Presentation defence economic_zones_rev_02_final_draft

DEFENCE ECONOMIC ZONES
Presentation to the Centre For Land Warfare Studies, New Delhi
20th November ‘ 2014
Transforming India’s Military Industrial Complex
Rev 02
The Nataraja Foundation

Ashish Puntambekar, The Nataraja Foundation, All Rights Reserved
© The Nataraja Foundation 2014
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About the Designer
Ashish Puntambekar is a trustee of the Nataraja Foundation and the lead designer of its design lab. He has over 23 years of
experience working with some of the finest talent globally in the Energy and Infrastructure sectors and specifically in the area of
large Infrastructure project design where he is a specialist.
He has recently been the convener of an International Advisory Board ( IAB ) with Harvard Economists, Former G – 7 Finance
Ministers, Foreign Ambassadors and Defence Analysts as members. His expertise in the Geopolitics of Petroleum, his deep
understanding of Middle East history and politics and his knowledge of technology shifts in the Energy Industry have earned him
a name in the energy analyst community internationally. Apart from this he has written articles on Geopolitics and Energy
Security for the Indian Defence Review magazine.
Ashish has worked in a number of diverse roles. He started his career as a project engineer working on a large petrochemicals
complex and then moved on to various increasingly senior engineering, business and senior management positions on
assignments involving Power plants , Ports, LNG Terminals , Oil Refineries and Pipelines. He has also worked as an Energy
Derivatives Trader for a period of 5 years where he has traded crude oil flat price and petroleum product derivatives on all major
commodity exchanges and OTC Markets / Investment banks around the world.
Over the years, he has designed several multi billion dollar projects which are under active consideration by the Indian
Government :
1. The Defence Economic Zone Project
2. The Vivekanand Secondary Education Megaproject
3. The Mumbai Megaproject
4. The Indian Crude Oil Strategic Reserve Megaproject
The Education Megaproject is the author’s favourite project as it has the potential to bring high quality education to 126 Million
children across 29 states and 7 Union Territories, totally free of cost. The Financing for this landmark project and the Mumbai
Megaproject will be without recourse to Central or State Government budgets and it is here ( financing ) where the author has
brought in considerable innovation.
Ashish has a bachelors degree in Mechanical Engineering and a Masters degree in International Business.

Acknowledgments
The designer would like to thank the following senior individuals for their contributions to the
development of this project concept document. Their ideas have greatly improved the Defence
Economic Zone Project.
1. Lt. Gen Vijay Oberoi, PVSM, AVSM, VSM ( Former Vice Chief Of Army Staff )
2. Dr. Anil Kakodkar ( Former Chairman Atomic Energy Commission )
3. Capt. Bharat Verma ( Editor, The Indian Defence Review )
4. Maj. Gen. Mrinal Suman, AVSM, VSM, PhD , Head, DTAASG ( CII )
5. Gen. VP Malik, PVSM, AVSM (Former Chief Of Army Staff )
6. Lt. Gen. PK Singh, PVSM, AVSM ( Director, United Service Institution of India )
7. Lt. Gen. Vinay Shankar, PVSM, AVSM, VSM ( Former Director General Artillery )
8. Vice Admiral AK Singh, PVSM, AVSM, NM ( Former GOC, Eastern Naval Command )
9. Lt. Gen Prakash Katoch, PVSM, UYSM, AVSM, SC ( Former DGIS )
10. Commodore Sujeet Samaddar, NM ( Former Principal Director Naval Plans )

Contents
❑ India 2014 … A Paradox
❑ India’s Defence Equipment Crisis
❑ Defence Manufacturing … A Performance Appraisal
❑ Show Stopping Weaknesses … Electronic Software & Metallurgy
❑ Defence Procurement Procedure … Dream Killer
❑ RBI’s Approaching Nightmare … Defence Imports
❑ Strategic Decision Criteria … The BIG Picture View
❑ India’s Job Creation Urgency
❑ Defence Economic Zones … Changing the Game
✓ Defence Economic Zones : Promised Deliverables
✓ DEZ Proposal
✓ Solid Economic & Business Case For DEZs
✓ DEZ Investment Formats … PPP Options
✓ Approximate DEZ Setup Costs
✓ Expected Investment Multiplier Impact of DEZs
✓ Proposed DEZs Vs. Ordinance Factories … Look & Feel
✓ Proposed Governance Framework For DEZs
❑ DEZ Strategic Design Concepts … Twelve BIG Ideas
❑ Areas Of Extreme Focus In “ Mission ” Mode
❑ Support Requested From Govt. Of India
❑ DEZ Project Execution Schedule ( Tentative )
❑ Thank You

India 2014 … A Paradox
India launches space missions at 1 / 10th the cost of NASA … Yet not
a single Indian defence PSU / private company today can make this
standard quality carbine … isn’t that odd ?
Today No Indian Company Can
Make This Standard Quality
Carbine.
MARS Missions ( Comparative Cost )
ISRO Mangalyaan Cost : US $ 76 Million
NASA Maven Cost : US $ 671 Million

