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Eye on Defence January 2014

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EY India's Quarterly defence newsletter.

EY India's Quarterly defence newsletter.

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  • 1. Eye on Defence January 2014 Dear readers, Contents Contents title Defence communication Contents subjects networks 02 Way forward for MSMEs in A&D 15 Request for Information (RFIs) for October—December 2013 22 Request for Proposal (RFPs) for October—December 2013 23 List of Industrial Licenses (ILs) filed for September— October 2013 25 New projects/investments/ contracts 26 JVs and alliances 29 Country-level deals and initiatives 31 Industry buzz 33 The Indian MSME base in defence production is beginning to realize its potential to complement the efforts of DPSUs and large Indian conglomerates. It is now well known that the goal of building an indigenous defence manufacturing base is challenging to attain without the support and active participation of the vibrant and nimble MSMEs of India. While subcontracting from DPSUs remains the preferred route of entry to the A&D industry for these companies, technological tie ups, induction into the global supply chain of OEMs and investment in R&D are now beginning to take off as alternative entry options. With this background, the MSME DEFEXPO 2013 was conducted successfully in Bangalore by the National Small Industries Commission. EY was the knowledge partner for this event. A mix of bureaucrats, officers, captains of the industry and leaders of successful MSMEs interacted with the participants and shared their views on the way ahead. A general sense of direction to increase MSME participation in the A&D industry was built successfully over the course of three days. In this edition, we have tried to present a consolidated and summarized view of the various topics that were discussed and the ways in which enhanced participation may be achieved. The Armed Forces have been rapidly modernizing their networks and have been putting newer and more reliable systems in place. This is a less understood domain, with immense business potential in the near term. Thus, in this edition, we have tried to identify the various defence communication networks projects that are currently under planning and execution. We have also tried to identify opportunities and avenues of participation for the industry in these projects. Among the regular sections, we have industrial license applicants, RFIs/RFPs released, new projects and investments, joint ventures (JVs) and alliances, country-level deals and the latest buzz in the industry. I would like to take this opportunity to offer you my warmest wishes for a happy, healthy and joyful 2014. I hope you find this issue useful. It has been our constant endeavor to make this publication increasingly relevant to you, and we will appreciate your comments and suggestions in this regard. K. Ganesh Raj Partner and Leader Aerospace and Defence practice
  • 2. Defence communication networks Overview In this era of network-centric battlefield/warfare, communication network technologies have indeed become the life line of all military operations, thus assuming a pivotal role in strengthening the country’s defence. The main demands made on military communication are of timeliness of establishment, reliability of operations, speed of action, and secrecy of transmitted information. With communication systems being the nerve of any operational system, these are all-prevalent and difficult to segregate. Nevertheless, for the ease of understanding, the systems can be broadly categorized into three tiers with respect to their mobility from the operational point of view, the levels of hierarchy at which they operate and the resultant communication technologies deployed. The layers are pictorially depicted in figure A. Fig A: Three-tier hierarchies of the military communication systems TIER 1 Static Networks TIER 2 Deployable Networks TIER 3 Tactical Networks 2 | Eye on Defence The network is static planned and well connected by wideband links such as OFC and other techniques Typically used for deployable headquarters, these types of networks can move on ad hoc basis from one geographical location to another requiring relatively fast set up and stable connections to the backbone on land to other deployable networks and for that matter use Line of Sight (LoS) digital radios or other means of communication The tactical networks are based on tactical radios e.g. VHF, UHF and other media) and characterized by high mobility, non stable and fault prone communication Current trends in the network communication of the Indian Armed Forces Increased reliance is being placed on intelligence and speed in data processing. This trend is necessitated by the need for quicker decisions and NCW capabilities in a highly mobile battlefield scenario. In this backdrop, existing networks are increasingly being upgraded to enhance Command, Control, Communications, Computers, Intelligence and Interoperability (C4I2) capabilities. The static communication network along the borders is being converted to optical fiber. In the last few years, all of the three defence services have made significant progress by using space technologies in the fields of communication, surveillance and reconnaissance, and search and rescue. The Navy has emerged as the most advanced service in deploying communication network technologies. However, there are integration issues within the three services to leverage a wide array of ISR capability. Ongoing network communication projects Various communication network systems are being developed for the three defence forces and are being planned to be deployed in the three-tier architecture discussed earlier. In addition, there is a pressing need for integrating the network of the three defence forces to facilitate quicker decisions and better cooperation/ coordination among the three services. We are, thus, analyzing ongoing projects under the following categories: • Communication projects at the static, deployable and tactical levels specific to the three services • Static communication networks common to the three services for inter services applications/integration Some of the major ongoing network communication projects at the static, deployable and tactical levels for all of the three defence services are listed and discussed below.
  • 3. Ongoing network communication projects for the Army The focus areas are: • the upgrade to Army Static Switched Communication Network (ASCON) at the static level; • net centricity and the cutting edge of operations at the tactical level, and • the tactical command, control, communication and information systems (TAC C3I) at the operational and tactical level; • battlefield management system (BMS) for units and at the below level. Program: Army Static Switched Communication Network Phase 4 (ASCON Ph-4) RFI issued: Sep 2010 Category: Buy and Make Indian Developed by: Telecommunications Consultants India Limited (TCIL) and various other Indian OEMs Likely development cost: INR3.5-4 billion (US$63–72 million) Brief: The ASCON project, executed by M/s ITI Ltd. in the late 1980s, provides secure voice and data links between the static HQ and formations in peace-time locations. It is the backbone communication network of the Army. It has undergone three upgrades since its inception. Over this period, it has been extended to cover almost all formations/establishments/units. In 2010, an RFI for ASCON Phase IV was issued by the Army and, subsequently, another RFI was issued by TCIL, which has been appointed as the nodal agency for this program and is looking for suitable partners. Program: Tactical Command, Control, Communication and Information System (TAC C3I) Developed by: Directorate General of Information Systems (DGIS) Brief: TAC C3I is being developed to assist in the NCW warfare of tomorrow and will comprise a number of specific subfunctions. TAC C3I is being implemented indigenously; conversely, other projects would likely seek foreign sub-systems and are currently in various stages of development/testing. TAC C3I comprises: • A rtillery Command, Control and Communication System (ACCCS)  • C ommand Information and Decision Support System (CIDSS)  • A ir Defence Control and Reporting System (ADC&RS)  • B attlefield Surveillance System (BSS)  • B attlefield Management System (BMS)  • C ommunication systems linking the C3I systems  •  Project ASTROIDS •  Tactical Communication System (TCS) Eye on Defence | 3
  • 4. Fig B. TAC C3I system Program: ACCCS Category: Buy and Make Indian Developed by: BEL, CAIR, ARDE and Project Management Organisation (PMO) Likely development cost: INR16.5 billion (US$300 million) Brief: The module for the artillery (ACCCS) is the first among various systems of TAC C3I to be fielded by the Army. This will connect the corps headquarter forward to the battalion headquarter. The applying of TAC C3I will, thus, assist commanders in the field in quick decision making based on real-/near-real-time processing of information. The project aims to automate all of the artillery functions of war. ACCS will perform vital functions such as technical and tactical fire control, deployment management, operational logistics and fire planning. As of now, phase 1 of the project has already been completed and implemented. Phase 2 and 3 will be extended to all of the artillery units, and the remaining corps would be completed by 2012–13. ACCCS completion is illustrated in figure C. Fig C. ACCS system Source: DRDO 4 | Eye on Defence
  • 5. Program: Command Information and Decision Support System (CIDSS) Sanctioned: 1999 Category: Buy and Make Indian Developed by: Centre for Artificial Intelligence and Robotics (CAIR), BEL, Tata Elxi and Y M Tech Likely development cost: Over INR412.5 billion (US$7500 million) Brief: CIDSS is primarily meant for collecting, collating, filtering, processing, formatting and displaying operational, intelligence and logistic information to support commanders in decision making at various hierarchical levels of field forces. The aim is to enable them to assess the battlefield scenario and take appropriate and timely decision. The system is being operationalized at present. The layout of the CIDSS vis-à-vis other sub-systems of TAC C3I is illustrated in Fig D. Fig D: CIDSS Battlefield Management Systems Arty Combat Command and Control System Battlefield Surveillance Systems CIDS Army Strategic Operational Information Dissemination System Electronic Warfare Systems Air Defence Control and Reporting System Source: Q-Tech Synergy Eye on Defence | 5
  • 6. Project: Air Defence Control & Reporting and Air Space Control System (AD C&R and ASC) Category: Buy and Make Indian Developed by: DRDO and BEL Likely development cost: Above INR3 billion (US$55 million) Project: Battlefield Surveillance System (BSS) Developed by: DRDOs CAIR unit Likely development cost: Over INR0.5 billion (US$100 million) Brief: This project aims to provide an efficient battlefield surveillance system that has the ability to provide military commanders at all levels with accurate, constant, all-weather and real-time surveillance of the battlefield. The test bed for the project has been developed. Project tenders are being evaluated. Brief: ADC&RS is a command and control system for integrating various radars and other army systems for air defence. This system will take care of all of the functions of air defence control and of the reporting system of the Army spanning from the time a target is picked up to its engagement by a suitable weapon system. The contract was signed with BEL in 2008, but the test bed is still to be materialized. Project: Battlefield Management System (BMS) Project: Army Strategic Operational Information Dissemination System (ASTROIDS) Development contenders: L&T, Bharat Electronics Ltd, Rolta Ltd, Tata Power (strategic electronics division), Hindustan Computers Ltd, Wipro, ECIL, ITI, Bharat Forge, Punj Lloyd Ltd, Tata Consultancy Services, Infosys Technologies, Tech Mahindra and CMC. Developed by: DRDO and BEL Likely development cost: Not specified Brief: It is a geographic information system-based application. This project has five modules covering GIS and terrain, operations, counter insurgency operations, intelligence and logistics. It has been implemented in three commands and six corps. In phase 2, some upgrades have been planned before porting to other commands. The project was scheduled for implementation by 2012–13. 6 | Eye on Defence Expression of Interest (EOI): Nov 2013 Tender issued Category: Make Indian Likely development cost: INR400 billion (US$7,272 million) Brief: It is a decision support system proposed to be implemented at the infantry battalion/regimental level, with program life cycle support, for 15–20 years. It is conceptualized as an integration tool supporting military users at all levels ranging from individual soldiers to battalion group/combat group commanders in the TBA. It includes the development of sensors, digitally enabled weapons and information grids to enable the efficient functioning of weapons. The BMS system will integrate all surveillance resources available at the battalion or regiment level, including from locally launched UAVs and ground sensors. It will also provide the accurate location of all the troops and key weapons platforms, as well as the location of enemy troops and terrain analysis. In this regard, an EoI has been issued to 14 vendors. Based on their detailed responses (still awaited), the Ministry of Defence (MoD) will be shortlisting two vendors or consortia as “development agencies” or DAs. Vendors have been given four months to form consortia, engage technology partners (could be foreign companies), frame their proposals and submit detailed proposals. They will be evaluated by an Integrated Project Management Team (IPMT), which will then select two DAs.
