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Billion Dollar Opportunities in the Indian Defence Sector

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This presentation was delivered by Dr V K Saraswat at India's National Competitiveness Forum 2015, the flagship event of India Council on Competitiveness.

Institute for Competitiveness (India) the Indian knot in the global network of the Institute for Strategy and Competitiveness at Harvard Business School has initiated the India Council on Competitiveness. The Council, created in collaboration with the U.S. Council on Competitiveness; is based in Gurgaon, India and is an association of distinguished members from industry, academia, think tanks, media and researchers. The mission of the India Council is to set an action agenda to drive Indian competitiveness, productivity and leadership in world markets to raise the standard of living for all Indians. For more information, visit www.compete.org.in

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Billion Dollar Opportunities in the Indian Defence Sector

  1. 1. BILLION DOLLAR OPPORTUNITIES IN THE INDIAN DEFENCE SECTOR Dr VK Saraswat DAE Homi Bhabha Chair Former Secretary Dept of Defence R&D; Scientific Adviser to Raksha Mantri and Director General DRDO & ADA Conference on Defence by Edelweiss Securities Ltd, Mumbai On 18 Jul 2014
  2. 2. Development & Production Culture 1960-2010
  3. 3. Indian Defence Industry (Govt & Public) Product Profile No. of Factories : 39 + 2 Principal Items - 881 Manpower : 99000 (approx) Anti Tank Guns, Field Guns, Mortars, Small Arms, Bombs, Rockets, Grenades, Mines, Depth Charge, Explosives, Propellants, Pyro Technique Stores, Transport Vehicles, Optical and Fire Control Instruments, Bridges, Assault Boats, Clothing / Protection Suits, Parachutes HAL (19 Div) BEL (9 Div) BEML (4 Div) BDL (3 Div) SHIPYARDS (4 Units) MIDHANI (1 Div) Sale Rs.1,43,230 Cr Sale Rs.6,012 Cr Sale Rs.3,290 Cr Sale Rs.475 Cr Sale Rs.2,798 Cr Sale Rs.2,424 Cr Aircrafts Radars Mining / Construction Eqpt Missiles Ships Super Alloys Prodn Helicopters Communicatio n Rail / Metro Products Torpedoes Submarines Titanium Spl.Purpose Steel UAV EW Systems Wheeled Vehicles Launchers Boats Turnover Rs.510 Cr Radars Elect/Opt Systems Decoys Integration of Sensors / Weapons / Communication Communication NVD Defence Public Sector Undertakings Ordnance Factories Product Profile No. of Factories : 39 + 2 Principal Items - 881 Manpower : 99000 (approx) Anti Tank Guns, Field Guns, Mortars, Small Arms, Bombs, Rockets, Grenades, Mines, Depth Charge, Explosives, Propellants, Pyro Technique Stores, Transport Vehicles, Optical and Fire Control Instruments, Bridges, Assault Boats, Clothing / Protection Suits, Parachutes Product Profile No. of Factories : 39 + 2 Principal Items - 881 Manpower : 99000 (approx) Anti Tank Guns, Field Guns, Mortars, Small Arms, Bombs, Rockets, Grenades, Mines, Depth Charge, Explosives, Propellants, Pyro Technique Stores, Transport Vehicles, Optical and Fire Control Instruments, Bridges, Assault Boats, Clothing / Protection Suits, Parachutes
  4. 4. Licensed Production Culture Poor Design innovation capability No R&D Activity Outdated Production Management System No Modernisation of production technologies Highly over staffed Excessive Government Control Poor Participation of private sector Over Dependence on Licensor No initiatives for indigenization
