Indian defence industry exports watch

[Indx TechStyle]

L&T wins $99.7 million Vietnam defence project

Larsen & Toubro (LET), one of India’s leading engineering and construction company said it has signed a$99.7 million project with Vietnam Border Guard to design and construct high speed patrol vessels in India.

The contract also envisages transfer of design and technology along with supply of equipment and material kits for construction of follow-on vessels at a Vietnam shipyard.

L&T won the tender which was floated back in 2015 by Vietnam’s Ministry of Defence.

The high-speed patrol vessels are purpose-built for controlling and protecting sea security and sovereignty, detecting illegal activities such as smuggling and undertaking search and rescue missions, said the company.

Constructed of Aluminium alloy the vessels are about 35 metres long and can clock a speed of 35 knots with a state-of-the-art navigation and surveillance equipment and self-defence Capabilities on board, the company added.

Earlier in 2015, a tender was floated by Vietnam’s Ministry of Defence for the Patrol Boats and six shipyards (L&T, MDL, GRSE, erstwhile Pipavav, ABG and PEC) from India participated in the bid. The MoD-Vietnam shortlisted three shipyards and undertook an extensive assessment of their design and engineering capabilities, yard infrastructure, track record and financial health. L&T qualified on all the parameters and was selected from among the six for the prestigious export contract.

L&T is presently executing Indian MoD contracts for design and construction of 54 Interceptor Boats (IBs) for Indian Coast Guard, out of which 28 IBs have already been delivered with the last boat having been delivered two years ahead of schedule. L&T is also executing orders for design and construction of seven Offshore Patrol Vessels for the Indian Coast Guard against a contract of Rs.1432 Crores and a Floating Dock for the Indian Navy with a contract value of Rs.468 Crores.

Larsen & Toubro is an Indian multinational engaged in technology, engineering, construction, manufacturing and financial services with USD 1.6 billion in revenue.

The move has come in the wake of heightened defence cooperation between Vietnam and India.

 

[Indx TechStyle]

Reliance Defence To Refit 1 Navy Ship Shortly, 2 Others By April 2017

Reliance Defence is refitting 3 Navy ships - INS Jamuna, INS Deepak and INS Savitri. (File)

New Delhi: The first of three ships of the Indian Navy undergoing refit at the Reliance Defence and Engineering Ltd (RDEL) yard will be completed shortly and the entire project, worth Rs 300 crore, is likely to be finished by April next year.

Through a competitive bidding process (4 bidders from PSU and private sector participated), RDEL has been awarded the contracts for refitting of three vessels - INS Jamuna, INS Deepak and INS Savitri.

The refit activities, largest contract given to a private company, are expected to be completed by April 2017 with the first refit (INS Jamuna) getting completed shortly, industry sources said.

Navy sources said the contract was awarded to RDEL primarily because of the dry dock it has.

RDEL operates India's largest dry dock of 662 m length and 65 m width. The shipyard has the only modular shipbuilding facility with capacity to build fully fabricated and outfitted blocks prior to their erection in Dry Dock.

The fabrication facility is spread over 2.1 million sq. ft. The shipyard has a pre-erection berth of 980 meters length and 40 meters width, and 2 Goliath cranes with combined lifting capacity of 1,200 tonnes, besides outfitting berth length of 780 meters, the company has earlier said.

 

[sorcerer]

$100 mn Defence Order From Vietnam, Culmination of Govt’s Look East Policy: Jayant Patil, L&T

In a chat with ET Now, Jayant Patil, L&T, says the company has a track record, having delivered to the Coast Guard in India and that is exactly where the new orders now have come in. Edited excerpts
ET Now: What is the nature of this order and the execution period?
Jayant Patil: This is a high speed interceptor boats. We are supposed to be delivering in two and half years to Vietnam.
ET Now: And this one among a series of orders which you expect and what will be the total size?
Jayant Patil: I would say that right now this is a single order. It is obviously in line with government's thinking of Look East so there are certain strategic issues involved and that is exactly the government is encouraging some these exports.
ET Now: Do tell us given that it is in the defensive space and are we going to see more such orders of this nature, what is lined for L&T within the defence sector and what kind of growth are you seeing in this segment going forward?
Jayant Patil: We certainly see this segment growing because the government has clearly articulated an export target and as result obviously we are today looking at quite sizable opportunities-- as I said the Look East direction as well some other friendly nations.
ET Now: So within the entire order book what is the outlook on the defence order book as of now? Where does it stand and where do you see it headed by the end of the year given that you are saying that you expect to see more growth in this segment?
Jayant Patil: I think this year it is a bit too early to talk because today the policies are facilitating exports as compared to what used to be the earlier scenario so we certainly will see exports gradually growing, bulk of the exports essentially require a good amount of track record and some of these vessels we actually have that track record having delivered to the Coast Guard right in India and that is exactly where we have these orders now coming in.
ET Now: The scale and size of these orders because this is about Rs 670 crore, would the kind of order inflow be along that kind of size or...
Jayant Patil: This is roughly about $100 million.
ET Now: Would future orders be also within that band of $100-150 million or higher?
Jayant Patil: We certainly have some in pipeline but generally Larsen & Toubro is not someone who talks speculative. We will talk when we actually have them.
ET Now: So what is the outlook as to the total order book as well for the company as of now?
Jayant Patil: You again know that in a segmental reporting we generally do not talk of sub segments, defence today we do not separately declare to our shareholders so that is a question I would do maybe some later date.
ET Now: What about the margins on this order?
Jayant Patil: Margins generally stay healthier than what L&T averages are, that is normally what happens in defence.
ET Now: Could you put a range to that on how much because pricing would be important to these order wins?
Jayant Patil: No. I know what you are hinting at but I do not think I will declare the margins on kind of this kind of a forum.
Source>>

 

[Indx TechStyle]

Giving Them Wings To Fly
Global defence contractors and local manufacturers are enthused by the business opportunities provided by the Make in India campaign. The enthusiasm has begun to translate into making India a hub for defence manufacturing.

