Defence Procurement: Truth vs Hype

This article was presented at a Seminar by CII CII-IAFBanner600x234pxon ‘Make in India for Indian Air Force through Innovation & Indigenisation – Season 2’ on 23rd May 2017 at Delhi.  Specific instances are cited, where the clauses in the Defence Procurement Manual have been breached in letter and spirit in actual practice.

DPM 2009 – THEORY vs. PRACTICE

Introduction: The term ‘Self-reliance’ has been a fashionable term of Prime Ministers and defense ministers over the last six decades. Yet, we continue to be reliant as ever on foreign OEMs for supply of critical weapons and systems. Apart from the financial burden, the intangible risk of blockage of spares and support due to international political posturing is even greater. Without true indigenization, self-reliance is impossible.

Today, the DPM 2009 is breached in both letter and spirit. DPM 2009 highlights the need for support and encouragement to indigenous manufacturers with D&D capability. In actual practice, this is rarely experienced. It also suggests that DPSUs & DRDO align their procedures accordingly. This does not appear so.

One of the glaring obstacles to successful indigenization is the lack of a collective approach. Aerospace and Defense (A&D) is a highly specialized technology sector with a veil of confidentiality that prevents familiarisation to private industries. Hence, induction of the private industry can only happen if there is adequate knowledge sharing with opportunities for exposure in either DPSUs or the BRDs of the IAF. While this is reflected in some of the paragraphs of DPM 2009, it appears to focus predominantly on procurement from foreign OEMs with only Chapter 15 being devoted to Indigenous D&D. Issues with reference to the specific paragraphs of DPM 2009 are listed below.

Para 2.4.4 – “Indigenous firms should be given all support to produce and supply quality goods”. This does not start and end with periodic seminars and workshops on Indigenisation, but should result in more practical support such as provision and access to airworthy grade raw materials, standard parts, processes, etc. either directly from the BRDs or through a DPSU. There should also be technical knowledge sharing on a ‘need to know’ basis.

2.5.2c – “Exemption from EMD and waiver of Security deposit for MSMEs” – PBGs and Warranty BGs are still insisted by many of the maintenance bases/depots. BGs are issued by banks only against deposits. Hence, this money gets locked up for over 18 months since the BGs roll over from a Security deposit to a Performance/Warranty BG. MSMEs getting into multiple projects cannot afford to lock up precious finances. Refer suggestion under Para 15.2.4.

3.2.5 – “Inter-Services and inter-departmental Acceptability of Registration” – This is meant to be applicable across all Services. However, it is seen that each BRD within the IAF, leave alone other Services, has its own Registration process.

7.10.3 – “Guidelines for levying of LD” – LD needs to be seen in the context of the specific procurement. Firstly, LD needs to be applied only when there is a definite hardship and cost suffered by the buyer, especially in case of routine and repetitive procurement of standard and proven parts. However, application of LD for the indigenous D&D of any item taken up by an Indian industry appears to be contradictory to para 2.4.4. While there is provision for waiving of LD, this is very rarely exercised due to fear of adverse audit comments.

11.2.2 – Repair Contracts – This is primarily aimed at foreign OEMs. However, the same terms are also applied to Indian firms, especially MSMEs, who take on very challenging tasks at very high financial risks at their own cost. Repair of obsolete parts and equipment of foreign origin are tendered for Indian enterprises only when the foreign OEM stops support. In such a scenario, the IAF has no other alternative than to attempt local repairs. Hence, it is neither fair nor encouraging for an Indian MSME to be penalized with LD, PBG & WG for successful execution of the job. Even in the case of unsuccessful attempt, the Indian vendor has already incurred a sizeable loss through expenditure in the process. Further, it is worth recognizing the value of undertaking repairs of foreign OEMs. Repair is one of the best and economical methods of demystifying and deciphering specialized technologies. Access to the inner parts of equipment reveals details of state of art manufacturing technologies, types of components and raw materials used, multi-disciplinary design techniques, methods of ruggedisation, maintainability features, etc. that can be effectively used for indigenous D&D.

11.3.2 – “Unforeseen repairs – Missing parts, PCBs, etc.” – Except in the case of a repeat order, all repairs of OEM equipment would certainly have many unknowns and hence unforeseen issues. In most cases, OEMs do not supply detailed technical documents other than basic guidelines on disassembly and re-assembly. Hence, the 60 days period as a limit for identifying and intimation of unforeseen repairs appears unrealistic, at least for repairs of LRUs. This needs to be made more industry friendly so that it is a win-win situation for the IAF and the industry.

11.8 – Warranty for repairs – It is highly unfair to seek a Warranty on repairs of aged and obsolete equipment since many of the parts other than the repaired part may sequentially fail due to its excessive age. Failure of such aged parts may also consequentially lead to failure of the replaced part. Hence, this is a grey area of the DPM that needs improvement.

13.8.5 – “Data sharing between Services” – This never seems to happen even within each Service, leave alone between them. There is an urgent need to implement this since successful indigenization or repairs in a particular domain (communication/ hydraulics/ controls/ pneumatics/ guidance/etc) can be put to quick and effective use for the benefit of both the industry and the Armed Services, due to similarities in platform systems.

