Larsen & Toubro’s whole-time director and senior executive vice president (defence and smart technologies) J. D. Patil, in this second and final part of an exclusive interview, explains to Defence.Capital editor N. C. Bipindra how the Indian defence ministry has exploited the COVID-induced situation to push for positive reforms in the sector through new acquisition procedures and draft production policy.
Ques. In September 2020, L&T was awarded a significant order from the Ministry of Defence for the Pinaka weapon system for the Indian Army. Please provide our readers what part of this three-way order would be handed by L&T and what are the timelines for this project?
Ans. Pinaka is our first major indigenously designed and developed Multi Barrel Artillery Rocket Weapon system inducted by the Indian Army nearly one-and-a-half decade back. Given the indigenous design and development with Defence Research and Development Organisation (DRDO), the programme has over 85 per cent indigenous content by value.
DRDO invited the industry as development partners for Pinaka programme in 1989. The strategy adopted was to concurrently develop the weapon system with different technologies but achieving the end purpose of developing an efficient weapon system, meeting the overall requirements.
Development contracts were placed on three development partners with L&T (28/24 Volt DC servo system capable of silent watch and operation), Tata (110 Volt AC with Engine driven generator) and a Small-and-Medium Enterprise partner for Servo-hydraulic system. While L&T and Tatas developed the systems and both qualified the series of trials including User Trials and having seen action during Kargil, Pinaka was inducted in the Army Artillery just after turn of the century.
Serial production orders for two regiments of Pinaka were placed in 2005 on both the development partners. Having observed the performance over in-service regiments, repeat orders for two more regiments were placed on the same production partners.
In 2017, a requirement was raised for six more regiments certain operational enhancements. L&T has competitively won four-regiment order, with a mandate to deliver them over a period of 36 months from the day the Bulk Production clearance is granted by the Ministry of Defence (MoD). The BPC hardware is currently under advanced stage of integration at L&T work centre.
Ques. How has the K9 Vajra project and its delivery to the Indian Army progressed? And what are the areas in which indigenisation has been achieved in K9 Vajra? Do you see the possibility of the K9 Vajra orders growing soon?
Ans: The K9 Vajra tracked SP Guns Programme was issued under ‘Buy Global’ category in 2011, however L&T and Hanwha Defense teams decided to bid with L&T to be lead bidder and making all the modifications to the K9 Thunder (South Korean version) to comply to Indian user requirements.
Thus, the joint decision to convert the ‘Buy Global’ programme in to ‘Made in India’ in line with L&T’s ethos of self-reliance. Under the Indian acquisition procedure, this programme called upon us, as per extant policies, to achieve over 50 per cent indigenous content instead of offsets of 30 per cent limit, had Hanwha been the bidder and won the programme. L&T custom designed 16 major subsystems of the K9 Thunder and integrated them in to the K9 Vajra and fielded the prototype system for Field Evaluation Trials by the User. It is noteworthy that the K9 Vajra was adjudged fully compliant during all the trials between 2013 and 2015.
After being declared winner of the programme, we began detailed engineering and engaged in serious indigenisation plan in concerted dialogue with our Korean partner. After conclusion of the contract negotiations, we telescoped planning for establishing a new green-field manufacturing – integration – testing complex for the programme and follow-on armoured programmes on the anvil (BMP upgrades, FICV, FRCV to name a few). Thus, the Armoured Systems Complex (ASC) was set up at Hazira, near Surat in Gujarat, spread over 50 acres, as an extension of our own existing globally benchmarked and spread over a sprawling 755-acre Hazira Manufacturing Complex. The ASC comprises of high-end plant and machinery, Industry 4.0 processes, unmatched automation of manufacturing process improving the performance benchmarks attained in our Korean partner’s plant, feeder shops, and a full-fledged mobility Test Tracks for acceptance and qualification of tracked howitzers and armoured vehicles family.
The complex is fed by an ecosystem and supply chain of five L&T defence units spread across India (two in Maharashtra, two in Karnataka and one in Tamil Nadu) as hubs, approximately 500 Tier-1 (100s of them Micro-Small-Medium Enterprises) and 1,400 Tier-2 partners as spokes and sub-spokes. Managing the domestic as well as Global Supply Chain, the programme management for a Complex Weapon System as full-fledged war going platform comprising 136 work packages, has been our strength to enable consistently delivering Vajra Howitzers ahead of schedule.
