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12-07-2006, 07:10 AM
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#1 (permalink)
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Guest
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Indias PVT sector jumps in defence
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PRIVATE SECTOR GUNS FOR DEFENCE
Giving defence deals to Indian firms may reduce our dependence on intermediaries and foreign countries
Shashwat Gupta Ray
Mumbai
The disintegration of the former USSR and the post-Pokhran sanctions hit India’s defence modernisation programme badly, leading to an acute shortage of spare parts and upgraded versions of existing weaponry. The spate of defence scams starting from Bofors to the Scorpene submarine deal has not been helping the cause of defence acquisitions either.
To find a way out of the crisis, the Centre has ushered in phased liberalisation into the defence industry realising the synergy and linkage effects that an enhanced domestic production could bring to the industry. The policy to deregulate certain select areas of the industry is aimed at import substitution through higher domestic production for meeting domestic defence requirements. The key areas of growth identified within the industry are expected to arise from the upgradation of the production capacity, technology transfer, and modernisation of the defence infrastructure
“The defence industry is gradually liberalising and the public sector is facilitating greater private sector participation in the area of defence goods production. There are about 5,100 companies supplying around 20-25 percent of components and sub-assemblies to State-owned contractors, and the market size was estimated to be around Rs 27,900 crore in 2005, of which the Army alone accounted for Rs 15,000 crore. Of India’s current defence procurement of capital items, more than 30 percent is imported; however, this is expected to change with the creation of more public-private partnerships,” says Shumit Vatsal, research analyst with Frost and Sullivan in his research paper on the Indian defence market.
To facilitate the acquisitions, the Defence Budget has been increased from Rs 83,000 crore in 2005-06 to Rs 89,000 crore for 2006-07 with Rs 39,400 crore as capital allocations. As far as individual sub-allocations are concerned, the Army is entitled to Rs 41,000 crore while the Air Force and Navy are allotted Rs 25,000 crore and Rs 15,000 crore respectively. The Centre expects its defence expenditure to exceed Rs 90,000 crore by 2008.
The defence industry in the past has been dominated by government-run public sector undertakings (PSU). This scenario has changed significantly with the ministry of defence providing licences to private companies to manufacture select aerospace and defence products.
“In 2001, the country opened up for up to 100 percent domestic private sector investments in the defence industry and allowed foreign direct investment of up to 26 percent in select areas. Some of the key non-PSU participants supplying defence equipment and services include Mahindra & Mahindra, Tata Group, Kirloskar Brothers, Larsen & Toubro (L&T), Ashok Leyland, Jindal, Max Aerospace & Aviation, and Ramoss India,” says Commodore (retired) R. Balasubramaniam, president, Pipavav Shipyard.
L&T has proposed to design and construct weapons platforms, weapon launchers, small arms, anti-tank weapon systems, rockets, torpedoes and mines. Mahindra Defence Systems and Ashok Leyland Limited manufacture light armoured vehicles for both the Indian Army and for armed forces of other countries.
The Indian Space Research Organisation (ISRO) has a strong partnership with the domestic industrial sector for the execution of space programmes. Over 500 small, medium and large-scale enterprises work with ISRO, supplying hardware, undertaking fabrication jobs, and establishing fabrication and test facilities. The domestic industrial sector provides all raw materials and high-tech electronic items required by ISRO and has also contributed towards developing systems for launch vehicles and remote sensing and ground equipment. Around 231 technologies developed by ISRO were transferred to the domestic industrial sector for commercial use. ISRO also undertakes technical consultancy projects for industries.
According to a market research report by Sanjiv Khanna for Industry Canada, eight regiments of the Pinaka multi-barrelled rocket-launcher have cost Rs 2,812 crore; 250 Light Combat Aircraft for the Air Force have cost Rs 18,900 crore; missiles, including the Agni, BrahMos, Prithvi and tactical missiles have cost Rs 5,850 crore; radars and radio equipment have cost Rs 3,748 crore; 200 self-propelled guns being manufactured with foreign assistance would cost Rs 3,600 crore. India is seeking participation from the private sector for these projects in a bid to reduce their import component by as much as 30 percent.
