Challenges in Defence Manufacturing

Difference in budgeting and procurement cycle makes acquisition a difficult process.

A robust unified requisite system for coordinated defense procurement is needed for effective utilization.

Lack of defence development experience, a roadblock for Indian Defence manufacturers.

High costs to bidders for “No cost no commitment” demonstration with no guarantee for business.

Availability of DRDO technology to only DPSU’s to a large extent.

Even if Private sector commits resources for large manufacturing facilities to demonstrate their capacity and capability in the defense business, there is no assurance of business.

In the last three years, significant contribution is from build to print category due to offsets.

The Semiconductor components form major part of BOM which is imported.

There is no significant Industry base in the components manufacturing due to lack of available technology as well as no availability of required investments.

Cost of the defence hardware / software produced under TOT or with license from foreign OEM’s still very high due to higher import content.

There is constant need to upgrade systems design due to fast obsolescence in electronics.

Lack of skilled manpower and interest to work in niche areas.

Expert’s Viewpoint on Defence Manufacturing

Shri S K Mishra (CEO & MD, BrahMos Aerospace)

“We need to have System, Structure, Procedure, Process and most importantly willingness of the Stakeholders in place to achieve the desired indigenization in the country. Suitable Govt. Policy & strategy fuels the Growth of Industries in establishing strong manufacturing base that accelerates the national priority for self-reliance with numerous employment generation”

Shri Sriram (SEC Industries)

“Even though overseas companies oblige the offset requirement with orders to Indian companies, the truth is that a major chunk of the value goes back to the overseas company/country in the form of imports required by the Indian company to manufacture the product. Government should create a special task force under the ministry of defence to address road blocks, protect existing supply chain industry and help initiate product development under PPP mode.”

Shri V Venkata Raju (MD, VEM Tech)

“It is time to identify & upgrade the material manufacturing facilities to AS&D Std. We must nurture defence companies to make them of global scale.”

Shri M V Reddy (Astra Microwave Products Ltd)

“We must encourage R&D in Industry & Academia. In order to enhance R & D and ensure long term growth of industry, there is a need to make it mandatory for defence industry to compulsorily invest significant percentage of revenue in R&D.”

Shri Neelesh Tungar (COO, Tata Power SED)

“We must reduce our delivery time by simplified licensing procedures for Defence Manufacture and reduction in acquisition cycle.”

Shri Ranganathan (VP, Business Development, L&T)

“PM Shri Narendra Modi’s dream of ‘Make in India’ is very important for us. We will make every possible effort to realize this dream in Defence Sector. With Government’s support , our Engineering force stand ready to take up any challenge.”

Maj Gen Mohandas (Retd) Advisor, Bharat Forge

“Government should be flexible in dealing with SME & Industry to grow in defense sector. We must make sure that our Industry stand ready to cope up with Technological & Financial Challenges, And here government can play significant role as a rational regulator. It’s time when India needs to reexamine structure of Defence production as the Chinese did in 2000.”

Lt Gen (Retd) A V Subramanian, AVSM, VSM

“We must make a strategic decision of what technologies are to be created and preserved within the country. We need to analyse and prepare our SRDM priorities. Priorities are systems requirements, if compromised can jeopardize our decisive edge in time of conflict or otherwise.”

Prof (Dr) Asim Tewari, (Incharge, NCAIR, IIT- B)

“Self reliance means we are prepared for the future challenges and to achieve this partnership of academia, industry & government is inevitable. We must overcome challenges of Access to technology, Raw material availability, Access to funding, Certification processes, Skill availability. We must do this with highest priority.”

Maj Gen S Bhattacharya, (VSM) ADG, Engineering Support Management – Army HQ

“Self-reliance with performance improvement (for current & future Systems). We must develop and produce what we shall need. I anticipate more institutionalized Governmental funding to pace up research in cutting edge technologies.”

Air Marshal (Dr) M Matheswaran (Advisor, HAL Bangaluru)

“What makes a country rise to technological and industrial excellence is the combination of a high value on the human capital variable and a low value on the vested interests variable, but that this low value is contingent on a high value on the consensus and cohesion variable.”

