Defence Notes

New Delhi, 27 July 2009

Defence Production

EXPANDING  INDIAN FOOTPRINTS

By Radhakrishna Rao

 India’s down-to-earth Defence Minister, A.K. Antony, has consistently been advocating the need for India to achieve self reliance in all aspects of defence technology and production to reduce dependence on imported hardware. Expressing his concern over the imported equipment and systems making up for 70% of Indian defence procurement, Antony has described the trend as both “shameful and dangerous”. Without mincing words, Antony has characterized Indian dependence on imported defence systems as an “undesirable situation” .Says Antony: “We had set the target for self reliance 50 years ago by our first Prime Minister, Jawaharlal Nehru. Unfortunately we are still importing 70% of the equipment .A country like India cannot allow this situation to continue”.

As part of its strategy to boost indigenous defence production capability, the Defence Ministry has decided to encourage the participation of India’s private sector in the defence production scenario. Observe Antony: “Now we have taken a decision that in all procurements, priority, wherever possible, if any equipment can be produced in India either by the public sector or the private sector, should be given to India. If that is not possible, only then we will buy from abroad”.

Giving details of the new move to involve Indian industries in the defence production at an accelerated pace, Antony noted that the Defence Procurement Procedure (DPP) which was earlier amended every two years, would now be amended every year. “The main idea is to give more teeth so that we can on the one hand assure more transparency and on the other, give more space to the Indian industries, both public and private.” He also revealed that of 55 items provided to the soldiers deployed in the Siachen glaciers and other high altitude areas, only 19 items are being imported. “We are gradually trying to produce these 19 items also indigenously,” states Antony.

 In what has been perceived to be a marked shift in defence procurement strategy, Indian Defence Ministry has decided to let Indian private firms bid for a US$1-billion project aimed at modernizing army’s tactical communications systems .If the proposal is carried through, it would be the biggest military project to date that would be thrown open to domestic private sector companies. Sometime back, India’s defence acquisition council, the high powered body that approves military projects involving huge outlays, had cleared the proposal for allowing local companies to enter the race along with state owned entities for the tactical communications system.

This system is aimed at equipping the defence forces for network centric warfare in which ground troops are connected to air force and navy through a satellite supported secure and integrated voice, data and video communications device. As pointed out by Frost and Sullivan of the total capital outlay of 54,824 crore for the defence sector in 2008-09 budget, the army has been sanctioned Rs.11,212-crore for its ongoing modernization programs including  tactical communications and unmanned aerial vehicles.

Along with many big, established players like Tata Advanced Systems (TAS), Larsen and Toubro (L&T) and Mahindra Defence Systems, many small and medium industrial outfits in India are showing an increasing interest in meeting the fast growing requirements of the Indian defence sector. “The private sector has graduated from being tradesmen to engineering companies. They are now synergistically using the technology and the skill set available to make, market and sustain world class products” says Dr.Prahlada, Chief Controller (Research and Development), Defence Research and Development Organisation (DRDO).Meanwhile, DRDO has revealed that it is willing to transfer the technology related to nuclear, biological and chemical (NBC) warfare to small and medium scale companies and in the process opening up business potentials worth Rs.2,000-crore.

‘We will spend Rs.300-crore on NBC sector. Around 60% of our work will be outsourced to SMEs (small and medium enterprises)”states W.Selvamurthy, Chief Controller Research and development (Life Sciences and Human resources), DRDO. DRDO is now working on developing new techniques to defend the country against a range of potentially lethal agents. These projects include nano technology based bio sensors, unmanned robot operated aerial and ground vehicles attached with NBC detector sensors, devices for detection of chemical clouds and self contained NBC shelters and hospitals to handle NBC victims.

All said done, the share of the Indian private sector in so far as capital spending on defence is concerned is just around 9%.As things stand now, Indian private sector appears to be a peripheral player in country’s defence sector dominated as it is by state owned giants and global aerospace and defence vendors. Meanwhile, the heavy engineering and infrastructure development company L&T  which is contributing to the missile launch systems including ones for Brahmos and Dhanush ,has announced a joint venture with European aerospace and defence consortium EADS to manufacture high end defence electronics products. The defence division of L&T which makes ancillary equipment for ships such as propulsion steering gears and shafts, is now planning to build ships for the Indian navy.

 Along with Godrej and Boyce as well as TAS,L&T is in the race for  bagging the contract for developing and building an unmanned aerial vehicle(UAV).This medium altitude, long endurance UAV christened Rustom will be designed to fly at an altitude of 250-km.”Only defence manufacturing coupled with economic might can make India a super power” quips A.M. Naik CEO of L&T.

 Tata Group companies have floated a number of joint ventures with foreign entities with a view to sharpen the edge of the defence production. TAS has a joint venture with Israel Aerospace Industries (IAI) for building unmanned aerial vehicles, missiles and radar systems. Tata Group has also a tie up with Sikorsky Aircraft Corp of USA to manufacture S-92 helicopter cabin in India. The cabin for this four bladed chopper, meant for both the civilian and military uses, is expected t roll out of the Greenfield facility near Hyderabad international airport by late 2010.

Observers of the Indian  defence sector  feel that the defence offset clause forming part of the defence procurement will help Indian private sector not only get business from foreign vendors implementing high ticket projects but also help it sharpen its technological skill and manufacturing base. The defence procurement policy stipulates that for import order in excess of Rs.300-crore, the suppliers must outsource around 30% with the Indian companies. Experts are of view that Indian companies can rake in US$10-billion in the next four to five years through the offset program.  In the ultimate analysis, it would be reasonable to assume that if Indian companies graduate to the position of delivering high quality products at low cost, foreign defence vendors will be tempted to set up manufacturing facilities in India to tap the skill base available with the Indian companies.---INFA

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