India's First And Crucial Defence Strategic Partnership Mechanism For Submarines Is Ready: Defence Secretary Ajay Kumar
Defence is as about security as crucial it is for the economy and technology. The inherent opportunity and challenges both lie in building capabilities for our industry and so the armed forces. India marks at the threshold of such breakthroughs in defense & aerospace--if the policies set forth rightly and implemented in spirit. India's Defence Secretary, Dr Ajay Kumar with his tech background is at the crucial juncture to drive policies within the complexity of defence industrial ecosystem that India must not loose the momentum at any cost. BW Businessworld's Defence Editor Manish Kumar Jha interacts with Defence Secretary on such policies issues exclusively. Interaction touches upon: Defence Export, Startups, Offsets, SP Model, MMRCA-2, OFs, NUH and crucial aero engine among others.
Quantum jump in export is one of the great success stories of inherent capability within with right policy thrust. As a defence secretary, you were bullish on such policy thrust from the beginning. What is the next target and exciting policy incentive for industries--public & private?
Ajay Kumar: Defence export has tremendous potential and our defence exports as you are aware has grown significantly. Last year because of Covid19 the growth was not in the same manner. But once this issue of Covid19 is addressed, we hope to see the exports start growing again.
The government has given thrust to export and a high level committee has also been made as ministerial committee with defence minister, external affairs minister and NSA which is overseeing overall defence export.
And our strength is leveraging our private industry because we have seen that the jump that has happened in defence exports, 85% of that was due to private industry.
At the same time we are also encouraging our defence PSUs to do well. It is part of the MoU they sign with the government in their performance metric that weight age has been given for defence export. Hence due to all these measures, we expect that in the coming years defence export to grow. One of the constraints on defence export has been that clearance from the countries from where we have licensed the technology or are sourcing some sub-systems or components. Now with increasing thrust on Atmanirbhar Bharat and indigenous technology, this issue also is going to be addressed.
Any number you would like to provide?
Ajay Kumar: India is currently ranked 19th in the list of top defence exporters in the world in 2019. We witnessed a staggering 700% growth in defence exports rising from Rs 1521 crores in 2016-17 to Rs 10,745 crores in 2018-19.
I just want to say that if we look at other countries' defence or aerospace industry it is USD 300-500 million dollars. Our defence export reached INR 11000 crores two years back.
This year, we hope it to increase, but what I am saying, we have a long way to go because that is the size of the industry and we will see further growth in the coming years.
How the defence export could be part of India’s foreign trade policy? How the Lines of credit could be the opportunities for industry to reach out for global markets and scale up? So far, we don’t have a robust export policy.
Ajay Kumar: Defence production has developed a draft for defence production and export, so the policy is already there and they are working on it. And, LOC is very much part of our export. The policy aims to achieve a turnover of Rs 1,75,000 crores, including export of Rs 35,000 crores, in aerospace and defence goods and services by 2025. We have several billion dollars of defence LOC that we have offered to several friendly countries and we are open to giving more defence LOC also. Line of credits is an important part but it cannot completely depend on defence LOC, it depends on many other global factors as firstly-- our willingness to export to countries, secondly-- streamlining the procedure of export and thirdly--our defence industry becoming a part of the global supply chain weather it is for parts and components or whether it is for platforms.
Next is our ability to provide services and maintenance overseas. If you are in the overseas market, you should be able to maintain that. Today, our market is reaching out to other countries. Defence is a monopoly only the government of that country is a buyer, so they have started working with a local government. Our defence sales are playing a very important role in this as they are enabling our industries to reach out to our local government so that they can service there. Local governments have rules as to who can and who can’t sell their products there, but our industry when I say industry, I mean both public and private sector are complying to their environment so that they can in the future start their sales.
I must say, today, we have our export to South America, America, Asia and Africa. Exports of such products to a number of countries including those who are big names in the export market like the US, Australia, Finland, France, Germany, Israel, South Africa and Sweden. These countries are in the list of 42 nations that also included Azerbaijan, Seychelles, Estonia, Indonesia, Guinea and Philippines.