“The best example of PSU-foreign-private collaborations in the defence sector is the BrahMos supersonic missile that can travel at a speed of Mach 2.8 and has a range of up to 300 km. It can be launched from various platforms — ship, land, aircraft and submarine,” says Commodore Balasubramaniam. As of today, this is the only supersonic missile produced in the world. It is designed jointly by npom of Russia and India’s Defence Research and Development Organisation. BrahMos is jointly funded by the two countries and involves inputs from 10 Russian and 20 Indian public and private sector industries, including L&T and Godrej.
Mass production of the missile has commenced and the company expects to supply India’s armed forces with 1,000 missiles by 2015. BrahMos officials are cagey about revealing the cost of the missile. Defence analysts say it is roughly Rs 10 crore per missile. The BrahMos will equip all major Indian warships like the three under-construction Project 15A destroyers and project Project 17 frigates and will be retrofitted on one existing warship each year.
Godrej-PCS has been working on the development of this complex system for almost four years now. The system has more than 2,000 intricate precision components and subassemblies. L&T, whose revenue target for 2007-08 is Rs 1,000 crore from defence, aerospace and nuclear power contracts, is working towards building the major sub-assemblies for both airframe and aero-engines of the missile.
The Army too has placed a substantial order for the missiles that would be inducted into the force in 2007. The land-to-land version is designed to be mounted on a Tata vehicle produced by Bharat Earth Movers Limited and the command post has been designed by Hyderabad-based Electronic Corporation of India Limited.
It is not just hardware production that has private participation. Tata Consultancy Services (TCS) has announced the integrated materials management online services (IMMOLS), a nationwide systems-integration project addressing the computerisation needs of the inventory control and logistics management of the Continued from Page 25
Air Force. “Involving an investment of Rs 55 crore, TCS IMMOLS has been implemented in a distributed manner at Air Force stations to replace the current manual system for materials management,” says a TCS source.
However, there are some major areas of concern. According to a US Congressional Research Service report, India’s defence spending is likely to increase in the years ahead for two reasons. One, India has repeatedly stated that it will not compromise on spending for national defence. Two, for the second year running, the ministry of defence has surrendered Rs 4,500 crore earmarked for capital purchases, with major acquisitions such as those of the Advanced Jet Trainers (AJT) not being finalised.
A separate accounting head for capital equipment purchase may become the precursor for establishing a “rolling fund” over the next two-three years. This fund will allow the ministry to carry forward unused amounts allocated for equipment purchases from one financial year to the next.
Several important Indian defence projects remain at the development stage, hampered by a paucity of resources and a lack of technical know-how that requires technology transfer. These projects include the Light Combat Aircraft, Main Battle Tank, Air Defence Ship, Advance Technology Vessel and AJT.
“India’s defence exports were a moderate Rs 234 crore as compared to Rs 130 crore in 1999, Rs 180 crore in 1998 and Rs 585 crore in 1997. India aims to reach Rs 936 crore worth of defence exports per annum by the next five years,” the US report says.
Several initiatives are in place to achieve this target. India will manufacture spares for MIG-21 aircraft and service and overhaul MIG aircraft in the region. Hindustan Aeronautics Limited (HAL) is establishing a centre of excellence for the machining of forgings and castings. HAL has been shortlisted by Honeywell for global procurement, as have the Tata group, L&T, SKF Bearings, AT&S India and Kirloskar. Honeywell plans to source products worth Rs 1,125 crore annually from these companies.
HAL has finalised orders worth Rs 81 crore with four buyers. These include its first order for the Advanced Light Helicopter; a Rs 27-crore sub-assembly order for Sukhoi aircraft; a Rs 22-crore order for forgings and castings from Rolls-Royce; and a Rs 4.5-crore deal with Snecma of France, also for forgings and castings.
