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Eye on Defence January 2015
1. Contents title
Contents subjects
December 2014
Eye on Defence
Dear readers,
The Ministry of Defence (MoD) of the Government of India has announced
a number of programs that involve indigenous manufacture of defence
equipment, including under the “Buy Indian,” “Make” and “Buy and Make
Indian” categories. The helicopter-acquisition programs, especially the
Naval Utility Helicopter and Reconnaissance & Surveillance Helicopter
program (Army), have generated both excitement and introspection.
This edition of Eye on Defence looks at the current inventory of the
Indian armed forces in terms of the force readiness of its helicopters and also details the various
helicopter-acquisition programs in the pipeline. The probable competitors of these programs are
highlighted along with a capability map of Indian companies engaged in the segment. While the
level of success these programs may achieve will only be revealed in time, they have provided
India’s private sector an unprecedented opportunity to graduate to system integrators in
partnership with foreign technology partners.
The new Government has made self-reliance in defence, indigenisation and growth of the country’s
defence industrial base the cornerstone of its defence policy. Its project-related announcements
under predominantly indigenous manufacture categories are a step in this direction. However,
there is a lot to be done to ensure the success of these programs from an operational standpoint.
The processes enshrined in the Defence Procurement Procedures (DPP) for the categories “Buy
Indian” and “Make” have significant room for improvement and are yet to be tested in acquisition
projects. This edition of Eye on Defence studies these processes and make recommendations for
improvement of these processes from an operational point of view.
Among our regular sections, we include relevant details about industrial license applicants, RFIs/
RFPs released, new projects and investments, joint ventures and alliances, country-level deals and
the latest buzz in the industry.
I hope you find this issue useful. It has been our constant endeavour to make this publication
increasingly relevant to you, and we would appreciate your comments and suggestions on this.
We would like to take this opportunity to wish our readers a prosperous and happy new year!
K. Ganesh Raj
Partner and Leader
Aerospace and Defence practice
Contents
Introduction 2
India’s goal of achieving
self-reliance and Defence
Procurement Procedures (DPP) 4
Acquisition and development:
military helicopters in India 7
Request for information
(October–December 2014) 14
Request for proposal
(October–December 2014) 15
New projects/investments/
contracts 16
List of Industrial Licenses (ILs)
filed for September 2014–
October 2014 17
Industry buzz 25
2. 2 | Eye on Defence
The MoD follows Defence Procurement Procedures to
meet its capital procurement needs in conformity with
the General Financial Rules. The first such document was
released in 2005. Since then, successive refinements have
been incorporated in new versions of the DPP. Ever since
they were first enshrined in DPP 2005, the objectives of the
procedures have been the same — “to ensure expeditious
procurement of the approved requirements of the Armed
Forces in terms of capabilities sought and time frame
prescribed by optimally utilizing the allocated budgetary
resources. While achieving the same, it will demonstrate
the highest degree of probity and public accountability,
transparency in operations, free competition and
impartiality. In addition, the goal of achieving self-reliance in
defence equipment will be kept in mind.”
Because the DPP has been evolving ever since it was set
up in 2005, the MoD has had to perform a balancing act,
and in the process, has not been able to fully comply with
the tenets enshrined in its own objectives. Expeditious
procurement and the degree of probity and accountability
have suffered while reactive measures such as “blacklisting”
of companies and “abeyance orders” have led to confusion.
It is perhaps pertinent to note that the most important tenet
of self-reliance has suffered due to lack of procedural clarity
and frequent apathy until last year when granting priority to
procurement from indigenous sources was included in the
DPP 2013.
While categorization of projects under “Buy Indian,”
“Make” and “Buy and Make Indian” is a step in the right
direction, much needs to be done to ensure the operational
success of these models. This paper aims to highlight the
lacunae in the existing process of Buy Indian,” “Make” while
recommending some changes that may bring more clarity
and accuracy to the processes discussed.
Buy Indian
Let us analyze “Buy Indian,” for example, and see how this
is formulated. Incidentally, this category is to be considered
the preferred mode of procurement. “Buy Indian” mandates
indigenous content of a minimum of 30% on a cost basis
(definition of indigenous content provided in Appendix F to
Chapter 1 of the DPP 2013). However, there is no clarity
on the guidelines laid down to arrive at this categorization.
Moreover, the private sector’s participation in the planning
India’s goal of achieving
self-reliance and the DPP
and categorization processes requires definition. Criteria
also need to be defined (e.g., indigenous development with a
certain level of success or if this technology is available with
any research agencies with a certain level of technology
readiness or if the Indian industry has the capability
to manufacture even with incremental support) and
communicated to the most important stakeholders, i.e., the
armed forces, the private sector and the DRDO, to ensure
ownership of the process.
Buy Indian and Buy Global: In terms of “indigenous
content,” the DPP does not differentiate between, “Buy
Indian” and “Buy Global.” In the case of “Buy Indian,” 30%
indigenous content is specified and in the case of “Buy
Global,” a minimum 30% offsets is mandated, though not in
all cases. This means that any foreign OEM can participate
in a RFP and provide equipment with 70% foreign content
while being compliant with the provisions of “Buy Indian.”
Therefore, “Buy Indian,” in its present form, is a misnomer
and needs tweaking, especially in the context of the present
Government’s concept of “Make in India” and “Made in
India.” President Abdul Kalam had suggested reversal of the
trend of 30:70, but we are still stuck at it.
How can this change be brought about? To achieve this, we
need to revisit the definition of “Buy Indian,” as outlined in
the DPP (which has remained unchanged from DPP 2005
till DPP 2013). To quote the DPP 2013, “Buy Indian” must
have a minimum of 30% indigenous content on a cost basis.
This clearly implies that the minimum indigenous content
expected is 30%, and definitely this is not the maximum
expected indigenous content. If this were true, then why is
it that the MoD has not specified even a single “Buy Indian”
proposal, with a requirement for indigenous content of more
than 30%, till date? This is due to two major factors:
• The MoD needs to be constantly updated, since officials
are posted on a rotation basis and there has been no
development of the concept of “Systemic Knowledge” or
any precedence available. There are often cases where
considerable development has already taken place. All
such proposals may be categorized as “Buy Indian” with
the prescribed indigenous content, which may be more
than 60% in many cases.