Shri B Prasada Rao, (Chairman, BHEL)

“Technology sharing is essential for boosting capacities of our industry, individually. A strong collaborative framework between Research Institution such as DRDO & Industries can be beneficial in larger national interest.”

Shri B S Vishwanatha (ED, BHEL)

“We need to identify the products with industry for development. We must prefer industries developing and establishing manufacturing. In development and research, BHEL is investing heavily on relevant futuristic development.”

Shri Bipin Katara (GM Strategic Planning, BEL)

“For BEL, SRDM means minimum dependence on foreign partners, acquisition of knowledge, cost effectiveness through import substitution and value addition within the Country. We are driven by objective of in-house design and development. And I m glad to say that 50% of our human resource is working in R&D. 85% of our Sales Revenue is generated by in-house R&D. We are re-investing 8% of our revenue in R&D.”Shri Bharat Singh (GM, Ordinance Factory of Medak)

Shri Bharat Singh (GM, Ordinance Factory of Medak)

“We must create a mechanism of forecasting long term technology Requirements (manufacturer + designer + user). We must create an independent Test House Agency for Developmental Evaluation of product. Additionally there is an immediate need for an academic institute, which can be dedicated to national security objectives. All this will serve our nation for better tomorrow.”

Cdr S Raman (Retd) (GRSE)

“It is need of the hour for us to update skills, training and knowledge base for shipbuilding industry. We should be increasing capability of Quality Inspection of IRS and Class Authorities in line with Navy and Coast Guard Requirement. Finally creation of a viable PPP models for mutual benefits of both Private Players and DPSU is not optional choice for us as nation.”

Mr Narayan Rao (CMD, MIDHANI – Mishra Dhatu Nigam Ltd)

“I reiterate my commitment for SRDM by fulfilling the demand of advanced metals, alloys, materials and products for strategic sectors such as Defence, Space. Midhani will play its vital role.”

Lt Gen V A Bhat (Former Director General – QA At Army HQ)

“Our SRDM objectives must be time driven. If we need specific system for our national defence, then that system should be our objective and priority. Administrative system should be our support system. It should not become road block in development agenda. Because, here we are dealing with our National Security. And there is no scope for compromise”

Maj Gen (Retd) Ravi Khetarpal (VSM, Ex-CMD, BDL)

“Our problems arise from faulty architecture, lack of strategic vision, and restrictive environment. It is time when we think SRDM for our security as well as to export our defence systems for safeguarding interests of our friends.”

Dr Satish Reddy (Research Centre Imarat – RCI DRDO)

“The combination of three forces—DPSUs, DRDO and private sector industries—would enable India break out of the historical era of license production in defence public sector industries. But we must invest heavily for futuristic collaborative R&D to propel India ahead of the world. Let world catches up with us on frontiers of Technology, Science & Security instead of we following the the global trends. And this idea is very much possible.”

Dr. Ajit T Kalghatagi, (Director R&D, BEL)

Development & Production of electronics is of paramount importance for India. The field of electronics is changing very rapidly. Our approach towards SRDM (in electronics) should be focused on defence utilization and commercial entrepreneurial opportunities that we can create within country. India should not remain end user of imported electronics. We must develop for our needs and for the global demand.

Air Vice Marshal Rajeev Sachdeva (Commandant College of Defence Management)

“Forces want best weapon system and electronics. Definitely, It would be beneficial if that can be produced in India. But our newly developing defence industry must keep it on first page that any flaw or a lag in defence system can cost lives of soldiers. They must have zero defect approach in development and their first interest must be National Interests”

Shri Vedveer Arya (ASL, DRDO, Author of Various Books on India’s Scientific Past.)

“We must categorise procurement priorities into No Alternative, Alternative available but quality improvement needed and indigenously available. We can develop our industry to meet Qualitative, Quantitative and Strategic user demand progressively, and reducing external dependence subsequently.”

