study on indian defense industries

1

LT COL K C MONNAPPA

2

TO ASCERTAIN IF CIVIL INDUSTRIES CANBE ALLOWED TO MANUFACTURE WEAPONS FOR THE MILITARY.

3

STUDY TO FOCUS ON FOLLOWING ISSUES :

WHETHER CIVIL INDUSTRIES BE ALLOWED TO PRODUCE WEAPONS FOR MILITARY.

TYPES OF WEAPONS WHICH CAN BE PERMITTED TO BE PRODUCED BY CIVIL INDUSTRIES.

4

STUDY FOCUSED ON ISSUES AT MACRO LEVEL BEING A FIXED DURATION STUDY

5

1. TO STUDY PRESENT SYSTEM OF PROCUREMENT OF

WEAPON SYSTEMS IN MILITARY.

2. IDENTIFY ROLE & SCOPE OF CIVIL INDUSTRY IN SUBJECT MATTER.

3. STUDY OF RECOMMENDATION S OF VARIOUS COMMITTEES FOR PRIVATISATION.

4. TO IDENTIFY WEAPONS WHICH CAN BE PERMITTED TO BE MANUFACTURED BY CIVIL INDUSTRY FOR MILITARY.

5. TO IDENTIFY CHANGES REQUIRED IN EXISTING POLICY,PROCEDURES & PROCESSES.

6

1. INTERVIEWS.

2. DISCUSSIONS.

3. BRAIN STORMING.

4. STUDY & REVIEW OF LITERATURE.

5. QUESTIONNAIRES & SURVEYS -BOTH OPEN AND CLOSED ENDED.

7

1. REFERENCE MATERIAL - BOOKS, MAGAZINES, OFFICIAL

DOCUMENTS & WEB SITES OF DPSUs& OFCs.

2. KELKAR COMMITTEE REPORT.

3. SENGUPTA COMMITTEE REPORT.

4. CII – KPMG SURVEY REPORT. 5. REVIEW OF DPP, DPM & JSG.

6. INTERACTION WITH OFFICERS AND CONCERNED PBOR OF 12

ARTILLERY BRIGADE UNITS,OTHER STATION UNITS OF NASIRABAD & JODHPUR.

7. QUESTIONNAIRES & INTERVIEWS.

8

PHASE – I : PRESENT SYSTEM OF DEFENCE

PROCUREMENT. PHASE – II : WHETHER CIVIL INDUSTRIES BE

ALLOWED TO PRODUCE WEAPONS FOR MILITARY ? PHASE – III : TYPES OF WEAPONS WHICH CAN BE PERMITTED TO BE PRODUCED BY CIVIL INDUSTRIES ? PHASE – IV : RECOMMENDATIONS & CHANGES REQUIRED IN PRESENT SYSTEM. PHASE – V : CONCLUSION.

10

PREVIEW : PHASE – I

GLOBAL ANNUAL GROWTH IN DEFENCE EXPENDITURE

14

GLOBAL DEFENCE MARKET: OPPORTUNITY FOR INDIA

22

25

AIRFORCE

Weapon system Deal Size in USD Offset Size Deal Status RFP Type Bidders/

Expected

Bidders

127 Multi Mission

Role Combat

Aircrafts

10,000 MN 50% Field trial being

conducted

Buy & Make

(Global)

Lockheed Martin ,

Boeing,

Dassault, UAC,

EADS, Saab

Gripen

6 Transport

Aircrafts

1,000 MN 30% Nomination

Based.Trials is

expected to take

place in 2012,

prior to formal

induction.

Buy Global NA

12 Heavy lift

Helicopter

700 MN 30% Tender released

on 26 May 2009

Buy & Make

(Global)

Boeing, Sikorsky,

Bell,

Westland,

Eurocopter, Mil-

MI Design

bureau.

26

ARMY


Expected

Bidders

197 Light

Observations/Utilit

y

Helicopters

3,000 MN 50% Tender released

in 2008 after

cancellation of

previous tender of

2004.

Buy & Make

(Global)

Elbit, Thales,

Marconi,

Motorola,

Ericsson,

Raytheon,

Honeywell

Future Infantry

Soldier

as a System

(F-INSAS)

1,100 MN 30% Tender released

by DRDO. Global

tender issued by

MoD in April 2008

Buy Global Elbit, Thales,

Marconi,

Motorola,

Ericsson,

Raytheon,

Honeywell

Howitzers 2,170 MN 30% The Army at this

stage has plans to

phase the 105

MM field gun

Buy & Make

(Global)

NA

27

NAVY


Expected

Bidders

7 Scorpene

Submarines

3,500 MN 30% Tender to be

issued

Buy & Make

(Global)

Companies

engaged in

electronics,

weapon control,

fire control,

navigation

systems, turbine

engine

manufacturing,

generators,

standoff weapon

systems.

