INDIAISM @indianBong @indiandefence.co.in @IndianSudhakar @IndianTiger @bhagat @bhakshak @Bharat Muslim @Bhayangkara
- @Haryanaa, @mkb95 @ashok mourya @ashok321 @Ashoka The Great @hellfire @Surya 1 @Surenas @suresh1773 @surya kiran @raven_robin @ravi gupta @ravinderpalrulez
- @Indrajit, @Kiarash @Kraitcorp @ @Hello It's me @ @enquencher @vinayvinay, @anant_s @dadeechi
@raj76 @@Indian009 @indiatester @Bhasad Singh Mundi @bhaktupdate @Marxist @Blue Warrior @Royal Blue007 @Levina @litefire @Nilgiri @sankar @sankaraiyer @TejasMk3 @Alphacharlie @guru1 @gurudev @Param @paritosh @parkour guy @raja hindustani @raja1 @sankar @sankaraiyer @Rain Man @JanjaWeed @wiseone2 @Vicar @Abba_Dabba_Jabba @Dragon4 @hinduguy @Hindustani78 @indiatester @Bhasad Singh Mundi @bhaktupdate @Marxist @Blue Warrior @Royal Blue007 @Levina @litefire @Nilgiri @sankar @sankaraiyer @TejasMk3 @Alphacharlie @guru1 @gurudev @Param @paritosh @parkour guy @raja hindustani @raja1 @sankar @sankaraiyer @Rain Man @JanjaWeed @wiseone2 @Vicar @Abba_Dabba_Jabba @Dragon4 @hinduguy@Hindustani78
______________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________
Indigenous Production Of Defence Equipments In INDIA
As India is moving towards transformation from a regional power to a global power, the defence sector is increasingly occupying even bigger space in the country’s long term strategic planning. As India is gaining power it is increasing its purchasing power as well with several high-end defence deals either in the pipeline or being envisioned to strengthen India’s force structure. Estimates show that the Indian Air Force will have more than 1000 fighter jets and around 60 squadrons by 2030. India will be spending more than USD 80 billion on capital acquisitions in the 2010-2015 timeframe.
The Indian government is very clear and focused in its vision for its defence sector - indigenization of the industry and acquiring advanced technologies which will in turn help to reduce dependence on imports from other countries around the world. In nitty-gritty, it would create a ripple effect that the government is hoping to initiate in this sector. In this evolving Defence value chain it would be unfair to ignore the role that human resource skills, Research and Development (R&D) and the long standing small and Medium Enterprises (SME) Defence Public Sector Units (DPSUs) suppliers and ordinance boards are going to play.
As an emerging economic superpower, India’s spending on defence is on a rapid upward trajectory. The main driver appears to be emerging rivalry with China – especially as Beijing seeks to increase its presence in the Indian Ocean. However, traditional rivalry with Pakistan as well as increasing internal security issues are also factors.
A Brief About The INDIAN Defence Sector
The opening up of the Indian economy during the early nineties heralded an era of unprecedented industrial growth in India. The growth rates matched those of the fastest growing economies. A confident and resurgent Indian Defence Industry is making forays into almost all the sectors of manufacturing. Lately, the huge opportunities for growth within the domestic and global defence and aerospace industries have attracted the attention of Indian industry.
India which is the world’s fourth largest fighting has the strength of defence equipments with regards to ‘State of the Art’, ‘Matured’ and ‘Obsolescent’ equipment is 15, 35 and 50 percent respectively. This suggests that the Government will have to make serious efforts towards upgrading its defence resources either by developing or procuring defence equipment and systems. Moreover, modernization, up-gradation and maintenance of the existing equipment will also provide immense opportunities to the industry. India is one of the largest global military spenders too. The defence budget for 2009-10 has increased by 34.19 percent over the previous year’s budget estimate (BE) of INR 1,056 Bn.
The Department of Defence Production of the Ministry of Defence is responsible for the indigenous production of equipment used by the Indian Armed Forces. It comprises the 41 Indian Ordnance Factories under control of the Ordnance Factories Board and 8 Defence PSUs namely, HAL, BEL, BEML, BDL, MDL, GSL, GRSE and Midhani.