  5. 5. BASANTPUSHPAKKRISHAK PROGRESS OF INDIAN CIVIL AVIATION HANSA 1960-70 1990’S AND BEYOND SARAS
  6. 6. MIDDLE YEARS OF INDIAN MILITARY AVIATION 1970-80 MIG-21 MIG-27 JAGUAR
  7. 7. LATER YEARS OF INDIAN MILITARY AVIATION 1980-2000 AND BEYOND….. CHEETAH CHETAK ALH MIG-29 SU-30 LCA
  8. 8. OVERVIEW OF SYSTEMS & TECHNOLOGIES DRDO 52 Labs Aeronautics Armament & Combat Engg Missiles & Strategic Sys Naval SystemsMaterials & Life Sciences Electronics 30,000 Workforce: • Scientists - 7000 • Technical Staff – 12,000 • Allied Staff – 11,000 OUR MISSIONOUR MISSION  Design, develop and lead to production state-of-art defence systems and technologies  Provide technological solutions to the Services to optimise combat effectiveness  Develop infrastructure and committed quality manpower and build strong indigenous technology base 10/01/15
  9. 9. PRODUCTIONISATION &DELIVERY EVOLUTION OF DEFENCE R&DEVOLUTION OF DEFENCE R&D 1958 1970 1980 1990 2000 2010 INCEPTION INSPECTION AGENCY REVERSE ENGG. TECHNOLOGY GENERATION SCIENTIFIC RESEARCH MAJORSYSTEMS &PROGRAMMES INITIATED PROTOTYPES &TRIALS IGMDP LCA MBT EW SYSTEMS IMPORT/EXPOSURE TO FOREIGN TECHNOLOGIES DESIGN & DEVELOPEMENT CONCURRENT ENGG LSP,USERTRIALS &ACCEPTANCE ~ 20 YEARS NEWSYSTEMS SYSTEMSTUDIES ANDANALYSIS Funding TYPICAL TIME FRAME FOR FIRST TIME SYSTEMS ELSEWHERE TOO
  10. 10. PROGRAMME DRIVEN PRODUCTION INFRASTRUCTURE PROGRAMMES : SLV3, PSLV, IGMDP 1970 – 1980 - 1990 IGMDP Management System • Three tier management system for Review and Execution • Concurrent development & production • Production agencies identified at conception of programme • Involvement of production agencies in development • Involvement of R&D labs in setting production infrastructure • DRDO/Space invested in HAL(ASD), BE, BEML, BDL, OF, ECIL • Strong Review Mechanism • Policy decision on - Cost plan development - Cost control - Redundancy management • Involvement of finance at every level Benifits • Manufacturing technology upgradation at production agency • Introduction of productionisation culture • Improved quality assurance and certification system – MSQAA • Ownership of programmes with synergy between R&D and PA • Prithvi and PSLV production achieved in 5 years with involvement of - 40 Private Industries - 09 public Sector Industries
  11. 11. PROGRAMME DRIVEN PRODUCTION INFRASTRUCTURE (Contd) INDUSTRIES HAL LARSEN & TOUBRO BDL GODREJ & BOYCE BEL JOHNGALT INTL BEML SEC INDUSTRIES OF’S VEM ECIL RASU TOOLS KELTECH PRAGA TOOLS REPUBLIC FORGE ECHJAY INDUSTRIES WALCHANDNAGAR INDUSTRIES OF TRICHY LAXMI MACHINE TOOLS TECHNOLOGIES / PRODUCTS AIRFRAME PROPELLANT TANKS WINGS NOSECONES ROCKET MOTORS LAUNCHERS RADARS PROPELLANTS WARHEADS DATA LINKS • HMX, RDX, OCTOL EXPLOSIVES • LP ENGINE COMPONENTS • HYDRAULIC / PNEUMATIC ACTUATION SYSTEMS • INERTIAL SENSORS • INERTIAL NAVIGATION SYSTEMS • ON-BOARD COMPUTERSTECHNOLOGIES / PRODUCTS FACILITIES  4/5 Axis Machining Centres  Automatic Welding Equipment  Magnesium Casting Facility  Process Shop – Surface Treatments  Vacuum Brazing  Precision M/c Shop  NDT Facilities for Propellants  HIP, CIP, Spinning, Flow Forming  Investment Casting; Powder Metallurgy products like Tungston AEROSPACE MATERIAL PROCESSING  Alluminium Alloys  Magnesium  Maraging Steel, 15 CDV6  Titanium  Ni based super alloys  Tungston  Glass Fibre & Carbon Fibre