Giving Them Wings To Fly

Giving Them Wings To Fly

Giving Them Wings To Fly

Giving Them Wings To Fly

The two key takeaways from the recent visit of defence minister Manohar Parrikar to the US are the signing of the bilateral Logistics Exchange Memorandum of Agreement (LEMOA) and the elevation of India as a ‘major defence partner’. Both these measures are part of the 28-months of sustained efforts by the NDA government to boost India’s defence capabilities after being voted to power. While LEMOA allows the militaries of both India and the US to access each other’s facilities for supplies and repairs, the designation of major defence partners allows defence trade and technology-sharing of a higher grade, Ash Carter, US defence secretary said after signing the agreement with Parrikar. With this agreement, India becomes an even closer ally of the US thereby giving a new vigour to the defence contractors and hardware manufacturers in both countries just as in the recent past when Prime Minister Narendra Modi visited France and the United Kingdom.

And that is the reason global defence contractors such as Thales from France, Lockheed Martin from the United States, BAE Systems from United Kingdom and several others have extended their whole-hearted support to the ‘Make in India’ initiative of the government, particularly in the defence sector, that talks of greater emphasis on local sourcing and local manufacturing and enhanced limit of foreign direct investments. And why not? After all, India is the world’s largest importer of defence equipment; it spends around $24 billion a year on defence equipment. As a result, several giant defence contractors have renewed their interest and participation in the defence requirements of India which is beginning to translate into the order books of the small and medium enterprises engaged in manufacturing of components for the Indian defence forces.

A recent report by FICCI and Centrum Capital said India will see a total defence budget allocation of $620 billion between 2013-14 and 2021-22, of which half will be capital expenditure and the annual opportunity for Indian companies — both public and private sector — is expected to touch $41 billion by 2021-22, it said. There’s more good news for private sector companies.

In February, at a session on defence at the Make in India Week in Mumbai, A.K. Gupta, secretary, department of defence production, had said that private sector manufacturers will now get an opportunity to pick up a 25 per cent share of defence production. And by end-March, defence minister Parrikar had cleared the decks for enhanced local manufacturing as part of the new defence procurement policy (DPP) 2016. Under the new DPP, the government has introduced a newly incorporated procurement class called “Buy Indian-IDDM”, where IDDM stands for Indigenously Designed Developed and Manufactured. The category refers to procurement of products from Indian vendors products that have been either indigenously designed, developed and manufactured with a minimum of 40 per cent local content or, products with 60 per cent indigenous content, even if not designed and developed locally. The policy has also significantly liberalised the offset liability for foreign vendors, which made it compulsory for companies to invest, or source, at least 30 per cent of the contract value in India. The new DPP has also increased the offset for all contracts from Rs 300 crore to Rs 2,000 crore.

Lockheed Martin & India Commitment

According to Lockheed Martin India chief executive Phil Shaw, the Government of India’s goal of indigenising the defence industry while creating more opportunities and easing the business environment for local manufacturing will have a two-fold benefit. “One, the outflow of precious foreign exchange will reduce as more and more defence equipment is manufactured in India itself. And two, as defence manufacturing increases, it will have a positive impact on job creation as well as provide additional tax revenue to the government,” tells Shaw to BW Businessworld adding that Lockheed Martin fully supports the ‘Make in India’ initiative of the Indian government.

The joint venture partner in Tata Advanced Systems, Lockheed Martin manufactures large aerostructures for the global supply chain of C-130J in Hyderabad. The C-130J Super Hercules is a four-engine turboprop military transport aircraft. It is a comprehensive update of the venerable Lockheed C-130 Hercules, with new engines, flight deck, and other systems. As part of its commitment to the ‘Make in India’ campaign, “all C-130Js manufactured have these large Indian built components incorporated for delivery to customers all around the world,” says Shaw.

Tata Sikorsky Aerospace, a joint venture between the Tata Advanced Systems and US-based Sikorsky Aircraft Corporation (a Lockheed Martin subsidiary) is producing thousands of components for the S92 helicopters and is the largest integrated component manufacturing facility in the private sector in the country, says Shaw.

Recently, Lockheed Martin has offered India the exclusive opportunity to produce, operate and export F-16 Block 70 aircraft, the world’s most successful combat-proven multi-role fighter aircraft. “Discussions are ongoing and further details will be determined in conjunction with the respective governments, Lockheed Martin, and Indian industry,” says Shaw. Additionally, the company is in talks with the government for finalising the deal of 16 multi-role advanced S-70B Seahawk helicopter for the Indian Navy.

Thales For India

In an interaction with BW Businessworld in May, Patrice Caine, chairman and CEO of French multinational Thales Group, the world’s 10th largest defence contractor, had said that it fully supported the ‘Make in India’ movement and that the Mirage 2000 upgrade programme is serving the strategic requirements of the ‘Make in India’ initiative. “Thales has been working on the upgradation of the Indian Air Force’s Mirage 2000 fleet, and the first four Mirage 2000 I/TI fighters have already been delivered,” said Caine. Thales’ interest in India is not new, the group has had a five-decade long association with the Hindustan Aeronautical Limited (HAL). Additionally, it has also created joint ventures with Indian manufacturers such as Samtel, BEL and L&T Technology Services.