  • 7. Project: Tactical Communication System (TCS) Expression of Interest (EOI) : 24 Sep 2010 Tender issued Category: Make Indian Shortlisted contenders: Bharat Electronics Limited (BEL) and a private Special Purpose Company (SPC), a consortium led by L&T, with Tata Power SED and HCL Infosystem Ordered quantity: Seven Systems Likely development cost: INR100 billion (US$1.8 billion) Brief: TCS is part of the Army’s quest to build a networkcentric warfare system to replace the aging Army Radio Engineering Network (AREN) system that was put in place in the 1980s. The communication system will be the foundation of the IA’s communication network, as well as the futuristic backbone for a digitized battlefield communication network facilitating communication from theatre command areas to troops deployed in forward areas. The project is categorized under the “Make” Category of the Defence Procurement Procedure. Five consortiums, including India’s top IT companies, were made out of the original eight contenders. Finally, the MoD has shortlisted two development partners: the government-owned BEL and a private Special Purpose Company (SPC), a consortium led by L&T, with Tata Power SED and HCL Infosystems as the two DAs. The MoD has sent staff qualitative requirements to the two competitors in October, asking them to give a detailed project report by January. Thereafter, each of the two competitors will have to build two prototypes of the TCS for about US$50 million (INR2.75 billion). The prototypes will then be put to trials. The government will contribute nearly 80% toward the cost of the prototypes, and the remainder will be borne by the competitor. The prototypes will undergo user trials by the Indian Army. The selected competitor would then produce the entire TCS. The envisaged TCS Hierarchy is demonstrated in Fig E. Fig E. Tactical Communication System hierarchy Source: Q-Tech Synergy Eye on Defence | 7
  • 8. Project: Mobile Communication System (MCS) Fig F. Configuration details of MCS Developed by: DRDO Likely development cost: Not declared Brief: The DRDO has developed a mobile communication system (MCS) technology for defence services to provide reliable and secured wide-area connectivity for both data and voice between various nodes. The system is under development. Source: http://drdo.gov.in/drdo/English/index.jsp?pg=communication.jsp Program: Satellite Communication (SATCOM) Project: Coastal Surveillance Network Brief: On the lines of the GSAT-7 Defence Satellite System for the Navy, the Army is looking to adopt a dedicated satellite system to augment its communication capabilities. The details of project are being finalized. Category: Buy and Make Ongoing network communication projects for the Navy Project: Microwave Satellites or Short-Wave Radios Category: Buy and Make Indian Developed by: L&T’s Strategic Electronics Center Likely development cost: INR100 billion (US$1.8 billion) Brief: Microwave satellites, or short-wave radios, are the usual mode of military communication worldwide. India is poised to become one of the few countries to indigenously build and enhance the capability of strategic communication to sub-surface vessels. The project has been awarded to L&T. 8 | Eye on Defence Developed by: BEL and the foreign prime contractor yet to be decided on Ordered quantity: 110 multi-modal coastal surveillance radars Likely total cost: US$3 Billion Brief: To further strengthen coastal security, the Defence Ministry is planning to set up additional static radars and sensors to closely monitor the movement of suspicious ships. These radars and sensors are to be implemented as a part of the Phase II of the Coastal Surveillance Network (CSN). The project is being carried out in two phases, with the first phase already nearing completion. The prime contractor is Sweden SAAB Tech, and Indian company BEL has been assigned to assemble all of the imported systems and sub-systems that are being received in semi knockeddown condition from the former. The second phase involves setting up of 110 multi-modal coastal surveillance radars and 37 towers. For phase two, TERMA has reportedly
  • 9. already been engaged as a sub-contractor. The Low Light Level TV (LLLTV) with Charge Coupled Device (CCD) Camera from OBZERVE, Canada and Thermal Imager from Cantrop, Israel, has been cleared during the field evaluation trials, and contract negotiations are underway. Other potential beneficiaries include Cobham, Thales and Elta. Project: Satellite Communication (SATCOM) GSAT-7 Defence Satellite Category: Buy and Make Indian Developed by: Indian Space Research Organisation (ISRO) Ordered quantity: 1 Satellite development cost: INR6.55 billion (US$121.9 million), including the rental for rocket and insurance Brief: India’s first satellite dedicated to use by the military has been successfully launched into orbit. The GSAT-7 will transform the capabilities of the Indian Navy, allowing it to communicate with its fleet across the Indian Ocean through a top-secret encrypted system. Navy ships will be able to exchange data about the precise location of enemy ships and submarines. As part of the process, each ship in the fleet will have a comprehensive digital map of the position of friendly forces and enemy forces. Ongoing network communication projects for Air Force Project: Theatre Deployable Communications (TDC) Wireless Distribution Module (WDM) Brief: The IAF has approved and initiated the induction of DRDO Theatre Deployable Communications (TDC) Wireless Distribution Module (WDM). The module provides a lineof-sight extension of a local area network and a radio frequency link extension of local internet protocol-based traffic to rapidly distribute network capability to tactical war fighters in remote areas. The TDC system is mobile and modular. The equipment is packaged in kits and modules that are installed, transported and operated from transit cases and can be tailored to meet specific mission needs. Project: Air Force Net (AFNet) Category: Buy and Make Indian Developed by: BSNL, HCL Infosystems and CISCO Ordered quantity: 100 Likely cost: INR10.77 billion (US$195.8 million) Brief: The IAF has been able to establish its fiber-optic network AFNeT, which offers up to 500 MBPS encrypted, non-jam-able bandwidth to replace the existing troposcatter-based communication network. The modern, stateof-the-art AFNeT is a fully secure communication network that provides IAF with a critical link among its command and control centers, sensors such as the Airborne Early Warning and Control Systems and shooters including fighter aircraft and missile squadrons. With the launch of AFNET, IAF has become the first among the three services to complete the interlinking of major installations throughout the country on a high bandwidth network. AFNet will eventually be connected and extended to a unified digital grid encompassing all of the legs of Indian Armed Forces. AFNet is likely to be extended and connected to the digital information grid project, which is currently under implementation for the Indian Navy and the Indian Army, by 2015. Category: Buy and Make Indian Developed by: DRDO Ordered quantity: 140 WDM Suites Likely Cost: INR3.6 billion (US$65 million) Eye on Defence | 9
  • 10. Project: Integrated Air Command, Control and Communications System (IACCCS) Category: Buy and Make Indian Ordered quantity: Ten IACCS centres Likely cost: INR165 billion (US$3.5 billion) Brief: The IACCCS is being established under a two-phase program for the IAF. The IACCCS has been designed as a robust, survivable network-centric C4I3 infrastructure that will receive direct real-time feeds from virtually all sources. The IACCCS will also coordinate the early warning and response aspects of a layered, ground-based, two-tier ballistic missile defence (BMD) network that is currently at an advanced stage of development. Phase 1 had become operational last year. The way ahead is now clear for plugging into the IACCCS a large number of new-generation ground-based radars that are being delivered/acquired for airspace surveillance in search of airborne targets and for coastal/ground surveillance. Project: Operational Data Link (ODL) Phase II Expression of Interest (EOI) : Not yet issued Category: Buy Global Likely contenders: Elta; Rafael; Lockheed Martin and IAI Ordered quantity: 100 Likely development cost: INR230 million (US$4 million) Brief: The ODL is a pilot project for the Indian Air Force’s network-centric warfare program that will provide the force with the capability to field advanced data and voice 10 | Eye on Defence networking over the next 10 years. After the successful implementation of the first phase, worth INR230 million (US$4.2 million), the RFI for the Operational Data Link (ODL) phase II is currently under discussion. The decision on the launch of phase II is yet to be announced. The ODL will integrate all aircraft, AWACS, radars and UAVs with the C2 structure. It will have both data and voice networking capability. Project: Computerised Inventory Controlled Project (CICP) RFI/RFP: To be issued soon Category: Buy Global Likely contenders: Thales, IAI, ST-Engineering, Raytheon, EADS, Northrop Grumman, Boeing and Lockheed Martin Brief: The project entails the automation and integration of all ammunition and ordnance store depots with the central data center in Delhi and the disaster site in Pune. The project RFP is being re-floated due to technical problems. Since all spade work has already been completed, the project is likely to be completed by 2015. Program : Satellite Communication (SATCOM) Brief: On the lines of the GSAT-7 Defence Satellite System for the Navy, the IAF is expected to have its dedicated satellite by 2013–14. Also, a communication-centric intelligence satellite will be operational by 2014 and will serve as a test bed for anti-satellite weapon development. The details of project are classified.