India’s Defence Equipment Crisis
Source : Worrisome State of the Indian Armed Forces, Major General Mrinal Suman, AVSM, VSM, PhD. Head, Defence Technical Assessment
and Advisory Services Group ( Confederation of Indian Industry )
State of Equipment Profile Desirable
(Percentage)
Current Inventory
(Percentage)
State of the Art Equipment 30 % 15 %
Equipment of Matured Technologies 40 % 35 %
Equipment Becoming Obsolescent 30 % 50 %
Current State Of Equipment Used by the Indian Armed Forces ( 2014 ) :
Worrying Truths :
1.97 % of Aircraft with the Indian Air Force Are Obsolete . Similar situation may exist as regards equipment with the
Navy & Army.
2.Despite being made aware of this, the UPA Government did not take any steps to acquire any Major Defence
Platform for the last 10 years
3.Government Plan to indigenize production and reduce imports to 30 % by 2005 has been an utter failure. In fact
foreign purchases went up to 70 % as the UPA Government favoured imports
4.Two submarines have sunk , killing dozens of sailors because critical equipment was not repaired /
replaced on time.
Gen VK Singh Letter
to the Prime Minister
which was
subsequently leaked
to the media.
Situation Demands “ Breakthrough thinking ” which goes far beyond
current Defence Procurement Procedure ( DPP ).
Very
worrying
as India
could
lose the
Next War

Defence Manufacturing … A Performance Appraisal
1. Govt. Organizations currently dominate Defence Manufacturing / R & D in India
• 37 Ordinance Factories
• 9 Defence PSU’s
• 50 Defence R & D Labs / DRDO
2. These Govt. Organizations have a Disastrous Project Development Record :
• Saras Aircraft … Test flight kills entire crew after 20 years in Development
& after consuming Rs. 1000 Crores
• Akash Missile … Missile fails to take off & when it does take off, misses target
• INSAS Rifle … Rifle frequently gets jammed. Barrel gets bent due to poor metallurgy.
3. System Operations Record :
• Rampant Corruption … Ordinance Factory Board Members caught taking bribes
• Unsafe Practices … Thousands of Crores worth of live shells have exploded as they
are stored in the open sun without any protection
• Incompetence … System is incapable of producing even the simplest clothing and
shoes for the Armed Forces
• Spare Parts … Armed Forces forced to buy Spares at inflated prices as
PSU’s are incapable of manufacturing even simple spares
✓ TATRA Truck Jack … Costs Rs 3000 … Bought by Army for Rs 30,000 / unit
✓ HDW Submarine Bolts … Cost Rs 200 … Bought by Navy For Rs 25,000 / unit
Budget Rs 15,000 Crores / Year
Possibly Rs. 3,00,000 Crores Spent over the last 50 years with nothing to show.
System Requires Alexandrian Solution

Show Stopping Weaknesses … Electronic Software
& Metallurgy
Despite 56 years of DRDO, India’s Defence Sector still faces two massive technical barriers
• Electronics Software :
- Due to DRDO’s incompetence , today all software that runs India’s defence equipment has been written
by foreign programmers
- Not a single person in the Indian System ( Defence Companies Or the Armed Forces ) knows which
code has been written in the software that operates critical equipment
- It is therefore possible that hidden sub-routines within imported software can be activated to make
critical equipment malfunction in a potential future war.
• Metallurgy :
- The Indigenization Effort is critically dependent on Access to Sophisticated Metallurgical / Alloy Steel
technologies and most importantly Welding technologies
- Due to lack of knowledge of Metallurgy, the situation today ( 2014 ) is that No Indian Company can
make a Modern Carbine or even a Sophisticated Pistol.
- Manufacture of weapons also requires knowledge of Super alloys and Composite materials and all
the technologies related to their manufacture. Very few Indian companies have this knowledge.
- Necessary capability can be acquired by Indian companies by entering into Strategic JV’s with
Japanese, German, Italian, French or German companies that own these special technologies.
India Needs To Adopt “ Breakthrough Thinking ” in Mission Mode
Defence Software & Metallurgy Represent
Hundred Of Millions Of Dollars of Business Each
Year For Companies
BUSINESS POTENTIAL ----- >

Defence Procurement Procedure … Dream Killer
✓ MOD does not have the Ecosystem or the Mindset
✓ Even most recent DPP has serious problems … it is designed
to obstruct
✓ Recommendation : Simplify & Eliminate
- Write a 4 – 6 Page Simple and Clear DPP on the lines of
the American Constitution
- Eliminate Department of Defence Production
- Be practical … Allow Commission Agents …They are an
essential part of global commerce
- Simplify qualifying criteria initially to allow build up of local
skills ( 10 year period for small vendor companies ).
- Relax investment threshold in DEZs to encourage participation
- Move critical defence equipment procurement to empowered committee under PMO.
( 1 ) ( 2 ) ( 3 ) ( 4 )
Current DPP Needs Surgery
Current DPP is obsolete in concept … We need a “ Make in India ”, 4 – 6 Page
DPP
Finally put entrepreneur in Jail
“ Simplified “ Defence
Procurement Procedure
Force
Entrepreneur
To Give
Bribes

RBI’s Approaching Nightmare … Defence Imports
India headed for serious financial trouble unless bold initiatives are taken to
indigenize military hardware manufacture.
Indian Defence Imports Expected To Rise Dramatically
Sources : BCG – CII Report ( April, 2012 ), Report of the XIIIth
Finance Commission, Bloomberg,
Planning & Design Lab Analysis
Hard Facts :
Over the last 10 years total FDI in Defence has
been just US $ 5 Million, whereas India has
imported in excess of US $ 50 Billion worth of
Defence Equipment over this same period.
Huge Jump in Defence Spending expected
( % of CAD ) as India attempts to upgrade its
weapon systems.