Commenting on the success of its Indian JVs, Caine recounted: “Thales and HAL have been long-term partners in providing airborne avionics, mission systems and equipment for aircraft and upgrade programmes. One of the key programmes, the Mirage 2000 upgrade, which we are undertaking together with Dassault Aviation is a fine example of our association with HAL,” he said. The BEL-Thales Systems (BTSL), a joint venture between Bharat Electronics Limited (BEL) and Thales, which was incorporated in August 2014, is dedicated to the design, development, marketing, supply and support of civilian and select military ground-based radars for both Indian and international markets.

During Defexpo India 2016, Thales and BTSL signed a partnership agreement for joint development of the PHAROS fire control radar. Thales holds 26 per cent equity in BTSL with Bharat Electronics has the balance. “We forged a joint venture (Samtel Thales Avionics) with Samtel in 2008 to locally develop and produce helmet-mounted sights and displays, military avionics and airborne sensor systems for the defence market,” said Caine. Samtel Avionics holds 74 per cent equity in the joint venture, while Thales owns the balance. The joint venture is fully operational and the production of displays for the Mirage 2000 upgrade programme paves the way for future opportunities to serve local and export markets, he said.

Support From BAE Systems

Alistair Castle, vice president and general manager India at BAE Systems, says India is a priority and that is the reason the company believes in co-producing and co-developing in India, for India and from India for exports. “This is already in progress at the Indian production line for the BAE Systems’ Hawk advanced jet trainer where 99 out of the total 123 Hawk aircraft ordered by India will be manufactured,” he says. BAE Systems is working with its local partner Mahindra Defence Systems, the defence production firm of the Mahindra Group, for the proposed in-country assembly, integration and test facility for the M777 Ultra Lightweight Howitzer. This programme is expected to integrate around 40 Indian companies into the global supply chain of BAE Systems. As Castle said, “Indian defence industry continues to build significant capability. As founding partners of defence manufacturing in India, we underline our longstanding commitment to sharing technology and capability with Indian industry.”

Boost To Local SMEs

Small and medium enterprises such as Noida-based Samtel Avionics and Kanpur-based MKU are reaping the benefits of local sourcing norms and the booming defence manufacturing market. Says Puneet Kaura, managing director of Samtel Avionics: “Samtel-HAL joint venture completed the delivery of 1000 Su-30 MFDs to HAL, which was a major landmark in this relationship. At the same time, the Samtel Thales JV completed the first phase of delivery of MFDs for Mirage 2000 upgrade to Thales France.” He says the growth in Samtel Avionics’ consolidated turnover over last year was more than 100 per cent. “The order book has also grown with more customers and projects getting added in the domain of vetronics and avionics,” says Kaura. Samtel has received some more orders during this year to supply 7 inch handheld displays to the army, the volume of the supply is expected to go beyond 10,000 units over the next four to five years, he says. “We also got the order for design and development of x3 display for Pilot Control Unit of LCH (Light Combat Helicopter). This will be our second product on the LCH platform,” he adds. Samtel is also the prime supplier for three Indian programmes for armoured vehicle displays for the Indian army. These projects have been won with the help of its partner General Dynamics Mission Systems, Canada.

Kaura says the initiatives taken under the ‘Make in India’ umbrella are a clear evidence that the government has a firm focus on developing the indigenous manufacturers, especially the micro, small and medium enterprises (MSMEs). “Changes like the introduction of the IDDM category in the DPP will go a long way in supporting companies like us who have proven competencies in indigenous design, development and manufacturing. Most importantly, what ‘Make in India’ has truly achieved is in focusing the world’s attention towards the manufacturing competencies of Indian companies,” he adds.

Neeraj Gupta, managing director of MKU — which is registered with NATO and the United Nations as a regular supplier of ballistic protection solutions such as body armour, vests, helmets as well as other solutions for both soldiers as well as armoured vehicles, ships and aircrafts —agrees with Kaura. “The Make in India initiative is a very positive step in the expansion of defence-industrial complex in the country. With a bit of hand holding by the Indian ministry of defence, the hurdles in export of defence items have been minimised. This is evident in the phenomenal growth in exports in the last two years,” says Gupta. MKU apparently has one of the largest manufacturing facilities globally for armour protection where it can manufacture 200,000 jackets and helmets annually. MKU also has setup a joint venture with German company EIS Gmbh to manufacture cable harness for the aerospace industry. The JV company is, however, also exporting harness to airbus industries in Europe. Talking numbers, Gupta says in 2014-15, the company had achieved a turnover of over Rs 250 crore which in 2015-16 increased by 35 per cent. “MKU has been making healthy profits, while in 2014-15 EBITDA was Rs 20 crore approximately, in 2015-16 it climbed up by 215 per cent. The gross profit also went up 73 per cent compared to 2014-15,” adds Gupta.

"We support Make-in-India"
Phil Shaw, CEO, Lockheed Martin India
Your assessment of government’s plans to push local manufacturing?

Lockheed Martin supports India’s goal of indigenising the defence industry via a strategy of creating more opportunities and easing the business environment for local manufacturing, which in turn will reduce dependency on imports.

Your views on relaxed FDI norms? Does it help you in any way?

Our preferred route is partnerships and we have excellent relations with the Indian industry. As far as FDI is concerned, Lockheed Martin reviews each business case on its individual merits and any decision is taken accordingly. Lockheed Martin is invested in Indian defence manufacturing. We support ‘Make in India’ and ‘Skills India’ initiatives with our two JVs that have trained the majority of their own staff through apprenticeships and on-the-job training. The numbers employed in both JVs has reached almost 1,000 personnel. In the C-130J joint venture, 600 personnel have been trained, with an additional 400 personnel that are now employed in local aerospace industries.

