Indian Defence Review

There is near unanimity in public perception of the Indian public sector involvement in aerospace and defence, be it the bloodsucking Defence Research & Development Organisation (DRDO) gluttonously gorging itself on 6.3 per cent of the total defence budget or the dinosauric Hindustan Aeronautics Limited (HAL) with a gigantic size of infrastructure and manpower, but diminutive and mediocre productivity. The perception is that these government machineries can never become productive, their exceptionally appalling work culture cannot be changed, their internal inefficiencies cannot be nudged towards acceptable levels of professional competence and their self-perpetuating hold through the bureaucratic and technocratic dispensation at the central government level is unshakable.

There are a couple of success stories, the most prominent one being Indian Space Research Organisation (ISRO) but that exception itself is evidence of the role bureaucracy plays in the public sector; ISRO was always under the Prime Minister’s Office (PMO) and was never subjected to the manipulations and machinations of the bureaucracy. As its budget was overseen by the PMO and as it was accountable to the PMO for projects, timelines and productivity, it evolved as a success story. As for the bulk of the public sector, productivity has been unremarkable. This sorry state of affairs was further compounded by the fact that the government patronage to public sector denied to the private sector an equal opportunity. National security concerns were invoked as alibis for keeping the private sector away from big ticket requirements for defence production. Even after the government’s languid cogitative processes realised that the aerospace and defence sectors were afflicted by dual ailments of public sector inefficiency and private sector exclusion, the initiatives taken to redress the state of these two sectors have shown unexceptional results. This article looks at the major players, the opportunities and the impediments related to private sector participation in aerospace and defence sectors.

Private Players

Aero India Air Show 2019 saw an impressive display of Indian companies in the private sector with Tata Aerospace and Defence occupying one of the largest display stalls of the Air Show. More than 600 Indian and 200 foreign companies participated and witnessed the largest Air Show in Asia. If orders are to be used as a measure, those signed at the Air Show did not impressively showcase Make in India. Even the deals signed were more for international end users and not so much for Indian needs. However, the accomplishments of private companies in the aerospace and defence sector are gradually becoming noticeable; some prominent ones are discussed here to get an insight into their future prospects.

JRD Tata, the founder of the Tata Group, is often called the father of Indian aviation. Apart from being the first Indian to receive a pilot’s license in India, he started India’s first civil airline. Last year, Tata Sons Ltd. announced that it was consolidating its various business interests across aerospace and defence verticals under Tata Aerospace & Defence (Tata A&D). These include mobility solutions, aerospace, weapon systems, sensors and Command, Control, Communication, Computers and Intelligence (C4I). Tata A&D was projected as an outfit drawing synergies from entities across the group, including Tata Motors Ltd’s defence division, TAL Manufacturing Solutions Ltd. (a subsidiary of Tata Motors), Tata Power’s strategic engineering division, Tata Advanced Materials Ltd. (TAML) and Tata Advanced Systems Ltd. (TASL). The stated aim was of course to design and develop equipment and platforms uniquely suited to the Indian defence forces.

In the past, the company tied up with Honeywell International to build defence navigators. Tata Boeing Aerospace Ltd. (TBAL), a joint venture between TASL and Boeing Company, the world’s largest aerospace company, was inaugurated in Hyderabad last year as a facility to produce fuselages for AH 64 Apache attack helicopters. The related partnership agreement was signed as far back as in 2015, and Boeing is shifting its Apache attack helicopter manufacturing to TASL from its current supplier Korean Aerospace in South Korea. TASL also has a partnership agreement with Boeing to develop Unmanned Aerial Vehicles (UAVs). It has also tied up with Lockheed Martin, an American aerospace and defence major that manufacturers the F-16 fighter jets. Lockhed Martin is also pitching for the Indian Air Force’s (IAF’s) new fighter deal or for a possible tie-up with Saab, should the deal favour Gripen.

