The government granted emergency powers to the defence forces to procure weapon systems via the ‘Make in India’ route amid tensions with China that lingered for over two years. The government’s nod was given on 22 August, to resort to fast track route at a Defence Acquisition Council (DAC) meeting chaired by Defence Minister Rajnath Singh. These powers have been invoked in recent times to upgrade, and indigenise, military arsenal in a timebound manner.

Emergency powers were granted to the forces by the Narendra modi administration post the terror attack at Uri in 2016. Rs 11,000 worth of contracts were inked post that security crisis.

However, the procurement done post Galwan eclipses the Uri figures. In 2020, the government had allowed the forces to bolster capital (with a ceiling of Rs 300 crore per acquisition) as well as spend from the revenue budget.

Emergency powers to shop for arms and ammunition are usually invoked during the time of conflict. Post the Galwan clashes in 2020, China was deemed a real threat and the Army set upon a shopping spree to upgrade its armoury. The focus has been on indigenisation as well as modernisation of Indian armed forces.

Post the clashes in eastern Ladakh, the Army was procuring armour-piercing fin-stabilised discarding sabot (APFSDS) ammunition fired by the T-72 and T-90 main battle tanks, additional Heron drones, Man Portable Air Defence System (MANPADS), mines and high altitude clothing, among other things.

The government had capped capital acquisitions (such as tanks, aircraft etc) to Rs 300 crore for each acquisition. But capital acquisition usually takes time – the weapon systems that are procured under it need multiple trials and permissions even when fast-tracked.

The government has also in recent years permitted the forces to upgrade their current systems by spending from their revenue budget. Each of the expenditure under this category is capped at Rs 500 crore. The defence forces dip into their revenue budget to buy spares, ammunition and other military equipment that is considered critical for their operational needs.

Following the emergency procurement nod, the armed forces will have to place their orders within six months (that is by February-March) after which the deliveries to them will be made within a year. Imports are discouraged but will be permitted if absolutely necessary.

Emergency powers in the past have been used to purchase ‘Heron’ unmanned aerial vehicles (that are now keeping a watch on Chinese movements in Ladakh and the north east) and also small arms such as the Sig Sauer assault rifles. The forces have also got missiles that can hit ground targets from long ranges.

The French Rafale fighter jets were also fitted with the HAMMER missiles under this procurement route. France had agreed to supply them at a short notice. These missiles have the capability of destroying any target within the range of 60-70 km.

The armed forces have a long list of equipment to buyand the emergency powers give them the liberty to source the best systems and shrink the time period to receive them.

With the Ministry of Defence (MoD) ensuring that emergency financial powers allocated to the armed forces for quick contracting of weapon systems arenot used for imports, a significant opportunity has opened up for domestic companies, with officials saying that dozens of proposals are under discussion and the focus is on industry-led design and development.

It is learnt that several dozen projects are under discussion, with the private sector set to deliver a variety of weapons including swarm drones, long-range rockets, next generation mines, armed unmanned aerial vehicles and artificial intelligence-enabled systems.

The focus will be on industry-led design and development, with proposals already received from companies. A high-level meeting in South Block this week is expected to further accelerate this process, for which the government has already allocated 25% of its annual research and development budget.

One of the proposals under discussion is a new tactical surface-to-surface missile, which will be a first of its kind project to be developed by the private sector. Being proposed by Economic Explosives Ltd, the 250 plus km range missile would be exponentially cheaper than the Brahmos and is fully indigenous. The ministry is also reviewing a proposal by the same company for guided Pinaka rockets, with a range of up to 150 km and new generation mines.

The bar on imports under the emergency route was imposed after several rounds of internal discussions where it was agreed that capacity exists in the domestic sector to deliver on urgent requirements of the armed forces.

The corporatisation of the Ordnance Factory Board has allowed its newly created entities to create private sector partnerships and changes are expected in other large public sector units to gear up for a similar future.

Ministry officials say that the recent geopolitical situation has reaffirmed the need for self-reliance, given the uncertainties in supplies and spares due to the Russia-Ukraine crisis. Dependence on foreign sources for vital equipment, they say, can be leveraged and impact strategic sovereignty of the country.

Revised estimates in the budget documents shared earlier this year show that the armed forces spent over Rs 21,000 crore on top of last year’s budget allocation amid the tensions at the Line of Actual Control (LAC) with China. In 2021, the armed forces spent Rs 20,776 crore on the emergency purchase of weapons and systems to beef up its capabilities at the northern border.

As the deadlock lingers for over two years in a row, India is strengthening its preparedness and continues to build border infrastructure to support its troops.

Usual Procurement Route

The Defence Acquisition Procedure 2020 (DAP 2020) guides all capital or equipment procurements and upgrades by the military. It was first initiated in 2002 to streamline military hardware procurement in a timebound manner. However, even in its eighth edition since 2002, the DAP 2020 is still a lengthy and cumbersome procedure that many defence experts have called to reform.

It stipulates a time frame of 74-106 weeks to complete a procurement but rarely achieves that target.

Usually a request for Information (RfI) is placed for the concerned platform sought to be purchased after which specifications are issued for it then responses are received. Several bureaucratic steps later, technical assessments and field trials are conducted. An oversight committee would endorse these procedures. After more bureaucratic hurdles a contract would negotiated, endorsed then finally inked.

As per the normal procedure, the defence secretary can clear purchases upto the limit of Rs 500 crore. The defence minister can approve expenditure with a ceiling of Rs 2,000 crore while for the finance minister this figure is pegged at Rs 3,000 crore. Anything beyond this amount would be deliberated by the Cabinet Committee on Security headed by the prime minister.

The post Armed Forces Get Emergency Powers appeared first on IMR.

In a major boost to Defence Production under the ‘Make in India’ initiative and towards achieving self-reliance in the critical field of Defence equipment, Goa Shipyard has placed a maiden order on Bharat Heavy Electricals Limited (BHEL) for supply of an upgraded Super Rapid Gun Mount (SRGM), the Main gun onboard most Warships of the Indian Navy.

The order envisages supply, installation and commissioning of the entire system – Upgraded SRGM and accessories for Triput Class Frigates of the Indian Navy, which will be manufactured by the Haridwar unit of BHEL.

