eye on defence january 2017
TRANSCRIPT
Contents title
Contents subjects
Dear readers,
In our continued effort to provide an in-depth analysis of the defence industry, this edition of Eye on Defence covers two significant developments within the industry: one of which has been recently signed and the other that everyone is waiting expectantly to reach a conclusion.
Our first article focuses on the recent agreement signed between the Indian and the French Governments. We have provided insights into the aircraft in question, Rafale, and opportunities arising from the offset clause of the deal. The article provides an overview of the deal, key tier-1 suppliers, likely beneficiaries from the offset clause and the impact of the deal on the Indian defence manufacturing sector.
Our second article covers the Indian military aero-engine market, highlighting the various types of engines and the key importers. The article throws light on the indigenous design and development, production and manufacturing, and maintenance capabilities. The article also details the emerging requirements and emergence of the private sector in the military engine market.
Our third article focuses on one of the key policy decisions pending within the current defence procurement policy: the Strategic Partnership model. We have laid out the entire thought process on the evolution of this model to where things stand today. The article also describes the various specifications of this model, including the qualification requirements to identify and select the strategic partners. Although this initiative has not yet been formalized and not all stakeholders have shown equal interest, nevertheless India’s reliance on defence imports for key technological programs will push the policy makers to come up with innovative policies in the near future.
A new addition to our magazine in recent times has been the global A&D industry buzz in terms of the key defence developments, new deals, contracts etc. in various countries.
Among the regular sections, we have industrial license applicants, RFIs/RFPs released, new projects and investments, joint ventures and alliances and country-level deals.
I hope you find this issue useful. It has been our constant endeavor to make this publication increasingly relevant to you, and we will appreciate your comments and suggestions in this regard.
K. Ganesh Raj Partner and Leader
Contents
Introduction
Rafale Deal: Opportunities arising from offset obligations
Indian Military Aircraft & Rotorcraft Engines Market
Strategic Partnerships: Challenges and Opportunities for Indian Corporates
Request for Information (September 2016–November 2016)
Request for Proposal (September 2016–November 2016)
List of Industrial Licenses (ILs) filed during September 2016–November 2016
New projects/investments/contracts
JVs and alliances
Country-level deals and initiatives
Industry buzz
Global industry buzz
Analysis of M&A trends
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2 | Eye on Defence
The Indian Government signed a €7.9 billion (~INR590 billion) contract with France on 23 September 2016 for the purchase of 36 units of Rafale jet, a medium twin-engine fighter jet manufactured by Dassault, for the Indian Air Force (IAF). The deal includes 28 single-seater and 8 dual-seater Rafale jets for €3.3 billion (~INR246 billion) — at a “vanilla price” (just the aircraft alone) of €91.1 million (INR6.8 billion) per unit for the single-seater jet and €94.0 million (INR7.0 billion) per unit for the double-seater jet. The remaining €4.6 billion (INR344 billion) is for spares, logistics and weaponry. These jets will help the IAF meet its critical requirements of replacing its aging fleet and keeping its arsenal of mid-category fighter jets updated. Equipped with the best-in-class technologies, the Rafale jets, once
Rafale deal: potential opportunities from the contract
inducted, will act as a much required stop-measure and will bolster the country’s defence and strike power. The fighter aircraft will occupy the mid-level force structure, while the Tejas Light Combat Aircraft is expected to step in at the low end and the advanced indigenous descendant of the Tejas, the fifth generation fighter that India is jointly developing with Russia, will form the top-of-the-line component.
The deal comes with a 50% offset clause. The offset clause will highly boost the domestic defence manufacturing industry, as Dassault and its tier-1 suppliers will look for Indian players that can manufacture the eligible products and provide eligible services under the terms of the contract to discharge their offset obligation.
