Raising the FDI cap and other incentives in Aerospace and Defence Industry – Challenges ahead

Published: May 17, 2020 1:53 PM

The Ordnance Factory Board (OFB) has expressed in the past to set up joint centres of excellence, a thought that did not progress much beyond the seminar that they were advocated in.

aerospace industry, defence industry, finance minister nirmala sitharaman, coronavirus economic package india, make in IndiaThe drone market is huge. Its applications range from Military, Law Enforcement, medical, agriculture and anything else one can think off.

By Lt Col Manoj K Channan (Retd)

The Finance Minister in a bold move to give impetus to the Aerospace and Defence Industry made some structural policy reforms in a bid to attract the “big boys” to come to an emerging market decisively moving away from an import regime to “Make in India”. In the past, many OEMs; Lockheed Martin with their F 21 Program, SAAB with Gripen, Eurofighter manufactured by a consortium of Airbus, BAE Systems and Leonardo the erstwhile Finmeccanica; have been offering 100 % Transfer of Technology and shifting of the manufacturing lines to India.

The political leadership keeping our current inventory in mind need to go for an “arranged marriage” with the right potential partner with all the right offerings to boost the depleting inventory as well as the serviceability of the current inventory.

The increase from 49% to 74% should give confidence is on the table and the clause of 100% FDI on a case by case hopefully stays on. Now is the time for reaching out to Political Leadership to make this happen. The transfer of technology clause needs to be re-visited; no one is giving away the golden goose for a pittance.

In the Aerospace domain components and airframe are capabilities that have been developed over the years. The drawback is the MRO of the engines. The Mirage engine M 53 -5 P2 is still going back to France for repairs at a huge cost. Now that the Rafale (M88 Engine) are likely to be inducted in July this year, it would be pertinent for SAFRAN (Snecma) keeping in mind the Airbus Fleet with CFM 56 engines as well as Pratt and Whitney need to create a facility, to address this along with Boeing and Lockheed Martin taking similar action. The Offset Clauses need to be negotiated hard along with the capacity building.

Pulak Sen, founder secretary-general, MRO Association of India stated that “decision to converge defence and civil MRO would need more clarification because of the requirement of a separate set of certifications to repair defence aircraft. On a limited basis for a few years, civil MROs have been working with Indian Air Force the volume of which is minimal. This direction of the Government will make the defence forces burdens go down a little from their BRDs so that the respective service units can focus on their prime job roles. He further stated that Convergence between the Defence sector and Civil MRO will be highly beneficial to the Indian Aviation Industry. This move will create economics of scale by retaining the much-needed Forex in the country. Also, this move will provide employment to defence personnel in civil MROs post-retirement.”

The Defence Secretary should correct this forthwith without waiting for industry representation.

Hindustan Aeronautics Limited (HAL) continues to be the system integrator for the assembly of aircraft in India. It should remain one and should outsource the MRO aspect to capable companies who have OEM certified manpower with up-gradation of skills as a mandatory clause.

The Ordnance Factory Board (OFB) has expressed in the past to set up joint centres of excellence, a thought that did not progress much beyond the seminar that they were advocated in. The ammunition of Russian Origin, and now the BAE Systems needs to be manufactured in the country. This commodity expended in large numbers as our border is in a state of No War No Peace. OFB needs to set up a single-window online platform for the potential partners to reach out and address this critical issue. Profit margins have to be reasonable.

The Future Ready Combat Vehicle and the next generation Infantry Combat Vehicles has had the officers of the respective arms writing out the Qualitative Requirements which has ensured that the project never took off the drawing board. DMA should identify an existing platform and make up the deficiencies.

Small arms and ammunition is a critical requirement of the country. We have a very large inventory and need to support it with the right ammunition and spares. These are stand-alone weapons. The Infantry remains in the low priority list of improving their technologies. It’s time to make these weapons smart with multiple improvements in a single up-gradation package by innovative technology developers. Manufacturing of spares should cater to the domestic market as well as the International Market. Day and night scopes, shot detection systems are some of the basic requirements of a modern-day warfighter.

The drone market is huge. Its applications range from Military, Law Enforcement, medical, agriculture and anything else one can think off. The Beyond Visual Range Line of Operations (BVLOS), loiter and kill capability, smart precision-guided rockets need to be developed as part of the technology-dependent warfare that the Chief of Army Staff has been stating in his various addresses in the recent past. Drones have effectively been used to sanitise select cities and have helped curb the menace of the Corona Virus.

The Defence Procurement is a slow-moving dragon caught up in a web of bureaucracy in which the Government is in a constant battle not to be caught by the “noting’s on file” which the CAG can refer to and make an official’s life miserable years after having remitted office. The NCNC trials and the requirement of operational efficiencies in different terrains and weather conditions need to be expedited. The OEM should self-certify the technical specifications and huge liquidity damage clauses are incorporated for metal fatigue, non-functioning. The performance parameters are well known as the OEMs routinely check them out in the conflict zones of Middle East, Afghanistan and South America in the war against drug cartels.

The Strategic Partnership clause of Make I needs to be revisited and the Make II clause under the IDDM needs to make the Government of India more accountable. The clause that the Government has the right to cancel the bid in its entire process reflects a lack of transparency in its commitment.

The joint development programs, need to be fast-tracked, Department of Military Affairs has a task at hand at the Macro Level to address and move away from lesser issues of concern which can be well administered by the service chiefs.

The Finance Minister has done her bit, the Defence, Home. External Affairs and the Ministry of Commerce need to step up to the challenge and make this happen. A body needs to be set up of these officials under the PMO to give fast track clearances with online approvals. The time of a file waddling from desk to desk, from a desk officer to the Secretary concerned is over, the Decision Makers have to take this bull by the horn and make it happen. It’s an age of transparency within the government and not turf wars. Collectively the Political Leadership and the Officers in uniform and the bureaucracy owe this to India.

(The author is an Army Veteran. Views expressed are personal.)

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