CHAPTER 15 – INDIGENOUS Design & Development

15.1.2 – “Economic viability of indigenization to be established based on likely requirement for 3 to 5 years”. Further refers to “economies of scale so as to make it commercially viable …”. Strangely, many RFQs issued by the BRDs do not even indicate future requirements. A D&D RFQ for qty. 1 or 2 is absolutely meaningless and displays a complete lack of understanding of ROI for private industries. Further, this also makes a mockery of a tender process since bidders can exaggerate the unit price and lower the D&D cost so as to still achieve L1. However, they stand to make higher profits on future production, whenever that happens. This actually works against the interests of the buyer and the Govt. Hence, the evaluation criteria for L1 should include at least the first batch of future supplies which should also be specified in the RFP.

15.2.1c – “Development contracts may be placed with two or more contractors in parallel. EOQ may be placed on L1 contractor”. When future quantities cannot be clearly predicted, only L1 would get the order. However, to keep the option of allowing additional contractors in case of higher quantities, the design of L1 could be used by any other vendor against payment of a royalty. The Royalty amount should be specified as part of original tender bid.

15.2.3 – NCNC contracts – This is one of the most dangerous options for an industry for two reasons.

  1. The buyer is never under any compulsion to procure the developed product on some pretext or the other since there is no commitment.

  2. As price is not pre-negotiated, IFA can insist on an RFQ for bulk supplies and the NCNC vendor could lose the bulk production bid negating the whole purpose of undertaking development at his own cost.

15.2.4 – DPM 2009 states that “Deposits and EMDs need not be insisted from reputed companies”. This option is rarely exercised even with MSMEs with proven track records in A&D sector. A scientific and transparent system of rating MSME vendors based on successful completion of prior projects can be easily implemented. Such rating can be used to either reduce or completely exempt the MSME from EMD or Performance/Warranty deposits. The rating can also consider failures and delays to derate the MSME thus making the system very dynamic. Ideally, this rating system should be common and universally applied across all defense services.

15.3.2 – Design – IPR for indigenous design should be held by the firm developing it. Customer should provide a “Non-Disclosure undertaking” and should not provide the same to any other indigenous supplier.

15.10.2 – Acquiring Manufacturing Drawings – This para makes no mention of IPR for the design realized by the vendor. True value of IPR lies in the recurring profits resulting from long term bulk production and not in the actual design cost. Hence, the IPR ownership should not be transferred to the Services, but should remain with the D&D organization. Alternatively, a royalty amount can be negotiated as part of the tender bid. This topic was discussed at one of the seminars held in Delhi a year ago and Govt. representatives had largely agreed with this argument. As stated in above Para 13.3 and 15.1.2, future quantities are not always stated. Further, insistence of submission of design is neither universally applied nor stated in the RFQ. The matter raises its ugly head only at the successful delivery of the product and at that stage no MSME would have the ability to take a legal stand on this issue since payments would be withheld. This matter therefore needs better clarity in statement.

Miscellaneous Issues:

The concept of IDDM should be brought into DPM and given primacy over all other forms of procurement.

Local Taxes and duties – Exemption certificates, etc. – Services should pay all duties and taxes based on documentary evidence of actual payment. Vendors should not be subjected to harassment by Local governance bodies.

Registration and Categorisation: The matter of registration and categorization of products and services has been misinterpreted by some of the Buyer agencies. It was contented that registration was valid only for the specific type of product/services that the MSME has already delivered. This is incorrect. Eg; An organization with competence and proven track record in electronics should be permitted to bid for any electronic equipment as long as some competence in reverse engineering or design exists.

Conclusion : DPM 2009 needs to be improved further through active and collective participation of all stake holders that includes the Armed Services, DPSUs, large and MSME private sector companies.

 

Make in India and 100% FDI in Defence: a double-edged sword?

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The ‘Make In India’ slogan announced by a refreshingly new and agile PM of our country two years ago was lapped up by many Indian enterprises that were starved of economic activity. It was almost like a mouth-watering feast of desserts being brought to a buffet table with a million hungry people waiting for a meal. Then came the pronouncement of encouragement to indigenously manufactured equipment, platforms and arms for the Indian defence forces already starved from lack of capital acquisitions from foreign companies for over a decade. Next came the DPP2016 with the inclusion of a special category ‘IDDM’ to pronounce that Indian Designed, Developed and Manufactured items would get the highest priority in the defense procurement process. This was the cherry topping the dessert!

And now comes the announcement of 100% FDI in A&D, closely followed by the American offer of shifting the F-16 production line to India. So, is this the final serving of the customary ‘Paan beeda’ or is it a hangman’s noose after the last fulfilling meal for the Indian industry?!

I must have attended at least ten defense related conferences and seminars across the country in the last 12 months. In every one of them, one fact that came through very clearly was the mirage of Transfer of Technology from foreign OEMs. Senior representatives of the Armed Services, the DRDO and DPSUs, openly conceded that no ToT of any value was ever achieved over the last five decades. It was almost unanimously agreed that the only way towards military self-reliance was through indigenous R&D, design, manufacturing and lifecycle support. Everyone pointed to the success of ISRO in the face of sanctions and denials and how this could be achieved in other spheres of defense preparedness. It is therefore worthwhile exploring various scenarios that could emerge from the allowance of 100% FDI in A&D.

