India’s defence industry is now capable of manufacturing wide variety of high-end requirements e.g. tanks, armoured vehicles, fighter aircrafts, helicopters, warships, submarines, missiles, electronic equipment, special alloys, special purpose steels, and variety of ammunition.

The value of indigenous defence production for Financial Years 2020-2021 and 2021-2022 was Rs 84,643 crore and Rs 94,846 crore respectively.

Domestic Procurements

The Government, in the last three years, ie, from 2019-20 to 2021‑22 and current year (2022-23 up to September, 2022), had accorded Acceptance of Necessity (AoN) to 163 proposals worth Rs 2,46,989.38 crores approximately, under various categories of capital procurement which promote domestic manufacturing as per DAP-2020.

The share of domestic procurement in the total procurement has seen an upward trend. In 2018-19, the domestic procurement stood at 54% of the total procurement; this figure jumped to 59% in 2019-20 and to 64% in 2020-21. In 2022-23, it has been increased to 68% for domestic procurement, of this 25% budget has been earmarked for procurement from private industry.

With focus of Government on indigenisation and procurement of defence products from the domestic resources, the expenditure on defence procurement from foreign sources has reduced from 46% to 36% in the last four years i.e. from 2018-19 to 2021-22.

Domestic Projects Realised

With focus on indigenisation and procurement from domestic industries, all the major areas of domestic defence production ecosystem such as weapons, ammunition, fighter aircrafts, helicopters, missile systems, warships, submarines, armoured vehicles, radars, communication systems, surveillance systems, etc. have benefited from the initiatives and also given boost to the growth of domestic industries including MSMEs and start-ups.

Many significant projects that have been produced in the country during the last few years include (alphabetically listed):

• 155 mm Artillery Gun system ‘Dhanush’
• 25 ton Tugs
• Advanced Light Helicopter
• Anti-Submarine Warfare Corvette (ASWC)
• Arjun Armoured Repair and Recovery Vehicle
• Armoured Personnel Carrier ‘BMP-II/IIK’
• Bi-Modular Charge System (BMCS) for 155mm Ammunition
• Bridge Laying Tank,
• Cheetah Helicopter
• Dornier Do-228
• Fast Interceptor Boat
• High Mobility Trucks
• INS Chennai
• INS Kalvari
• INS Khanderi
• Inshore Patrol Vessel
• Integrated Air Command and Control System (IACCS)
• Lakshya Parachute for Pilotless Target Aircraft
• Landing Craft Utility
• Light Combat Aircraft ‘Tejas’
• Main Battle Tank ‘Arjun’
• Medium Bullet Proof Vehicle (MBPV)
• Offshore Patrol Vessel
• Opto Electronic Sights for Battle Tanks
• Software Defined Radios (SDR)
• Su-30 Mk1
• Surface to Air Missile system ‘Akash’
• T-72 Tank
• T-90 Tan
• Unmanned aerial vehicles
• Water Jet Fast Attack Craft
• Weapon Locating Radar (WLR)

Further, for the first time, a Made-in-India Advanced Towed Artillery Gun (ATAG) howitzer gun developed by our industry was part of the 21-gun salute during the Independence Day celebration at Red Fort in Delhi.

Policy Initiatives to Encourage Self-Reliance

These projects are the result of several policy initiatives and reforms taken by Government in the past few years to encourage indigenous design, development and manufacture of defence equipment, there by promoting self-reliance in defence manufacturing in the country.

 These initiatives include:

• According priority to procurement of capital items of Buy Indian (IDDM) category from domestic sources under Defence Acquisition Procedure (DAP)-2020.
• Earmarking of 25% of R&D Budget for Industry led R&D.
• Establishment of two Defence Industrial Corridors, one each in Uttar Pradesh and Tamil Nadu.
• Implementation of Public Procurement (Preference to Make in India) Order 2017.
• Launch of an indigenization portal namely SRIJAN to facilitate indigenisation by Indian Industry including MSMEs.
• Launch of Innovations for Defence Excellence (iDEX) scheme by involving Start-ups & Micro, Small and Medium Enterprises (MSMEs).
• Launch of Mission DefSpace.
• Liberalisation of Foreign Direct Investment(FDI) policy allowing 74% FDI under automatic route.
• Notification of  four  ‘Positive  Indigenisation  Lists’  of  total  411  items  of  Services  and  three  ‘Positive Indigenisation Lists’ of total 3738 items  of Defence Public Sector Undertakings (DPSUs), for which there would be an embargo on the import beyond the timelines indicated against them.
• Opening up of Defence Research & Development (R&D) for industry, start-ups and academia with 25 percent of defence R&D budget.
• Progressive increase in allocation of Defence Budget of military modernisation for procurement from domestic sources, etc.
• Reforms in Offset policy with thrust on attracting investment and Transfer of Technology for Defence manufacturing by assigning higher multipliers.
• Simplification of Industrial licensing process with longer validity period.
• Simplification of Make Procedure.

Specific provisions have been introduced in DAP-2020 under ‘Buy and Make (Indian)’ and ‘Buy (Global – Manufacture in India)’ category, wherein indigenous production is carried out with Transfer of Technology (ToT) from foreign OEM.

To enable adoption of Artificial Intelligence in defence, Defence AI Council (DAIC) and Defence AI Project Agency (DAIPA) has been created. Further, an AI roadmap has also been finalised for each Defence Public Sector Undertaking (DPSU) under which 70 defence specific AI projects have been identified for development.

Government has notified the ‘Strategic Partnership (SP)’ Model which envisages establishment of long-term strategic partnerships with Indian entities through a transparent and competitive process, wherein they would tie up with global Original Equipment Manufacturers (OEMs) to seek technology transfers to set up domestic manufacturing infrastructure and supply chains.

The expenditure on defence procurement from foreign sources has reduced from 46% of overall expenditure in 2018-19 to 36.7% as per data till December 2022.

Research & Development

Defence Research & Development (R&D) has been opened up for industry, start-ups and academia with 25 percent of defence R&D budget earmarked, to promote development of defence technology in the country.

Defence Research and Development Organisation (DRDO) identified nine thrust areas for focused research, namely Platforms, Weapon System, Strategic Systems, Sensors & Communication Systems, Space, Cyber Security, Artificial Intelligence & Robotics, Material & Devices and Soldier Support.

Technology Development Fund (TDF) Scheme also funds industries, especially – Start-ups and MSMEs upto an amount of Rs. 10 Crore, for innovation, research and development of defence Technologies in the field of defence and Aerospace.

Defence Industrial Corridors

To achieve ‘Aatmanirbharta’ and realise the goal of ‘Make in India’, Government of India has established two Defence Industrial Corridors (DICs) in the country, one in Uttar Pradesh and other in Tamil Nadu. These are expected to attract investments in Aerospace & Defence sector and established a comprehensive defence manufacturing ecosystem in the country. Moreover, the respective State Governments have also published their Aerospace & Defence Policies to attract private players as well as foreign companies including Original Equipment Manufacturers (OEMs) in these two corridors. The two State Governments have already signed MoUs/Agreements with various industries for investment worth total value of about Rs 24,000 crore. Investments worth Rs 2,242 crore and Rs 3,847 crore have been made in Uttar Pradesh Defence Industrial Corridor (UPDIC) and Tamil Nadu Defence Industrial Corridor (TNDIC) respectively.

DPSUs carved out of OFB

The seven new DPSUs carved out of erstwhile Ordnance Factory Board have been incorporated as wholly owned Government companies under the Companies Act 2013 in October 2021. Government has taken steps to initially handhold and support these new defence companies in starting their business as corporate entities. In this regard, outstanding indents with erstwhile OFB were grandfathered and converted into deemed contracts valuing about Rs 70,776 crore for the next five years. These deemed contracts provide annual targets for delivery of products. Every year, 60% of amount pertaining to that year’s target would be paid by the Services to the new DPSUs as advance as per the terms and conditions stipulated in the deemed contract. The advances provide the working capital to the newly constituted DPSUs. With more functional and financial autonomy, these new DPSUs are focusing on widening their customer base, including exports to augment the volume of defence production.

Defence Innovations

An innovation ecosystem for Defence titled Innovations for Defence Excellence (iDEX) was launched in April 2018 to foster innovation and technology development in Defence and Aerospace by engaging Industries including MSMEs, Start-ups, Individual Innovators, R&D institutes and Academia. iDEX provides them grants/funding and other support to carry out innovations/R&D which has potential for future adoption for Indian defence and aerospace needs. Under iDEX, 233 problems have been opened, 310 Start-ups have been engaged, 140 contracts have been signed. ‘iDEX Prime’ framework under iDEX has been launched in 2022 to support Start-ups with Grant-in-Aid up to Rs 10 crore to enable the development of high-end solutions.

Till October 2022, a total of 595 Industrial Licences have been issued to 366 companies operating in Defence Sector.

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The proposed GOCO model would allow the contractors to use army’s infrastructure and manpower to carry out repair and overhaul work. Under it, the contractor would be responsible for the daily operations of the workshops, sourcing of spares and meeting targets, while the ownership of the workshops would remain with the army.

The contractors will carry out overhaul of tank T-72 and T-90, repair of tank T-72 and T-90 Class B rotables including engines and base repair of major and minor assemblies of tank T­72 and T-90.

The bidder was expected to have relevant experience to carry out similar projects including projects done in the defence sector involving services, manufacturing, overhauling, repair, maintenance modifications/upgrades or supply chain in last seven years.