Cost structure and delivery
Overview and introduction of the Rafale deal
43.2%
22.4%
21.1%
8.9%4.4%
Production contracts for OEMs Other sub-systems IAF-specific platforms fittings
Armaments packagePerformance-based logistics package
€7.9 billion deal for purchase of 36 Rafale aircraft
100% = €7.87 billion
Cost breakdown of the Rafale deal
1. Production contracts with OEMs such as Dassault Aviation, Thales Group, Snecma and Sagem worth €3.42 billion
2. Various types of simulators for operational flight conversion and ground maintenance; part-task training tools for the employment of a variety of precision-guided munitions (PGMs); and mission planning-and-replay systems worth €1.8 billion
3. Armaments package to be provided by MBDA worth €710 million
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Leading suppliers for the deal
1. Production contracts worth €3.42 billion and armaments package worth €710 million
The IAF will also get free training packages for nine personnel (three pilots and six ground crew personnel) estimated to be worth €100 million. An initial 15% of the contract value is to be paid as advance, another 25% by end 2017, another 55% in progressive tranches once aircraft deliveries begin and the final 5% upon completion of the delivery. The deliveries are expected to begin after 36 months and are expected to be completed in 67 months. France will also provide logistics and ground support and ensure that at least 75% of the total aircraft fleet (i.e., 27 out of 36 aircraft) are operationally available at any given time.
Besides Dassault (OEM in the deal), the tier-I vendors (and partners of Dassault) — namely, Safran, Thales and MBDA — have major shares in the deal. Production contracts and armaments packages for these OEMs account for more than 50% of the deal value (€4.13 billion). Out of the production and armaments contract, Dassault will account for approximately a 45% share while Thales, Safran and MBDA will collectively account for the remaining 55%.
45.5%
20.7%
16.6%
17.2%
Dassault
Thales
Safran
MBDA
100% = €4.13 billion
Share of OEM and tier-1s in production and armaments packages in the deal
4 | Eye on Defence
Key platforms/systems/sub-systems provided by the leading suppliers:
Dassault
OEM Domain Current major relationships with Indian companies
Dassault Main integrator, aero platform and structure
It has tied up with Reliance Defence and Engineering Limited (RDEL) and can potentially work with RDEL for the major share of offsets. Besides, it also has MoUs with Tata Technologies and Infotech Enterprises.
Thales Modular data processing unit (MDPU), missile electronics, spectra EW suite, advanced main machine interface, front sector optronics, Active Electronically Scanned Array (AESA) RBE2,
Apart from having a wholly owned subsidiary, Thales India Pvt. Ltd, the company also has tie-ups with HAL, Bharat Electronics Limited (BEL), Samtel (Avionics) and L&T (airborne assemblies and systems).
Snecma S.A. or Safran Aircraft Engines Engines, starting system (APU), internal navigation, landing and breaking systems, wiring and other sub-systems
It has a JV with Hindustan Aeronautics Limited (HAL) in Bangalore. There is also a tie-up with Max Aerospace.
MBDA Missiles The company has tie-ups with BDL, HAL and Defence Research and Development Organisation (DRDO).
Dassault Aviation, the OEM, will need to discharge the major portion of the offset obligations. As of now, it has entered into a strategic partnership with India’s Reliance Group, in October 2016, and announced a 49:51 JV Dassault Reliance Aerospace in India. The new JV would be focused on supporting the IAF’s Rafale program through the production of aero structures, electronics and components for the aircraft’s Snecma M88 engines. The JV will also “develop major Indian programmes with high levels of technology transfer” and focus on promoting programs under the Indian Government’s new procurement category called “Buy Indian - Indigenously Designed Developed Manufactured (IDDM).” The JV will be based at an aerospace industry park that the group is developing in Nagpur, where RDEL has been allotted 289 acres of land by the Maharashtra Government. The facility in Nagpur will produce sub-systems and components and export them to Dassault Aviation for the production of Rafale fighter
jets in France. Besides, the JV will also produce critical components. The components manufactured at the Dassault Reliance Aerospace JV facility in India will form part of Dassault’s global supply chain. As a result of this tie-up, it is most likely that RDEL will be executing a significant portion of the offset flow, which could be in the range of INR100 billion. This could potentially be the largest offset contract to be executed by any defense company in India till date.