Strategic Decision Criteria … The BIG Picture View
Global Economy Crystal Ball
Global Economy May See Another Dip …
Overcapacity Overhang May Reduce Cost Of
Building New Capacity
Copper Chart is a warning. Govt. of India needs to act desicively … to prevent
US $ 245 Billion Forex outflow by 2025
Copper Chart is a warning. Govt. Of India needs to
initiate large projects to spur domestic demand, clear
supply side bottlenecks and generate employment
on a large scale before global economic weakness
overwhelms us.
Rising Defence Equipment Imports
( Forecasting Out to 2025 )

Age ( Years ) Male Female Total
Number % Number % Number %
10 - 14 59729000 5.4 56221000 5.1 115950000 10.5
15 - 19 56839000 5.2 53233000 4.8 110072000 10.0
20 - 24 52337000 4.7 48845000 4.4 101182000 9.1
Total 168905000 15.3 158299000 14.3 327204000 29.6
Young People In India ( 2004 )
Source : WHO Report on Adolescent Health , 2007
Age ( Years ) Male Female Total
Number % Number % Number %
0 - 6 82952135 6.9 76837152 6.3 159789287 13.2
7 - 14 231103188 19.1
15 - 19 * 41810300 5.4 39354700 5.1 81165000 10.5
Total 312268188
Population Size By Age Group ( Census Of India , 2011 )
Source : Census Of India, 2011
India’s Job Creation Urgency
Urgent need To create new jobs within the Indian economy supports
domestic defence manufacturing projects.
Data taken from 2007 WHO
Report, adding 7 years and
applying an Adjustment
Factor of 0.7 to the 17 – 21
age group to generate
15 – 19 Age group data.
We added 7 years to the
7 – 14 and 15 – 19 Age
Groups.
A Conservative Adjustment
Factor of 0.5 is then applied
to obtain stats for the Age
Group 15 – 20.
Essentially … We have to
create roughly 150 Million
New Jobs by 2018 or face
Mass Unrest / Riots Across
India.
It appears that in 2004 itself
the UPA Govt. knew that
the situation was very
serious. But they did
nothing for 10 years.
New Job Creation Asking Rate is Roughly
50,000 - 75,000 Jobs / day for BJP Govt.

Defence Economic Zones
( DEZs )
Changing The Game

“ Describe a future worth creating and then reap the
Global Competitive Advantage by preparing for it
and making it happen. ”
– Pierre Wack
( French thinker in the 1970’s who re-designed Shell Oil and made it the company it is today )
Breakthrough Thinking

Defence Economic Zones / Defence Manufacturing Corridors will achieve the following
for India :
❑ Foreign Exchange Savings in excess of US $ 200 Billion & indigenized production of
Sophisticated Military Equipment to the extent of 75 % - 80 % … by 2025
❑ Massive Transformation of India’s Military Industrial Complex … Assisted by private
sector participation in Military – Industrial clusters
❑ Creation of a Platform for Unprecedented innovation in defence technologies by
co - locating Six universities / IIT research departments & full time inter-disciplinary
Defence Engineering courses within each DEZ
❑ Large increase in Aerospace / Weapons Exports
❑ Creation of 3,00,000 New Hi-Technology Jobs in the defence sector
❑ Strategic enhancement of India’s diplomatic stature globally by providing the
ability to intervene Militarily in any theatre of conflict through precision Military strikes
Defence Economic Zones … Promised Deliverables
DEZs will catalyze and help realize the Prime Minister’s “ Make In India ”
dream

DEZ Proposal
DEZs Represent An Alexandrian Solution Bypassing
Non Performing Defence PSU’s & DRDO
❑ It is Proposed to Construct Six New Ultramodern DEZs in
Two Phases with the objective of indigenizing 75 – 80 %
of Defence Equipment production by 2025
❑ Each DEZ will be a 3000 – 5000 acre facility or a
Defence Manufacturing Corridor with ultramodern
factories, logistics & communication facilities
❑ DEZs will be developed as PPP’s between State
Governments and a lead Indian Developer ( selected
through a bidding process ), A few large International
Defence contractors will be consortium partners. Nearly
2500 small vendors will be located in each DEZ.
❑ DEZ PPP’s will be selected from 3 – 4 transparent
investment formats
❑ Six IIT Departments co-located within each DEZ will
collaborate with manufacturers to enable unprecedented
innovation in defence technologies.
❑ DRDO / Defence PSU’s will be allowed to participate but will
be specifically kept out of the Lead Developer role … to
prevent any further waste of time.
Global Logistics Hub : Heavy Lift Military
Courier Aircraft will move weapons to
Ranges for Testing. They will also carry
Export cargoes and spares to foreign
clients

