Indian defence industry exports watch

[Indx TechStyle]

India's Wipro to acquire Israeli defence firm

Bangalore-based Wipro Infrastructure Engineering has signed an agreement to acquire Israeli aerospace and defence (A&D) firm HR Givon, it was announced on 1 August.

The transaction - the value of which was not disclosed - is subject to approval from Indian and Israeli authorities but is expected to be completed by September 2016, Wipro said in a statement.

The Indian company said its acquisition of HR Givon will support efforts to broaden its product portfolio, expand its global footprint, and strengthen customer relationships in the A&D industry.

Another target, it added, was to secure contracts linked to Israeli-Indian defence trade.

Buy the foreign company to acquire the tech. That's even better than ToTs and JVs. I'm looking ahead for Leonardo Finmeccanica, Lockheed Martin, Boeing and Ilyushin, Irkut Aircraft Corporations too (just my wishful thinking).

@Akask kumar @Kyubi @ezsasa

 

[Indx TechStyle]

Defence Ministry taking steps to revive HSL, says Parrikar

Defence Minister Manohar Parrikar. File photo | The Hindu
___________________________________________
The Ministry took over the shipyard in 2010 to exclusively cater to the Navy’s increasing orders.

The Hindustan Shipyard Limited (HSL) in Visakhapatnam has been tasked with building various vessels for the Navy, and efforts are on to improve its technical capability and transfer ordered from other public sectors. All these measures, Defence Minister Manohar Parrikar said in the Rajya Sabha on Tuesday, are being taken ensure the HSL’s revival and expansion.

The Minister said this in a written reply to question posed by MP Mohd. Ali Khan.

In the last couple of years, the HSL has been awarded various Navy projects — the construction of five fleet support ships, two Landing platform docks and two special operations vessels — on nomination basis by the Defence Ministry, Mr. Parrikar added.

The HSL, which is in the negative financially, is looking for greater order flow to earn revenue. “Placing orders on HSL to ensure break even order of Rs. 5,000 crore,” the Minister noted.

The HSL, which was earlier with the Shipping Ministry, was taken over by the Defence Ministry in 2010 to exclusively cater to the Navy’s increasing orders, and take some of the burden off other shipyards that are unable to meet deadlines.

Detailing the steps being taken to increase the HSL’s present capacity, Mr. Parrikar said: “Strategic partnership is being conceived to help modernise the yard, enhance its technology and equipment, and improve its capacity to produce specific technology intensive naval vessels.”

Last year, the HSL signed a MoU with Hyundai Heavy Industries (HHI) of South Korea to build support vessels and possibly conventional submarines, if selected. Plans are on for a long-term tie-up with HHI to build vessels for the global market.

Mr. Parrikar also stated that the HSL is being encouraged to take commercial orders, and noted that the Minister is considering giving the shipyard a grant of aid to help with restoration work following the damage caused by cyclone Hudhud in October 2014.

 

[ezsasa]

Lately we are seeing some old tenders being cancelled and there are news reports of them getting re-issued.

Looking at such news many people are asking current RM is behaving like st.anthony . For these people take these following observations based on news reports into consideration for these specific cases.

1) if there is a old tender and technical evaluation is
Completed and product selected by forces, govt is cancelling old tender and going for direct FMS route thereby avoiding middlemen.

2) if the technical evaluation is inconclusive, tender is re-issued as per DPP 2016 with make in india aspect included in the tender.

This is just a theory....

 

[Indx TechStyle]

Tata Technologies Plans Major Acquisitions Push

Tata Technologies
Artist rendering of Tata Technologies new European headquarters, currently being built in Leamington, UK.

WASHINGTON — Over the next four years, Tata Technologies plans to acquire a number of secondary and tertiary defense suppliers as part of a corporate plan to grow revenues from $500 million today to around $1 billion by 2020.

In a wide-ranging interview at the Farnborough Air Show last month, Tata Technologies CEO Warren Harris made it clear that his company is actively seeking companies it can buy up in order to grow its global footprint, specifically among those secondary and tertiary firms that make up the US defense supply chain.

Relationships between US defense primes and their suppliers “require a lot of trust,” Harris told Defense News July 14. “It’s very difficult to fast-track your way into a relationship that is predicated on a lot of trust. So we’re trying to buy into marquee relationships through targeted acquisitions.”

Tata Technologies is part of the larger Tata Group, the massive Indian conglomerate with 29 entities collectively valued at over $116 billion. While not among the largest Tata companies, Tata Technologies handles a significant portion of the conglomerate’s defense work.

Part of that comes from handling offset obligations from Western defense firms that want to do business with India. In 2008, the company created a joint venture with Hindustan Aeronautics Limited (HAL), India’s largest defense aerospace firm, for just that purpose, focusing on tooling and manufacturing.

But with a corporate mandate from Tata Group leadership to reach $500 billion in global revenue by 2021, Harris sees an opportunity for Tata Technologies to grow in importance moving forward.

“In the last six years our compound annual growth rate is 16 percent,” Harris explained. “We fully expect to be able to maintain that organically. Our trajectory over the next four years organically sees us going to $800 million, so we see about $200 million in revenue that will come in from acquisitions.”