5Eye on Defence |
Thales
Snecma SA/Safran Aircraft Engines
Thales is the largest tier-1 involved in the Rafale program, accounting for more than 20% of the deal value. Thales will provide a number of state-of-the-art equipment and systems aboard the Rafale, including the RBE2 AESA radar (active electronically scanned array), the Spectra electronic warfare system, optronics, the CNI, the majority of the cockpit display systems, power generation systems and a logistics support component.
Safran will supply a number of key systems and equipment for the Rafale jet, including the M-88 aircraft engines, and will account for more than 15% of the deal value. Apart from the aircraft engines, Safran will also provide the engine’s power transmission (including the engine-mounted accessory drive and the aircraft-mounted accessory drive, as well as the flexible driveshaft), landing
Thales has JVs with Indian companies such as Samtel Avionics Limited, BEL and L&T Technology Services and long-term working partnership with HAL. Thus, besides RDEL, these Indian companies are also likely to get a piece of the offset through their association with Thales. It is likely that the technology transfer and platform-specific work-share will be distributed across a broad-base and a variety of Indian companies.
systems (Rafale’s landing gear, wheels and carbon brakes, braking and steering systems, landing gear extension and retraction system, and hydraulic generation system), inertial navigation system, engine control units, actuators and several optronic components and assemblies. It will also provide wiring on the Rafale aircraft.
Safran has a strong presence in India with operations of eight subsidiary companies and JVs, including two JVs with HAL and Max Aerospace India. The company plans to discharge its offset obligation by reviving a fighter jet engine program Kaveri, which was stalled in 2014 after the Kaveri gas turbine engine developed for combat planes
MBDA will provide armaments to the Rafale jet, including the Meteor radar guided Beyond Visual Range (BVR), an air-to-air missile with a beyond-visual-range over 100 km, and Storm Shadow (known as Système de CroisièreAutonome à Longue Portée – EmploiGénéral or SCALP in the French military), a long range air-to-ground cruise missile with a range of over 560 km. The total value of the armaments
and unmanned aircraft was unable to provide the required power thrust. The Kaveri engine is planned to be used in the indigenous Tejas fighter, which is likely to be inducted in 2020. The company has signed a US$2 million consultancy agreement and has further offered to invest €1 billion (INR74.7 billion) in the Kaveri engine project.
package to be provided by MBDA is approximately €710 million (INR53 billion). MBDA will work with DRDO to transfer the thrust vectoring technologies that are expected to be used in Astra and other missiles, putting them at the level of Meteor. The company also has tie-ups with BDL and HAL.
MBDA
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Impact on the Indian defence industry
References:
The offset clause in the Rafale deal will provide a great opportunity for all Indian manufacturers, big or small, and is expected to bring in business worth over €3 billion (INR224 billion) over the next seven years. Indian players and foreign—Indian JVs can contribute to the Rafale program either as direct tier-1 suppliers to Thales, Safran, MBDA and Dassault, or as tier-2/3 suppliers to their supply chain partners. The final offset contract is expected to be signed within six months.
*The following conversion rate has been used: €1 = INR74.7.
1. “Thales to hold 25 percent of Rafale value that India inked with France”, The new Indian Express, 18 October 2016 via Factiva
2. “Thales Highlights Equipment In Indian Rafale Deal”, Defense World, 23 September 2016, via Factiva
3. “Why the Rafale deal will be a game-changer for India”, Rediff News, 22 September 2016, via Factiva
4. “Rafale deal signed: An overview of its history and what this means for India”, First post, 23 September 2016, via Factiva
5. “Rafale Deal is Emblematic of What Modi is Trying to Fix in India’s Defence Industry”, The Wire, 23 September 2016, via Factiva
6. “Details emerge on cost of India’s Rafale deal”, IHS Janes, 28 September 2016, via Factiva
7. Local Partners, Thales company website, accessed 6 December 2016, https://www.thalesgroup.com/en/india/global-presence-asia-pacific/india
8. “French boost to jet engine plan, Kaveri project being revive”, The Economic Times, 30 November 2016, via Factiva
9. Safran in India, Safran company website, accessed 6 December 2016, http://www.safran-group.com/country/safran-india/e
10. “India finally signs deal with France for 36 Rafale fighters” IHS Janes, 23 September 2016, via Factiva
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8 | Eye on Defence
Indian military aircraft and rotorcraft engines market
As India is moving on the path of modernization of its Armed Forces, the one prominent gap that remains and has been acting as a major obstacle is the limited success in designing and developing an indigenous modern aero engine. There are many types of aero engines, as mentioned below, depending on the platforms, such as turboprops, turbofans, ramjet and turbojet
The oldest and most general purpose jet engines, finding use in a largevariety of applications earlier; most efficient at supersonic velocities, andcapable of speeds around Mach 3; not used anymore
Use a jet engine to turn a large propeller, which produces most (90% ormore) of the thrust
On Indian aircraft: AL -55, PC-7 Trainer, AI-20D -5M, C295 transport (proposed), Do-228MP, An-32 transport etc.
