DEFENCE INDUSTRY IN INDIA

By:

Sarvesh Mishra

A NATION’S MILITARY STRENGTH IS DETERMINED BY ITS ECONOMIC MIGHT

INDUSTRY PROVIDES THE MILITARY WITH THE WHEREWITHAL TO FIGHT THE NATION’S WARS.

DEFENCE : ROLLING THE STONE !

The opening up of the Indian economy during the early nineties heralded an era of unprecedented industrial growth in India

Huge opportunities for growth within the domestic and global defence and aerospace industries have attracted the attention of Indian industry

The current profile of equipment held by the Indian Armed Forces with regards to ‘State of the Art’, ‘Matured’ and ‘Obsolescent’ equipment is 15, 35 and 50 percent respectively

OVERVIEW

The country’s defence services include three armed forces and other departments

Defence Research and development organization

Defence ordinance factories

Defence public sector Units

Defence Production

Defence Public Sector Units (DPSUs) plays an integral part in defence production

India has 39 Ordnance Factories and 8 DPSUs DPSUs account more than 65% of the total industrial output Value of production is US$ 3.9 billion

Highlights of budget and expenditure

Allocation increased to 495.2 Billion rupees R&D allocation raised to 46.80 Billion rupees Running expenditure increased by 3.8%

Global Spending on Defence

Expected to remain Flat or decline

Decline in spending by US and rest of Europe

Compensated by China, India, Saudi Arabia, Japan and Brazil

Ordnance Factories OrganizationIndian Ordnance Factories trace their history to 1801, when the first factory to produce guns was established at Cossipore, KolkataToday, the organization consists of 39 factories and two projects, coming up at Nalanda in Bihar and Korwa in U.P

The turnover during the financial year 2011-12 was Rs 12,391 croreThe projected turnover for 2012-13 is Rs 12,935 croreThe turnover has shown steady growth during the last five years

The major investment plans during the 12th Plan period are:

(a) Augmentation of capacity for production of Tank T-90

(b) Creation of capacity for production of variants of tank T-72

(c) Augmentation of capacity for ICV BMP-II and its variants

(d) Augmentation of capacity for Engines of Armoured vehicles

(e) Nalanda and Korwa project

(f) Augmentation of capacity for Pinaka Rocket

(g) Creation of capacity for production of 155 mm Howitzer

(h) HMX and Ammonium per-chlorate plant

(i) Booster and Sustainer for Akash missile

(j) Creation of capacity for production of Track Link Assembly for armoured vehicles

India has established eight Defence Public Sector Undertakings (DPSUs) whose responsibility is to provide the Armed Forces state-of-the-art equipment's and at the same time enhance country's self-reliance in defence production

Defence Public Sector Undertakings

Name of the PSUs

2010-2011 2011-12 2012-13(April-Dec 2012)(Provisional)

Value of Production

Value of Sales Value of Production

Value of Sales Value of Production

Value of Sales

HAL 16450.84 13115.50 12693.19 14204.21 14403.82 14315.68

BEL 5520.80 5529.69 5793.58 5703.63 6290.19 6012.19BEML 3795.07 3647.07 4077.19 3648.37 3359.70 3289.79MDL 2611.41 636.56 2523.69 2262.87 1068.51 1063.19GRSE 1053.30 546.22 1293.80 546.33 1507.21 427.25GSL 990.32 514.46 676.40 269.70 506.00 749.36BDL 910.92 939.10 992.94 959.12 475.00 475.00MIDHANI 485.46 417.87 496.00 509.01 2810.00 2424.81HSL 603.84 652.14 564.04 564.04 553.78 558.59

TOTAL 32421.96 25998.06 29110.83 28667.28 30974.21 29315.86

VALUE OF PRODUCTION AND SALES OF DEFENCE PSUs

Defence Public Sector UndertakingsUndertakings have not been able to arms the defence forces, resulting in huge arms imports, to the tune of over US $ 5-6 billion per year

Though the volume of production by DPSUs has increased over the years, the value addition by them has progressively decreased

Most of DPSUs are over-dependent on external sources for raw material, components and spare parts, and capital goods for the production requirements

The export performance of DPSUs taken together is below the three per cent of total value of production or total value of sales

TRENDS IN DRDO EXPENDITURES

% SHARE OF DEFENCE BUDGET IN GDP

FDI IN DEFENCE SECTOR

RECENT ACHIEVEMENTS Agni, the 3500 kms range ballistic missile was successfully launched with user participation

Successful flight test of Endo atmospheric Interceptors for 2000 kms class target were carried out

Capabilities of NAG, the third generation anti tank missile, which is a vehicle mounted system was demonstrated

Advanced versions of BrahMos supersonic cruise missile, were developed and flight tested

Major procurement contracts for India:- Navy impending contract for project 17A frigates that will be built by MDL and GRSE

Supply of 145 ultra light howitzers by BAE system (USA) worth 647 million dollars

Supply of 6 Lockheed Martin C-130 J ‘Super Hercules’ aircraft for Indian special forces worth 1 billion dollars

ROADBLOCKS Lack of a coherent industrialization policy

Lack of domestic capability to cater to demands from global primes

Taxation issues

Restriction on foreign investment (FDI) only 26% as of now

Restrictions of dual use technologies

Inadequate trained manpower

Opportunity in Indian defense industry Strong focus on IT, High-tech engineering and research and design capabilities

IT infrastructure and manufacturing potential to be one of the key global sourcing definitions

THANK YOU!!