  12. 12. COMBAT AIRCRAFTS AERONAUTICS AEROSTAT UAV NISHANT MICRO UAV TECHNOLOGIES
  13. 13. GRADUATION OF INDUSTRY TECHNOLOGY TRANSFER DESIGN & BUILD – STRATEGIC PARTNER TO R&D EVOLVE PROCESS & MFG. GROWTH • Process for Fab. • Eqpt. & Trg. • KOP (L&T, BEL & OF) L&T, Tata & BEML DRDO INITIATED PROGRAMMES 1950-70 1980 1990 2000 2010 • Design by DRDO • Build to Design IGMDP, EW T-72,BMP-II MCP MAL • Build to Specification
  14. 14. INDUSTRY PARTNERSHIPINDUSTRY PARTNERSHIP Tata MTAR Godrej L&T KCP CEL ASTRA SEC ind. High Energy Batteries Ajay Sensors MACMET PEL . . Tata L&T Deepti VEM Astra Ananth Tech Data Pattern Zetatech MACMET Dynamatic Technologies Dynalog Alpha Desgn Apollo Micro Systems RAP . . . . .. Value addition by industry System Design specs 1970 1980 1990 2010 50 200 500 2000 100 Fabricator Fabrication & Testing Subsystem, Design, Fabrication & Testing LRSAM DRDO+ Israel+ Indian Industries Brahmos DRDO+ Russia+ Godrej SRSAM DRDO+ MBDA Aero Engine GTRE + CIAM GTRE + SNECMA I2 MC Uncooled FPA, MEMS . . Global Collaboration 2020
  15. 15. FUTURE SYSTEMS & OPPORTUNITIES
  16. 16. Indian Aerospace Industry – an attractive opportunity India’s presence in all segments of Aerospace Value ChainIndia’s presence in all segments of Aerospace Value Chain Major global aerospace companies present in India in some way or the other • India – one of the fastest-growing aerospace markets in the world • Mostly due to defence spending and growing commercial aviation market • Expected to add ~ 4000 military and commercial aircrafts in next 15 yrs • MRO segment estimated to grow at 10% and reach USD 2.6 bn by 2020 This would require significant investment in capacity building 17
  17. 17. India is expected to be the third largest Aerospace market after U.S. and China by 2020 Development Programs: •Aeronautics, Armaments, Combat vehicles • Electronics, Missiles, Materials •Medium Multi Role Combat Aircraft (MMRCA) •Fifth Generation Fighter Aircraft (FGFA) •Multirole Transport Aircraft (MTA) •Medium Lift Helicopters (MLH) •Light Utility Helicopters (LUH) • Hypersonic vehicles Development Programs: •Satellite Launch Vehicles •PSLV , GSLV •Satellites •INSAT , IRS Intensive technology and safety requirements mandate significant investments in R&D and quality control • India projected as 5th largest buyer of passenger aircrafts • Commercial aircraft projected to grow at 6% CAGR • Business jets to grow at 11% CAGR • Modernization underway: • Airports • Communications • Radars • Facilities for MRO • 10th biggest spender in defense. FY 13 budget – USD 35bn • Expected to spend USD 100 bn in next decade • Military expected to add 1000 rotary & 1200 fixed wing aircrafts 18
  18. 18. WEAPON SYSTEM DEVELOPMENT – NEXT 30 YEARSWEAPON SYSTEM DEVELOPMENT – NEXT 30 YEARS Missiles • Hypersonic and sub-sonic cruise missiles • Long range ballistic missiles with MIRV ( multi-platform – land, air, under-water) • Ballistic & cruise missile defence systems with space segment • Multi-platform tactical missiles & missile based PGM’s Naval Systems • Torpedoes with thermal engines Aeronautics • UAV, UCAU, aerostats, airships with multiuse payloads • Multi role stealth combat aircraft EW Systems • Multi-platform EW systems • Cyber warfare systems Armaments & Combat Systems • Next generation MBT, APC • Remotely piloted reconnaissance ground vehicles • Low cost guided multi-barrel rockets with PGM’s • Self propelled guns with PGM’s. New Concept Weapons • Directed Energy - Lasers, micro-wave, particle beams • Kinetic Energy - EM cannons, kinetic kill vehicle • Non-Anti Personnel - Chemical energy-losing agents, Low energy-laser blinding weapons, Omni directional irradiation weapons 19