• The private sector is hamstrung by the minimum
requirement of indigenous content without the adequate
support of the Government or the DPSUs (which are in
fact competing with the private sector for some projects).
Policies should incentivize and not penalize.
3. 3Eye on Defence |
While the MoD tries to balance the dual objectives of helping
the armed forces achieve operational readiness at the
earliest and ensure a vibrant indigenous defence industrial
base, the move to award major contracts under categories
including indigenous production is laudable. However, intent
without action is detrimental to the cause. In the context of
indigenization, the MoD must realize, appreciate and make
provision for the fact that aerospace grade raw materials
and some core technologies necessary for modern systems
are unavailable indigenously. There is some flexibility
required in this aspect as well as the systemic support of
the Government to ensure transfer of technology, and more
importantly, its absorption. The DRDO has a key role to
play in this. Should this not take place, despite considerable
efforts made in indigenous development, and categorization
of projects in the Buy Indian (or Buy and Make Indian)
category, foreign companies may find an Indian company
willing to front end the tender by just a minimum 30%
indigenous content and beat the price, as against a genuine
4. 4 | Eye on Defence
indigenous product that may have a higher amount of
indigenous content
Where else does the fault lie? There is a basic problem
arising out from the larger issue of the planning process
— it fails to acknowledge self-reliance as a reality, as is
evident from minimum order quantities (MoQ). For example,
whereas an MoQ of 126 aircraft was granted in the case
of the Medium Multi Role Combat Aircraft MMRCA, a
mere 20 was granted for the Light Combat Aircraft LCA’s
development program. How then can the program be
expected to be a success? Can there be a model of buyers’
assurance for relevant developmental programs, which
will then incentivize the private industry to make upfront
investments.
“Make” procedure
The “Make” procedure, as enshrined in the DPP, is
complicated and difficult to understand and execute. This
is evident, in part, by the failure of many “Make” project to
be conceived, even after eight years of it being introduced
in the DPP. Some key aspects of this are discussed in the
subsequent paragraphs.
Discussions on the “Make” procedure were initiated in 2003,
and it took more than three years to finally include the first
procedure as part of DPP 2006. The concept was that the
DRDO was not efficient in conceiving projects that required
designing and development, and therefore, such large
projects with a huge financial outgo needed to be handled
by the SHQs/MoD. However, even after eight years of the
procedure being in practice, not a single project has been
conceived thus far. Therefore, fundamental changes may be
required in the procedure and merely tweaking itmay not
yield the desired results.
Risk ability: The procedure is a high risk for industry and
low risk for the Government. The need for procedural checks
before funds can be released can be a deterrent rather
than an incentive. Therefore, the Government needs to
demonstrate a greater risk taking ability in the interest of
the project.
Integrated project Management Teams (IPMTs) vs project
director: The concept of integrated PMTs is to replace the
project directors and program directors of DRDO ‘Make’
programs by personnel from within the MoD. The issue that
arises here is that a floating population may not be able to
handle long gestation projects and the period indicated (e.g.,
three years) is considered a routine insertion, since anyway,
the authorized tenure of any officer in armed forces is three
years and all others have longer tenures. Bureaucrats, who
handle such projects at the decision-making levels, also have
shorter tenures.
The IPMTs must be fully empowered and enabled to take
informed decisions in time on timely completion of projects.
Other committees or agencies must only exist in advisory
roles. IPMTs must have an indefinite tenure, with defined
milestones to be achieved in definite time periods before
any change can be incorporated. All time overruns must be
accommodated in this tenure.
Domain knowledge: The IPMT does not and cannot have
domain knowledge in program management and related
functions. While the various committees are in an advisory
capacity, the IPMT needs to be enabled with greater powers
to be able to take informed decisions. However, it will always
lack in domain knowledge in design and development, which
are far more complicated than mere print to manufacture.
The risk-taking ability of program directors/the IPMT, which
is in direct proportion to their domain knowledge, has a
strong bearing on the success of a program.
IPRs and their custody: Intellectual Property (IP) created
must remain with the agency that has developed it.
Government has no right to claim the IP just because it has
funded it. Moreover, development agencies must have the
liberty to use the IP so developed for commercialization for
supply within the country. However, a control mechanism
can be established for exports, since the technology belongs
to the country as a national asset.
Finance/Advisor cost: These are really not required in the
5. 5Eye on Defence |
feasibility study, since it is all about capability-building.
Inclusion of personnel from the Finance Department must
be on a need basis and not at each stage, since this has the
potential to cause delays in capability-building.
MSME: Merely paying lip service to the inclusion of MSME
organizations in the feasibility study may not serve the
purpose of developing them. The “Make” procedure may
mandate a minimum percentage of sourcing from MSMEs
by value in each project. This must be a necessary condition
in the Expressioin of Interest (EOI) and subsequently in
the Detailed Project report (DPR). Such a mandate may be
included in all “Make” projects.
Time and cost overruns: Time and cost overruns are
mainly a function of the decision-making ability of the IPMT.
Projects normally take a different shape on the ground than
as they are seen on paper. Maneuvering various aspects
of a project, such as validations/variations of designs,
innovative solutions, market volatility, raw material supply
Vs demand, integration of various sub systems and so on do
have tremendous effect on the project. Since no advance
funds are allocated by the government to the development
agencies, huge risk taking ability from industry cannot be
expected overnight.
Categories defined under “Make in India”:
• Categories B and C: Since the Government is not
funding these, they need to be considered under “Buy
Indian” with the provision that all testing facilities
will be made available, free of cost. There may be no
restriction of the number of Developement Agencies
(DA), since this would have no impact on costs as far
as the Government is concerned. More companies
should be encouraged to come forward for No Cost No
Commitement (NCNC) testing of prototypes. At the
critical mass of projects, RFPs can be issued without
waiting for complete finalization of all the stages.