  1. First of all, it needs to be appreciated that A&D industries operate with low volumes with production often taken up in batches. Hence, the employment potential is certainly limited compared to consumer/industrial product industries. When it comes to production of military platforms themselves (aircraft, helicopters, tanks, armoured vehicles, etc.), only 10 to 15 of these are made in a year. Almost all the systems and sub-systems are outsourced to a global supply chain that comprises specialized competences. Hence, even if a foreign platform manufacturer sets up an Indian operation, he would still import the systems and parts from his global supply chain. It is worth noting here that the systems and equipment constitute more than 70% of the lifecycle costs of the platform. Further, it is the systems that undergo periodic upgrades which are supplied by the OEMs. Hence, there is not much to be gained by the mere fabrication of the outer shell of an aircraft or tank if the expensive systems are also not manufactured in India. For this to happen, we need to create the complete ecosystem of Tier-1, Tier-2 and Tier-3 supply chain of Indian companies and these are far more important than the Integrator company. In the absence of such a holistic approach, we would only help foreign OEMs in increasing their participation in Indian defense procurements. This would go completely against the goal of ‘Self-reliance’.
  2. It is seen that foreign OEMs who establish their Indian subsidiaries very often assemble their products using CKD kits imported from abroad. Since the imported parts and assemblies are produced on a global production scale, they would cost relatively lower than being manufactured here in smaller volumes. However, they are still marked as ‘manufactured in India’ just as Korean and Taiwanese consumer products assembled in India. Further, since this only involves screw-driver technology, there can be no benefit of either exposure or value addition to Indian employees. On the other hand, with no design and development costs to be incurred, these products can be priced lower than what Indian companies can deliver, thus killing Indian R&D and design organisations, including DRDO and DPSUs.
  3. With long lifecycles of 40 years, all military platforms go through at least a couple of systems upgrades. If the foreign OEMs are included in the IDDM category just on the basis of their manufacturing plant located in India fulfilling the stipulated 60% indigenous content clause, then all the upgrades will have to automatically go to them with no participation of either genuine Indian owned companies or individuals. This is again a lost opportunity for Indian defense enterprises. This would ultimately lead to the demise of even the few Indian enterprises that have already shown signs of meeting the challenge of IDDM.
  4. Almost all spare parts of platforms and equipment are now being imported from the OEMs abroad. Without a strong drive towards indigenization of all parts and systems, more and more spares will be continued to be obtained from abroad, channelized through the Indian subsidiaries with a ‘Made in India’ label. This serves neither the hunger for technology nor exposure to manufacturing.
  5. In the unlikely event of a foreign OEM willing to manufacture a major chunk of equipment, systems and assemblies in its Indian factory and using them for meeting Indian defence requirements as well as exporting them back to the parent country, this would most likely involve use of automated machines and processes with little employment potential. While a small number of operators and technicians would find employment opportunities, they could gain some insights into modern manufacturing technologies. However, to interpret the nuances of such processes and technologies, leading to improvement of Indian design and development capabilities, it would need a more holistic exposure with smart and competent engineers involved in the operations. Would the foreign OEM do this?

Finally, coming to the offer of Lockheed Martin to shift their manufacturing plant of the F-16 fighter aircraft to India, it is a well-known fact that the F-16 was first manufactured for the USAF  forty years ago in 1976 with subsequent versions being supplied to various NATO countries. The manufacturing plant is already planned for closure and so it is evident that the company is offering to relocate a scrapped and obsolete plant to India. This once again confirms what we get from foreign OEMs!

In the final analysis, does 100% FDI sound like a double edged sword or a dagger used for ‘hara kiri’?

Challenges & Solutions for Make In India in the A&D sector

CHALLENGDefexpo 2016-titleES FOR MAKE IN INDIA IN THE A&D SECTOR

The ‘Make in India’ campaign seems to focus on ‘Build to print’ as per drawings supplied by a foreign OEM. While this may provide some short-term benefits, it will not lead to self-reliance in the long term. Experts in the A&D arena have openly acknowledged that the so-called ‘Transfer of Technology’ has never resulted in any provision of core technology other than basic manufacturing and maintenance documents. To be truly self-sufficient in this critical sector, we need to Create, Innovate, Design, and Manufacture in India through indigenous R&D.

Any entrepreneur desiring to design and manufacture for the A&D sector faces many challenges. These are:

Internal:

  1. Lack of specialised domain knowledge and awareness of the stringent quality standards and military This is a result of the historical confinement of the domain within DPSUs for the last six decades with no access to the private sector.
  2. Capability to design equipment to overcome harsh conditions imposed by extremes of temperature, humidity, altitude, vibrations, corrosive atmosphere, etc.
  3. Competence to engage in technical discussions with certification authorities.
  4. Multi-disciplinary domain knowledge that is essential for holistic design and manufacture.

External

  1. Delays in all processes up to several years for even a small project. Tender bids are required to be valid for at least six months and often for 12 months.
  2. Small volumes leading to problems in sourcing specialised components at competitive prices.
  3. Uncertainty about future production orders for an indigenisation product.
  4. Availability of trained workforce

While the responsibility to develop competency in the domain rests with the entrepreneur, the external challenges above are detailed as follows:

RFQ and tender stage:

One of the greatest challenges relates to lack of ownership and decision making in the DPSUs and the Armed Services. It often takes two years for a requirement to mature to an RFQ, even for ‘critically required’ LRUs, sub-assemblies and spare parts. The subsequent process of tender evaluation, price negotiation and order release takes at least 6 months. In many cases, orders are not released even after the L1 vendor has attended price negotiation meetings. These are highly demotivating to an entrepreneur. In most cases, technical specifications of the OEM equipment are not even available with the tendering agency and the RFQ states ‘Generation of technical specifications is a part of the indigenisation process’. If this is so, how does a bidder specify what he would deliver and how does the tendering agency evaluate the bid?