The Tata Group has already demonstrated the capability to build aero structures such as those for Sikorsky helicopters, Pilatus trainers and the Lockheed Martin C-130 tailplane. Several Tata factories in Hyderabad work for different aerospace and defence companies and are fully functional separate units with high-grade security. Many of the arrangements outlined above are a part of the mandatory 30 per cent offset obligations foreign defence manufacturers have to invest in India. For example, Pilatus moved its manufacturing to Tatas from Poland-based PZL-Swidnik under the offset clause related to the Pilatus PC7 sale to the IAF.

Tata companies have proved reliable, punctual and assured quality partners for such deals. In addition, the cost of production has been cheaper than from foreign companies. Indeed Tata’s reputation has built up in a manner that would assure orders and collaborative partnerships even beyond the offsets stage. Already, Tatas are trying to move up the value chain. Tata Lockheed Martin Aerostructures Limited (TLMAL), a joint venture between TASL and Lockheed Martin Limited, is producing – as the single source – empennage assemblies for all new CJ130J Super Hercules aircraft being produced in the United States (US). The hundredth one was delivered just before the Aero India Air Show 2019. To put things into a clearer perspective, the empennage assembly has about 2,300 parts of which around 2,100 are being manufactured in India.

Another Tata company, TAL Manufacturing Solutions Ltd (TAL), a wholly-owned subsidiary of Tata Motors, is commercially producing Advanced Composite Floor Beam (ACFB) for Boeing Company for its 787-9 and 787-10 Dreamliner aircraft. These ACFBs are shipped out of the aerospace manufacturing facility located in MIHAN SEZ, Nagpur and currently, TAL is the only non-US facility to supply ACFBs to Boeing. TAL also has an exclusive contract with aerospace firm RUAG for supplying parts that will go into A320 planes made by Airbus SAS. The contract with RUAG is worth $170 million for making 550 sheet metal, machine parts and sub assemblies, which are fitted in to the Airbus A320 family of aircraft. Thus TAL is working with leading edge aerospace technology with two leading airplane makers. The company has tied up with Airbus to build 56 aircraft for the IAF. It also announced the delivery of components for fifteen CH-47F Chinook helicopters to Boeing. These will be configured and delivered to the IAF.

TASL also bagged one of the largest projects under the ‘Make in India’ initiative. It will team up with the world’s largest defence contractor, Lockheed Martin, to make F-16 fighter aircraft. At the 2019 Aero India Air Show, DRDO displayed two models of the C295 – a Multi Mission Maritime Aircraft (MMMA) for the Coast Guard and an Airborne Early Warning & Control (AEW&C). If the projected requirement of 62 aircraft for the IAF and six for Coast Guard is approved, it is possible that the first 16 would be built by Airbus and the rest by TASL in India.

Set up in 2017, Dassault Reliance Aerospace Limited (DRAL) is a joint venture between Anil Ambani’s Reliance Group (51 per cent stake) and Dassault Aviation SA, an aircraft manufacturing subsidiary of Dassault Group. At its Dhirubhai Ambani Aerospace Park manufacturing facility in Nagpur, it is producing components for business jets of Dassault. It completed its first Falcon 2000 cockpit front section and is establishing infrastructure to produce complete Falcon 2000s by 2022. Although Dassault has not committed to shifting all its Falcon 2000 production to DRAL, the small numbers to which Falcon 2000 production has dwindled down to, is indicative that it might well happen. Indeed, shifting its production to DRAL may bring down the cost of production marginally, thus making it more attractive to prospective customers. DRAL was established to cater to Dassault’s projected offset obligations from the 36 Rafale order hanging fire since 2016. Eric Trappier, CEO Dassault Aviation has reportedly stated that if the 36 Rafale order was followed through with another order for more Rafale jets, Dassault would consider producing them in India. Reliance Naval and Engineering Limited (RNAVAL), formerly Reliance Defence and Engineering Limited/Pipavav Defence and Offshore Engineering Company Limited, has the largest engineering infrastructure in India and is one of the largest in the world. RNAVAL is the first private sector company in India to obtain the license and contract to build warships, although it is currently not doing well.