  • 11. Static communication networks for three services The static communication part for the three defence services is progressing well, and a new optical fiber cable network and DCN received approval recently. Project: Defence Communication Network (DCN) Project: Network for Spectrum (NFS) for Defence Services Tender issued: 2009 Category: Buy and Make Indian Developed by: BSNL with other likely companies L&T, Sterlite and Punj Lloyd, TATAs Ordered quantity: 100 Category: Buy and Make Indian Likely development cost: INR181.5 billion (US$3.3 billion) Developed by: HCL Infosys Brief: The Network for Spectrum (NFS) will function as a fiber optics network to be used exclusively by the Indian Armed forces in exchange for the spectrum being released by the Defence Forces. This will be a country-wide secure, multi service and multi-protocol converged next generation network based on exclusive and dedicated tri-services optical transport backbone. NFS will be a “Next Generation Network” based on highly resilient and virtualized IP/MPLS backbone and gigabit optical access networks based on fault tolerant carrier ethernet transport technologies. The complete network will be controlled from geo redundant central and regional network operating centers. A total of seven tenders are to be issued under the Project Network for Spectrum. The entire project was cleared by the Cabinet in August 2012, and it was to be completed within three years. It was further agreed to setting up an exclusive defence band and a defence interest zone along 100 km of the international border, where spectrum will be reserved only for use by the armed forces. As of now the programme Likely development cost: INR8 billion (US$145.5 million) Brief: A tri-service defence communications network is being progressed to cover communication requirements of all three services at the strategic level and transcend inter-service boundaries. The network will link all of the three HQs internally, as well as with the MoD and the operational formations of the three services right up to the corps level. When ready, it is expected to cater to the military’s communication needs for the next 30 years. DCN envisages a network of optical fiber cables, satellite earth stations and transportable and portable satellite terminals with high security features. The DCN will be part of a tri-service strategic network, initially on a hired bandwidth, and will be migrated to the OFC being laid out as part of the NFS at a later stage. There would be a satellite overlay to cater to redundancy/remote area locations and disaster recovery sites. It will provide voice, data and video services over IP to the strategic elements of Army, Navy, Air Force, Headquarters (HQ) Integrated Defence Staff (IDS) and Interim National Command Post (INCP). The project was awarded to HCL earlier this year, and work will be implemented within 24 months of the signing of the contract. Along with this program, a pan-India optical fiber cable network will be laid over 60,000 km to provide connectivity for 129 army, 162 air force and 33 navy stations. It will also make for highly effective pan-India redundancy to individual services networks, which is an imperative given the current state of cyber warfare. This integrated network will allow the defence forces to free spectrum. Source: http://indianarmy.nic.in Eye on Defence | 11
  • 12. has been derailed with the first major RFI issued in Nov 2012 standing cancelled and also no timeline being decided for other RFIs too. Pan-India optical fiber cable network. The project entails an RFI for the tender to lay over 60,000 km optical fiber cables to provide connectivity for 129 army, 162 air force and 33 navy stations; the project is part of the move to create exclusive spectrum infrastructure for the services; the tender was issued in Nov 2012, but it got cancelled in Feb 2013. As many as 14 top companies, including L&T, Sterlite and Punj Lloyd, had expressed interest in this turnkey project worth INR47.71 billion (US$867 million). Once implemented, this project will become the heart of the alternative communication backbone, Network for Spectrum (NFS), which BSNL will build in the next two years. Purchase orders for optic fiber cable gear are expected to be placed in two months. BSNL has also indicated plans to roll out an INR26.11 billion (US$474.7-million) internet protocol (IP) network for the Defence Ministry by June 2014. Apart from this, it will place orders worth INR13 billion (US$236.3 million) for transmission systems using dense wave division multiplexing (DWDM) technology by March 2014. Challenges A large number of networks based on a wide range of technologies are likely to emerge. The challenge will then be to assimilate new technologies, as well as to converge these networks that are based on multiple technologies. Furthermore, harnessing wireless technologies for enabling mobile communication for combat elements will be a key focus area. This implies that Indian defence services need to overcome the challenges of security 12 | Eye on Defence architecture, connectivity matrix and points of exchange of information, integration, legacy systems, standards and protocols, functionalities and procedures, time sensitivity, human resource issues, training of users and management of trained manpower. Roadmaps of information and communication must converge into an integrated information communication technology roadmap. Communication and information systems planning should be seamless, horizontally and vertically, with adequate safeguards and authority in place. Also, services need to focus on spectrum management and technology to telescope bandwidth. Market opportunities As the three defence services of India continue on the road to modernizing their forces, the need for technological investment in communication and other ISR technologies, including space and military satellites, is worth highlighting. The Indian Armed Forces are spending heavily on communication networking technologies, with an average 5% allocation annually in the defence budget. Considering the ongoing procurements and others in the pipeline, the defence communication network market of the Indian Armed Forces roughly amounts to over INR800 billion (US$14.5 billion). It is expected to grow at 8%, translating into a number of lucrative opportunities for foreign and Indian OEMs. Defence communication network programs such as Army Wide Area Network (AWAN Phase II), ASCON and BMS are typically bundled with communication entities such as Software Defined Radio (SDR), high-frequency radio handsets and TR modules for RADAR. The following table enumerates some of the main RFIs that had been issued by the MoD in the last few years for strengthening the defence communication of the three armed forces:
  • 13. Date of issue Item Defence service Mar 09 Radio Transponder Beacon and Receiver System IA June 09 IP Radio IA Nov 09 Infra Red Jammer for Army Aviation Units IA Sep 09 Tactical Access Switch IA Dec 09 Information for Project Loginet IA Jan 10 Secure Mobile Communication System (SMCS) IN Feb 10 Electronic Theodolite IA Feb 10 FINSAS Computer Sub System and Integration of Components IA Mar 10 FINSAS Single Band and Dual Band Handheld Radio Sets (HHRS) IA May 10 Electronic Theodolites with Laser Range Finder (LRF) IA May 10 WIMAX System IA June 10 ELINT Intercept Receivers IA June 10 WIMAX system IN July 10 Military Wireless Loop IA Aug 10 Mobile Cellular Communication System IA Sep 10 Project ASCON Phase IV IA Oct 10 8/34 MBPS Radio Relay IA Feb 11 Tactical Optical Fiber Cable System IA Feb 11 FINSAS Computer and Communication System IA Feb 11 RF Field System with accessories, RF Horn antenna with tripod IA Feb 11 Army Wide Area Network (AWAN) PHASE-II IA Feb 11 Fibre Scope IA Mar 11 Telemetry System IAF Aug 12 Internet Protocol (IP) Radio IA Aug 12 ELINT Intercept Receiver for Mountainous Terrain IA Sep 12 1 KW HF Transmitter/ Transreceiver Set IN Oct 12 Project ASCON Phase-4 IA Mar 13 Advance Surveillance Receiver IA Apr 13 TARANG Mk-1B Radiation Warning Receiver System Mechanical Mod Kits IAF May 13 Vehicle Mounted Air Band Transceiver IAF Aug 13 Wireless Communication System IAF Sep 13 Communication Equipment IAF Oct 13 SAKRIYA (Radio And Cell Phone Jammer Counter IED System) IA Oct 13 VHF and UHF Aerials --- Nov 13 Range Operational Communication (ROC) System --- Nov 13 Motion Sensors DOH IN Eye on Defence | 13
  • 14. Conclusion As the Indian defence forces transform themselves into primed modern fighting machines, communication and networking undoubtedly are going to play a very strategic and tactical role not just in network-centric warfare, but also in conventional battles and wars. With this realization, the Indian Armed Forces have modernized their communication networks by adopting several new technologies. That said, there is an inevitable need for an integrated communication network that enables requisite standard signal communication support to all of the three services. Modern strategic and tactical level command and control systems also need to be acquired on priority for better synergies during conventional and sub-conventional conflict. Along with this, the acquisition of TCS, a BMS and other necessary communication networks needs to be hastened. References 1. Vivek Raghuvanshi, “Experts: ‘Make India’ Approach May Undercut New Comm System”, Defence News, 26 November 2013 2. Ravi Shankar Pandey, “Communication in Defence: Securing the frontiers”, Voice & Data, 6 January 2005 3. Prakash Katoch, “Defence Communication and Surveillance”, Defence and Security of India, 01 September 2013 4. Kalyan Parbat, “BSNL to roll out Rs 4,771 Crore cable network for defence”, Economic Times, 20 November 2013 14 | Eye on Defence
  • 15. Way forward for MSMEs in A&D As per the 4th Census of MSME sector, this sector employs an estimated 59.7 million persons across more than 26.1 million enterprises. Of these, only 1.5 million enterprises are in the registered segment, while the remaining 24.5 million (94%) are unregistered. In terms of their distribution across Indian states, more than 55% of all MSMEs in India are located in just six states: Uttar Pradesh, Maharashtra, Tamil Nadu, West Bengal, Andhra Pradesh and Karnataka. In terms of economic value, the MSME sector accounts for about 45% of the manufacturing output and around 40% of the total export of the country. Apart from forming the bulwark of industrial units in the country (as high as 90%), MSMEs play a pivotal role in the economic growth of India. It makes its contribution through high labor intensity and high potential of employment at lower capital costs, and export and growth enhancement. It also serves the national objectives of socio economic inclusion by engaging in industrializing rural and backward areas, reducing regional imbalances and assuring more equitable distribution of national income and wealth. The MSME sector has a larger role to play in the post downturn market, as most of the industries look to achieving breakthrough innovation rather than economies of scale to drive down costs, achieve growth and stay ahead in the market place. MSMEs, with their agility, innovativeness and flexibility, are best placed to take advantage of this changing scenario. MSME revenue 80 INR Trillion India’s MSME base Fig A. Growth in numbers and revenue of MSMEs 60 40 20 0 69.2 24.9 2006-07 45 2011-12 2014-15 44.7 48.5 2011-12 2014-15 Number of MSMEs 60 Millions This article comes in the backdrop of the MSME DEFEXPO 2013 in Bangalore on the 14th of December. Participants were absolutely riveted about opportunities in the Aerospace and Defence sector; however, most of them could not decide on a preferred route of entry. We have, in this article, tried to present a broad-level and simplified view of the various avenues available to MSMEs for participation in the A&D industry. 40 20 0 36.7 2006-07 Source: Annual Report of the MSME ministry and EY analysis. Numbers for 2011-12 and 2014-15 are projections MSMEs in Aerospace and Defence More than 6,000 MSMEs operate in the A&D domain in India, supplying 20%–25% components to DPSUs, the DRDO, the OFB and the Armed Forces. These MSMEs came into existence on account of outsourcing of production by DPSUs and OFs. Ever since the defence sector in India was opened to private sector participation (in 2001), they have stepped up their role by way of offset related business, supply orders from foreign OEMs and, in some cases, direct participation in MoD contracts. Promising trends in this space include DPSUs restricting their role to that of an integrator, thereby allowing larger work share for MSMEs in the Tier 2 and 3 space; and OEMs spreading well differentiated Tier 1 and 2 supplier bases toward low-cost centers and increasing offset business on account of increased capital acquisition. It seems likely that MSMEs in A&D will replication the transformation in the automotive industry in India. Eye on Defence | 15