Small volumes

In most cases, annual quantities of specialised parts and equipment are in single digits. This makes purchase of specialised, military grade raw materials and components very difficult. These include even screws, nuts, washers, consumables, etc., that are used on airborne equipment. This imposes either very high costs on a small quantity, or a large inventory of unused materials.

Qualification Testing

  1. Before the indigenised unit can be integrated into a military platform, it needs to be qualified by subjecting it to stringent life-cycle tests. This includes expensive EMI/EMC and Environmental testing that is only carried out in a few specially equipped laboratories. These tests can by themselves cost anywhere from Rs.6 to 10 lakhs.
  2. Qualification tests are to be conducted in Govt. approved test agencies. While large corporates are able to afford investments in expensive test facilities within their organisation, MSMEs find it unaffordable. MSMEs therefore have to rely on external service providers such as DRDO or DPSUs. Time slots at such external agencies are very difficult to obtain for a private company. This hurts the progress of the projects leading to cost escalation. Reputed test houses in the private sector are far more expensive than govt. controlled agencies.

Serial Production

There have been many instances where no production orders have been placed after indigenous development of even a ‘critically required’ item that has been designed, tested and qualified by a vendor. This is a complete let down and one of the demotivators for design entrepreneurs to enter this sector.

Funding and cash flow

Funding for long gestation A&D development projects is just not available. Indian banks and funding agencies do not appreciate the value of research, design and development. While the present Indian Govt. has proposed to set up a Defence R&D Fund for MSMEs, the modalities of making this available to genuine entrepreneurs is yet to be formalised.

Availability of trained workforce

Trained workforce, especially design engineers, are simply not available due to disconnect between industry and the academia. This is even more severe in the specialised A&D sector.

Conclusions & Suggestions:

  1. DRDO and DPSUs should facilitate domain specific knowledge sharing with A&D MSMEs to empower them to appreciate the intricacies and challenges of indigenous development.
  2. Funding mechanisms for long gestation D&D projects need to be created on priority since this involves self-reliance in defence and aerospace. One method could be the award of rating points (similar to credit rating by CIBIL), proportional to the value of A&D related orders successfully executed by an MSME. The accumulation of points would indicate the maturity and capability of the vendor. These could be accumulated and monetised for obtaining special financing from Public Sector Banks, as well as for proportional reduction of monetary Performance Guarantees to the customers.
  3. Establishment of virtual clusters of MSMEs linked to larger private companies or DPSUs/DRDO will result in an organised growth of MSMEs with specialised aerospace domain knowledge that can ultimately lead to complete indigenous equipment and systems development capability over time.
  4. The same ecosystem can then be leveraged by the educational institutions for teaching as well as training the graduates in the field of A&D, within industries on live projects. Engineering colleges today teach the aeronautical subjects without even a physical contact with a live aircraft or engine.
  5. Materials Bank to be established for easy availability of commonly used military grade raw materials and standard parts for MSMEs.
  6. Establishing testing labs by the Government, exclusively for use by private MSMEs or by directing a priority allotment of time slots at govt. labs.
  7. Excise duties, Service Tax and VAT (GST) should be exempted for all related inputs as well as the final product/services. It does not make any sense for duties and taxes to be paid from one Govt. account to another through the intermediary private vendor who has to also deal with the cash flow issue.

There is no dearth of technology and competencies among Indian private sector industries in undertaking challenging indigenisation projects. All they need is a friendly and supportive induction into the sector.

The original article appeared in the Defexpo 2016 Show Daily of Geopolitics Magazine on March 30, 2016.

Budget 2016: To boost start-ups, find quick cure for the ‘pain of doing business’ in India

The annual budget exercise of the government has turned into more of an occasion for raging media debates and controversies than a sound and logical process of provisioning financial allocations for planned revenues and expenditures.

The fact that tax and duty rates are altered almost every year, by itself shows a lack of clear long-term planning while encouraging unreasonable expectations from society and industry.Budget should also quantify tax incentives for investors as proposed in the ‘Start-up India Action Plan’

An astute business instinct is truly reflected in our PM’s leanings towards encouraging business and industry, more particularly the small ‘Start-ups’. I sincerely believe that the flagship ‘Start-up India’ campaign should be seen as a clarion call of the PM to every Indian to ‘wake up and start working’ rather than limit it to only business start-ups.

No business or industry can operate efficiently and competitively if rest of society and the bureaucracy does not. Aspirations have to rise collectively rather than individually. It is only then that financial allocations can have any impact on society as a whole. Having said that, ‘Start-ups’ are the new-found bandwagon across the country with a national slogan to boot. With global luminary CEOs to add their flavours to the campaign, it is obvious that Budget 2016 would be scoured for any and all support, incentives and subsidies for ‘Start-ups’. So, what is it that they really need?

First and foremost, it would be funds and investors. The most empowering feature of the budget could be to confirm and quantify the tax incentives for investors as proposed in the ‘Start-up India Action Plan’. Extending this further, it is also necessary to incentivise the private sector for creation of new Incubation Centres since this is one of the key enablers of a Start-up ecosystem.

Investments in Incubation Centres should also be entitled to at least some tax incentives. Differential rates of taxes and duties have been used in the past for encouraging certain types of industries as well as for setting them up in undeveloped areas. This scheme could now be used to encourage setting up ‘Start-ups’ in Tier 2 and Tier 3 towns.