  19. 19. TECHNOLOGIES MISSILES • MEMS based actuators, sensors • RF seekers – Electronically steered arrays, Power source, klystrons, MPM, signal processing, ATR • Gel propulsion systems • Navigation sensors - RLG, FOG, DTG, HPM, Navigation on chip ELECTRONICS • IIR Seekers – focal plane arrays, bolometers, CCD’s, adaptive optics, IR domes • Laser seekers • Network centric warfare technologies • Active phased array radars • Space based IR sensors, SAR • Secured multi-layer high speed communication network • Mini & micro Satellites • VLF, ELF, blue-green laser • SDR MATERIALS • Ceramic radomes • High temperature materials • Stealth materials AERONAUTICS • Airborne (AEWS, ESM, ECCM Systems) • Gas turbine engines • Stealth technologies • Robotics & unmanned vehicles ARMAMENT & COMBAT TECHNOLOGIES • High energy solid propellants (ADN) • Pulse detonation engines • Thermobaric warheads • Automated, composite, bridging systems • Soldier as a system • Low intensity conflict technologies LIFE SCIENCES • NBC defence Technologies NANO TECHNOLOGIES • NANO materials, nano sensors, • NANO structures, nano electronics WARGAMING • Wargaming, modelling & simulation of defence systems TECHNOLOGY DEVELOPMENT – NEXT 30 YEARSTECHNOLOGY DEVELOPMENT – NEXT 30 YEARS 20
  20. 20. EMERGING DEFENCE & AEROSPACE MARKET (2010-2025) • IMPORT PRODUCTS (BUY-Make) approximate estimates – MMRCA Rs.42,000 Cr – Guns Rs.8000 Cr – C-17 Aircrafts Rs.25,000 Cr – MIRAGE Upgrade Rs.10,000 Cr – Helicopters Rs.10,000 Cr – Missiles Rs.7,000 Cr • INDIGENEOUS PRODUCTS (Make India) – Missiles Rs.1,03,600 Cr – Aircrafts • Light Combat Aircraft Rs.57,000 Cr • FGFA Rs.30,000 Cr • AEW&C Rs.2000 Cr • AWACS Rs.6000 Cr • UAV’s Rs.2000 Cr
  21. 21. EMERGING DEFENCE & AEROSPACE MARKET (2010-2025) contd • INDIGENEOUS PRODUCTS (Make India) • Rockets Rs.1100 Cr • Tanks Rs.3000 Cr • EW Systems Rs.1500 Cr • Radars Rs.7000 Cr • Naval Systems Rs.1200 Cr • Field Gun Rs.2000 Cr • Electro Optical Systems Rs.1000 Cr • Helicopters • ALH Rs.8000 Cr • LCH Rs.5000 Cr
  22. 22. 10/01/15 DRDO - An Overview 23 GLOBAL TECHNOLOGY GROWTH
  23. 23. AEROSPACE & DEFENCE MANUFACTURING CHARACTERIZED BY • COMPLEX DESIGNS AND LONG PROJECT CYCLE • LARGE R&D INVESTMENTS • LARGE INVESTMENTS IN MANUFACTURING & TEST EQUIPMENT • MATERIALS OF UNIQUE SPECIFICATIONS • ADVANCED MANUFACTURING TECHNIQUES • PHYSICAL SIZES RANGING FROM MMS TO FEW METERS. • LOW BATCH SIZES – OFTEN ONE OFF. • FAST TECHNOLOGICAL OBSOLESCENCE • DIVERSE TECHNOLOGIES • INTENSIVE TECHNICAL, QUALITY AND SAFETY REQUIREMENTS • STRINGENT REGULATORY ENIVRONMENT • SUPPLY CHAIN MANAGEMENT
  24. 24. FRAMEWORK OF ADVANCED MANUFACTURING TECHNOLOGY Source: IDA Report 2012, Emerging Global Trends in Advanced Manufacturing