12 Stealth

Frigates

7,600 MN 30% RFP to be issued Buy & Make

(Global)

Similar to above

16 Multi Role

Helicopter (MRH)

1,000 MN 30% Issue of tender-

10 Aug 2008

Buy & Make

(Global)

Finmeccanica &

others

1. SHORTCOMINGS OBSERVED POST KARGIL CONFLICT .

2. INTEGRATED DEFENCE STAFF (IDS) MADE RESPONSIBLE FOR :

A. PREPARATION OF BOTH SHORT TERM (SCAP & AAP) AND LONG TERM

PERSPECTIVE PLANNING(LTIPP).

B. RECEIVING AND PRIORITISING EQUIPMENT

REQUIREMENTS FROM SERVICES.

3. ROLES WERE REDIFINED FOR FOLLOWING:

A. DAC (DEFENCE ACQUISITION COUNCIL ) - PRINCIPAL APPROVAL OF

CAPITAL ACQN IN LTIPP,IDEN & APPROVE ‘BUY OR BUY & MAKE’

PROCEDURES.

B. DEFENCE PROCUREMENT BOARD(DPB) - DEALS WITH REVENUE

CAPITAL,APPROVES AAP PROCEDURE. ALSO DEALS WITH SINGLE VENDOR

CASES & FAST TRACK PROCEDURES (FTP).

C. ACQUISITION WING - THREE DIVISIONS FOR LAND,SEA & AIR WITH EACH

RESPONSIBLE FOR ENTIRE CAPITAL PROCUREMENT PROCEDURE. 29

PROCUREMENT TIMELINE

Timelines Authorities Involved Actions Taken

1 Month SHQ, HQ IDS, DPB,

Acquisition Wing of

MoD

Commenced by the issue of RFI laying down only “Essential parameters”

and not the “desirable parameters”

SHQ compiles the comments of the DDP, DRDO, MOD (Finance), MOD

(Admin) and forwards the same to the HQ IDS

4 Months SHQ - Service

Headquarters

DAC - Defence

Acquisition Council

SCAPCHC - Service

Capital Acquisition

Plan Categorisation

Higher Committee

Lays down following requirements:

Quantity, time frame, offset obligation, training, maintenance etc

Technical parameters, field evaluation on No-Cost-No-Commitment basis

Commercial aspects including payment terms, guarantee/warranty

Criteria for evaluation and acceptance

11 – 17

Months

Technical Evaluation

Committee (TEC)

SHQ, DRDO, DGQA,

Acquisition Wing of

MoD

Evaluation of proposals and preparation of TEC report

Vetting of report by Technical Manager and acceptance by Directorate

General Acquisition DG (Acq.)

Field trials/ DGQA/ maintainability trials, preparation and approval of staff

evaluation at SHQ and acceptance of the same by DG (Acq.)

30

PROCUREMENT TIMELINE

Steps Timelines Authorities Involved Actions Taken

Commercial

Negotiations

4 – 11

months

Technical

Oversight

Committee

Commercial

Negotiation

Committee

Competent

Financial

Authority, MoD,

MoF, Cabinet

Committee on

Security (CCS)

Technical Oversight Committee involved for cases over INR 300

Cr.

Opening of bids and determination of L1

Contracts Negotiation Committee (CNC) negotiations,

finalisation of CNC report

Approval of Competent Fianance Authority (CFA) – MoD, MoF,

CCS

Evaluation of commercial offset offers

Contract

Signing

Thus the cumulative process takes around 20-34 months

31

DPP 2002 – 03 •INTRODUCED AFTER KARGIL CONFLICT TO FORMALISE PROCUREMENT PROCESS BY MoD •APPLICABLE TO PROCUREMENTS FLOWING OUT OF ‘BUY’ DECISION OF THE DAC •DOCUMENT REVISED IN 2003 TO INCLUDE PROCUREMENTS UNDER ‘BUY AND MAKE’ CATEGORY

DPP 2006 •EXTENDED TO INCLUDE PROCUREMENTS UNDER THE FTP, ‘MAKE’ CATEGORY AND PROCEDURE FOR INDIGENOUS WARSHIP BUILDING •CONCEPT OF OFFSETS INTRODUCED; ENVISAGED USD 10 BN TO FLOW BACK BETWEEN 2007-2012 •TRANSFER OF TECHNOLOGY ENVISAGED IN THE ‘BUY’ CATEGORY •LEVEL PLAYING FIELD BETWEEN DPSUS AND RURS ADDRESSED •DECISION TAKEN TO REVIEW THE DPP AFTER EVERY TWO YEARS