How confident are you for our home grown LCA Tejas-- TejEX -- being acquired by other countries which will give big boost to our defence industry?
Ajay Kumar: I am 100 % sure of its acceptance and in due course of time there will be market for Tejas.
You have a strong technological background, and you have been focusing on the futuristic technology and its applications in defence through IDEX and defence start-ups? Could you talk about some breakthrough innovations? How do you want it make it as part of defence ecosystem?
Ajay Kumar: I would say that we have one of the most amazing successes in the field of defence technology, I will say this because defence IT start-ups have shown that start-ups are able to create new technologies at the fraction of the cost, in fraction of time and in products and technologies which are far greater in number in which we were able to work on a given point of time. So earlier if we were able to access 5 technologies at a time, today we are able to develop 25 technologies at the time and the cost and time today are units and tens of crores as against 100s and 1000s of crores.
So the time has reduced from years to months and several of these technologies are so advanced that even the global companies and global governments are coming and approaching us to collaborate with the start-ups to share those technologies.
I think our defence PSUs are doing great job to help the start-ups with the new technologies.
Would you like to share the technological breakthrough of some of the start-ups in India under such initiatives?
Ajay Kumar: The swarm technology which is developed by New Space Technology—one of the start-ups, request has been received from US Air Force Lab which is equivalent of DRDO. It was shown during the Army Day and labs wanted to collaborate with them. It is a demonstration of our advance capability especially by start-ups.
Airbus global supply chain is today serviced by a stat up in Bangalore. Let me give you another example, recently, startup at IIT Madras has developed unmanned ground vehicle in collaboration with BEML. I must say that our DPSUs are doing a wonderful work in this regard especially in areas like AI.
Another start up innovation story is Situational Awareness for our tank which is created within the time frame of 12 to 18 months. Another start-ups has created conversation between the normal telephonic conversations absolutely secured—another security dimensions. We did not have such critical technology. Earlier US used to provide secured encrypted hardware to India. One start-up has developed kind of camera which we used to import from Israel at high cost and now it is available here at the fraction of that [in terms of cost]
Funding for them and specific policy support?
Ajay Kumar: In DAP 2020, we have introduced specific provisions which enabled procurement from Start-ups. This is the first time that such provision were introduced in Defence Acquisition Procedure especially for start-ups.
This year, we have earmarked Rs 1000 crores in our capital procurement budget only for start-ups. It will now provide clear market for start-ups. Today, we have 500 to 500 active startups in defence and aerospace ecosystem. I see this number double in two years. These start-ups will be the backbone of our defence innovation ecosystem.
Two perspectives on defence Offset: International OEMs talk about the technology exchange and the ease of entry through Offset. On the other side, in reality, it has not achieved any significant technology gains after 52 such offset discharge with $ 10 billion? What is way out for Offset? Is it being phased out?
Ajay Kumar: Offset policy has been revised in the defence accusation procedure, with thrust on investment and technology rather than procurement. Previous Offset policy had thrust on procurement as they had to procure the goods. Now, we have given thrust to investment in technology. But having said that our idea is that if we are going to be true to Atmanirbhar Bharat then offset is only when we are importing. If we are continuously going to reduce the import, not every import contracts also attracts offset only if it is above Rs.2000 crores, so the number of case under offset is becoming down in going forward.
In the year 2020, 87% of all the EONs we have given to domestic defence contractors, so all these 87% of the contracts were not under offset, remaining 13% we have to see if there is any contracts above Rs 2000 crores. Our efforts is to continue this kind of a domestic thrust under Atmanirbhar Bharat.
How is the OFB’s corporatization unfolding? What are the structural improvements which will make it more accountable and efficient for developing next generation military equipment?
