Defence Industry

Indian Defence Private Sector: Some Initial Successes Yet Miles To Go
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K9 VAJRA-T Gun at L&T Armoured System Complex, at Hazira

•  Another initial success related to the procurement of 145 M777, 39-calibre 155mm Howitzers from M/s BAE Systems, USA under the Foreign Military Sales (FMS) route. A huge contract valued at Rs 5,070 crore is a glorious chapter for the Indian private sector giant Mahindra Defence. Some highlights:

—  Way back in February 2016, BAE Systems, upon careful analysis of the technical prowess of Mahindra Defence, selected the private sector player to establish an in-country Assembly Integration and Test (AIT) facility for M777.[17]

The Defence Minister’s delegation to Russia in November 2019 included some 50 Indian companies in a bid to attract Russian partners in JVs and MoUs…

—  With AIT operational on our land, out of 145 howitzers contracted, only 25 were scheduled to come fully assembled from the BAE, rest of the 120 Howitzers were to be progressively built by Mahindra Defence in India.[18]

—  AIT also meant a facility for life-time support of a foreign made weapon in India. What a reassuring fact!

•  Another initial success relates to a Public-Private Partnership (PPP) Project for the Advanced Towed Artillery Gun System or ATAGS for short. At Rs 3,364.78 crore for 150 guns, ATAGS has the distinction of being the biggest completely indigenous PPP Project. Also, the prototype ATAGS from Bharat Forge holds the world record for achieving the longest range of 48.074 km.

The uniqueness of ATAGS is that not only one but three private sector giants have joined hands in producing the gun. Bharat Forge along with OFB is making the gun barrel, Mahindra Defence is manufacturing the recoil system while TATA Power Strategic Equipment Division (SED) along with Punj Loyd, is producing the muzzle brake and some other components. It is indeed a positive development for the private sector wherein the Government in a kind of policy reversal, has decided that that the country’s first home-made 155mm towed gun ATAGS will be built jointly by public and private sector players.[19]

•  Open sources reported in March 2019 that TATA Power SED has bagged a Rs 1,200 crore contract for supplying 23 systems of Three-Dimensional (3D) ship-borne air surveillance radars. While this is a radar which has been built by a Spanish company Sistemas Defence, it is TATA power SED that is the Prime contractor with the foreign OEM providing product support.[20]

Slowly but surely, a network of Indian private sector players are finding themselves worthy, by way of business experience, domain expertise and financial clout…

•  Indian Defence and Aerospace Company (IDAC) the flagship company of Adani Defence and Aerospace is already into a number of niche sectors such as systems and avionics for aerial platforms, carbon composites, aero-structures and assembly for Unmanned Aerial Systems (UAS), transmission and gearboxes for rotary-wing platforms. IDAC is poised for integration of larger platforms such as fighter and transport aircraft, helicopters, UAS, as well as transporter-erector-launcher platform for missile system.[21]

From coal mining to highways to gas retail, and on to defence and aerospace, this private sector player is focusing on ToT from global players for critical platforms and technologies, helping out the growth of MSMEs and building capabilities for strengthening the indigenous muscle.[22]

This list can go on and on, establishing one fact over and over again that the private sector ‘has the capability and the potential’. Not that it has no unresolved issues. It has many of them with the MoD, with the Government and with the old public sector mindset that refuses to change. With all the initial successes and amidst buoyant sentiment, a new meaning of the Make-in-India has emerged in recent times – the one that goes to strengthen the defence manufacturing ecosystem by cutting through the red-tape and inertia of yesteryears. It roughly unfolds like this:

•  Slowly but surely, a network of Indian private sector players are finding themselves worthy, by way of business experience, domain expertise and financial clout, to measure up as ‘suitable global partners’ and trustworthy members of the global supply chain.

•  Such players, as stated above, are taking bold steps to forge international partnerships with world’s best OEMs by first putting Indian money and capability on the table and then asking them to join in for a win-win. With the aura of a market as huge as India, the foreign OEMs are all too willing, in fact queuing up!

•  Winning bids amidst fierce global competition and taking upon them to supply major platforms in niche technology domains to the defence forces all on their own clout and confidence.

“BAE Systems-built 155mm M777 Ultra Lightweight towed Howitzer (ULH) painted in the unique Indian Artillery camouflage design inducts its first gun systems in Maharashtra, India in 2018.”

•  Taking on the role of becoming centres of excellence in the global supply chains by undertaking design, development, manufacture and export of big ticket/small ticket items on the global format.

