Defence Minister urges defence PSUs & ordnance factories to be more dynamic

Private Sector being given full play in achieving self-reliance in defence production

Defence Minister Nirmala Sitharaman, has underlined the need for revitalising defence PSUs and ordnance factories for meeting the ammunition needs of India’s defence forces. “The managements of these organisations need to be ahead of the curve and show dynamism,” as they possess immense and valuable assets that could offer manufacturers huge production opportunities, she said.

The Defence Minister was addressing Ammo India 2018, the 1st International Conference on Military Ammunition on the theme, Make in India – Opportunities and Challenges, organised by FICCI and the Centre fort Joint Warfare Studies (CENJOWS) under the Ministry of Defence on March 12, 2018.

The government has opened up private investment in defence production, including liberalisation of foreign direct investment. It has initiated steps to develop two defence industrial production corridors in the country and also proposes to bring out an industryfriendly Defence Production Policy 2018 to promote domestic production by public sector, the private sector and MSMEs.

The Defence Minister said that the government expects wholehearted participation of Indian industry and foreign OEMs to leverage the indigenous capability and opportunities for self-reliance in defence production. She said that Defence Ministry was encouraged by the quantum of outsourced component in defence manufacturing which had risen to 29 per cent in fiscal 2016-17. This, she said, displayed that Tier-I Indian companies were up to their task and also serve as an assurance to SMEs that their products would be sourced by big companies.

The Minister said that it was in this context that the announcement was made in the 2018-19 Budget that two defence industrial production corridors would be established. The one between Chennai and Bengaluru via a stretch of ordnance factories was coming up well and it was encouraging that SMEs had started to bring in start-ups to produce for the armed forces. Coordination between the DIPP and the Home Ministry was being actively pursued and this should give comfort to OEMs that different arms of the government were engaged in a well-oiled effort. The government was also actively working on the second corridor between Aligarh-AgraJhansi-Chitrakoot-Kanpur-Lucknow, she said.

She also said that under the ‘Make II’ initiative, procedure had been simplified and once a prototype was developed and tried out, manufacturers should not worry about orders as these would be forthcoming. The Defence Minister also released a FICCI-CENJOWS knowledge paper on ‘Ammunition Manufacturing in India: Road to Self-reliance’.

Lt General, Giri Raj Singh, SM, Director General Ordnance Services, Indian Army, in his address, pointed out that under one of the largest procurement initiatives in arms and ammunition launched by the Defence Ministry, RFPs for eight projects were released for procurement of medium and large calibre ammunition for the Industry private sector. These projects entail an expenditure of ` 70,000 crore in 10 years. The final corrigendum, incorporating the amendments, to the RFPs would be out in the next one month. He said that the vision was complete self-reliance in armament manufacturing and the government’s ‘Make in India’ programme has paved the way for making the vision a reality.

Rashesh Shah, President, FICCI, called for fast-tracking the clearances of licences for production by the private industry, easing of restrictions on the number of contracts a company could bid for and reduction in the requirement of high earnest money for procurement orders. He also underlined the need for creating a level-playing field for all players to speed up indigenous defence manufacturing.

Lt General Vinod Bhatia PVSM, AVSM, SM (Retd), Director, CENJOWS, in his concluding remarks at the inaugural session said that Ammo India provided a common platform to industry players to share their concerns on national security to facilitate the preparation and presentation of a pragmatic roadmap for defence production to the government.

Secretray General, FICCI, Dr Sanjaya Baru assured the Defence Minister that FICCI is ready to extend all support to the government in the organisation of the upcoming Defexpo.

FICCI-CENJOWS Knowledge Paper

The FICCI-CENJOWS knowledge paper makes several recommendations to the Ministry of Defence and private industry to attain the objective of self-reliance. These include:

Reduce procurement lead times: Multiple RFIs and RFPs have been issued in the past with no result in the arms and ammunition category.

RFP must outline complete roadmap: It would not suffice to simply issue RFPs exclusive to private industry. Complete roadmap for an ammunition RFP should be outlined, one with hand-holding and guidance to the private industry from the Government of India, (including agencies like the DGQA, the end user and DRDO).

Long-term covenant: This should be part of any proposal for ammunition manufacturing, once you place an order on a company then for next 10 years they would be the source for that product (in order to get ROI on infrastructure investment).

Industrial licensing process should be streamlined: DIPP has an online process now but MHA (which issues licence for small arms and ammunition) is an offline process; Documents required need to be clearly stated, since the documents stated on the site and forms do not seem to suffice.

Establish an Ombudsman for Industrial Licence: Regular feedback mechanism and intimation to the industry on details lacking in their application and well as status.

The paper notes that lack of design and R&D within the private sector, still leaves us dependent on foreign OEMs for transfer of technology. Notwithstanding the fact that this sector was not open to the private industry, there needs to be more than just intent from the companies to fructify arms and ammunition manufacturing and address the needs of the Armed Forces.