The upgraded SRGM is a state-of-the-art weapon system having additional features such as capability to manage different types of ammunition to engage fast, manoeuvring and non-manoeuvring, radio controlled targets. The upgraded SRGM has the capability to fire advanced Ammunition with higher range and programmable ammunition.

BHEL has been a reliable supplier of critical equipment and services in the Defence and Aerospace sector for over three decades with the aim of making a major contribution towards self-reliance in these sectors.

Towards this, BHEL has established dedicated, intricate manufacturing and inspection facilities at its manufacturing plants, for production, installation & commissioning and lifecycle support of various products and components. The initiatives taken by BHEL will be a driving force towards the AatmaNirbhar Bharat Abhiyan of the Government of India.

LCA-Mk2 to Roll Out Next Year

The configuration for the Light Combat Aircraft (LCA)-Mk2 has been frozen and steel cutting is expected to begin soon while configuration for the fifth-generation Advanced Medium Combat Aircraft (AMCA) has been frozen and preliminary design completed, Dr Girish S. Deodhare, Programme Director (Combat Aircraft) & Director, ADA, said at a seminar in New Delhi on 12 September.

“The detailed design is complete. In fact, we are in the critical design review stage and metal cutting should start very shortly. Roll-out of the aircraft (Mk2) is planned next year and the first flight in early 2023. We are well on track to achieve these goals,” Dr Deodhare said.

The aircraft features enhanced range and endurance including an onboard oxygen generation system, which is being integrated for the first time, Dr. Deodhare said.

Heavy weapons of the class of Scalp, Crystal Maze and Spice-2000 will also be integrated on the Mk2. The LCA-Mk2 will be a heavier and much more capable aircraft than the current LCA variants.

The Mk2 is 1,350 mm longer featuring canards and can carry a payload of 6,500 kg compared to 3,500 kg the LCA can carry.
In February, the Defence Ministry signed a Rs 48,000-crore deal with Hindustan Aeronautics Ltd. (HAL) to supply 83 LCA-Mk1A to the Indian Air Force. In August, the HAL signed a $716 million deal with GE Aviation of the U.S. for 99 F404 aircraft engines and support services to power the Mk-1A. The Mk2 will be powered by a more powerful GE-414 engine.

The Indian Air Force (IAF) has one squadron of the LCA in initial operational clearance and deliveries of the second squadron in final operational clearance configuration are under way.

The HAL has already set up a second assembly line to ramp up production from eight aircraft a year to 16. Order for 83 Mk-1A is expected to be completed by 2028-29, Dr. Deodhare said.

Preliminary Design Review of AMCA Completed

According to Dr Girish S. Deodhare, Programme Director (Combat Aircraft) & Director, ADA, the the configuration of the Advanced Medium Combat Aircraft (AMCA) had been frozen, preliminary service quality requirements finalised and preliminary design review completed. The initial design of the AMCA was started way back in 2009.

“We are moving to critical design review by the middle of next year with the roll-out planned in 2024 and first flight planned in 2025,” he said at a seminar on 12 September, in New Delhi.

The AMCA would be a twin engine stealth aircraft with an internal weapons bay and a diverterless supersonic intake, which has been developed for the first time for which the design is complete.

It will be a 25-tonne aircraft with internal carriage of 1,500 kg of payload and 5,500-kg external payload with 6,500 kg of internal fuel.

The AMCA will have stealth and non-stealth configuration and will be developed in two phases, AMCA Mk1 with existing GE414 engine and an AMCA Mk2 with an advanced, more powerful engine to be developed later along with a foreign partner, Dr. Deodhare added.

The manufacturing and production of the aircraft will be through a special purpose vehicle, which will also have participation of private industry.

Simultaneously, the project for development of a twin-engine deck-based fighter jet meant to fly from the Navy’s aircraft carriers is also making progress. On the various programmes under way, Dr. Deodhare said there was commonality of systems and technologies.

Aerostructures of Boeing’s F-15EX Eagle II to be Built in India

Aerospace major Boeing has awarded a contract to India-based Dynamatic Technologies for manufacturing assemblies for its tactical fighter ‘F-15EX Eagle II’. This is a first instance in which aerostructures for F-15EX Eagle II will be made in India. Besides, the contract will given a boost to the ‘Aatmanirbhar’ programme and strengthens US-India collaboration on aerospace and defence industrialisation.

Accordingly, Dynamatic Technologies will supply the F-15EX aerostructure assembly requirements from FY22. The company will manufacture these aerostructures from their manufacturing facility in Bengaluru, Karnataka.
According to Boeing India President Salil Gupte: “We see tremendous potential for India to contribute to the global aerospace industry as an industrial and technology partner.”

“The award of aerostructure assemblies for the latest and most advanced version of the F-15 aircraft family is a reflection of Boeing’s focus on Aatmanirbhar Bharat and a testimony to the world class capability of our industrial partners in India.”

Army Taps Tonbo Imaging for Specialised Sights

The Army has placed orders with with a Bengaluru-based firm – Tonbo Imaging – for specialised sights under emergency procurement to help some of its elite units operating in both urban warfare and at the borders. The order for two set of sights as part of a spate of emergency procurement being done was placed “recently”.

One contract is for about 600 pieces of multi-functional thermal imaging binoculars for target acquisition and the other is for multi mission-sight, which can be mounted on the helmet and also the weapon.

The contract value is for over Rs 100 crore and the procurement is being done by the Infantry Directorate, adding that while earlier the Northern Command had procured one of these sights for its soldiers in smaller batches, this time the Army Headquarters is doing it.

They also said that there would be a larger procurement order in play if the systems, which have to be delivered in 12 months, perform according to expectations.

The multi-mission sights are lighter and more tuned for close combat.

Tonbo Imaging is one of the few companies in the world to manufacture such systems. Some of their products are deployed at the Line of Actual Control (LAC) during the ongoing Ladakh standoff for surveillance operations.

When the company initially began commercial operations around 2012, it focused on the global market. Five countries were buying their products before India bought from Tonbo. Founder Arvind Lakshmikumar’s prior work with US’ DARPA (Defense Advanced Research Projects Agency) helped him get recognition of products early on in the US market.