The company will maintain a blend of commercial and defense work, Harris said, noting that right now Tata Technologies is about 70 percent automotive, 11 percent aerospace, and 12 percent industrial heavy machinery. As a result, Harris wants to see aerospace grow at a much higher rate than automotive, in order to keep a balanced portfolio.

Asked whether there is a target for defense growth, Harris said the company has “aspirational targets in terms of commercial and defense, but I think it is going to be very driven by our success in and around acquisitions.”

In other words, the company is casting its gaze far and wide to figure out what additions could help it grow revenues. So what kind of companies could be targeted?

“Most of the traditional work we’ve done is in mechanical systems, and increasingly a lot of innovation is being driven in embedded and software arenas, so we’re looking very aggressively at organizations on the West Coast and organizations that can complement that mechanical bias,” he said.

Harris later added that given the automotive focus of the company, firms that do defense work in land systems would make a lot of sense. Specialists in cyber could also be on the list, as well as companies specializing in smart-car-type technologies.

“We’re certainly very bullish about the prospects for the Indian government to discharge some of the plans that have been built in for the last 10 years.”
Warren Harris, Tata Technologies CEO

It’s a good time to be shopping, Harris believes, because the economic situation of the last few years, particularly in the defense world, means a number of small firms are looking for more security than they’ve had in the past.

“You take in the United States, most of the big defense manufacturers have grown up through the support of a supply chain that has a very long tail. There are a lot of small companies providing engineering services, IT services, some of which are commodity services, many of which in some areas are very strategic,” Harris said.

“Those organizations have not fulfilled their potential because of limited cash, access to the right appropriate resources, global footprint — and what we hope to offer those organizations is all of those things, and what we’re hoping to get through the relationship is the type of relationship that is difficult, again, for an outside organization to fast-track their way into.”

Systems Versus Prime

But while the company is looking to make additions, don’t expect Tata Technologies to become a prime developer of weapons systems in the near future — at least in the US.

The company’s role will remain “secondary to tertiary in the developed markets. In the UK and US that’s where we tend to position ourselves,” Harris said.

But in India and the Middle East, “we’re looking to play a much more influential role, we’re looking to be Tier 1. Even as a prime,” he added.

Unsurprisingly, India remains the hub of Tata’s defense growth strategy. Harris expressed hope that India is sorting out the procurement knot that deviled numerous programs over the last decade, which in turn will net his company an influx of cash thanks to its tie-up with HAL.

“We’re certainly very bullish about the prospects for the Indian government to discharge some of the plans that have been built in for the last 10 years,” he said. “We’ve been expecting this wave of procurement decisions that have not been realized, but I think over the last 12-18 months we’re really starting to see signs that will start to happen.”

In the long term, Harris said he could see Tata move into being prime on a number of defense programs in India – “it is certainly the ambition of the group,” he notes — thanks in part to the planned procurement decisions and the offsets that come along with them.

That ties into concerns from US industry that, in a rush to secure international sales over the last decade, American firms gave away too much knowledge and intellectual property to customer nations.

Both David Melcher, head of the Washington-based Aerospace Industries Association, and a report from the analytics group Avascent have warned that some of these nations may rise up as competitors to the US thanks to the knowledge they gained through offsets.

Harris agreed that “if the US defense industry stands still, that’s likely to happen,” but expressed confidence that US industry will find a way forward.

“If they stand still and don’t invest in talent, don’t invest in IP, then there is no question there are a lot of organizations out there that are very ambitious and they are looking to take advantage of current opportunities to get better very quickly. And many organizations, including ourselves, have relatively deep pockets to invest,” he noted.

“But I live in the United States and I’m very much an advocate for the US. There is no other country that can innovate the way the US companies can, and as long as we continue to commit ourselves to that, I think the US shouldn’t be too concerned about the competition that is likely to come in from different parts of the world.”

 

[tharun]

Modernization of Ordnance Factories

The obsolescent 105mm Indian Field Gun needs immediate replacement






PIB

4239 crores modernization? what is the use? they can't provide neither quality nor quantity..Give that to private sure they will stand upto word

 

[Indx TechStyle]

4239 crores modernization? what is the use? they can't provide neither quality nor quantity..Give that to private sure they will stand upto word

No, they can.
It's management issue.
DRDO and PSUs have both successes and failures.
We invest $49.5 billion dollars annually for research. So, there's no point in saying Government PSU's and factories can't do. Just manage it properly.
Moreover, we can't give everything to private sector. Government has to keep itself alive. Plus private sector can never have several technological milestones achieved by government.

 

[tharun]

No, they can.
It's management issue.
DRDO and PSUs have both successes and failures.
We invest $49.5 billion dollars annually for research. So, there's no point in saying Government PSU's and factories can't do. Just manage it properly.
Moreover, we can't give everything to private sector. Government has to keep itself alive. Plus private sector can never have several technological milestones achieved by government.

What is this keeping alive mean? and private sector can achieve any milestone with giving them free hand and some orders to keep company afloat.