Only private entities were eligible to respond by 1 June. Defence public sector undertakings (DPSUs) and Ordnance Factory Board (OFB) were not eligible to participate in this project.

Overview of Project GOCO

ABWs are an important part of the industrial base of Indian Defence forces. Eight ABWs were established during the Second World War to carry out repairs and overhaul of weapons, vehicles and equipment to keep the Indian Army operationally ready. These ABWs play important role in reset and regeneration of combat capability of Army.

ABWs carry out base repairs and overhaul of weapons, vehicles and equipment to keep the Indian Army operationally ready both during peace and war. They also undertake manufacture and indigenization of spares. In a bid to enhance the combat potential of the Armed Forces, a Committee of Experts (CoE) under the Chairmanship of Lt Gen DB Shekatkar (Retd), was constituted in 2016 to identify and recommend methods to meet the objective of an agile but effective military to meet current and future threats that the country faces.

Based on the recommendations of this Committee, a decision has been taken by the defence ministry to outsource the functioning of the ABWs to private sector players towards operating the workshop in the Government Owned Corporate Operated model. 505 ABW, Delhi Cantt is to be the first ABW to be put on the GOCO Model.

Overview of the 505 ABW

505 Army Base Workshop has historically overhauled and carried out base repairs of tanks as well as engines and major/minor assemblies of tanks. It currently overhauls 70 x T-72 tanks annually and its associated engine, assemblies etc. 505 ABW is scheduled to start all these activities for tank T­90 from FY 2020-21. Spares required for the overhaul activity are currently sourced from Ordnance Factories, DPSUs, ex Trade and from OEMs (ex Import). 

Consultants Report

PricewaterhouseCoopers (PwC), which in January 2020 was selected as a consultant and attract private players for the project, has submitted a report to the army.

PwC has given several examples of countries like the US operating similar models with high-tech infrastructure and suggested that these could be replicated here as well, officials said. PwC also gave examples of assembly lines run by Indian private companies and suggested that the workshops could be revamped on similar lines. However, army officials told the consultancy firm that it would not be possible to have a similar setup like the US because of the limited budget and that there was no requirement of establishing additional infrastructure, as the existing machinery was enough to meet the requirements.

For and Against the Model

Officials who are opposed to the move have claimed that it could increase the cost and that private companies in India did not have the skills to carry out this work. The model will also deplete the army’s capabilities built over years to overhaul equipment. Private firms are pushing for bringing in their own manpower, citing requirements of a younger and technically more qualified workforce. Officials also fear private operators to poach serving officers to manage the facilities. If the GOCO model is implemented, the private contractors will replace all infrastructure. The cost of the additional infrastructure will be added to the annual production cost.

Those supporting the model, however, say privatisation was important. They army then does not have to run workshops in remote areas and that was a way of reducing administrative flab. A question being raised from within the army was whether private firms were capable of providing critical spares for equipment such as tanks. A reason why the GOCO model was being implemented was because questions had been raised about the army’s capability to repair and overhaul its equipment in time. While the army was capable of meeting targets, the delay was caused by the Heavy Vehicle Factory of the Ordnance Factory Board in Avadi, Tamil Nadu, not providing adequate spares on time.

Comments

IMR spoke extensively to Maj Gen Ravi Khetarpal who commanded a Base Workshop in Bangalore and was Chairman & Managing Director of Bharat Dynamics Ltd. These comments are based on his considered views.

ABWs were raised over the years primarily to meet the Army’s requirement of base overhaul of major weapon systems and equipment and were distributed geographically to also meet the socio-economic obligations of the Government.

They were (and are) headed by very experienced senior EME officers who have been progressively trained in leadership and management techniques in MCEME and Army schools of instruction. With over 25 years service in the field army, the urgency and necessity of ensuring reliable  weapon systems is well known to them.

The civilian workforce is motivated and highly skilled. However, no mention has been made of their management, handling or rightsizing.  Outdated labour laws have always been a drawback in their management and will remain so even in a GOCO environment, unless revised.

The primary focus of every Commandant of ABW has been to ensure laid down annual targets are met. However, the major drawback, over the past seven decades, has perpetually been the non-availability of major overhaul spares, which have not been forthcoming in a timely and streamlined manner either from the OEMs, mainly from abroad, or the OFB factories and DPSUs. This single factor has been responsible for the delays in delivering the weapon systems on time. Under GOCO, how corporations are going to streamline spares and inventory management and ensure that spares come as “complete overhaul kits”, especially from the foreign OEMs, DPSUs and the OFB, over which they have no control, will be worth noting. It would be better to only corporatize inventory management, rather than tampering with the organisational system of ABWs which has well stood the test of time.

Commandants of ABWs have had to function with limited financial powers, budgets and red-tape. Consequently, purchase of non-available spares, modernisation and upgradation of infrastructure, plant and machinery suffered, but not due to lack of enthusiasm or ideas. Catching up now by GOCOs will result in a huge financial burden which will eventually have to be reimbursed by the MoD. Incremental development of infrastructure based on detailed project reports (DPR) already planned, may smoothen the financial hit. Commandants of ABWs need to have their financial powers enhanced with freedom to buy “off the shelf” including central procurement items, to reduce red-tape and consequent delays. Base Repair Depots (BRD) of the Indian Air Force (IAF) are an example.

Corporations will follow the “Cost Plus” model of financial accounting. They will be paid the complete cost of overhaul and spares plus a 15-20% profit to ensure attractive bottom lines. Assets of ABWs, built up over the years, may also be acquired by them at a pittance. Further, there is no mention of downsizing/rightsizing of manpower and, if proposed, the unions will not permit it, as is known from previous experience. Therefore, in reality, this model will eventually be cost-accretive, instead of resulting in a savings to the State.

Indigenisation of critical spares has been a major success story of the ABWs, especially for urgent operational commitments like for snow scooters in Siachen, track links for T-72 tanks, or for miscellaneous requirements of Northern Command, where the OEMs were playing truant or quoting unacceptable prices or timeframes to supply. These will likely take a backseat with GOCOs as the numbers required are very small and may not be cost-effective to manufacture. With the “Make in India” backdrop, indigenisation should also be of prime importance, but does not find a mention in the RFI.

By replacing existing EME manpower with younger civilian manpower by GOCOs, over time, efficacy of EME all ranks to overhaul equipment will deteriorate. The impact of this will be felt in the field army, as EME personnel gain valuable experience and knowledge during their 3-4 year tenure in an ABW as part of their grooming, which they pass on to their colleagues once back in the field.

In sum, rather than GOCO-ing all ABWs, it would be better to corporatise only the spares and inventory management part. With greater financial powers and independence and a guarantee of timely overhaul spares as complete kits, ABWs are fully capable of delivering quality overhauled weapon systems on time and in meeting any additional operationally urgent requirements of the field army.

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The Indian Air Force (IAF) is considering a a proposal for procuring the indigenous basic trainer aircraft, Hindustan Turbo Trainer 40 (HTT-40), from Hindustan Aeronautics Limited (HAL).

The IAF has sought inputs from HAL for formulating a statement of case required for revalidating an Acceptance of Necessity (AoN) by the Defence Acquisition Council (DAC).

In September 2019, HAL had successfully conducted a rigorous ‘six-turn spin test’ on a prototype of the HTT-40. The aircraft had returned to its original position each time after being thrown into multiple spins, which was termed as a landmark development by the HAL in the design and development phase of the aircraft. This development and testing will continue for some more time. HAL is working towards completing the certification process of the basic trainer by meeting all parameters that have been required of it by the IAF.

In November 2019, Chief of the IAF, Air Chief Marshal RKS Bhadauria, had undertaken a test flight of the HTT-40 from the HAL’s airport in Bengaluru.

In February 2010, the DAC had accorded an approval for the design and development of an indigenous basic trainer aircraft by the HAL. The DAC had also approved the procurement of aircraft by the IAF. The maiden flight of the prototype aircraft took place in the year 2016 nearly after three years of delay.

Apart from giving the go-ahead for the development of a new indigenous trainer to replace HPT-32 Deepak, the Indian government had also decided on an off-the-shelf purchase of basic trainers to meet immediate requirements.

Subsequently, in 2012, India signed up for the Swiss aircraft manufacturer Pilatus Aircraft Limited to procure 75 ready-to-fly PC-7 MkII at a cost of Rs 2,800 crore ($437.5 million, at then currency exchange). Pilatus completed delivery of all 75 aircraft in July 2018.

The IAF had fallen short of basic trainer aircraft after the indigenously manufactured Hindustan Piston Trainer-32 Deepak (HPT-32) were grounded in 2009 following a series of accidents leading to loss of lives. At present, the existing strength of trainer aircraft — including basic, intermediate and advanced trainers — with the IAF is 260, as against the sanctioned strength of 388. This includes 75 Pilatus PC-7 MkII aircraft used for the purpose of basic training.

India Developing Land

Pool to Attract Industry Leaving China

India is developing a land pool to lure businesses moving out of China. A total area of 461,589 hectares has been identified across the country for the purpose. That includes 115,131 hectares of existing industrial land in states such as Gujarat, Maharashtra, Tamil Nadu and Andhra Pradesh. Andhra Pradesh is in touch with several companies from Japan, the U.S. and South Korea. Uttar Pradesh is also developing an online system for land allotment for all industrial and commercial purposes and is in talks with global companies for attracting investments in sectors such as defence and aerospace.

Land has been one of the biggest impediments for companies looking to invest in India, with the plans of Saudi Aramco to Posco frustrated by delays in acquisition. Prime Minister Narendra Modi’s administration is working with state governments to change that as investors seek to reduce reliance on China as a manufacturing base in the aftermath of the coronavirus outbreak and the resultant supply disruption.