“With a greater role to play for the private companies in the defence sector’s indigenisation programme, we can certainly hope for a gradual decrease in the country’s dependence on foreign nations. We can save valuable foreign exchange and gradually eliminate middlemen who have been involved in major defence scams and thus have adversely hit the defence modernisation programme,” says N. Nigam, executive vice-president, L&T.
Agreeing with Nigam, former director general, military operations, Lieutenant General DB Shekatkar says, “Indian industry’s technical expertise is on par with global standards. We have made our own supercomputer param. Till recently our import content was 70 percent; indigenous content was 30 percent. But by 2015 we are hoping it would be opposite. If given the required design and the format, the industry undoubtedly would deliver.”
Shekatkar, who was also the additional director general, perspective planning, responsible for defence procurement and had worked closely with President APJ Abdul Kalam, who was then the scientific advisor to the defence minister, says that the industry could play a larger supportive role through partnerships with the ordnance factories and defence PSUs.
“These ordnance establishments lack the research and development (R&D) technological expertise, which the industry has. Initially the joint venture could begin with a 60:40 ratio between the government and private industry. But as the profits grow, the share could change to equal or may be even 40:60 ratio, or even more depending upon the circumstances. Even the Kelkar Committee report has given the same recommendations,” says Shekatkar.
He however warned the defence forces from resorting to delaying tactics. According to him, the defence forces change their order specifications mid-way. Allegedly, PSUs first approve everything and suddenly backtrack.
There are also, reportedly, delays in R&D. This halts the entire manufacturing process and prevents the industry from delivering in time. Apparently, this forces the armed forces to look at foreign markets for fulfilling their requirements.
“There has to be a two-way approach. First is a firm commitment from the forces on not changing the parameters after being approved, as this procedure itself goes through a lengthy scanning. Second, the industry should deliver the goods within the scheduled time. Otherwise the entire indigenisation process would lose effect,” says Shekatkar. “The industry too should come out with its own design specifications. This will reduce the dependency on the services to provide the specifications. Hence the entire process can begin must faster by having their own design ready and start working on it as soon as it is approved. This would be much better than first waiting for the designs and then beginning the manufacturing”
A greater role in defence by Indian firms may well lessen the need for intermediaries and foreign firms, hopefully eliminating potential scams. But, this will be possible only if the process isn’t derailed by bureaucratic tangles.
http://www.tehelka.com/story_main23....ate_sector.asp
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Quote:
TATA IN DEFENCE
Eyes aircraft avionics and electronic warfare systems.
Tata Power has secured a licence from the government to design and manufacture defence systems, including aircraft avionics and electronic warfare systems.
Tata Power, through its Strategic Electronics Division (SED), will design, develop, manufacture and assemble various upgrades of defence systems in Bangalore.
“The government has given seven specific licences for defence production. This is almost a comprehensive licence for Tata Power,” defence ministry officials said. A Tata Power executive confirmed the development.
Industry analysts said the company would become a key private player in defence production, providing competition to other industry participants like Larsen & Toubro (L&T), Mahindra & Mahindra (M&M), Kirloskar Brothers, Ashok Leyland, Jindal, Max Aerospace & Aviation and Ramoss India.
With the licence, the Strategic Electronics Division, which is recognised by the Ministry of Defence as a major centre for programmes on electronic warfare, naval combat and air defence, can upgrade electronic warfare systems of the Indian Army, Indian Navy, Indian Air Force, and para-military forces.
Besides network-centric warfare enablers, Tata Power can manufacture upgrades of weapon systems like rocket and missile launchers for ground and naval applications.
The industrial licence covers air defence guns, field artillery, naval guns, tanks, naval combat systems, and military-grade products such as consoles and rugged computers.
In 2004-05, the SED had developed Pinaka, a multi-barrel rocket launcher, and Samyuktha, an integrated electronic warfare system, which was supplied for induction by the Indian Army. The company also received orders for weapon launchers from the Army and Indian Air Force.
Sources close to the development said the Tata group had registered revenues of around Rs 1,100 crore from the defence sector in 2006.