• Category C: There must be a definite incentive for
Category B and Category C type of projects, especially
the former. Once an industry has successfully
demonstrated a product as desired, it can be
categorized as “priority lien” over the product. Such
industries and products must be included under “BNE/
BFE” in all acquisitions that include these. There is no
need for the primes of such contracts to be procured
from any other source when a tested one is available.
Design and development: This is the most crucial part
of the process and there should not be any restriction on
the essential parameters of proven products and neither
are they desirable for unproven ones. Such restrictions
inhibit the requirement of capability-building and the
armed services may have to settle for less, even in “Make”
programs that have long gestation periods.
Accountability: Fixing of accountability in collegiate
decision-making for a floating population (unique
combination) is difficult. It is important to device a
mechanism to ensure accountability and the IPMT must be
held accountable for delays, time and cost overruns, non-
starters or release of funds in time.
To summarize, as the Government embarks on the
ambitious project of achieving self-reliance in defence
production, it must ensure that the procedural and
structural environment reflects the intent of its policies.
7. Acquisition and development:
military helicopters in India
Profile of the existing inventory
The Indian Air Force (IAF), Indian Army (IA) and Indian Navy
(IN) have been operating different types of helicopters for
attack, search, rescue and relief operations over the years.
Presently, the Indian armed forces hold in their inventory
more than 750 helicopters of all types and classes, including
some specialized ones. Most of the requirements in the
helicopter segment are met through foreign procurement,
either directly or by transfer of technology.
The majority of India’s military helicopters, nearly 78%,
are light or medium lift transport ones and include the
Aérospatiale Alouette and Lama Helicopters, which are
called the Chetak or Cheetah and Mi series.
The shelf life/life cycle of a typical helicopter is around
15–20 years. A large section of India’s helicopter fleet,
comprising the Chetak or Cheetah and Mi series helicopters,
are more than 20 years old. The figure above depicts the
7Eye on Defence |
helicopter platforms of the three defence services and their
vintage models.
Indian Air Force
The current helicopter fleet of the IAF mainly comprises Mi
series helicopters (Mi-8/Mi-17 variants), Dhruvs, Chetaks/
Cheetahs/Cheetals. Mi 25/35 are used for the attack role
and heavy lift Mi-26 helicopters for special tasks. Nearly 78%
of the helicopters have already completed their prescribed
life-cycles and have gone through Total Technical Life (TTL)
extension to extend their lives. The IAF’s helicopter fleet
currently stands at 62% against its current operational
requirements. The HAL Dhruv —Advanced Light Helicopter is
the latest entrant in the IAF and is being used currently.
Indian Army
The Army Aviation Corps (AAC) currently flies more than
230 helicopters. Its inventory predominantly consists of
utility helicopters — the 100 HAL Chetak (Alouette II) and 50
HAL Cheetah (Alouette III) helicopters for light surveillance
and observation purposes. The army is operating with
slightly more than 70% of the helicopters against its current
operational requirements. Nearly 60% of the helicopters
have already completed their prescribed life-cycles and TTL
extension has been carried out on them to extend their lives.
Indian Navy
The Navy has around 148 helicopters operating from shore
bases and on-board warships including the aircraft carrier
INS Virat, which embarks a complement of Sea Harriers and
Kamov Ka-31s, Sea King and Chetak helicopters. The Kamov
Ka-31s provide Airborne Early Warning (AEW) support for
the fleet and the Sea King Mk 42A/B and Kamov Ka-25/28
are used in anti-submarine warfare.
Indian Coast Guard (ICG)
At present, the ICG has an inventory of 17 Chetak single-
engine helicopters and 9 twin-engine Dhruv advanced
light helicopters — all supplied by Hindustan Aeronautics
Ltd. (HAL). Around 82% of the Chetak helicopters in the
inventory are more than 15 years old.
Source: Compiled from Sipri database accessed between
1 December 2014 and 15 December 2014
Present fleet of helicopters with the Indian Armed Forces
IA
30%
IN
20%
IAF
50%
Utility helicopter
Qty 95+ Nos
Anti Submarine Warfare
Qty 55+ Nos
Attack helicopters
Qty 23+ Nos
Utility helicopters
Qty 155+ Nos
Utility helicopters
Qty 200+ Nos
Transport helicopters
Qty 215+ Nos
Attack helicopters
Qty 30+ Nos
Vintage spread Indian military helicopters
57%
30%
16%
30%
27% 40%
Existing Platfrom Desired Platform
20+ years 10-20 Years 0-10 years
8. 8 | Eye on Defence
Market opportunity
The armed forces have now expressed a strong desire
to quickly overcome the gaps in the desired number
of helicopters. The MoD has responded by tying this
procurement to its objective of giving a boost to indigenous
manufacturing and to encourage the involvement of the
private sector in defence manufacturing. It has initiated a
series of contracts for the country’s private sector under the
Buy-Make category of the DPP. Indian companies will need
to partner with global Original Equipment Manufacturers
(OEMs) to meet this demand.
Under the Buy and Make India category, Indian companies
are expected to ensure a minimum percentage of
indigenization in helicopters assembled in the country
through transfer of technology from foreign OEMs. While
this seems to be a step in the right direction, there are
planning and operational issues that must be ironed out
before the relatively new Buy and Make India categories
can achieve success. Partnerships with global OEMs are
expected to motivate private companies to undertake
complex manufacturing of complete defence systems.
Private enterprises have traditionally held back from
such activities due to issues relating to financial viability,
technical know-how and their lack of experience in
developing complete defence products.
Key programmes in the pipeline:
• Acquisition of 440 Reconnaissance and Surveillance
(RSH) helicopters for the Indian Air Force and Indian
Army.