At present, investors keen on setting up a factory in India need to acquire land on their own. The process, in some cases, delays the project as it involves negotiating with small plot owners to part with their holding.

Providing land with power, water and road access may help attract new investments to an economy that was slowing even before the virus hit, and is now staring at a rare contraction as a nationwide lockdown hit consumption.

The government has hand-picked 10 sectors — electrical, pharmaceuticals, medical devices, electronics, heavy engineering, solar equipment, food processing, chemicals and textiles — as focus areas for promoting manufacturing.

The four countries are among India’s top 12 trading partners, accounting for total bilateral trade of $179.27 billion. The foreign direct investments by the four nations between April 2000 and December 2019 stands at over $68 billion, government data shows.

Bharat Dynamics Get MRSAM Order from IAF

Bharat Dynamics received an order to supply medium-range surface-to-air missile (MRSAM) sections for Indian Air Force (IAF) deliverables on 6 May. The order has to be executed in next 24 months.

BDL stock gained 7.38% after the announcement. BDL’s standalone net profit fell 71.8% to Rs 53.18 crore on a 49.6% decline in net sales to Rs 495.42 crore in Q3 December 2019 over Q3 December 2018.

Bharat Dynamics manufactures defense equipment. The company offers ammunitions, counter measures dispensing, infra red interference indicators, and missile systems. BDL serves military and aerospace industries in India.

OFB Wins $145-mn Indent For BMP ICVs

The Ministry of Defence (MoD) placed an indent for supply of 156 upgraded BMP-2/2K Infantry Combat Vehicles (ICVs) for Rs 1,094 crore ($145 million) on the Ordnance Factory Board (OFB), on 2 June.

The BMP-2/2k will come with upgraded feature and would be powered by 285 horse power engines. With lesser weight that the previous variants, the latest BMPs will be highly mobile and meet all the tactical requirements of the mobility on the battlefield.

These ICVs will be able to reach a speed of 65 kms per hour with easy steering ability in cross-country terrain. They will have amphibious capabilities to travel at seven kmph in water. These are designed to overcome slope of up to 35-degree cross obstacles of 0.7 metre and have lethal firepower capability.

With the induction of these 156 BMP 2/2K ICVs, planned to be completed by 2023, the existing deficiency in the mechanised infantry battalions will be mitigated and the combat capability of the army will be further enhanced.

NASA Selects 3 Indian Companies For Ventilators

NASA’s Jet Propulsion Laboratory in Southern California on 29 May selected eight US manufacturers along with 13 International companies to make a new ventilator tailored for coronavirus (COVID-19) patients. There were three Indian companies that were selected among the 13 International manufacturers from countries like Australia, Brazil, Canada, Mexico, Egypt, UAE, Turkey, and Malaysia.

The three Indian companies that were selected are Alpha Design Technologies, Bharat Forge and Medha Servo Drives.

The device, called VITAL (Ventilator Intervention Technology Accessible Locally), was developed by engineers at NASA’s Jet Propulsion Laboratory (JPL) in just 37 days. The high-pressure ventilator was designed to use one-seventh the parts of a traditional ventilator, relying on parts already available in supply chains.  It offers a simpler, more affordable option for treating critical patients while freeing up traditional ventilators for those with the most severe COVID-19 symptoms. Its flexible design means it also can be modified for use in field hospitals.

OFBs, DPSUs Told to Ramp Up Output After Lockdown

Defence minister Rajnath Singh, on 28 April, speaking to top officials of the Ordnance Factory Board (OFB) and defence public sector undertakings (DPSUs) via video conference, asked the OFB and DPSUs to draw up contingency plans for resuming operations after the lockdown to combat the coronavirus disease (Covid-19) is lifted. Singh said such plans were necessary to ramp up production and compensate for the time lost due to the Covid-19 outbreak.

Singh praised the efforts of DPSUs in coming out with new products to fight Covid-19 and also the assistance provided by them to the local administration. The OFB has also earmarked 280 isolation beds at hospitals spread across 10 locations.

The OFB’s contribution in fighting Covid- 19 includes the repair of more than 100 ventilators, manufacture of 12,800 coveralls, development of specialised machines for testing of personal protective equipment (PPE) kits and supply of 6.35 lakh masks to local authorities.

Bharat Electronics Ltd manufactured 12,000 ventilators in May and another 18,000 in June to support the national effort to tackle the disease.

The statement said Hindustan Aeronautics Ltd has manufactured and supplied 300 aerosol cabinets to various hospitals and also distributed 56,000 masks and extended support to migrant labourers.

HAL, BEL, BDL Shares Up As FDI Limit Goes to 74%

Defence sector stocks rose up to 10% today after Modi government said it would ease foreign direct investment norms in defence manufacturing by allowing 74 per cent FDI under the automatic route to attract overseas players in the sector.

Share price of Hindustan Aeronautics Ltd (HAL) rose 10.03 per cent at Rs 576, Bharat Electronics Ltd (BEL) gained 5.54 per cent to Rs 71.5, Mishra Dhatu Nigam Ltd (MIDHANI) up 7.23 per cent at Rs 224.65 and Bharat Dynamics Ltd (BDL) gained 4.72 per cent at Rs 250.9. Apollo Micro Systems stock rose 8.69 per cent to Rs 95.7, BEML up 5.32 per cent at Rs 630, Bharat Forge up 4.02 per cent at Rs 288.70 and Premier Explosives rose 5 per cent to Rs 78.65 on BSE.

As per the current FDI policy, 100 per cent overseas investments are permitted in the defence industry — 49 per cent under the automatic route, while beyond that government approval is required.

In July 2018, the government eased foreign direct investment norms in the defence sector by allowing FDI up to 49 per cent under the automatic route.

RM: Pandemic Has Hit Defence Production

Defence minister Rajnath Singh, on 21 May, said the lockdown imposed to check the spread of the Covid-19 in late March has hit defence manufacturing harder than other sectors. He added it is because the government is the only buyer of the defence products.

Singh spoke about the hardships faced by the defence industry at an e-conclave at a defence industry webinar. He said the lockdown has hit the manufacturing sector, disrupted supply chains while the defence industry has also been affected due to the strict confinement measures.

Singh said the economic package and the reforms the Centre has announced to tide over the Covid-19 crisis and to give a push to Prime Minister Narendra Modi’s ‘Atmanirbhar Bharat Abhiyan (Self-Reliant India Movement)’ would strengthen the micro, small and medium enterprises (MSME) sector and generate employment.

HAL May Be Allowed In Navy’s Helicopter Competition

The defence ministry is re-evaluating its big ‘Make in India’ plan to manufacture naval utility helicopters. The companies have been asked to explain if the programme has export potential and the Centre is also looking at giving Hindustan Aeronautics Limited (HAL) a chance to enter the competition.

HAL, which has been making a strong pitch for its Advanced Light Helicopter (ALH), could get a chance to enter the competition if it is able to develop compliant prototypes, within a specified period of time. HAL has been pitching a naval variant of the ALH with folding rotor blades and tail but is yet to develop a prototype.

The Rs 21,000-crore plan to manufacture naval utility helicopters in partnership with a foreign vendor has been in the works for over a year and important decisions on going to the next step of technical evaluation have to be taken shortly.

Queries have been sent to Indian and foreign companies bidding for the project to understand if there are plans to continue the line beyond the 111helicopters envisaged to meet exports in both civil and military markets. The ministry is also assessing if a lesser number of choppers were to be ordered, what the impact would be on technology transfer and cost viability.

There is an apprehension that the project could be cut down in numbers as the ministry is revising all procurement plans due to an anticipated budget cut.

GSL Lowest Bidder in ships for Coast Guard

Goa Shipyard Ltd (GSL) has emerged as the front runner to build two pollution control vessels for the Indian Coast Guard, pipping L&T Shipbuilding and two other public sector shipyards. GSL will build the vessels for approximately Rs 600 crore once the final contract is inked. GSL is already executing a follow-on order for five offshore patrol vessels for the Coast Guard, the first of which was commissioned on 15 May.

Contract negotiations for the two pollution control vessels will begin with the defence ministry and the Indian Coast Guard, and once the terms are decided, the contract will be inked.

GSL is also building frigates for the Indian Navy. The keel for the first of the two guided missile frigates for the Indian Navy, known as Project 1135.6, were to be laid in early 2020. The stealth warships, valued at over Rs 14,250 crore, will be built at GSL based on technology transfer from Russia’s Yantar Shipyard and Severnoye Design Bureau.

AK SRIVASTAVA, NEW DIRECTOR (DEFENCE BUSINESS), BEML

AK Srivastava has assumed charge as  Director (Defence Business) and has been nominated as member of the Board of BEML Limited, Schedule ‘A’  Company, under Ministry of Defence. Prior to this elevation, he was Chief General Manger, BEML Defence (Marketing).

Srivastava is graduated from IIT Kharagpur in Mechanical Engineering and joined BEML as an Engineer Trainee in 1987. In his professional career spanning over three decades in BEML, he has  worked in various critical functional areas in the company, at different geographical locations including overseas.

The post Defence Industry News June 2020 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.

Mishra Mishra Dhatu Nigam Limited (MIDHANI) has developed 99.6 percent pure Nickel wire of dia 158 microns for ventilators use in a records time of 96 hours, the company announced on 4 May.