  • 16. PSUs/Govt Agencies (INR billion) SSI Sector (INR billion) Non SSI Sector (INR billion) Total (INR billion) Annual Turnover (INR billion) Total % Outsourced % outsourced to SSI 2008-09 15.66 20.82 37.26 73.75 276.33 27% 8% 2009-10 16.00 25.71 40.88 82.59 346.15 24% 7% 2010-11 28.69 19.37 50.09 98.15 386.22 25% 5% Year According to the Working Group on Defence Equipment of the Planning Commission Incentives for MSMEs — regulatory and fiscal The Indian Government has announced a number of incentives for MSMEs. In this section, we will revisit some of the initiatives that are relevant for MSMEs in A&D. This list is merely indicative (please refer a more comprehensive review to identify schemes relevant to your business). MSMED Act of 2006 and the Public Procurement Policy: The Micro, Small and Medium Enterprises Development Act was notified in 2006 to address policy issues, facilitate development and enhance the competitiveness of the MSME sector. Fig B. Offsets - sector-wise break up MSMEs 27% OFB and DPSUs 40% Large Private Industry 33% Source: EY analysis The Public Procurement Policy (effective 1 April 2015) seeks a mandatory 20% share for MSMEs in all government and public sector unit purchases over a period of three years. This move is expected to increase their market access and competitiveness. 16 | Eye on Defence Defence Procurement Procedures: The DPP was introduced to streamline and lay out a process of defence equipment acquisition in India. It has undergone six progressive revisions since its release in 2005. The latest version, applicable to projects announced on or after1 June 2013, clearly states preference for indigenous manufacture of defence equipment. This move is expected to enhance opportunities for Indian companies and subsequent JVs and technology partnerships between Indian and foreign companies. Offset Policy: Provisions to this effect were added to the DPP in 2005 and came into effect on 1 July 2005. Accordingly, the MoD was authorized to recommend the inclusion of an offset clause amounting to 30% of the indicative cost in the request for proposals in cases where the indicative cost was INR3 billion (equivalent to about US$60 million) or more in Buy Global or Buy and Make Global cases. The offset policy of DPP 2013 has introduced a multiplier of 1.5 if the Indian partner chosen to discharge the offset obligation is an MSME. This implies that if products worth USD 100 are procured from an MSME, the OEM will get offset credits worth USD 150 Defence Production Policy: The policy was put in place to achieve self-reliance in the design, development and production of equipment required for defence through private sector participation, especially MSMEs. Toward this end, a separate fund was envisaged to provide the necessary resources to MSMEs for enabling them to productionize niche technologies and sustain themselves, while adding significantly toward the defence base of the nation. This was reiterated in the Kelkar Committee Report in 2004. National Manufacturing Competitiveness Programme: It is the flagship program of the Government of India to develop global competitiveness among Indian MSMEs. The NMCP comprises 10 components to enhance the entire value chain of the MSME sector. It includes programs such as the establishment of new tool rooms, benchmarking of global competitors, enhancing of product and process quality, and
  • 17. cost reduction through lean manufacturing techniques. The program will be implemented through the public-private partnership model, along with the close physical and financial participation of the MSME sector. Point Registration Scheme (SPRS). To get registered, a micro and small enterprise has to submit an application form (in duplicate), along with requisite fee and documents, to the nearest zonal/branch and sub office/extension NSIC office. MSME Development officer: MSME-DO is playing a constructive role by rendering comprehensive services, including consultancy, through the institutional set up of its field organizations spread over different parts of the country. Through its network of offices and organizations, it provides services such as testing, certifications, tooling, training and technology development to MSMEs. A duplicate copy of the G.P. registration application form submitted by the enterprise will be forwarded to the concerned MSME-DI RITES/CDC, along with copies of the required documents and a requisite draft/pay order of inspection charges in favor of the concerned inspection agency requesting for carrying out the technical inspection of the micro and small enterprise. The MSME-DI RITES/CDC then forwards its recommendations in this regard. Credit Guarantee Fund Scheme: It was introduced in August 2000 for offering credit to MSEs, particularly micro enterprises, on loans of up to INR10 million without collateral/ third-party guarantees. The scheme is being operated by the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE), which was set up jointly by the Government of India and SIDBI. NSIC Cell: National Small Industries Corporation Ltd. (NSIC) is an ISO 9001-2008 certified Government of India enterprise under the Ministry of MSME. NSIC has been working to fulfil its mission of promoting, aiding and fostering the growth of small industries and industry-related micro, small and medium enterprises in the country. Toward this end, it provides services ranging from bank credit facilitation to market intelligence to registered companies. NSIC identifies financially and technically competent SSI units and enlists them for participation in the government stores purchase program. NSIC participates in bulk tender enquires of Central and state government and PSUs on behalf of small enterprises. On the receipt of orders, NSIC distributes them on the behalf of the quoting party. All of the industries that are registered with the Director of Industries (DI)/District Industries Centre (DIC) as manufacturing/service enterprises or having Acknowledgement of Entrepreneurs Memorandum (EM Part-II) are eligible for registration with NSIC under its Single After receiving the MSME-DI Inspection Report, NSIC will issue the GP Registration Certificate to the micro and small enterprise for items/stores, as recommended. To become an Indian offset partner and avail the multiplier benefit for MSMEs provided by the DPP 2013, the MSME must have and IEM II form filed with the district industries center. This document is sought by OEMs to prove that a unit is an MSME. Way forward for MSMEs in the A&D sector India has entered one of its most intensive and sustained defence equipment procurement cycles. The order books of DPSUs are overflowing with orders, and foreign OEMs are seeking opportunities to discharge offset obligations. This indicates that this is the right time for the private sector, in general, and the MSME sector, in particular, to explore this market. MSMEs are repositories of knowledge and innovation. They are nimble in developing and assimilating niche technologies, thus creating intellectual property through breakthrough R&D. Coupled with the regulatory support extended by the government, they are in a position to drive the much-needed indigenization in A&D. MSMEs can opt to enter the A&D space via several routes, as follows: Eye on Defence | 17
  • 18. DPSUs, OFB, DRDO and other government establishments What: Public sector companies possess huge infrastructure and manufacturing facilities; experience in systems integration with imported technology; trained engineering and manufacturing manpower; and access to defence research facilities, coupled with strong financial backing by the MoD. Also, they enjoy facilities in domains such as taxations, ERV and sometimes prioritization in tenders, making them the preferred choice of global manufacturers. Given their standing, MSMEs could contemplate becoming suppliers to these public sector units for various subcontracting and shared research opportunities, and specializing in some of the segments. This will help them attain marketing support and develop understanding of the market while they build capacity to take on larger, more technologically significant high-margin orders. Why: Significant opportunities that exist within the various departments and agencies of the MoD are listed in the table below. Revenue procurement The total budget of the MoD is divided into capital (45%) and revenue (55%) spend. About 40% of the revenue budget is spent on procuring items such as spares and MRO services for existing weapon systems through the various base repair depots of the IAF, workshops of the Army and naval dockyard of the Navy. These pose as niche opportunities for MSMEs, especially after the MoD has allowed the participation of private companies in MRO activities through DPP 2013. Supplier to DPSUs The execution period for the order books of some DPSUs is as high as 18 years. Given the everincreasing order books owing to nominated projects, sub-contracting and outsourcing are set to grow. The projects include development plans such as LCA, Project 75-I, Towed howitzer, missile programs, and multi role helicopters and licensed production such as T 72,90 tanks. JV with DPSUs The government has recently issued guidelines for the formations of JVs. DPSUs are now open to collaboration with private sector companies. To meet the challenge of expanding capacity, as well as ensure timely delivery, DPSUs will need to harness the potential of the MSME sector and create capabilities and capacities to outsource production, and processes and research to the latter. They may even partner for specific offset projects. DRDO The DRDO has openly expressed its desire to work more closely with MSMEs to drive innovation in its 50 odd labs across the country. The Directorate of Industry Interface and Technology Management (DIITM) within DRDO intends to partner with MSMEs for technology partnerships, prototype development, funding developing technologies, productionizing the technologies and other innovative models of association. Modernization of DPSUs and OFs To keep pace with the quantitative and qualitative requirements of the services sector and of other users, the government has initiated the modernization of DPSUs and OFB through various greenfield and brownfield projects, as well as through new capital, and renewal and replacement of obsolete plant and machinery. Investment of more than INR20 billion is expected during 2012-13 on this ambitious project. How: DPSUs and OFs have, as a policy, been outsourcing many of their requirements and have developed a wide vendor base, which includes a large number of mid- and small-scale enterprises, apart from large-scale industries. Percentage growth in vendor base is expected to increase by 6% until 2015–16. DPSUs, along with OFs, outsource 24%–27% of their orders to small- and mid-sized enterprises (SMEs). Requirements and tender documents are available at their respective websites, in government tenders under respective heads. DPSUs’ websites give reference to the purchase manual and sub-contracting registrations of vendors and sub-contractors. The Defence Procurement Manual, 2009 (DPM 2009), which covers all revenue procurement and procedures for the registration of firms, follows the Joint Services Guide: 015:13:03:2007 (JSG-015). This guide provides the methodology of assessment and registration of vendors, as well as their performance appraisal on technical and financial aspects and classification. Interested 18 | Eye on Defence