Rolls-Royce, HAL Pact for Adour Engine Parts

Rolls-Royce and Hindustan Aeronautics Limited (HAL) signed a “Make in India” agreement, on 14 September, to manufacture parts for Rolls-Royce’s Adour engines that will support the UK-headquartered company’s international defence customer base.
Variants of the Adour engine power the Indian Air Force’s (IAF) Jaguar fighters as well as its fleet of Hawk advanced jet trainers (AJT). The IAF has the world’s largest serving fleets of both these aircraft. HAL has manufactured and supported Adour engine variants, under licence from Rolls-Roy­ce, over several decades.

However, Rolls-Royce now aims to strengthen the spares and maintenance eco­system for Adour engi­nes in India. Rolls-Royce and HAL signed a Memorandum of Understanding (MoU) during Aero India 2021, in February, to establish an Authorised Maintenance Centre for Adour at HAL to support international military customers and operators.

Rolls-Royce underscores a three-point aim in the current initiative. The first is to equip Indian manufacturers with the knowhow, pro­cesses and experience to build complex parts that require a lot of high-technology processes. That would en­hance current capabilities and serve to make India atmanirbhar (self-reliant). Secondly, exporting parts from India would enhance supply chain efficiency and benefit Rolls-Royce’s global operators. Thirdly, since the Adour engines will continue to fly in India for the longest time, a self-sufficient supply chain would be in place to support those older engines.

Thales to Provide Emerging Technologies for Armed Forces

Leading French defence major Thales Group is planning to focus significantly on addressing requirements of the Indian armed forces for new-age cyber security solutions, artificial intelligence and advanced capabilities in big data analytics.

Chairman and CEO of Thales Group Patrice Caine said the company has been looking at expanding its overall footprint in India, particularly in the areas of emerging technologies that will be crucial for the armed forces.

The Indian Army, the Navy and the Indian Air Force have been focusing on acquiring futuristic technologies like nanotechnology, quantum computing, artificial intelligence, swarm drones and robotic technologies to deal with future security challenges.

Thales Group is aiming at expanding its overall footprint in India in a number of segments, including in areas of cyber security, artificial intelligence and digital solutions.

India is expected to spend close to $300 billion in the next five years in procuring defence equipment and almost all major global defence firms are eyeing a slice of it.

India is now considered as a key country for sourcing various raw materials for the company’s global production line and it is going to double procurement from the country in the next five years.

Thales is part of the French firms that provided key components for the Rafale jets procured by India. As part of Thales’ offsets commitments under the Rafale deal, the company helped Bharat Electronics Ltd (BEL) in producing modules for the RBE2 radar.

Thales has been providing avionics and other equipment to the state-run aerospace behemoth Hindustan Aeronautics Limited for over four decades and is involved in supplying equipment for various other key military projects.

Present in India since 1953, Thales has offices in New Delhi, Gurgaon, Hyderabad, Bengaluru, Chennai and Mumbai, among others. Over 600 employees are working with Thales and its joint ventures in India.

The post Defence Industry News appeared first on IMR.

On 28 September, 2020 defence minister Rajnath Singh unveiled the Defence Acquisition Procedure (DAP) – 2020 in New Delhi. DAP 2020 has been aligned with the vision of the Government of Atmanirbhar Bharat to empower Indian domestic industry through Make in India initiative with the ultimate aim of turning India into a global manufacturing hub.

The first Defence Procurement Procedure (DPP) was promulgated in the year 2002 and has since been revised periodically to provide impetus to the growing domestic industry and achieve enhanced self-reliance in defence manufacturing.

With the new Foreign Direct Investment (FDI) policy announced, DAP 2020 has adequately included provisions to encourage FDI to establish manufacturing hubs both for import substitution and exports while protecting interests of Indian domestic industry. DAP 2020 focuses on simplifying the defence acquisition procedure and institutionalising monitoring mechanism with concurrent actions using digital technologies & data base for selection of best equipment in a transparent and competitive manner giving adequate opportunities to capable vendors.

ALSO READ: Draft Defence Production and Export Promotion Policy 2020

Make in India initiative of the Government of India focuses on increasing participation of Indian Vendors including MSMEs, and therefore “Make” procedure has been further refined in DAP 2020 to make it more objective and time bound with focus on Indian industry especially MSMEs. The new DAP has 12 chapters instead of 8 chapters as per DPP 2016. There are new chapters on: 

•             Acquisition of Systems Products and ICT Systems: Acquisition of Systems and Information & Communication Technology (ICT) products is in a few aspects different from the regular acquisition projects.  The software and hardware elements of these projects usually require periodic up-gradations and intense obsolescence management to maintain tactical dominance in C4I2, EW and Cyber domain.   To provide an efficient and agile acquisition mechanism for acquisition and up-gradation of such products, certain provisions are incorporated in this Chapter, to be read in conjunction with relevant provisions of Chapter-II of Defence Acquisition Procedure.

•             Leasing: Concept of Leasing has been introduced to substitute capital expenses with small rental payments for defence equipment not directly involved in warfighting.

•             Other Capital Procurement Procedure: This chapter would lay out procedure on other capital expenses such as: overhauls, refits, upgrades and replacement of items of Capital nature. The procurement under this chapter will be as per list of items (as amended from time to time), which will be drawn up by HQ IDS and respective SHQs and promulgated by DG (Acquisition) in consultation with MoD (Finance).

•             Post Contract Management: This involves ensuring compliance with the terms and conditions of contract, managing contractual amendments, quality assurance, timely payment and deliveries, and resolving claims and disputes.

In the categories of procurement, the categories of Buy(Indian-IDDM), Make I, Make II, Production Agency in Design &Development, OFB/DPSU and SP model will be exclusively reserved for Indian Vendors meeting the criteria of Ownership and Control by resident Indian Citizens with FDI not more than 49%. This reservation will provide exclusivity in participation to domestic Indian industry. Impetus has been given towards developing indigenous defence industry by increasing IC percentages (%) in categories of procurement. The revised IC percentages are as follows:

Project Management Unit

One of the important announcements as part of the Defence Reforms announced in the Atmanirbhar Abhiyan, setting up of a PMU has been mandated to support contract management. The PMU will facilitate obtaining advisory and consultancy support in specified areas to streamline Acquisition process. The PMU will also support in setting up realistic GSQRs and simplification of trial procedures.

