India’s Aerospace & Defense Manufacturing – Vision ‘Atmanirbhar’ – Part 3
#Aerospace #Defence #Leadership
Lessons From Israel for India – “Two-fold National Policy”
Israel followed a two-pronged policy for Defense manufacturing and building their military-industrial base. On one hand, it emphasized on imports of Defense equipment from aboard and as per its necessity, Israel was able to tailor the weapon systems and develop the new ones. It’s a fact that Israel magnificently employs scientists and engineers in its Defense industry because nearly 75% of the arms productions are exported. On similar lines, India needs to formulate a “Two-fold National Policy” that would coordinate various establishments ranging from academia to scientific communities. Besides, GoI needs to create more incentives for scientists and engineers. Israel invests 4.2% of its GDP into R&D, whereas India (0.8%) fares very low on that indicator. Therefore, R&D in the public and private sector necessitates grave attention and improvement. In similar lines, India needs to strengthen innovation and production efficiency of its small and medium enterprise in the Defense sector. To maintain a presence in the international market, India too needs to focus on a demand-oriented Defense industry that fulfils global market demands.
Smartphone & Automobile Industry Show ‘It Is Possible’
India, with aspirations for its 1.3 billion people, wants to drive exports and become part of the global supply chain. The strategy India chose for Smartphone demonstrates the art of the possible. It went from being an importer of smartphones to a net exporter in the past five years with policy and infrastructure changes. The auto component sector is another industry example where many global OEMs (Original Equipment Manufacturers) and Tier 1 companies are sourcing from Indian manufacturers who are meeting the high-quality standards required by the foreign markets.
With the wind of BPS (Business Process Sourcing) behind it, where it dominates the market with over 80% of total BPS revenues, India can tag on and move up its Aerospace Industry value chain from design engineering & IT solutions into component and subsystems manufacturing for the world of aerospace.
Component Manufacturing – The Smartphone & Automobile Industries makes a strong case for global OEMs and their suppliers to examine India as a destination to play a vital role in the global supply chain for aerospace components and parts. There could be several advantages to gain from the low costs in India along with the technical and engineering expertise / skills available for high-precision and high-quality components.
Improving Logistic Infrastructure Atmanirbhar Bharat: ‘Manufacture For The World’ & ‘Employment For The Nation’:
Atmanirbhar Bharat is essentially about manufacturing for the world, creating jobs and making Indian A&D Industry more capable as compared to the rest of the world. India needs to have an employment-centred economy.
The Atmanirbhar Bharat program has been accompanied by initiatives making it easier to do business, making it more attractive for investments to come in. India has caught the attention of major A&D manufacturers with its low production cost and Govt’s strong focus on building manufacturing sector under ‘Make in India’ initiative. The Govt has been steadily creating an enabling ecosystem of policies and regulations to give the much-needed fillip to the Indian Defense Industrial Base (DIB).
The Industry experience about Govt’s procurement process is that its mired with intricacies, often leading Sellers (and Investors) facing significant uncertainty stemming from bureaucratic red tape, budgetary issues and the likes. Notwithstanding, the industries need to infuse large capital upfront to build capability (skilling, technology, partnership) and capacity (Infrastructure). Being high-tech, sustained funding requirements are required to manage technology upgrades and deal with obsolescence regularly. Other challenges include legal ones like information security, intellectual property protection, regulatory and transactional due diligence, etc.
The tri-service IDS was created in late 2001 as the nodal agency to foster military coordination and prioritize acquisitions. It is now part of the newly created Department of Military Affairs or DMA headed by Chief of Defense Staff that is responsible for issuing the 101-list, taking its cue from Atmanirbhar Bharat. There is little new that the list of 101 military platforms, munitions, missile systems, assorted materiel and ordnance released by the MoD for indigenisation late 2020 onwards can really do to localise Defense production and reduce import dependency.
Besides, this catalogue of 101, high and middle technology items like howitzers, transport aircraft helicopters, assault rifles, submarines and corvettes – whose import amongst other items, will be steadily embargoed till final termination in 2024 – is merely a ‘repetition’ of similar, albeit more elaborate inventory lists issued by the MoD in 2013 and 2018.The uncharacteristically bold decision taken by MoD to keep HAL out of contention for the manufacturing of transport aircraft could have single-handedly ushered in a new era for the private sector aerospace industry, had the contract with Airbus-Tata been for the manufacturing of C-295 transport in India been finalized in time.
As observed traditionally world-over, the promotion of manufacturing requires enhanced co-operation between the military and domestic (Defense) industry, which simply has not acquired the traits of collaborative partnership that propels the Defense industry in the western world and the US. Mutual trust is missing.
TPCR-2018 (Technology Perspective and Capability Roadmap), for instance, detailed a comprehensive overview of 221 pieces of military kit to be indigenized for induction into service by the late 2020s, as part of the overall ‘Make in India’ initiative that, so far, has exhibited limited success. In its preamble, TPCR-2018 declared, much like its 2020 avatar that it sought to provide direction to private and public sector industry to pursue the goal of Atmanirbhar Bharat. While the TPCR-2013 stated that the indigenization market was worth around $100 billion, the August 2020 Atmanirbhar initiative is pegged at a modest $53 billion during 2025-27 i.e. 50% of TPCR- 2013.
Curiously, the MoD’s policy fails in clarifying whether JVs or collaborative ventures between local private and state-owned entities and foreign OEMs will be embargoed or not. It’s unclear whether foreign OEMs would be placed on the ‘negative list’ or not. [MoD had declared that the proposed Atmanirbhar Bharat enterprise “offers a great opportunity to the Indian Defense industry to manufacture items in the negative (embargo) list by using their own design and development capabilities or adopting the technologies designed and developed by Defense Research and Development Organization (DRDO) to meet the requirements of the (Indian) Armed forces”].
Govt needs to clarify how it will manage the military’s urgent operational requirements in the event of delays by the DRDO, with its questionable developmental track record, in designing platforms, ammunition, missiles, torpedoes and a host of other critical equipment. Their scheme seems to be without taking into account the lead time, technological and financial implications of designing indigenous weapon systems.
Some Indian states like Tamil Nadu (TN), Telangana, Andhra Pradesh, Karnataka, Gujarat, Uttar Pradesh (UP), etc. are already ahead in the A&D industry race, eyeing investments in the coming years to become a preferred hub for the industry in the areas of engineering, design, manufacturing and allied activities. GoI has already earmarked 2 Defense Corridors in India i.e. UP, which leverages the existing manufacturing ecosystem in the state ideally suited for economic testing and R&D facilities and TN, which ensures a mature manufacturing ecosystem for investments and innovation.
Interestingly in the recent years about 500 start-ups having actively begun working in the A&D domain. MoD has 6 incubator partners to what it calls the IDEX (Innovation in Defense for Excellence) program. The IDEX challenges have been Defense start-up challenges and this has created a very active start-up community for A&D. Indian software companies are already at the global level of competencies, so the capability exists in India today. It is now a question of being able to leverage it and integrate it.
India has traditionally followed the transfer of technology (ToT) model in the Defense production ecosystem. It now recognizes the fact that TOTs can only take us thus far. Its high-time that India needs to have more control on technology and target to develop totally indigenous Defense platforms to meet its security needs and that for the world.
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