Indian Defence Review

There are two concerns which need to be addressed to make Strategic Partnerships contribute in a meaningful and time-bound manner. The first and foremost concern is the lack of institutional capacity and ability to guide the new process to its logical conclusion. In the past, several promising measures, especially those connected with the ‘Make’ and ‘Buy and Make (Indian)’ procedures, have failed to yield the desired results because of these shortcomings. Although the new Chapter VII of DPP talks of “an appropriate institutional and administrative mechanism” besides “adequate expertise in relevant fields of procurement, contract law and Transfer of Technology (ToT) arrangements”, much would depend on how they unfold. Needless to say, it is the lack of reforms in the structures and decision-making processes surrounding procurement and production that have inhibited the development of a strong defence industry.

On May 31, 2017, in a major policy reform intended to promote ‘Make in India’ in defence manufacturing, the Ministry of Defence (MoD) announced the much-anticipated Strategic Partnership model for the Indian private sector. The model, whose concept was first suggested by the Dhirendra Singh Committee in its July 2015 Report, populates Chapter VII of the Defence Procurement Procedure 2016 (DPP 2016). It visualizes designating a few private companies as Strategic Partners (SP) that would not only assume the role of system integrators, but also lay a strong defence industrial foundation by making long-term investment on production and R&D infrastructure, creating a wider vendor base, nurturing a pool of skilled workforce and making a commitment to indigenisation and technology absorption.

The aim of this model is to enhance India’s self-reliance index in defence procurement. This continues to remain at an abysmally low level, despite a huge defence industrial complex, much of which is managed by state-owned Defence Public Sector Undertakings (DPSUs) and the Ordnance Factory Board (OFB). The strategic partnership model seeks to identify a few Indian private companies as Strategic Partners who would initially tie up with a few shortlisted foreign Original Equipment Manufacturers (OEMs) to manufacture big-ticket military platforms. In the initial phase, the selection of SPs would be confined to four segments: Fighter Aircraft, Helicopters, Submarines and Armoured Fighting Vehicles (AFV)/Main Battle Tanks (MBT). In each segment, only one SP would generally be selected, as per the revised DPP. However, going back in time, the manufacture of components, assemblies and sub-assemblies was thrown open to the private sector in 1991.

With a view to promote defence-industry partnership, in 1998, the MoD constituted six Joint Task Forces in collaboration with Confederation of Indian Industry. Consequent to their recommendations, the Government opened up defence production to the private sector in January 2002. It allowed 100 per cent private equity with 26 per cent Foreign Direct Investment (FDI). It was a major policy change. Subsequently, the Department of Industrial Policy and Promotion (DIPP) issued detailed guidelines for the issuance of licence for the production of arms and ammunition.

Constituted in 2004, the Kelkar Committee made several radical recommendations. The Government had accepted a majority of them but their implementation somehow lacked earnestness and focus. And the DIPP in consultation with the MoD, , had issued 37 letters of intent for the manufacture of various types of military hardware which included armoured and combat vehicles, radars, electronic warfare equipment, warships, submarines, avionics, military aircraft, safety and ballistic products, armaments and ammunition.

Despite the above measures, there was no discernible change in the ground situation. Only a handful of India’s top companies got involved in small value defence contracts. The private sector had to remain content with the supply of some low-tech items to the public sector. Their supplies to DPSU and Ordnance Factories grossed over `1,200 crore and `1,900 crore respectively in the year 2013-2014, the last year the previous government was in power. However, while these figures do signify the contribution made by the private sector, they also highlight the fact that the private sector continues to be merely an outsourcing base for the public sector. Given decades of insulation and prejudices, this was no small achievement. But old mindsets, complexities of complex procurement procedures and clout wielded by the public sector, have been acting as major deterrents to any meaningful participation of the private sector. New aspirants in particular, find the whole regime to be highly forbidding. However, there was seen a renewed interest and this was stoked by the government’s ‘Make in India’ campaign. Prime Minister Narendra Modi and the previous Defence Minister and now, Goa Chief Minister, Manohar Parrikar’s statements about the manufacture of defence equipment were at the core of this initiative.