• Procurement of 100 Naval Utility helicopters
9. 9Eye on Defence |
Apart from the above, there are various on-going and future programmes that are likely to provide opportunities to the
private sector, which can participate as component/sub-system suppliers or offset partners. A brief summary of the major on-
going and future helicopter-procurement programmes of the three defence services are as follows:
Major on-going and future procurement
Indian
Airforce
Mi-17 V-5 59+12* US$1.9 billion First batch of 19 Mi-17 V-5 has been delivered. The
remaining 40 helicopters are to be supplied by the end of
2015.
* Nos. 12 for Ministry of Home Affairs
Light utility helicopter 125 Over US$2 billion Combined order of 384 units for IAF and IA
Likely foreign contenders: Kamov, Airbus, Sikorsky, Bell
Helicopters and Augusta Westland
Indian contenders: Tata Group, Mahindra & Mahindra
Group of Industries, Larsen & Toubro, Bharat Forge, Punj
Lloyd, Taneja Aerospace and HAL
ALH Dhruv Mk III 38 US$2.5 billion Combined order for IAF and IA (105 for IA and 54 for IAF)
Deliveries ongoing from HALRudra Mk IV Weaponised
Utility Helicopter
16
Attack helicopters 22 US$1.4 billion Apache AH 64D of Boeing declared as L1 helicopter;
commercial negotiation ongoing; option for additional
nos.: 22
Heavy-lift helicopters 15 US$650 million Boeing’s Chinook selected over Russia’s Mi 26T2 as L1;
commercial negotiations ongoing
VVIP helicopters 12 US$900 million Three of the 12 helicopters already delivered; deliveries of
others stalled
Light combat helicopters 65 US$1-1.5 billion -
composite figure
Combined order of 179 for IAF and IA; to be manufactured
by HAL, which has built two prototypes till date
Indian Army
Light combat helicopters 114 US$1–1.5 billion -
composite figure
Combined order of 179 for IAF and IA; To be made by
HAL. As of now, HAL has built two prototypes.
ALH Dhruv Mk III 45 US$2.5 billion Combined order of 159 units for IAF and IA, with 83 Dhruv
Mark III utility helicopters and other 76 Mk IV helicoptersRudra Mk IV 60
Light utility helicopters 259 Over US$2 billion Combined order of 384 units for IAF and IA
Likely foreign contenders: Kamov, Airbus, Sikorsky and
Bell Helicopters
Indian contenders: Tata Group, Mahindra & Mahindra
Group of Industries, Larsen & Toubro, Bharat Forge, Punj
Lloyd, Taneja Aerospace, HAL
Indian Navy
Multi-Role Helicopter (MRH) 16 + 44
follow-on order
US$1 billion US S-70 Bravo from Sikorsky shortlisted; CNC to now
commence
Naval Multi-Role Helicopter
(NMRH)
75 US$4 billion RFI issued on 8 October 2014
Likely foreign contenders: Eurocopter, Bell Helicopter,
Sikorsky and Kamov Co.
Kamov Ka - 31 5 US$195-200
million
Approved by Government, Deal yet to be signed
ALH Dhruv 32 US$1.2 billion Combined order for Indian Navy and Coast Guard
DAC clearance given recently
Source: Compiled by Q-Tech Synergy and EY from various open sources accessed between 1 November 2014
and 15 December 2014
10. 10 | Eye on Defence
A large proportion of the current helicopter fleet of the
armed forces will be reaching the end of its operational
lives in the near future, leading to an acute shortfall in the
number of operational helicopters. The Defence Ministry
has plans to add more than 1000 rotary wing aircraft of
different categories (valued at billions of dollars) to the
current aircraft capacity of the armed forces in the coming
decade to meet this deficiency. The figures projected
for procurement include 500 helicopters by the IA, 350
helicopters by the IAF, and 200 helicopters by the IN
and ICG. If we include requirements from civil sector, the
figure will cross the 2,000 mark. The numbers justify the
investment and the long-term sustenance vision of India’s
private sector.
1000+ Helicopters by 2027
440
179
16+75
22
181
59
100
Attack Heavy
lift
VVIP
15 9
MI 17 MAH Naval
Utility
LUH Dhruv LCH
Source: Compiled by Q-Tech Synergy and EY from various open sources
accessed between 1 November 2014 and 15 December 2014
11. 11Eye on Defence |
Furthermore, keeping in view the procurements in the
pipeline mentioned above, it is projected that the armed
forces are likely to spend around US$15-20 billion
(INR550–1100 billion) on acquisition of military helicopters
till 2027. Taking into consideration the civil helicopter
market, the figure zooms up to US$30-40 billion (INR1650–
2200 billion) in the next 15 years. This definitely represents
an opportunity for India’s private sector in coming years. It
needs to grasp this opportunity and gear up to tap it.
India’s aerospace industry
As far as indigenous capability to design, develop and
produce helicopters is concerned, government-owned
HAL has been the leader. HAL’s Helicopter Division has
produced 336 Chetak and 246 Cheetah helicopters so far
and overhauled more than 200 helicopters of both the
types. It has also undertaken Category “B” repairs of more
than 75 helicopters and put them back into operation. HAL
is currently developing and producing variants of the ALH
Dhruv for the armed forces and civil services.
HAL has acquired 610 acres of land in the Tumakuru
district of Karnataka, to meet the requirements of the
Light Utility Helicopter program (designated by the
MoD as the RSH program), and is expected to provide
employment to 3000 people at this facility. HAL had
frozen the design of its indigenously produced LUH in
2012 and has completed assembling its Ground Test
vehicle. It is expected to utilise its experience in the
areas of engines, gearboxes, cockpits and avionics
from the Dhruv project and data bank from flight test
PGMS of Dhruv, Rudra and LCH. It is now in the process
of development of rotor blades at its Composite
Manufacturing Division
The private sector’s participation in the aerospace/
helicopter-manufacturing segment has been as suppliers,
fabricators to HAL and OEMs so far. Some major private
players intend to develop the technological capabilities
required to undertake the complex manufacturing
required in the sector, but they are likely to start as
system integrators or recipients of technology.