TurbojetOn all old military aircraft, especially combat
TurbopropOn smaller aircraft
Essentially a turbojet but with a large ducted fan that provides additionalthrust by moving large amount of low velocity air around the main engine;more efficient than turbojets at subsonic speeds
On Indian aircraft: IL -78 tanker, LCA Tejas Mk-1 and Mk 2 combat, A-50EhI AEW&C, Tu-142 ASW, Global-5000 AGS, Jaguar combat, IL-76 transport A-50 AEW and Su-30MKI combat.
TurbofanOn all large military aircraft, especially combat and commercial aircraft such as Boeing 747
Very similar to turbojets but with additional turbine expansion; a form of gasturbine, which is optimized to produce free turbine shaft power rather thanjet thrust; used mainly on helicopters
On Indian helicopters: HAL Dhruv, Rudra, HAL LCH & LUH, Kamov Ka-60, AH - 64combat helicopters
TurboshaftOn all helicopters
Identical to a turbojet with all of the rotating parts removed; primarily usedwith missiles because of their simple, small and high - velocity design; not -being used on aircraft currently; previously used on aircraft such as AQM-60 Kingfisher and D -21.
On Indian aircraft/missiles: BrahMos
RamjetMilitary applications and is almost exclusively used on missiles such as Meteor
Identical to a ramjet, but with one difference: combustion occurs with the airmoving at supersonic velocities; estimated not to work well below Mach 5,but could possibly reach speeds of Mach 24; no scramjets in use currently;however, large military potential for their use on aircraft and especially on missiles
ScramjetMilitary aircraft but basically for missile such as X-51 wave rider
Types of engines
Source: Compiled by Q-Tech Synergy
The engines on unmanned aircraft systems (UAVs) could be gas turbine engines, piston engines or Wankel rotary engines, depending on their role. Mostly, the small gas turbine engines used in UAVs are designed keeping in view their mission requirement, which is generally one shot or short-time applications.
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Engine imports by India
Some of the global aero-engine OEMs include CFM International (JV between GE and Safran), General Electric, International Aero Engines (JV between Pratt & Whitney, Pratt & Whitney Aero Engines International GmbH, MTU Aero Engines and the Japanese Aero Engine Corporation), Pratt & Whitney, Rolls Royce. Snecma, NPO Saturn and Euro Jet.