Solid Economic & Business Case For DEZs
Sources : Defence Services Estimates, Indian Ministry of Defence, Economic Survey 2009 – 10,
Report of the Thirteenth Finance Commission ( 2010 – 2015 ), Union Budget of India,
Indian Ministry of Finance, Mckinsey Analysis
DEZs Present Indian Companies With An Attractive Business Proposition
on an EBITDA basis
Current Defence Procurement Procedure ( DPP ) is
Not Conducive to the creation of a Scaleable Defence
Manufacturing Platform
✓ DEZs have been Conceptualized with a focus
on Scalability & Financial Viability
✓ Each of the three DEZs in Phase I, represent
a Revenue Opportunity of US $ 3.3 Billion
by 2017, based just on Offsets.
✓ If the other two DPP Mandated Quotas “ Buy
( Indian ) and Make & Buy and Make are
committed / Re - Located to DEZs, it becomes
an even more attractive business proposition.
✓ In addition, Defence Engineering Services and
Component Manufacturing / Spares businesses
( For the Indian market ) represent attractive
opportunities for investors :
1. Defence Engineering : US $ 2 – 4 Billion /year
2. Components / Spares : US $ 4 – 6 Billion /year
Not Included in these estimates :
1. Potential Demand From Police, Paramilitary, Coast
Guard or Healthcare / Civil Aviation Sectors
2. Large Gain in Market Cap for Companies

DEZ Investment Formats … PPP Concepts
✓ Each of the Six proposed DEZs will be put out on Open Competitive Bidding :
- Corporates / Consortia ( Indian + Foreign ) will be allowed to bid. Anchor
Sponsor will be 100 % Indian Owned
- DPSU’s / DRDO can be partners but not anchor sponsors in any DEZ
- Winning Consortia will be granted a 30 Year, Renewable BOO concession
✓ DEZ Concessions may be in accordance with any one of four possible investment formats :
- Pure Rental Model with a Govt. policy commitment to buy 75 – 80 % of equipment
from the DEZs. Developer risk will mainly be rentals
- Landlord ( Developer ) + Rental Model with Govt. providing viability gap funding
- Defence Contractor Offset Based Model … + Tenant Rentals
- Hybrid Model … Rentals + Urban Development Rights on adjacent parcels of land
Need To First Focus on Freezing Investment Format … Then Move Extremely
Fast Into Construction
Public Brings
in Policy
Private Player Brings
in Investment
4 Page Concession
Document
✓ Simple & Clear PPP :
Does a PPP Concession document
need to be 100 + pages ?

Approximate DEZ Setup Costs
Considerable Innovation & Granularity is Possible in Project Configurations

Expected Investment Multiplier Impact Of DEZs
Defence Economic Zones Will Create Huge Wealth with an Investment Multiplier
Impact of approx. US $ 108 Billion
Six DEZs with A Capex of
approx. US $ 6 Billion / unit
= US $ 36 Billion
Investment Multiplier = 3
US $ 108 Billion
+
3,00,000 New Jobs
In high technology areas

Proposed DEZs Vs. Ordinance Factories … Look & Feel
Ordinance Factories ( 2014 ) Vibrant DEZs ( 2020)

Proposed DEZs Vs. Ordinance Factories … Look & Feel
Defence PSUs ( 2014 ) State Of The Art DEZs ( 2020 )

Governance of DEZs : Directly under PMO
( To Enable Un-Precedented Innovation like ISRO )
Prime Ministers
Office
Implementation
Functions
Planning
Functions
Defence and Aerospace
Commission
•Receives plans approved by DAC
•Converts capability needs into
performance parameters
•Analyses alternatives to acquire
equipment within specified time
•Identifies the most beneficial
and cost-effective route
•Oversees growth of indigenous
defence industry
•Acts as nodal authority for offsets
Segregation of Planning
and Implementation Functions
Defence
Technology
Advisory Board
Policy Review
and Training
Committee
Technology
Advisory Board
Defence and Aerospace
Commission
Maritime Industry Wing
Oversee indigenous production of maritime systems,
both under license and through local development.
Act as an interface between the government and
industry (both public & private) for maritime
systems.
Aerospace Industry Wing
Oversee indigenous production of aerospace
systems, both under license and through local
development. Act as an interface between the
government and industry (both public & private) for
aerospace systems.
Land Systems Industry Wing
Oversee indigenous production of land systems,
both under license and through local development.
Act as an interface between the government and the
industry (both public & private) for land systems.
Acquisitions Wing
An integrated set-up to undertake all acquisition
functions relating to outright purchases and handle
cases wherein indigenous production under license
is planned after initial purchase.
Exports and Cooperation Wing
Promote defence exports through proactive initiatives
and close liaison with industrial associations. Exploit
opportunities for international armament
cooperation, both for development and sale to other
countries.
Defence Offsets Authority
Independent and empowered single window agency to
manage all offset activities in a predictable, efficient
and transparent manner. Responsible for approving
and validating discharge of offset obligations. Oversee
import of technology and its absorption.
Defence R&D Wing
Evolve technology upgradation plan. Identify key
technologies for focused attention, both through
development and imports. Oversee absorption of
imported technologies. Supervise DRDO performance.
Work with industrial associations.
SME Wing
Act as an umbrella agency to help SMEs to enter
defence sector with their niche technologies and
provide support to them in retaining their
technological lead through continuous innovations.
Suggested Structure of Defence and
Aerospace Commission
Defence
Perspective
Planning
Council
➢A broad-based
overarching
policy making
body
➢Approves
identified
capability gaps
➢Approves 15-
years Long
Term Integrated
Perspective Plan
and 5-years
Services Capital
Acquisition Plan
Ministry of
Defence
Entire DEZ structure will report directly to the PMO
Source : Adapted from Major General Mrinal Suman, AVSM, VSM, PhD.
Head, DTAASG ( Confederation of Indian Industry )
Six DEZs