Another key focus areas of the review was to implement Ease of Doing Business. with emphasis on simplification, delegation and making the process industry friendly with certain specific provisions incorporated:-

•             Procedural Changes: Single stage accord of AoN in all cases upto Rs 500 crores has been instituted thereby reducing time. FTP cases, post accord of AoN, will be progressed as per delegated powers thereby reducing the procurement cycle considerably. In Planning Process, LTIPP has been re-designated as Integrated Capability Development Plan (ICDP) covering planning period of ten years instead of 15 years.

ALSO READ: Reforms in Defence Procurement Announced

•             Request for Proposal (RFP) and Standard Contract Document (SCD): Certain measures to provide clarity and alignment of requirements as also enabling provisions have been incorporated in the RFP and SCD in terms of Flow Chart drivenguidelines, provision of in-storage preservation and termination of contracts in cases where projects are not progressing as per pre–defined milestones.

A separate dedicated chapter has been incorporated in the DAP 2020 for acquisition of systems Designed and Developed by DRDO/DPSUs/OFB. A simplified procedure with Integrated Single Stage Trials to reduce timelines and laying greater emphasis on evaluation through certification and simulation. Aspects of Spiral Development have been incorporated.

The Government of India.s new DAP 2020 document will certainly instil a confidence and will meet aspirations of stakeholders across the spectrum.

Comments

Defence Acquisition Procedure is based on the concept of “Womb to “Tomb” and has certain unique aspects such as supplier constraints, technological complexity, foreign suppliers, high cost, foreign exchange implications and geo-political ramifications, and therefore is not a standard open market commercial form of procurement. While maintaining highest standards of transparency, probity and public accountability, a balance between competing requirements such as expeditious procurement, high quality standards and appropriate costs needs to be established. As a result, decision making pertaining to defence acquisition remains distinctive and complex.

Atmanirbhar Bharat initiative, further accentuated by policy reforms in the defence sector as part of Phase IV ‘New Horizons of Growth’ is focussed towards enhancing self-reliance in defence production, indigenisation of spares, overhauling of trial and testing procedures based on realistic Services Qualitative Requirements (SQR) and requisite monitoring by Project Management Unit (PMU) for time bound procurement. There is a need to institute enabling provisions for utilisation and consolidation of design, development and manufacturing infrastructure available in the country. A need has also been felt, for identifying strategic partners for promoting defence production in the private sector. The FDI policy statement of enhancing FDI through automatic route from 49% to 74% in defence should enable ‘Manufacture in India’ a lucrative option for foreign equipment manufacturers.

Make in India initiative of the Government of India focuses on increasing participation of Indian Vendors including MSMEs, and therefore “Make” procedure has been further refined in DAP 2020 to make it more objective and time bound with focus on Indian industry especially MSMEs. Cutting down permissible timeframes for various activities and institutionalising robust mechanisms to monitor for probity at various stages of the acquisition process are the attributes of this DAP.

While the Defence Acquisition involves long gestation periods, where as the needs of the Armed Forces being non negotiable, flexibility in the procedure has been provisioned for, to ensure timely availability of important equipment. But the proof of the pudding will be in the eating.

DAP 2020 may be a product of extensive analysis, deliberations, interactions and focused formulations, to further ‘Self Reliance’ of the country in the defence sector and implement ‘Ease of Doing Business’ with emphasis on simplification, delegation, reduced timelines and making the process as industry friendly as possible, but again, mindsets also need to change.

Category              DPP 2016             DAP 2020
Buy (Indian-IDDM)          Min 40%               Min 50% 
Buy (Indian)       Min 40%               Indigenous design – Min 50%
                                Otherwise – Min 60%
Buy & Make (Indian)      Min 50% of Make         Min 50% of Make  
Buy(Global- Manufacture in India)           –         Min 50% of Buy plus Make
Buy (Global)       Min 30% for Ind vendors   Min 30% for  Indian vendors

The post DEFENCE PROCUREMENT: Defence Acquisition Procedure (DAP) 2020 Released appeared first on IMR.

•             Foreign Direct Investment cap will be raised from 49% to 74% under automatic route to attract Foreign original equipment manufacturers (FOEMs) to set up shop in India.

•             A negative list for import of defence equipment will be made and increased every year as indigenous capability increases. Draft DPP 2020 has introduced a new category called “Make-III” which shall support the indigenous production of imported spares.

•             Capital budget will be provided for separate in the defence budget for indigenously developed products, as opposed to procurement from the global market in consultation with the Department of Military Affairs (DMA).

•             The Ordnance Factory Board (OFB) and its factories will be corporatised to improve the autonomy, accountability and efficiency of ordnance supplies.

•             The procurement process will be speeded up with time-bound procurement. A Project Management Unit (PMU) will be set up to support contract management. GSQRs will be drawn up realistically and honoured but the notified list of items can only be purchased from India.

Foreign Direct Investment

While raising the FDI limit in the defence sector under the automatic route from 49% to 74%, Sitharaman also said that the import of some weapons and platforms will not be allowed. “We shall notify a list of weapons and platforms which will not be allowed or imports. Every year this list will be increased, as we build capacities,” she said.

“Make in India and self-reliance have become a partner, particularly when you are talking about industries like defence. Armed forces require the best of equipment and the latest technology, so some of the latest weaponry will continue to be imported. But some equipment are being made in India and can be bought by the armed forces,” she said. Certain items banned for imports can only be purchased from within the country.

Raising FDI was an old pending demand of FOEMs as it would help them in protecting IP in high tech areas. However, even now 100% FDI is permitted through the approval route. No major OEM has come forward to utilise it. Defence manufacturing is unlikely to get any boost due to this single factor. FOEMs will set shop here only when they see bright prospects of purchase orders matching their investment.

India attracted only a measly $ 8.8 million (Rs 66 crore) in FDI in the defence manufacturing sector in the past 19 years –from April 2000 to end of 2019. The figures were tabled in Lok Sabha on 4 March 2020.

