Chakraview

Why this is a good time for private sector in India defence manufacturing – Part-1

Photo: India’s defence production secretary Raj Kumar e-flagging off K-9 VAJRA-T’ howitzer at L&T’s Armoured Systems Complex at Hazira in Surat, Gujarat through video conferencing from New Delhi on Nov. 10.

(Editor’s Note: The views are that of the author’s. For the writer’s other interests, read the credit line at the end of the article.)

By Lieutenant General (Dr) V. K. Saxena

From the perspective of self-reliance and ‘Atmnirbhar Bharat‘, India has a reason to cheer in the festive season in 2020, as realisation dawns that the nation’s private sector in defence manufacturing is finally arriving in more ways than one. Yet, there are certain challenges that actually measure the gap between the status today and the lofty targets that are set out in the Ministry of Defence (MoD) policy driving documents in the recent past, which will be covered in the next part of this two part series.

The K9 Story

On Nov. 10, a Defence.Capital report said that Larsen and Toubro (L&T) has flagged off its 81st K9 Vajra-T howitzer from its Hajira facility and claimed with justified pride that despite the pandemic, the company will stick to its delivery schedule of completing the entire contract of 100 howitzers in 42 months, as allowed by the ‘Force Majeure‘ clause due to COVID-19.

This little news is actually big news. It is not only in sharp contrast to the erstwhile practice of ‘endless time and cost overruns in the delivery of the projects’, but also and more importantly, it signals a ‘new norm’ where the private sector delivers, and delivers in time.

What is so special about the K9 case? Some points are enumerated in response to this question.

K9 is a 155-mm, 52-calibre self-propelled (SP) howitzer. The Original Equipment Manufacturer (OEM) of this weapon is Hanwha Defense of South Korea. The significance of K9 and its Indian connection are:

  1. K9 represents an important weapon system in the package of weapons recently inducted (or are due to be inducted) towards the modernisation of the Indian Army‘s Regiment of Artillery. This modernisation basically involves the induction of the latest guns, howitzers and other systems incorporating niche technologies, both through the indigenous, as well as, import route.
  2. Some of the main weapons in the above package are the M777 155-mm, 39-calibre Ultra-Light Howitzers (ULH) from BAE Systems‘ American subsidiary; Advanced Towed Artillery Gun System (ATAGS) as a Public-Private-Partnership (PPP) project between Defence Research and Development Organisation (DRDO) and the private industry; and the 155-mm, 45-calibre ‘Dhanush‘ towed howitzer indigenously manufactured and inducted.
  3. The Request for Proposal for K9 Vajra-T was issued way back in 2011 while the contract was signed in May 2017 at Rs 4,366 crore ($800 million). It is not an ordinary ‘Buy (Global)‘ procurement case where the foreign OEMs call the shots and involves the Indian players as a second fiddle, merely as a matter of procedural compliance. It was a case where for the first time, the bid was led by an Indian private sector major (L&T) with Hanwha Defence of South Korea in the tow. Kindly note the role reversal.
  4. The primacy of L&T was not only limited to the contract, but extended all the way to execution. Riding on total technology transfer, of the 100 howitzers, only the first 10 were to be received from Hanwha Defence as Semi-Knocked Down (SKD) packages to be assembled in India, and the balance 90 were to be ‘wholly made in India’.
  5. The schedule for the 100 was: 10 to be assembled from SKDs by Nov. 2018, 50 to be made by Nov. 2019, and the balance 40 to be made by Nov. 2020. It is incredible to note the following:
    (a) The total schedule was 36 months (Nov 2017-Nov 2020).
    (b) Six months were granted as ‘Force Majeure’ clause due to COVID-19.
    (c) Total schedule became 42 months. (36+6 months).
    (d) All the 100 artillery units will be supplied well before the 42 months run out.
  6. This signals a new era. An era which not only sees the rise of the Indian defence private sector, but also a new-found capability to deliver within time.
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The M777 Story

Even the procurement of M777 ULH as one of the weapons in the modernisation package of artillery regiments, has a message to give. Salient points:

  1. The contract for 145 numbers of M777 was signed way back in Feb. 2016 between BAE Systems and Mahindra Defence Systems at a cost of Rs 5,060 crore ($685 million).
  2. The OEM reposed faith in the Indian player who went ahead to establish in India, a full-fledged Assembly-Integration-Testing (AIT) facility for making M777 end-to-end, right here in India.
  3. AIT goes beyond its thee alphabet acronym:
    (a) It represents a global OEM reposing faith in the Indian player for producing his prestigious and signature weapon, totally in India.
    (b) The above faith is pursuant to a thorough check that the Indian partner will able to maintain the type of quality and consistency that will qualify it to carry the BAE Systems colours.
    (c) The AIT will not only service the Indian contract, but also, it will become a future manufacturing hub for world-wide supply of the weapon system.
  4. In fact, the K9 followed the signatures of M777 as regards the ‘Make in India‘ component. The M777 contract signed just prior to K9 also envisaged that out of the 145 howitzers on order, only 25 will come fully assembled, the balance 120 will be made in India at the AIT facility near Delhi.