Upside for global defence contractors to set up manufacturing base here…

Lockheed Martin will be happy to support the government’s strategic partner initiative. We will happily comply with whichever procurement and production strategy the government elects to follow, which of course is to support “Make in India” and to develop the defence industrial base. We have supported similar industrial activity in other countries over the years and would be delighted to participate in the same here in India.

 

[Indx TechStyle]

Defence Security: The Next Sunrise Industry?
The Modi government has opened up the defence sector to 100 per cent FDI. The goal is to make India a defence manufacturing hub and end its dependence on imports. All that spells a huge opportunity for the private sector.

With the Modi government having finally cleared the way for up to 100 per cent foreign direct investment (FDI) in India’s defence sector — a longstanding demand of foreign manufacturers — experts are now of the view that defence could be the next sunrise industry in India. What they are yet to agree on is the size of the Indian market, as figures range from $650 billion to $150 billion over the next decade. A more realistic estimate, however, would be $250 billion over the next decade, based on an assessment by SIPRI, the authoritative Stockholm International Peace Research Institute, which says India spends around $24 billion a year, largely on arms imports, making it one of the world’s largest importers of defence systems and equipment. But Prime Minister Narendra Modi’s government wants to shed that dubious distinction and make India a defence manufacturing hub. The question is, how soon can India turn the corner?

Until now, despite the claims of several governments in the past about the need to decrease imports by enhancing indigenous production, the sacred area of defence-related manufacturing had largely been the monopoly of government PSUs (public sector units), which have a cumulative turnover of Rs 50,000 crore. But now, according to A.K. Gupta, secretary, department of defence production, in the ministry of defence (MOD), the government is more than willing to accommodate the private sector in this space, by giving it an opportunity to pick up a 25 per cent share of defence production, as the ministry has already delicensed 60 per cent to 70 per cent of the production.

But even then, perhaps for another decade, India’s armed forces will continue to depend heavily on imported weapon systems, as they continue to lurch from one operational crisis to another, confronting natural disasters, battling insurgencies and cross border attacks, but still alert across India’s vast borders and sufficiently equipped to confront the dual threat posed by China and Pakistan. However, with the sensitivities to scandals high on the minds of those responsible for defence purchases in India’s MoD, almost every single item is purchased only when there is a critical shortage of a weapon system needed to replace the one’s that the armed forces desperately need, having more that exhausted the life span of the equipment they have. There is thus, little or no long-term perspective planning that can be implemented in actuality.

This leaves little room for the armed forces to order and wait for local products, since the design, manufacture, trials and induction of a weapon system often takes 15 years or more. Such long delay in local production of weapon platforms could lead to them being declared either ineffective or outdated. The light combat aircraft has taken more than three decades to ready for induction. Successive governments have said that our public sector undertakings can be allowed to develop almost everything that our forces need. Defence manufacturing being classified as a ‘secret’ domain, however, denies the private sector the opportunity to enter into this domain.

In the last few years, private sector participation in India’s defence sector has increased, however. On the other hand, foreign defence contractors are showing their confidence in India by expanding their tie-ups with Indian companies. This is facilitated by policy support, both specifically for defence and generally, under the Make in India campaign. Thus, large Indian conglomerates have increased their exposure to defence manufacturing.

“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,” says Kabir Bogra, associate partner at New Delhi-based law firm, Khaitan and Co.

For instance, BFL has tied up with Israel defence tech firm Rafael Advanced Defense Systems and Elbit Systems and UK-based Rolls-Royce. Similarly, the Tata Group has tied up with US-based firms, Sikorsky Aircraft, Lockheed Martin and Boeing. Earlier this year, the Tata Group said it expects the defence and aerospace business to increase its revenue by 7.5 per cent to Rs 2,650 crore in the coming year. Defence and aerospace were identified as important growth drivers by Tata Group chairman Cyrus Mistry and significant investments will be made in these areas, according to Mukund Rajan, member, group executive council and brand custodian of Tata Sons.

“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, the naval utility helicopter (NUH) 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,” says Bogra. The success of the Make in India campaign in the defence sector will ultimately depend on the extent to which the government can leverage its massive spending programme to promote domestic manufacturing.

Official statistics show that India’s defence spending has steadily declined in the last decade, with about 1.8 per cent of its GDP being allocated for defence. A parliamentary standing committee report has, however, recommended an allocation of at least three per cent of GDP for defence. Some international observers are of the view, however, that India spends about as much on defence as a proportion of its GDP as the UK or France, with 36 per cent of its spending assigned to capital acquisitions. But, only about 35 per cent of defence equipment is manufactured in India, mainly by the PSUs. The rest is imported. Moreover, even when defence products are manufactured domestically, there is a large import component of raw materials at both the system and sub-system levels. The National Democratic Alliance (NDA) government at the Centre is thus keen to leverage this advantage to promote investments in the defence sector.

To that effect, the NDA government has taken several policy initiatives to lower entry barriers and improve the ease of doing business in defence manufacturing. The regime and procedure for granting industrial licences for manufacturing defence equipment has been significantly liberalised and speeded up, clarifications have been issued to facilitate implementation of offset obligations, an export strategy has been announced and export NOCs are issued online. Furthermore, with the FDI policy liberalised, a new DPP (defence procurement procedure) is being implemented, that should further strengthen the policy regime to promote defence production in India.

The way forward will not be without obstacles, though. For their part, defence firms will have to learn to manage some uniquely Indian requirements. To expand an industry to meet tomorrow’s challenges, India’s MoD and its contractors may have to look towards more mature defence manufacturing markets, such as the United States, France and the UK, as well as developing markets such as South Korea and apply some of the philosophies pioneered by them. One essential move is to decide on core capabilities and focus efforts on building these in India. Other steps include improving the talent market, building skills in both government and private companies and ensuring open and inclusive access to defence markets.