Dynamatic Technology Limited is a Bengaluru-based world-class design, engineering and manufacturing company which designs and builds highly-engineered products for hydraulic, automotive, aeronautic and security applications. It is a leading private R&D organisation with numerous patents and inventions to its credit and its partners include Airbus, Boeing and Bell Helicopter. It is a single source supplier for power and mission cabinets for Boeing P8 Poseidon aircraft. It also has a long term contract with Boeing for Chinook CH 47 helicopters for which it builds critical structures – aft pylon and cargo ramp, which are fitted on its fuselage. More than 75 structures have been delivered to Boeing so far. It is also the global single source for beams on the Airbus A320 family and for A330. All the control surfaces of the Indian-built Sukhoi Su30 MKI are built by Dynamatic for HAL with which it has been partnering for more than two decades. Dynamatic has also won the contract for manufacture of the main fuselage structure for the Light Combat Aircraft (LCA) Tejas. It has signed MoUs with Russian helicopters for the Kamov and with Saab for manufacture of fighter aircraft in anticipation of the Gripen being selected for the IAF’s search for 114 fighters.

The Mahindra Group’s entry into defence industry was through its Jeep vehicle to which it has gradually added land and naval systems, defence electronics and communication systems. Mahindra Defence is developing the iconic ultra-light Howitzer battlefield guns in partnership with the British company BAE Systems. It has shown interest in aerospace for more than a decade and ventured into it through Mahindra Aerospace in 2008, acquiring Gipps Aero and Aerostaff, Australia in 2010. It has a manufacturing plant near Bengaluru since 2013, and manufactures airframe parts and assemblies. Among its successful projects was the development of a new utility aircraft – the C-NM5 – together with India’s National Aerospace Laboratories (NAL) in a first of its kind co-development effort. This multi-mission five-seater civil aircraft saw the light of day in 2011, when it was flown at the aircraft production facilities of Mahindra Aerospace in Australia.

Mahindra Aerostructures has also signed a long-term contract with Airbus SAS to manufacture and supply components for A320neo and A350XWB. In 2016, it set up a new firm, naming it Mahindra Airways Ltd. and leaving watchers guessing about whether it had ambitions in the civil aviation business or in aerospace infrastructure. Its civil aircraft business, based in Australia, currently produces Airvan 8, a versatile utility aircraft, sold across 30 countries and it has also launched a ten-seater turboprop, Airvan 10 at the Paris Air Show in 2017. Last year, Boeing entered into a partnership with Mahindra Defence Systems Ltd. (MDS) and HAL for the manufacture of the F/A 18 Super Hornet fighter aircraft in India.

Larsen & Toubro (L&T) had begun work with DRDO on several defence projects but security concerns and the step-motherly treatment meted out to private players in defence projects, meant an early exit for L&T. With changes in the dispensation, L&T has made an entry again into the defence sector and is currently one of India’s leading private suppliers of defence equipment and systems. The company provides indigenous, design-to-delivery solutions in defence that include land-based weapon launch systems, air defence and artillery systems and upgrades, to naval weapon launch systems with fire control solutions, bridging systems, communication, avionics, C4I and missile systems. Its facilities include a state-of-the-art Greenfield Shipyard at Kattupalli (near Chennai), a shipyard at Hazira, a Strategic Systems Complex at Talegaon (near Pune) for assembly and integration of land and naval weapon systems, a Precision Manufacturing and Systems Complex in Coimbatore, which produces precision airframe assemblies, components and sub-systems for missiles and aerospace, and a Strategic Electronics Centre at Bengaluru which undertakes production of military communication systems and avionics. It has a 51:49 Joint Venture (JV) with MBDA Missile Systems of France. This is viewed as a notable achievement. As part of this JV, L&T will develop missile and missile systems for the Indian armed forces.