India has been completely dependent on imports for engines for all aero platforms — aircraft, helicopters and UAVs — and has been procuring from the US (General Electric, Honeywell and Pratt & Whitney), Europe (Rolls-Royce and Snecma) and Russia (Klimov and NPO Saturn) in the past to meet its growing requirements. In the last 15 years, India has imported engines worth US$1,267 million, accounting for 3% of the total military imports by the country. The engines import during 2000—2015 are depicted in the table below:
Aero-engine import (2000—2015)
Country Nomenclature Quantity Remarks
Russia
PS-90A Turbofan 12 For 3 A-50EhI AEW&C aircraft
NK-12 Turboprop 6 For modernization of 8 Tu-142 ASW aircraft
AL-55 Turbofan 250 For the HJT-36 trainer aircraft
D-30 Turbofan 24 For the 6 Il-78 tanker aircraft
PS-90A Turbofan 92 For modernization of 20 Il-76 transport aircraft and 3 A-50 AEW aircraft
AL-31 Turbofan 800 For modernization of Su-30MKI combat aircraft; in spares; delivery 2013—2022
PS-90A Turbofan 8 For 2 A-50EhI AEW&C aircraft
The US
F404 Turbofan 24 A US$100 million deal; F404-GE-f2J3 version for the Tejas Mk-1 (LCA)
F404 Turbofan 17 A US$105 million deal; F404-GE-IN20 version for the LCA Tejas Mk-1
F414 Turbofan 99 (signed but not delivered)
A US$800—900 million deal (including 81 produced in India); for the Tejas Mk-2 LCA; most assembled in India; selected but not yet ordered by end-2015
TPE-331 Turboprop 28 For 14 Do-228MP MP aircraft
T-700 Turboshaft 6 Spares for the AH-64 combat helicopters
F-125 Turbofan 270 (still under negotiation)
F-125IN version for modernization of 125 Jaguar combat aircraft; delivery possibly in 2015/2016—2023/2024; selected but not yet ordered by end-2015
Canada
PW100 Turboprop/Turboshaft --- (proposed sale) For the 56 C295 transport aircraft from Spain; yet to be ordered
PT6 Turboprop 75 For the 75 PC-7 trainer aircraft
PT6 Turboprop 38 (proposed sale) For the 38 PC-7 trainer aircraft
Germany BR-710 Turbofan 4 For 2 Global-5000 AGS aircraft
Ukraine AI-20 Turboprop 100 AI-20D-5M version for the An-32RE modernized aircraft
France TM 333 2B2 250 Installed on Dhruv helicopters; being replaced by Shakti engine (Shakti is also a French engine with some levels of indigenization)
Source: SIPRI & Compiled by Q-Tech Synergy
Engine development and manufacturing involves high-end technology and because the process is innovative, it is competitive and capital-intensive with long development cycles. Indigenous development and manufacturing of aero engines is mainly based on the “built to print” method that too in the Government domain. With the augmenting requirement of aerospace platforms by the Armed Forces
in the coming years, indigenous development of engines by the Defence Industrial Base (DIB) is the need of the hour. The industrial landscape in design and development and manufacturing in the country mainly lies in the Government sector, besides some OEMs and their subsidiaries. Refer the table below:
Design and development capabilities
Organization Products/technologies developed
Aeronautical Development Establishment
Small gas turbine engine used on Lakshya-PTA UAV
Gas Turbine Research Establishment (GTRE)
Programs undertaken
• Kaveri aero engine• Kaveri Marine Engine Demonstrator• Full Authority Digital Engine Control System (FADEC) for the Kaveri engine and its derivatives• Turbocharger for MBT Arjun• Engine life counter• Air turbine starter• Data acquisition system for gas turbine engine testing• HF-24 afterburner
Programs in the pipeline
• K9+ Turbofan Jet Engine Project• K10 Turbofan Jet Engine Project• Ghatak — Kaveri derivative to be developed to power India’s unmanned combat air vehicle
DRDO AURA• Development of 80 kN thrust class engine
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AERDC — Engine Research and Design Bureau — HAL
Developed and certified projects
• HJE-2500 engine• PTAE-7 engine for the Lakshya aircraft• GTSU-110 starter engine for LCA (Tejas)• Shakti engine — co-development with Turbomeca, France• Test Bed Projects — TM 333-2B2/Shakti engine test bed, Adour engine test bed, Pegasus
engine test bed, Garrett engine test bed, R29B engine test bed and LM 2500 engine test bed• Accessories — pneumatic starter (HFES); hydraulic pump (HHP)
Programs in the pipeline
