“Make II will ensure the integration of Indian Industries with Global Supply Chain” – Dr Ajay Kumar Singh

The Department of Defence Production in March, 2018 released the draft of a new Defence Production Policy (DProP) that is aimed at boosting the manufacturing capabilities in India. The policy, following its introduction, is expected to bring the ‘Make in India’ initiative to life.

The new policy promises to make India a sustainable defence manufacturing hub. Life of Soldiers on the sidelines of DefExpo – 2018 interacted with Dr. Ajay Kumar Singh, Secretary, Department of Defence Production. An extract from the interview has been reproduced here –

LoS – Could you shed some light on the efforts of your department in driving the Make in India initiative to achieve the self-reliance in defence manufacturing?

Dr AK : We have been able to achieve advancements continuously with Make in India. The turn over of our public sector alone is 55,000 cr, which is not at all a small amount. In addition, we have the contributions of the private sector, where the number stands between 10-15,000 crores. Since, majority of them fall under delicenced category, it won’t give us the exact numbers. We are going to set-in a process through which we will be able to get a better estimate of the total turn over from the private sector including the delicenced category. Since, the 2/3rd of the particulars are in the delicensed category, a broader perspective of the happenings including the advancements is not easily visible. Considering those stats, we would be amongst the top 15 countries perhaps 12 countries in the world in terms of defence production.

Today, we are making all kinds of naval vessels either through ToT or totally through indigenous capabilities. Also, we are exporting naval vessels.  We are, today, 95% indigenous capable on the body, hull and main ship. On the move side, we have achieved about 45-50% indigenisation. On the weapon side, it comes around  30-40%. There is credible indigenous capability.

On the aerospace front, we are making fighter aircraft. Our own 4th generation Tejas is best in its class of fighter jets. We are also manufacturing Sukhoi and Jaguar fighters. Coming to the civilian sector, we have Dornier. Defence manufacturing industry in India is growing rapidly. It might not be big yet, but it will be eventually with the pace its carrying cause of the business opportunities.

There are at least half a dozen to dozen companies of 50-100cr turn over, which are into the manufacturing of components for aerospace industry. We can expect these numbers to increase exponentially in near future. We are witnessing an increase in MRO activities. So, the wide spectrum of aerospace industry is ready to be catered by Indian players.

In case of land, we have a range of missiles. Brahmos, which is the state-of-the-art missile, has all three versions – land, sea and air. Apart from that, we have Pinaka missiles, range of rockets and artillery guns. The ATAGS has created new world record and it is a testimonial to the quality of the indigenous products.

So, we have that complete chain of products, which are being manufactured based on both ToT and indigenous technology. While manufacturing these products, we need components and we are still dependent on the import. And, there lies the efforts of our team in bringing the shift from import to export. For our self-reliance, rather than seeking technology transfer and making things here, we need to develop technology and carry out the further process. Private sectors also have been given the opportunities, which will ensure a healthy competition with public sector.

The Assembly Line of Apache Helicopters; Courtesy - Boeing India.
The Assembly Line of Apache Helicopters; Courtesy – Boeing India.

LoS : One of the major concerns for the Forces with indigene products has been their production rate. What are the actions taken by your department to overcome these challenges?

Dr AK : The need is for competition. Any monopoly created has the likelihood of becoming a bottleneck is very high. The need, therefore, is to move from the public sector to also the private sector. With competition, if one does not perform the other performs. We need to have a healthy competition. So, we have allowed the private sector to be part of the system.

Forces have the right to ask what they want, since they have to go and fight the war on the field. We have no issue with that. Our only objective is to create what they want from our end. It is either with our own technology or with ToT.

Even in case of procurement, as a part of our policy, we have included that the companies should manufacture the deliverables in India, after providing the first set of readily available equipment if demanded so.

In future, we should always be on frontier of the technology. Until we have our technological base on various platforms, we have to utilize the offerings of the global players under a condition that we want your product, but, Make in India.

LoS : Make in India itself has been slow to catch up. So, what are the efforts that the department has been placing to add tractions to the initiative?

Dr AK : Make in India, has been progressing steadily and has given the much needed exposure and opportunity to the capable. One of the big success in make effort is Make II. It was launched on 18 jan 2018 in Chennai. It’s a new initiative. From then,  23 projects have been taken up. When we take up a project, we do not know whether industry can do it or not. We are having meetings every month on Make II and I’m happy to say that industry has shown interest on 17 of those 23 projects. One significant thing about Make II is once the RFP is issued, it cannot be retracted. So, these 17 projects will happen now under the Make category.

We are trying to simplify the tender process also. If it’s a multi-vendor situation, L1 will get order no negotiation, it’s a simple process. I think Make – II is the policy that will bring a whole lot greater Make projects.