This would have multiple benefits for investors, employers as well as creating new employment opportunities in smaller towns. Operating costs would also be lower. Of course, this would have to be coupled with improving infrastructure in the smaller towns, but isn’t this what the PM and his team are proposing every day? None of the above would make any impact unless the much talked about ‘pain of doing business in India’ changes to ‘ease of doing business’ in the real sense. The Start-up Action Plan also talks of achieving this.

It must however be emphasised that ‘Ease of Doing Business’ should be the norm across all categories of businesses, and not just for Start-ups, if India has to achieve the growth figures it aims for. To this end, the 3-year concessional period exclusively for Start-ups is meaningless. Although today’s start-ups are all in a connected flat world, and establishing digital connectivity is far easier than physical, the creation of ‘Start-up Clusters’ with all required infrastructure located within the physical boundaries of the Cluster would be beneficial in many ways.

Considering the fact that the entrepreneurs founding a start-up have no time to run around setting up the nitty-gritty of infrastructure, common facilities like stable power with stand-by gen sets, telecom, transport bays, clean and basic residential accommodation, virtual office or common office facilities, etc. could be created by the government itself as the facilitator. This would save precious funds and time for the entrepreneur.

Incubation centre could also be co-located. With remote online monitoring and a bunch of progressive bureaucrats involved, this dream is realisable. However, this needs a sizeable investment by the Governments, both Central and State. If the Government can be convinced, the budget needs to make a significant allocation for Start-up clusters across the country.

Ultimately, the Union Budget is only one of the contributors to achieve the various policies of the government of the day through allocation of the necessary funds. Much more needs to be done on the ground, in a sustained and committed manner, to achieve the goals of ‘Start-up India’.

The Original article appeared on First Post.

Defence Procurement Procedure’s new avatar inspiring; some players seek more tweaking

The much-awaited changes to India’s Defence Procurement Procedure (DPP) were announced last month. This was in line with the promise made by Defence Minister Manohar Parrikar, after he took over the reins of Ministry of Defence in November 2014. The new look DPP, set to take shape in the next two months, gives major impetus to the Narendra Modi government’s flagship Make in India mission. It has some inspiring elements to boost Indian private companies to undertake research and development in the aerospace and defence (A&D) sector.

One India elicited the views of some of the private A&D players to capture the mood of the industry, which has always felt that enough is not being done to win their hearts. Here are the excerpts from a series of interviews we did recently. Offset mechanism not working in interest of country G Raj Narayan, Managing Director of Radel Advanced Technology (P) Ltd, has been a visible voice in the last couple of years in various A&D forums. He says it was clear from the beginning that the offsets mechanism wasn’t working to the interests of India. “The insistence of the foreign OEMs to dilute the same on the pretext of ‘not finding capable Indian partners’ was only an indirect method of preventing any exposure to Indian companies on related technologies. The only way to improve our state of self-sufficiency is to develop R&D in-house and design from whatever technologies we are presently exposed to (LCA, Jaguar & Mirage), and then move upwards to higher levels indigenously,” says Raj. According to him, the raising of the offset applicability to acquisitions of Rs 2000 crore and above is irrelevant. “The higher preference to ‘indigenously designed, developed and manufactured’ items certainly makes more meaning than the vague ‘Make’ and ‘Make & Buy’ categories. This is a confirmation of the preference for Indian products which needs to be applauded. Further, the focus on enabling and empowering R&D as well as supporting MSMEs through funding is a huge step forward. Though this could still throw up problems in distinguishing between ‘mature and capable’ MSMEs and ‘raw’ MSMEs, proper processes could certainly be set up to ensure that the right company get the right amount of funding appropriate with its track record and status,” Raj added. Radel’s ongoing projects for various military programmes include, auto-selector bomb release system, speed switch, anti-collision lights, cockpit control unit and ground test rigs of various aircraft and helicopters. Introduction of IDDM a good move Puneet Kaura, MD and CEO, Samtel Avionics, says that the introduction of a new category — Indigenous Design Development Manufacturing (IDDM) – is a welcome move. “We welcome the move to introduce the IDDM category in the DPP as it will back companies like us who have proven competencies in indigenous design, development and manufacturing. Furthermore, the announcement of funding by the government for R&D purposes will help build a technology base in the country,” says Puneet, among the early players in the A&D sector. He said the growth of the Indian defence industry has been marred by delays. “The new DPP addresses this through a definitive step to cut down the delays in procurement by reducing the time lag between AoN (acceptance of necessity) and the tender or request for proposal (RFP),” says Puneet. Samtel through its joint venture with HAL, has been developing MFDs for Su-30 MKI within its facility in Greater Noida. The Samtel-HAL JV has already delivered 125 sets of MFDs for Su-30 MKIs. Will boost investments and better quality of products According to Rajeev Kaul, MD & Group CFO, Aequs, told One India that that take on LI policy in the new-look DPP is a positive step. “L1 policy is a bold move and it credits the capability of the bidder. This would encourage quality consciousness and boost investments in better quality products,” says Rajeev. Aequs has been supplying main landing gear shackle for the B787 programme. Aequs manufacturing facilities are located in Belagavi, Bengaluru, and Houston. Offset limit should be brought back to Rs 300 crore Col H.S. Shankar (Retd), CMD, Alpha Design Technologies Pvt Ltd, feels that increasing the offset applicability limit is a retrograde step and will deny Indian industry, particularly MSMEs, large chunk of their work content. “It is our view that offsets (with Rs 300 00 crore and above limit) was working satisfactorily (except for few glitches at MoD) and benefiting Indian Industries enormously. This will be a big blow to Indian industries. The limit should be reviewed and brought back to Rs 300 crore. He said the MSMEs/FICCI had listed many suggestions to the DPP Review Committee, but they were not accepted. “We wanted the ‘Make’ category to be split into two categories: ‘Make’ large industries with higher limits and ‘Make’ MSMEs with a limit of funding up to Rs 500 crore per project,” says Col Shankar. Commenting on the ‘strategic partners,’ the veteran A&D expert felt that it was a retrograde move of brining in ‘public sector mentality’ into private sector by reserving few big players in private sector. “This is a back door entry for big private sectors – something which Kelkar Committee had recommended as ‘Udyog Ratnas’ in 2016 and rejected and not implemented by successive governments,” says Col Shankar. MSME categorisation limits for A&D products must go up Naresh Palta, CEO (Aerospace), Maini Group, said the government funding of 90 per cent for indigenous R&D will spur domestic products and technologies. He also felt that ‘accepting offers in single tender cases’ would remove major hurdles for industries developing niche products. However, Palta felt that the DPP’s new avatar is silent on measures for SME segment. “We want the new policy to increase MSME categorisation limits up to Rs 150 crore for A&D projects specifically. Further taxation relief to Indian products vis-à-vis imports, for level playing. We are still unable to compete our products in the domestic requirements with imported ones due to higher duties and taxation incident,” says Palta.