  • 19. firms can download “Supplier Registration Form” and submit it duly filled. Along with this, they are required to enclose their company profile/catalog and details of similar jobs undertaken, and of staff and operatives, annual reports, CVs of key officers, list of customers and other relevant information to prove their competence. Vendors registered with one department of the MoD can be considered for procurement by other departments. Despite a common format, procurement agencies such as DGOF, DPSU, DRDO and DGOS follow their own vendor registration process, with no common database. Offsets provide an unprecedented opportunity for Indian MSMEs to participate in the A&D industry and ultimately get inducted into the global supply chains of OEMs. To become an IOP, the Indian partner needs to be: • Involved in eligible products/services (Annexure VI to appendix D-DPP 2013) • Owned and controlled by Indian promoters • Carrying out manufacture/provision of services from within the territory of India Production/Procurement organization Estimated vendors Nature of procurement Remarks Director General Ordnance Factories 2000 Input material/component/ subsystems • No authentic single-source database is available Defence Public Sector Undertaking 1800 Input material/components/ sub-assemblies • DGQA/Service Headquarters procurement of parts /sub systems by Material Organization 2500 Spare parts/replacement items Some MSMEs are registered with more than one agencies, even within the organization • Almost 95% of the vendors are MSMEs DRDO 400 Sub systems development Source: Enhancing Role of SME’s in Indian Defence Industry, Ernst and Young, 2009 Offset route to success in A&D • Since the introduction of the offset clause (in the revised DPP announced on 1 July 2005), the MoD has concluded 16 offset contracts worth US$4.3 billion with various vendors, according to section 2.1 “Management of Defence Offsets” of the Report No 17 of the Comptroller and Auditor General 2012-13. If the current pace of modernization continues, offset business worth US$24 billion may be expected to flow into the sectors of defence, civil aerospace and internal security in the next decade. Fig C. Value of offset contracts in USD million per year Compliant with the extant regulations of the GoI (including the FDI policy) • Hold an industrial license for the MANUFACTURE of defence goods (as appearing in the newly announced defence items list on the Department of Industrial Policy and Promotion website) A healthy financial position, a good track record of timely supplies, project execution and the ability to absorb technology will undoubtedly increase favor for the company. OEMs also insist that the IOP have the requisite certifications including AS 9100C and ISO 14001. 1684 768 1010 2007 386 207 54 2008 2009 2010 2011 2012 Source: Defence Offsets - An opportunity in the making by KPMG Eye on Defence | 19
  • 20. OEMs are very particular about certifications and processes to be put in place with regard to suppliers. Other entry options • Indian private integrators • Globally, OEMs and Tier 1’s use a rating scale; some of them may have minor modifications such as Gold Tier and Silver Tier. To get a “PREFERED” Supplier status usually takes 2-3 years and includes a thorough technical and financial audit, among other qualification criteria. Once qualified, the OEMs support its suppliers in developing world-class facilities, best practices, processes; attaining certifications and credit lines, and building an upstream supply chain. This process then makes the suppliers attractive to other OEMs, which become willing to enter long-term contracts with the supplier in the high-margin A&D domain. After the successful execution of the offset program in terms of time and cost, the IOP may become the global preferred supplier to OEMs that are looking at offsets as an opportunity to build a supplier base in low-cost economies. The participation of private sector players is on the rise since the government liberated the A&D sector. These players have developed capabilities and have invested in infrastructure to combine the best managerial acumen with project management experience. MSMEs must see larger private companies as partners in their development and growth. Various avenues of participation may include engaging in joint bidding, consortia, production, and marketing and business development, particularly for government procurement programs. Successful examples include Pinaka Rockets and Samyukta Electronic Warfare Systems. MSMEs have a vibrant culture of innovation. They could help large private companies develop and productionize niche technologies. Alternatively, they could participate in supplier development programs, where SMEs are coached and mentored in key areas such as design and production engineering. Supplier Status Status Category Rating Certified Incentives Purchase orders Approved Preferred >98% Yes Yes Yes Probationary/ Entry <95% or less than minimum number of orders yet to be placed or 1 Qtr. Data only No No No Conditional <95% for 2or 3 Qtrs. No No Yes / No Dis Approved Unacceptable performance No No No Dis Approved 20 | Eye on Defence
  • 21. Development/Participation in clusters A cluster consists of groups of associated and interconnected firms that are linked vertically and/ or horizontally through the similarity of their products, services, input, technologies, transportation, warehouses and communication. These similarities result in interrelationships and trust, which build collective efficiency. A&D MSMEs could benefit from such an arrangement. Furthermore, clusters facilitate technology and personnel sharing and create opportunities for enhanced efficiency in organizations. They also provide joint business development opportunities, as well as better access to market information and capital. Common facilities for design, testing and simulation may be established in SME clusters, as required, on a pay-per-use model. Cases in point are the Pune Auto cluster and Bangalore Technology cluster. The Faridabad industry belt could provide a model to that effect. Aerospace parks/SEZs are coming up, especially in Karnataka, Tamil Nadu and Andhra Pradesh. Joining hands with MSMEs outside the nation MSMEs from other parts of the world (especially UK and US) are increasingly expressing interest to collaborate with Indian companies on Indian programs and create pockets of research, production and training excellence in the Southeast Asia region. They are often wary of tying up with larger companies due to fears of divergent capabilities and priorities. Collaborating with these foreign companies through research and production programs could result in mutually beneficial ventures. The trade associations of various countries organize regular business delegation visits for MSME representatives of their countries to look for mutually profitable partnerships. Associating with these companies for co-production, knowledge sharing and capability building could help Indian MSMEs understand global best practices, get access to new markets and opportunities, and develop technological leadership in the industry. This may even help Indian companies establish direct supplier relationships with foreign Tier 1 manufacturers and OEMs. References: 1. Ministry of Micro Small and Medium Industries 2012-13 annual report 2. Report, Working Group on Defence Equipment, Planning Commission, 2011 3. Website of Ministry of Micro Small and Medium Industries, http://msme.gov.in/, accessed 5 December 2013 4. Enhancing Role of SME’s in Indian Defence Industry, Ernst and Young, 2009 Eye on Defence | 21
  • 22. Request for Information (RFIs) for October–December 2013 Date of issue RFI details Response date Issued by Defence service 5 Dec 2013 Taser (Advance Pistol) for Indian Army 26 Dec 2013 MGO PPO-5 For IA 21 Nov 2013 Total Station as a surveying instrument 20 Dec 2013 Directorate of Hydrography Navy For IN 21 Nov 2013 Hydrographic Single Beam ECHO Sounder 20 Dec 2013 Integrated HeadQuarters, Ministry of Defence(N) 21 Nov 2013 Motion Sensors DOH 20 Dec 2013 Directorate of Hydrography Integrated - MoD Navy For IN 20 Nov 2013 Fire fighting systems/equipment 20 Dec 2013 Directorate General of Ordnance Service For IA 11 Nov 2013 Armoured Recovery Vehicle (ARV) 20 Dec 2013 DG of Eme (Eqpt)-Master General of Ordnance Branch For IA 25 Oct 2013 Mobile Missile Coastal Battery (MMCB) 22 Dec 2013 Directorate of Staff Requirements MOD - Navy For IN 24 Oct 2013 Day and Night Rangefinder Binoculars 12 Dec 2013 Directorate of Staff Requirements MOD - Navy For IN 24 Oct 2013 Electro Optical System with Automatic Infrared Search and Track Facility Having Provision for Remoting Gun Mounts (EOIRST) 12 Dec 2013 Directorate of Staff Requirements MOD - Navy For IN 24 Oct 2013 Helmet Mounted Night Vision Sights (HMNV) 12 Dec 2013 Directorate of Staff Requirements MOD - Navy For IN 24 Oct 2013 Day and Night Rangefinder Binoculars 12 Dec 2013 Directorate of Staff Requirements MOD - Navy For IN 15 Oct 2013 Rappelling Gloves 29 Oct 2013 ADOS( Store) For IA 8 Oct 2013 Driving Simulators 28 Oct 2013 Army Air Defence College, Gopalpur For IA 8 Oct 2013 DRONA Small Arm Simulator (MK-III) 28 Oct 2013 Army Air Defence College, Gopalpur For IA 8 Oct 2013 Differential Global Positioning System (Satellite Based) 31 Oct 2013 Principal Director of Hydrography - Navy For IN 1 Oct 2013 Portable Deep Water Noise Range (PDWNR) 21 Oct 2013 Project-75, IHQ MoD (Navy), For IN 22 | Eye on Defence