The Indian Armed Forces are currently the world's largest arms and ammunitions importer, with Russia, Israel, and to some extent, France and United States being the primary foreign suppliers of military equipment. The history and development of Indian ordinance factories is directly linked with the British reign in India. The East India Company considered military hardware to be a vital element for securing their economic interest in India and increasing their political power. In 1775 British authorities accepted the establishment of the Board of Ordnance at Fort William, Calcutta. This marks the official beginning of the Army Ordnance in India.
In 1787 a gunpowder factory was established at Ichapore; it began production in 1791, and the site was later used as a rifle factory beginning in 1904. In 1801, Gun Carriage Agency (now known as Gun & Shell Factory, Cossipore) was established at Cossipore, Calcutta, and production began on 18 March 1802. This is the oldest ordinance factory in India still in existence.
The Indian manufacturing industry has been a significant contributor to India’s GDP and has displayed impressive growth in the last ten years. However, the sector’s 16 percent share in GDP is among the lowest compared to other the rapidly growing developing economies and recently released National Manufacturing Policy has articulated an inspirational objective to increase this share to 25 percent over next ten years.
A vibrant domestic defence manufacturing sector can be a vital nail to help realize to fulfill the vision of becoming a super power in the defence sector. The Defence Production Policy 2011 has reiterated the strategic and economic importance of self–reliance in the area of defence. Developing a strong defence manufacturing sector enhances security as it reduces reliance on foreign suppliers, provides opportunity to create IP and domestic technologies and capabilities which often have significant civil applications, provide a platform to tap export markets. Most importantly it has a potential to create over one million jobs.
Defence spending in India has grown at about 17 percent in the past years, and with this India has came forth as one of the largest arms importer in the world. By 2014, it is expected that India would become the third largest defence spender after the US and China. Despite this huge market, the current policies and structure of the industry has constrained the domestic defence production with only 30 percent of the demand being met internally. The participation of private sector is even lower at about 10 percent that too mostly from Tier II or III suppliers.
Historically, India has always favoured the public sector over the private in the areas of defence production. India’s first industrial–policy resolution in 1948 made it clear that a major portion of industrial capacity was to be reserved for the public sector including all arms production. When this document was revised in 1956, it placed the munitions, aircraft and shipbuilding industries in public sector under central Government control, preventing private sector production.
Major Public & Private Sector Undertakings In Defence Sector
- Hindustan Aeronautics Limited (HAL) - Design, development, manufacture, repair and overhaul of aircraft, helicopters, engines and their accessories.
- Bharat Electronics Limited (BEL) - Design, development and manufacture of sophisticated state-or-the-art electronic equipment components for the use of the defence services, para-military organizations and other government users.
- Bharat Earth Movers Ltd (BEML) - Multi-product Company engaged in the design and manufacture of a wide range of equipment including specialized heavy vehicles for defence and re-engineering solutions in automotive and aeronautics.
- Mazagon Dock Limited (MDL) - Submarines, missile boats, destroyers, frigates and corvettes for the Indian Navy.
- Garden Reach Shipbuilders & Engineers Ltd (GRSE) - Builds and repairs warships and auxiliary vessels for the Indian Navy and the Coast Guard.
- Bharat Dynamics Limited (BDL) - Missiles, torpedo counter measure system, counter measures dispensing system.
- Mishra Dhatu Nigam Limited (MIDHANI) - Aeronautics, space, armaments, atomic energy, navy special products like molybdenum wires and plates, titanium and stainless steel tubes, alloys etc.
- Goa Shipyard Ltd (GSL) - Builds a variety of medium size, special purpose ships for the defence, Indian Coast Gaurd (ICG) and civil sectors.
- Tata Advanced Systems Limited (TAS) - Design, manufacture and supply of composite components, sub-assemblies for applications in aerospace division and solutions for personal armour, vehicle armour and special applications.
- Larsen and Toubro - Design, development and manufacture of integrated land based /naval combat/missile systems, defence electronics & control systems and integrated naval engineering systems.
- Kirloskar Brothers - Infrastructure projects (water supply, power plants, irrigation), project and engineered pumps, industrial pumps.
- Mahindra Defence Systems - Total solutions for the range of light combat/armoured vehicles, simulators for weapons & weapon systems, sea mines, small arms, variants and associated ammunition.