• GTSU-127 starter for the LCA Mk II main engine• Auxiliary power unit for FGFA• Turbocharger• Smoke generator• Air producer for the Jaguar aircraft• Compact auxiliary power unit• Indigenization — air turbine wheel (ATW) and air turbine starter (ATS)• Test beds — Shakti engine test bed at Bangalore, GE F 404 engine test bed at Sulur, Al 31 FP
engine mobile test bed and Al 55I engine test bed at Hakimpet• 25 kN Hindustan Turbo Fan Engine (HTFE 25)• Hindustan Turbo Shaft Engine (HTSE-1200) • Small turbofan engine for UAVs• APU for MTA• Starter engine for fighter aircraft engines• Turboprop engine for trainer aircraft• Gas turbine engine for industrial application (4 MW class)
Propulsion Division of National Aerospace Laboratories (NAL)
• Distortion screens for aero-engine intakes• Centrifugal and mixed flow compressors• Detection of stall in centrifugal compressors• CD airfoils for axial flow compressors• Stall control using air jets and casing treatment in axial flow compressors• Reverse flow combustors and atomizers• Gas turbine cooling — film, effusion and impingement• Afterburner, exhaust nozzle and thrust vectoring• Ramjet/scramjet combustors• Bump foil and active magnetic bearings (AMBs)• Squeeze film dampers, composite rotor shafts and shaft flexure control• MAV propellers and ultra-light helicopter• Wankel and pulsejet engines• Endothermic and bio fuels• Micro gas turbine and high-speed alternator
Indian Institute of Science (IISc)
Theoretical and experimental fluid mechanics, applied aerodynamics, hypersonic and high enthalpy flows, computational Fluid dynamics, flight mechanics of aircraft and helicopter dynamics, control of aerospace vehicles, space robotics etc.
Source: Compiled by Q-Tech Synergy
As for UAVs, the small gas turbine engines used on the Lakshya-PTA UAV have been developed by ADE, while, NAL undertakes the development and testing of pulsejet engines for mini UAVs and MAVs. Pulsejet engines of thrust 1.8 to 2.1 kgf have been designed and tested. A successful flight of a mini UAV with a pulsejet engine has been
demonstrated. Further, the Rotary Engines and Ceramics Application Laboratory (RECAL) of NAL is capable of developing and testing Wankel engines for UAVs of power range 1 to 120 hp. The lab has successfully developed and flight-tested a 55 hp Wankel engine for the UAV Nishant.
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Production/manufacturing capabilities
Shakti turbo engine
In India, till date, only DRDO and HAL have been designated as entities for designing and developing engines. DRDO undertook the development of indigenous GTRE GTX-35VS Kaveri, an afterburning turbofan engine, in 1989 with a probable date of completion of 1996, which was extended to 2009. Kaveri was originally aimed at powering the LCA Tejas being built by the Aeronautical Development Agency (ADA). However, the aero engine developed by DRDO was unable to achieve the required thrust to power LCA and thus was officially delinked from the Tejas program in September 2008. While the Tejas needs an engine with 82—90 kN of peak thrust, the Kaveri could manage only 72 kN during flight testing in Russia. The DRDO finally winded up the Kaveri engine (GTX-35VS) program on November 2014. The Government has spent INR21 billion (US$350 Million) so far on the development of the engine. Till date, a total of nine Kaveri prototypes and four Kaveri core engine prototypes have been developed and these have accumulated more than 2,550 hours of engine testing. The Kaveri engine was also integrated with IL-76 Aircraft and flight-tested. As of now, it has been decided to use the Kaveri derivative engine (“dry” engine) without afterburner for powering Indian unmanned combat aircraft, tentatively called Autonomous Unmanned Research Aircraft. Also, the Government is determined to involve the private sector in this project. The target is to get the system operational within 8 years once the funds are cleared by the
Government. Recently, France had offered to invest INR60 billion (US$1 billion) to revive project Kaveri, proposing a joint development plan.
HAL is the only Indian player whose engine division has a history of license producing various imported designs, which include:
• Building engines under transfer of technology for all aircraft acquired from Russia in the recent past — for example, the AL-31 FP for the Indian Air Force’s Su 30MKI and the RD-33 MK for the Indian Navy’s MiG-29K.