The wire will be used in oxygen sensors pertaining to critical care ventilator. Prior to this development, the Nickel wire of these purity standards used to be imported. Supposedly, this innovative move of the Defence PSU will strengthen India’s fight against Coronavirus (Covid-19).

The news came almost a month after Bharat Electronics Limited (BEL) announced the production of ventilators with the help of local companies.

MIDHANI is specialized metals and metal alloys manufacturing facility in India, located in Hyderabad, Telangana. It is a public sector undertaking (PSU), under the administrative control of Department of Defence Production, Ministry of Defence.

New Remote Weapon Station by OFB

India’s Ordnance Factory Board (OFB) has developed a new remotely operated weapon station (ROWS) armed with the Russian-designed NSVT 12.7 mm heavy machine gun (HMG), in conjunction with Bharat Electronics Limited (BEL), according to the Ordnance Factory Board’s (OFB) portfolio.

The new ROWS, which is simply designated Remote Control Weapon Station (RCWS), broke its cover at the DefExpo 2020 defense show held in Lucknow in early February. The unmanned combat station was specifically designed to carry a combat-ready NSVT HMG, which is mounted on a two-axis stabilizer.

The RCWS can be used to engage both ground and aerial targets, with keeping its operator safe from threats. Originally, the station was intended for the upgraded Arjun Mk. IA main battle tank (MBT). The module has also been configured for the Arjun armored recovery vehicle and the C-431 patrol ship of the Indian Coast Guard; however, it can be installed on a wide range of ground and surface carriers. The RCWS works in both day and night modes and is equipped with a laser rangefinder. An automatic target tracker and a remote arming device can be additionally mounted.

According to the OFB, the organic armament suite of the new unmanned station can be reinforced with an anti-tank missile, machine gun, or automatic grenade launcher. “The module can be employed during low-intensity conflicts,” says the portfolio, adding that the RCWS had already passed through firing tests at sea.

India is also reported to have imported marinized unmanned combat stations from Israel: since 2016, the Asian country has been negotiating the acquisition of 747 Elbit Systems’ RCWSs armed with 12.7 mm HMGs (probably M2HBs, but Elbit also offers its combat stations with the NSVT machine gun). India was planning to directly import 136 RCWSs and produce the remaining 611 modules in-house.

The OFB did not provide any detailed information about the new combat station.  However, it is believed to carry a traditional sensor suite with a daylight TV camera, thermal imager and laser rangefinder.

HAL working on Cheaper TejEx LCA For Export

After successfully reducing the price of the upgraded Tejas Mk1A by nearly half at less than $45 million a unit for soon to be concluded order for 83 jets, Hindustan Aeronautics Limited (HAL) is working on developing a low-cost version of the fighter jet designated as “TejEx” for Export Market from 2023 onwards.

TejEx will be more expensive than the Tejas Mk1A but will be cheaper then Mk1 which HAL has currently in production. TejEx can be customizable as per customer requirements and can have systems and subsystems from both Mk1 and Mk1A configuration to make it slot right between both the aircraft in terms of technology on offer.

TejEx test plane will be HAL funded and will be used as a product demonstrator for the potential customers and the first aircraft will likely be ready by end of 2023 once the system and configuration are confirmed after considering the requirements of the export market.

TejEx will have the radar option of ELA-2032/MMR, ELA-2052 and even Uttam AESA in later stages with choice of weapons integration which includes India’s offering like Astra BVRAAM, SAAW and Inertial guided bomb. Weapons that have been cleared for Tejas Mk1 and Mk1A will also be on offer.

Procurement Rules Relaxed For Armed Forces

The Ministry of Defence (MoD) has invoked emergency powers in the wake of the coronavirus outbreak to expedite the procurement of supplies required to establish and run quarantine and isolation facilities for the Indian Armed Forces and as well other facilities requested by the civil administration across the country.

The emergency powers will provide three important exemptions in the existing procurement rules – exemption from long-drawn bidding procedure, dispensation of procurement from Government e-Marketplace (GeM) and making 100 percent advance payment to suppliers after due diligence – to procure necessary supply in the fastest possible manner.

The move will ensure swift and smooth purchase of stores, equipment, rations, chemicals, medicines and also their speedy transportation by the armed forces.

Since the armed forces have been asked to set up facilities for troops and also extending help to local authorities through quarantine facilities in Rajasthan, Telangana, Uttar Pradesh, Andhra Pradesh, Bihar, Maharashtra, Kerala, Tamil Nadu, Karnataka and Assam, the prevailing health emergency requires immediate procurement of certain items in quantities, which may not be available with a single supplier or within the time-frame in which they are needed.

As per the directive, army units too have been exempted from government financial rules which makes it mandatory for them to purchase provisions through GeM.

The ministry said that the rules related to GeM purchase will not be applicable to emergent purchases, medical and other supplies related to Covid-19 operations.

The army formations have also been exempted from lengthy bidding procedure by relaxing the existing rules. The normal bidding procedure for procurement is a long-drawn process but in this pandemic situation, the MoD has allowed to receive bids by email or fax instead of e-procurement portals. The army formations will verify the authenticity of the firms and bidding time will be reduced as per the emergent requirement.

Bharat Dynamics Wins IAF Missile Order

Bharat Dynamics Limited (BDL) said, on 5 May, that  it had bagged a Rs. 293.33 crore ($40 million) order for supplying Medium Range Surface-to-Air Missile (MRSAM) sections for the Indian Air Force (IAF) deliverables.

The order will be executed by the company within the next 24 months. The company had (provisional and audited) an order book of Rs 7,413 crore ($977 million) till 1 April, including Akash missiles (seven squadron) contract for Rs 1,700 crore ($225 million) received during the quarter ended 31 March.

Soon after the stock exchange filing on the new order for MRSAM sections, Bharat Dynamics jumped five per cent to Rs. 224.85 ($2.95). The stock has gained 7.38 per cent in two trading sessions from its previous closing low of Rs 209.4 ($2.76) posted on May 4.

BDL’s standalone net profit fell 71.8 per cent to Rs 53.18 crore ($7 million) on a 49.6 per cent decline in net sales to Rs 495.42 crore ($65 million) in third quarters ending December 2019 over the corresponding quarters in December 2018.

Bharat Dynamics designs and manufactures guided weapon systems and its products include Milan-2T, Konkurs-M, Invar ATGM, Akash, advanced lightweight torpedo (TAL), torpedo counter measure system, counter measures dispensing system and infrared interference indicator.

Indian Navy Partners With Think3D

The Indian Navy has partnered with Indian 3D printing service bureau think3D to help produce spare parts on demand using additive manufacturing, for both on and off-shore scenarios.

The availability of spare parts has been a recurring problem for the Indian Navy due to the use of old, imported machinery. Collaborating with think3D, the Indian Navy has sought to solve this problem by instead 3D printing spare parts and replacing them on demand. think3D has supplied various 3D printed spare parts to Indian Navy, all of which have been successfully tested and incorporated into its machinery. One particular case study that the company has shared revolves around the replacement of centrifugal pump impellers, key components for a ship’s operation, using 3D printing.

Seeking an alternative manufacturing process where these impellers can be produced quickly and at a lower cost of ownership, the Indian Navy identified 3D printing as a possible solution, and contacted think3D.

After being contacted by the Indian Navy, the think3D team visited the ships to understand the problem in detail and to collect data on the impellers, including material properties required and boundary conditions. Its first step involved 3D scanning the impeller and reverse engineering its design. This was performed using an EinScan Pro+ 3D Scanner and CREO to create the CAD model based on the scanned data. Using ANSYS software, think3D then investigated which material and 3D printing process would benefit the application. Various materials like nylon composites, glass filled nylon, PA12, other regular plastics were tested for suitability.

With the successful completion of the 3D Printed impeller, think3D has now set its sights on building a digital repository of impellers for the Indian Navy. Once the repository is built, the company has committed to 3D printing the required impellers on demand to supply to the Navy.

Recently, the maritime industry has increased its adoption of 3D printing technology to combat similar issues experienced by the Indian Navy, mainly surrounding the supply of spare parts.

Israeli Defence Companies Adapt Sensors to Screen For Virus

Israel’s Ministry of Defense (MoD) was working with two Israeli defence companies to develop radar- and electro-optical-based sensors to monitor peoples’ vital signs and identify ones infected with Covid-19. The programme is led by the National Emergency Team of the Directorate of Defense Research and Development (DDR&D) under the MoD.

The ministry made the announcement on 31 March, saying Elbit and Israel Aerospace Industries (IAI) have adapted existing systems. “The data, including pulse, respiratory rate and temperature, are measured remotely using a combination of radar and electro-optical sensors, thus reducing the risk of infection to medical personnel. The next stage of development [is] screening and prioritising patient care based on the analysis of vital data.”

IAI-Elta took its 1 kg ELM-2114 perimeter surveillance radar as the basis for its medical system. The radar uses the very low frequency K-band so can be safely placed very close to people. Using the radar, the system can track a person’s movements as they breath as well as their pulse when placed 3 metres away, with medics in another room receiving readings in seconds.

IAI is currently producing its first system and expects to start producing several more for hospitals within two weeks.

BEL, HAL, BEML Get Back to Business

Defence production, which had come to a standstill for close to a month in the wake of the government enforcing a lockdown to combat the spread of the Covid-19, resumed on 28 April. More than 36,000 employees work with the three PSUs.

Hindustan Aeronautics Limited (HAL), Bharat Electronics Limited (BEL) and Bharat Earth Movers Limited (BEML) – all headquartered in Bengaluru – had ordered the closing down of their manufacturing units from March 24 onwards.