Currently, the reality is that India’s MoD largely controls the business of defence in the country, through its affiliates. “Indian defence industry is dominated by defence public sector undertakings (DPSUs) and ordnance factories (OFs) which contribute about 90 per cent of the total domestic defence manufacturing output. The 41 ordnance factories are spread across 26 different locations and employ close to 1, 25,000 people. The DPSUs and OFs manufacture a wide spectrum of equipment including small arms and field guns, ammunitions, explosives, armoured vehicles, transport vehicles, clothing, parachutes and general stores. The DPSUs account for approximately 65 per cent of the total industrial output of the defence public sector enterprises,” says Ravi Singhania, of Singhania and Partners.

Critics of this centralised approach at indigenisation say that this is precisely where the problem lies, even though the DPSUs and OFs typically outsource 20 per cent to 25 per cent of their production requirements to private companies, resulting in about 6,000 MSMEs that are dependent on the DPSUs for their survival. This has over a period of time created self-complimenting cliques and a culture of nepotism that has eventually led to the Armed Forces rejecting many of their products as outdated or sub-standard. The entry of a growing number of large private companies into this market now, is making the older players nervous. While many private players have in recent years been involved in a minor way with several defence projects like the Integrated Air Defence Command and Control System (IACCS), Tactical Communication System (TCS), Battlefield Management Systems (BMS) and Futuristic Infantry Combat Vehicles (FICV) and some of these are in the early stages of deployment, there is now a new beginning in India’s defence industrialisation with big projects being awarded to private players, according to Singhania.

Over the past year, licences have been issued to the Indian private sector for manufacturing armoured vehicles, electronic warfare systems, military aircraft, unmanned aerial vehicles, radars, ship borne platforms, etc., opening up the doors for Ashok Leyland Defence Systems, Larsen & Toubro, Mahindra and Mahindra, Pipapav Defence and Offshore Engineering, Piramal System and Technologies, Reliance Industries, and the Tata Group, to play a major role in India’s defence industry in the years ahead. But they will need to move quickly to fulfill India’s large military wish list. Much of the Indian military’s arsenal has platforms that are nearing the end of their service lives, resulting in equipment voids in many critical areas.

The longstanding IAF demand for fighters and other aircraft, for instance, needs to be urgently addressed (the new LCA will take some more years to take its place in IAF’s frontline squadrons). The Army’s immediate need for tanks, missiles, artillery systems, and better assault rifles to match the AK-47, a favourite of terrorists worldwide (the demand for rifles to replace the sub-standard INSAS could be in the range of a quarter million rifles) and of course, the need to add some serious blue water punch to the Navy — all offer unprecedented opportunities for those in this business. A more detailed assessment of the big ticket items and their costs follows.

The collective requirement of helicopters for India’s three services and the para-military forces is 800 helicopters of various types, necessitating an immediate investment of $12 billion. The Indian Army’s sorry state of artillery guns, air defence systems and the yet to be fully inducted new-generation personal weapons and battlefield communication systems, shows a projected cost of Rs 1, 81,450 crore ($26.9 billion) for immediate acquisition of ground forces equipment.

Even though the Indian Navy has been way ahead of the other two services in designing and inducting military platforms, the Navy is well short of its stated requirement of 160 warships and vessels, along with their full stock of helicopters, torpedoes, sonar equipment and air defence systems, making its ships vulnerable to enemy submarines, aircraft and anti-ship missiles. All this will cost serious money, even with the urgent procurement of submarines, stealth frigates, logistic support vessels, anti-submarine and counter-mine vessels and crucially, ship-borne helicopters. This adds up to Rs 2,96,800 crore ($44 billion), of which one-tenth must be provisioned for in this budget. After catering for committed liabilities, the Navy’s capital allocation needs to rise to Rs 53,591 crore ($8 billion) this year.

The Indian Air Force, which has now made it known that it cannot handle a two-front conflict should there be a simultaneous push from China and Pakistan, is desperate for fighters to replace its ageing fleet of MiG-21s and MiG-27s. Even though Modi’s visit to France had led to the announcement that India will buy 36 off-the-shelf Rafale fighters, since the joint Indo-Russian venture to co-develop a fifth-generation fighter will still take time, the IAF’s wish list could see contracts worth Rs 1,72,600 crore ($25.5 billion) come into force. This would need an allocation of Rs 17,260 crore in 2016-17, over and above what was committed last year. It takes the IAF’s capital allocation to Rs 48,741 crore ($7.2 billion).

But time is running out. The 2016-17 Budget* wouldn’t immediately precede a national election in which defence is a subject that gets few votes and considering that India’s politicians only pay lip service to doing ‘whatever’ is necessary — Modi’s government could still be bold enough to do the needful. According to official statistics, the share of defence spending in the GDP has declined steadily in the decades after liberalisation, with a particular dip after the United Progressive Alliance government came to power. India now spends less than two per cent of its GDP on defence. In contrast, NATO countries, even though they are safe under the US military umbrella, are required to spend two per cent of their GDP on defence. A Western study suggests that India must spend 4-6 per cent of its GDP, to have a first class military force.

For those in the ‘business of defence’, India will be the market to get into, in the decade ahead. According to consultancy IHS Jane’s report, the combined defence budgets in the Asia-Pacific region will grow from $435 billion last year to $533 billion in 2020, furthering a shift in global military spending away from Western Europe and North America toward the emerging markets, especially in Asia. The figure will put the Asia-Pacific on a par with North America, which is expected to account for a third of global defence spending by then, from almost half now.