The major private players today include the Tata Group,
Reliance Industry Limited (RIL), Mahindra, Magnum
Aviation, Larsen and Turbo (L&T), Max Aero Space, Taneja
Aerospace and Dynamatics Technologies, etc. Apart from
these, there are some private companies that have been
issued Industrial licences for helicopter sub-systems/
avionics. Major Indian companies such the TATA group,
Reliance, Mahindra and L&T have been eager to join the
helicopter-manufacturing industry for a long time.
Indian Military Helicopter Market Projection - 2014-2017
IA 500 units
48%
IN 200 units
19%
IAF 350 units
33%
Source: Compiled by Q-Tech Synergy and EY from various open sources
accessed between 1 November 2014 and 15 December 2014
12. 12 | Eye on Defence
Most helicopter platforms are imported from major global
OEMs such as Boeing, Airbus, Kamov, Bell Helicopter,
Sikorsky, Eurocopter, etc. These OEMs have a presence
in the Indian market and have set up JVs or technical
centres in the country. Overseas companies such as
Airbus, Alten, Altran, Assystem, CAP GEMINI, Honeywell,
GE and Safran have also set up their own captive centres
in India to cater to the growing need for engineering
services in the country. These companies have plans to
expand their operations in India further and some have
tied up with Indian players.
TATA: Tata Advanced Systems Limited (TASL) is the only
private company in India to have an assembly line to
manufacture helicopter cabins. In 2009, TASL tied up with
US-based Sikorsky to make passenger helicopter S-92
cabins for the company at its facility in Hyderabad. These
cabins are meant to supply Sikorsky’s export orders. Tata
Advanced Systems and the Sikorsky Aircraft Corporation
already have a joint venture in India, Tara Aerospace, to
make a range of sub-components and parts for aircraft
and helicopters, including for S-92. TASL aims to ship 48
assembled kits.
Dynamatics Technologies: Dynamatics Technologies
has been making airframe components and details
parts for Bell 407 at Dynamatic Park, Peenya, since
December 2013. The company has already successfully
completed the First Article Acceptance of Aft Fuselage
detail parts for Bell 407 and recently commenced
production for shipment to Bell’s aircraft assembly site
at Mirabel, Canada. It has also signed a Memorandum of
Understanding (MoU) and a Model Purchase Contract with
Boeing for manufacture of Aft Pylon and Cargo Ramp
Assemblies for Boeing’s CH-47F Chinook helicopter. Work
is scheduled to commence by the end of 2014
Bell Helicopters (part of the Textron Group in the US)
intends to increase its sourcing from Indian companies,
and Dynamatics is at the centre of its strategy. Bell may
also look at assembling complete cabins for Bell 407 in
India in the future.
Taneja Aerospace and Aviation Limited (TAAL):
TAAL is a recognized manufacturer of aero structures,
engineering solutions and aircraft maintenance support
systems. While its main customers include Hindustan
Aeronautics Limited (HAL), ISRO, NAL and Aeronautical
Development Establishment (ADE), TAAL has also
upgraded Mi 17 helicopters. It has been recently awarded
a contract to maintain and repair Mig 29 aircraft.
13. 13Eye on Defence |
L&T: L&T has been engaged in the fields of design,
manufacture and supply of components, subsystems
and systems for aerospace applications, but not in
manufacturing helicopter parts.
Mahindra Aerospace: A relatively a new player, at present
in partnership with the National Aerospace Laboratories
(NAL), the company is developing a new five-seat light-
utility aircraft. It is also working on a new 10-seat turbine
and an 18-seat twin turbine aircraft.
Reliance Industry Limited (RIL): RIL has entered tie-
ups with global OEMs, Boeing and Dassault Aviation, to
manufacture the latters’ sub-systems/components under
Indian offset programmes relating to defence deals. RIL
has tied up with Boeing to manufacture the components
of the P8I LRMR and C-17 military transport aircraft,
which is being developed for the Indian Air Force and
Indian Navy, respectively. Furthermore, it is working on
a similar collaboration for Apache attack helicopters and
Chinook heavy-lift helicopters. However, its manufacturing
operations are yet to take off.
Several SMEs including major Indian IT service companies
such as Infosys, Wipro, Mahindra-Satyam, TCS, BAeHAL,
QUEST (now Aques), CADES and GENSER have entered
the aerospace engineering design services business
(including to meet software- and system-related needs)
and are looking at upcoming helicopter programs with
hope.
Conclusion
The Government has taken a step in the right direction
to involve the private sector in helicopter manufacturing
by implementing two major helicopter programmes
for it. The coming years are likely to see procurement
programmes that can be bought under the “Buy and
Make” category. Opening up of indigenous helicopter
design and production capability to the private sector is
expected to reduce delays and inefficiencies, and widen
the manufacturing base and competition in the country.
In addition, it may also help to reduce the cost of leading
edge technologies and products due to export-related
possibilities and economies of scale.
However, the Government should ensure that it clearly
understands the difficulties new private players
may face in transitioning to manufacture of military
helicopter integrators and that the foreseen fleet size
(indicated in tenders) should be adequate for private
companies to bid for and lead to a comprehensive
and satisfactory industrial return oriented to serious
transfer of technology. The LUH project is likely to be a
test case for the “Buy and Make Indian” category.
