DEFEXPO 2018: A PUSH FOR CAPABILITY DEVELOPMENT

Defexpo 2018 was a mega show put up by India’s Ministry of Defence in Chennai. It opened on 11 April 2018 with typical military fanfare on the East Coast Road located near Kollam, not very far from Mahabalipuram on the seaside. Designed to project India as the new ‘defence manufacturing hub,’ it was formally inaugurated by the Prime Minister, Shri Narendra Modi on 12 April. The four-day event was well represented by Indian defence manufacturers, both from the public and private sectors and a large consortium of foreign defence firms, eager to showcase their products. Also present in Chennai were a large number of mission heads from foreign countries, who had come to see what India had to offer in terms of weapons and equipment. In a positive development, about a quarter of the space in the Defexpo was allotted to the MSMEs (Medium, Small and Micro Enterprises), in a bid to give impetus and support to the smaller players, who play a vital role in the establishment of a defence industrial base.

While this is not the first Defexpo hosted by India, it does represent the first serious attempt by India to project itself as a major military manufacturer. Generally, earlier editions of Defexpo were hosted in Delhi, for ease of administration and also because it was more convenient for the participants to liaise with government officials. This pattern was changed in 2016, when the then Defence Minister, Shri Manohar Parrikar shifted Defexpo to Goa, which was his home state. The present Defence Minister, Ms Nirmala Sitharaman has followed in the footsteps of her illustrious predecessor and taken Defexpo to Chennai, her home state. There are undoubtedly advantages of hosting such huge mega shows in Delhi, but their utility in being hosted in other parts of the country too is undeniable. In the case of Tamil Nadu, as the event is being held in a coastal town, it gives Indian defence manufacturers the opportunity to showcase their ship building capability, as well as to demonstrate the efficacy of their missile systems by firing over the sea.

Chennai as the venue also assumes significance as the Union Budget of 2018 had announced the creation of two defence corridors—one in Tamil Nadu and the other in Uttar Pradesh. Shortly thereafter, Defence Minister Nirmala Sitharaman initiated the development of the Tamil Nadu Defence Corridor at a defence industry meet held in Tiruchirappalli on 16 March, work on which has already begun.This corridor, extending from Chennai to Hosur, Coimbatore, Salem and Tiruchirappalli as major nodes, will open new opportunities for the industry. The Tamil Nadu Defence Production Quad as it is being termed, will build on the existing defence ecosystem in the form of Ordnance Factory Boards, vendors working with defence Public Sector Undertakings and other allied industries. The corridor aims to bolster interaction between all industry players in order to create long-term synergy and eventually develop the area into a defence production powerhouse.

A major message that emerged from Defexpo 2018 was that India has attained significant manufacturing capabilities. It showcased the strengths of India’s public sector, the emerging defence industry in the private sector and the spread of the MSME base for components and subsystems.

It is not very clear why the foreign participation in the Defexpo 2018 was lower than the previous edition. About 232 foreign companies had participated in Goa, as compared to 154 this time, which marked a significant decrease. This perhaps could be due to the late announcement of the venue and perhaps also due to the fact that India’s push for self reliance has kept some sellers away. However, all major players from across the globe were present, which augurs well for the collaborative effort which India intends to undertake in the years ahead. The strength of the Indian exhibitors was however higher, which was indicative of the push and focus on ‘Make in India’.

This was also for the first time that India’s 44 Defence Attache’s (DA) from her missions abroad were present for the Defexpo. A few days before the Defexpo, the Defence Minister, in her interaction with the DA’s, spoke of expanding defence manufacturing in India and stressed that the attaches needed to engage more with all stakeholders in the defence sector, including DPSUs, to expand broader defence cooperation links. This was a clear signal that India now desires to export arms and equipment abroad. While India, as of now is perhaps the largest importer of arms, its exports are minuscule. The tag of being the largest arms importer is one which India needs to get rid off as soon as possible, which is why it is important for India’s defence industrial base to achieve vibrancy in the shortest possible time. For this, it is essential that India’s exports of defence material is substantially increased. The Parliamentary Standing Committee on Defence, in one of their reports recently tabled in Parliament had also said that most of the DPSUs (being the primary builders of defence equipment in India) have not had much exports in the past few years. Defexpo 2018 was aimed at changing the status quo to project India as a potential sources of supply of defence systems and components across the world.