  25. 25. FRAME WORK OF ADVANCED MANUFACTURING TECHNOLOGY ADVANCED PRODUCTS • Technologically Complex • Use New Materials • Highly Sophisticated designs • Innovative products SMART MANUFACTURING ENTERPRISE CONCEPTS • Manufacturing goes beyond the factory floor • Paradigms of “Manufacturing as Eco- System” have emerged • Smart Enterprises create and use data and information throughout he product life cycle • Create Flexible Manufacturing processes to cater for changes in demand at low cost without damage to environment • Product design to facilitate efficient production and re-cyclability ADVANCED PROCESSES & TECHNOLOGIES • Advanced Manufacturing consisting of ‘Know How’ of production with focus on Advanced Processes & Technologies BUILDING BLOCKS (DRIVERS) • Breakthroughs in Physics, Chemistry, Material Science & Biology • Convergence of Physics, Chemistry, Material Science & Biology • Advances in computational modelling & prediction along with computational power
  26. 26.  Water Jet Machining  Hexapod Machining  Multi Tasking Machines  Role Extrusion for Missile cases  Single Crystal based Super Alloys for Gas Turbines Engines (BLISK)  Integral Fuselage Design & Manufacture (Welded structures) – Extrusions, Laser Beam Welding, Friction Stir Welding  Near Net Shape Manufacturing  Advanced Aluminum Alloys & Fabrication technologies for Space Transportation Systems – Near Net Extrusion ADVANCED AEROSPACE & DEFENCE MANUFACTURING TECHNOLOGIES 2005 & BEYOND
  27. 27.  Roll Forging Cryogenic Tanks  Shear Forging Adaptor Rings  Spin Forming for Tank Domes  Friction Stir Welding Internally Stiffened Extrusions  High Voltage electron Beam Welding - Reactive Material Ti-6Al-4V Alloy - Multiple Tier Welding, Multi-thickness welding  Friction Stir Welding  Laser Consolidation Processing  Laser Engineered Net shaping  Vacuum Plasma Sprays  Photo Chemical Machining ADVANCED AEROSPACE & DEFENCE MANUFACTURING TECHNOLOGIES 2005 & BEYOND (CONTD)
  28. 28.  MESO / Micro Mechanical Manufacturing (M4)  Micro EDM  Focused Ion Beam Machining (FIB)  Feinto – Second Lasers  Micro USM  Micro Turning  Thermal Barrier Coating Processes  Near Net Shape manufacturing of Advanced Ceramics – Gel Cast Ceramic Radome  Surface Micro Machining & Bulk Micro Machining processes for Sensors, Actuators  Nano Technology ADVANCED AEROSPACE & DEFENCE MANUFACTURING TECHNOLOGIES 2005 & BEYOND (CONTD)
  29. 29. Metallic Materials Aerospace Grade Shape Application Aluminum Alloys 2xxx (Al-Cu-Mg) 7xxx (Al-Zn-Mg-Cu-Zr) 6xxx (Al-Mg-Si) Sheet Plate Extrusion Forgings Aircrafts, Missiles, Launch Vehicles, UAVs, Bridges Lithium – Aluminum Alloys - do - Aircraft Structures Titanium Alloys Ti-6Al-4v Ti-10V-2Fe-Al - do - Aircrafts, Missiles, Tanks, Rockets, Armaments, Engg Eqpt High Temperature Materials Titanium Alloys Nimonic Alloys Niobium Alloys - do - Metallic Honey Comb & Foams Missiles, Aero-Engines, Launch Vehicles, Scramjet, Hypersonic Aircrafts and Missiles Metal-Metal composites based on Nb, Ti, Polymer and SiC C-C C-SiC SiC-SiC TaC / Ta2C Mo-Si-B NB-Si-C Mo-Si-B Investment opportunities in Aerospace & Defence Materials Characteristics : High Quality – Low Volume – Technology Denied
  30. 30. Metallic Materials Aerospace Grade Shape Application Super Alloys Nickel based Titanium based Thermal Protection Coatings Zircon Yiltrium stblised Zr Si3N4 Special Steels 11-10 PH Steel Maraging Steel 350/250 Ultra High Strength Steels (AB2/AB3) Ship, Submarine, Rocket Engines, Aero Engines, Engg.Structures, Armaments Investment opportunities in Aerospace & Defence Materials - contd Metallic Materials Shape Application Silicon Gallium Arsenide Germanium Cadmium Zinc Telluride Mercury Cadmium Telluride Gallium Nitride Bulk Crystals Wafers Epitaxial Layers (nm - µm Sensors, Lasers / Detectors, VLSI, MEMS, MMIC, Optical Components Functional Materials Characteristics : Ultra High Purity R/M 7 N to 9N