References:
• Man Mohan, “Defence deals: Indian pvt sector joins hands
with foreign firms”, The Tribune, 6 June 2014
• http://www.sipri.org/, aerospace and defence related
custom searches, accessed 5 September 2014
• Ajai Shukla, “’Indian’ Dhruv Copter get Italian makeover”,
Business Standard, 13 September 2010
14. 14 | Eye on Defence
Date of issue RFI details Response
date
Issued by Defence
service
2 Dec 2014 Thermal night sights for assault weapons and un-
cooled thermal night sights for special forces
15 Jan 2015 Directorate of Special
Ops & Diving
For IN
2 Dec 2014 Preparation of detailed project report and
consultancy for Naval Aviation Management
Systems (NAMS)
30 Jan 2015 Directorate of Air
Projects and Plans
For IN
28 Nov 2014 Passive surveillance 28 Dec 2014 Directorate of ASR (EW ) For IN
20 Nov 2014 Uncooled thermal imager- based Drivers’ Night Sight
(DNS) for T 90 Tank
20 Dec 2014 Directorate of General
Mechanical Forces
For IAF
13 Nov 2014 Mini trucks 12 Dec 2014 MGO branch For IA
5 Nov 2014 De-militarisation of obsolete/unserviceable
explosives
3 Dec 2014 MGO branch For IA
5 Nov 2014 Tracked Light Dozer (TLD) 12 Dec 2014 E-in-C branch For IA
31 Oct 2014 Integrated ASW defence suite 15 Nov 2014 Principal Director Staff
Requirements, IN
For IN
31 Oct 2014 Reconnaissance and Surveillance (RSH) helicopters 23 Dec 2014 Army Aviation For IA
28 Oct 2014 Construction of four Multi- Purpose Support Vessels
(MPVs)
11 Dec 2014 Directorate of Ship
Production
For IN
22 Oct 2014 Assault Rifles, Qty.- 32,000 Nos. 21 Nov
2014 Date
extended to 2
JAN 2015
Directorate General of
Perspective Planning AIR
HQ (VB)
For IA
21 Oct 2014 Comprehensive upgrade of BMP 2/2K for IA 15 Nov 2014 DGMF For IA
15 Oct 2014 Remote actuator of influence mines 17 Nov 2014 MGO branch/MGO
COORD/PPO
For IA
8 Oct 2014 20 mm SAPHEI ammunition 5 Nov 2014 MGO PPO For IA
8 Oct 2014 Naval Utility Helicopter (NUHs), simulators and
associated equipment
24 Nov 2014 Directorate of
Information Technology
For IN
Request for information
(October–December 2014)
15. 15Eye on Defence |
Date of
issue
RFP details Response
date
Issued by Remarks
14 Dec 2014 Bullet-proof jackets, qty —2058 30 Dec 2014 --- For IA
9 Dec 2014 Automatic electronic warning system 26 Dec 2014 Air Force Station Bidar For IAF
9 Dec 2014 Air rifles and pistols, ammunition and allied
accessories
22 Dec 2014 282 Medium Regiment For IA
7 Dec 2014 Tactical vests, qty — 2000 30 Dec 2014 GOC-in-C,HQ Northern Command For IA
4 Dec 2014 Heat exchanger air to air aircraft for Mirage
aircraft — qty 4
1 Jan 2015 ACAS (Eng-B) For IAF
4 Dec 2014 Full-body protector, qty — 5200 2 Jan 2015 Commandant Proc- cell Director
General
For CRPF
3 Dec 2014 Low-tech ammunition for Assam Rifles 31 Dec 2014 HQ DGAR For Assam
Rifles
29 Nov 2014 Counter Radio-Ied System (CRIS), (IS), qty
—182
29 Dec 2014 GOC-in-C, Northern Command For IA
26 Nov 2014 Ammunition pouches and grenades made in
disruptive and RAF patterns
5 Feb 2015 --- For CRPF
26 Nov 2014 Surveillance-ROV (SROV) for detection of
CBRN
16 Dec 2014 Research Development
Establishment
Issued by
DRDO
25 Nov 2014 Personnel protective gear Items 15 Dec 2014 --- For ITBP
25 Nov 2014 22 free rifle Anschutz and accessories 8 Jan 2015 NCC Group For IA
19 Nov 2014 NBCD and fire-fighting Items 3 Dec 2014 Coast Guard Region (NW) For ICG
18 Nov 2014 Electro stun guns 26 Dec 2014 DG, CISF For IA
14 Nov 2014 V/UHF radio (MXF 4027 V2) 3 Dec 2014 CABS*Centre For Air Borne
System
Issued by
DRDO
14 Nov 2014 Impact Fuze DPICM to ARDE 27 Nov 2014 ARDE*Armament Research &
Development Establishment
Issued by
DRDO
14 Nov 2014 Weapon-mounted target-acquisition system
and image- acquisition device, qty 4
3 Dec 2014 OIC ACSFP, HQ Western
Command
For IA
12 Nov 2014 NBC filter type 2 Dec 2014 *Research & Development
Establishment —RDE(E)
issued by
DRDO
12 Nov 2014 Security equipment (multifunctional electronic
target system, qty 3 six-lane and qty1 four-
lane
16 May Director
ACSFP CELL
For IA
12 Nov 2014 EOI for development of active protection
system for armoured fighting vehicles
29 Jan 2015 *Combat Vehicles Research &
Development Estt. (CVRDE)
Issued by
DRDO
5 Nov 2014 For IAF 13 May GOC-in-C, HQ Northern
Command
For IA
Qty: 6
3 Nov 2014 Integrated weapon training simulator 18 Nov 2014 Regimental Centre Kamptee For IA
28 Oct 2014 Hand-held thermal imager laser range 16 Dec 2014 Directorate of Special Ops &
Diving
For IN
Request for proposal
(October–December 2014)
16. 16 | Eye on Defence
28 Oct 2014 Reflex sight for 5.56 mm Tavor assault rifle,
qty200
8 Dec 2014 HQ Northern Command For IA
28 Oct 2014 Border surveillance management system, qty
6
8 Dec 2014 HQ Northern Command For IA
27 Oct 2014 Small arms interactive console simulator, qty3 6 Nov 2014 ACC&S For IA
23 Oct 2014 Development and supply of PEC radar
interface
18 Nov 2014 For IN
20 Oct 2014 Thermo vision camera 20 Nov 2014 Centre for High Energy Systems
and Sciences
Issued by
DRDO
20 Oct 2014 EOI for indigenous development of centrifugal
pumps for Talwar Class ships
14 Nov 2014 Directorate of Indigenisation For IN
18 Oct 2014 Deep search metal detector, qty199 19 Nov 2014 ACSFP Cell Udhampur For IA
17 Oct 2014 V/UHF radio (MXF 4027 V2) 29 Oct 2014 *Centre For Air Borne System
(CABS)
Issued by
DRDO
14-Oct-2014 Life jackets, qty 2000 29 Oct 2014 OIC ACSFP, GS (Jt Ops),
Chandimandir
For IA
11 Oct 2014 SAKRIYA radio and cell phone jammer counter
IED system, qty 22
7 Nov 2014 GOC-in-C For IA
10-Oct-2014 Bomb suit, qty 6 26 Nov 2014 DG SSB For SSB
8 Oct 2014 Replacement of existing UTD-20 engine and
manual transmission for Infantry Combat
Vehicle (ICV) BMP-I
1 Dec 2014 EME Dte For IA
4 Oct 2014 Gun powder for 155MM ammunition 28 Oct 2014 O.F. Bhandara Issued by
OFB
1 Oct 2014 Night sight for 5.56MM Galil assault rifle, qty
25
11 Nov 2014 HQ Northern Command Arty
Branch
For IA
Request for proposal
(October–December 2014) (cont’d.)
