Among the first things the new Government did after coming to power was raising the foreign direct investment (FDI) limit in defence to 49 per cent. This was followed by the call to foreign investors to ‘Make in India’. Puneet Kaura, Executive Director of Samtel Avionics, an MSME that makes high-technology avionic products for commercial and military use in India and overseas, feels the time is right for pushing public-private partnerships (PPPs) in defence. Edited excerpts:

What is your view on ‘Make in India’ and hike in FDI limit in defence?

If I compare defence with other industries, the private sector is in a nascent stage. We will be more comfortable if we are able to control the contracts, as the ‘Make in India’ policy is built around giving preference to Indian companies.

If this is diluted, the situation will tilt towards foreigners, and this might not favourable. Also, 49 per cent FDI in defence is good, but beyond that, the industry will not be comfortable. Similarly, any dilution in the ‘Make in India’ policy wherein foreign OEMs (original equipment manufacturers) are given preference would dilute the very effort of creating an indigenous industry.

What has your experience been in countries, such as the US?

The US industry is far advanced and older. We opened our gates to private sector in defence only 10-12 years ago. We have relations with companies in France, the UK and are trying to establish relations with a firm in Brazil. In all these countries, preference is given to local industries in the defence sector.

What key challenges do private defence firms face in India?

The legacy in India has been to focus on defence public sector undertakings (PSUs). However, I feel a very strong PPP model is required in defence,like our joint venture with HAL (Hindustan Aeronautics), which is an aircraft integrator.

If you look at the global model, except for the final integration of an aircraft, they have strong consortium partners, say, in Boeing etc, where outsourcing work is done, whereas in HAL, everything is done in-house. They have a few JVs and also outsource work. So, these are the kind of the initiatives that the Government can provide to private defence firms.

You talked about PPPs, but what are the hurdles for a stand-alone private defence company?

I won’t call these hurdles, but there are two major enablers. One, fast-track clearance of several pending contracts is needed. Two, we need an environment where we start looking at private companies at par with defence PSUs. Setting up joint ventures is a good idea.

Which segment are you looking at in automobiles?

We are looking at the armoured vehicle segment. We recently tied up with General Dynamics of Canada to jointly produce digital displays in future infantry combat vehicles. On the commercial automobile side, we have a display product that can be used by waste management trucks.

What kind of growth are you looking at?

We are now in the fourth year of revenue and expect double digit growth every year. About 60 per cent of our revenues will come from overseas. The consolidated turnover of the Samtel Group is ₹150 crore and we are looking at ₹500 crore by 2016-17.

The Government is considering changing the definition of MSMEs across verticals. What is your view?

Defence, aerospace, robotics etc., are highly tech-driven. The technical barriers are also very high.

From that point of view, a different classification for a hi-tech industry with a globally large potential might not be such a bad idea.

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