 

[Indx TechStyle]

What is this keeping alive mean? and private sector can achieve any milestone with giving them free hand and some orders to keep company afloat.

I will look ahead for your comment if any Indian private company makes some valuable tech which is beyond technical approach of government.
That will take decades or probably never, to make private sector technologically more advanced than Government.
Private sector has undoubtedly nice management, but it's light years behind Indian Government in Technical Capabilities which are shadowed by mismanagement.
Even private sector is most of times helped of GoI.

BTW, I don't see that private sector could launch carriers, subs or ships before Government of India unless government itself helps them.

Foreign private sectors are no different, well behind their government counterparts but popular because of management.
Governments have huge R&D budgets and have experiences of making technologies since establishment of the country.

 

[aditya10r]

I will look ahead for your comment if any Indian private company makes some valuable tech which is beyond technical approach of government.
That will take decades or probably never, to make private sector technologically more advanced than Government.
Private sector has undoubtedly nice management, but it's light years behind Indian Government in Technical Capabilities which are shadowed by mismanagement.
Even private sector is most of times helped of GoI.

BTW, I don't see that private sector could launch carriers, subs or ships before Government of India unless government itself helps them.

Foreign private sectors are no different, well behind their government counterparts but popular because of management.
Governments have huge R&D budgets and have experiences of making technologies since establishment of the country.

then the best available option is increasing r&d base in the private sector and meanwhile develop products by dedo and manufacture with the help of private sector and gain the know how

 

[Indx TechStyle]

then the best available option is increasing r&d base in the private sector and meanwhile develop products by dedo and manufacture with the help of private sector and gain the know how

But @tharun thinks private sector can do it all alone. Somebody tell him what's annual Research & Development Budgets of private companies against government.

 

[aditya10r]

But @tharun thinks private sector can do it all alone. Somebody tell him what's annual Research & Development Budgets of private companies against government.

even if they had the money the know how,the research base,the scientists,the experience,and most importantly the coordination with the armed forces are needed..
these are the strengths of drdo which are not available to the private industry.they need drdo at least for a decade to become r&d experts

 

[Indx TechStyle]

India Considers Venture Capital Funds To Discharge Offsets

Indranil Mukherjee/AFP via Getty Images
Overseas defense companies could invest in select Indian venture capital funds

NEW DELHI — Overseas defense companies could invest in select Indian venture capital funds (VCF) to discharge compulsory defense offsets if a proposal, currently under consideration, is implemented by the Indian Ministry of Defence (MoD), according to a senior ministry official.

Investments by overseas companies in approved VCFs could be used in mainly startup defense companies in the micro, small and medium enterprises (MSME) either through equity stakes or direct investment in these small companies. Under the proposal, only domestic VCFs approved by the MoD could used for this purpose.

According to the senior official, the government wants to boost MSMEs in the defense sector, which number more than 5,000, as they face fund crunch.

"The rates of interest to seek funding for MSMEs are very high right now and with stiff conditions. The government wants to create jobs and this can come from the MSME sector. The sickness of good defense MSME sector will get reduced to a large extent through the VCF route, which also will enable original equipment manufacturers (OEM) and tier I companies to create a large supply chain and thus create jobs," the official said.

Overseas defense companies are finding it difficult to execute defense obligations because India's defense manufacturing industry lacks the requisite depth to absorb the billions of dollars worth of offset business coming its way. OEMs find it uneconomical to procure defense components and subassemblies from India manufacturers. Low productivity and experience of labor manufacturing in India offsets the cost advantage of cheaper labor.

It is estimated that India's offset market is worth more than $10-15 billion in the next 10 years.

Several overseas defense companies had to pay fines for not fulfilling offset obligations, according to another MoD source.

Between 2008 and 2014, overseas companies have been able to fulfill only half of the $1.3 billion worth of offset obligations, the source added.

VCF can be one way of letting an overseas defense company fulfil its mandatory defense offsets, but overseas defense companies want VCFs to be foreign-owned, too.

"VCF targeted at MSMEs would enable the fund to provide equity to MSMEs in the defense space. This could provide much-needed risk capital for MSMEs," said Vivek Rae, the MoD's former director general of acquisition.

Rae, however, added: "The VCF would need to be an Indian fund."

Jan Widerström, chairman and managing director at Saab India Technologies, welcomed the VCF method of discharging. "The idea of a VCF to discharge offsets is definitely innovative, and shows the willingness and openness of the government to try new and interesting methods of supporting Indian defense MSMEs. We are not fully familiar with how this would work in practice, though, and will have a better appreciation once we have seen more details about the plan."

In India, VCFs are registered with the investment regulator Securities and Exchange Board of India. There are around 200 registered domestic VCFs and more than 100 foreign VCFs mostly operating from Mauritius that can be invested in designated sectors of the economy but not defense.

However, investment consultants say VCFs have often been used to pump unaccounted money from overseas. Vijay Karol, the director of financial firm Kamakshi Securities said: "Offshore funds can use venture capital funds as their India-based conduits to channel investments into defense companies and not much can be known about the source of the money."