In February 2015, Prime Minister Modi said at the Aero India Airshow in Bengaluru that the country imports nearly 60 per cent of its defence equipment, spending tens of billions of dollars. Even a 20 to 25 per cent reduction in imports could create additional 100,000 to 120,000 highly skilled jobs in India, he had stated. Since then, the private sector has shown vigour and initiative for this national dream. Private players such as Larson & Tubro, the Tata Group and Reliance Industries are just a few leading examples amongst many in the defence industry undertaking joint ventures with Original Equipment Manufacturers (OEMs) to manufacture weapons and platforms in India. Have they assumed the role of systems integrators to lay a strong defence industrial foundation by making long-term investments in production and R&D infrastructure, creating a wider vendor base, nurturing a pool of skilled workforce and making a commitment to indigenisation and technology absorption as envisioned in the new policy of May 2017?

In times to come, these leading conglomerates will definitely assume the role of systems integrators provided the Government of India carries out structural reforms and enhances the capacity of the MoD to handle ‘Make in India’ earnestly. A brief overview of the initiatives, undertaken by the private players, in the arena of defence manufacture and R&D, will help build perception on both, the contemporary position and future trajectory.

Larson & Tubro

155mm/ 52 Cal Tracked Self Propelled (SP) Gun: On May 12, 2017, Larsen & Tubro announced that they have entered into a contract with the MoD for supply of 100 units of 155mm/52 calibre Tracked Self-Propelled Gun Systems to the Indian Army.

The K9 VAJRA-T 155mm/ 52 Cal: Tracked Self-Propelled Howitzer meets the requirements of 21st century warfare, which is based on the following missions – deep fire support with its longer firing range, qualitative superiority to overcome a numerical disadvantage with its higher rate of fire and accuracy and effective and reliable fire support in all kinds of circumstances with its higher mobility and protection.

The K9 VAJRA-T is a variant of K9 Thunder which is inarguably the world’s best 155mm/52 Cal SPH in terms of number of systems in active service. Currently, K9 Thunder is serving as one of the main conventional deterrent forces for a number of armies including the Korean Army. The K9 Thunder has established its superiority through demonstrations and evaluation tests at various proving grounds in extreme weather conditions, jungles, barren deserts and extremely cold areas. By demonstrating its ability to handle Indian as well as all NATO standard ammunitions, the K9 VAJRA-T has proven its excellent conformability to any field artillery unit.

155mm/ 52 Cal Towed Gun System TRAJAN: The 155 mm/52 calibre Towed Gun System jointly developed by L&T and Nexter Systems, France for the Indian MoD is under User Evaluation by the Indian Army. L&T is responsible for development of the mobility system of the gun, whereas Nexter provides the Ordnance System.

Pinaka Multi-Barrel Rocket Launcher (MBRL): The Pinaka Multi-Barrel Rocket Launcher (MBRL) System is a high-tech, all-weather, long-range, area fire artillery system built on an 8×8 chassis with high cross-country mobility. It is fitted with electro-mechanical outriggers with an auto-levelling feature which stabilises the launcher. The Pinaka, currently in serial production, has been designed and developed by L&T in association with the DRDO.

Medium Range Surface to Air Missile Launcher: This is a trailer based, platform independent, all-electric mobile launcher configured for launching eight canisterised missiles in vertical mode. The system is a self-sustaining unit, equipped with wireless communication to facilitate remote firing in single/ripple mode. It is fitted with electro-mechanical outriggers with auto-leveling feature with an additional option to level with or without trailer. The electronics of the system is based on VME 64-bit architecture with MIL grade electronics. The system is provided with multiple power sources, with battery back-up of seven minutes.