Ajay Kumar: I think corporatization of OFB will introduce greater productivity and efficiency in this organisation. 150 years back it was possibly the leading arms producer of the world. our effort is to restore that past glory of OFB and corporatization is a step in that direction.
The GoI has been looking into the specifics of format and other modalities, helping the new structure will achieve the aim corporatization have in mind and I think we will be able to do it. Corporatization does not mean disinvestment it just means that from being a government department it just becomes a defence PSU.
Let’s talk about some key projects that are delayed. Please tell us the status of P75 I under the strategic partnership model which is under process but still awaiting final outcome to begin with. Is it because of the dependency on AIP under development?
Ajay Kumar: We are taking ahead the strategic partnership model and because this is the first case of strategic partnership model and because we have the multiple players-- we have the OEMs, we have the strategic partners, you have the government.
So, we are in the process of formulating the contracts between these parties so that the whole responsibilities and legal accountability mechanisms are suitably designed and now I think that it is ready and we should see that happen shortly.
No, it is not because of the AIP systems. The key question is the structuring of SP Model because of the various stakeholders involved in this project which will be the first such exercise. Decision making process is on. Anyway preparation is done now so it should happen soon.
Recently Indian navy acquired drones on lease. Does it open doors for such acquisition to save cost and time for the armed forces?
Ajay Kumar: Our trust is on Atmanirbhar Bharat and our trust is to make sure that the defence preparedness of India is not compromised and taking both these principals in account mutual decisions are taken and we will take mutual decisions based on that.
How are we leveraging international partnership for crucial aero engine technology? So far it has not materialized? How can we speed up?
Ajay Kumar: Aero engine is a very important area which we need to address. GTRE and DRDO have been addressing or helping in the development of aero engine.
However, there are certain gaps and DRDO is talking to Safran for getting the gaps filled to create the aero engine and based on those discussion we hope, we will finalize soon.
Nevertheless these all are long term decisions; significant decisions. So I think all matters have to consider before we take a decision but I can tell you that this is the area we are working on from many angles and we need to address the issue.
Is it a priority areas?
Ajay Kumar: Priority is Atma Nirbhav Bharat. Under Atma Nirbhav Bharat, aero engine is priority area.
Is 114 fighter jets under MMRCA 2 progressing? IAF is facing the severe shortfall of combat jets. If you could comment on the status?
Ajay Kumar: The air force has still not finalized and once the (Services Qualitative Requirements (SQRs) are finalized and they come out with a specific proposal the actions will be taken on the matter.
What are the initiates of the Defence Investor Cell and investment in Defence Corridors?
Ajay Kumar: Defence investor cell is helping a lot of investors because defence was wrapped in some mystery. Very difficult to access and no one knows what the policies are, whom to contact where to go.
So defence investor cell has been able to create Communication Bridge between anyone who needs to deal with defence and its multifarious organization.
It is about facilitating a potential investor who is interested, it can also be someone who is doing business, innovation or setting a factory. We are providing hand holding and sharing of policy initiatives through information dissemination. It is available both online and offline. They also register all the request they are receiving and I have seen several people commend the work. They have helped people for example getting payments etc. It is not like invest India. Basically, it is part of the ease of doing business effort in Defence and Aeropsace.
What is the Status of Indo-Russian joint production of AK 203 rifle? It was expected that there will an announcement during Russian foreign minister’s visit to India. Earlier reported, even price is sorted out.
Ajay Kumar: It will start, the matter is at advance stage and you should expect it shortly.
Are we building a light lightweight tank for our mountain corps? Are we getting it from DRDO or through the collaborations with foreign OEMs ?
Ajay Kumar: On specific project, our principal stands as 1: We believe on Atmanirbhar Bharat 2: We don’t want our defence’s preparedness to be compromised. So within the framework, we take individual project decision as what to be done.
Status of NUH (Naval utility helicopters)? Are we focusing on the HAL’ s ALH version or through Partnership with OEMs?
Ajay Kumar: On Individual project, I will not comment but That matter is under discussion and finalization.