Military outlays in Asia and Oceania which includes Australia and New Zealand grew 5.4 per cent in 2015, outpacing a one per cent rise in global spending, according to SIPRI. China had the biggest defence budget in the region last year at $146 billion, according to the government. Jane’s Weekly said it expected China’s budget to rise by about five per cent to $233 billion by 2020. China’s outlays were two per cent of its economy, well below the US expenditure of 4.70 per cent of its economy last year, while Russia’s expenditure of 3.90 per cent of her GDP amounted to $71.90 billion.

If India is to discard its dubious distinction of moving from crisis to crisis — a trend that has led to the acquisition of an ad-hoc arsenal and many top manufacturing firms being black-listed after scandals — it must at the earliest, adopt a national security doctrine, to plan for the purchase or development of weapon systems. Only then can it truly have a long-term integrated perspective plan, as the DPP mandates. At present, each of India’s armed services has its own doctrine, apparently preparing to go to war all by itself! And the armed-police forces are even worse off. They have none at all.

 

[Indx TechStyle]

Chance To Join The Big Party
A massive opportunity stares at startups in the defence sector and the right kind of support from the government and private investors could give them the impetus they need.

Photo Credit : Shutterstock,

Startups in the defence sector have a goldmine to dig. The total defence budget for 2016-17 is Rs 2.49 lakh crore, of which electronics forms a major component. Electronics alone is expected to generate $72-billion worth of market opportunities for startups over the next 10 years. The government’s Make in India initiative, as part of which several policies have been rolled out over the past two years, has in addition given a special impetus to the private sector to invest in research, design, and development.

“There are many opportunities for startups to tap some of the need for small-scale equipment for training and use in counter insurgency and in anti-terrorism operations from bullet proof jackets to radio sets, vision devices and simulators. The Armed Forces and police forces are looking at affordable options that guarantee quality. They are open to weaning away from the defence PSUs, and this is where the opportunity lies,” says Maroof Raza, strategic affairs expert.

The Defence Procurement Procedure 2016 (DPP) effective 1 April 2016 has introduced a key new category called Indigenous Designed Developed and Manufactured (IDDM), which has been given the highest priority. The category refers to products procured from Indian vendors that have either been designed, developed and manufactured with at least 40 per cent indigenous content, or products that have 60 per cent indigenous content on a cost basis, but have not been designed and developed indigenously.

At present, India is the largest importer of defence equipment and many of its defence needs are met through imports. “But, the Indian government’s vision is to develop a strong self-reliant domestic industry in the defence sector with substantial participation from the private sector, including MSMEs and startups to reverse the trend of imports,” says S. K. Sharma, chairman and managing director of Bharat Electronics. “It is a great opportunity for MSMEs/startups to leverage their capabilities for the development of innovative products and technologies required for meeting the emerging needs of the Indian defence forces,” he added.

In fact, defence startups are right here among us, perhaps a bit overshadowed by the more talked-about players in the e-commerce sector, but they are silently working their way up. For instance, VizExperts, a Gurgaon-based technology startup in the visual computing field founded by Praveen Bhaniramka, has been helping organisations “enhance situational awareness” and take well informed decisions from data.

Bootstrapped with an initial investment of Rs 2 crore, Bhaniramka’s venture targets defence homeland — police, paramilitary and organisations like Defence Research & Development Organisation (DRDO) and Indian Space Research organisation (ISRO). It has products in domains like 3D GIS, simulation, 3D video wall processing and virtual reality.

Then, there are more mature companies like Centum Electronics, which is specifically targeting the Indian strategic electronics market, now growing at a CAGR (compound annual growth rate) of about 18 per cent. “We design and manufacture electronic systems and subsystems for missiles, radars, electronic warfare, avionics and communications. With our strategic focus on indigenisation of products that are currently being imported, we have developed technologies and processes which are unique in the country,” says Apparao Mallavarapu, CMD, Centum Electronics.

Hyderabad-based Zen Technologies develops training simulators for weapons and allied defence equipment. The company went public in 2000 and over the years, Zen has developed expertise in designing, developing and manufacturing various types of simulators. Zen believes that its products that are developed in-house, not only meet all qualitative standards but are also cost-effective.

In July this year, Zen received an export order worth Rs 30 crore from the Egyptian ministry of defence — its biggest export order till date. The Ministry of Defence, Egypt has chosen the company to provide a range of training equipment, including smart target systems. The company has supplied over 450 simulators to over 100 customers across defence, services, state police forces, paramilitary forces and Navy.

Bengaluru-based Alpha Design Technologies offers technical support, indigenous assembly/manufacturing facilities and technology integration services for a wide range of products to Indian and international organisations. It specialises in laser aiming systems, thermal imagers and fire control systems, tactical communication, navigation systems and simulators, among others. Early this year, Adani Aero Defence Systems & Technologies, a fully owned subsidiary of Adani Enterprises, signed a “statement of intent” with Alpha Design Technologies to work together in the field of unmanned Aircraft Systems (UAS) in India.

Founded in 2007 by Parag Naik, Hemant Mallapur and Vishwakumara Kayargadde, Saankhya Labs is another Bengaluru-based startup. It has built a chip called ‘Pruthvi’ that functions as a software-defined radio (SDR). Pruthvi has so far been used to power satellite communication, drones, ultra-HD set-top-boxes and video surveillance applications. The SDRs, which deal with changing radio protocols in real time, also have significant utility in the military.

Scope For Growth

Startups can play a pivotal role in helping India leapfrog ahead of others in defence production. Given the rapidly changing nature of defence technologies, agility is critical and this is where engagement with the startup community will help India develop world-class products quickly.