Apart from SED, other group companies such as TCS, Tata BP Solar, VSNL, Tata Infotech, Tata Advanced Materials, and CMC are contributing to defence production.
http://www.business-standard.com/com...Left=0&chkFlg=
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Quote:
Both L&T and Tata Power have bagged a Rs 172 crore worth contracts to supply Pinaka multi-barrel rocket launchers for two regiments of the Indian army.
L&T is developing prototypes for various Defence Research and Development Organisation projects and have strong capabilities in composites for aerospace applications.
Tata Power's strategic electronic division, which has received seven licenses for various defence projects recently for electronic warfare, naval combat and air defence.
Close to 1,000 companies in the country are supplying structural parts and sub-assemblies to the services and defence PSUs and according to analysts, the estimated size of the market is about Rs 30,000 crore.
http://www.outlookindia.com/pti_news...d=73&id=434864
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Quote:
Tata Power's Strategic Electronics Division issued seven Defence Production Licenses by Government of India
Tata Power Company Ltd has announced that, The Government of India, Ministry of Commerce and Industry, Department of Industrial Policy and Promotion has issued to the Company, seven Licenses for its Strategic Electronics Division (Tata Power SED). These Licenses enable the Tata Power SED to be the Prime Contractor for the sale to the Ministry of Defense (MOD) for designing, development, manufacturing, assembling and upgrading mission critical systems in seven core areas of Defense Strategic Electronics.
The Tata Power SED, a leading domestic player in Strategic Electronics, is recognized for harnessing its "Systems and Engineering" capabilities. It is emerging as a Prime Contractor to MoD for Indigenous Defense Production. Earlier this year, Tata Power SED secured Orders for Pinaka Multi Barrel Rocket Launcher System from the Indian Army and Futuristic Automatic Data Handling System for Air Defence from the Indian Air Force.
Mr Rahul Chaudhry, CEO, of Tata Power SED said "SED is now poised to harness its multi disciplinary capabilities and emerge as a long term reliable partner to Indian Defense forces. Over next five years these licenses open a domestic addressable market of over Rs 20,000 Crores, for Tata Power SED, which includes upgrades of existing platforms. Additionally, business opportunities through OFFSET (as set out in MoD’s Defence Procurement Procedure - DPP 2006) for Systems Design, Engineering and Testing Services will also be targeted by the Company, opening up the export market".
The seven Defence Production Licenses pertains to:
1. Design, Development, Manufacture, Assembly and Upgrades of Electronic Warfare Systems for Army, Navy, Air Force, Para-military and Inland Security.
2. Design, Development, Manufacture, Assembly / System Integration of Warfare enablers, development of specialized antennas & masts. Ruggedisation of COTS and specialized software for network management, monitoring and security. Integrated GIS with communication and navigation system for Defence and civilian applications, Global Positioning Systems and GPS based vehicle navigation and tracking systems, etc.
3. Design, Development, Manufacture, Assembly and Upgrades of Avionics, Airborne assemblies, Systems and Equipment for Aircrafts, Helicopters & AWACS.
4. Design, Development, Manufacture, Assembly and Upgrades of Air Defence guns, Field Artillery, Naval guns, Tanks, Combat Vehicles, Anti-Tank Weapons systems.
5. Design, Development, Manufacture, Assembly and Upgrades of Naval Combat, Air Defence, Artillery, Command & Control Systems, Border Security and Surveillance.
6. Design, Development, Manufacture, Assembly and Upgrades of MIL (Military Grade) products such as Display Consoles, Rugged Computers, Workstations Servers, On Board Computers, etc.
7. Design, Development, Manufacture, Assembly and Upgrades of Weapon Systems - Rocket and Missile Launchers.
http://www.equitybulls.com/admin/new...et.asp?id=5343
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Wow...  |
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12-07-2006, 13:06 PM
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#2 (permalink)
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Senior Contributor
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Quote:
Originally Posted by joey
Wow... |
Joey...start studyin...if you want to get involved |
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12-11-2006, 08:37 AM
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#3 (permalink)
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is a
Senior Contributor
Join Date: 08-13-05
Location: Bangalore, India
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Good news
__________________
Wild Wild Web 
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12-11-2006, 09:31 AM
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#4 (permalink)
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Senior Contributor
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TATA is already doing most of the stuff mentioned in the report, albeit for DRDO, and not on its own stand alone projects.