Sitharaman was hopeful that the change could encourage global companies like Boeing, Lockheed Martin, Airbus, Saab, to invest in India. This will also be a boon for warship making industry, UAVs, Artificial intelligence, helicopters, military vehicles, aerospace ventures making sub-assemblies and part of aviation systems.

Negative List

On imports, the minister said that while essential weapons not produced here will be sourced from abroad, a negative list will be generated and notified for which all imports will be banned. This list will be generated by the Department of Military Affairs and will have year wise timelines to reduce import dependency.

The government said that it would also move towards indigenisation of spare parts for foreign systems that are already in service. Indian industry will be encouraged to produce spare parts locally for the consumption of the armed forces.

The Vice Chief of Indian Army, Lt Gen SK Saini, said the proposed ‘import ban’ list of military hardware will not restrict the forces to procure niche technologies from abroad. He said 80 per cent of the Army’s capability development and more than 92 per cent of its sustenance budget was based on indigenous products and services.

Separate Budget for Indigenous Products

The government will make separate budgetary provisions for procuring only Indian made defence items to boost the economy in the post Covid 19 world. According to estimates, the Indian armed forces are projected to spend around $130 billion in capital procurement in the next five years.

The existing categorisation process is supposed to ensure that any item that can be made in India should not be imported. But our defence manufacturing sector, dominated by defence public sector undertakings (DPSUs), has very limited capability in certain areas. As long as we remain totally dependent on DPSUs, there is hardly any hope for import substitution of more complex equipment.

On 20 May, the defence ministry issued directives providing for procurement of 26 spares and equipment for military use only from domestic suppliers in sync with the government’s focus on encouraging indigenous defence manufacturing.

All the items identified for procurement from domestic defence manufacturers are used in shipbuilding. So far, the defence ministry has notified 127 items where purchase preference is given to local suppliers who meet the minimum local content (MLC) as prescribed for each item. The local content prescribed for the 26 items is in the range of 40 per cent to 60 per cent.

Procurement Process

The government’s intention is to speed up the procurement process by bringing in mechanisms to make realistic General Staff Qualitative Requirements (GSQRs). Besides the overhauling of testing and trial procedures, the defence ministry will also set up a Project Monitoring Unit to support contract management.

Every revision of DPP has been done with this issue as its prime objective. A Project Management Unit (PMU) will be set up to support contract management, besides the realistic setting of General Staff Qualitative Requirements (GSQRs) of weapons/platforms. GSQR’s are the parameters for choosing a weapon or platform. All major projects already have Project Management Teams. Only the name is being changed to Project Management Unit.

How is the criteria of a GSQR to be judged as realistic? Even now all GSQRs are expected to be realistic and there is a well-defined process to ensure that. There is some scope of simplifying trial and testing process, particularly for the land systems. The main requirement in this area is to improve processing efficiency of Procurement Wing of MoD.

The NCNC trials and the requirement of operational efficiencies in different terrains and weather conditions need to be expedited.

Corporatisation of Ordnance Factories

The minister said that the long pending corporatisation of the Ordnance Factory Board (OFB) has been approved that will enable them to cut costs and overheads for more efficient operations. She also said that the OFB factories could be listed in the markets in the near future to bring in transparency in their operations. The corporatisation of OFBs has long being contested by staffers but the defence ministry has gone ahead with the process, with a detailed roadmap for implementation ready. Sitharaman emphasised that this does not mean a privatisation of the factories but is being done to improve performance. Privatisation is a better option.

Summary of Reforms in Defence Procurement

Foreign Direct Investment Cap

•             Will be raised from 49% to 74% under automatic route

Negative list for import of defence equipment

•             Will be increased every year as indigenous capability increases; new products will be added to this list.

•             Priority to be given to indigenised production of imported spares

•             Draft DPP 2020 has introduced a new category called “Make-III” which shall support the indigenous production of imported spares.

Capital Budget

•             Provision of a separate defence budget for capital procurement of indigenously developed products, as opposed to procurement from the global market in consultation with the Department of Military Affairs.

•             According to Air Chief Marshal RKS Bhadauria, IAF is looking to procure 450 aircrafts in the next 35 years and now is the perfect time for industries to respond and come up with solutions which are rapidly put in place. Indian industry should come up to the challenge of delivering these aircraft.

Ordnance Factory Board (OFB)

•             Corporatisation of OFB would improve the autonomy, accountability and efficiency of ordnance supplies

•             This has been in discussion for some time and is a clear indication of the government’s definite intent to increase output efficiency from Ofs.

Procurement Process

•             Setting up a Project Management Unit (PMU) for time bound procurement and support for contract management purposes

•             GSQRs would be drawn up realistically and honoured but the notified list of items can only be purchased from India

The post Reforms in Defence Procurement Announced appeared first on IMR.

HAL is also poised to scale another summit this year, with its operational turnover for 2019-20 on track to exceed Rs 20,000 crore – for the first time ever.

However, HAL has to take a bank loan to pay its interim dividend. That is because its finances are deep in the red because of huge dues from the Indian Air Force (IAF), by far HAL’s biggest customer. IAF’s dues, which are for aircraft and services already delivered, is likely to be around Rs 17,000 crore – only a little less than its entire year’s turnover. The IAF says the defence and finance ministries that are holding up payments to HAL.

This unpaid bill reflects a rising trend that is evident in HAL’s annual reports. In 2016-17, the IAF’s dues to HAL amounted to Rs 3,995 crore; in 2017-18 it rose to Rs 6,751 crore; in 2018-19 it more than doubled to Rs 13,939 crore; and is likely to rise this year by another Rs 3,000 crore.

With HAL lacking money for day-to-day production, design and development and even to pay salaries of employees, the once cash-rich defence public sector undertaking (DPSU) has had to turn to the banks for loans. HAL’s past two annual reports paint a picture of financial decline. Bank balances dropped from Rs 8,345 crore in 2016-17 to Rs 6,433 in 2017-18 to Rs 101 crore last year. This year, it will be in negative.

Meanwhile, borrowings have steadily risen. HAL’s annual reports reflect borrowings of Rs 950 crore in 2016-17, which dipped slightly to Rs 764 crore the next year, before zooming to Rs 4,058 crore in 2018-19. This year, HAL is learnt to have already borrowed over Rs 8,000 crore and this is on course to rise by another Rs 1,500 crore for running expenses and dividend payouts.