BEL, one of the largest defence PSUs, has been taking initiatives to achieve self-reliance in defence production, with a strong thrust on indigenization and has been outsourcing from the Indian private sector, including MSMEs and startups. “BEL recognises outsourcing as one of the strategic tools to achieve cost benefits and also complement the strengths of the private sector to build a strong industrial base,” says Sharma.

In this direction, BEL has taken several measures to encourage the private sector, including startups, to be part of the supply chain. Some of the measures include relaxing the eligibility criteria for registration from startups as vendors, identifying products/areas for procurement from startups and implementing online vendor registration and e-procurement processes. “Apart from innovation, startups will be expected to be engaged in the development, deployment or commercialisation of new products, processes or services driven by technology or intellectual property,” says Sharma.

Startups often face huge challenges owing to the complicated bureaucratic set up, where they have to compete with much larger companies for government projects. Despite being a promising sector with immense opportunities, the defence startup community is often deprived of funding. Startup founders have urged the government to support them with friendly policies and adequate funding so they may showcase their indigenous innovation to the world.

“Most investors in India look for short-term returns and in the defence sector, the gestation period is comparatively longer,” says Bhaniramka. “India has a lot to learn from the US government which has programmes like SBIR (Small Business Innovation Research) that drive innovations in the defence market, which subsequently create innovative products for general civilian usage as well.”

That said, the silver lining is the government’s intent, with initiatives like Make in India and Startup India, which will open up opportunities in the defence sector as well. The recently-announced DPP-2016 has tweaked many existing policies to address concerns of defence manufacturers and suppliers, which will ensure faster procurement, especially through newly-introduced categories targeted to boost indigenous development through small and medium industries. Startups will surely gain from some of these measures.

 

[Zebra]

Very sad.

No news about new IAF fighter aircrafts.

 

[Scarface]

Very sad.

No news about new IAF fighter aircrafts.

I'd say the Rafales are as new as they get,It hasn't even been a two days since we signed the agreement.

I stopped caring when I read that the current government showed no interest in for the F-35
Well atleast we'll have make in India with the 4th gen fighters

 

[Indx TechStyle]

‘Focus On Fire Power, Mobility’
Baba Kalyani, chairman and managing director, Bharat Forge, tells BW Businessworld that the group is focusing on making artillery guns, armoured vehicles, protected vehicles and missiles.

Baba Kalyani, chairman and managing director, Bharat Forge, tells BW Businessworld that the group is focusing on making artillery guns, armoured vehicles, protected vehicles and missiles:

On India as a production base

Like the rest of the world, India is gearing towards the Fourth Industrial Revolution (Industry 4.0), which is going to drive the next wave of transformation in manufacturing operations and productivity. Amid a challenging global scenario, India remains one of the most attractive economies of the world with a growth rate of 7.6 per cent.

On India’s target to boost arms exports 20-fold to $3 billion across a decade

The Kalyani group, with its full scope of products developed for the defence sector, is excited about the prospects of the industrial sector in India. This increasing product portfolio, coupled with the government initiative to boost arms exports, puts us in a sweet spot to capture this opportunity. We are seeing a lot of traction from neighbouring countries and the Middle East. But we should not lose focus on first developing a robust and self-reliant defence industrial base in the country.

On the products that the group is keen to manufacture

Using the combined strength of various Kalyani Group companies, we have established modern and sophisticated infrastructure required for manufacturing artillery guns. My group follows a product driven strategy and believes in developing products that demonstrate our capability. We have designed, developed and manufactured 100 per cent indigenous systems like Bharat 52, Bharat 45, Garuda 105 and the latest Ultra-Light Howitzer (ULH). Having proven our capabilities with these developments, we are now focusing on the requirements of the Indian defence forces and are confident of providing state-of-the-art indigenous artillery solutions for them. In armoured vehicles, the Kalyani Group has been a long time supplier at the sub-system level. We are now focusing on mobility and fire power solutions, along with our global partners.

In the protected vehicles segment, we have developed products like the Light Strike Vehicles, Light Specialist Vehicles and Light Armoured Vehicles and are participating in tenders of the ministry of defence. In ammunition, we are not looking at developing routine products, but are working towards developing niche products like BMCS, FSAPDS, etc. We are also partnering with foreign partners for Electronic Fuze technology. The aim is to compliment the OFBs/ DPSUs. We have partnered with leading OEMs for missiles and AD programmes in India.

On FDI in defence production in India

Two major foreign OEMs, Elbit and Rafael, have formed defence units (in the form of joint ventures) with the Kalyani Group. We also have some other foreign companies talking to us for similar ventures. I am sure similar discussions are going on with many other companies in the country, as well.

On the group’s business targets

In India, defence, the Railways and oil and gas, are the critical market segments for us. We believe defence is a sunrise sector and we have a solid roadmap to increase our presence in that space. The focus areas in defence are artillery guns, armoured vehicles, protected vehicles, missiles and AD and ammunition. Our Make in India strategy is also well on its way, wherein, we are targeting import substitution across all verticals.

 

[Indx TechStyle]

@Scarface @Chinmoy @amoy
Can someone tell me that how much weapons (in monetary terms) are exported by United States, Russia and PRC in USD?

 

[tharun]

Defence Security: The Next Sunrise Industry?
The Modi government has opened up the defence sector to 100 per cent FDI. The goal is to make India a defence manufacturing hub and end its dependence on imports. All that spells a huge opportunity for the private sector.

1) We can get 16 conventional submarines without brahmos for 60k crores
2)Each frigate 1$ billion dollar that too much we can get two actually.
3) Boeing P8-I are waste most subs now are non-magnetic..we better invest in underwater listening sysytems.

