Rising to the defence

PRIVATISATION

Public-private joint ventures in the defence sector get a boost from home-grown enterprises.

With the Indian defence budget estimated to cross $20 billion by 2008, and 26 per cent FDI suggesting the government's inclination towards gradual indigenisation of defence supplies, it's clear why companies have rushed in to grab the opportunity of outsourced materials and services that could comprise $6-7 billion.

At Defexpo last month, of the 422 companies that participated in the defence exposition, 200-odd companies were Indian, and director Major General Umang Kapoor was heard saying, "We are not here to sell but for joint ventures, sharing ideas "" all aimed at mutual benefit."

The defence sector's glasnost comes with increasing realisation in South Block that the standard of Indian industry in defence products matches international qualities.

"Companies like Tata, L&T, Mahindra & Mahindra are already working closely with DRDO (Defence Research & Development Organisation), on some big ticket projects, and are doing a great job," says K P Singh, secretary (defence production), Ministry of Defence.

And corporate biggies aren't letting the opportunity slip by. The Tata group is planning to double its revenues from the defence sector from Rs 1,100 crore expected in the current financial year to Rs 2,200 crore by the end of financial year 2008-09.

Mahindra & Mahindra is looking at increasing its revenue from the defence sector from Rs 100 to over Rs 140 crore. And commercial vehicle major Ashok Leyland recently bagged an order worth Rs 230 crore to supply 872 indigenously designed water bowzers to the Indian Army. The company will commence supply before the close of this financial year, and will conclude it within six months.

Defence analyst Jasjit Singh supports these moves by private players. "With obsolescence setting in and heavy dependence on imports, modernisation and indigenisation are bound to occur," he says.

The government-private sector equation should change from a buyer-seller arrangement to that of joint ventures and collaborations, he suggests.

"Larger companies like HAL should focus on integration and let the private sector take care of things down the line."

The Tata group, which services the defence sector through nine companies (Tata Motors, Tata Power, Nelco, Tata Consultancy Services, Tata BP Solar, Tata Infotech, Tata Advanced Materials, and VSNL), is ready to invest up to Rs 1,000 crore by 2008-09 in manpower, research and development, and is hopeful of bagging huge orders for the prestigious Pinaka project (see box).

Mahindra & Mahindra have supplied 200 bullet-proof vehicles to the defence sector and should be able to sell another 300 in the financial year 2006-07.

And managing director R Seshasayee of Ashok Leyland says though defence supplies as a percentage of its total turnover will continue to remain in the 8-12 per cent range, the company is planning to enter the export market by servicing the demand of the armed forces in foreign countries.

"We are technically qualified to supply defence vehicles to some countries in ASEAN and in Africa," he says.

Again, Larsen & Toubro is banking on the "potential for increasing defence related business", according to M V Kotwal, senior executive vice president (heavy engineering division).

The company has already obtained letters of intent for licenses covering a very wide range of defence equipment for all the three services.

Cisco Systems India, currently deploying web area networks, intends to suss out opportunities in the areas of high-end multi-protocol platform and optical solutions.

"We intend to position our portfolio of solutions for tactical battlefield communications systems," says Karan Bajwa, vice president, government & defence, Cisco.

And for Alcatel, a third of its revenue comes from non-operators, of which a significant chunk is the defence sector.

"We are negotiating a radio backbone for border areas and will bid for EPABX and microwave requirements," says Ravi Sharma, managing director and president, South Asia, Alcatel. Altacel already provides ERPsolutions, Internet protocol products and portions of radio and telecom backbone to defence.

Additional reporting by Kalyan S Ramanathan and Joji Thomas Philip

Tomorrow: What plans upcoming private players have for the defence sector

JOINT FORCE

K P Singh, secretary (defence production), Ministry of Defence, makes a case for private public co-production ventures, some of which include:

Pinaka: A multi-barrel rocket launcher, its prototype was developed by Tata Power's Strategic Electronic Division in partnership with Armament Research & Development Establishment. Larsen & Toubro also concluded parallel development on a multi-barrel rocket launcher, and both Tata and L&T are in negotiations with the Ministry of Defence for supplying these to a regiment each. The launchers are far cheaper than their international competition "" the American M270, ASTROS II of Brazil, and URAGAN of Russia.

Samyukta: A ground-based integrated electronic warfare system covering both radar and communication frequency bands, it has been jointly developed by DRDO, Corps of Signals, DPSUs and the private sector. Tata Power's Strategic Electronics Division (TPC-SED) along with other partners developed the integrated real time command and control software; 40 SMEs developed components with TPC-SED as the production agency.

Sarvatra bridge: The equipment developed for bridging dry and wet gaps has been developed by DRDO and L&T. The bridge is capable of being launched within a very short time and can sustain traffic of even heavy military vehicles. According to experts, Sarvatra bridge is qualitatively superior to its precursor, the imported AM-50 bridge set.