The ATAGS Story

A word now on the ATAGS 155-mm 52-calibre Advanced Towed Artillery Gun System. This project has several firsts to its credit. Some salient points:

  1. It is he first indigenous PPP project of this magnitude ever signed in the history of Indian defence procurement.
    (a) Total requirement – approximately 2,000 ATAGS.
    (b) Approved cost of 150 ATAGS by Defence Acquisition Council in Aug. 2018 – Rs 3,364.78 crore ($455 million).
  2. It is the first PPP project where a public sector player has partnered with four defence majors in the private sector. These are Bharat Forge Limited, Mahindra Defence Systems, erstwhile Tata Power Strategic Equipment Division (SED) and Punj Lloyd Limited.
  3. Each of above private players has a significant work share in the overall gun that signifies a core competency and a niche capability.
  4. For instance, Bharat Forge’s ATAGS holds the longest range achieved record at 48.074 km (designed gun range is 45 km). In fact, it cuts both ways: on Sep. 12, Bharat Forge’s gun had a barrel burst after a firing test, causing injury to four army personnel.
  5. That the order of 150 ATAGS will be shared between the PPP players points towards the fact how each one has come out stronger in the developmental journey starting 2013-14.
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Navy’s 3D Surveillance Radars

Marking another success for the private sector, it was reported in Mar. 2019 that Tata Power SED has signed a Rs 1,200 crore ($163 million) contract with the MoD to supply 23 three-dimensional (3D) surveillance radars to Indian Navy for ship-borne deployment.

What is peculiar and heart-warming about this contract? Probably the following:

1.The foreign OEM for this equipment is Indra Sistemas of Spain, but it is Tata Power SED, which is the prime contractor. It is Indian player that has negotiated the contract with the MoD.

  1. This contract is under the ‘Make in India’ initiative and is being processed under the category ‘Buy and Make (Indian)‘ of the Defence Procurement Procedure.
  2. This follows a similar category of contract in 2017 which Tata Power SED executed while partnering with DSIT of Israel for supplying Portable Diver Detection Sonar (PDDS) to the the Indian Navy.

In Dec. 2019, the MoD issued a list of contracts awarded to the Indian industry (both public and private) since 2014 when the ‘Make in India’ got going. It quotes a huge figure of Rs 196,000 crore ($2.6 billion) spread over 180 contracts.

A perusal of the list does bring out that while a major chunk of the contracts has, of course, gone to the public sector, quite a significant share has been bagged by the private sector as well. Some figures:

  1. Public Sector: Rs 45,000 crore ($6 billion) contract for Mazagon Dock Shipbuilders Limited and Garden Reach Shipbuilders and Engineers Limited for seven stealth frigates, Rs 19,100 crore ($2.58 billion) contract for Ordnance Factory Board for 464 T-90 battle tanks, Rs 14,100 crore ($1.9 billion) contract for Hindustan Aeronautics Limited for 28 Dorniers, Rs 6,300 crore ($852 million) for Bharat Electronics Limited for seven squadrons Akash air defence missiles and Rs 7,900 crore ($1 billion) for BEL for the Indian Air Force‘s Integrated Air Command and Control System (IACCS) nodes.
  2. Private sector: Rs 4,300 crore ($ ) for L&T for 100 K9 Vajra artillery guns; Rs 1,200 crore ($ ) to Tata Group for naval radars; and Rs 5,060 crore for Mahindra Defence Systems for the 145 M777 Ultra Light Howitzer.
  3. Some of the many private sector players, who received orders are Tech Mahindra, Tata Power SED, Larsen & Toubro, Ashok Leyland, Adani Group, Tata Motors, Bharat Forge Limited, MKU Limited, SMPP Delhi, Alpha Design Technologies Private Limited, Zen Technologies Limited, Force Motors, and Titagarh Wagons Limited.

(To be concluded in Part-2 tomorrow)

(The writer is a retired Indian Army officer and former Director General of the Corps of Army Air Defence)

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Categories: Chakraview, Indian Air Force, Indian Army, Indian Coast Guard, Indian Navy, Industry, Modernisation, Opinion, Procurement

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