The original article appeared on One India

Defence Procurement Procedure’s new avatar inspiring; some players seek more tweaking

The much-awaited changes to India’s Defence Procurement Procedure (DPP) were announced last month. This was in line with the promise made by Defence Minister Manohar Parrikar, after he took over the reins of Ministry of Defence in November 2014. The new look DPP, set to take shape in the next two months, gives major impetus to the Narendra Modi government’s flagship Make in India mission. It has some inspiring elements to boost Indian private companies to undertake research and development in the aerospace and defence (A&D) sector.

OneIndia elicited the views of some of the private A&D players to capture the mood of the industry, which has always felt that enough is not being done to win their hearts. Here are the excerpts from a series of interviews we did recently. Offset mechanism not working in interest of country G Raj Narayan, Managing Director of Radel Advanced Technology (P) Ltd, has been a visible voice in the last couple of years in various A&D forums. He says it was clear from the beginning that the offsets mechanism wasn’t working to the interests of India. “The insistence of the foreign OEMs to dilute the same on the pretext of ‘not finding capable Indian partners’ was only an indirect method of preventing any exposure to Indian companies on related technologies.

The only way to improve our state of self-sufficiency is to develop R&D in-house and design from whatever technologies we are presently exposed to (LCA, Jaguar & Mirage), and then move upwards to higher levels indigenously,” says Raj. According to him, the raising of the offset applicability to acquisitions of Rs 2000 crore and above is irrelevant. “The higher preference to ‘indigenously designed, developed and manufactured’ items certainly makes more meaning than the vague ‘Make’ and ‘Make & Buy’ categories. This is a confirmation of the preference for Indian products which needs to be applauded. Further, the focus on enabling and empowering R&D as well as supporting MSMEs through funding is a huge step forward. Though this could still throw up problems in distinguishing between ‘mature and capable’ MSMEs and ‘raw’ MSMEs, proper processes could certainly be set up to ensure that the right company get the right amount of funding appropriate with its track record and status,” Raj added.

Radel’s ongoing projects for various military programmes include, auto-selector bomb release system, speed switch, anti-collision lights, cockpit control unit and ground test rigs of various aircraft and helicopters. Introduction of IDDM a good move Puneet Kaura, MD and CEO, Samtel Avionics, says that the introduction of a new category — Indigenous Design Development Manufacturing (IDDM) – is a welcome move. “We welcome the move to introduce the IDDM category in the DPP as it will back companies like us who have proven competencies in indigenous design, development and manufacturing. Furthermore, the announcement of funding by the government for R&D purposes will help build a technology base in the country,” says Puneet, among the early players in the A&D sector. He said the growth of the Indian defence industry has been marred by delays.

“The new DPP addresses this through a definitive step to cut down the delays in procurement by reducing the time lag between AoN (acceptance of necessity) and the tender or request for proposal (RFP),” says Puneet. Samtel through its joint venture with HAL, has been developing MFDs for Su-30 MKI within its facility in Greater Noida. The Samtel-HAL JV has already delivered 125 sets of MFDs for Su-30 MKIs. Will boost investments and better quality of products According to Rajeev Kaul, MD & Group CFO, Aequs, told OneIndia that that take on LI policy in the new-look DPP is a positive step. “L1 policy is a bold move and it credits the capability of the bidder. This would encourage quality consciousness and boost investments in better quality products,” says Rajeev.

Aequs has been supplying main landing gear shackle for the B787 programme. Aequs manufacturing facilities are located in Belagavi, Bengaluru, and Houston. Offset limit should be brought back to Rs 300 crore Col H.S. Shankar (Retd), CMD, Alpha Design Technologies Pvt Ltd, feels that increasing the offset applicability limit is a retrograde step and will deny Indian industry, particularly MSMEs, large chunk of their work content. “It is our view that offsets (with Rs 300 00 crore and above limit) was working satisfactorily (except for few glitches at MoD) and benefiting Indian Industries enormously. This will be a big blow to Indian industries. The limit should be reviewed and brought back to Rs 300 crore.