17. 17Eye on Defence |
List of Industrial Licenses (ILs) filed
for September 2014–October 2014
Application no. and date Name of applicant Items manufactured
306
16/09/2014
Harish Viswamurthy Harohalli RF and MW system for use in radar and
EW systems; high-power transmitters
including travelling wave, tube amplifiers,
microwave power
305
05/09/2014
Cecilia Dsouza Optical instruments and equipment
304
05/09/2014
Nathu Lal Choudhary Explosive class 2 (bulk emulsion)
303
05/09/2014
Dr. Amarnath Gupta Military fuses of all types including filing
and assembling
302
05/09/2014
Jiju John Parts and accessories of articles from
headings 9301 to 9304
18. 18 | Eye on Defence
New projects/investments/
contracts
Name of entity Project details Value
Government of India • ► The Government has cleared a proposal to build six stealth
submarines at a cost of INR500–600 billion each.
• ► It will allow foreign companies to participate in the program
through JVs with Indian enterprises.
• ► DCNS of France, Kockums of Sweden, Rosoboron Export of
Russia and ThyssenKrupp of Germany are in talks with Indian
companies to provide technology and supervise production of
submarines in the country.
INR3,000 billion
Government and Airbus Defence
and Space
• ► India has entered a deal with Airbus Defence and Space for
delivery of a dedicated facility in the country to maintain and
repair its submarine fleet periscopes.
• ► Airbus is partnering with Tata Consultancy Services and H&H
Precision Private Limited to set up the facility. The project is due
to be completed in September 2016.
• ► Setting up of this facility is the first step in the establishment
of an in-country service capability for India’s future naval
operations.
INR988 million
Indian Air Force (IAF) • ► The IAF is likely to procure 106 more Pilatus PC-7 basic trainer
aircraft, adding to its current fleet of 53.
• ► The largest number of PC-7 aircraft will be produced in India
with a license from the Swiss aircraft-maker Pilatus.
• ► The Defence Acquisition Council (DAC) is yet to give final
clearance to the proposal.
INR700 billion
Indian Army • ► The Indian Army will procure 814 mounted gun systems (MGS)
as part of its Field Artillery Rationalization Plan (FARP).
• ► The DAC has cleared the army’s proposal to tender for these
truck-mounted self-propelled 155 mm gun systems.
• ► The army can import the initial 100 guns, but it will have to
procure the remaining 714 from Indian vendors, licensed by
foreign vendors or manufactured with indigenous technology.
INR158 billion
19. 19Eye on Defence |
Government and Rafael • ► India is expected to sign a deal with Israel’s Rafael Advanced
Defence Systems Ltd. to procure 8,300 Spike-MR missiles and
more than 300 launchers.
• ► Spike MR, a lightweight third-generation man-portable missile
system, is especially designed for medium-range anti-tank
operations, urban and traditional warfare, to provide ground
support and for special missions.
• ► The weapon system operates in the fire-and-forget mode for
autonomous and medium range target engagement of up to 2.5
km.
INR32 billion
Indian Navy and HAL • ► HAL will supply 12 Dornier Do-228 Maritime Surveillance and
Patrol Aircraft (MSA) to the Indian Navy.
• ► The Defence Acquisition Council (DAC) has granted Acceptance
of Necessity (AON) for the proposal.
• ► The new aircraft will be produced at HAL’s Transport Aircraft
Division (TAD) in Kanpur, and deliveries are expected to begin
from 2016.
INR19 billion
IAF and Taneja Aerospace &
Aviation
• ► IAF has awarded a contract to Taneja Aerospace to upgrade MIG
29 aircraft.
• ► The contract will be executed over a period of three years,
starting 1 December 2014.
INR127 million
IAF • IAF is planning to take up the job of assembling Pilatus
PC-7 aircraft at its Base Repair Depot (BRD). IAF’s BRD at
Coimbatore is likely to execute the project.
• A team from the Swiss aircraft maker, Pilatus, visited the BRD
and gave the first go-ahead to the IAF.
NA
21. 21Eye on Defence |
Joint ventures and alliances
Name of entity Project details Value
Bell Helicopters and Dynamatic
Technologies
• ► Bell Helicopter has signed an agreement with Dynamatic
Technologies for supply of major airframe assemblies for Bell
407 GX helicopters.
• ► The seven-year contract includes provisions for extension of the
life of the product.
• ► Its agreement with Dynamatic is aligned to Bell’s global sourcing
strategy for its 407 GX helicopter.
NA
Snecma and Max Aerospace • ► French engine-maker Snecma has signed an agreement with
Max Aerospace to set up a JV, Max Aero Engines Private Limited
(MAEPL), for maintenance of military aircraft engines.
• ► Under the agreement, MAEPL will provide complete engine-
support solutions, in particular shop-level maintenance and
flight line services, and cover all maintenance, repair and
overhaul services in India.
• ► It will provide maintenance services for the Snecma M53 engines
powering Mirage 2000H Vajra fighters for the IAF, starting
2015.