By default, the big projects in the hand of leading front-runner giants also bring many opportunities to small businesses to keep the wheels rolling. The results of the above can be gauged in the pattern of growth of funds of the private sector vis-à-vis public sector in the recent past. Here is a sample:

•  It was reported in July 2019 that the sales turnover of the private sector is rising faster than the DPSUs. In that, in FY 2018-2019, while the annual production of the private sector jumped by 12 percent year-on-year, the same was only three percent for the DPSUs. This translates to a compounded annual growth rate of seven percent for the private sector as compared to the 3.5 percent of the DPSUs.[23]

As much as 73 percent of the share still belongs to DPSUs and OFs and a mere seven percent is attributed to other PSUs/JVs…

•  Out of the total domestic annual sales turnover of the defence industry amounting to some Rs 80,502 crore in FY 2018-2019, the share of private sector has jumped to Rs 16,000 crore, (20 percent) recording a positive year-on-year increase of over four percent.

Still a Long Way To Go…

All that has been said above must not lead to a conclusion that the private sector has arrived fully. In fact, the overall picture is far from perfect and there are miles to go. Some details:

•  Just as a mirror image of the rosy picture of the faster growth in the revenue and a bigger total share of 20 percent in the pie of defence annual sales, the fact remains that as much as 73 percent of the share still belongs to DPSUs and OFs and a mere seven percent is attributed to other PSUs/JVs. So where are the bulk of orders? This requires no answer.

•  All the initial successes of the private sector notwithstanding, the abiding feeling in the private sector is that they are still very much struggling for orders.

•  According to an open source report quoting a market expert, the reality on ground is that still there is large pipeline of procedures, approvals and multiple layers of processing before an order ultimately reaches a private sector order book. The stark fact is there are ‘hardly any orders on the table’.

It is for the MoD to realise that private sector has the capability and the potential to take Indian defence manufacturing sector to higher levels…

The Way Ahead

It is for the MoD to realise that the abiding feeling in the private sector that there are hardly any orders addressed and is reversed over time. It is for the MoD to realise that private sector has the capability and the potential to take Indian defence manufacturing sector to higher levels. The bureaucracy needs a change of mindset. It is for the MoD to walk the talk on its many promises, whether it is SPM, PPP, ILs and most importantly, the “order flow” to the private sector. It is for the MoD to cut out the l existing unending procedural delays, multiple stages of bureaucratic approvals and the thriving muscle memory of ‘public sector – first port of call’.

If Prime Minister Narendra Modi’s dream of Rs 35,000 crore in defence exports in the next five years is to be realised, then the combined might of the public and private sector will have to pull together. For this to be optimal, the huge untapped potential of the private sector must be exploited to the hilt. That the MoD is at it, is the hope of the author.


[1] “Larsen and Toubro wins large contract from Indian Army for Advanced IT-enabled network,” at Accessed on 09 Apr 2020.

[2] “Private sector in defence production, “at www.indiandefencereview .com.Accessed on 11 Apr 2020.

[3] “Indian defence industry: an agenda for Make-in India,” at Accessed on 11 Apr 2020.

[4] ibid

[5] “Defence procurement: way forward” Defence ProAc Biz News VOL VI Issue 1,” at Accessed on 11 Apr 2020.

[6] “Antony hints major policty changes for defence industry,” at on 11 Apr 2020.

[7] “Strong order inflow to bring earning upgrades for BEL,” at Accessed on 11 Apr 2020.

[8] 2 ibid.Accessed on 12 Apr 2020.

[9] “Private Sector Investment in Defence Production,” at Accessed on 12 Apr 2020.

[10] “Efforts to boost defence sector,” at Accessed on 13 Apr 2020.

[11] Ibid.Accessed on 13 Apr 2020.

[12] “No more red tape , private sector may soon lend a cutting edge to India’s weapon capability,” at on 13 Apr 2020.

[13] 8 ibid.Accessed on 14 Apr 2020.

[14] “Rajnath Singh pushes for indigenisation of defence equipment,” NDTV 16 Sep 2019

[15] “India to receive first batch of K 9 Vajra self-propelled howitzers this month,” at .Accessed on 14 Apr 2020.

[16] “Indian Army : Indian Army gets new teeth, K 9 Vajra . M777 howitzers inducted,” at Accessed on 14 Apr 2020.

[17]“BAE Systems selects Mahindra as partner for Howitzer assembly facility,” at on 15 Apr 2020.

[18] Ibid.Accessed on 15 Apr 2020.

[19] “ In policy reversal, Private companies to build Indian howitzer, “at Accessed on 15 Apr 2020.

[20] “Tata Power SED bags Rs 1200 crs contract from Defence ministry,” at Accessed on 15 Apr 2020.

[21] “Growth with goodness,” at on 15 Apr 2020.

[22] “Adani Defence & aerospace …” at www. Accessed on 15 Apr 2020.

[23] “Defence Production: revenues of private companies rise fster than DPSUs,” at on 16 Apr 2020.

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The views expressed are of the author and do not necessarily represent the opinions or policies of the Indian Defence Review.

About the Author

Lt Gen (Dr) VK Saxena (Retd.)

former Director General Army Air Defence. Currently Distinguished Fellow VIF and Visiting Fellow CLAWS.

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