In 2013, Wipro Infrastructure Engineering (WIN) set up India’s first Aerospace actuator manufacturing facility at the Devanahalli Special Economic Zone in Bengaluru. In 2016, WIN acquired HR Givon Ltd., an Israeli aerospace company manufacturing metallic parts and assemblies for the aerospace industry and running three manufacturing plants, two in Israel and one in the US. Two years ago, WIN and Israel Aerospace Industries (IAI) entered into a strategic alliance for the manufacture of composite aerostructure parts and assemblies. The objective is to have a manufacturing facility that will meet the requirements of international aircraft OEMs and Tier I suppliers. The tie up with IAI is seen by WIN as a step towards achieving a high pedestal in the aerospace industry.

The Kalyani Group, known for its company Bharat Forge which claims to be the largest forging company in the world, entered defence manufacturing seven years ago through Kalyani Strategic Systems and is making advances towed artillery guns for the Indian Army which are under user trials. Once complete and inducted, the Kalyani Group will produce 150 units. It also makes and exports aero defence systems to Israel’s Rafael Advanced Defence Systems and is looking for opportunities in manufacturing jet turbo engines and drones for the Indian defence market. Its strength lies in metallurgy which is a weak area for Indian private players. It supplies jet engines that are used in tanks and is looking to develop engines that can be used for helicopters. So far, it has no plans to enter into aero structures and aerospace.

The Adani Group is aggressively eyeing aerospace and defence industries and has acquired five defence ventures in the past, the latest being Alpha Design Technologies Ltd. which has partnerships with key manufacturers in Russia and Israel in the areas of defence and space ranging from drones to helicopters and simulators. It is also a supplier for the LCA Tejas. Adani Defence is also working with Israeli Elbit Defence Systems and has set up a facility with Elbit in Hyderabad for producing the Hermes 900 drones which would be exported to Israel and have also been offered to the Indian military. It also has a joint venture with US-based Rave Gears and Punj Lloyd for the manufacture and assembly of high precision gears and transmission systems for helicopters. For the 114 fighter aircraft quest for the IAF, Adani has entered into collaboration with Saab in 2017, for the possible production of Gripen in India, should it get selected.

Punj Lloyd, mentioned above is also a private player with potential in defence and aerospace sectors. It has interests in small arms, homeland security, land-based systems, defence aerospace and component manufacturing and ambitions in making it big in defence and aerospace under Make in India. Godrej Aerospace has had a partnership with Rolls-Royce since 2014, and announced last year that it had won a Rs 200-crore, five-year contract with Rolls-Royce for manufacturing products such as unison rings, complex fabrication and external brackets commodities which would lead to the shipment of 600 different parts spread across various Rolls-Royce civil aerospace engine portfolio. Godrej Aerospace has also set up a centre of excellence in Mumbai for the manufacture of aerospace brackets.

Another company worthy of note is Aequs Aerospace specialising in precision machining for aero-systems, aero-structures, landing gear and engine components, sheet metal fabrication, forging, surface treatment, aero-structure assembly along with testing and prototyping of components. Located in Aequs Special Economic Zone (SEZ), Belagavi, it offers a fully capable manufacturing ecosystem claiming to be the largest aerospace capability in India’s private sector. Its core business is precision machining of aerostructure and aerosystem components with machining capabilities that follow robust systems and processes approved by major OEMs and global aerospace companies. Its customers include global industry leaders such as Airbus, Boeing, Safran, Collins Aerospace, Eaton, Honeywell Aerospace, Dassault, Saab and GKN (Fokker), amongst others. Since 2009, it has been producing machined parts for Airbus – single-aisle, long-range, and large aircraft including wing leading edge sub-assemblies for its A380. It has been delivering titanium machined parts for the A320neo since 2016, when it also received the Airbus Innovation Award for its ecosystems of efficiency. Its notable achievement is its recognition as a top Detailed Parts Partner (D2P) by Airbus for three years in a row since 2016.