DEZ Strategic Design Concepts … Twelve BIG Ideas
“ Design is about demonstrating how Elegant something can be,
Good Design has a Profound Capacity. ”
- Tom Peters

DEZs As Innovation Clusters
❑ DEZs Have Been Conceptualized As Industry – University Clusters
✓ Each DEZ will be a Vertically Integrated structure consisting of :
- A Lead Developer and its Foreign JV Partner if any
- A Number of Defence Contractor JV’s / Manufacturing units
- 2500 Component Vendors
- Defence Related Service Companies / Maintenance Workshops
- Strategic Armed Forces Technical Units ( user presence )
- Up to Six University Departments/ IIT’s with
Full Time Graduate Courses in Defence
Engineering / Technology / Weapons design
✓ System design will enable the development of
deep Linkages between Defence Contractors,
Component Vendors and University Departments
✓ DEZs will Undertake a 15 Year Investment Plan
To develop powerful Linkages within the
University System and possibly up to the
Secondary School System
✓ Industry Cluster - Academia Interaction will Serve
As Catalyst For A National Innovation Backbone
DEZs Will Solve the Huge “ Linkages “ Problem that Indian Companies Face in
Defence Manufacturing
Michael Porter Model
Concept 1

Project & Product Level Innovation Concept 2
❑ Within the Innovation Cluster, DEZs will focus on Project Level and
Product Level Innovation to Crash Costs of Weapon Systems & Spares
DEZs Will Innovate both on the Project & Product level to dramatically reduce
procurement costs of weapon systems & essential spares
✓ Massive Transformation will be achieved by
Executing concepts / wisdom gathered from
the Automobile ( Tata Nano ), Telecom (
Reliance ) and Space ( ISRO ) Experience :
▪ Tata Nano … The US $ 2000 Car
▪ Reliance Telecom … Reduction in Price
of a telephone call ( Rs 16 / Min… to 30
Paise / Min
▪ ISRO … Mangalyaan Mission @ 1/10th the
Cost of NASA’s Maven Mars Mission
✓ Technology gaps will be addressed through
a global recruitment strategy in key
areas such as Systems Integration & Design
Sources : NDTV, Other Media
✓ DEZs will focus on Metallurgical Technologies
& Defence Software development to fill
Strategic gaps that currently block the
development of indigenous weapon related
technologies.
Technical assistance from Japanese,
German, French, Russian and other sources will
be sought to achieve breakthroughs in
Critical Metallurgy & Software related areas.

Aircraft Carrier
Capex : US $ 3 Billion – US $ 14 Billion
Opex : US $ 3 Million - US $ 7 Million / day
Technology Leapfrogging
China
Dong Feng – 21 D
Aircraft Carrier Killer
System… can destroy
an aircraft carrier while
it is still 2500 Km from
the coast.
( US $ 10 Million / Unit )
United States
Manta, Submarine Drone, Potential Carrier Killer
( US $ 200 Million ) ??
<
❑ DEZs to Think in terms of Alternative Low Cost Technology Solutions
Indian DEZs Will Seek To Leapfrog Technology … to Establish A New Military
Parity at the Lowest Possible Cost
The DF – 21 D development and its deployment
Economics may change the dynamics of deployment of
Aircraft Carriers in future.
DF - 21 D is a system that requires terminal guidence as it
approaches its target. This presents a BIG technical
challenge for Indian weapon designers.
Concept 3
Are Aircraft Carriers
becoming an Obsolete
Weapon System in
certain theatres ?
Not including the cost of
its satellite support
system for terminal
guidence .

Logistics / Communications Hub
❑ The 3000 – 5000 Acre DEZ s will be Very Different from todays Sleepy
Defence PSUs and Ordinance Factories
Logistics :
✓ Each DEZ will have its own landing strips & rail
/ road linkages with the objective of :
- Reducing weapon development cycle times
- Considerably driving down costs
✓ Logistics platform will enable :
- Movement of weapon systems between the Six
DEZs and Military Ranges for weapon testing
- Direct export of weapon systems
- Participation of India based aerospace & satellite
companies in the global civilian aerospace
markets ( wing assemblies , components etc. )
Communications :
✓ DEZs will deploy a Next Generation “ Context Based
Communications Platform ” to enable :
- Unprecedented transparency & accountability
- Execution of large & complex weapon development projects
- Coordination of conventional & covert Military operations
DEZs Envisaged As Next Generation, Global Logistics & Communications Hubs
AN 225 Military Courier Aircraft
Concept 4
NORAD Class
Command Center
To coordinate Special
Force Missions overseas