Policy Outline for Self Reliance In Defence Manufacturing

Role of Defence PSU’s

Creating Collaborative framework for defence manufacturing in which User – Government – DPSU’s – Private Industry – Academia will hold role specific responsibility & Accountability.

DRDO should focus on time stipulated R&D to develop robust defence capabilities for future strategic requirements.

DPSU in manufacturing sector should be encouraged to develop & manufacture products for Military Users as well as Civilian Commercial utility to achieve financial sustainability and reduce dependence reliant on government funding.

Road Ahead for Self-Reliance in Defence Manufacturing

Flexibility (to develop) & accountability is the way.

There is an immediate need for time bound flexible policy approach towards MSME’s and newly devolving industries in this sector to provide growth opportunity and become capable to serve nation in longer run.

Partnership of academia, industry, User & government is essential.

Collaboration between top research institutes and DRDO for basic and advanced research specific to defence technology.

Harmony amongst DPP, DPM and DprP as also the procurement manuals of DPSU and Ordnance Factories.

Augment the Rules of Business of Departments and Wings of MoD to drive indigenization and tie it with acquisition and sustainment.

Create an Additional Secretary level post to incubate a coherent defense industrial base, deploy venture capital to foster and preserve key technologies. This Govt position to drive the ‘Make in India’ defense sector initiatives.

Facilitate user participation in indigenous weapon system up gradation. Spawn SPV for Technology Transfer

Develop methods to produce and supply sustainment centric items through rapid indigenization.

Develop adequate procedures to deter false declarations of level of indigenization, and seek rapid indigenization in all categorizations.

Priorities Acquisition.

Strategize what technologies are to be created and preserved within the country.

Study and publish authentic document on Defense Industrial Base.

Study the efficacy of ToT acquired so far to improve the process for future.

Set up foundries for production of semiconductors in the country by reviving projects like FAB City.

Incentives for manufacturing of components to be provided which will enable component suppliers to have ROI.

Provide R&D funds to MSME’s through DRDO/DPSU’s or directly to encourage building next generation technology within the country.

Participants at Tier – 1 level to get tax incentives for the indigenously developed sub-systems / components that are incorporated into their product portfolio.

Improving existing procurement strategies to speed up capital acquisitions.

Simplified licensing procedures for Defense Manufacture and reduction in acquisition cycle.

Address acute shortage of critical ammunition and small arms.

Solutions for import substitution by inducting transparency in the industry and offering incentives.

Address the taxation issues to create level playing field.

Concluding Remark

Notable presence of distinguished personalities as Guest Speakers made valuable contribution with their critical viewpoint. On 7th of February 2015, Hon’ble Raksha Mantri Shri Manohar Parrikar in his inaugural speech asked for flexibility (in development) along with accountability. RM conveyed his full support for SRDM with emphasis on strategic solutions (from all stake holders) for present and future problem. RM asked Forum for Integrated National Security (FINS ) to submit seminar report in 48hrs. FINS adhered to the requisite. Shri J Krishna Rao ( Industries Minister, Telangana State ) expressed his goal of making Telangana – the heart of defence production in India with greater private participation to serve nation on dual front of Economic Security by creating jobs in State along with Military Security by developing systems that will play vital role in protecting our Country.

Shri A P Jitendra Reddy ( MP & Member of Standing Committee on Defence ) graced the occasion with his presence. He congratulated Forum for Integrated National Security ( FINS ) for taking up SRDM cause. He expressed greater expectation after strong initiative to achieve fruitful result.

In Valedictory Session on 8th of February 2015, Shri E S L Narsimhan (Hon’ble Governor of AP & T) shared his intelligence experience in relation to SRDM. He asked strong government support for SRDM Goal. In-depth & interactive deliberation by expert Speakers with well informed audience was helpful in developing a comprehensive Policy Outline, which is beyond scope of this brief note. In coming time, Forum for Integrated National Security (FINS) will publish a book on SRDM Seminar.

Furthermore, Forum for Integrated National Security ( FINS ) will continuously pursue Self Reliance in Defence Manufacturing beyond this epitome for decisive outcome.