Notwithstanding the COVID-19 restrictions, we have already delivered 81 K9 Vajra Howitzers (As of Nov. 2020) and expect to complete the deliveries over coming five to six weeks. Also, we have not only exceeded the indigenous content but also built over 80 per cent of work packages (112 out of 136 work packages) in the K9 Vajra system through a trusted supply chain of 1,900 partners.
In doing this, we have established a new benchmark in Indian defence industry to emulate. One large production contract to the private sector, first of this size ever, yielded setting up a model digitalised production factory with high levels of robotization (ASC – Hazira), creating a trusted supply chain, qualifying the 14,000 items produced indigenously concurrent to the production, integrating the K9 Vajra as a complex weapon system requiring interdisciplinary skill sets and delivering the contract well within stipulated delivery period.
We have received the User feedback that the K9 Vajra has been performing beyond their expectations.
We certainly hope and look forward to receiving additional orders for sustenance of the tier-ised ecosystem, primarily involving MSMEs spread across four most Industrialised states of India, until other major Armoured System programs fructify.
Ques. What were the compelling reasons for transferring the military communication business out of the defence engineering segment of L&T to Smart World and Communication business earlier this year?
Ans. L&T continued to invest in pursuing military communications segment for past nearly one-and-a-half decade to build competencies in the secure commination domain. While we succeeded in few major naval communication programmes, on one hand, the mega programmes like Tactical Communication System and Battlefield Management System kept getting delayed as they involved funding the private sector for Research and Development in defence. However, Smart World and Communication business created just five-six years back to focus on addressing need for Smart Cities, Safe Cities and Communications segments saw significant growth.
We saw that the in-house capabilities realised for military communication can build significant differentiation to our Homeland Security – Smart and Safe City Solutions business, given that the data including transmission and storage needs to be completely secured. The natural synergy between two businesses segments pursued by the same company, needed to be leveraged and thus, we decided the merge them. Notwithstanding, we shall continue to address the military communication segment requirements alongside the homeland segments, concurrently.
Ques. Where do you see L&T’s defence engineering business growing from here, against the backdrop of the COVID slowdown over the next five years? What is the end state that L&T wants to achieve in its defence engineering business?
Ans. Currently, we are the largest among private sector companies in India. Our vision is to make L&T Defence among the top few defence companies in India and a significant player in the global arena.
COVID-19, of course, has been a significant disruption, which almost brought the whole world into a stand still. All that the L&T Defence leadership team had to decide was to continue our delivery performance with wholehearted support from our domestic supply chain, without a let up in making honest efforts to deliver on time.
It is very significant to note that besides 31 Vajra’s delivered from mid-Jan. 2020, we completed production of all the balance (up to 100) and they await arrival of few global supplies and then they are ready for FATs, track trials and delivery. Concurrently, we have progressed on warships construction and launched the last Offshore Patrol Vessel (OPV), completed the sea trials of sixth OPV, delivered a ship to the United States Navy, and are about to deliver another to Ghana Navy, and to a South Eastern friendly nation. Also, our strategic systems complex at Talegaon, near Pune, flagged off and delivered more than 60 weapons/engineering systems for the land and naval segments.
This period, we have seen depletion of order books and keenly await push for contracting activities to pick up.
The MoD has very gainfully exploited the COVID period as an opportunity to drive significant structural reforms in the defence sector. The new Defence Acquisition Procedure 2020 has addressed multiple long standing level playing field issues, rationalised processes and procedures and enhanced ease of doing business.
The draft Defence Production and Export Promotion Policy sets the vision for 2025 to almost double the size of defence industry in revenue terms. The announcement of separate domestic budget for defence capital procurement and import embargo for 101 items and more in the pipeline provide major fillip to the defence industry, going forward. These have assured the keen support of the Government of India towards indigenising defence and making India ‘Atmanirbhar’.
Having seen India’s performance against COVID and the daily reduction in fresh as well as active number of cases, and green shots in the economy becoming visible in Sep-Oct 2020, we are anticipating a swift bounce back, especially with the multiple vaccines in sight. Thus, from a long-term perspective, while COVID-19 would have seriously affected the industry in 2020, we saw that the impact on the Indian defence sector would dampen by the end of 2020 and growth returning, including bounce back in 2021-22 financial year, to normalcy over the next two to three years.