Indian defence manufacturers cautiously optimistic on defence partnership policy

Amrita Nair Ghaswalla Mumbai | Updated on January 12, 2018 Published on May 26, 2017

Indian defence manufacturers can now bid to build fighter aircraft, helicopters, submarines, armoured vehicles and battle tanks   -  PTI

Apprehensions over scale of orders, payments timely

Though the government has cleared a “long-awaited historic policy” to boost local defence manufacturing, a cautious tone permeated discussions with the captains of defence industry on matters related to the manufacture of high-tech defence equipment in the country.

SP Shukla, Group President - Aerospace and Defence, Mahindra Group, said that though the Strategic Partnership Model was the right approach to develop an indigenous manufacturing base in the defence sector, and Mahindra Defence has always supported the government on this model, it is important to ensure that the projects assigned to strategic partners are successful, both technologically and commercially. BVR Mohan Reddy, founder and Executive Chairman, Cyient Ltd, said, “Quality certification could be one of the major impediments. The private sector should be given access to defence testing laboratories and defence certification agencies. We need a strong ecosystem. As opposed to pure manufacturing, the government should consider innovation, engineering, manufacturing and after-market support as one basket of offerings.”

Time lag

Stating that the policy opens up opportunities for large players, who in turn will start developing ecosystem partners, Reddy said the process would, however, take time.

“There will be some lag in actually awarding contracts. Indian private industry has to build the confidence in defence procurement agencies. This can happen only by awarding some contracts and evaluating the results.” Reddy pointed out that the private sector would also have “some apprehensions” on the government accepting their products without delay and making payments on time. The private sector and the procurement agencies have to build mutual trust. “The government. should also take steps to ensure that MSMEs are nurtured by strategic partners as they build the supply chains,” he said.

Jayant Patil, Senior Vice-President and Head of Defence and Aerospace at L&T, said the government had sent out a clear message to foreign defence sector OEMs that the days of India’s total dependence on them for its defence requirements are numbered. “We will now be able to undertake system engineering and integration indigenously. With this announcement, the government wants to send the right message, and it will help break the mindset that India cannot provide for itself,” he said.

He added that the shift in policy conferred Indian players with an upper hand to choose the right partner rather than be chosen by foreign players, granting them the ability to “just source what is needed from overseas than accept large imports and be foisted with lower tier work.”

Amber Dubey, Partner and Head, Aerospace and Defence, KPMG in India, termed it a game-changing reform. However, big-ticket orders were needed for the final push. “No private company can invest big time in defence R&D and manufacturing unless the order size is substantial. The risks are higher since in defence, there is only one domestic client, the Ministry of Defence (MoD),” he said.

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Published on May 26, 2017
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