NA
Airbus and Tata Advance Systems
Limited (TASL)
• ► Airbus Defence and Space is teaming up with TASL in its bid
to replace the IAF’s fleet of Avro 748 small tactical transport
aircraft with the Airbus C295 twin turboprop medium airlifter.
• ► The main competitor for Airbus C295 for the bid is Alenia
Aermacchi with its C27J Spartan.
• ► If the C295 were to be chosen for the contract, Airbus would
supply the first 16 aircraft “in flyaway condition from its
own final assembly line”, and the remaining 40 would be
manufactured and assembled by TASL in India.
NA
Safran and Bharat Forge • ► French engine manufacturer Safran has tied up with Bharat
Forge to manufacture components for commercial aerospace
applications.
• ► The companies have decided to tie-up after 18 months of
trial production of forgings in a variety of materials. They plan
to explore further opportunities in India’s civil and military
aerospace segments.
NA
23. 23Eye on Defence |
Country-level deals and initiatives
Country Nature of transaction Additional details
France • ► French Defence Minister Yves Le Drian visited
India and expressed France’s desire to be part of
the Government’s “Make in India” initiative.
• ► He also discussed possibilities for the French
defence industry’s contribution to this initiative.
• ►The French Defence Minister
also reviewed the progress of
negotiations between India
and France for purchase of
126 Rafale fighter aircraft.
• ►Mr. Drian and his Indian
counterpart Manohar Parrikar
reviewed preparations for
a major joint aero-naval
exercise, Varuna, in April
2015, which will be France’s
maiden aero-naval exercise in
the Indian Ocean.
Indonesia • ► India’s Air Chief Marshal Arup Raha visited
Indonesia on invitation from the country’s Air
Chief Marshal Ida Bagus Putu Dunia.
• ► This was the first visit by an Indian Air Chief to
Indonesia in over a decade and took place against
the backdrop of the East Asia Summit meeting
between Indonesian President Joko Widodo and
Indian Prime Minister Narendra Modi.
• ► During the visit, Indonesian Air Force officers
expressed their keen interest to augment their
scope of cooperation with the Indian Air Force
through increased interaction in the future.
• ► India’s Air Chief also met
General (retired) Ryamizard
Ryacudu, the Indonesian
Minister of Defence.
• ► The Indonesian Minister of
Defence was appreciative
of India’s ongoing initiatives
in the field of defence
cooperation and underlined
the immense scope
and potential to further
engagement between the
armed forces of the two
countries in the future.
Mauritius • ► The Mauritius Government has ordered a
Dornier-228 aircraft (worth INR1 billion) from
India’s state-run HAL for surveillance on the sea.
• This is the third Do-228 order
from Mauritius and will boost
India’s defence export efforts.
27. 27Eye on Defence |
By providing a means to fully understand the elements
of each proposal/offer, along with a detailed roadmap of
how each element will be delivered, Dassault Systèmes’
3DEXPERIENCE platform with the ‘Winning Program’
industry solution experience enables companies to increase
their win ratio and deliver more innovative offerings to
market without the associated risk.
With our Prime Minister’s recent call to ‘Make in India’
the focus in the aviation industry has shifted strongly to
indigenisation along with modernisation of this vertical in
India. There has also been a sharp focus on IT adoption
and research in high technology space. Dassault Systèmes’
Aerospace & Defence 3DEXPERIENCE industry solution can
help the Indian industry to become more competitive.
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28 | Eye on Defence
29. Why choose Team EY?
Unique Team Experience Offset Structuring Industrial Connects End to End Solutions
• Team member
was a part of the
team that wrote
the Indian Defence
Offset policy in
2006.
• Team member
founded the DOFA.
• Team member has
written a complete
book on Offsets with
the CII.
• Offset Structuring
worth US$ 3.7
Bn executed
successfully.
• Total experience of
66 man years in the
Armed Forces.
• MoD experience of
14 man years.
• Team has members
from the Auto
practice-India’s
only proven
manufacturing
competence
• We have offices
in Bangalore;
Pune Hyderabad
& Chennai where
these manufacturing
and IT capabilities
reside
• Industrial License
Application
• FIPB approval
• Due-diligence
services
• Transaction
Advisory for M&A
• Tax Mitigation in
offset contracts
• Creation of a
compliant Offset
Schedule
• Quarterly Offset
progress report
Unparalleled Support & Advantage for OEM’s & Indian Companies
29Eye on Defence |
30. 30 | Eye on Defence
Services offering – Tax & Regulatory
Contract
negotiation stage
Post contract
signing support
Other
Compliance
and Advisory
Pre bid stage1 2 3 4
► 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
ServicesOffering
Support
atevery
stage Contracting Process
► 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
Importance
► Develop certainty with
respect to impact and
incidence of direct and
indirect taxes in India
► Establishment of a tax
efficient and regulatory
compliant structure in
India
► Compliance with ever
evolving tax and
regulatory regime in India
► Upfront identification of tax
and regulatory implications
under the RFP
Services offering - Defence Offset
Bid Stage Contract
negotiation stage
Post contract
signing support
Pre bid stage
1 2 3 4
Offset process
► 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
► Industrial Licensing for
IOPs
► IOPs financing
► Joint venture structuring
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
► 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.
Servicesoffering
Supportatevery
stage
Contracting process
► Support in compiling
documentation
required for offset
discharge
► Support in
preparation of
quarterly / half
yearly reports on
fulfillment of offset
obligations.
Importance
► To ensure a suitable
Technical and commercial
offset plan that should find
favour with the TOEC and the
CNC.
► Support in getting the
technical offset
proposal approved in
time so that it does not
obstruct main contract
signing
► Continued support for
offset execution to avoid
penalties and loss of faith
with the MoD
► 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
► Planning for submission
► Identifying the right
partners and
methodologies
► Getting the
documents right for
submission
► Building the right
offset program
► Getting the
optimum
economic value
for offsets
► Documentation
of offset
execution