HAL is the only aircraft manufacturer in the country. It produces the LCA, Su-30 MkI, Hawk, Dornier aircraft, Chetak, Cheetah, ALH Dhruv helicopters besides producing engines, avionics, aerospace systems and materials.

BEL makes products in the areas of radars, missile systems, military communications, naval systems, electronic warfare and avionics, among others.

BEML, which is involved in the manufacturing of trucks used by the military and also integral rail coaches and metro cars, has about 7,000 employees all over India with about 2,000 working in Bengaluru alone.

Thales Reliance Defence Systems Resumes Operations

Thales Reliance Defence Systems (TRDS) resumed operations in MIHAN special economic zone (SEZ) in Nagpur in Maharashtra  after the Centre eased restrictions for some sectors amid the lockdown for the coronavirus outbreak. In a release, on 21 April, the firm said it was providing a safe working environment and said it was operating at 30 per cent staff in the first phase now.

TRDS has finished assembly and testing of first AESA radar at its facility in MIHAN. It will also be undertaking the assembly of electronic warfare systems here, the only facility outside France to have this capability, the release said.

Dassault Reliance Aerospace Resumes Operations

Dassault Reliance Aerospace Ltd (DRAL) re-started operations, on 20 April, at its Mihan special economic zone (SEZ) in Nagpur, in line with the government’s plan to lift the nationwide lockdown in a phased manner, according to a company statement. The company will operate with 25-30% of its total strength in the first phase, and plans to scale up operations as per the directives of the district administration and local authorities.

Dassault Reliance Aerospace supplies aero structure assemblies for Falcon 2000 business jets and components for Rafale aircraft, as part of the global supply chain for Dassault Aviation.

Anil Ambani-led Reliance Infrastructure Ltd holds 51% stake in DRAL, a joint venture with Rafale fighter jet manufacturer Dassault Aviation which owns the remaining.

The government had initially imposed a 21-day national lockdown, effective 25 March and till 14 April. With the rise in the number of Covid-19 cases in the country, it decided to extend the lockdown until 3 May but allowed some sectors to resume operations.

Captions

Bharat Electronics Ltd unveiled a Remote Controlled Weapon Station armed with a 12.7mm machine gun at Aero India in 2017. Seen here are the CMD of BEL, MW Gawtama and Maj Gen GD Bakshi, Editor IMR.

BDL has bagged a Rs 293 crore order from the IAF for MRSAM sections

The post Industry News appeared first on IMR.

The World Health Organisation (WHO) declared the outbreak of the disease COVID-19 due to Corona virus as a Public Health Emergency of International Concern on 30 January 2020. On 11 March, COVID-19 was declared as a pandemic. The UN Department of Economic and Social Affairs (DESA) has analysed that the global economy could shrink by up to 1% as opposed to a growth of 2.5%3 before this crisis hit the world. There is high possibility that it may reduce even further if restrictions such as lockdown continue, and governments do not provide financial support.

The Ministry of Finance, on 8 April 2020, released an order listing spending and cash flow management of each ministry. For the Ministry of Defence (MoD), the order has put a cap of 20% to defence capital, defence services and defence pensions. This means that only 20% of the budget can be spent in the first quarter of 2020-2021 (April to June).

On 27 March 2020, Society of Indian Defence Manufacturers (SIDM) organized a webinar with MoD for the Indian industry. The panel included Defence Secretary, Secretary (Defence Procurement), Directorate General (Acquisition), CMDs of the nine defence public sector undertakings (DPSUs) and Master General Ordnance (MGO) amongst others. In the webinar, DG Acquisition shared that a general order for all capital acquisitions has been published for extension of submission of bids, RFI, EoI, etc. MGO stated that all trials have been frozen and no new trials shall begin until the situation changes for the better. DPSUs were advised to ensure Industry that payments are made to all industry with preference to MSMEs. MoD urged the industry to support in fighting COVID-19 by providing ventilators, personal protective equipment and any other products for the same.

Indian Armed Forces and civil administration have been running quarantine and isolation facilities in the country. In order to speed up the procurement of supplies for these facilities, MoD has invoked emergency powers which will provide three important exemptions in the existing procurement rules. These are exemption from long-drawn bidding procedure, dispensation of procurement from Government e-Marketplace (GeM) and making 100% advance payment to suppliers after due diligence – to procure necessary supply in the fastest possible manner.

An amount of Rs 50,000 crore has been provided to National Bank For Agriculture & Rural Development (NABARD), Small Industries Development Bank of India (SIDBI) and National Housing Bank (NHB) to meet the needs of agriculture and the rural sector, small industries, housing finance companies, NBFCs and MFIs. RBI has announced that Non-performing Assets (NPA) norms of 90 days have been relaxed. The period of moratorium will be excluded from the 90-day classification norms of NPAs for those accounts, which would avail the moratorium facility. Non-Banking Financial Companies (NBFCs) have been given flexibility for relief to their borrowers.

Impact on Indian industry

Since the lowdown period in India has started, no production or less than 10% production is being done on the shop floor so far. Even with relaxation from 20 April 2020, return of workers and staff who have gone to native places or are unwilling to travel will be difficult to manage. Workforce limitation is major challenge as industrial areas are away from housing areas and people have to consider their safety of travel. At the same time, migrant workers/ labour will re-join after 3-4 months and there is a chance of skillset loss and deviation in quality of products in the initial period before everything streamlines.

Many Indian companies keep inventory for 3 months of future production, thus the challenge of limited supply is currently addressed. However, if the global situation does not ease by June, then manufacturing industry will start to feel the burden of raw materials and bought out items necessary for production.

There is significant insecurity in the industry as budget priority, policies and strategy focus will change for at least next two years and many on-going capital acquisition plans will be deferred indefinitely. As economy dips, health and infrastructure will get priority over other sectors. Specifically, for the Aviation industry, this will either be a short term “V-rise” or a long term “U-recovery”. With thorough applications of stringent A&D quality standards, with BCP being a critical requirement, maintenance and upkeep of facilities is manageable remotely with minimum human intervention. By July-Aug production/ utilisation levels may reach 70% and only after September it is expected that there will be 90-100% utilisation. This is subject to rate of growth of Covid-cases.

Aerospace demands long cash flow cycle (at least a 6-month credit cycle). Presently, finance institutions are providing support only for 2 months. There needs to be an extension to match the cycle of the sector for at least 6 months if not more. Additionally, lower rate of interest for borrowing is vital for achieving international competitiveness. Similar sized company in Thailand may borrow at 7-8% vs. aerospace MSME in India which borrow at around 12%.

While the outbreak of Corona virus has created a situation of uncertainty and apprehension for every organisation, Micro, Small and Medium Enterprises (MSMEs) are the worst affected. Then nation is striving to follow prime minister’s appeal of not dismissing employees and continuing paying salaries. However, MSMEs, especially those with weak balance sheets, are finding it difficult to retain employees.

Key issues that MSMEs in India are facing today are tabulated in table above.

Anticipated post lockdown scenario in India

Discussions with Indian industry involved in defence manufacturing has also brought out the following projections:

•             It is anticipated that due to complete halt of all activities, the problems of cash flow, raw material prices and logistics problems will arise after lockdown is over.

•             It appears that complete revival of any MSME shall require at least 6-12 months.

•             Most of the MSMEs are very disturbed and there is feeling that 40% of the MSMEs will be wiped out in three months’ time unless Government comes out with a major package.

•             Prices of raw material are expected to increase. Already suppliers have started reaching out for price increase due to low supply high demand situation on certain consumables or raw material.

•             Raw material prices, due to dependency on China are bound to increase and as always would be passed on to the end users.

•             Marginal increase in prices of products (approximately 3-4%) unless imported.

•             Transportation will not be a problem after lockdown.

•             Most of the factory workers are migrants from villages or other states. Many of them may not return after the lockdown. So MSMEs will have to recruit fresh employees and train them. Cost of wages and salaries will rise. Labour unrest can also be a threat. Hence, getting raw materials shortage can hamper production.

•             Increase in cost of all raw materials, labour costs and import costs will increase final product cost, reduce profits and many MSMEs will be out of business if government doesn’t give encouragement and incentives.

Other industries such as tourism and aviation are also at a standstill since almost 100 countries have closed national borders in the last month. Even after these restrictions are lifted, the demand for new aircrafts will be low since practice of social distancing will continue. People will refrain from travelling unless very essential.

The entire world is putting in efforts in any and every way possible to restore normalcy slowly and gradually. It has become prudent for governments to shift their focus inwards. Countries will concentrate on reviving their economies and restrain from nefarious activities. Since conflict will reduce, demand for military arsenal will also reduce. As a ripple effect, global trade will reduce, export of defence products will not increase because of reduced demand.

Exit Strategy

Today, though the world might debate on Covid-19 being a conspiracy, it is unified against China for not containing the Corona virus and lack of information it provided to the world. Consequently, international trade towards China will experience a dip but the sum total trade will remain the same. According to US-India Strategic and Partnership Forum (USISPF), around 200 companies are seeking to shift their manufacturing from China to India. USISPF also said that to attract these companies, India needs to introduce reforms, be more transparent in the process and engage more. Other countries like South Korea and Japan are also seeking to move their factories to India from China. Andhra Pradesh is under consideration by companies like POSCO and Hyundai Steel. Japan has also been reported to spend $2.2 billion help companies to shift out of China.