By 2025, India is aiming to be one of the world’s top five defence exporters with self-reliance in 13 areas covering almost the entire range of weapons and systems. The export target has been fixed at Rs 35,000 crore (USD 5 billion) by 2025. The NDA government when it came into power in 2014 had set its eyes on increasing exports and consequently, India’s exports grew from USD 179 million in FY 2013-14 to USD 319 million in FY 2015-16. In percentage terms this indeed was a quantum jump, but in real terms it represented an increase of just USD 140 million. To get the export target to USD 5 billion within seven years from now is an ambitious target representing an over 15 fold increase from the current level of exports. But it is doable, if policies remain consistent, the public sector
performs and the private sector is given the requisite support.

Obviously, India needs to turn its military related trade into a two way affair, but it would require Indian diplomacy to re-orient itself toward securing weapons contracts for major
indigenouslydeveloped systems. It was towards this end that the Defence Minister had called all the DAs for the Defexpo. Indian exports will most likely concentrate on homegrown missile and naval systems, which have high indigenous content in terms of components. As India is now part of the Missile Technology Control Regime (MTCR), having gained entry into this exclusive club in 2016, it will need to progressively leverage the various international collaborations it has built up through years of co-production and co-development for export purposes. Exports will generally be of certain classes of tactical systems, but weapons with greater strategic import can be offered to select partners. The focus will likely be on a few key defence partners with which it has maximum strategic congruence for building up its position in the global defence market.

One such military partner is Hanoi. Military cooperation with Hanoi remains high on the exports priority of New Delhi, with Hanoi having evinced interest in the BrahMos missile and in the Defence Research and Development Organisation (DRDO) developed Varunastra 533 mm heavyweight torpedo that has been inducted into the Indian Navy (IN).

Indian exports in the recent past have included light helicopters to Afghanistan, Nepal, and Namibia, DRDO developed HMS-X2 sonars to Myanmar (the same sonar likely to feature in Vietnam’s Petyaclass upgrade) and protective armour to NATO members like Turkey. The 1,300-ton offshore patrol vessel (OPV) MCGS Barracuda,built by DDPcontrolled Garden Reach Shipbuilders & Engineers (GRSE) was delivered to Mauritius in December 2014 for USD 50.8 million. This marked the first ever export of a home built warship. Thereafter, two advanced OPVs were delivered to Sri Lanka, the second one being delivered just a month before the Defexpo on 22 March 2018. Both the OPVs were built by India’s government owned Goa Shipyard Limited. The second OPV, a 105.7 meter vessel named ‘SLNS Sindurala,’ was delivered 25 days ahead of schedule. Goa Shipyards Limited has also built two fast patrol vessels for the Mauritius Coastguard, and is contracted to build ten 14.5m-long fast interceptor boats. India is now looking to export new OPVs, interceptor craft, corvettes, and frigates to littoral states in the region. This is underlined by the fact that Indian defence shipyards have enhanced their capacity and productivity via recent modernisation efforts and are now in a position to compete for foreign orders. Defexpo 2018 will give this the necessary push.

Domestic modernisation programmes of both Russian as well as Western origin systems have given Indian industry a lot of experience in the arena of integrating equipment from diverse sources with different industry standards. This in turn has allowed Indian industry to emerge as a supplier of sensor and navigation upgrade packages for platforms of diverse origin besides being able to offer standard spares and maintenance services for the same. These capabilities are now getting reflected in the growth in exports that has taken place of late. For instance, last year India exported select avionics for Malaysia’s Su-30 MKM fighters, which are similar to India’s own Su-30 MKIs, and the two countries agreed to set up a “Su-30 forum” last November for exchanging information on training, maintenance, and technical support. With India beginning to train Vietnamese pilots for their own Su-30 MKV2s, one can expect similar exports to Vietnam too in the future.