The overseas companies will not, however, be allowed to repatriate capital employed at home except for dividends or rate of interest. In other words, investments involving VCFs can't be removed from their designated fund and sent back home, except for dividends or interest.

Defense analyst Nitin Mehta was wary about the new concept to use VCFs as another way to discharge offsets because investments in MSME are already risky, and investors or OEMs may not want to take the risk involved in investing in these funds.

"The whole concept of venture capital investments is that a large majority of such investments fail, so there is inherent risk in such investments — especially in a sector like defense and in a geography like India," Mehta said.

Apart from ownership of the VCF, another major issue is the criteria for the selection of MSME companies, which will get the benefit of the capital infusion.

Ashok Kanodia, managing director of defense MSME at Precision Electronics Limited, said: "The investor (OEMS, etc.) would like some control or oversight on his investment. How does he [the OEM] redeem his investment and what role [will] he ... play in selection of a borrower? These are some of the issues which need to be thrashed out before the VCF could actually take off."

Amit Cowshish, the MoD's former financial adviser, has said the VCF proposal under consideration will create yet another avenue for the discharge of offset obligations.

"Under the existing procedure, offsets can be discharged through a combination or permutation of six avenues laid down in the guidelines. These include direct purchase of defense products/services from Indian entities; investing in Indian defense industry through the Foreign Direct Investment route; transfer of technology/equipment to Indian private/state-owned companies; and transfer of identified critical technologies to the state-owned Defence Research and Development Organization," Cowshish said.

 

[Indx TechStyle]

India Allocates USD 150bln To Modernise Army

The Narendra Modi government recently allowed around 200 executives of private-sector defence companies to get access to Indian Army bases, as they climbed into tanks and talked to combat soldiers. The executives also held talks with Indian Army officers in the western city of Ahmednagar and learned about the Army’s equipment needs.

Senior Defence Ministry spokesperson Nitin Wakankar said that the government made the unprecedented move, as it plans to spend USD 150 billion in the next 10 years for modernising the Army with the help of private players. The spokesperson explained that transparency is a part of Prime Minister Modi’s efforts to transform the world’s biggest arms importing country into a defence manufacturing powerhouse. So, according to Wakankar, executives of defence equipment manufacturing firms were allowed to visit Army bases.

The Indian premier has a ‘big’ plan for the Army. Modi believes that a closer collaboration with the Armed Forces will help private players increase their technological capacity and create job opportunities for more than 10 million Indians each year. Wakankar stressed that the government-owned companies’ failure to understand the problems faced by the Army on a daily basis disheartened the PM. Their failure caused a lengthy delay in delivering weapons and equipment – worth nearly USD 4.5 billion – to the Armed Forces. The delay not only hampered the Indian Army’s modernisation plan, but also impacted the South Asian country’s defence preparedness. As a result, India became heavily dependent on imported weapons.

Meanwhile, a senior Army official has welcomed the government’s decision, saying that PM Modi’s “Make in India” initiative will help “harness the preparedness of the Indian private industry towards meeting the felt-needs of the Armed Forces and reduce dependence on foreign vendors”. Assistant Professor at Singapore’s S Rajaratnam School of International Studies Anit Mukherjee, too, has congratulated the Modi government for opening itself up to private industry. He said that the “very, very significant departure” from the usual norm could make India a defence manufacturing powerhouse in the future.

Currently, India depends heavily on the US, Russia and Israel for defence equipment. If top Indian firms, like Mahindra & Mahindra Limited, Tata Group, Larsen & Toubro and Bharat Forge, can produce quality defence equipment in collaboration with foreign companies, such as Honeywell International Inc. and Dassault Aviation SA, then it will be a huge boost to the Army.

For his part, retired Indian Army veteran Deepak Sinha said: “The Army has always preferred to keep interaction with business houses to the minimum. This interaction with business executives would certainly be a first, and a very good omen at that.”

SOURCE: InSerbia

TAGS:

• Army
• India

 

[Indx TechStyle]

Make India defence production hub, says NITI Aayog member

NITI Aayog member V K Saraswat on Thursday called upon stakeholders in the defence electronics sector to transform India to be the centre of the fourth wave in defence manufacturing.

Delivering the inaugural speech at the DEFTRONICS 2016, the flagship defence electronics event organised by the India Electronics and Semiconductor Association (IESA) in association with Nasscom, Saraswat said the defence manufacturing shift globally has seen the Wave 1 from the US to Japan.

"The Wave 2 was witnessed from Japan to Europe and the Wave 3 from South East Asia to China. I want the Wave 4 to be from China to India,” he added. Saraswat also unveiled the Defence Electronics and System Design Policy Recommendations report brought out by the IESA and Nasscom along with global strategy consulting firm Roland Bergerand.

The report estimates that the aeronautics and defence electronics market for India is estimated to be in the range between $70 billion and $72 billion in the next 10-12 years. Almost $53 billion to $54 billion comes from electronics spend as a part of platforms.

"This indicates immense potential as there exists a significant gap between supply and demand. Though India is considered as a 'soft power’ in the space, we are yet to witness a single Indian company that develops strong end-to-end aerospace and defence software solutions,” he said.