  • 23. Request for Proposal (RFPs) for October–December 2013 Date of issue RFP details Response date Issued by Remarks 6 Dec 2013 Bullet proof harness with shoulder pad 23 Jan 2014 HQ South Bengal Frontier For BSF Dec 2013 Prequalification are invited for Design Fabrication, Supply, Installation, Commissioning, Performance Demonstration of System / Plant and Machineries - A required for Capacity Augmentation for Manufacture of Explosive Reactive Armour (ERA) to 500 sets/Annum at site & acceptance trial 4 Jan 2014 OFB, Bhandara For OFB 13 Dec 2013 Air defence weapon station 7 Jan 2014 Combat Vehicles Research & Development Estt. Issued By DRDO 3 Dec 2013 25 Dec 2013 Location of Miss and Hit, Combat Shooting Target System and Improvised explosive device Simulation System Infantry School For IA 25 Nov 2013 Bullet Proof Guard Room 17 Dec 2013 Staff Officer Provost HQ SWAC, IAF For IAF Qty: 13 Nos. 19 Nov 2013 Portable High Intensity Search Light 17 Dec 2013 Col GS (MIS) For IA Qty: 600 Nos. 19 Nov 2013 High Resolution Binocular 9 Dec 2013 HQ Central Command Avn Branch For IA Qty: 172 Nos. 18 Nov 2013 MORTAR Bomb ML 120 MM Smoke With Fuze 10 Feb 2014 MGO PPO For IA Qty: 9605 Nos. 18 Nov 2013 Automatic Gun Alignment & Pointing System 19 Dec 2013 ARDE Issued by DRDO 14 Nov 2013 Electronic Flash Gun 22 Nov 2013 Air Force station Bidar For IAF 13 Nov 2013 Air Brreak Contractor K-915 II-4 Complete 3 Dec 2013 LP Cell For IAF Qty: 10 Nos. 12 Nov 2013 Goggle GS MK-II 10 Dec 2013 Ordnance Factory Dehra Dun For OFB 8 Nov 2013 Spotting Scope with Digital SLR Camera 3 Dec 2013 DG ITBP For ITBT Qty: 03 Nos. 8 Nov 2013 Fuse Link Cartridge Ceramic 20A for Indian Army 18 Nov 2013 Comdt COD Agra For IA Qty: 12 Nos. Eye on Defence | 23
  • 24. Date of issue RFP details Response date Issued by Remarks 7 Nov 2013 Range Operational Communication (ROC) System 2 Jan 2014 ADE Issued By DRDO 7 Nov 2013 Anti G-Suit for MIG Series and SU-30 Aircrews 12 Dec 2013 Directorate of Procurement For IAF 2 Nov 2013 Fuse PV 40A 30V for ICV BMP 12 Nov 2013 Comdt COD Agra For IA Qty: 42 Nos. 1 Nov 2013 Boom boat Barrier with Retractable Antidiver Net and fixed Antidiver net 18 Nov 2013 Base Logistics Officer -Visakhapatnam For IN 31 Oct 2013 Hand held GPS 26 Dec 2013 Aeronautical Development Establishment MoD Issued By DRDO 31 Oct 2013 Advance Surveillance Receiver 25 Nov 2013 GOC-in-C, Northern Command For IA Qty: 33 Nos. 29 Oct 2013 IBs EX-ABG Underwater and Jet Routines(Work Package Yearly, Two Yearly and Three Yearly) 24 Nov 2013 Headquarters Coast Guard Region North West For ICG 23 Oct 2013 Light Weight Jacket 11 Nov 2013 HQ Central command Ord Branch For IA Qty: 516 22 Oct 2013 Propulsion system sensors for Rustom II Aircraft 6 Nov 2013 Aeronautical Development Establishment Issued By DRDO Qty: 01 Nos. 22 Oct 2013 Aircraft Weighing System 6 Nov 2013 Aeronautical Development Establishment Issued By DRDO Qty: 03 Nos. 18 Oct 2013 312A-292 Lug 356 for Aircraft Bombs on NATO aircrafts 11 Nov 2013 Air Force Station Amla, For IAF Qty: 3000 18 Oct 2013 Personal Protective Equipments: Safety Helmets, Respiratory Mask, Gloves Goggle Etc 5 Dec 2013 Naval Materials Research Laboratory Issued By DRDO Qty: 14 Items 14 Oct 2013 Installation Of Rukmani C Band ­ Satcom Terminal On Board Twelve WNC Ships 11 Nov 2013 The Admiral Superintendent For IN 14 Oct 2013 Battery Operated Mobile Platform 8 Nov 2013 --- For IN 12 Oct 2013 CCTV Surveillance system (Turn Key Project) at AF Stn Kanpur 30 Oct 2013 Air Force Station Kanpur For IAF 10 Oct 2013 Snow Mobiles 12 Nov 2013 HQ Northern Command, Engineers Branch For IA Qty: 20 Nos. 9 Oct 2013 Electric Hand Gun, Electric Hand Blower 28 Oct 2013 BEML Limited Qty: 1000 each 9 Oct 2013 VHF and UHF Aerials for GRSE Yard Nos. 2092-99 (LCU Project) 18 Oct 2013 GRSE --- 8 Oct 2013 Propellant NGB-204/0.41x15x 167 for 84 MM CARL GUSTAF Ammn. 29 Nov 2013 Ordnance Factory Khamaria For OFB Qty: 110000 Kg 24 | Eye on Defence
  • 25. List of Industrial Licenses (ILs) filed for September—October 2013 Application no. and date Name of the applicant Item of manufacture 61 31/10/2013 Lotus Aviation Pvt. Ltd. Personal locating beacon, emergency locating transmitter, terrain and obstacle warning system, test equipment 60 21/10/2013 Bharat Forge Ltd. Small arma, weapons & armaments, fuse setting devices specially designed for ammunition, ammunition, military ground vehicles, special naval equipment, etc. 59 18/10/2013 Paramount Communications Ltd. Wire, cables, cable harnesses and components thereof for various applications including naval, aerospace and military end-use 58 18/10/2013 HICAL NSE Electronics Pvt Ltd. Manufacture of parts and accessories for industrial machinery other than for food and textile industries and other products 57 8/10/2013 Pipavav Defence And Offshore Engineering Co. Ltd. Mfg., assembly & testing of radars, radio remote control, apparatus and air, land and naval electronic warfare systems for the Indian armed forces 56 3/10/2013 Samtel Thales Avionics Ltd. Ml5, ml10 & ml 11 55 19/09/2013 Vetrivel Explosives Pvt. Ltd. Class-2 slurry/emulsion explosives, bulk class-2 slurry/emulsion explosives, bulk explosives 54 19/09/2013 Mahindra Telephonics Integrated Systems Ltd. Manufacture, integration, testing, maintenance, repair, overhaul and installation of c4isr systems incl. but not limited to radars, surveillance equipment, intercommunication and electro optical systems for defence platform 53 17/09/2013 Arcotech Limited Brass cups 52 11/09/2013 Mahindra Telephonics Integrated Systems Ltd. Design, development, mfg., integration, testing, maintenance, repair, overhaul and installation of electronic components, subassemblies, assemblies and cable-harness for all types of defence platform Eye on Defence | 25
  • 26. New projects/ investments/contracts Name of entity Project details Value* Ordnance Factory Board (OFB) • ► The MoD has cleared the OFB’s proposal to place an order for 235 T-90 tanks. INR60 billion • ► The tanks will be manufactured with the transfer of technology from Russia. Government of India (GoI) • ► The GoI has approved a contract for the purchase of defence equipment, including night vision devices and rockets, for the Armed Forces. • ► India will purchase 5,000 third-generation night vision and thermal imaging devices for the Russian-origin T-72 and T-90 battle tanks and its BMP Infantry Combat Vehicles (ICVs). • ► India will also purchase 10,000 rockets. • ► India may soon consider fresh acquisitions of the Israeli Barak surface-to-air precision-guided missiles, manufactured by Israel Aircraft Industries (IAI). • ► The Indian Navy has already been using the missiles. • ► will establish an unmanned aerial vehicle (UAV) facility at the Leelabari Airport IAF in Lakhimpur district, Assam. • ► The facility, which will deploy drones, is meant for reconnaissance along the IndoChina border. • ► Israeli firm has been given the contract to construct the facility. An • ► Mahindra Aerospace opened an aero-structure production facility at the Narsapura Industrial Estate near Bangalore. • ► The factory is equipped to produce large, complex sheet-metal components through CNC routing, stretch-forming, bladder press, heat treatment and other specialized paraphernalia. • ► covers 270,000 sq ft, including almost 110,000 sq ft of space for the production It of vital airframe assemblies and subassemblies. • ► The plant can generate up to US$40 million revenue per year, at its top capacity. • ► BDL opened a unit in Vishakhapatnam, its first in the city and third in the state (Andhra Pradesh). • ► The unit will initially manufacture lightweight torpedoes and move on to heavyweight torpedoes and related weapon systems such as mines and decoys. • ► German defence company Atlas Elektroniks is close to signing a deal with the Indian Navy for the supply of low-frequency sonar systems for its warships. • ► The Active Towed Away Sonars (ACTAS) are intended to be mounted on six Indian Navy warships. These low-frequency sonars with active and passive operating system would help surface vessels locate enemy submarines, torpedoes and surface ships from a very long range and launch attacks. GoI Indian Air Force (IAF) Mahindra Aerospace Bharat Dynamics Limited (BDL) Atlas Elektroniks 26 | Eye on Defence INR50 billion INR8.8 billion INR2 billion INR1.5 billion INR600 million NA
  • 27. Name of entity Project details Value* Bharat Forge • ► Bharat Forge will offer end-to-end solutions for artillery systems and armored vehicle upgrades for T-72 and T-90 tanks and other artillery systems, including the 155/52 gun. NA • ► The Foreign Investment Promotion Board (FIPB) approved the company’s proposal to form a 74:26 JV with Israeli company Elbit Systems Land and C4I. • ► The GoI handed over Advance Light Helicopter (ALH) Dhruv to Maldives. • ► will be mainly used for search and rescue operations. It • ► The Indian Armed Forces have been assisting in capacity building across the defence sector in Maldives. • ► HAL is developing an indigenous light utility helicopter to ferry troops and supplies in high altitude areas such as Siachen Glacier. • ► The program for developing the 3-ton helicopter is in the “design freeze” stage. • ► The machine is expected to be ready by 2015. • ► The IAF may soon assemble 50 Mi-17 helicopters at its base repair depot (BRD) in Chandigarh as part of its efforts to indigenize spares of the helicopters. • ► has also taken up the job to overhaul SU30 fighter planes. However, it is still at IAF an initial stage, with only 5% to 10% of the job being done at BRD Chandigarh. • ► The Indian Navy is preparing to induct 45 warships and submarines by 2027 on order with both public and private shipyards in India. • ► The Indian Navy has 132 ships, including 14 submarines and 216 aircraft, of which 80 are fixed wing, 122 helicopters and 14 unmanned aerial vehicles. • ► The Indian Navy had made a distinct shift from a buyer’s navy to a builder’s navy and urged the industry to participate wholeheartedly in shipbuilding programs. • ► QuEST Global Manufacturing, in a JV with Saab AB, Sweden, inaugurated its Aerostructure assembly facility at Hattargi in Belgaum, Karnataka. • ► The facility, located in QuEST’s fully operational SEZ, will develop its aerospace business with focus on build-to-print assemblies for emerging market opportunities in India. • ► Premier Explosives has set up facilities at its Peddakandukuru factory in the Nalgonda district of Andhra Pradesh. • ► The company will use the facilities to process raw materials and to store commercial explosives. GoI Hindustan Aeronautics Limited (HAL) IAF Indian Navy QuEST Global Manufacturing Premier Explosives NA NA NA NA NA NA **The values of the deals have been converted to Indian Rupees using Oanda currency conversion tool 1US$ = INR62 Eye on Defence | 27
  • 28. Sources: 1. Mahindra Aerospace inaugurated new manufacturing plant close to Bangalore, Mena Report, 31 October 2013, via Factiva, © Al Bawaba 2. “India to buy 6 more C-130J ‘Super Hercules’ aircraft from US for over Rs 4,000 crore”, Deccan Chronicle, 14 September 2013, via Factiva 3. Bharat Dynamics opens unit at Visakhapatnam, Business Line (The Hindu), 31 October 2013, via Factiva. 4. “Global Manufacturing Aerostructure assembly facility at Hattargi in Belgaum Aerostructures Assemblies India (AAI)”, Projects Today, 14 October 2013, via Factiva, © Economic Research India Pvt. Ltd. 5. “German firm set to supply sonar systems for Indian Navy”, Samay Live, 13 October 2013, via Factiva. 6. “Premier launches new facilities”, Business Line, Dec 16, 2013, via Factiva. 7. “India hands over Dhruv to Maldives”, Deccan Chronicle,15 December 2013, via Factiva. 8. “Bharat Forge offers local solution to Army’s needs”, Financial Express, 10 December 2013, via Factiva. 9. “India lines up Night-Vision purchase”, Jay Menon, Aerospace Daily & Defence Report, 4 December 2013, via Factiva, © McGraw-Hill, Inc. 10. Navy readies to induct 45 new warships, submarines”, Financial Express, 4 December 2013, via Factiva, © Indian Express Online Media Pvt. Ltd. 11. “HAL developing light choppers for high-altitude operations,” Press Trust of India, 14 November 2013, via Factiva. 12. “IAF to assemble 50 more Mi17 choppers,” The Times of India, 2 November 2013, via Factiva. 13. “IAF to set up UAV facility at Leelabari Airport,” Assam Tribune, 12 November 2013, via Factiva. 14. “India may consider fresh acquisitions of Baraks,” The Asian Age, 12 November 2013, via Factiva © 2013 Deccan Chronicle Holdings Ltd.) 28 | Eye on Defence