The firm’s annual report for 2018-19 takes note of the dues, but states in its “Significant Accounting Policies” that: “Debts from Government departments are generally treated as fully recoverable and hence the firm does not recognise credit risk of such financial assets. Impairment on account of expected credit loss is being assessed on a case to case basis in respect of dues for a significant period of time.”

Even if the IAF’s debts are fully recoverable, there are significant financial penalties that HAL is paying as a result of its disrupted cash flows. Prior to 2015, HAL’s hefty cash reserves generated income for the company. Today, its balance sheet reflects a growing “cost of finance”: Rs 10 crore in 2016-17, Rs 28 crore in 2017-18, Rs 170 crore in 2018-19 and, apparently, an even larger figure in the current financial year.

Economic Explosives Makes Multi-mode Grenade

Economic Explosives Limited (EEL), a company under the Solar Group, a major producer of commercial and defence explosives, expects to put up its latest electronic multi-mode hand grenade for trials soon. The company has finished internal trials of the electronic grenades and soon user trials, which is an evaluation by the Army, will take place. The electronic device will ensure the perfect timing for explosion in the grenade.

The technology for making the grenade has been shared with the company by Chandigarh-based Terminal Ballistics Research Laboratory (TBRL), a unit under DRDO. Based on it, EEL has come up with initial units of the grenade. EEL said it has also developed electronic grenade – mechatronic – which also has a multi-mode function.

TBRL has also shared the technology of the non-electronic multi-modal grenades with EEL, making it the sole private player to take part in the process for supplying the weapon to the army.

EEL has already taken part in a request for proposal (RFP) by the Army to make multi-modal grenades without using the electronic mechanism. The weapon will also be made by the Ordnance Factory, Khamaria in Madhya Pradesh. Both the entities await the bulk production order from the Army.

Maintaining the timing for explosion, once the pin is removed, is a crucial requirement for a grenade’s functioning. As per the Army’s requirements, it has to be not before 3.5 seconds and not later than 4.5 seconds. In the grenades made so far, the process is chemically controlled. “With the electronic chip fitted, precise timing can be maintained.

Govt Bets More on MSMEs For Defence Production

The number of Micro, Small & Medium Enterprises (MSMEs) in the domestic defence production sector had increased by 21 per cent from the entire FY19 till the second quarter of the financial year 2020, according to the data shared by the MSME Minister Nitin Gadkari in Rajya Sabha. The total number of MSME vendors of Defence Public Sector Enterprises/ Ordnance Factory Board stood at 15,089 in FY17, which declined to 7,591 MSME vendors during FY18 followed by a marginal increase to 8,643 vendors during FY19. However, it increased further to 10,506 till Q2 FY20. The increase in MSMEs share in India’s defence manufacturing space gains significance amid the government’s focus on leveraging small businesses and startups in the defence sector.

Subhash Chandra, Secretary, Department of Defence Production (DDP), Ministry of Defence speaking at a FICCI event, in 2019, had stressed upon the integration of MSMEs and startups into the defence manufacturing ecosystem. “Industry concerns have also been taken into consideration and demystifying of work processes will come only through interactions. The three-armed forces also need to open their doors for discussions with the industry,” he said.

In February, the government had announced a challenge for startups seeking their solutions to help counter-terrorism unit National Security Guard (NSG). The number of startups, till 4 December 2019, in the aeronautics, aerospace, and defence sector stood at 194 registered with Startup India, minister of state for defence Shripad Naik had informed the Lok Sabha.

Moreover, in November 2019, defence minister Rajnath Singh, in order to help India achieve its goal of indigenization and self-reliance in the defence sector with the contribution of startups and MSMEs, had announced the third phase of Defence India Startup Challenge (DISC) under its Innovations for Defence Excellence (iDEX) – programme to boost innovation in the defence sector.

Through iDEX and startup challenge, the government is looking to invest in 250 startups and “achieve 50 tangible innovations in the next five years”  Chandra had said.

OFB Exports 52-calibre Barrels to Bofors

The Ordnance Factory Board (OFB), which celebrated its 219th foundation day on 18 March, has exported its newly developed 52-calibre barrel for 155 mm artillery guns to Bofors Test Center, its chairman Hari Mohan said. He said that OFB has exported two 52-calibre barrels to Swedish arms manufacturer Bofors AB, from which it had imported 155 mm howitzer guns in the mid-80s. “We have made a prototype which is truck-chassis mounted,” Mohan said.

In the last 14-15 years, the OFB has done “immense progress” in the field of high-calibre barrels, be it for tanks, medium and heavy artillery guns, and the barrel of Dhanush artillary gun has been indigenously developed, he said. “Now we are embarking upon a barrel further increasing it to 52-calibre. The range of 155 mm Dhanush gun is 38 km. The Bofors gun barrel is 39-calibre, while that of Dhanush is 45-calibre,” he said.

More than 150 rounds of shells have been fired from these 52-calibre barrels, he said.”The barrel is behaving better than expected and the Bofors Test Center is extremely happy,” he said.

Apart from the barrel, Bofors is also taking the breech mechanism and muzzle brakes and all the three are being used, he said on Tuesday.”We indigenously developed the technology for 155mm/52-calibre barrels and exported these to Bofors Test Center,” OFB chairman said. He said the OFB, which had initially handed over six Dhanush artillery guns to the Indian Army, will, in a few weeks, supply another six such guns.

Ordnance Factory Tiruchy Hands Over 500 Rifles to CRPF

Ordnance Factory Tiruchy (OFT), on 12 March, handed over the first consignment of 500 assault rifles to CRPF. Trichy Assault Rifles or TAR, as these are called, are the indigenous version of AK-47 rifle.

OFT started the development of the rifle in 2015 and established a production line in 2017. The first batch of 200 TARs was delivered to Chandigarh police in March 2017. In November 2017, the CRPF tested the rifle for functionality and reliability. It was subjected to a life cycle test by firing 15,000 rounds in one go. In February 2018, the TAR was deployed for a field trial at Jagdalpur, Raipur, Guwahati and Srinagar. Following this, order for 6167 rifles were placed.