The former Chief Scientific Adviser to the Indian Minister of Defence and Director General of DRDO said this has compelled India to keep depending on foreign companies. "The only option for Indian electronics component companies is to target strategic electronics (defence) industry, and we should act now. We need to understand that the return on investments in the defence electronics industry in India is long-term and the players need to have a long-term view,” he said.

Speaking at the event, Nasscom President R Chandrashekhar said India is required to keep pace with the innovation happening across the globe and need to start providing a stimulus to companies in the defence electronics domain.

"Hence, it is really important for us to create an arrangement for technology transfer with more advanced nations and the role of the government will be significant. They should create an environment for the domestic players to cross-pollinate knowledge and technologies with other countries,” he said.

Commenting on the occasion, IESA President M N Vidyashankar said India is the seventh largest aeronautics and defence market globally and is still dependent on imports to fulfil defence needs.

 

[Indx TechStyle]

India’s aerospace & defence market to reach $70 billion in 2029
According to a joint report by IESA, Nasscom and Roland Berger, India is the seventh largest (A&D) market globally.
BY: PTI | NEW DELHI |
Published On:August 4, 2016 10:51 PM

The market opportunity for aerospace and defence (A&D) electronics in India is pegged to be at USD 70-72 billion in next 10-12 years, a report today said. According to a joint report by IESA, Nasscom and Roland Berger, India is the seventh largest (A&D) market globally.

“India has needs to modernise its A&D capital equipment base by addressing obsolescence as well as build additional capability through new capital acquisition. This requirement is also supplemented by additional budgetary allocations of the Ministry of Home Affairs for paramilitaries and state police force requirements,” the report said. All of this results in India being substantially attractive as an A&D market, it added. “The total market opportunity for A&D electronics for India to ranges from USD 70-72 billion in next 10-12 years,” the report said.

Of this, almost USD 53-54 billion emanates from electronics spend as part of platforms, while another USD 17-18 billion of demand comes from projects that are traditionally called system-of-system projects like Indian Army’s Project TCS, BMS etc, it added.

“The size of strategic electronics is projected to grow to USD 72 billion from the present USD 1.7 billion market and this indicates immense potential as there exists a significant gap between supply and demand,” NITI Aayog member V K Saraswat said.

“Though India is considered as a ‘soft power’ in the space, we are yet to witness a single Indian company that develops strong end-to-end Aerospace and Defence software solutions. As a result, we keep depending on foreign companies,” he added.

He also said the return on investments in the defence electronics industry in India is long term and players need to have a long-term view. “We expect the government to support startups in the defence electronics industry in India. Defence manufacturing shifts globally has seen the wave 1 from US to Japan, wave 2 from Japan to Europe, wave 3 from South East Asia to China and want wave 4 to be from China to India,” he added.

The report said there are certain issues that need to be addressed, which includes lack of visibility and delays in award of contracts, streamlining transfer of technology and push manufacturing in India.

“It is important for us to create an arrangement for technology transfer with more advanced nations and the role of the government will be significant here. They should create an environment for the domestic players to cross-pollinate knowledge and technologies with other countries,” Nasscom President R Chandrashekhar said.

 

[Indx TechStyle]

Defence Electronics policy likely to be rolled out soon

The country’s first Defence Electronics and System Design Policy, which has been on the anvil since December 2014, is now a few steps away from being approved.

The draft recommendations for the Policy, which were put together by the India Electronics and Semiconductor Association (IESA) along with Nasscom and submitted to the Secretary, Defence Production last May, went through several iterations over the last 18 months, both at the government and industry level.

In addition, Roland Berger, a leading global strategy consulting firm with expertise in defence, was roped in 18 months ago — in an advisory capacity — to further fine tune the recommendations based on the feedback of the Defence Ministry and other industry stakeholders.

The recommendations, which are based on current aerospace, defence, internal security trends and happenings, will provide guidance to the formulation of the Defence Electronics policy by the Union Ministry.

“We submitted the final draft recommendations for the Policy on July 25 in a meeting chaired by the Defence Minister that lasted one hour and 15 minutes in New Delhi. It has taken three meetings with the government and 12-15 meetings with the defence PSUs and other industry stakeholders over the last 18 months to prepare the final draft recommendations,” Krishna Moorthy, Chairman-IESA, told BusinessLine on the sidelines of Deftronics 2016, the annual flagship Aerospace & Defence event organised by IESA and Nasscom.

“From the precision with which questions were asked and from the seriousness of intent, I am sure the Policy will be approved. However, it may take some more time for this to happen, as different recommendations that we have made have to go to the relevant Ministries that handle it, such as Commerce and IT.”

Equipment import

Stating that nearly 70 per cent of the defence budget goes towards importing capital equipment, of which electronics constitutes a significant part, he said it therefore makes business sense to come up with a policy that promotes indigenous manufacturing capabilities and helps to create millions of jobs.

The final draft recommendations of the Policy, which was launched at Deftronics, pointed out various opportunities, issues and risks that will play a significant role in the formation of the aerospace & defence electronics market.