 

[tharun]

What is this MOD civils budget goes to...........................

 

[Zebra]

I'd say the Rafales are as new as they get,It hasn't even been a two days since we signed the agreement.

If I am not wrong, Rafales are for SFC.

And they are not just for the jobs like intercept something or drop few 500/1000 kgs bombs somewhere.

I stopped caring when I read that the current government showed no interest in for the F-35
Well atleast we'll have make in India with the 4th gen fighters

F/A-18 ASH and Gripen are better.

What say.....!

 

[Indx TechStyle]

'BrahMos Reaching Next Level Of Technology'
Sudhir Kumar Mishra, CEO and managing director, BrahMos, talks to Businessworld’s Brij Pahwa about the BrahMos venture.

Sudhir Kumar Mishra, CEO and managing director, BrahMos, talks to Businessworld’s Brij Pahwa about the BrahMos venture. Edited excerpts:

Tell us how the idea for the BrahMos missile was conceived and also about the joint venture that gave birth to it.

BrahMos has successfully travelled from “mind to market” in a spectacular journey within a very short span of time. The BrahMos joint venture was established between India’s DRDO and Russia’s NPOM in February 1998 to design and develop a high-speed, high-precision, ‘fire & forget’ tactical weapon. With the excellent scientific and technical cooperation between the two partnering nations, BrahMos was conceived, designed, developed and successfully test-fired for the first time in June 2001. Today, BrahMos boasts of being a universal, versatile, state-of-the-art weapon capable of being launched from multiple platforms for multiple missions. The JV has established a robust military industrial complex in both India and Russia in which a large number of public and private sector industries, laboratories, and institutions are developing, producing and supplying numerous systems and components for the BrahMos weapon system.

What are the existing variants of BrahMos and what new variants are you planning to launch?

For the Army, we have developed the mobile land-attack BrahMos with block-I, block-II and block-III configurations for different missions. For the Navy, both the anti-ship and land-attack variants have been developed and deployed. The Indian Air Force has deployed the mobile land-attack version of the weapon.

The newer variants of the weapon would be BrahMos-NG, a smaller, smarter version of existing BrahMos and BrahMos -II (K), the hypersonic missile with a top of speed of mach 5-7. We are also working on developing an advanced block-IV configuration missile for the army which will have a 90-degree steep dive attack capability. Such a missile could also be used as a “carrier-killer”, if need be.

How do you plan to sell the missile internationally and to which countries?

The inter-governmental agreement (IGA) that was signed between India and Russia in February 1998 made provision for exporting BrahMos to third countries which are friendly to both the partnering nations. The world over, weapon are exported on a government-to-government basis. It is for the Indian government to decide whom it wants to export to. So, export is on our priority list and we are negotiating with a number of countries at present to sell our weapon. BrahMos Aerospace has excellent production facilities and supply chain management to meet export quantity.

 

[Scarface]

@Scarface @Chinmoy @amoy
Can someone tell me that how much weapons (in monetary terms) are exported by United States, Russia and PRC in USD?

In 2014,US defence exports account for 10.194 billion USD

Russia is at 5.971 Billion and PRC is 1.978 billion

You can find the figures for previous years
Here
https://en.m.wikipedia.org/wiki/Arms_industry

 

[Indx TechStyle]

In 2014,US defence exports account for 10.194 billion USD

Russia is at 5.971 Billion and PRC is 1.978 billion

You can find the figures for previous years
Here
https://en.m.wikipedia.org/wiki/Arms_industry

So, if India exports $2 billion weapons in next two years, can we come in top 5?

 

[Scarface]

So, if India exports $2 billion weapons in next two years, can we come in top 5?

Yeah but that will he hard,
Just because we sign a deal with a country for defence equipment worth 2 billion in next year but the deliveries will finish in 36-48 months doesn't mean that's our net export,what matters is the deliveries

The export value is calculated by the products actually delivered,we will have to deliver 2 billion worth of defence equipment made by us in 1 year to come into the top 5.

 

[Scarface]

If I am not wrong, Rafales are for SFC.

And they are not just for the jobs like intercept something or drop few 500/1000 kgs bombs somewhere.



F/A-18 ASH and Gripen are better.

What say.....!

Rafales aren't for SFC according to Dassault CEO Eric Trappier

This is what he said when asked about nuclear role of Rafale

And the French Rafales are nuclear capable?

"That is something specific to France. Therehave been questions on the high costs. It issaid India can buy three Russian Sukhois forone Rafale. Yes, maybe Rafale is moreexpensive. But those who know about fighters also know that Rafale is much more capable than a Sukhoi… in terms of survivability and all combat roles. The Russian aircraft are good, no doubt.But when your air force will have the Rafale, they will be happy to have it in their inventory, just like the Mirage-2000s which are the backbone of IAF. Rafale is more acompetitor for the F-35. We are a generation ahead of the F 16".

Pretty funny what he says about the F-35 though.

We will probably modify it ourselves for SFC without the French.

I'd say the F-18 ASH is definitely the best option if no F-35

Not very enthusiastic about the Gripen though.

 

[Zebra]

Rafales aren't for SFC according to Dassault CEO Eric Trappier
This is what he said when asked about nuclear role of Rafale
..................................
...................................
I'd say the F-18 ASH is definitely the best option if no F-35
Not very enthusiastic about the Gripen though.

The best replacement for Mig-21 and still a multirole aircraft.

 

[Scarface]

The best replacement for Mig-21 and still a multirole aircraft.

MiG-21 doesn't need to be replaced because Tejas has already replaced it,on paper of course but it won't be long before paper becomes reality