• Manufacturing the Artouste turboshaft engine since 1961 to equip the Indian Chetak and Cheetah helicopters under manufacturing license granted from France’s Turbomeca. These are not in use anymore. Further, HAL has jointly developed the HAL/Turbomeca Shakti turboshaft helicopter engine with France’s Turbomeca to power the Dhruv choppers produced by them. The program to develop this engine was initiated in 1999 and by late 2007, HAL had started fitting the Shakti engines on HAL Dhruv. These engines, which power the HAL Dhruv and HAL Rudra, will also power the HAL Light Combat Helicopter (LCH), which is under development. It is an upgraded version of the Turbomeca Ardiden and was developed under the aegis of a HAL—Turbomeca JV.
HAL has also undertaken a project with its internal resources for indigenous design and development of turboshaft engines. Recently, HAL achieved a milestone with the successful completion of the inaugural run of the core of 25 kN indigenous aero engine (Hindustan Turbo Fan Engine — HTFE 25), which was completed in June 2016. It can be used for basic, intermediate and advanced trainer aircraft, besides business jets, five ton weight class aircraft in single engine configuration and nine ton weight class aircraft with twin engine configuration. It also initiated the design of HTSE-1200, meant for 3-tonne to 6.5-tonne helicopters. The HTSE-1200 can be used for helicopters of 3.5 ton class in the single engine configuration (e.g., LUH) and of 5 to 8 ton class in the twin engine configuration (e.g., ALH and LCH). The engine develops a power of 1,200 kW at sea level and can operate up to an altitude of 7 km. Both the projects are expected to reach fruition by around 2020—21.
The PSU has also entered into key JV partnerships in this domain with global OEMs such as Rolls Royce and Safran to manufacture high-tech components for aircraft engines.
13Eye on Defence |
Some of the major engine-procurement programs in the near future include light transport (AVRO and AN-32), LCA Tejas and AMCA, which entail the procurement of approximately over 2,000 engines. Furthermore, the Indian Armed Forces are planning helicopter procurement programs aimed at strengthening the military helicopter assets through the procurement of 1,000+ rotary wing aircraft, including attack, utility, multi-role and lift platforms, by the end of 2027. The projections depicted in the table below indicate that the country would need about 4,000 helicopter engines in the next 20 years or so.
Emerging requirements
Aero engine market size
No. of platforms
ENG/ACTotal no of engines
Spare engines Total Remarks
Light transport (AVRO)
~60 2 112 28 140 Excluding a small number of aircraft and the FGFA deal
Light transport (An-32)
~80 2 156 39 195
LCA Tejas IAF
MK1 ~20
Mk IA ~80
Navy
MkII ~45
Army
Total ~150-200
3.5 700 175 875
AMCA 200 3.5 700 350 1050
Helicopter variants
Heli Qty
VVIP ~10
Heavy Lift ~15
Attack ~20
NUH ~100
MRH ~90
LCH ~180
Dhruv ~190
Cheetal ~20
LUH ~385
Total ~1,000
3.5 3,500 500 4,000 More than 4,000 Heli engines are required.
14 | Eye on Defence
An aero engine’s life is about 1,500 hours; each fighter platform with a service life of 5,000—6,000 hours will require around 3.5 engines each. The development of each engine variant costs around INR120 billion (US$2 billion). Hence, there seems to be a huge development cost and demand. Similarly, each helicopter consumes three to three-and-a-half engines over its service life, while each twin-engine chopper will require six to seven engines. This makes it a total market size of about INR500 billion (US$8—US$10 billion).
The cumulative Indian military aero-engine market is expected to be worth approximately INR3,500 billion (US$60 billion—US$70 billion) over the next two decades. Beyond one-time engine supply to the defence forces, immense potential is seen for repeated business in components and spares, which include nozzles, turbine blades and vanes, drive shafts, flexible couplings casings, compressor, housings, stators and sub-assays, which are likely to be sourced domestically.
Thus, the opportunities span the entire spectrum, from supplying engine to engine components/spares to providing maintenance repair and overhaul (MRO) services. In fact, MRO-related expenses can often exceed the initial procurement cost of an engine. Maintenance, which includes dismantling, inspecting, assembling and testing aircraft engines, is, however, the single largest MRO segment. Engine maintenance constitutes 35% of the overall cost of maintaining an aircraft. More than two-thirds of engine maintenance is taken up by the cost of materials, with labor accounting for another 22%. India’s MRO segment is expected to grow to INR180 billion (US$3 billion) by 2020.