These series of event present themselves as a golden opportunity for India to become a leading manufacturing hub and attract large foreign investments. This will also aid India to accelerate the revival of its economy in the near future along with giving a boost to Make in India. India has lost a window for abundant development when USSR split. India did not capture the moment like shipyards such as Fincantieri and Daewoo which came up since they employed jobless people and tapped into the market in the right time. Ruble fell to unprecedented low and India did not cash on it. Therefore, India cannot miss this prospect. The Industry ministry, Finance ministry and Commerce ministry are in process of developing a package to attract companies planning to exit China. Tax and duty incentives, fast track clearances both at central and state levels with single window clearances where possible, easier availability of land, relaxations from too many regulations if the planned factory is in a SEZ are a few suggestions to be included in this package.

To take full advantage of this situation India must focus on quality, cost effective products in an innovative way. Companies need to focus on digital strategy, embrace change, build strong digital fluency, focus on automation and establish single interface for multiple function for agile response. If a company is not online, it is time to have a digital presence. This is the time organisations have to know more about their clients, their buying patterns, why are they buying from a particular source and what is the unique value that source is creating or selling. As of now, it is unclear, how many companies have reviewed their sales pattern data by demography, channel etc. Any organisation needs to understand the customer, and this is the right time to take up this task by conducting interviews/calls and asking their opinion about the products and identifying the gaps based on their feedback. Introducing key team members to customers especially sales, marketing, finance and support leads is another need of the hour. This is the time where companies need to establish metrics and start measuring. They need to create product awareness, new leads, new signup, referral programs and identify churn rate.

There is no contention in the fact that government is the single buyer of defence products in India. MoD needs proactively engaging with industry by placing orders. If this is not done, problems like cash flow and unemployment will rise leading to a hungry work force and in turn an angry work force. Problems in hinterland is the last thing a government wants.

As far as the issue of financial resources for procurement from industry is concerned, it is important to realise a way so that military modernisation does not take a hit. Capital defence budget consists not only of modernisation but also land, construction work etc. The 20% cap should be enforced on the budget outlay for such segments without hampering military modernisation. On the revenue side, a 30% cap has been indicated. In these times, there is no troop movement hence less fuel consumption, no military/international exercises. The only major negative impact is that no training can be conducted. However, this loss of training in quarter 1 and 2 of 2020 will be offset by rapid training schedule fitted in the curriculum in the next 2-3 quarters. Hence, operational efficiency shall not be affected.

If India wants to save its MSMEs, MoD should ensure placement of direct offsets on MSMEs and give up wasting offset credit value to be given to OEMs abroad for non-productive items like buying land in Defence Corridors, establishment of test facilities, ToT, etc., (and most of them with offset credit multiplication factors). Direct offsets should only be resorted to and not indirect offsets as has been proposed under new DPP-2020.

Courtesy: E&Y Report

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Though the company did not mention the exact value of the contract to establish an unified network management system to manage, support and operate the countrywide network under the NFS, as per its project classification, ranges between Rs 2,500 crore and Rs 5,000 crore.

It involves creating a centralised network monitoring, management and control system for all the seven layers under NFS which interconnects 414 defence stations.

The scope also includes Next Generation Operations System and Software based Unified Network Management System, Eight Network Operations Centers (NOCs) consisting of National NOCs, Disaster Recovery NOCs, Regional NOCs, Security Operation Centers, Tier III Data Centres and Training Infrastructure, the company said.

This is a significant departure from past practice, when Bharat Electronics (BEL) would have been “nominated” to discharge a contract with such crucial electronic security elements.

Under the “Network for Spectrum” (NFS) arrangement, in which the military has surrendered 40 megahertz (MHz) of spectrum to the Department of Telecommunications (DoT) – 25MHz in the 3G band and 20MHz in the 2G band. In return, BSNL was charged with establishing a pan-India OFC network for the military’s exclusive use. In May 2018, the Union cabinet approved the expenditure of Rs 24,664 crore for the OFC network.

The facilities under this project will allow real-time monitoring of the complete IT network backbone of the Indian army and provide complete visibility of deployed Network assets, leading to optimal utilization of resources, it added.

At the heart of L&T’s UNMS software system is the so-called Next Generation Operation Support System (NGOSS), a key module that has the job of ensuring the entire network is up and running optimally. This will involve complete visibility and real-time monitoring of the diverse network assets on a common management platform.

The NGOSS functions like the backend software that conventional wireless network service providers -such as Airtel, BSNL, Jio and Vodafone – use to route and connect calls from subscribers’ mobile phones, find an alternate routing if a transmission tower is down, and quickly repair malfunctioning systems.

Similarly the NGOSS will ensure the proper functioning of all AFN services such as voice and video calls, data transmission, etc. It will also manage the adding and deleting of subscribers and value added services.

This will be done through a “Data Centre Infrastructure” that will be responsible for networking, routing and switching, provision of servers and storages, and the security firewalling appropriate to a military network.

The project is to be implemented in 18 months followed by three years of warranty and seven years of Annual Maintenance Contract (AMC) during which L&T will provide managed maintenance services.

Since Independence, all communications between the service headquarters in New Delhi, theatre command headquarters in locations like Udhampur, Shillong and Kochi and further to corps, divisions, brigades and air and naval bases and logistical units were carried out via decades-old landlines, radio relay, radio and troposcatter links.

Now, a 60,000-kilometre long, pan-Indian, optic fibre cable (OFC) network will soon connect all these locations. Bharat Sanchar Nigam (BSNL) has already completed 57,000 km of the AFN. This includes optical cabling, the transmission and routing backbone and, crucially, the last-mile connectivity with forward bases. Since many of them are in remote locations without road links, they are connected to the AFN with microwave radio or satellite links.

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DRDO decided to focus on creating mass supply of items needed for the fight against the global pandemic COVID-19. So far four items have been readied and will be available for war against corona – critical care ventilators, personal protective equipment, advanced five-layer N-99 face masks and hand sanitizers.

Sanitizers and Masks

Hand sanitizer being the basic instrument against spread of COVID-19 has now been developed in-house at DRDO. By third week of March, it was produced in sizeable quantities and distributed to major offices and establishment within the capital. Approximately 4,000 litres of hand sanitizer had been provided to Indian Armed forces, Armed Forces Medical Corps, Defence Security Corps, 1,500 litres to Ministry of Defence, 300 litres to Parliament, and 500 litres to various security establishments and high offices to address sanitisation issue to keep administration work without fear of contamination.

With the Delhi Police (DP) working under difficult conditions to maintain law and order, DRDO provided 20,000 three-ply masks and 1,000 litres of hand sanitizers. In addition, DRDO distributed hand sanitizers to DP at about 40 nakas all around Delhi.

Initially a DRDO lab, Defence Research & Development Establishment (DRDE), Gwalior had produced approximately 20,000 litres to cater initial requirements of its employees and government offices and ministries. In the meantime, DRDO identified a vendor with the WHO formulation (Gwalior Alco Brew Pvt Ltd), which had been provided with technical support.

The company identified has the capacity to make around 20,000 to 30,000 litres of hand sanitizers per day and this will be commercially available for Rs 120/- (inclusive of GST) in different sizes of 200 ml and 500 ml.

Ventilators

With ventilators emerging as the biggest need of the hour since COVID-19 affects pulmonary functions keeping in mind the futuristic requirement. The DRDO has stepped in to help the private sector to mass produce the devices. A design of ventilators made by the Defence Bio-Engineering & Electro Medical Laboratory (DEBEL), Bangalore (a DRDO lab) had earlier been transferred to Mysore-based Scanray Technologies, Mysore that will now be mass produced.

DRDO was helping them to increase production rate and the needed critical parts. The DRDO has identified local alternatives to supply critical components.  The company has agreed to share the technology and design with other Indian companies free of cost to expand production capability. Around 5,000 ventilators will be produced in the first month and 10,000 subsequently.

Personal Protective Equipment

A protective body suit developed earlier by DRDO’s Institute for Nuclear Medicine and Allied Sciences for medical and paramedical staff to manage and evacuate causalities in the event of CBRN emergencies has now been adapted for use by medical staff and health workers engaged in combating Covid-19. The suit is washable, and has passed the ASTM International standards. The body suit can be used to manage and evacuate the causalities in the event of radiological emergencies, which has been converted as a full body suit to stop contamination. Over 10,000 such suits are being produced per day by private manufacturers and production is expected to ramp up further with more private players joining hands.

DRDO was working on providing ready-to-eat meals for the government and health workers through the Defence Food Research Laboratory, Mysuru which already supplies them to the armed forces. The Ordnance Factory Board (OFB) has also ramped up production of sanitizers, masks and body suits.

Casualty Evacuation Bags

DRDO has designed a casualty evacuation bag to transport or isolate persons infected with Covid-19. The bag is water and air-proof and treated to deal with biological agents.

DRDO hopes to transfer the know-how to private industry which has expertise in this field to manufacture them.

The bag, in the shape of a rigid cylinder, is made of non-woven, water-repellant fabric with air and waterproof zippers as well as a ventilator. It is coated with a film to cater to a chemical, biological, radiological and nuclear (CBRN) environment with requisite protection against blood and viral penetration.

DEBEL, which carries out research in aero-medical engineering and life support equipment and Nuclear, Chemical and Biological (NBC) protection systems, has developed this bag.

The size and shape of the Covid casualty evacuation bag is something akin to a fabric chamber developed by DEBEL in the aftermath of the 1999 Kargil conflict to manage patients affected with High Altitude Pulmonary Odema (HAPO). The chamber is airtight and simulates air pressure that is prevalent at lower altitudes while evacuating patients from high altitude.

