MBDA—giving a boost to the Indian defence sector supply chain
Prime Minister Narendra Modi’s call to US companies to participate in the Indian defence sector has generated plenty of euphoria. This is not very different from the Prime Minister signaling another boost to indigenisation prior to embarking on his trip to Japan; earlier decision to manufacture medium level military transport aircraft in India reinforced by decision of manufacturing light utility helicopters also in India instead of importing them.
The Modi’ Government has made it clear that it intends to do its utmost to see India becoming self-reliant in arms procurement. The ‘Make in India’ campaign is a clear signal of intent and Defence Minister Arun Jaitley has already set out his stall along these lines. In achieving this strategy, the state sector with its large defence public sector undertakings (DPSUs) has a major part to play but it is clear that eventual success will also depend on the involvement of the growing private sector with its inherent dynamism. Large Indian companies have already begun investing heavily in view of the new procurement trend. They are aiming to be well placed to benefit from the expected boost in defence spending that India deems necessary to confront the traditional security challenges posed by its neighbours. However, and as recognised by Prime Minister Modi in calling upon India’s “entrepreneurs with an engineering background to set up clusters of defence units”, the skills offered by the small and medium enterprises (SMEs) will be crucial in setting up the required industrial framework. These SMEs are required, particularly in the area of electronics, even though small companies have traditionally found entry into the defence market exceptionally difficult to achieve.
The question needs to be asked concerning the current capability of the private sector to offer the advanced technology solutions necessary to develop and produce the next-generation of defence equipment. This is where international partnership enters the equation. It is through close partnerships and transfer of technology that the levels of know-how gained over many years can be acquired to the benefit of the Indian defence industrial sector. The Indian Government’s recent decision to up FDI from its previous 26 per cent to the current level of 49 per cent is most definitely a step in the right direction as it will serve to build confidence for international companies to make the necessary investments in India’s industrial infrastructure.
MBDA, as is well known, has been working with Indian defence industry for well over 50 years with its Milan ATGM being manufactured under licence by BDL. This experience has seen MBDA developing important links with the full supply chain behind this staple of the Indian Army.
Understanding the mechanisms of this supply chain has stood MBDA in good stead as recent contracts are calling increasingly on the skills and input of a range of Indian companies, mainly SMEs. MBDA’s offset programme related to the weapon package of the Mirage upgrade programme will include the transfer of production of several sub-assemblies of MBDA’s MICA air-to-air missile and MICA launchers (rail & ejection) involving both electronic and mechanical domains. The above mentioned direct offset projects, that will see some 80 per cent of both the rail and the ejection launch systems components sourced in India, involve many high skilled SMEs, mostly the type of SMEs that the Indian Government wants to see prosper, either directly as a Tier-1 subcontractor of MBDA or through the supply chain of a large defence private industrial company. As well as the missile casing and cables, advanced componentry such as the aerodynamic servo-controller units that allow the missile to follow the guidance trajectory with the launcher will also be produced by Indian private sector SMEs for assembly in France.
Discussions are currently underway with potential suppliers for the local supply of elements for the ASRAAM air dominance missile that was ordered as part of the Indian Air Force’s Jaguar bomber upgrade earlier this year. As with MICA, a significant part of the launcher’s components will also be sourced in India providing a healthy boost to defence sector SME revenues and experience.
It can be seen that MBDA is offering so much more than world leading missile systems. It is also providing much needed technical support to the defence industrial sector. This support is crucial if India is to gain access to world-class technologies and industrial solutions that it does not currently possess. That is why the much talked about DRDO-led SRSAM air defence programme is so important. It is important not only to India’s armed forces but also to the full gamut of the Indian defence industry structure from the DPSUs such as BDL through to a large number of private sector SMEs. Using MBDA’s skills acquired in developing supply chains around the world, India’s most able companies, of all sizes, will be involved in producing the revolutionary new missile’s key sub-assemblies including radar and IR seekers and the propulsion system. In fact some 75 per cent of SRSAM’s contract value will go directly to India’s defence industry with the potential for significantly more once the weapon enters the export market. Of course, export success will serve to boost prestige for India’s defence industry capabilities and prowess and foster even greater success and financial returns in the future. As a sign of how important SRSAM is to India’s defence industry plans, Jean-Yves Le Drian (Designation needs to be mentioned) has even written to Defence Minister Arun Jaitley underlining the fact that within a few years, the project would enable India to get “the strategic missile autonomy it has been calling for”.
MICA IR on Rafale