  31. 31. EMERGING SCENARIO IN INDIA AND TRANSFORMATION STRATEGY FOR MEETING THE CHALLENGES
  32. 32. Emerging Eco System 2000 +Emerging Eco System 2000 +
  33. 33. Emerging Eco System 2000 +Emerging Eco System 2000 +
  34. 34. New Collaboration Models TYPE SYSTEM PARTNERS JOINT DEVELOPMENT - LR SAM – LONG RANGE SURFAVCE TO AIR MISSILE - INDIA (DRDO) - ISRAEL (IMI) JOINT VENTURE - BRAHMOS - INDIA (DRDO) - RUSSIA EXCHANGE OF SCIENTISTS - BMD PROGRAMME - INDIA - BELARUS COLLABORATIVE RESEARCH - GYRO & NAVIGATION SENSORS DEVELOPMENT - PGM DEVELOPMENT - INDIAN UNIVERSITIES / RESEARCH INSTITUTIONS - GLOBAL PARTNERS
  35. 35. Royalty Model (Outright sale off of mature technologies ) Total Risk-Revenue Partnership Sharing Model ( Partnership from the stage of Conceptualization) Partial Risk-Revenue Sharing Partnership Model ( Partnership from certain level of Maturity) Models for Public Private Partnership
  36. 36. Micro financing in Indian Defence Sector • Promoting Micro financing in Indian Defence Sector, specifically, in Sensitive & Strategic areas is essential to achieve sustainability in defence supplies to services. • Initially, High cost investment vs Low volume turn over in defence sector. • Raising FDI limit with certain overriding protection clauses to safeguard Industry / Self Reliance Interest. • Indian Private industry must be promoted & supported by micro financing to ensure Indian defence sector commercially competitive. • Modes of Micro Financing to Private Industry. – Micro financing by Govt. – Micro financing by Private institutions – Availability of subsidized loans. – Operation of facilities on GOCO basis
  37. 37. Creation of a National Aerospace and Defence Technology Commission to Coordinate, Review, Prioritize and take decisions on investment, collaborations, Export and joint ventures & give direction to aerospace & defence production for improving countries self reliance, GDP and finding the right place as developed nation in the aerospace sector against global competition. Strategy for Accelerated TechnologyStrategy for Accelerated Technology UpgradationUpgradation
  38. 38. Strategies for Improved Industry Participation in Defence & Aerospace Sectors Collaboration and Synergy with indigenous R&D System to strengthen “Know-How” and “Know-Why” aspects of technology development and production. It will provide  High Performance  Cost Effectiveness  Availability on Demand  Product Life-Cycle Support  Software Upgradation  Concurrency of Development and Productionisation and augmentation of production infrastructure and Technology Transfer and Absorption  Shorter time from Concept to Delivery to market
  39. 39. Aerospace & Defence Industry Complex Aerospace Industrial Complex - Comprehensive solution for Space & Defence Sectors • Proposed Aeroparks can become Industrial Complexes • Existing skills of Auto Industry will complement the Aviation in utilizing the highly skilled & qualified manpower • UAVs, Civil Aircraft – Production and Maintenance opportunities • Existing IT skills can be utilised for CAD/CAM • Deposits of titanium Ore – highly used in aerospace industry • World Class research facilities to be tapped for industrial application

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