The total market opportunity for aerospace & defence electronics for India is estimated to be $70-72 billion by 2029.

To tap this, the country needs 2 million engineers with deep understanding of defence electronics.

However, the country can produce just 72,000-1,00,000 engineers at best, observed Rahul Gangal, Partner, Roland Berger.

 

[Indx TechStyle]

Parrikar restructures bureaucracy in defence ministry

The Indian Army has grown to become the second-largest in the world and would continue to expand in next few years.

Over the last few decades, the Indian Army has become the second-largest in the world and would continue to expand in next few years as India prepares itself for the two-front war against China.

The story is the same for the Indian Air Force, which is world's fourth largest with over 600 fighter jets and a modern fleet of transport planes, unmanned aerial vehicles and helicopters.

Though the size of the forces had expanded, their management in the defence ministry had remained under a single person, the joint secretary (Ground and Air), making it difficult for the officer to focus properly on both the forces.

The defence rejig order

Along with it, organising the Republic Day and Independence Day celebrations, involving parade, dance and drama shows, added to the burden.

"With such important portfolios, not only the office but the officer, too, had become overburdened. The process and speed of decision-making had also become a casualty. This was happening to others as well," an officer sitting on the first floor of the South Block told THE WEEK.

The two services had also pointed out there was too much on their plate and that the officers were not able to give much time to their respective cases.

In the past, too, there were calls from services to rejig the structure in the ministry but an overhaul did not happen.

Keeping these considerations in mind and after deliberations with his key team members and ministry officials, Defence Minister Manohar Parrikar has carried out the much-awaited restructuring of the babudom in his ministry.

“Under this, we have upgraded a few posts and some new offices have been created to carry out smooth functioning of ministerial work, and responsibilities have been distributed evenly among officers keeping in mind the workload aspect,” Defence Minister Parrikar told THE WEEK.

On July 25, Parrikar issued an order, a copy of which is with the THE WEEK, curtailing the powers of the joint secretary (Ground and Air) by half, making him responsible only for the ground force (army) and taking away the air force.

The incumbent Jiwesh Nandan, a UP cadre IAS officer, will now manage only the army and will be known only as joint secretary (army). The charge of the air force has been given to Himachal Pradesh cadre officer Bharat Khera.

He was in the department of defence production. A well-reputed officer, Khera has been given the charge of the newly-created office of joint secretary (air), said a top South Block official.

With this redistribution, the officers can focus more on one particular force. Also, it would help in reducing the time taken by respective officers to learn the practices and procedures of respective services as they vary from one another.

For example, Nandan had never served in the defence ministry earlier and had to learn about both the army and the air force.

"With this move, the chances of hearing stories about a babu delaying a file related to buying snow jackets for soldiers in Siachen or helicopters not flying due to want of spares would be very less," a source close to Parrikar said.

As part of the revamping, Parrikar has also done away with 'irrational' work distribution amongst his officials. Earlier, some important divisions of the army were being looked after by the officer in-charge of the navy and vice versa.

"This irrationality has been done away with, as the joint secretary looking after the navy was also looking after the important arm of ordnance in the army."

Now, ordnance has been taken away from the incumbent Rabindra Panwar, an IAS officer of the Bihar cadre. He will look after only the navy, sources said. The charge of ordnance has now been given to the joint secretary (army).

As part of the distribution of work, Parrikar got the high-profile Indian Foreign Service officer, Shambhu Kumaran, into the office of joint secretary in charge of international cooperation. The specialist post had been occupied by IAS officers for the past 15 years.

At a time when India is holding several foreign cooperation projects, including exercises and joint drills, this move is of diplomatic help to the ministry.

The officer is also helping the government get foreign cooperation for the Make in India projects, which is the key focus area of the establishment.

Parrikar has also made changes to the level of additional secretaries. K. Suresh Kumar, a 1986 Jammu and Kashmir cadre officer, has been recently empanelled as additional secretary, which has helped in reducing the workload on the two existing officers in the ministry. Kumar has not only been retained in the defence ministry, his post has also been upgraded.

Ravikant, a 1984 Bihar cadre officer, must have heaved a sigh of relief as the responsibility of looking after the joint secretary in-charge of air force has been shifted to the other additional secretary, Jurugumilli R.K. Rao, an officer from Bihar cadre of 1985 batch.

After the restructuring, Ravikant would now be supervising the work of joint secretaries looking after the army, navy and international cooperation, while Rao would do the same for officers in-charge of air force and works.

Kumar would be looking after the all-important vigilance wing and the officers carrying out day-to-day work of the ministry, along with handling a large number of litigations and court cases involving the government.

The nomenclature of these officers has also been personalised. Their offices are now known by their initials like the office of additional secretary Ravikant is known as AS(R), while JKR Rao’s office is known as AS(J) and K. Suresh Kumar has been designated AS (K). Earlier, the two additional secretaries were known as AS Alpha and AS Bravo.

Next restructuring wave in acquisition wing

As per the ministry of defence’s latest order, the all-critical acquisition wing has been left untouched. The wing is responsible for all the new purchases of weapon systems for the armed forces, including important items like Rafale combat aircraft.