DPP 2008 •INTRODUCED CONCEPT OF OFFSET BANKING; ALLOWING VENDORS TO DISCHARGE THEIR OFFSET CREDITS AGAINST RFPS ISSUED WITHIN TWO FINANCIAL YEARS OF DATE OF APPROVAL OF BANKED CREDITS •REMOVAL OF OFFSET OBLIGATION FOR CONTRACTS WITH AT LEAST 50 PERCENT INDIGENOUS CONTENT •INCR OFFSET OBLIGATION TO 50 PERCENT ON A PER CASE BASIS CHANGE IN LICENSING POLICY, WITH A PRIVATE COMPANY REQUIRING LICENSE ONLY IF STIPULATED UNDER LICENSING REQUIREMENT FOR DEFENCE INDUSTRY, ISSUED BY MINISTRY OF COMMERCE •INCREASED INFORMATION PROVIDED DURING ISSUE OF RFPS •OFFSET PENALTY INTRO FOR

INDIAN PRIME IN ‘BUY (GLOBAL)’ TENDERS

DPP AMENDMENT 2009 •INTRODUCED A NEW CATEGORY OF PROCUREMENT – “BUY AND MAKE (INDIAN)” TO ISSUE RFPS TO ONLY INDIAN VENDORS WHO HAVE THE REQUISITE FINANCIAL AND TECHNICAL CAPABILITIES •PUBLIC VERSION OF LTPP COVERING A PERIOD OF 15 YEARS TO BE WIDELY PUBLICISED •ENHANCEMENT OF ROLE OF INDEPENDENT MONITORS IN INTEGRITY PACT •LIBERALISATION IN OFFSET PROVISIONS BY PERMITTING

CHANGE IN OFFSET PARTNER

DPP 2011 •NEW SECTION ON GUIDELINES FOR SHIP BUILDING TO INCREASE COMPETITIVENESS •THE SCOPE OF OFFSET POLICY GUIDELINES HAVE BEEN EXPANDED TO INCLUDE CIVIL AEROSPACE, INTERNAL SECURITY AND TRAINING

34

THE GOVERNMENT HAD SET UP THE KELKAR COMMITTEE IN 2004

AIM

TO EXAMINE AND RECOMMEND CHANGES NEEDED IN DEFENCE ACQUISITION PROCEDURES

ENABLING A GREATER PARTICIPATION OF PRIVATE SECTOR IN DEFENCE PRODUCTION

STRENGTHENING SELF-RELIANCE IN DEFENCE PREPAREDNESS.

THE COMMITTEE SUBMITTED ITS REPORT IN TWO PARTS.

THE FIRST PART OF THE REPORT, SUBMITTED IN APRIL 2005

FOCUSED ON THE REVIEW OF THE DEFENCE PROCUREMENT PROCEDURE

MADE SEVERAL RECOMMENDATIONS LINKED TO THE ISSUE OF ENHANCING INDIGENOUS

PRODUCTION.

SECOND PART OF THE COMMITTEE’S REPORT WAS SUBMITTED TO MOD IN NOV 2005.

THE COMMITTEE HAS RECOMMENDED THAT THE GOVERNMENT SHOULD GIVE GREATER FREEDOM

TO THE PSUS TO FORM JOINT VENTURES AND CONSORTIUMS.

THE COMMITTEE RECOMMENDED ADOPTION OF THE SOUTH KOREAN MODEL TO IDENTIFY RAKSHA

UDYOG RATNA (RUR) ON THE BASIS OF THEIR PERFORMANCE.

35

PREPARATION OF A 15-YEAR LONG-TERM PLAN, FORMING THE BASIS FOR AN ACQUISITION PROGRAMME

INFORMATION SHARING OF THE REQUIREMENTS OF ARMED FORCES WITH THE INDUSTRY

IDENTIFICATION OF ENTRY POINTS FOR THE PRIVATE SECTOR IN THE ACQUISITION PROCESS

ACCREDITATION AND FOSTERING OF RAKSHA UDYOG RATNA /CHAMPION

EVOLVE POLICY FRAMEWORK TO PROMOTE PARTICIPATION OF SMALL AND MEDIUM ENTERPRISES IN DEFENCE PRODUCTION

SETTING UP A NEW PROFESSIONAL AGENCY FOR DEFENCE ACQUISITION

PROVIDING DEFENCE RESEARCH AND DEVELOPMENT OPPORTUNITIES, BOTH TO THE DRDO AND THE INDUSTRY

PROMOTING TRANSPARENCY IN DECISION MAKING.

ENCOURAGING OPTIMUM UTILIZATION OF EXISTING CAPACITY.