OFT would supply TARs in both fixed and foldable butt models, sources said adding that the latter was in the development stage. The TAR is compatible with GP-25, 30 and UBGL M-6 grenade launchers.

OFT has so far supplied more than 10,000 rifles to Central Armed Police Forces including the BSF, SSB, ITBP & CISF. Police force in several States have also inducted TAR under their modernisation scheme.

OFT has also taken up research and development projects such as the trial of 7.62X39mm TAR Carbine(long barrel firearm) and 40X46mm UBGL (Under Barrel Grenade Launcher) for TAR/AK 47, which after induction would serve as an import substitute.

India to Go Ahead With $2.3 Bn Turkish Shipyard Deal

India is going ahead with a $2.3 billion (about Rs 15,000 crore) deal to manufacture fleet support vessels (FSVs) in collaboration with Turkey’s Anadolu shipyard following a review after questions were raised on Turkey’s links with Pakistan and a diplomatic tiff with Turkey after, its president Recep Tayyip Erdogan raised the Kashmir issue and attempted to draw similarities to the Palestine conflict.

The formal contract was signed days after India issued a strong statement rejecting all references made to Jammu and Kashmir in a joint declaration by Turkey and Pakistan during President Erdogan’s visit to Islamabad in Fenruary.

Turkey’s TAIS had emerged as the lowest bidder for a contract to manufacture five of the 45,000-tonne FSVs at the Vizag-based Hindustan Shipyard Limited (HSL) last year, but the contract signing was put on hold in October following the repeated raising of Kashmir issue by Erdogan at international forums.

The defence ministry’s vigilance department was asked to review the order and gave a go-ahead. Similarly, inputs were received from MEA on diplomatic implications, after which it was decided to proceed with the Turkish collaborator.

The Indian FSV project was initially given a go-ahead in 2016 after the Navy projected a requirement for ships that could carry fuel and other supplies for warships at sea.

Turkish shipyards are a major supplier of warships to the Pakistani Navy and concerns had been raised on how access to the strategic HSL by its engineers and workers could result in serious security issues. HSL is located close to the Ship Building Centre, where India’s nuclear armed submarines are built, as well as the Eastern Naval headquarters.

Besides four new corvettes, Turkey has designed a fleet support vessel for Pakistan, supports its submarine fleet and has signed a deal to sell 30 T-129 attack helicopters that have been developed in collaboration with Italian company Finmeccanica (since renamed as Leonardo). In September 2019, Erdogan had used the ceremony to launch new corvettes for the Pakistani Navy.

India Secures $40 mn Deal For Weapon Locating Radar

In a major boost to the country’s defence sector, India reportedly overtook Russia and Poland to win a $40 million defence deal to supply four indigenously-built Swathi weapon locating radars (WLR) to Armenia. The deal was a major achievement for the ‘Make in India’ programme in the defence sector.

Swathi WLRs were developed by the Defence Research and Development Organisation (DRDO) and are manufactured by the Bharat Electronics Limited (BEL).

Armenians had conducted trials of systems offered by Russia and Poland that were also good but they gave a final nod to the Indian system. India has already started the supply of the equipment to Armenia.

Swathi WLR provides fast, automatic and accurate location of enemy weapons like mortars, shells and rockets in its 50-km range. It can simultaneously handle multiple projectiles fired from different weapons at different locations. The system is capable of adjusting the fire of own artillery weapon also. The weapon includes 81mm or higher calibre mortars, 105mm or higher calibre shells and 120mm or higher calibre free flying rockets.

The deal will open a new market for the sale of India’s indigenous systems, which are much cheaper than their European and other rivals. The government is also targeting South-East Asia, Latin America and Middle-East countries to secure defence orders.

Tata Subsidiary, Nova Integrated Systems Opens

NOVA Integrated Systems Limited (NISL), a new defence subsidiary of TATA Sons’ TATA Advanced System Limited (TASL) opened in Hyderabad on 12 March.

NISL will be bringing five new defence projects to Hyderabad which include mobile command and controls for Indian Army, mobile VSAT communication shelter, radar and microwave component manufacturing, electro optics and electronics manufacturing and R&D and prototyping facilities. This will create direct employment to 600 people and help the local defence supply chain to grow.

Speaking at the ground breaking ceremony of NISL, IT and Industries Minister KT Rama Rao said, “I am glad to be here for the ground-breaking ceremony of NOVA Integrated Systems Limited (NISL), the Defence subsidiary of TASL. The growth of TATA group companies in Hyderabad during the past decade and in particular the past six years has been phenomenal. We are glad that you chose Hyderabad to host over 90 per cent of TASL Aerospace manufacturing and continue to further invest in our ecosystem.”

He also acknowledged TATA group’s contribution in bringing marquee Global OEMS such as Sikorsky, Lockheed Martin, Boeing and GE Aviation to Hyderabad. The projects have been instrumental in making Hyderabad a preferred destination for global OEMs for Make in India Aerospace and Defence, he added.

India Projects $11 Bn

in Offset Deals by 2024

The defence ministry has revealed new details about the scope of defence offsets being undertaken through partnerships between foreign original equipment manufacturers (OEMs) and Indian offset partners (IOPs). In comments to India’s Parliamentary Standing Committee on Defence, which were published in a report tabled in parliament on 13 March, the Ministry of Defence (MoD) said that up until October 2019 it had entered a total of 54 defence offset contracts with foreign OEMs.

Of these contracts, 32 are related to Indian Air Force (IAF) procurements, with 15 and seven defence offset deals linked to Indian Navy (IN) and Indian Army (IA) acquisitions respectively. In terms of the value of these offset contracts, the MoD said in the report that it projects that offsets worth $11.80 billion will be discharged through OEM-IOP partnerships during the period between 2008 and 2024.

Of this amount, approximately $2.8 billion has been discharged of which $1.68 billion has been verified through audits. The remaining offsets were under clarification and examination. It added that more than 170 local firms had been selected as IOPs by foreign OEMs.

Other than offsets, the government has set a defence export target of Rs 35,000 crore by 2024-25. The defence exports rose from Rs 1,500 crore in 2016-17 to Rs 4,500 crore 2017-18 to Rs 10,700 crore in 2018-19. For the current fiscal, the Centre has set a target of Rs 20,000 crore.