__________________
Karmani Vyapurutham Dhanuhu
My bow is stretched for its task
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12-11-2006, 20:08 PM
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#6 (permalink)
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Senior Contributor
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Sure, why not. Each can keep the other on its toes.
But the problem so far, has been that the private sector is risk averse when it comes to defence, since it wants assured orders before it proceeds with a project. The services will give an order only if the specs are met. Till then they wont. So private sector has gone for the route of being a DRDO system provider. The companies currently asking to be treated on par with PSUs unfortunately, are still showing some of the old attitude (not the biggies like L&T, TATA etc but others)- they want to be given preference, when all their facilities allow is part assembly, not manufacture. This the MOD has not agreed to, with reason. The forces are now following the"we fund your prototypes" kind of management, which is positive. On another note; the offset agreement allows for Indian firms to manufacture items. Elta won a deal for some 200 Million $ for IAF's medium power radars- so they have signed a 30% offset deal with a couple of firms, one will be supplying travelling wave tubes. L&T is also involved.
Last edited by Archer : 12-11-2006 at 20:24 PM.
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12-11-2006, 23:35 PM
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#7 (permalink)
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Senior Contributor
Join Date: 09-01-04
Location: North London
Country: 
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Still....I cant wait to see our chaps wearing TATA helmets.  |
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12-12-2006, 10:13 AM
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#8 (permalink)
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Regular
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Wow!! This indeed was a good piece. Thanks for sharing.
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12-13-2006, 15:09 PM
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#9 (permalink)
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Senior Contributor
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Quote:
Originally Posted by Archer
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Since Indian Pvt concerns are more into assembling and not manufacturing or R&D,how about inviting foreign defence Cos to set up shop here?I mean they must be interested..for eg..LockMartin and Boeing are saying they will invest a lot into India.Maybe they are given the requirements by the services and they could come up with products suited to Indian needs and in India itself.The money for the R&D could come partly from the services and partly the Cos themselves.And since those Cos already have a world market to sell their products,they wont also be too hesitant to invest some money on their own,unlike the Indian pvt cos who has to depend mostly on the services to sell their products and the services are most of the time so very finicky...so its understandable from their PoV.And for the various components and subsystems ,the Indian cos can be involved...and that also takes care of the offsets factor.And then the point remains of indigenization...maybe some amount of ToT to Indian Cos could be done. |
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12-13-2006, 15:22 PM
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#10 (permalink)
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Senior Contributor
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Ok...another thing i just wanted to know your take on....
What sort of improvements do you think DRDO need?
I have some knowledge about some of the problems...obviously its second hand.Two schoolfriends of mine had actually joined DRDO about 2yrs back as engineers..when they were fresh out of Jadavpur University..and they were very interested at that too.But they just left after two years and they said that their main gripes were pay and perks,no performance based incentives and inter departmental politics.And now ones in Nvidia and another at IBM.
Just wanted to know how serious are those problems if any.
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12-14-2006, 04:00 AM
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#11 (permalink)
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Senior Contributor
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DRDO needs three things-
1. Better pay- the MOST IMPORTANT thing that they need right now.
2. Control over its own destiny, not by penpusher IAS jerks and the CAG over its choices
3. Less internal bureaucracy and GOI rules, and a better promotion structure (based on what DRDO wants, not what GOI does in every dept).