WORKING OUT REQUEST FOR PROPOSALS (RFP) TO INCLUDE AN OFFSET CLAUSE FOR CONTRACTS VALUED AT RS. 300 CRORES AND ABOVE.

RE-EXAMINING THE CONCEPT OF NEGATIVE LIST FOR DEFENCE EXPORTS AND SETTING UP OF AN EXPORT MARKETING ORGANISATION.

36

Ser No

Company Sales (INR

Mn)

Products/Services

1 Hindustan

Aeronautics

Limited (HAL)

86,250 Design, development, manufacture, repair and overhaul of aircraft,

helicopters, engines and their accessories

2 Bharat Electronics

Limited

(BEL)

41,025 Design, development and manufacture of sophisticated state-or-the-art

electronic equipment components for

the use of the defence services, para-military organisations and other

government users

3 Bharat Earth Movers

Ltd

(BEML)

27,133 Multi-product company engaged in the design and manufacture of a

wide range of equipment including

specialised heavy vehicles for defence and re-engineering solutions in

automotive and aeronautics

4 Mazagon Dock

Limited

(MDL)

23,217 Submarines, missile boats, destroyers, frigates and corvettes for the

Indian Navy

5 Garden Reach

Shipbuilders

& Engineers Ltd

(GRSE)

5,566 Builds and repairs warships and auxiliary vessels for the Indian Navy

and the Coast Guard

6 Bharat Dynamics

Limited

(BDL)

4,543 Missiles, torpedo counter measure system, counter measures

dispensing system

7 Mishra Dhatu Nigam

Limited (MIDHANI)

2,550 Aeronautics, space, armaments, atomic energy, navy special products

like molybdenum wires and plates,

titanium and stainless steel tubes, alloys etc.

8 Goa Shipyard Ltd

(GSL)

269 Builds a variety of medium size, special purpose ships for the defence ,

Indian Coast Gaurd (ICG) and civil

sectors

38

1. A PARADIGM SHIFT IN STRUCTURE OF DEFENCE INDUSTRY.

2. PRIVATE PLAYERS NO LONGER RESTRICTED TO SUPPLYING RAW MATERIALS, SEMI-FINISHED PRODUCTS, PARTS AND COMPONENTS TO DPSUs AND OFCs.

3. ALLOWED MANUFACTURE OF MORE ADVANCED DEFENCE EQUIPMENT AND SYSTEMS.

PARTICIPATION OF PRIVATE SECTOR IN DEFENCE INDUSTRY

40

4. IN TERMS OF MARKET SHARE, PRIVATE SECTOR STILL AT A NASCENT STAGE.

5. UNDER THIS POLICY ALL DEFENCE RELATED ITEMS WERE REMOVED FROM THE RESERVED CATEGORY AND TRANSFERRED TO LICENSED CATEGORY.

6. 100 PERCENT PRIVATE SECTOR OWNERSHIP PERMISSIBLE AND FDI UP TO 26 PERCENT.

PARTICIPATION OF PRIVATE SECTOR DEFENCE INDUSTRY

41

7. APPROXIMATELY 70 PERCENT OF INDIAN DEFENCE PROCUREMENT COMING FROM OVERSEAS SOURCES.

8. OF THE 30 PERCENT OF ORDERS PLACED IN INDIA, ONLY AN ESTIMATED 9 PERCENT ATTRIBUTED DIRECTLY TO THE PRIVATE SECTOR.

9. PRIVATE SECTOR ACCOUNTS FOR 25 PERCENT OF THE COMPONENTS PROVIDED TO DPSUs.

PARTICIPATION OFPRIVATE SECTOR IN DEFENCE INDUSTRY

42

10. ENJOY A 14 PERCENT SHARE IN OVERALL MARKET. 11. DEFENCE MARKET IS ESTIMATED TO BE WORTH USD

700 MILLION . 12. EXPECTED TO INCREASE WITH GROWING

PARTICIPATION OF PRIVATE PLAYERS.

13. MAJOR INDIAN INDUSTRIAL HOUSES LIKE THE TATA GROUP, MAHINDRA GROUP, KIRLOSKAR BROTHERS AND LARSEN AND TOUBRO HAVE DIVERSIFIED IN TO DEFENCE PRODUCTION.