South Asian Defence Shield
❑ India has not attacked anyone for the last 2500 years. National military strategy
& weapons deployment therefore will be predominantly defensive
South Asian Defence Shield will be enforced by Smart , Next Generation
Weapon Systems … DEZs sized to produce 75 % of such systems
Concept 5
Area north of the
South Africa – East Timor Parallel
will be rendered impenetrable
to hostile naval attack by 2025.
By 2025 India is
projected to be
a US $ 4.5 Trillion
Economy.
Enhanced Air Force &
Smart Artillery units will
deliver Fuel - Air, Daisy
Cutter / MOAB & other
sophisticated access
denial ordinance.
Directed Energy weapon
development to be future
priority programme
Indian Armed Forces
Therefore will
undergo a Strategic
Reset to cater to an
expanded economic
reference frame of US
$ 4.5 Trillion
India will not
hesitate to
deploy Fuel – Air
& Other High
Energy Weapons
to defend her
land borders and
to minimize
troop casualties .
Such weapon
use will be
restricted within
our borders to
ensure that India
does not
violate any
international
treaty
1
2
4
5
3
Use of Extreme High Energy Weapons within our
borders does not violate any International treaty.

Doctrine of “ Economic ” Maximum War
❑ South Asian Defence Shield to be Enforced by use of maximum un-restricted force
DEZs designed to support a policy that ensures any hostile force crossing
Lakshman Rekha will face Eviction … at lowest possible cost
Any potential Kargil
like situation in the
future could potentially
handled by a small
group of Military
Engineers working on
laptop computers
backed by Air Force
and Smart Artillery
units deploying
extreme high energy
weapons. This will
provide support to
conventional artillery /
infantry units.
“ Eviction by Burning ”
where technically
possible, to ensure that
there will be no more
Kargils
Concept 6A
Chinese Dong Feng 21 – D Lookalike , Access Denial Systems
& Terminal Satellite Guidance will be developed to safeguard
India’s marine frontiers
India will promptly deploy
Fuel - Air Weapons /
Daisy Cutter Lookalikes
where technically possible.
These will support artillery
& ground troops if Indian
territory is encroached
upon in future.

Maximum Impact, Low Cost Artillery
The Indian Political class as a whole needs to be made aware of the immense
possibilities of this class of weapons
Several Indian Chemical / Petrochemical
companies can very easily make these high
impact ( Non Nuclear ) conventional weapons.
These can be made ready for deployment by
Artillery units within a few days
Concept 6B
High energy ( BLU Series, MOAB ) Systems used by the
Americans in Iraq and Afghanistan
& Fuel Air Systems used by the Russians in the Chechen
capital of Grozny in 2000
✓ In the 1999 Kargil War India deployed
Heavy Artillery, Infantry Troops & the
Air Force …Thousands of soldiers died
and tens of thousands of artillery shells
were used.
✓ Cost Effective High Energy Weapons :
Fuel – Air weapons / daisy cutter ( BLU /
MOAB ) series weapons are a viable
alternative that May considerably reduce
both the cost and the duration of conflict.
✓ High energy weapons are very easy to
manufacture in various parcel sizes and
can be deployed quickly using either
MLRS ( multiple launch rocket systems ),
short range missiles or dropped as
bombs from aircraft.
✓ Low Cost Artillery = No more Kargils.
Two types of very simple weapons :
1. Ethylene oxide ( EO ) based systems
2. Ammonium Nitrate + Aluminium Powder + Polystyrene
❑ There is a need to reduce the human and material cost of military operations
to defend land borders

Strategic Diplomacy Backed By
Neptune Spear Lookalike Capability
Concept 7
❑ Overseas Military Strike Capability is critical to gaining Diplomatic
Leverage in the 21st Century
✓ DEZs will create this global precision strike capability for India through :
- Manufacturing the following sophisticated equipment for the military
- Drones / Stealth helicopters / Stealth aircraft
- Special purpose missiles
- Sophisticated telecommunications equipment
- Night vision equipment
- Specialized short & long range rifles
- Extreme high energy munitions
- DEZs will also provide the Infrastructure for training our special
forces ( Black cats ) :
- Weapons knowledge upgrading
- Simulator based training
- Provision of operations command centers
- Mobile Launching facilities of medium / short range missiles to
support Special Forces on overseas missions
DEZs will strategically enhance Indias diplomatic muscle internationally
DEZs designed to
enable precision
strikes by Indian
special forces
globally

The 5th Dimension … Cyber Warfare Concept 8A
Targets :
✓ Military :
- Command & control systems at military HQ
- Air defence networks
- Weapon systems that require computers to operate
✓ Civilian :
- Telecommunications networks & satellites
- Government offices & national databases
- Banks & financial institutions / stock exchanges
- Private corporations ( Customer A/c’s, Business Intel, Innovations )
- Industrials : Power plants / Refineries & Chemical plants
- Electricity grids
- Transport infrastructure
✓ Examples : Sabotage, Information theft, Denial of service attacks, URL re-direction,
and most dangerous of all … Data Modification
Cyber Warfare
Cyber Espionage Cyber Attack
Critical Countermeasure :
Indian Govt. must BAN import of
telecommunications equipment &
software from nations suspected
of waging cyber rar
Sophistication benchmark :
Stuxnet Worm used on Iranian Nuclear Centrifuges
in Natanz ( Sept 2010 )
Hostile Cyber intrusion can do as much damage as a Conventional War. India is
currently a sitting duck