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Equipment Developed by DRDO

Product                                                                                Industry

Sanitizer                                                               Gwalior AIco Brew, Gwalior

Shreenathjee Chemicals, Bhopal

Trolley Mounted Sanitizer            Ceasefire Equipment, Delhi

Aska Equipment, Delhi

Ventilator                                                            Scanray Pvt Ltd, Mysore

BEL, Bengaluru

PPE Mk2                                                              GokaldasExports, Bengaluru

Kusumgarh Corporate Ltd.

Personnel Sanitization Enclosure              DH Ltd, Ghaziabad

Personnel Sanitization Unit         Scientific Equipment Ltd, Delhi

N99 Masks                                                          INTEC Safety, Kolkata

Venus Industries, Mumbai

Full Face Shied-Visor based         iMake, Hyderabad

Non-critical medi-suit                     Medikit, Mumbai

Protection Bio-suit                                          Frontier Protective Gear, Kolkata

Portable Backpack Sanitizer         Ceasefire Equipment, Delhi

Aska Equipment, Delhi

Personal Protective Eqpt Mk1    Frontier Protective Wear Kolkata

Shiva Texyam, Coimbatore

Aeronov, Noida

Arvind Ltd., Ahemdabad

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In 2004, the cost of the project was revised to Rs.2839.00 crore with PDC of December 2009. Almost Rs 2100 crore have been spent so far.

The Comptroller and Auditor General (CAG) in its 2010-11 report said that Rs 1,892 crores had been spent over two decades on the project, but the country ended up buying General Electric (GE) engines at a cost of Rs 883 crore to power the LCAs.

The project had overshot its budget by 642 per cent without any perceptible results. The project underwent five revisions of cost, and saw a 1,013 per cent rise in its foreign exchange element since inception.

The CAG report had criticised Gas Turbine Research Establishment (GTRE) for having finally opted for a joint venture (JV) with a foreign partner, when the purpose of the Kaveri project was to indigenously develop a high performance jet engine for use on fighters.

Kaveri engine (K-9) was flight tested for the first time on November 3, 2010 by DRDO during the Flying Test Bed (FTB) trials (on board IL-76 aircraft) at Gromov Flight Research Institute (GFRI), Moscow, Russia.

The engine remains under development but has been dropped as a prospective power plant for the LCA. It is now a technology demonstrator engine for the LCA. A dry thrust only variant of the Kaveri maybe used to power the Indian Unmanned Combat Aerial Vehicle (UCAV). Also, more into the future, the Kaveri could be developed as the K-10 with the help of a foreign collaborator to power the Advanced Medium Combat Aircraft (AMCA).

Reasons for Non-completion

The following are some of the major reasons for non-completion of project within the time-schedule (as stated by defence minister Manohar Parrikar in Parliament on 30 July 2015):

•             Technological difficulties faced during development due to complexities of engine system.

•             Non-availability of raw materials/ critical components.

•             Lack of infrastructure/ manufacturing/ test facilities within the country.

•             Non-availability of skilled/ technical manpower in the field of aero-engine technology.

•             Increase in scope during development.

Core Technologies

DRDO has not been successful so far in developing the nickel and cobalt super alloys for the Kaveri turbine capable of withstanding temperatures of 1,600oC without warping.

Shaping the alloys into engine parts is an equal challenge. GTRE has learned how to make “directionally solidified” turbine blades, but it has not mastered the making of “single-crystal blades,” which are now standard.

Milestones Achieved

Although there has been delay in development of aero-engine due to reasons stated above, DRDO for the first time ventured to initiate development of aero-engine technology, which only few developed countries in the world possess. The following are some of the major milestones achieved in this programme:

•             Successful completion of 73 hours high altitude testing and 57 hours trial on FTB have proved level of technological capability and maturity.

•             Full Authority Digital Engine Control (FADEC) System has been designed, developed and qualified indigenously.

•             Twelve materials have been indigenously developed and type certified.

•             Total of 9 Kaveri prototypes and 4 Kaveri core engine prototypes have been developed and accumulated more than 2550 hours of engine testing.

•             Kaveri engine was integrated with IL-a6 Aircraft and flight-tested.

•             Tacit knowledge acquired by the scientists are being applied in aerospace technology and other disciplines.

Indian Eco-system

The Indian aircraft industry is dominated by one big public sector player – Hindustan Aeronautics Ltd (HAL). It is supported by DRDO’s several establishments and laboratories, notably GTRE and Aircraft Development Authority (ADA) as well as National Aeronautics Laboratory (NAL).

HAL’s engine division has a long history of licenced-production of various imported designs. HAL has been making aero engines under licence from Russia for its MiG-21 and Sukhoi-30 fighters, with Britain’s Rolls Royce for Jaguars and advanced jet trainer (AJT) Hawk and Shakti aero engines for its advanced light helicopter (ALH) Dhruv.

Assembling and overhauling are not the same thing as designing and developing aeroengines. It has not taken up jet engines for fighters so far. HAL has taken up the design and development of the following aero engines:

•             25 kN Turbofan Engine. The design and development of 25 kN Turbo fan Engine are expected to meet the requirement of engines for basic/ advanced military trainers, small business jets and also for large UAV applications. Core-2 engine run was successfully carried out in January 2018. Development effort of this engine will enable the country to achieve self-reliance in design of this class of engines and technologies thus mastered would be further leveraged to design and develop higher thrust engines for modern fighter aircraft.

•             1200 KW Turboshaft Engine. HAL has also taken up the design and development of 1200KW Turboshaft engine which would be used as power plant for three to six-ton category helicopters. HTSE-1200 engine technology demonstrator is assembled and inaugural test run successfully carried out on February 12, 2018. Maximum speed archived so far is 76% of the RPM. Engine light up under hot and cold conditions was successful.

Until 1991, private companies were not permitted to operate in the aircraft industry. HAL has grown but being government-owned and run, it has suffered from the ills of bureaucracy and reliance on government funds and orders.

Comments

GTRE took over three decades to design and develop the Kaveri aero engine for the indigenous Light Combat Aircraft (LCA) Tejas, but it could not be used for want of the required thrust and overweight. As the tests failed to meet the required parameters to fit into the LCA, General Electric (F404-GE) engines are used for the Tejas fleet.

It can be said that the IAF put the cart before the horse, in that, the LCA design and development started without a proven engine around which to develop the aircraft. On the other hand, GTRE took a bigger bite than it could chew, without the infrastructure and testing facilities, technology or skills and with very little funds to make an ambitious jet turbine engine, which is more complex than rocket engines. Meanwhile, over years of delay, the requirements of the IAF went up to 70-75 kN or dry thrust and 100-110 kN of wet thrust.

Considering the fleet replacement programmes, modernisation strategies and aircraft upgrade projects of the Indian Air Force coupled with increasing defence expenditure, the Indian military aircraft engines market is poised to grow year-on-year. Some of the major engine procurement programmes in the near future will be for the Avro, An-32, LCA Tejas, AMCA and these entail procurement of around 3400 to 4000 engines.

The Indian Armed Forces have embarked on the largest helicopter procurement programmes and their requirements aim at strengthening the military helicopter assets through the procurement of 1000 plus rotary-wing platforms including attack, utility, multi-role and airlift platforms by the end of 2027. Projections are that the country would need 4000 to 6000 helicopter engines by 2020.

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Partnership with SNECMA

Even before the engine was flight-bed tested in 2010, DRDO offered to co-develop and co-produce 90 kN thrust class of upgraded Kaveri engine with Snecma, France to meet the operational requirement of Light Combat Aircraft (LCA), Tejas with 48 months from the date of project inception. The modified Kaveri engine proposal provided comparable thrust throughout the flight envelope of Tejas. Minimum changes were required in the airframe to integrate this engine without affecting the weight and configuration of Tejas. Indian Air Force. Indian Air Force has suggested a proven engine that was already in production and flight worthy for meeting immediate requirement. A Request for Proposal (RFP) has been issued to reputed engine manufacturers.

Snecma had developed the M88ECO a development of the M88-2 engine which powers the French Rafale. The M88-2 has a thrust of 50 to 75 kN and full authority digital engine control (FADEC) for carefree handling anywhere in its operating envelope.

Defence minister AK Antony, confirmed in Parliament on 22 November 2011 that DRDO “is negotiating with Snecma, France for co-development and co-production of Kaveri Aero Engine for the Light Combat Aircraft (LCA) Tejas Mk-II.” But on 4 January 2013, it was reported that the MoD had decided to float tenders to identify a foreign collaborator for improving thrust of the Kaveri engine since Snecma was a single-vendor case and it wanted to select a partner through competitive bidding.

Ironically GTRE sought a technology partner to develop a more powerful Kaveri engine “quickly and to become self-reliant in engine design to avoid the next cycle of engine development which could take another 15-20 years.” But the opposite of that happened.

The process for selecting a partner willing to share core technologies is still under way.

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The HF24 Story and the Missed Opportunity

In 1956 India decided to design and develop a supersonic fighter, the HF-24 Marut. It was agreed with Egypt that India would develop the air frame and Egypt would jointly develop the jet engine with India. The IAF wanted it to be a twin-engine supersonic fighter with Mach 2.0 speed.

World over aircraft were designed around a proven engine. The user would first decide on the class of the fighter, say 10 or 15 tons and select a suitable, tested and reliable engine with the required thrust and then design the airframe around it with weight to spare and space to cater for later developments. Our designers placed the cart before the horse – they went about designing the plane with no suitable engine in mind.