14. JOINT VENTURES ON BOTH STRATEGIC AND PRODUCT SPECIFIC BASES.

PARTICIPATION OF PRIVATE SECTOR DEFENCE INDUSTRY

43

COMPANY YEAR OF

INCEPTION OF

DEFENCE

OPERATIONS

PRODUCTS/SERVICES

TATA ADVANCED SYSTEMS

LIMITED (TAS)

2007 DESIGN, MANUFACTURE AND SUPPLY OF COMPOSITE

COMPONENTS, SUB-ASSEMBLIES FOR APPLICATIONS IN

AEROSPACE DIVISION AND SOLUTIONS FOR PERSONAL

ARMOUR, VEHICLE ARMOUR AND SPECIAL

APPLICATIONS

LARSEN AND TOUBRO - DESIGN, DEVELOPMENT AND MANUFACTURE OF

INTEGRATED LAND BASED /NAVAL COMBAT/MISSILE

SYSTEMS, DEFENCE ELECTRONICS & CONTROL

SYSTEMS AND INTEGRATED NAVAL ENGINEERING

SYSTEMS

KIRLOSKAR BROTHERS - INFRASTRUCTURE PROJECTS (WATER SUPPLY, POWER

PLANTS, IRRIGATION), PROJECT AND ENGINEERED

PUMPS, INDUSTRIAL PUMPS

MAHINDRA DEFENCE SYSTEMS 2001 TOTAL SOLUTIONS FOR THE RANGE OF LIGHT

COMBAT/ARMOURED VEHICLES, SIMULATORS FOR

WEAPONS & WEAPON SYSTEMS, SEA MINES, SMALL

ARMS, VARIANTS AND ASSOCIATED AMMUNITION.

ASHOK LEYLAND 1970s DESIGN, DEVELOPMENT AND MANUFACTURE OF

SPECIAL VEHICLES, SERVING INDIAN ARMED FORCES

AND INTERNATIONAL CUSTOMERS SUCH AS US ARMY

44

1. MSMEs ARE DEPENDENT ON OUTSOURCING .

2. MSMEs PROVIDE COMPONENTS TO DPSUs AND LARGE PRIVATE PLAYERS.

3. DPSUs AND ORDNANCE FACTORIES OUTSOURCE 20-25 PERCENT OF THEIR REQUIREMENTS TO THE PRIVATE SECTOR.

4. OUT OF OUTSOURCING, APPROXIMATELY 25 PERCENT REQUIREMENT MET BY MSMEs.

45

1. OFFSETS INTRODUCED IN INDIA IN DPP 2006 AS A POLICY TO PROMOTE INDIGENISATION OF INDIAN DEFENCE INDUSTRY.

2. UNDER CURRENT POLICY:

A. PROCUREMENTS OVER Rs. 3 BILLION IN ‘BUY (GLOBAL)’ AND ‘BUY AND MAKE ‘.

B. AN OFFSET OBLIGATION OF A MINIMUM OF 30 PERCENT OF PROCUREMENT VALUE.

46

49

PREVIEW : PHASE – II

1. WAR ON TERROR & IS SITUATION.

2. INDO-PAK RELATIONS.

3. SINO-INDIA RELATIONS.

4. INDIA’S RELATIONS WITH OTHER NEIGHBOURS.

5. PEACE PROCESS IN AFGHANISTAN.

6. UNITED NATIONS & SECURITY STRUCTURE.

7. COMPETITION FROM EMERGING MARKETS.

1. ORDNANCE FACTORIES. 2. DPSUs. 3. R &D THROUGH DRDOs LAB. 4. THROUGH IMPORTS. 5. SOME SPARES THROUGH CIVIL

INDUSTRIES.

1. EXPERIENCED POOL OF SCIENTIESTS.

2. INPLACE INFRASTRUCTURE.

3. WORLD CLASS MISSILE TECHNOLOGY AND SPACE RESEARCH.

4. IT SAVVY POPULATION.

5. WORLD CLASS TECH INSTITUTIONS.

1. LACK OF PARTICIPATING CIVIL

INDUSTRIES.

2. FAILING PUBLIC SECTOR.

3. VESTED INTERESTS.

4. NO MIC.

5. SINO-RUSSIAN RELATIONS.

6. NON-ALIGNMENT OF PUBLIC AND CIVIL

INDUSTRIES.

7. INADEQUATE SPARES AND UPGRADATION.

8. TECHNOLOGY TRANSFER AND

VULNERABILITY.

9. OBSOLESENCE OF CURRENT EQUIPMENT.

STRENGTH

• EXISISTING INFRASTRUCTURE.

• SKILLED LABOUR.

• SCOPE OF EXPANSION.

OPPORTUNITIES

• CREATION OF MORE JOBS.

• ALIGNING WITH CIVIL INDUSTRIES.

WEAKNESSES

• INSUFFICIENT & INFLEXIBLE INFRASTRUCTURE.

• CHANGE CONSUMES TIME & CAPITAL.

• LACK OF MOTIVATION-POOR HR POLICIES.

THREATS

• JOB INSECURITIES FOR EXISTING LABOUR.