Prime Ministers
Office
Chairman , Joint Chiefs Of Staff
Army Navy Air Force Chief of Integrated
Defence Staff
( Including ISRO Military Satellites )
Indian Cyber Command
Reports to Chairman Joint Chiefs.
Has a US $ 250 Million / year
Budget and 3000 Software
Engineers & Expert Hackers
Next. Gen. Cyber Command …Structure
Headed by a
National
Cyber Security
Coordinator
with direct
access to PMO
Civilian & Government Networks
National Informatics Centre ( NIC ), Indian
Computer Emergency Response Team CERT – In,
National Critical Information Infrastructure
Protection Centre ( NCIIPC )
-Telecommunications Infra
-Commercial Computer Networks
-National Electricity Grids
-Banks & Financial Institutions
-All Government Offices
Military Networks
Both Defensive & Offensive Capability
Defence Minister
Defensive Unit
( Maintains Military Networks )
& Conducts :
Cyber War Games for Civilian
& Military Networks
Elite Corps
( 600 Cyber Commandos )
Bluest of the Blue
Cyber Forensics Unit /
Cyber Warfare Unit
United States
Cyber Command
European
Govt.
Agencies
Indian Software
Companies PPPs @ US $ 100 Million / Year
Joint Task Forces
& Training
Hotlines & Protocols
Concept 8 B

Strategic Redundancy Through Asset
Distribution … In Industrial Corridors
Concept 9
Everyone
needs a
Plan B
❑ From a military risk management standpoint, it is necessary to
distribute the DEZs geographically, functionally & spatially
✓ The Six DEZs will be distributed across India ( Two of the DEZs will
be at a coastal location ) to cater to a maximum attack scenario
✓ Three of the DEZs will be 3000 – 5000 acre facilities while the
other three will be distributed within designated Industrial Corridors/
Regions
✓ Development will be cluster specific (Avionics, Artillery etc.) to foster
innovation
✓ Basic concept is that if any of the DEZs get bombed or are destroyed
due to any reason, The Nation will still have three distributed DEZs or
Industrial Corridors
✓ Special logistics infrastructure will be developed to create 2500
Vendor facilities outside each of the DEZs
✓ Even within the DEZs , certain critical infrastructure will be located
within heavily fortified Bunker Facilities
DEZs will be Geographically and Functionally distributed for Redundancy … to
reduce risk of a Maximum Attack scenario on Military – Industrial infrastructure

Doctrine of Practical Procurement
❑ DEZ s based procurement strategy will be driven by Supreme National
Interest to ensure defence preparedness & local manufacturing capacity building
Two strategies will be deployed for the first 15 years :
1. Preferred supplier status for companies located within DEZs
✓ Government to encourage domestic manufacture by stipulating that parties setting
up facilities in DEZs will be preferred in the same equipment category
2. Re-consideration of Blacklisted defence contractors :
a) Cause :
✓ It is common knowledge that the real culprits have been politicians from previous
governments
b) Resultant Situation Today ( 2014 ) :
✓ Indian Defence preparedness has suffered due to blacklisting of foreign
defence contractors
✓ The Indian Armed Forces have been forced to buy spares at between 50 – 100 times
the actual cost by going through circuitous routes / agents
c) Proposed Solution :
✓ Supreme Court Review of blacklisted defence contractors on a case by case
basis followed by regularization of contractors who meet court determined criteria
Strategic National Interest Considerations will predominate in defence
manufacturing capacity building
Concept 10
BLACKLISTED DEFENCE
CONTRACTORS

Buying International Defence Contractors Concept 11
✓ India is the worlds largest military equipment
importer. This is an untenable position.
✓ Large import appetite needs to be converted into
a strategic strength by going out and
acquiring sophisticated defence technologies by
directly buying mid – size / large global
defence equipment manufacturers.
✓ Potential Strategic benefits :
1. Drastic reduction in technology acquisition
cycle time by India
2. Savings of billions of dollars of forex. each
year through easier licensing
3. Large scale access to global defence &
aerospace markets
✓ India is a Natural Military Ally of the US & Europe
and has the same security concerns. Lets
therefore talk to the US & EU governments
to streamline defence contractor buyout
permissioning by Indian companies.
Proposed defence contractor
acquisition & deployment strategy :
1.Focus on Mid – Sized Defence companies
with unique technology
3.Focus on companies in Germany, Italy, the UK,
Japan, France , Sweden and South Korea
2.Once a foreign defence contractor is taken over,
move a substantial part of its manufacturing and
product development function to DEZs located in
India
Lets Go Out & Buy
Government Defence Equity Fund :
1. Govt. of India could set up a US $ 5 Billion
Defence Equity Fund to provide soft loans to
Indian Companies for International Acquisitions
in critical technology areas. This Quasi Equity
Fund will be directly under the control of the
Cabinet Committee on Security.
2. Give Indian companies Minimum Guaranteed
Orders if they take loans for acquisitions
“ The first quality that is needed is Audacity.”
- Winston Churchill

