Our Policy Will Enable Another USD 14 Billion Worth Of Production In A Period Of 7 Years: Dr. Ajay Kumar, Secretary, Ministry Of Defence.

PM Modi recently announced the two defence corridors and set an ambitious target of Rs 35,000 crore by 2025 in the defence production. It is in the direction that Ministry of Defence (MoD) is gearing up to address the challenges and fine tune the policies that provide impetus to the defence production in India. BW Businessworld’s defence editor, Manish Kumar Jha speaks with Dr. Ajay Kumar, Secretary, Department of Defence Production, Ministry of Defence (MoD) at his office to discuss various new initiatives presently underway at DDP.

The Draft Defence Production Policy 2018 envisions India to be one of the world’s top five Defence producers by 2025 with self-reliance in 13 areas and the export target has been fixed at Rs. 35,000 crore ($5 billion) by 2025. How realistic is the vision?

The Value of Production from OFB & DPSUs put together is currently approx. Rs 55000 crore (USD 8 Billion). Nearly 65% of the parts/components/subsystems have been delicensed and as a rough estimate, approx. 3 Billion USD worth of defence items are being manufactured in the private sector. Thus, presently Defence production would stand at approximately USD 11 Billion.

This policy envisages adding another USD 14 Billion worth of production in a period of 7 years, which translates to CAG of 15% approx.  With the opening up of the sector and the thrust being given to the private sector, DDP believes that these numbers are attainable.

The Draft Defence Production Policy is expected to spur private investments in defence sector. Elaborate measures have also been proposed for export promotion.  The targets are kept on the higher side as DDP is of the firm opinion that moderate 'incrementalism’ will not have the desired effect.

The announcement of two Defence Industrial Corridors by PM Modi promulgates a robust ecosystem of Defence manufacturers of Indian and foreign OEMs. Can you apprise of the development?  How much GOI plan to invest?

Subsequent to the announcement of setting up of two Defence Production Corridors in the Budget for FY 2018-19, Government decided to set up these corridors in Tamil Nadu and Uttar Pradesh. For the Tamil Nadu corridor five nodal points viz. Hosur, Salem, Trichy, Coimbatore and Chennai were identified. For the UP corridor six nodal points viz. Agra, Aligarh, Chitrakoot, Lucknow, Kanpur and Jhansi have been identified.

Soon after announcement of these corridors industry interaction with all the stakeholders were held in both the States. This generated a lot of interest and the local industry associations took the lead in arranging these interactions. Indigenization programmes displaying the items that are proposed to be indigenized by the DPSUs/OFB/DRDO/Army/Navy/Airforce are also being held in several locations.

The states of Tamil Nadu and Uttar Pradesh are taking requisite steps to come up with appropriate policy framework to facilitate the local defence industries. 

GoI is in the process of appointing consultants for preparing Detailed Project Report (DPR) on the corridors. The DPR would recommend the steps – policy initiatives, financial investment, infrastructure upgradation that would be required in each of the nodal points of these corridors to facilitate the defence industry not only to meet the demands of the Indian armed forces but also to integrate themselves into the global supply chain of defence related items. The recommended steps would also attract a sizeable number of foreign OEMs to set up their production units in these locations. The recommendations would be considered and acted upon by the Government of India. Once these are finalised the quantum of investment required would be known.

In your statement, you have heavily emphasized the ‘structural changes’ in the Defence procurement process and that are going to speed up the processes. Could you elaborate on these specific elements?

The Simplified Make-II process of Defence Procurement Procedure (DPP) 2016 has been introduced and is being further streamlined to make it easier for industry to enter in defence production sector.  More than 26 projects have been approved in principle and may proposal have been submitted suo moto by the industry.   

 Despite some of the commendable performance, Defence public sectors are still looked at being laggards for their slow pace of delivery and turnaround time. How are you driving away the perceived malaise?

Our endeavour is to build on the existing strengths of the public sector but the thrust is towards moving Defence Production for bigger investments to come from the private sector.  

The Draft Defence production Policy envisages infusion of new technology/machineries in OFB/DPSUs to enable them take up advanced manufacturing/development of futuristic weapons and equipment.  In any industry, investment in continuous modernization is utmost essential otherwise the investment already made in the industry will go waste because of technological obsolescence. 

We are also encouraging OFB/DPSUs to increase productivity and timely execution of orders by addressing issues of high inventory handling, greater vendor outsourcing, improving skill levels, overall program management etc. Greater use of IT based systems including systems for supply chain management customer relationship management, data analytics, etc., is also being encouraged.

Disinvestment of minority stake in DPSUs is being pursued to introduce, competition and market discipline thereby releasing large amount of public resources both tangible as well as intangible.  

DPSUs/OFB are also encouraged to explore partnerships so as to avoid duplication of production facilities and idling of existing facilities.

In DEFEXPO 2018, PM Modi announced the launch of innovations for Defence excellence (IDEX) which envisioned a Defence innovation hub throughout the country. How much have we garnered? How many centers/hub you are planning throughout India?

We have introduced iDEX (Innovations for Defence Excellence), which aims at creation of an ecosystem to foster innovation and technology development in Defence and Aerospace by engaging Industries including MSMEs, Start-ups, individual Innovators, R&D institutes and Academia and provide them grants/funding and other support to carry out R&D development if they have good potential for future adoption for Indian Defence and Aerospace needs. 

iDEX will function as the executive arm of Defence Innovation Organization(DIO), carrying out all the required activities for Co-innovation/co-creation of relevant technologies, Piloting of candidate technologies in important platforms and Indigenization of various defence and aerospace related platforms.

We are currently looking at collaborating with (5) Incubators (IIT Bombay SINE, IIM Ahmedabad CIIE, T-Hub/Hyderabad, Forge/Coimbatore, IIT Chennai and setting up (2) Defence Innovation Hubs at CODISSIA-Coimbatore and IIT, Kanpur and enter into partnership with them to run programs such as accelerators, long-duration incubation, piloting and prototype investments.

Through IDEX, is MoD also planning to spur collaborations with Universities/research institutes wide across India to nurture and support the innovation and research in the Defence sector? Along, according to you, what are the missing links in our innovation index as far as many critical technologies are concerned in the area of Defence production?

There is a need for identifying capability voids and defining critical technologies required for indigenous research/manufacturing in consultation with industry and academia. They will provide advice regarding technology platforms/equipment/systems, which should be developed in the country in the medium and long term. Wherever required, Government will provide support for development of such platforms/equipment/systems.

R&D capability mapping would have to be done to identify defence related technologies.  This mapping should cover DRDO labs, other public sector laboratories, academic institutions and industry.

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