Mobile Autonomous Launcher – Four Missile Configuration: This an all-electric mobile launcher designed for launching four containerised/canisterised missiles in vertical mode. It is fitted with electro-mechanical outriggers with an auto-levelling feature, which stabilizes the launcher. The launcher is equipped with a unique sliding feature to adjust the position of missiles and provide ground contact for Jet deflectors during launch. The electronics of the launcher have been designed using VME-based MIL grade electronics and provide multiple power sources with battery back-up of 15 minutes.

Universal Launcher: The Universal Launcher is a multi-role, modern launcher designed and developed by L&T jointly with DRDO/R&DE (E). The all-electric system designed for a payload of over 2,000kg is configured on a TATRA vehicle. The system is designed for vertical launch as well as for tracking and launching of missile in inclined mode. It is fitted with electro-mechanical outriggers with an auto-levelling feature, which stabilises the launcher. This Universal Launcher can be configured for a range of containerised/canisterised missiles.

Mobile Launchers: L&T has partnered with Indian defence for development of various land-based systems of different missile launchers under the DRDO’s IGMDP programmes. These integrated weapon systems include the development and production of land-based platforms on both road-based and rail-based systems. Based on this association, L&T has successfully contributed to the development of multiple Strategic Missile Launcher Systems in collaboration with the DRDO. Some of the successfully developed systems have been the Prithvi-II Launcher and Rail and Road Mobile Launchers for Strategic Missiles.

Reliance

Reliance Shipyard is the first private sector shipyard in India to roll out indigenous warships for the Indian Navy and enter the elite group of Government-owned shipyards in the indigenous construction of warships. These NOPVs would add tremendous strength to the Indian Navy in ensuring maritime security of the Indian Ocean Region (IOR).

NOPVs are designed to support coastal and offshore patrolling, securing offshore assets and performing escort duties and fleet support operations. The state-of-the-art warship is 105 M long with a displacement of 1,500 tonne. It would be propelled by two diesel engines which can deliver speeds up to 25 knots and has an endurance of about 6,000 Nautical Miles.

Reliance Defence and Engineering Ltd. (RDEL) has also submitted bids for two prestigious programmes of the Indian Navy which includes design and construction of four Landing Platform Dock (LPD) and eight warships of the Anti-Submarine Warfare Shallow Water Craft (ASW SWC). The combined value of these Projects is approximately `30,000 crore and bids are expected to be opened in a few months. RDEL’s shipyard has also been considered by the MoD under the new policy of Strategic Partnership model for design and construction of six submarines of Project 75i (worth more than $10 billion) under the ToT from OEMs. In February this year, Reliance Shipyard became the first shipyard in South Asia to sign the Master Ship Repair Agreement (MSRA) with the US Navy to perform complex repairs and alternation services for the US Navy’s Seventh Fleet. The fleet has around 100 vessels and has huge business potential.

RDEL is also executing a contract to build 14 Fast Patrol Vessels (FPVs) for the Indian Coast Guard at a cost of `920 crore. The FPVs are primarily for Patrolling within the Exclusive Economic Zone (EEZ) and are engaged in coastal patrol, anti-smuggling, anti-piracy and Search and Rescue Operations. The RDEL is also constructing a Cadet Training Ship (CTS) for the Indian Coast Guard. Apart from design and construction of warships for the Indian Navy and Coast Guard, RDEL has also built ships for varied clients including Ice Bulk Carriers for Norwegian company, Offshore Support Vessels (OSVs) for ONGC and Deck Cargo Barges for NPCC-UAE. The company has also repaired and retrofitted commercial and defence ships as well as mobile oil drilling platforms for international clients.

TATA Group

Armoured amphibious platforms, blast-proof vehicles, Unmanned Aerial Vehicles, multi-barrel rocket launchers, electronic warfare systems and nuclear submarine control centres – all are products of a long-standing public-private partnership between the Tata Group and the MoD. Tata Advanced Systems Ltd (TASL) operates India’s largest private sector, integrated, detailed part manufacturing facility for fixed wing aircraft and helicopters in a joint venture with Sikorsky. They are the single global source for the assembly of helicopter fuselage for one of the best-selling helicopters, the Sikorsky S-92, used for VVIP transport. The company has three different units producing globally-competitive products for helicopters and the aerospace sector. TASL is also the single global source designated for the empennage (tail and tail assembly) and centre wing box structures for Lockheed Martin’s C 130J military transport aircraft. Another major area of business for the company is missiles. TASL is the lead integrator for the development and assembly of command and control systems for India’s major missile programmes and has created a design and development centre for indigenising missile sub-systems and mini-UAVs.