He said the MSMEs/FICCI had listed many suggestions to the the DPP Review Committee, but they were not accepted. “We wanted the ‘Make’ category to be split into two categories: ‘Make’ large industries with higher limits and ‘Make’ MSMEs with a limit of funding up to Rs 500 crore per project,” says Col Shankar. Commenting on the ‘strategic partners,’ the veteran A&D expert felt that it was a retrograde move of brining in ‘public sector mentality’ into private sector by reserving few big players in private sector. “This is a back door entry for big private sectors – something which Kelkar Committee had recommended as ‘Udyog Ratnas’ in 2016 and rejected and not implemented by successive governments,” says Col Shankar.

MSME categorisation limits for A&D products must go up Naresh Palta, CEO (Aerospace), Maini Group, said the government funding of 90 per cent for indigenous R&D will spur domestic products and technologies. He also felt that ‘accepting offers in single tender cases’ would remove major hurdles for industries developing niche products. However, Palta felt that the DPP’s new avatar is silent on measures for SME segment. “We want the new policy to increase MSME categorisation limits up to Rs 150 crore for A&D projects specifically. Further taxation relief to Indian products vis-à-vis imports, for level playing. We are still unable to compete our products in the domestic requirements with imported ones due to higher duties and taxation incident,” says Palta.

The original article appeared on OneIndia.

New Defence Procurement Policy results in dynamic changes

In an attempt to streamline defence acquisition and give a boost to the “Make in India” initiative, the government on Monday approved changes to the Defence Procurement Procedure (DPP). This will give Indian private companies a chance to locally produce equipment and invest in research and development (R&D).

At a meeting chaired by Defence Minister Manohar Parrikar on Monday evening, the Defence Acquisition Council (DAC), which is the supreme decision-making body for the Ministry of Defence, allowed changes to the DPP after a one-year review, The Tribune said.

“Recommendations of the expert committee headed by former Home Secretary Dhirendra Singh were considered and most of them were approved,” Parrikar was quoted as saying by The Hindu.

As per the changes, the procurement policy of 2016 will have a new category — an Indigenously Designed, Developed and Manufactured (IDDM) platform. Under this category, if the design is indigenous, it will be mandatory to have 40% local content, but if the design is not local, 60% content will be mandatory.

Another major change to the DPP is “small and medium-scale industries will get opportunities,” Parrikar said. However, two issues have to be addressed: “The method of blacklisting for firms” and the “requirements for guidelines to select the correct strategic partner for producing equipment in India”. The DPP offsets limit has been increased from Rs 300 crore to Rs 2,000 crore, The Tribune report said.

“Issue of Offsets is actually irrelevant since this was not working in any case. As I have been saying all along, Offsets even for projects in excess if 2000 crores will be of no use from a defense technology point of view,” said G Raj Narayan, Founder & Md of Radel Group.

India is currently the largest buyer of military equipment and weaponary, which accounts for 15% of all international imports, Stockholm International Peace Research Institute, a Sweden-based think tank said.

The original article appeared on IBTimes.

He is at ease designing musical instruments and missile launchers

A musician credited with inventing the electronic tambura and electronic tabla, G. Raj Narayan may seem to be an odd man out at a seminar on military hardware and electronic warfare.

But Raj, as he is popularly called, is not only at ease with both the fields but is among the lead panellist, given his foray into defence and aerospace, involving manufacture of military-grade weapons for the Indian defence establishment.

A former design engineer at Hindustan Aeronautics Ltd. in Bengaluru, Mr. Raj Narayan, who has a master’s degree in electronics from IIT Madras, has a passion for Carnatic music and was a regular on AIR and Doordarshan till 10 years ago before he decided to strike it out as an entrepreneur in aerospace and defence equipment manufacturing.

Given his background in HAL and experience of working on platforms ranging from Gnat to MIG and Jaguar, Mr. Raj Narayan floated Radel Group, a precision engineering group in Bengaluru, which now develops components for the fighter aircraft of the Indian Air Force (IAF).

May seem hi-tech for the uninitiated but not for Mr. Raj Narayan who said the design and circuitry involved in making a digital musical instrument or military equipment were the same. Speaking to The Hindu on the sidelines of the Indian Science Congress, Mr. Raj Narayan said, “My exposure to electronics and miniaturisation as a designer in HAL enabled me to design circuits for musical instruments”.

Mr. Raj Narayan, who was part of the team that built India’s first indigenous cockpit simulator, also invented the electronic tabla and electronic veena, and mass produced them for the music industry. The music unit grew and supported his venture back into aerospace in 2005; the two companies are located in the same building in Bengaluru, and what is more, they have the same employees.

Today a design engineer may be working on a musical instrument, tomorrow he may work on ammunition firing equipment of an aircraft. “That is the beauty of the whole exercise as the process of electronic design and packaging is the same but the only difference is that defence products have to be conceived and designed at a higher level than for a consumer product,” said Mr. Raj Narayan.

The musician, who received the Karnataka Kalashree award in 2001, recently innovated a missile launcher for the Jaguar based on the latest micro-controller technology to replace obsolete circuits and it has been cleared for induction by the IAF.

The original article appeared on The Hindu.

MSMEs should scale up their capabilities

Micro, Small and Medium Enterprises will have to scale up their capabilities to design and manufacture parts, sub-assemblies as well as complete products which requires a wide variety of skills, said G Raj Narayan, founder and MD Radel Group and Chief Mentor of Drona.