  • 29. JVs and alliances Name of the entities Nature of transaction Value* Reliance Industries Limited (RIL) and Dassault • ► and Dassault are planning to set up a facility in Bangalore. RIL • ► The facility will produce wings for the Rafale combat aircraft. Bharat Electronics Limited (BEL) and Pilatus • ► BAE will manufacture electrical harnesses for the global supplies of Swiss company Pilatus Aircraft Ltd. • ► The two companies will set up a manufacturing facility at BEL’s Bangalore complex. The arrangement is part of the offset commitment of Pilatus, which is supplying 75 basic trainer aircraft to the Indian Air Force for around INR 38 billion. • ► The two companies will also review potential offset project opportunities in the near future. • ► HAL signed an MoU with TII for the adoption of an Integrity Pact (IP), a tool developed to ensure that all activities and transactions between companies or government departments and their suppliers are handled in a fair and transparent manner. • ► HAL has already signed this this pact with 115 vendors (85 foreign and 30 Indian). • ► will support HAL by providing advice and resources to implement the IP program. TII HAL is the first defence PSU to sign such an MoU with TII. HAL and Transparency International India (TII) INR10 billion Indian Space • Research Organization (ISRO) and National • Aeronautics and Space Administration (NASA) ► ISRO and NASA are in talks to jointly develop a dual frequency radar satellite. ISRO has already conducted preliminary talks with NASA’s space communication and navigation program office for the project. • ► Mahindra Aerospace signed a technology partnership with the Aernnova Group, a leading aero structures Tier 1 supplier headquartered in Spain with global facilities. • ► Japan’s ShinMaywa Industries Ltd is seeking an Indian partner, mainly for the maintenance, repair and overhaul (MRO) of the ShinMaywa US-2 amphibious aircraft. The company will offer the amphibious aircraft to the Indian Navy. • NA ► The company, however, does not want to partner with HAL, as the public sector aerospace company is excessively large-sized and complicated for ShinMaywa. • NA ► Aernnova and Mahindra Aerospace will work together to develop capabilities and meet small aircraft market demand for mutual benefit. This is Aernnova’s first technology partnership with an Indian aero structure manufacturer. • NA ► The company currently has limited presence in the Indian civil aviation market and hopes to forge a strategic alliance with India in the larger context of the expanding Indo-Japan relations. Mahindra Aerospace and Aernnova ShinMaywa Industries Ltd ► The project is expected to be completed by 2020. NA NA Eye on Defence | 29
  • 30. Tata Group and AgustaWestland • ► FIPB approved a JV between Tata group and AgustaWestland to carry out integration and flight testing of eight-seat AW119 helicopters. • NA ► The JV, called the Indian Rotorcraft, will be a supplier to the Indian Defence Forces’ Reconnaissance and Surveillance Helicopter (RSH) program. Sources: 1. “HAL signs MoU with Transparency International India”, Vayu Aerospace & Defence Review, 30 October 2013, via Factiva. 2. “EADS, IISc ally for aerospace research”, Deccan Herald, 25 October 2013, via Factiva, © The Printers (Mysore) Private Ltd. 3. “BEL to make aircraft harnesses for Pilatus”, The Hindu, 22 October 2013, via Factiva, © Kasturi & Sons Ltd 4. “Mahindra ties up with Aernnova to make small planes in India”, Domain-B, 22 October 2013, via Factiva, ©The Information Company Pvt. Ltd. 5. “RIL, Dassault plan to setup Rs 1000 crore warplane facility”, Financial Express, 11 December 2013, via Factiva. 6. “India JV may open way back for AgustaWestland,” Flight International, 12 November 2013, via Factiva, © Reed Business Information Limited. 7. “Isro, Nasa in talks to develop radar satellite,” The Times of India, 11 November 2013, via Factiva. 8. “Japanese firm looks for tie-up outside HAL”, S. Anandan, The Hindu, 25 September 2013, via Factiva, © Kasturi & Sons Ltd.) 30 | Eye on Defence
  • 31. Country-level deals and initiatives Country Nature of transaction Additional details China • ► China and India are working to forge a Border Defence Cooperation Agreement (BDCA). Both sides have exchanged drafts of what they opine should form part of the new agreement. • India is concerned with China’s rapid expansion ► of forces in the Line of Actual Control (LAC) during the past decade, with as many as 27 airfields in Tibet and Xinjiang. • ► The GoI has conveyed to China that it will not be possible to freeze the infrastructure construction and forces at existing levels along the 4,057-km-long LAC. • The GoI has recently undertaken to build a ► network of border roads, upgrade advanced landing grounds, raise a Mountain Strike Corps and base Sukhoi Su-30MKIs in the north-east. • ► India and France signed 11 MOUs in the field of science and technology at the IndiaFrance Technology Summit, organized by the Department of Science and Technology, Confederation of Indian Industry (CII) and French Embassy. • The agreements include an MOU between the ► Department of Science and Technology and Institut National de Recherche en Informatique et en Automatique (INRIA) for a joint targeted program in information and communication science and technology. • An ► MOU was also signed between the Department of Biotechnology (DBT) and CNRS for establishing an international associated laboratory in the area of systems immunology and genetics of infectious diseases, LIA SIGID. France Kyrgyzstan • ► The Defence Minister of Kyrgyzstan visited India • from 11 to 15 September 2013. • ► official meeting was held between the An Defence Minister of India and the Defence Minister of Kyrgyzstan. Both the sides reaffirmed their desire to further ► enhance bilateral defence cooperation in areas of interest such as training and UN peace keeping. • Both sides also agreed to take steps to enhance ► cooperation between the armed forces of the two countries. • Oman Russia ► The ministers discussed a range of issues of mutual interest concerning bilateral defence cooperation and security issues. • ► Indian naval ships INS Mysore, INS Tarkash, INS Tabar and INS Aditya are on a month-long overseas deployment to the Gulf to reinforce bilateral ties and participate in naval exercises with friendly regional navies. • The visit is aimed at bolstering ties with Oman ► and reinforcing cooperation in maritime security between India and Oman. • The visiting ships form part of the Indian ► Navy’s Western Fleet under the Western Naval Command and are based in Mumbai. • ► Russia and India are looking to the possible production of Russia’s Superjet 100 regional airliner and a future Irkut MS-21 jetliner in India. • • ► The two countries have also agreed on a collaboration to jointly develop and manufacture civilian aircraft and helicopters. Under the agreement for civilian aircraft, a ► JV company will be established in India for manufacturing and modifying Ka-226T light helicopters for medical, rescue and other purposes. • According to India’s calculations, the cost of ► a plane built on the territory of India can be reduced by 40%. • The Russian Government has also offered to ► establish a manufacturing facility in India for the joint production of defence hardware. Eye on Defence | 31
  • 32. Spain ► Spain is close to signing a deal with Indian Navy for shipbuilding. • The US • ► Navantia, a company owned by the Government of Spain, will build ships and submarines in • India after the transfer of technology. • ► Deputy Defence Secretary proposed ways to US deepen defence ties between the US and India, including co-development of the next version of the Javelin anti-tank missile now built by Raytheon Co and Lockheed Martin Corp. • • Navantia has an MoU with India’s Larsen & ► Toubro (L&T), which is already working with the Indian Navy in heavy engineering. Navantia and L&T are working jointly on ► building four landing platform docks for amphibious military operations and disaster relief for the Indian Navy. Rather than simply buying this generation of ► Javelin, India would co-develop and co-produce the next generation of Javelin for international buyers. Sources: 1. “India and Kyrgyzstan to Increase Defence Co-Operation”, PIB- GoI website, pib.nic.in/newsite/AdvSearch.aspx, accessed 5 December 2013) 2. “India, France sign 11 MOUs for promoting technology”, Dion News Service, 24 October 2013, via Factiva. 3. “Border Defence Co-operation Agreement with China”, Vayu Aerospace & Defence Review, 30 October 2013 4. “Russia eyes production of commercial aircraft in India”, Press Trust of India, 4 October 2013, via Factiva 5. “India, Russia agree on joint aircraft production”, Aerospace Daily & Defence Report, 1 October 2013, via Factiva, © McGraw-Hill, Inc. 6. “Spain offers India advanced ship building technology,” Indo-Asian News Service, 30 November 2013, via Factiva © Indo-Asian News Service. 7. Source: “Indian naval fleet set to boost security ties”, Times News Service, 21 September 2013, via Factiva 32 | Eye on Defence
  • 33. Industry buzz IAF to build its own trainer aircraft The IAF is all set to independently manufacture its first aircraft. The task has been entrusted to 11 Base Repair Depot (BRD) of the Head Quarters Maintenance Command (MC) in Nashik. The aircraft manufactured by the IAF will be a trainer one. The project is expected to be operational by 2015–16. (Source: IAF to build its own trainer aircraft, Press Trust of India, 7 October 2013, via Factiva.) India’s indigenous LCA Tejas to join IAF India’s indigenous light combat aircraft (LCA) Tejas was granted initial operational clearance (IOC) to join the air force. The LCA project was first approved in 1983 at a cost of INR 5.6 billion to replace the aging MiG-21. The IOC signifies that the fighter is fully airworthy in varying climatic conditions, ranging from extremely low temperatures of high-altitude areas to the searing heat of deserts. The Tejas Mark-I fighter, however, will be ready to go to battle only in 2015, once it gets the final operational clearance (FOC), after the integration of all weapons and other systems, to ensure that it can fire 23mm guns, rockets and beyond visual range (BVR), missiles as well as undergo air-to-air refueling. As of now, the Tejas can let loose only close-range R-73 air-to-air missiles and air-to-ground laser and unguided bombs. (Source: “Made in India Tejas to join IAF”, Deccan Chronicle, 20 December 2013, via Factiva.) India to bolster UAV fleet for border surveillance India plans to invest over US$2 billion in the next five years to strengthen its UAV fleet and make its border surveillance, intelligence and communications capabilities sharper. The Indian Army invited bids in October to purchase 49 UAVs for real-time intelligence and surveillance to detect human or vehicular movement, target recognition and identification, and electronic intelligence and communication