While India still has many miles to cover before it can be branded as a major defence exporter, the event sought to highlight the country’s growing private industry and spreading MSME base for components and sub-systems. India’s success in manufacturingindigenously developed military helicopters, aircraft, artillery guns, missiles and rockets were also showcased along with her capabilities to manufacture submarines, frigates and corvettes. This was done through live demonstrations of naval, air and land systems to include performances by the Tejas light combat aircraft, light utility helicopter and Arjun tanks.

Spare capacity will off course remain a key consideration in arriving at a decision to actually export any indigenouslydeveloped system. This means that India’s defence manufacturing capability will have to grow to an extent where it can meet the nations requirements and still have the capacity to export. Economies of scale can drive down costs, but that also means that the orders from the Armed Forces themselves will have to be large enough to sustain the defence industry. The Defence Exports Steering Committee (DESC) headed by the secretary of DDP, with representatives from the Military, MoC, MEA, and occasionally even industry and academia will look into promotion of defence exports, to include the need for soft financing to weaker countries.

The Defexpo 2018 also provided a platform for collaborative arrangements with foreign firms. With respect to cooperating with France, India’s Minister of State for Defence, Dr Bhamre stated thatthe Make-in-India initiative offers a valuable opportunity for Indian and French enterprises to enter into arrangements for co-development and co-production of defence equipment in India, including through transfer of know-how and technologies to the mutual benefit of all parties. Shri Jayant Sinha, Minister of State for Civil Aviation also pitched in, urging French companies to manufacture in India and export to other parts of the world. It was on the sidelines of this event that Society of Indian Defence Manufacturers (SIDM) and GIFAS, the French Aerospace Industries Association, signed a Memorandum of Understanding (MoU) aimed to promote a sustainable framework for present and future partnerships and cooperative actions between the French aerospace industry and the Indian defence industry.

The US had a large delegation led by their Ambassador to India, Mr Kenneth I. Juster and Major General Bryan Suntheimer, Deputy Commanding General of U.S. Army Pacific. 19 US companies participated in the Defexpo. Large foreign pavilions were taken up by the US with Boeing and General Atomics, Russia, Israel, Naval Group from France and South Korea. Large spaces were allotted in the first four halls to the bigger companies like Tatas under the single banner of Tata Aerospace and Defence with foreign collaborators; PSU Shipyards with their achievements for Make In India for the Navy; Alpha Technologies with strong Israeli support; Mahindras and Zen Technologies who have been in the game for years; Larsen and Toubro Ltd who have been impressive with many products and who showcased the 155mm Vajra guns being made in India; Kalyani and Adani group. The show included new entrants with projects in bigger stalls this time like Punj Group and Yeoman who are connected and Kalyani and even DCM who were there with local truck manufacturer Ashok Leyland showing of the Stallion truck with others. The DRDO showcased the ATAGS along with its various other products.

Many private defence companies have all legally got foreign partners and are now succeeding. Defexpo 2018 was a platform which helped them network with their customers who can see latest developments and learn about them. Amongst the many highlights on display were TATA’s South African partnership for jammer and EW station with Grintek, Kalyani with Turkey for UWAVs, which the Navy is looking at, the Naval shipyards foreign tie ups and Vikrant’s progress, Israel’s new Torpedo stopper and jammers and mortar firers and AK- 103. No technology is barred for India and the foreign manufacturers sense a good business opportunity when they see one.

Defexpo has set the stage for Indian defence manufacturing to pick up in a big way. Indian corporates now should seize the moment and play a constructive role in ensuring that the big ticket MOD Projects succeed and deliver. The challenge however lies in moving the sluggish and lethargic babus of the MoD and making them perform. For the Government, the Defence Minister and the Prime Minister, the challenge is in converting a good swing, as we say in golf, with an appropriate follow up. The signs are right. Let us await the delivery now.

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