- Ashok Leyland - Design, development and manufacture of special vehicles, serving Indian Armed Forces and international customers such as US army.
In this planning stage and transformed settings the country enjoys advantages like availability of investible capital, accessibility to earlier denied dual technologies, willingness for cooperation and collaboration by defence production giants - particularly from the West in the wake of the economic downturn. India today has a scientific community that is globally competitive and a pool of skilled manpower with long years of experience and knowledge relating to Defence industries.
There is also a new enthusiasm in India’s public sector enterprises. For acquiring self reliance – cutting across the barriers of public and private sectors, the Indian Defence Ministry can perhaps take a leaf from the experience of ISRO which outsources components, hardware and sub-systems for its launch vehicles and satellites from the Indian industrial units, both in the private and public sectors.
Vision, convergence, speed and de-bureaucratization of defence production and technology development should be the guiding Mantra of India in the coming decades.
Private defence firms keen on Make in India
Imports contribute 75% of India’s defence equipment needs; the domestic private sector’s share is just 5%
P.R. Sanjai
The Akash missile was displayed during the Make in India Week in Mumbai in February. Photo: Abhijit Bhatlekar/Mint
Mumbai: Domestic telecom equipment maker Himachal Futuristic Communications Ltd (HFCL) is known for two things: in the late 1990s, it made outrageous bids for telecom licences and later on it had its share of run-ins with the capital markets regulator for its suspected involvement in rigging share prices in a case dating back to 1999-2001.
But that’s the past and it’s makeover time as the company, with revenue of Rs.2,553 crore in 2014-15, has won government licences to design, develop and manufacture aircraft and unmanned aerial vehicles.
HFCL is just one of the private firms eyeing defence projects. Between January 2001 and February 2016, the commerce ministry has granted 333 industrial licences to private firms for defence manufacturing, according to data on the department of industrial policy and promotion (DIPP) website.
They include Micronel Global Engineers Pvt. Ltd, Marine Electrical (I) Pvt. Ltd, Defsys Solutions Pvt. Ltd, Naistoco India Pvt. Ltd, Comint Systems and Solutions Pvt. Ltd, Ananth Technologies Ltd, DCX Cable Assemblies Pvt. Ltd and OIS Advanced Technology Pvt. Ltd.
There are more familiar names too: Tebma Shipyards Ltd, Premier Explosives Ltd, Titagarh Wagons Ltd, Taneja Aerospace and Aviation Ltd, Punj Lloyd Aviation Ltd, Dynamatic Technologies Ltd, Bharati Shipyard Ltd, Ashok Leyland Defence Systems Ltd and AMW Motors Ltd.
And then there are big, established ones such as Bharat Forge Ltd (BFL), Reliance Industries Ltd (RIL), Tata group, Larsen and Toubro Ltd (L&T), Godrej Group and the Mahindra Group.
Anil Ambani’s Reliance Group and the Adani Group’s Adani Defence Systems and Technologies Ltd are the latest to enter the race.
So, why is there a rush to be part of the defence sector?
It is partly the result of Prime Minister Narendra Modi’s emphasis on defence equipment as part of his Make in India campaign.
This government thrust for defence too has a reason. India is the world’s largest importer of defence equipment and spends around $24 billion a year, according to Stockholm International Peace Research Institute. And this means import substitution and indigenization.
Domestic private firms have a significant opportunity, says Kabir Bogra, associate partner at New Delhi-based law firm Khaitan and Co. “The serious players in the space have been investing for the past decade or more (Tata group, BFL, L&T) and have built a portfolio in electronics, land systems, aerospace products and short-range missiles. Most of these are either in talks or have already concluded framework arrangements with foreign original equipment manufacturers (OEMs), therefore to a large extent, the preparatory work is completed or in progress,” he said.
For instance, BFL has tied up with Israel defence tech firm Rafael Advanced Defense Systems Ltd and Elbit Systems Ltd and UK-based Rolls-Royce Corp. Similarly, Tata group has tied up with US-based firms Sikorsky Aircraft Corp., Lockheed Martin Corp. and Boeing Co.