SWOT ANALYSIS : ORDNANCE FACTORIES

STRENGTH

• LARGE NO OF SUCCESSFUL PROJECTS.

• HIGHLY SKILLED TEAM OF SCIENTISTS.

• LARGE NUMBER OF READY LABS ALL ACROSS THE COUNTRY.

OPPORTUNITIES

• LARGE SCOPE OF EXPANSION OF R&D.

• LARGE SCOPE OF SALE OF R&D.

WEAKNESSES

• DELAYED PROJECTS RESULT IN HY IMPORTS.

• LACK OF INDIGENOUS TECH.

• REQUIRES PRODUCTION UNITS.

THREATS

• EVER CHANGING GSQRs.

• BANS.

• TRANSFER OF TECH.

SWOT ANALYSIS : DRDO

STRENGTH

• EXISISTING INFRASTRUCTURE.

• SKILLED LABOUR.

OPPORTUNITIES

• CREATION OF MORE JOBS.

• EXPANSION OF INDUSTRIES.

• TOT.

WEAKNESSES

• LARGE GAP IN PRODUCTION AFTER APPROVAL RESULTS IN HY IMPORTS.

• LACK OF TECH.

• DEPENDENT ON SUBSIDIES/GRANTS.

THREATS

• LOSS OF PROJECTS.

SWOT ANALYSIS : DPSUs

STRENGTH

• SUCCESS STORY FOR INDIA.

• INDIGINISATION.

• LARGE NUMBER OF INDUSTRY AVLB ACROSS COUNTRY.

• SKILLED & MOTIVATED LABOUR.

• HIGH TECH AVLB.

OPPORTUNITIES

• LARGE SCOPE OF EXPANSION GLOBALLY.

• EASIER TOT THROUGH JV.

• AVLB OF TECH THROUGH DRDO.

WEAKNESSES

• LACK OF SPECIALISED INFRASTRUCTURE AND DEVELOPMENT.

• LACK OF EXPERIENCE.

• VERY LIMITED DOMESTIC CUSTOMER BASE.

• EXPORTS– PRESENTLY AN ABSTRACT IDEA.

THREATS

• ACCESS TO SENSITIVE INFO.

• PROFIT CENTRIC.

• GREATER SHARE BY FOREIGN COLLABRATORS.

• MORE LOBBYING.

• RISK WPN PROLIFERATION AND WAR.

SWOT ANALYSIS : CIVIL INDUSTRIES

STRENGTH

• SUCCESSFUL PAST PROJECTS.

• INPLACE INFRASTRUCTURE.

• EXPERINCED WORKERS AND SCIENTIESTS.

OPPORTUNITIES

• IMMENSE SCOPE OF EXPANSION.

• LARGE SCOPE OF OFFSET & STRENGTHENING OF DOMESTIC MARKET.

• LARGE SCOPE OF R & D

WEAKNESSES

• DELAYED PROJECTS.

• CHANGING GSQRs.

• LACK OF LATEST TECHNOLOGY.

• VESTED INTERESTS.

• LIMITED R & D.

THREATS

• OBSOLETE EQUIPMENT.

• LAGGING BEHIND IN TECH & WEAPON RACE.

• AFFECTS PREPAREDNESS FOR WAR.

SWOT ANALYSIS : GOVT-PUBLIC

STRENGTH

• ONLY LTD ADDL INFRASTUCTURE IS REQUIRED.

• TECH DEFI REDUCED.

• MOTIVATED & SKILLED LABOUR.

• GLOBALLY COMPETITIVE.

• BEST OF EVERYTHIG AVLB.

OPPORTUNITIES

• LARGE DEFENCE MARKET AVLB ABINITIO.

• INDIGINISATION CAN BE MAXIMISED.

• READY MADE R&D AVL THROUGHDRDO.

• EASIER TOT THROUGH JV FOR BAL TECH.

• INCREASED EXPORTS GLOBALLY.

• GREATER OFFSETS.

WEAKNESSES

• PROFIT CENTRIC.

THREATS

• ACCESS TO SENSITIVE INFO.

• JV & FOREIGN COLLABORATION REQUIRES INCREASE IN FDI CEILING.

• MORE LOBBYING FOR SALE OF WEAPONS.

• RISK WAR AND WEAPON PROLIFERATION.

SWOT ANALYSIS : GOVT-PUBLIC-CIVIL

SHOULD CIVIL INDUSTRIES BE ALLOWED TO MANUFACTURE WPNS FOR THE MILITARY?

60%

40%

YES

NO

QUERY POSED AS PART OF QUESTIONNAIRE TO RESPONDENTS FROM DRDO

SHOULD CIVIL INDUSTRIES BE ALLOWED TO MANUFACTURE WPNS FOR THE MILITARY?