"The defence minister is considering the recommendations of the Dhirendra Singh Committee, which has recommended the creation of a new procurement wing with dedicated specialist officers to buy weaponry for each service. This, at the moment, is touted to be the next wave of restructuring in the functioning of the defence ministry," said an officer.

"Based on the recommendations of the committee, an expert group under former Director General (Acquisition) Vivek Rae has been formed which will help in streamlining the acquisition process and make it timely and responsive,” a defence ministry official explained.

The delays in procurements for armed forces have been a major source of embarrassment for the defence ministry. A new acquisition wing under an additional secretary-rank officer was created over a decade ago but in vain. The present DG (acquisition) Smitha Nagaraj was brought back to the Centre by the Prime Minister’s Office to hasten the procurement process.

Old timers in the defence ministry say that attempts were made to restructure the bureaucracy in time of defence ministry when Pranab Mukherjee and A.K. Antony were at the helm, but the plan could not succeed because of the officers themselves.

Parrikar, however, has been able to make the changes and, hopefully, it will transform the defence ministry into a well-oiled machine.

 

[Indx TechStyle]

Defence manufacturing needs long-term strategy

The burgeoning demand from Indian defence establishments for aeronautics and defence electronics has really propelled Indian manufacturers to think differently to take on the design-led manufacturing. The Indian defence manufacturers are emulating the great strides made by Indian information and engineering technology to come up with an ecosystem to compete globally.

As per the Defence Electronics and System Design Policy Recommendations report brought out by the India Electronics and Semiconductor Association (IESA) and Nasscom, along with global strategy consulting firm Roland Berger, the aeronautics and defence electronics market in India is estimated to be in the range between $70 billion and $72 billion in the next 10-12 years. Almost $53 billion to $54 billion comes from electronics spend as part of platforms.

The just-concluded conclave of aerospace and defence electronics industry players, DEFTRONICS 2016, was an eye-opener of sorts for the Indian defence industry, as Indian manufacturing and software industries found a level playing field to address the global business opportunities at the same time meeting new requirements at the local market.

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. As defence manufacturing takes long gestation and critical technologies were not accessible, the government played a key role in it. 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.

When the 'Make in India’ and offset clause came into existence, Indian companies came up with continuous efforts of design-led manufacturing. This has opened up opportunity Indian industry to create capabilities. To facilitate the Indian industry to optimise this opportunity and create world-class companies and capabilities, there is a need to integrate Indian companies into global value chains of OEMs (Original equipment manufacturers), and to build an ecosystem.

According to Bharat Electronics (BEL) General Manager (Technology Planning) C P Suresh, support systems are very much required in the defence industry. "But the key issue is that when the product is getting inducted it will become obsolete. We have to look into design-led manufacturing where we should have system level understanding of the process,” he said. Suresh said the full-life cycle of a defence product is 15 to 20 years and for this process to sustain we need a design-led manufacturing. "We 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,” he said.

M N Vidyashankar, IESA president, opined that one of the major issues for Indian companies is the lack of visibility in defence manufacturing. "This lack of visibility limits the ability of Indian companies to proactively plan and create competencies knowing that there is a strong government orientation to look at similar segments,” he said.

Delays distract

It is evident from experience that one of the best ways to help establish a deep and robust industrial base is placing orderers to local OEM players. Electronics is a level 2 industry. The companies in this segment secure contracts once OEMs receive contracts. Delays in an award of contracts distort the abilities of players.

Structural issues must be sorted out in order to streamline the transfer of technology and push manufacturing in India. From the manufacturing perspective, DPSUs have traditionally occupied the entire breadth of the supply chain, and limited outsourcing from DPSUs is depriving the Indian industry of considerable opportunities. On the other hand, the private industry has its own set of issues which includes critical shortages of key infrastructure and talent. The recommendations for each of the above issues have been categorised into short-term, medium-term and long-term action plans.

According to Rahul Gangal, partner of global strategy consulting firm Roland Berger, electronic is a horizontal that cuts across verticals in defence. "The key challenge is to build a local defence electronics industry that can meet the needs of the Indian programme and also be a basis for an export launch-pad,” he said. Gangal said for the creation of a viable defence electronics industry, the creation of common infrastructure is a key aspect. "Such infrastructure can usually not be built by individual companies and globally the norm is for the government to create this infrastructure that private industry can access on a service fee basis. The same model should be replicated in India,” he said.

Robust industry

For creating a robust industry, it is important to ensure cost base of Indian suppliers, including their profitability expectations are aligned with global needs and norms.

"Currently, this is difficult as profitability expectations of Indian manufacturers, driven by high cost of capital in India, is much higher than the global average. In such a scenario, it is critical to come up with a structure that subsidises the Indian cost structure. Hence, a model similar to ESDM (Electronic System Design and Manufacturing) can be leveraged to provide incentives for A&D electronics manufacturing. In the case of technology transfer, it is also important for encouraging design by Indian OEMs so as to retain full product IP and future commercialisation potential in India,” said Vidyashankar.