The “ Synergy ” Concept Concept 12
DEZs Objective is to achieve Synergy by Marrying Outcome based orientation of
the military / private sector with Process orientation of the PSU’s
✓ Synergy between public sector and private
parties is built into the DEZ concept
Armed
Forces
Defence PSU’s ,
DRDO, Ordinance
Factories Private Sector
DRDO
& Defence Labs
9 Defence
PSU’s
37 Ordinance
Factories
Defence Economic
Zones
Private
Sector
▪ Upgrade & encourage
skill building
▪ Use public sector labs for
development & testing while
paying market price for facility
use
▪ Lease out DPSU Labs
- Tier I
- Tier II
- Tier III
Re-deploy and Re-energise Ordinance factories.
Set KRA’s and let them compete with vendors in
the DEZs
DEZs encourage Joint Projects between
DRDO and the private sector with free
movement of personnel based on demand for
skills.
Clear PPP Policies will
encourage the Private
Sector to invest in the
DEZs.
6
IIT Research
Departments
Armed
Forces
Set Synergy Goals
2 – 3 Years
5 – 7 Years
10 + Years
DEZs seek to achieve synergy
by maximizing strengths of both
Govt and the Private Sector

Areas Of Extreme Focus
In “ Mission ” Mode
Proposed startup : March ‘ 2015

Advanced Military Materials & Metallurgy Mission
Potential partner countries : Japan, Germany, South Korea
Italy, France, & Russia
Ceramic Pistol
Advanced Carbon Fiber
Composites
Graphene For The MilitarySuper Alloys for Next Generation Guns
❑ Advanced metallurgy & materials
for military applications is a HIGH
priority area within DEZ system
✓ Advanced metallurgy and strategic
materials labs to be set up in Mission
Mode in collaboration with IIT’s
✓ Indian Companies to get into JV’s
with specialized foreign firms with
knowledge of advanced metallurgy /
materials
✓ Encourage Indian companies to buy /
Lithium / Germanium mines abroad Mission Startup : March ‘ 2015
Strategic Metals / Minerals
Germanium , Aluminium, Lithium
Alloys For Aerospace

National Mission For Weapons Software
Development
Armament Software Technology
Centre Of Excellence
Battlefield Systems
&
Software Engineering
Munitions And Control
Unit Software
Mission Startup : March ‘ 2015
❑ Govt. Of India needs to sponsor a policy that will
encourage Indian software companies to focus on and
allocate resources to capture this US $ 500 Million / Year
domestic market besides creating large opportunities
for Export.
Weapons Software is an extremely critical area and a Huge business opportunity
for Indian companies

National Mission For Advanced Weapons
Systems Design & Development
❑ Weapons Design & System Integrator skills are critical
to success of the Programme.
A two pronged strategy will be deployed immediately :
A. Short Term
Recall a few retired ISRO scientists / project managers to
take on role of weapon system integrators
B. Long Term
✓ Mission will startup Six New interdisciplinary courses in
weapon system design at the IIT’s
✓ A separate interdisciplinary course in Weapon System
Integration will be jointly offered by the DEZ in collaboration
with the IIT’s and the IIM’s
✓ Industry will sponsor these courses. First set of Graduates
with integrated degrees will pass out in 2019
✓ Graduates from these courses will need another Six years of
rigorous practice to be ready ( 2025 )
Mission Startup : March ‘ 2015
Creation of a few hundred System Designers & Project
Integration specialists is Critical

Support Requested From Govt. of India
❑ Support For the DEZs Concept and its recognition as a High Priority Govt. of India project
directly under the Prime Ministers Office ( like ISRO )
❑ Necessary Changes to the Defence Procurement Procedures to enable DEZs
( Scrapping of department of defence production + Big changes in the DPP )
❑ Identification of appropriate sites in Six states for setting up DEZs / Defence Industrial
Corridors with private participation with several private parties participating under Open
Competitive Bidding

DEZ Project Execution Schedule ( Tentative )
ZeroDate
01stJan‘2015
Jan‘2016
Jan‘2017
Jan‘2018
Jan‘2019
Jan‘2020
Jan‘2021
Jan‘2022
Jan‘2023
1. Set up Committee to Re-Write 6 Page, Simplified Defence Procurement Procedure
2. Develop PPP Framework and Documents for farming out DEZ projects under Public Private Partnerships
3. Start process for identifying Six potential sites for DEZs across India. Two of these will at coastal locations.
4. Issue Request For Qualification ( RFQ ) for Indian promoter led consortiums
5. Issue Request For Proposals ( RFP ) to qualified parties
6. Contract award to 3 consortiums under Phase I
Examine bids & award 30 Year , renewable
BOO concessions
Construction of 3 DEZ’s under Phase I
Phase I
Commissioning
Construction of 3 DEZ’s under Phase II
Phase II
Commissioning
Condition Precedent to Project / Criticial design requirement :
DEZ Project to be placed directly under the supervision of the PMO ( Similar to ISRO )

Thank You For Your Attention
A – 2, Dattaguru
Deonar Village Road
Deonar, Mumbai – 400088
Ph : 91- 22-27707623, 07045414679
Email : ashish.puntambekar@gmail.com
nataraja.foundation@gmail.com

Presentation defence economic_zones_rev_02_final_draft

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