BEL Achieves Turnover of

Rs 12,500 Crores

Defence PSU Bharat Electronics Limited (BEL) posted a turnover in excess of Rs 12,500 crore during FY 19. The company had a growth of 6 per cent over the previous year’s turnover of Rs 11,789 crore.

BEL’s order book as on April 1 was Rs 51,800 crores. The year saw BEL securing significant orders worth Rs 13,000 crores. Some of the major orders acquired during the year are Akash (7 Sqns), Coastal Surveillance Systems (CSS), upgrade for EW system, radars, AMCs for radars and weapon systems, Software Defined Radio (SDR), sonars, Advanced Communication Systems, etc.

Some of the flagship projects executed during FY 19 were Command & Control Systems, thermal imagers for tanks, upgrade of communication system, land-based EW systems, weapon repair facility, electronic fuzes, various radars, smart city projects, Delhi CCTV project, Schilka upgrade, avionics package for LCA, classroom jammers, real time information system for railways and LRSAM.

BEL achieved export sales of $48.59 million during FY19. Major products exported included cable looms, coastal surveillance system spares, radar, Compact Multi-Purpose Advanced Stabilization System (CoMPASS), electro mechanical parts, etc.

BEL’s Chairman and Managing Director MV Gowtama said, “The global lockdown due to COVID-19 and the economic slowdown had some impact on BEL during the last month of the last quarter of FY 2019-20. Execution/acceptance of some of the major projects could not be completed due to Force Majeure which otherwise would have further contributed to BEL’s revenues during FY 2019-20 itself. However, BEL remained focused on enhancement of its capabilities and competitiveness.”

===============

HAL Finances – In the Red

(Rs crore)

2016-17                2017-18                2018-19                2019-20*

Revenue from operations            18,554  18,624  19,894  20,500

Payments due (mostly IAF)         3,995     6,751     13,939  17,000

Bank balances  8,345     6,433     101         Negative

Borrowings         950         764         4,058     9,500

Cost of finance                  10           28           170         NK

*Estimations for year ending March 2020

Source: HAL annual reports

======================

Shirish Khare, General Manager, Ordnance Factory Tiruchy handed over the first consignment of Trichy Assault Rifles to DS Rawat, DIG, Central Reserve Police Force, on 12 March.

Ground breaking ceremony of Nova Integrated Systems Ltd by KT Ramarao Mininster for IT, Industries, MA & UD and Praveen PA, Director Defence & Aerospace, Government of Telangana, on 12 March 2020.

The post DEFENCE PROCUREMENT : Draft DPP 2020 Revealed appeared first on IMR.

The DAC is headed by the defence minister. The other members of the council are the minister of state for defence, the chief of defence staff, the three service chiefs, the defence secretary, secretary defence research and development, secretary defence production and director general, acquisition. Gen Bipin Rawat attended the DAC meeting for the first time as the Chief of Defence Staff (CDS).

P-75I submarines will scale up the navy’s undersea warfare capabilities and counter the rapid expansion of the China’s submarine fleet. The project will be pursued under the government’s ‘strategic partnership’ (SP) model, which seeks to provide fillip to the government’s Make in India programme.

The DAC short-listed the Indian strategic partners and potential original equipment manufacturers (OEMs) who would collaborate to construct six conventional submarines in India.

The Indian strategic partners cleared to collaborate with the foreign OEMs are Mazagon Dock Shipbuilders Limited (MDL) and Larsen &Toubro (L&T). The foreign yards they can team up with for the project are the French Naval Group, German conglomerate Thyssenkrupp Marine Systems, Russia’s Rubin Design Bureau, Spain’s Navantia and South Korea’s Daewoo Shipbuilding & Marine Engineering Company.

Hindustan Shipyard-Adani Bid Rejected

A joint venture between the Adani Group and state-owned Hindustan Shipyard Limited (HSL) was rejected by an empowered committee as it did not meet the eligibility criteria for being shortlisted as a strategic partner (SP). The Congress Party had alleged earlier that the Modi government was planning to overrule Navy decision to favour the Adani Group for the construction of the submarines, violating the defence procurement policy (DPP).

The two Indian entities were selected as strategic partners after an examination of financial records and manufacturing facilities by the Navy’s empowered committee. Both state-owned MDL and private sector giant L&T have considerable experience in shipbuilding. The empowered project committee was formed with the Navy’s Controller of Warship Production and Acquisition as the head of the panel including several other Joint Secretaries as its members.

It was the second project to be cleared under the SP model after the DAC, in August 2018, approved a project to build 111 naval utility helicopters in the country to replace the navy’s outdated fleet of French-designed Chetak choppers. The naval utility helicopter (NUH) project is worth Rs 21,738 crore.

Further Process

It will take years for the submarine project to materialise as the process is quite long-drawn out.

The ministry will take the project forward by issuing requests for proposals (RFPs) to the short-listed Indian strategic partners who will then respond with techno-commercial offers in collaboration with one of the short-listed OEMs. In exceptional cases, rules allow the Indian strategic partner to submit techno-commercial offers in collaboration with two OEMs.

The next steps would involve opening and evaluation of technical offers, trials, staff evaluation, opening of commercial offers of companies technically compliant with the RFP and finally, the selection of the strategic partner with the lowest bid.

P75I Submarines

The plan to build six new submarines as part of Project 75I(I for India) is a follow-on of the Project 75 Kalvari-class submarines. Under this project, the Indian Navy intends to acquire six diesel-electric submarines, which will also feature advanced air-independent propulsion systems to enable them to stay submerged for longer duration and substantially increase their operational range.

The Navy wants the submarines to be equipped with heavy-duty firepower as it wants the boats to have at least 12 Land Attack Cruise Missiles (LACM) along with Anti-Ship cruise missiles (ASCM). The Navy specified that the submarines should also be able to carry and launch 18 heavyweight torpedoes in the sea. Compared with the Scorpene, the firepower required in the next line of submarines is many times more than what is being put on the Scorpenes which have the heavyweight torpedoes and the Exocet surface to surface missiles as their main weapons.

The post Navy Modernisation : MDL and L&T Cleared as Strategic Partners appeared first on IMR.