intelligence. The bids have been invited from private Indian companies Tata Advance Systems, Hi-tech Robotics, Idea Forge, Dynamatrics, Ufcon, Omnipresent Technologies, Datapattern and government-owned Bharat Electronics. (Source: “India to bolster UAV fleet for border surveillance”, Vivek Raghuvanshi, Defence News, 28 October 2013, via Factiva © Army Times Publishing) Navy may extend service life of six submarines The GoI is examining a Navy proposal to extend the service life of six Russian-built Kilo-class submarines. In the late 1990s, India approved a 30-year plan to build 24 diesel-electric submarines to augment its submarine fleet strength. However, there is a three-year delay in the delivery of the first of the six submarines from Scorpene that are under construction at the Mumbai-based Mazagon Docks. Furthermore, there is a two-year delay in the government’s processing of a tender for the second line of six submarines. The life extension will plug the gaps of reduction in the Navy’s conventional submarine fleet. (Source: “Navy may extend service life of six submarines, Says Antony”, New Indian Express, 9 December 2013, via Factiva.) Indian Navy inducts advanced jet trainer Hawk 132 The Indian Navy has inducted the fourth-generation advanced jet trainer aircraft, Hawk 132. The aircraft was built by HAL with the transfer of technology from the UK. Hawk 132 is equipped with advanced and reliable navigation systems and has the capability to deploy an impressive array of weaponry, including air-to-air missiles, air-to-ground rockets, bombs and guns. It can also carry two extra fuel tanks under the wing, which give it the capability to travel additional distance. Hawk 132 is a competent aircraft being used by 24 nations around the world. (Source: “Indian Navy inducts advanced jet trainer ‘Hawk 132’,” Press Trust of India, 6 November 2013, via Factiva) Indian Mars orbiter out of Earth’s influence The Indian Orbiter to Mars zoomed out of the Earth’s sphere of influence while cruising in the Sun orbit on its 10-month long voyage to the red planet. The Earth’s sphere of influence extends up to 925,000 km in the interplanetary space. Scientists at the Indian telemetry, tracking and command network (Istrac) and the Indian Deep Space Network are monitoring the spacecraft’s movement in the sun-synchronous orbit and checking its subsystems. When the spacecraft is closest to Mars, it will be captured into the Martian orbit through slowing its speed. India is the first Asian country and fourth nation in the world to leap into the interplanetary space with its Rs.450-crore exploratory mission to Mars, about 400 million km from Earth. (Source: “Indian Mars orbiter out of earth’s influence”, Indo-Asian News Service, 4 December 2013, via Factiva.) Eye on Defence | 33
  • 34. India successfully launches Agni 5 missile Agni 5, India’s long-range inter-continental ballistic missile (ICBM), was successfully launched on 15 September 2013 from DRDO’s Launch Complex at Wheeler’s Island. Various ships with radars and electro-optical systems, stationed at mid-range and at the target point, tracked the ICBM in real time. The Agni 5 is powered by three stage-solid rocket motors. It is designed to deliver nuclear warhead with high precision. India’s defence exports rise in October 2013 (Source: “Latest launch of Agni 5 ICBM”, Vayu Aerospace & Defence Review, 30 October 2013, via Factiva) Despite the global slowdown, India was able to manage decent exports in October due to the diversification of its export markets. The exports of spacecraft, aircraft, ships and boats from India rose to US$831 million in October 2013 from US$ 130 million in October 2012. A countrywise analysis reveals that India’s defence exports to the US fell by 11% in October 2013 on a y-o-y basis, while exports to the UAE, Italy and Saudi Arabia rose by 32%, 15% and 10%, respectively. India tests N-capable missile (Source: “Aerospace exports flying high,” Deccan Chronicle, 23 November 2013, via Factiva, © Deccan Chronicle Holdings Ltd.) India successfully test fired its nuclear-capable surfaceto-surface missile, Prithvi-II, for the third time within the last two months. The indigenously developed ballistic missile, with a maximum range of 350 km, was fired from the integrated test range at Chandipur-on-sea in Balasore district, about 230 km from Bhubaneswar. The test was carried out by the Strategic Forces Command (SFC) as part of a regular training exercise. (Source: “India tests N-capable missile”, The Financial Daily, 5 December 2013, via Factiva.) India unveils shorter-range Pragati missile India will replace its tactical ballistic missile Prithvi-1 with a shorter-range missile, the Pragati. Unlike the Prithvi-I, which is propelled by a liquid fuel, Pragati is a solid-fuel missile with a shorter range of 70–170 kms. The Army had been demanding a solid-fueled missile in place of the Prithvi-I missile since its induction in 1994. The Army claims that the Prithvi-I was cumbersome to move, maintain and deploy. (Source: “India Unveils Shorter-Range Pragati,” Defence News, 11 November 2013, via Factiva © 2013 Army Times Publishing) Government wants to end PSU’s monopoly in defence contracts The GoI is opening up bidding for defence contracts to private players to to end the monopolies of PSUs. Public sector players have traditionally had privileged access to government contracts, especially in the field of defence manufacturing. The IAF supports the move and believes that the Indian private sector has the capability to design and develop air combat platforms. (Source: “Breaking PSUs’ monopoly: Defence system eyes private cos,” MoneyControl, 22 November 2013, via Factiva.) AgustaWestland faces termination for breach of deal The GoI is set to cancel its INR 35.46-billion VVIP helicopters contract with AgustaWestland. The company had violated the contractual provisions and the integrity pact in the deal to supply 12 AW-101 choppers to the IAF. The MoD issued the final show cause notice to AgustaWestland on 21 October 2013. The final cancellation process was initiated after the MoD received the opinions of the Law Ministry and the Attorney General that there was a clear violation of the integrity pact and the contractual obligations by AgustaWestland. (Source: Agusta faces termination as AK claims breach of deal, The Times of India, 31 October 2013, via Factiva, © Bennett, Coleman & Co., Ltd.) 34 | Eye on Defence
  • 35. Sikorsky targets helicopter production in India Tata venture makes first indigenized chopper cabin Sikorsky Aircraft Corp., a unit of United Technologies Corp., plans to bid for US$14-15 billion worth military helicopter contracts in India over the next 10 to 15 years. Sikorsky believes that its existing production facility with India’s Tata Group in Southern India to make cabins for a civilian transportation helicopter could easily be retooled to produce military helicopters such as the Black Hawk. The JV of Tata Advanced Systems Ltd (TASL) and Sikorsky Aircraft Corporation has produced an indigenized cabin for the S-92 helicopter. The venture formally handed over the cabin to Sikorsky at a function held at its facility in Adibhatla near Hyderabad. The Adibhatla facility has so far produced 50 cabins after rolling out the first cabin with imported parts in 2011. Sikorsky and TASL had entered an agreement in 2009 for the production of S-92 helicopters for civilian use in India. (Source: “Sikorsky Targets Helicopters for India,” The Wall Street Journal Asia, 1 November 2013, via Factiva © 2013 Dow Jones & Company, Inc) (Source: “Tata venture makes first indigenised chopper cabin “, Business Line, 25 October 2013, via Factiva, © Informatics (India) Ltd. ) Eye on Defence | 35
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  • 37. Services offering – Tax & Regulatory Importance Services Offering Support at every stage Contracting Process 1 Pre bid stage 2 Contract negotiation stage 3 Post contract signing support 4 Other Compliance and Advisory ► Review the clauses of RFP in order to highlight the clauses/terms from a tax & regulatory perspective. ► Suggest alternative approaches where necessary ► Advising on tax issues Association of Persons ('AOP') exposure under the consortium model and suggesting adequate safeguards. ► Identification of a suitable business model. ► Formulate appropriate tax positions ► Back End advise on tax and regulatory clauses in the bid negotiation with the objective of optimizing the tax & regulatory implications. ► Responding to queries pertaining to any tax or regulatory issues which may arise during the discussion stage ► Assistance in set up of the agreed upon business model. ► Advise on subcontracting/ local purchase arrangements from tax and commercial perspective ► Formulate appropriate tax positions ► Plan for advance ruling for upfront certainty/ clarity ► Upfront identification of tax and regulatory implications under the RFP ► Develop certainty with respect to impact and incidence of direct and indirect taxes in India ► Establishment of a tax ► Compliance with ever efficient and regulatory evolving tax and compliant structure in regulatory regime in India India ► Corporate tax and indirect tax compliance ► Accounting services ► Background check (Fraud investigation) on viability of the chosen Indian Offset Partners (IOP’s) ► Foreign Investment Promotion Board (FIPB) & Industrial License (IL) application and clarifications for IOPs Services offering - Defence Offset Support at every stage Contracting process Pre bid stage 1 ► Planning for submission ► Identifying the right partners and methodologies Offset process Services offering ► Help evolve an understanding of the offset process and stakeholders Indian offset partners(IOPs) ► Identification of IOPs (M&A / JV / Licensed Manufacture / Sourcing) ► Clarification from DIPP/FIPB/MoD regarding their regulatory status Support services Importance ► Industrial Licensing for IOPs ► IOPs financing ► Joint venture structuring ► Evolve understanding of offset process amongst the core team for optimal planning ► Identification of eligible and viable IOPs who can sustain through the duration of the offset program Bid Stage 2 ► Getting the documents right for submission ► Building the right offset program Offset Proposal ► Identification of methods of offset discharge ► Structuring/vetting of Technical and commercial offset proposals ► Support in answering the queries of the MoD Indian offset partners(IOPs) ► Structuring contractual arrangements with IOPs ► Valuation of offset attributable ► Financial & Background due diligence of IOPs Contract negotiation stage 3 ► Getting the optimum economic value for offsets ► Continuous support through on call advisory ► Support in preparation of appropriate responses to MoD queries ► Identification of stand by IOPs in case of removal of existing ones ► Any other support as maybe required. ► To ensure a suitable ► Support in getting the Technical and commercial technical offset offset plan that should find proposal approved in favour with the TOEC and the time so that it does not CNC. obstruct main contract signing Post contract signing support 4 ► Documentation of offset execution ► Support in compiling documentation required for offset discharge ► Support in preparation of quarterly / half yearly reports on fulfillment of offset obligations. ► Continued support for offset execution to avoid penalties and loss of faith with the MoD
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