“However, for them to deliver on their potential, the government needs to be commercially sensitive and a few large contracts need to be commissioned. Most notably, NUH (naval utility helicopter) tender needs to be taken on priority along with artillery products to send a clear signal to the domestic industry that things are moving. The ministry of defence needs to commit itself to time frames for concluding these,” Bogra said.
The tender to buy NUH was scrapped in 2014 after years of process or inviting proposals and tenders. But now things are different as the government aims to revive the private sector. According to A.K. Gupta, secretary, department of defence production, ministry of defence, the private sector now has the opportunity to pick up a 25% share of defence production.
“Around 25% of the defence PSU (public sector undertaking) turnover can be off-loaded to the private sector, and the ministry has already de-licensed 60-70% of the production,” he said earlier this month in Mumbai.
Public sector undertakings in defence sector have a cumulative turnover of about Rs.50,000 crore, he said.
Last week, Tata group said it expects defence and aerospace business to increase its revenue by 7.5% to Rs.2,650 crore in the year to 31 March.
Defence and aerospace are important growth drivers identified by Tata group chairman Cyrus Mistry and significant investments will be made in these areas, said Mukund Rajan, member, group executive council, and the brand custodian of Tata Sons Ltd.
Tata group companies engaged in the defence and aerospace sector include Tata Advanced Systems Ltd (TAS) and its subsidiaries, Tata Advanced Materials, Tata Motors Ltd, Tata Power Strategic Engineering Division, TAL Manufacturing Solutions, Tata Technologies, Tata Consultancy Services Ltd, Tata Steel Ltd, and Tata Elxsi Ltd.
Defence has the potential to contribute 15% to Tata Motors’ revenue from the current 3% if it wins the order to make Future Infantry Combat Vehicles or FICVs, for the Indian Army, said Vernon Noronha, vice-president of defence and government business at Tata Motors.
The contenders for the FICV contract include L&T, Mahindra and Mahindra, Reliance Defence and Engineering Ltd (formerly Pipavav Defence) and Titagarh Wagons Ltd. The order could be worth about Rs.60,000 crore over the next few years, according to defence ministry officials.
Currently, the order book of Tata Advanced Systems (TAS), the aerospace and defence arm of Tata group, stands atRs.4,500 crore. A majority of it are export orders, said Sukaran Singh, chief executive of TAS.
It expects to get more orders in the domestic market, he said. TAS is working on projects, including missiles, radars, aerospace and unmanned aerial vehicles and counts companies such as Lockheed Martin Corp., Sikorsky Aircraft Corp., Boeing Co., Pilatus Aircraft Ltd, Cobham, RUAG and Rolls-Royce as its customers.
In November, TAS formed a joint venture with Boeing to make aerostructures for aircraft, deliveries for which will start from 2018.
Tata Motors, in partnership with the state-run Defence Research and Development Organisation, has also designed and developed India’s first amphibious infantry combat vehicle Kestrel.
Last week, the auto maker tied up with BFL and General Dynamics Land Systems to develop FICVs for the Indian armed forces.
Tata Motors has supplied over 100,000 vehicles to the Indian military and paramilitary forces, so far, and expects its future growth to come from combat vehicles, the group’s executives said.
Tata Power SED, another group company, is planning to invest Rs.700 crore to set up a defence equipment manufacturing plant in Karnataka, Tata executives said on Wednesday. It plans to double investments at this plant over the next two to three years.
To be sure, currently imports contribute almost 75% of the defence equipment needs; public sector and domestic private sector players contribute only 20% and 5%, respectively.
A January report of domestic brokerage ICICI Securities Ltd said it is difficult to track any other industry with similar import-substitution opportunity all through the history of independent India.
“While the growth of the defence sector will follow along its strategic and technological requirements, the domestic defence industry is still in its infancy—which translates into a huge opportunity for investors and Indian enterprises,” ICICI Securities said.
The brokerage firm also foresees hurdles for private enterprises. “Across platforms, indigenization has more or less trailed the intended goals, with imports inevitably making up for the shortfalls. Further, execution of platforms has faced the typical headwinds of higher book-to-bill ratios for defence PSUs. While DPP (defence procurement procedures), 2013, has created excitement along with Make in India projects, it may take significant time to fructify. Over the next five years, we see limited prospects of meaningful indigenization barring radars and missiles,” the report noted.
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