The Maini Group, known for India’s first electric car Reva, has also forayed into aerospace starting with its automobile plant and then setting up a separate plant for aerospace in end-2017. Maini Precision Products (MPP) is the company that handles the aerospace sector producing precision components and sub-assemblies used in aero structures, aero engines and aircraft systems.

Team Indus is a Bengaluru-based aerospace company deserving a special mention as it is possibly the only one related to the ‘space’ part of aerospace. A last minute entry into the Google Lunar X Prize mission announced in 2007, it is India’s first privately funded moon mission to develop low-cost space exploration robots. The prize is for the first privately funded team to place a spacecraft on the moon surface, travel 500 metres on the surface and send back videos and photos from the moon. Team Indus has already developed the exploration robot and received a reward of $1 million for testing its landing system and is now preparing for the moon landing. Another private start up, Accreate Labs & Innovation is all set to produce 3D printed User Interface Panels for ISRO.

As mentioned earlier, the private companies listed above are not the only ones with the potential to take Indian aerospace and defence sectors to the top of the international market; there are many more with a large number of Micro, Small and Medium Enterprises (MSMEs) increasingly contributing to these sectors through sub-contracts. However, as can be seen clearly from the repertoire outlined above, most of the productivity of Indian private companies is actually contributing to international companies; only a small portion is directed at Indian aerospace and defence sectors.

Conclusion

According to a five-year report by Stockholm International Peace Research Institute (SIPRI), India is the world’s second largest arms importer after Saudi Arabia. However, it was the largest until last year and the drop to second position this year, as pointed out by analysts, is largely due to delays in deliveries by foreign suppliers. The Defence Sector was opened up to the private sector in 2001, but bureaucratic and complex processes prevented large-scale private sector participation. The ‘Make in India’ programme announced in 2014, the Defence Procurement Procedure 2016 (DPP 2016), the strategic partnership policy promulgated in 2017 and a new DPP released just before DefExpo 2018, have been some of the initiatives of the government to get the private sector to take a larger chunk of the aerospace and defence pies. However, self-reliance in these sectors, the laudable objective of all government policies and initiatives, remains a distant dream for the time being.

Indian Defence Review Apr-Jun 2019 (Vol 34.2)
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The ‘Make in India’ and ‘Skill India’ are programmes with laudable objectives, but with unremarkable success so far. Government endeavours to encourage private participation are visible in other initiatives too. The DPP 2016 has been modified continually to simplify processes and make them more industry-friendly. Aware that a large base of domestic manufacturing industry is crucial, the government has introduced in the DPP the strategic partnership model allowing collaboration with overseas companies to manufacture everything from submarines to fighter jets in India thus opening the doors for Indian companies to form joint ventures with multinational OEMs. The aim is to increase the number of companies that offer high-quality and innovative solutions at a low cost as some Indian companies are already doing. Aerospace manufacturing sector is complex, capital-intensive, has high technological requirements and demands long gestation periods. Europe and the US are far ahead of India and to close that gap, private participation with willing government collaboration is essential.

As an illustration, the future of LCA Tejas is being hitched to private participation. Reportedly, L&T is to work on its wings, Dynamatic Technologies on its front fuselage, VEM Technologies on the centre fuselage and Alpha Design Technologies on its rear fuselage. Hindustan Aeronautics Ltd. (HAL) will, of course, undertake the final assembly. Then there is the big opportunity with 36 Rafale jets and 114 MMRCAs where both these sectors stand to gain with offsets/Transfer of Technology. With a healthy ecosystem for aerospace and defence manufacturing and around 3,000 MSMEs exclusively focused on aerospace and defence, India has the potential to become an international hub for these sectors. More importantly, self-reliance in these two areas is critical if the Indian economy is to grow steadily and reach the fifth position globally. Hopefully, the ongoing government initiatives will start showing some results and private sector efficiency will supplant public sector tardiness in the future – the sooner the better for India.