100%

YES

QUERY POSED AS PART OF QUESTIONNAIRE TO RESPONDENTS FROM ASSOCHAM AND CII

1. BRISK BUSINESS BY PRIVATE FIRMS WORLD OVER.

2. REVITALIZE OWN DEFENCE INDUSTRIES.

3. SAVING FOREX.

4. TECHNOLOGY SPILLOVER.

5. CAPITAL INVESTMENTS.

6. CREATION OF JOBS.

7. REDUCTION IN IMPORTS.

8. SELF RELIANCE.

9. ALIGNING PUBLIC- CIVIL INDUSTRIES.

1. JOINT VENTURES – CAPITAL, TECHNOLOGY AND CAPABILITY.

2. EASY WAY FOR TRANSFER OF TECHNOLOGY.

3. INFLATED PRICES BY FOREIGN FIRMS.

4. ISROs EXPERIENCE.

5. DEVELOP INDIGENOUS QUALITY EXPERTISE.

77

PREVIEW : PHASE –III

78

REQUIREMENT OF WEAPON SYSTEMS

EXTREMELY HIGH RATE OF SUCCESS OF HIGH TECH

WEAPONS IN PRESENT DAY WARS DICTATES NEED TO

DEVELOP/ACQUIRE TECHNOLOGY THAT IS IMPORTANT

TO FUTURISTIC REQUIREMENTS.

0% 5%

10% 15%

20% 25%

RADARS & UAV

COMBAT SYSTEM

COMN SYSTEM

ROCKET & MISSILE SYS

DIRECTED ENERGY WPNS

ADVANCED MTRL TECH

ARTIFICIAL INTELLIGENCE

ROBOTICS

NANO TECH

BIOTECH

WHAT KIND OF WPN SYS ARE REQUIRED IN THE FUTURE?

1. BATTLE FIELD TRANSPARENCY

2. COMBAT SYSTEM

3. COMN SYSTEM

4. ROCKET & MISSILE SYSTEM

5. DIRECTED ENERGY WPNS

6. ADVANCED MATERIAL TECH

7. ARTIFICIAL INTELLIGENCE

8. ROBOTICS

9. NANO TECH

10. BIOTECH

RECONNAISSANCE TECHNOLOGY HAS ABILITY TO PLOT OUT ENEMY POSITIONS TO A ‘T’ FOR UN-MANNED VEHICLE/STEALTH AIR. CRAFT TO ENGAGE.

FUTURE WAR WILL CONSIST ONLY OF THOUSANDS OF ROBOTS & UN-MANNED VEH.

1. BATTLE FIELD SURVEILLANCE RADARS.

2. WEAPON LOCATING RADARS.

3. UAVs WITH ADVANCED SENSORS.

4. FUTURISTIC ELECTRONIC WARFARE SYSTEMS.

DOMINATOR UAV

FLYBOT

FIRE SCOUT – UAV HELICOPTER

MQ9 REAPER – PREDATOR UAV

HUNTER UAV AIRSTRIKE – VIPER AIR ATTACK

97

ltipp

98

AREAS OF EXCELLENCE OF CIVIL INDUSTRY

1. IT.

2. MISSILE & SPACE TECHNOLOGY.

3. ELECTRONICS & COMMUNICATION TEHNOLOGY.

WHAT KIND OF WPNS SHOULD THE CIVIL INDUSTRIES MANUFACTURE FOR THE MILITARY?

5% 10%

85%

NO WPNS

SOME WPNS

ALL WPNS

QUERY POSED AS PART OF QUESTIONNAIRE TO RESPONDENTS FROM ARMY

WHAT KIND OF WPNS SHOULD THE CIVIL INDUSTRIES MANUFACTURE FOR THE MILITARY?

95%

3% 2%

NO WPNS

SOME WPNS

ALL WPNS

QUERY POSED AS PART OF QUESTIONNAIRE TO RESPONDENTS FROM DRDO

102

WEAPONS SYSTEMS RECOMMENDED FOR MANUFACTURING BY CIVIL INDUSTRY

CIVIL INDUSTRY BE PERMITTED TO MANUFACTURE ALL WEAPON SYSTEMS EXCEPT NUCLEAR WEAPONS.

103

SHORT TERM EXPECTATIONS FROM CIVIL INDUSTRY

1. COMBAT SYSTEMS. 2. ELECTRONICS & COMN SYSTEM. 3. ROCKETS & MISSILE.

107

LONG TERM PLANS

1. DIRECTED ENERGY WPNS.

2. ADVANCED MATERIAL TECH.

3. ARTIFICIAL INTELLIGENCE.

4. ROBOTICS.

5. NANO TECH.

6. BIOTECH.

WHAT CHANGES ARE REQUIRED TO BOOST CIVIL INDUSTRIES PARTICIPATION IN DEFENCE

MANUFACTURING?