Uma Maheshwar, Executive Chief Consulting Engineer, GE Aviation- India, said "India will have to see the global technological changes in the aerospace and electronics to become the leader in the space.”

" Since a digital wave is happening globally, all the flying material now onwards will have a hybrid propulsion, combining both electricity and gas turbines. The warfare space will shift from electronics to digital. Additive manufacturing will bring a sea change and there will be no more component manufacturing but only system design and manufacturing,” he said.

Rohit Joshi, co-founder of Logic Fruit Technologies, said "there is a glimmer of hope in the system as the government is pursing I-Highway Programme to secure entire India from digital attack, UAV-based security system and videos surveillance very systematically.

"Indian companies have forgotten the fit and finish in the product development in the aviation and electronics industry. We have seen how our auto industry has been evolved by building the entire ecosystem in the country,” said Joshi.

To cater to the market opportunity, the Indian defence industry should create world-class companies and capabilities that address not only India opportunities but also leverage from integration into global value chains of OEMs. The government should take steps with a long-term vision to make it happen.

 

[Indx TechStyle]

Defence Ministry approves new Blacklisting norms; file with AG
Defence Minister Manohar Parrikar has been working on the new blacklisting policy for long and has held numerous meetings with various stakeholders on the issue.
BY: PTI | NEW DELHI |Updated: August 8, 2016 6:49 PM

The Defence Ministry has cleared the new blacklisting policy, which is now being vetted by the Attorney General, that seeks to act harshly against wrong doers but also ensures that much needed modernisation plan for the armed forces are not affected.

“The file has been cleared. It is now with the Attorney General for legal vetting. It will be issued as soon as his office clears it,” a top defence official told PTI. Defence Minister Manohar Parrikar has been working on the new blacklisting policy for long and has held numerous meetings with various stakeholders on the issue.

Sources said the new norms will be a mixture of heavy fines, graded blacklisting and other penalties. The move comes just months after the Defence Ministry laid down norms for engaging agents in defence deals. Foreign defence firms can now appoint ‘agents’ to market their products to the armed forces and the government but with strict oversight which includes opening up of company’s books to scrutiny besides not allowing any success bonus or penalty fees among other measures.

The defence forces were hit hard by existing blacklisting norms under which the previous government had blacklisted many critical firms under a blanket policy. Parrikar had earlier voiced his concerns over indiscriminate blacklisting of companies supplying defence products over “small issues”. However, he had insisted that “serious crimes” should not go unpunished.

Parrikar had in June told PTI that the government will not hesitate to buy a product from another company even if any equipment or software manufactured by the blacklisted entity was embedded into it.

“Globally, many products have components from various companies. While a company which falls under the blacklisting purview will face action, we will also ensure that the policy does not affect any procurement from another company not related to the blacklisted one,” Parrikar had said.

 

[Indx TechStyle]

Defence Minister To Have More Say In Key Military Appointments

Defence Ministry earlier went by recommendations of the Chiefs and the service headquarters

New Delhi: In a break from the past, Defence Minister Manohar Parrikar is taking greater interest in appointments of Principal Staff Officers (PSO) to Chiefs, Vice Chiefs and Army Commanders and their equivalent in the Navy and Air Force. Senior-most officers of the three forces are appointed as PSO and they advise the chief on critical issues.

Earlier, the Ministry of Defence went by the recommendations of the Chiefs and the service headquarters. Now, sources tell NDTV, Mr Parrikar has told the services that while he would take into account the recommendations of chiefs for the appointments, the final call would be of the ministry. And, some recommendations for appointments as PSO have been sent back with queries.

It is understood that while the recommendation of the Chief of Army Staff in the appointment of the vice-chief has been accepted by Mr Parrikar, he has hasn't accepted the recommendation of the Army Headquarters in certain cases.

Senior Ministry of Defence officials said Mr Parrikar has asked the forces to inform the ministry about all officers who are ligible for promotions instead of just the first three or four officers, as was the custom earlier. The change in the process comes after several retired officers have suggested to the Defence Minister that recommendations of the service headquarters should not be final.

Besides, there have been allegations that some appointments were influenced by regimental preferences. Former Defence Ministers AK Antony and Pranab Mukerjee also questioned appointments but that was never a policy, more an intervention.

In a related development, the Ministry of Defence has appointed Lieutenant General Bipin Rawat, currently commanding the Pune based Southwestern Command as the new Vice-Chief of the Indian Army. The current Vice-Chief MMS Rai retires this month. The delay in naming the new Vice-Chief was attributed to the consultations between the defence ministry and Army Headquarters.

Sources said the defence ministry has also cleared the appointment of Lieutenant General Surinder Singh as the Western Army Commander. He is from the Mechanized infantry and now heads the Sukhna-based 33 Corps. The outgoing Western Army Commander Lieutenant General KJ Singh retired on July 31. Lieutenant General SK Patyal has been appointed as the Director General of Military Intelligence. The previous DGMI Lieutenant Genral KG Krishna retired on July 31. General SK Patyal was commanding the Leh-based 14 Corps Command.