In the 1960s, the very successful ‘Sabre killer’ Gnat was inducted into the IAF. It was powered by a Rolls Royce Orpheus 703 engine with dry thrust of 20.9 kN. Rolls Royce was also developing an improved version of the engine that would provide a thrust of 35.6 kN to power the improved Gnat for the RAF. When the RAF decided not to go for the improved Gnat, the Rolls Royce project was also in limbo. Rolls Royce offered to jointly develop it with India for the HF-24 for a reported cost of $3 mn. This option was rejected. Meanwhile, the Eqyptian effort to produce a suitable engine for the HF-24 Marut failed. India looked at the Russian Tumansky engine, which was suitable, but rejected it on flimsy grounds.

With no other choice, the HF-24 Marut got the Orpheus 703, which was being assembled in India for the Gnat. It was the death knell of the HF-24 Marut. It remained underpowered and was phased out after by 1990, all because of lack of synergy and understanding between the military, bureaucracy, politicians and scientists.

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The Pune-based Kalyani Group, which has made a major foray into the field of artillery gun systems, is pitching strongly to supply artillery gun systems to the Saudi Arabian military.

Two types of gun systems, both designed and developed by Kalyani Group, will be sent later in 2020 to Saudi Arabia, for trial evaluation by the Royal Saudi Army in the harsh Saudi Arabian desert. The guns include the so-called Bharat 52, a 155mm/52 calibre towed howitzer that is the first gun the Kalyani Group built. Saudi Arabia will also evaluate the Garuda V2, a 105 mm gun mounted on a light vehicle chassis for added mobility.

Kalyani Group, by virtue of its organic skills in metal castings and forgings, is playing the larger role, including building barrels for its own, as well as Tat Advanced Systems’ gun.

Initial Operational Clearance for HAL Light Utility Helicopter

The Hindustan Aeronautics Limited (HAL) has received the initial operational clearance (IOC) for its light utility helicopter (LUH), paving the way for its production.

There is requirement of some 484 light copters for the three armed forces and the LUH is expected to fill in with at least 187. However, there is no order for manufacturing so far from either the Indian Air Force or the Indian Army.

The LUH is a single engine, lightweight, highly agile 3-tonne utility helicopter, indigenously designed and developed to meet the operational requirements of Indian Army and the IAF.

The nimble 3-tonne LUH began development in 2009 and first flew in 2016. In just four years, the machine has proved itself admirably in trials in super-high altitude regions like Leh and the hot deserts.

The LUH will replace the Army and Air Force’s fleet of over 200 vintage French-designed Cheetah and Chetak helicopters that have been in service for over 50 years. Navy Chetaks will be replaced by the Naval Utility Helicopter project being steered under the Strategic Partnership project.

The IAF and the Army need 384 light utility helicopters – at least 184 of these will be built by HAL and the remaining 200 machines by the Ka-226 being built by an Indo-Russian joint venture. These procurements will of course be dictated by available budgets.

Show-cause Notice to Reliance Naval

In fresh punitive action against the Anil Ambani-promoted Reliance Naval and Engineering Limited (R-Naval) the government has issued a show-cause notice to the debt-ridden company and encashed all its different bank guarantees worth around Rs 980 crore, for its failure to deliver five naval offshore patrol vessels (NPOVs) under a Rs 2,500 crore deal,

R-Naval will have to explain within a month why the contract inked in May 2011, under which the five 2,000-tonne NPOVs were to be delivered from 2014-2015 onwards, should not be cancelled forthwith.

R-Naval had earlier been taken to the National Company Law Tribunal (NCLT) by the IDBI Bank for debt-resolution, with the latter also recently filing an application to initiate insolvency proceedings against the company.

R-Naval had inherited the contract for the NOPVs, the largest such warship deal awarded to the private sector, after it acquired Pipavav Defence and Offshore Engineering Company Ltd, which had gone under heavy debt, in 2015.

The work at the Pipavav shipyard in Gujarat had earlier come to a grinding halt but there was some progress after R-Naval took over the reins, with the first two NOPVs, Shachi and Shruti, being “launched” in July 2017.

R-Naval had also announced grandiose plans of constructing even bigger warships and submarines for the Indian Navy as well as servicing and repairing warships of the US Navy’s Seventh Fleet stationed in Japan. But no such plans actually materialized on the ground.

In December 2018, the then Navy chief Admiral Sunil Lanba had dismissed any talk of “preferential treatment” being given to R-Naval, stressing that some of its bank guarantees were being encashed as a penalty against failure to deliver the OPVs in time.

Boeing Looks to Accelerate Manufacturing

US giant Boeing said, on 6 February, that it was looking to accelerate manufacturing engineering and services, develop a globally competitive aerospace workforce besides investing in innovation, digitisation, research and technology.

Boeing highlighted future investments to accelerate its “Make in India” efforts and the capabilities being proposed for the Indian armed forces, specifically the next generation F/A-18 Block III Super Hornet fighter.

The F/A-18, on offer to the Indian Navy, is fully compatible with the carriers and will boost the growing maritime and defence relationship between the US and Indian navy.

Boeing also affirmed its commitment to provide its defence customers with data-based information for empowered decision support and optimisation of operations and missions.

The Boeing India Engineering and Technology Center in Bengaluru and Chennai undertakes advanced aerospace work and supports Boeing’s global engineering growth. Boeing has made strategic investments in an upcoming wholly owned engineering and technology campus with future avionics manufacturing and assembly capability in Bengaluru.

Boeing Mulls F-15EX offer to India

Boeing is contemplating pitching the F-15EX to New Delhi for one of the country’s long-running fighter procurements – a contest in which its F/A-18E/F is already competing.

The company has requested US government clearance to offer the twin-engined type for an Indian air force requirement for 110 fighters, while it continues to offer the F/A-18 Super Hornet to both the Indian navy and Indian air force, and our F-15 is experiencing a resurgence in interest in the US and around the world.

The licence will allow Boeing to discuss the F-15EX with Indian officials in compliance with the USA’s International Traffic in Arms Regulations.

Boeing’s move would see it offer the latest EX variant of the long-running F-15 to New Delhi. Enhancements over previous iterations include a active electronically scanned array radar and improved payload.

The potential entry of the F-15 into the contest is the latest twist in yet another convoluted Indian procurement exercise. After the collapse of its Medium Multi-Role Combat Aircraft (MMRCA) fighter acquisition in 2015, New Delhi rebooted the requirement, initially as an acquisition of a single-engined type, which was later broadened to include twin-engined aircraft.

Likely contenders for the new, poorly-defined requirement already represent a virtual who’s who of combat aircraft. They include the single-engined Lockheed Martin F-16V – dubbed the F-21 for the Indian contest – and Saab Gripen E/F, alongside the twin-engined Dassault Rafale, Eurofighter Typhoon, and Super Hornet. Russia is also likely to offer the RAC MiG-35 and Sukhoi Su-35.

In addition, there is a separate 57-aircraft requirement for the Indian Navy, which Boeing is also addressing with the F/A-18E/F.

For the air force offer, competitors have made much of their willingness to offer New Delhi generous industrial participation, in line with the “Make in India” programme.

IRHL Aims to Achieve 70% Localisation of Kamov Copters

India aims to achieve the target of 70 per cent local content by the time the last of the Russian-origin Kamov 226T helicopter is delivered, The Russian Helicopters Holding Company (part of Rostec State Corporation) signed a roadmap with the IRHL, on 6 February, for localisation of Ka-226T helicopter production in India.

The first batch of helicopters will come out of our production facility at Tumkur in Karnataka by 2025 if everything goes as per plan. The Defence Acquisition Council of the Ministry of Defence was expected to give a go-ahead to the signing of a formal contract.

The roadmap reflects timelines for setting up production facility in India, contracting with suppliers, transferring design documentation, supplying technological equipment and machine kits, training Indian personnel and other key stages of the project to localise production of Ka-226T.

The copter had two sources of parts – Russian origin and western origin. Around 74 per cent of the copter is of Russian parentage. Its engine is from Safran France.

For the 140 copters to be made in India, the Russian part of the content will be indigenised in phases. We will have 70 per cent local content in place of Russian components by the end of phase IV of production. This will include the technology for rotors.

Indo-Russian Helicopters Limited is a joint venture of Russian Helicopters, Rosoboronexport and the HAL. The company was registered in India in May 2017 as part of a project to localise production of Ka-226T helicopters.

HAL Needs New Orders to Keep Going After 2021-22

Hindustan Aeronautics Limited (HAL) is betting on the Indian Air Force (IAF) to place the Rs 39,000 crore order for 83 Tejas LCA Mk 1A. As part of its existing orders, HAL has to supply 24 LCA jets and a few Sukhoi-30s to the IAF.

 HAL’s order books are empty beyond 2021-22 and new orders from the armed forces are critical for continuity in production, the government has told Parliament’s standing committee on defence.

Another order that HAL is eyeing is the supply of 70 locally produced basic trainers to the IAF. If it gets the order for the Hindustan Turbo Trainer-40 (HTT-40), HAL could begin production of the trainers by early 2021.

HAL’s production over last several years has been growing with highest turnover of Rs 19,705 crore recorded in the financial year 2018-19. However, the major part of existing orders for supply of aircraft and helicopters will be liquidated shortly with the major manufacturing order of Su-30MKI being completed in 2019-20.

Considering production/procurement lead time of 18 to 24 months involved in the manufacture of aircraft/helicopters, the existing facilities at HAL face the threat of idling and production will show a declining trend for want of confirmed orders.

Out of the 40 LCAs already ordered by the IAF, 16 have been deliveredin the initial operational clearance (IOC) configuration.

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