20%

25%

30%

25%

FDI

OFFSET

TAXATION

TRANSPARENCY

QUERIES POSED TO RESPONDENTS FROM ASSOCHAM AND CII

IS THERE A NEED TO INCREASE THE FDI LIMIT?

57%

17%

26%

YES

MAYBE

NO


DO DPSUS HAVE AN EDGE OVER PRIVATE INDUSTRIES IN PROCURING DEFENCE

CONTRACTS?

85%

10% 5%

YES

MAYBE

NO


ARE YOU SATISFIED WITH INDIA’S OFFSET POLICY?

47%

24%

29%

NEEDS IMPROVEMENT

GOOD

SATISFACTORY


ALLOW SINGLE SOURCE COMPETITION WHERE APPROPRIATE.

DEFENCE UNDERSPENDS COULD BE ADDRESSED THROUGH ROLLING BUDGETS.

GOVERNMENT SHOULD COME UP WITH A NATIONAL OFFSET POLICY MUCH BROADER IN SCOPE.

CONCEPT OF MULTIPLIERS IN OFFSETS TO ENCOURAGE INWARD INVESTMENT OF SOUGHT AFTER TECHNOLOGIES MUST BE INTRODUCED.

TOT NEEDS INCLUSION IN OFFSET POLICY.

DEVELOP A COMPREHENSIVE AND BROAD RANGING INDUSTRIALISATION STRATEGY FOR DEFENCE TO INCLUDE RAKSHA UDYOG RATNAS(RURs) OR CHAMPIONS OF DEFENCE AND MSMEs.

ENSURE A LEVEL PLAYING FIELD BETWEEN DPSUs & PRIVATE PLAYERS.

CONTINUE TO USE DPSUs IN AREAS WHERE THEY HAVE ALREADY CREATED SUBSTANTIAL CAPABILITIES.

115

► SUPPLIES OF EQUIPMENT MACHINERY,SPARES,TOOLS ETC. MEANT FOR ARMED FORCES OR DEFENCE ESTABLISHMENTS SHOULD BE EXEMPTED FROM APPLICABLE DUTIES.

► DEFENCE SECTOR SHOULD BE GRANTED SIGNIFICANT CONCESSIONS UNDER SERVICE TAX ANALOGOUS TO THOSE ENVISAGED UNDERCUSTOMS AND CENTRAL EXCISE LAWS.

GOVERNMENT MAY CONSIDER ESTABLISHMENT OF DEDICATED SPECIAL ECONOMIC ZONES (SEZS).

CLEARANCE OF GOODS AND SERVICES FROM SEZS UNITS TO THE INDIAN DEFENCE SECTOR SHOULD BE TREATED AS DEEMED EXPORTS AND REVENUE FROM SUCH DOMESTIC SALES SHOULD BE COUNTED TOWARDS FULFILMENT OF THEIR EXPORT OBLIGATION.

GOVERNMENT SHOULD CONSIDER EXEMPTING JVS FORMED UNDER OFFSETS OR FOR RESEARCH AND DEVELOPMENT WORK IN THE DEFENCE SECTOR FROM LEVY OF R & D CESS.

COMPUTATION OF PROFITS FOR ENTITIES

OPERATING IN THE DEFENCE SCETOR MAY BE

PROVIDED.

EXPENDITURE ON PURCHASE, LEASE OR

RENTAL OF LAND/LAND RIGHTS, CAPITAL

EXPENDITURE, EXPENDITURE BEFORE

COMMENCEMENT OF BUSINESS ETC BE ALLOWED.

INCREASE FDI CAP FROM 26% TO 49% TO ENCOURAGE BETTER INVESTMENT

AND TRANSFER OF TECHNOLOGY.

1. INVOLVE CIVIL INDUSTRY IN MANUFACTURE

OF WEAPON SYSTEMS FROM ‘IDEA’ STAGE.

2. GSQRs SHOULD NOT BE CHANGED FROM TIME

TO TIME.

3. DIPLOMACY SHOULD LOOK FOR MARKETS

FOR GOOD QUALITY BUT CHEAPER WEAPON

SYSTEMS IN UNDERDEVELOPED/DELELOPING

COUNTRIES.

4. REVERSE ENGINEERING SHOULD HELP US OUT.

5. ABSORB TOT IN MANUFACTURING INDUSTRY.

6. ALLOW EXPORTS.

7. REQUIREMENT OF A REGULATORY BODY.

4. QUALITY CONTROL & VARIOUS CHECKS.

study on indian defense industries

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