While we do ToT, we still import a lot of components. Sometimes 30-50% cost of the equipment dervies out of the import itself. So, we need to start design, develop and manufacture these components indigenously. For which, Defence Innovation Hubs can be utilised. If we can indigenise, then there is no need of procurement. The gap of capability and innovation to do the needful can be minimised by IDEX scheme. If I were saying 55,000Cr is being produced by the PSUs, 25-30,000Cr of components are coming via import, which if we can do through IDEX, much more Make in India will start to happen.

Today, the world is moving towards cyber, AI and other related technologies.Experts have quoted that the new warfare will be very different from traditional warfare. Being a IT hub, we have huge opportunities. If we consider fighter planes, submarines, aircraft carriers et., need huge amount of investment. But, when it comes to IT and cyber, the investment required is relatively very less and is all about innovation. However, placing few experts in the lab doesn’t provide us the solution. We have to ensure that a significant number of human resource are placed under the umbrella to make IT and cyber as the area where Make can happen in a speedy manner.

The Make can happen to component industry as well. We have five to ten companies which are making aero components. They are not only selling to HAL, they are also selling to Boeing, Lockheed, Airbus, Rolls Royce and so on. Our auto component manufacturers are selling the components to the top manufacturers of the world. A company in Bengaluru, which makes non-pressure components for the small arms has covered over 50% of the global market. There is a company in Kanpur, which is selling shoes for army from last 20yrs. There is another set of scope of activities,where Indian companies gets integrated with global supply chain and not dependent on our own demand.

A Sukhoi depicting a bombing run; Courtesy - IAF
A Sukhoi depicting a bombing run; Courtesy – IAF

Likewise, in the four areas, Make II for Indian demand, indigenisation of components, technology innovation and creating a component industry in India will lead to integration with global supply chain and this is how the make initiative going to evolve in the future.

LoS : Is there a need to create synergy between public and private sector or will it be more effective if they are treated as competitors?

Healthy competition is required and there should be synergy as well. They collaborate for few projects and they compete for few.

LoS : When it comes to foreign OEMs, they are having concerns on the capabilities of the private partners in executing the project. They need the PSUs to be part of the project to participate. What is your take on this?

Dr AK : We have no objections, if they want the comfort of PSUs to be part of it. Our main idea is we want Make in India and we want to give the freedom to the companies to decide whom they want as the partner.

LoS : A lot of foreign OEMs have expressed their interest in investing in India, given the huge opportunities here. They also have few concerns regarding the FDI policy we have, its at 49% and they have the concern that their ownership will be lost. What will be the department do about that ?

Dr AK : Normally, we would want the Indian majority stake company to be active and come to the front in defence sector and I think it can happen. Indian industry has shown dominance in IT industry and few other industry. But, in niche technology areas we don’t see technology happening in India for next ten years. Rather than continuing to import from outside, we don’t mind higher FDI. Even in the present policy, you can go upto 100% with government approval. If you see the new draft, there are provisions to go up to 74% where the technology is niche.

For example, we do not have semi conductor vapour fabrication.  We do not see those technology in India for 10-15 years. Once the company comes in and sets up the platform, a lot of intangible benefits will come along with it. People will learn the technology, supply chain will start and India will be the center of it.

LoS : Two defence corridors have been proposed till now. What are we aiming through defence industry corridors?

Dr AK : We are trying to create a vibrant self sustaining ecosystem which will create the whole supply chain for defence manufacturing and make it more economically viable for companies in that value chains to exist.   Whether it is the need for infrastructure, or testing infrastructure or industrial infrastructure or knowledge infrastructure or the skill requirement, all those will be easily available for the working of the corridor.

LoS : With no forthcoming orders from the forces a lot of existing production line are grinding to a halt. Be it the Arjun line at HVF Avadi or the Su-30 line of HAL at Nasik. How will the ministry account to this shortfall being raised by the PSUs?

Dr AK : Our philosophy is to make the things, what the forces need. These needs will change from time to time. We will create the capabilities that is needed to manufacture the various requirement of the forces. And, our demand is not coming down. we can assure you. The demand profile is only increasing. Plus, we are opening up exports.  Today, for example, HAL has opened up licensed production of ALH cause they cannot do it all by themselves. We may do similarly for the Dornier also, which will be required for regional connectivity under the udaan scheme. It’s a small aircraft with 19 seater that could be used to connect the cities.

In case of assault rifles, we said last time that they will be manufactured 25% in OFB and 75% in industry. With the ever increasing demand, we want both sectors to meet the requirements of the forces.

A Pinaka MBRL in Action; Courtesy - PIB , Artillery Indian Army, Indian Army, India Artillery Modernisation
A Pinaka MBRL in Action; Courtesy – PIB

LoS : Where do you see Indian Defence industry in next decade?

Dr AK : Indian defence industry has a bright future. It is the sector which is going to grow significantly. We will be exporters, a lot of countries are interested to buy from India. Start ups will emerge to give some significant technology to the world. And, large number of active MSMEs will be a part of domestic and global supply chain.

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