Speaking at a Plenary Session at the 103rd Indian Science Congress on Aims to focus on the Make In India initiative with particular reference to the Defence and Aerospace sector’, he said that MSMEs in India contribute more than 45 per cent of the industrial output and hence constitute a large section of the manufacturing chains of almost all products. He said that ‘Make in India’ opens up far more opportunities of raising their value proposition than being mere vendors to the large DPSUs.

Considering that less than 10 per cent of the engineers churned out of Indian colleges are found to be employable in the core engineering industries, imparting practical skills is the need of the hour for MII to succeed.
Institutions such as the Drona School of Engineering Practice, which orients engineers to practical hands-on exposure to high value engineering skills in an industrial environment, are the way forward.
The ‘Make in India’ is a paradigm shift from the past two decades of Indian obsession with IT and ITeS services during which manufacturing industries were allowed to collapse.

There appears to be a new found realization of the benefits of manufacturing A&D products in India for domestic consumption rather than import them.
However, ‘Make in India’ goes beyond just manufacturing, to design, innovate, manufacture and support in India.
Viewed holistically, this has profound implications across a wide section of businesses.
It involves huge numbers of creative engineers, technicians, professors, research scholars, sales, marketing and support staff, etc.
all of whom need to possess specialized skills, he added.

The original article appeared on UniIndia.

Designing, creating and innovating in India

Prime Minister’s ‘Start-up India, Stand up India’ initiative can succeed only when the focus in our colleges shifts towards creating and owning intellectual property. Creativity is a talent nurtured right from childhood. Various types of arts, crafts and hobbies expose a child to a variety of skills that develop creativity. Design, per se, need not always involve either creativity or innovation. It is only when creativity is embedded into the art of design that innovation happens. Innovation can also result from a strong desire to find new or improved solutions to existing problems. However, this talent is reinforced by a creative aptitude. A combination of all these characteristics is what actually results in innovative designs, products and services—some of which can be revolutionary.

It is, therefore, obvious that innovative engineers cannot be created overnight. The process has to be part of an integrated system which includes parents, teachers, schools, colleges and industries—all of which encourage inquisitive curiosity with practical exposure, leading to development of interest, aptitude, skills and aspirations to excel as a practicing engineer.

The reason that barely 7% of the approximately 1.5 million engineers graduating every year in India are employable in core engineering sectors is the absolute lack of aspiration. They get into an engineering college—or a medical college, for that matter—only because of peer and parental pressure, and not out of desire or deep interest. If their ultimate evaluation is also based on rote-based learning and marks obtained, we are neither inculcating in them the “ability to learn” nor practical capabilities that are relevant to a prospective employer. “Learning to learn” and “learning to apply” should, therefore, be the cornerstones of education, be it engineering, medicine, accountancy or management.

Design, innovate & make in India: The Prime Minister is charming young students by ‘Make in India’ and ‘Start-up India, Stand up India’ initiatives. However, we need to not just make in India, but create in India, design in India and innovate in India, so as to create and own intellectual property. What we need is a solid design and manufacturing base to enable these initiatives to succeed. However, without competent engineers to drive these programmes, how can the campaigns even take off—whether in aerospace, defence or consumer sectors? For this, we need to skill our engineers not just as computer operators, but also as intelligent designers and engineers in practice.

The core of all these will be effectively addressing our flawed education system—right from primary school to the highest education. If we need to create, innovate and design, we need performing engineers, doctors and scientists who are capable of designing products, or can at least reverse engineer like the Chinese, and then innovate further.

Design & innovation: Design skills lie at the top of the pyramid, which include a variety of multidisciplinary abilities. Creative design requires the essential powers of creative, analytical and critical thinking.

Skilling cannot happen only in a college environment. Universities and engineering colleges need to tie up with industries to provide the engineers hands-on exposure to “live” projects within the industry.

So, what should be the action plan for educators? Or, in other words, how can engineering students create and innovate in the next year or two?

Foundation: Educators need to start the process with first-year students. The laying of strong fundamentals forms the foundation, on which the superstructure of “engineering practice” can be built. Fundamental concepts can be better grasped by students when they are explained with the help of simple, practical, everyday examples of theory.

Innovation: It is then possible to climb the ladder of innovation step-by-step, by teaching students how to think and create, starting with simple hands-on projects that are made by students as early as the very first semester.

Action plan for students: For students, the motto should be “empower yourself to learn”. It is not easy to overhaul the engineering education system. Yet we occasionally read about a handful of students who have created a gadget for the farmer, or a solar-powered vehicle, etc. How did these students achieve the same, in spite of being part of the same system? They educated themselves outside the “syllabus” and college routine. Engineering students need to read the latest journals, magazines and information online in the core sector of their choice—be it electronics, mechanical, chemical or any other. Project work today is considered a dreary chore, to be completed by hook or crook to qualify for a degree. So as to become a creative engineer, students need to break out of this mindset. They need to develop the interest to try and make simple projects themselves, learn from mistakes through analysis, and finally succeed in creating a simple project. This exercise itself is bound to provide a lot of pleasure and excitement, besides providing invaluable educational insights about the subject. Ultimately, these very habits—of keeping oneself abreast of developments, of working with one’s hands and trying out an idea in practice—are the ones that will stand them in good stead throughout their career. Indian students can certainly innovate and create in the next two years, by using their imagination and practical experimentation to create products and solutions for everyday life.

The original article appeared on Financial Express.