Tata Motors: A Tata company whose relationship with India’s defence and security forces is synonymous with that of the group is Tata Motors, India’s largest automobile company. It is now strategically moving from the logistics vehicle segment into the combat vehicle segment. A leading supplier of mobility solutions, it has supplied over 100,000 vehicles to the Indian military and para-military forces thus far. Tata Motors has partnered the DRDO on projects such as the Prahaar missile launcher, the quick deployment communication terminal, light armoured troop carrier, bomb disposal van and wheeled armoured amphibious platform.

In addition to the Indian Army, Indian Navy, Indian Air Force and para-military forces, the company now also supplies to the defence forces of other countries including that of Sri Lanka, Bangladesh, Nepal, Tanzania and to the UN peace-keeping forces in conflict zones in Africa. The company showcased two new combat vehicles at the Defexpo 2014 at New Delhi, the Kestrel, a wheeled, armoured amphibious platform providing mobility to troops in the battlezone with armour protection backed by fire support and a light-armoured, high-mobility reconnaissance vehicle that will move ahead of armoured columns.

Tata Power SED: One of the largest prime contractors in the Indian defence sector, Tata Power SED has partnered the MoD, the armed forces, defence public sector undertakings and the DRDO for over 40 years. It has executed projects of national importance such as Pinaka, a multi-barrel rocket launcher, the Akash launcher systems for the Indian Air Force and the Indian Army, the integrated guided missile development programme, the Samyukta electronic warfare system and the Arihant nuclear submarine control centre.

Global Interest

On August 20, 2017, the Agence France Presse reported that India has drawn up a shopping list for tens of billions of dollars of foreign fighter jets, armoured vehicles, submarines and helicopters but it will only sign the cheques if they are made in India. The world’s largest defence importer has announced a new policy inviting foreign defence manufacturers to set up shop as minority partners in India. It initiated the bidding process for submarines in July. Such deals would boost job creation and bring key defence technologies into India. Foreign companies say the opportunity is too good to miss.

Europe’s Airbus Group, angling to sell its Panther helicopters, has said that if it wins a contract worth several billion dollars and expected to span at least a decade, it would make India its global hub for the manufacture of multi-purpose choppers. The company currently builds these at Marignane in France. Lockheed Martin says if its F-16 fighter jet is selected (it is likely to compete with Saab for that order of close to $15 billion), it will “support the advancement of Indian manufacturing expertise.” Germany’s ThyssenKrupp Marine Systems and France’s Naval Group are eager to compete for a contract of up to $10 billion to build submarines in the country. Luring foreign defence companies to build in India would be a major and much-needed boost to the economy. Prime Minister Narendra Modi, with less than two years to national elections, faces pressure to create more jobs for the hundreds of thousands of people joining the workforce every month.

Conclusion

Dr Lakshman Kumar Behera of IDSA, who specialises in matters related to defence procurement and production, believes that, despite the potential benefits, there are two concerns which need to be addressed to make SPs contribute in a meaningful and time-bound manner. The first and foremost concern is the lack of institutional capacity and ability to guide the new process to its logical conclusion. In the past, several promising measures, especially those connected with the ‘Make’ and ‘Buy and Make (Indian)’ procedures, have failed to yield the desired results because of these shortcomings. Although the Chapter VII of the new DPP talks of “an appropriate institutional and administrative mechanism” besides “adequate expertise in relevant fields of procurement, contract law and Transfer of Technology (ToT) arrangements”, much would depend on how they unfold. Needless to say, it is the lack of reforms in the structures and decision-making processes surrounding procurement and production that have inhibited the development of a strong defence industry.