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12-14-2006, 04:06 AM
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#12 (permalink)
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Senior Contributor
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Quote:
Originally Posted by MarquezRazor
Since Indian Pvt concerns are more into assembling and not manufacturing or R&D,how about inviting foreign defence Cos to set up shop here?I mean they must be interested..for eg..LockMartin and Boeing are saying they will invest a lot into India.Maybe they are given the requirements by the services and they could come up with products suited to Indian needs and in India itself.The money for the R&D could come partly from the services and partly the Cos themselves.And since those Cos already have a world market to sell their products,they wont also be too hesitant to invest some money on their own,unlike the Indian pvt cos who has to depend mostly on the services to sell their products and the services are most of the time so very finicky...so its understandable from their PoV.And for the various components and subsystems ,the Indian cos can be involved...and that also takes care of the offsets factor.And then the point remains of indigenization...maybe some amount of ToT to Indian Cos could be done.
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Indian companies are already into R&D. They have been pushed into it by DRDO and ISRO, many of them kicking and screaming, since they wanted nothing to do with the MOD, and GOI procurement. As one gent told me- why should I code xyz for DRDO when for the same time, my firm can get a contract for and get paid ten times that, from abroad! And it is correct to some degree. Many small firms have been very adaptive (they are startups in areas where they would get no work from abroad or anywhere else, anyways because of security restrictions), and companies like L&T, TATA, Wipro etc were more responsive. DRDO is basically moving to what they refer to as the Design and Develop, model. IOW, they design, depute people to the firm to assist, but more and more of the work is going to private industry.
Frankly, I wouldnt trust any foreign firm with the kind of work India needs, what you are suggesting is valid in a way, but imho, unfortunately, they often represent their country of origins interests, which might not coincide with the Govt of India's. IOW, they can set up subsidiaries and try to generate employment within India, but as a rising regional power, India needs to do its stuff itself, foreign assistance should be in areas where our own is not supplanted or compromised, or what gives our product the extra bit of help, which has it ready on time/budget or makes it even better. But we have to develop, and rely on our own Mil-Ind complex. There are no two ways about it.
Last edited by Archer : 12-14-2006 at 04:15 AM.
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12-14-2006, 05:58 AM
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#13 (permalink)
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Senior Contributor
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Quote:
Originally Posted by Archer
Indian companies are already into R&D. They have been pushed into it by DRDO and ISRO, many of them kicking and screaming, since they wanted nothing to do with the MOD, and GOI procurement. As one gent told me- why should I code xyz for DRDO when for the same time, my firm can get a contract for and get paid ten times that, from abroad!
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The GoI or the MoD can force the pvt cos into doing their projects?  |
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12-14-2006, 08:48 AM
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#14 (permalink)
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Senior Contributor
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In a manner of speaking, but times have changed..
Kalam personally went and met bigwigs when IGMDP was launched and asked for their support. Some agreed, some didnt.
Today, its far harder, especially with the halo of India shining over the private sector. But on the plus side, private industry now realises the money in defence, some fellers also want in by hook and crook. They want the same status, same deal as DPSUs and DRDO, but have not shown the infrastructure or for that matter the investment to back it up..and are conducting a very public campaign about "discrimination". In the meanwhile they are also paying off mags like Force to push for "their case". Heh, how times change. But the MOD is acting as gatekeeper and only letting those with a proven track record- L&T, TATA through.
Some local projects which have succeeded recently have pi$$ed off a load of arms sellers, especially one which the IA is buying 6 -8 regiments of. It was thought to be a done deal for imports, what with a Billion $ price tag, but it went belly up, because DRDO and its private partners delivered. So now its being attacked on the grounds of some magic foreign assistance, because DRDO and its partners are undertaking some tough negotiations and "show us proof" for whatever tech is being offered, without just handing over the moolah.
Another project which is being "pushed for", is the refit of IN Kilo subs. Again very open attempt to have the IN purchase some gear as it is "essential".
The campaigns are getting more and more brazen. A couple of years back, a Czech firm even openly ran adds for reopening the AJT tender and getting its L-159 "in" versus the Hawk. It didnt work. Before that, a massive media campaign was conducted against the Su-30 MKI as it was a "paper project", unlike "proven fighters". Heh, arms sellers.
Last edited by Archer : 12-14-2006 at 08:57 AM.
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12-15-2006, 12:21 PM
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#15 (permalink)
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Senior Contributor
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Yup...I think i understood what you said...thanks for all that Archer.
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