Market sizeIn the absence of technological know-how to develop engines, a lot of the requirement will be met via imports or co-development, creating a very large offset opportunity for India’s emerging aerospace industry. Thus, there is a lucrative opportunity for foreign manufacturers as well, especially those who view India’s potential as an opportunity to outsource manufacturing work, partly because of offset requirements and cost benefits.
The market would also pave way for JVs/MoUs between foreign and Indian firms for engines as well as engineering components. Thus, there would be plethora of opportunities and ample business for existing tier-2 players (companies that will build engine hydraulic systems, electrical power systems etc.) and tier-3 players (companies that have casting and forging capabilities and can build fasteners, bearings, wiring harness and machine structural sheet metal). The tier-3 segment, which is still upcoming, in particular, is likely to see a big uptick.
15Eye on Defence |
Till date, HAL has been the single source of engine/major engine component production in India; therefore, despite being loaded with contracts, it is likely to draw even more business. Now, some of the private sector companies have sought industrial license to make engine parts.
The Indian private sector has already proved its capabilities in the automotive industry and is emerging as a sourcing hub for engine component requirements (both domestic and global), such as piston and piston rings, engine valves and parts, fuel injection systems, cooling systems and parts and power train components (crankshafts, camshafts etc.). The private sector should be able to catch up on defence power plant capabilities soon.
Emerging private sector
Partnerships
The time has come to amalgamate the expertise and competence available in both the public and private sectors of the country to create a high tech platform for developing aero engines. The industry needs to intensify its collaborative ventures to leapfrog in this field. Indeed, resources available in private companies such as Tata Power, L&T, Kirloskar and Godrej could be harnessed to build a vibrant technological base for aero engines of varying thrust ranges. As a result, the Government has taken steps in this regard. For example, awarding of the contract to TASL, which has a JV agreement with Airbus, for the AVRO replacement program for the IAF substantiates this fact. Tata will act as the Indian production agency in this program and will be involved in every step, including engine development.
Some of the companies that have formed JVs in this domain are listed below:
Company JVs
HAL In 2008, HAL signed an agreement with Honeywell to manufacture the TPE331-10 engine in India.
In 2005, HAL teamed up with Snecma to create an equally-owned JV Snecma HAL Aerospace Pvt. Ltd. in Bangalore, to produce pipes for aero engines.
Further, in 2015, both companies signed a MoU to explore the possibility of establishing a JV in India for the production of aero-engine parts. The proposed JV will initially focus on the manufacture of high-tech parts for Dassault Rafale’s Snecma M88 engine and then subsequently contribute to other major aerospace projects of HAL and Snecma
In July 2010, HAL tied up with Rolls-Royce (UK) and formed a 50:50 JV company (JVC) International Aerospace Manufacturing Pvt. Ltd. (IAMPL). The JVC manufactures compressor rings, turbine blades and nozzle guide vanes for Rolls-Royce. It also has a license agreement with Rolls Royce to locally manufacture the Adour 871 engines for the new IAF Hawks.
GTRE In 2015, GTRE entered into an MoU with JSC Klimov for the joint development of a multi-axis thrust vectoring nozzle for future generation aero-engine applications.
Max Aerospace Max Aerospace signed an agreement in October 2014 with Snecma to create a JV Max Aero Engines Private Limited (MAEPL), which will provide complete engine support solutions, in particular, shop-level maintenance and flight line services. More specifically, its main role will be to provide maintenance services for the Snecma M53 engines powering the Mirage 2000H “Vajra” fighters, on behalf of the IAF, starting 2015.
Wipro Infrastructure Engineering
Wipro Infrastructure Engineering has an MoU with Spanish company CESA (Compania Espanola de SistemasAeronauticos SA), a subsidiary of Airbus, for the manufacture of precision engineering components, including hydraulics.
Source: Compiled By Q-Tech Synergy
16 | Eye on Defence
The drive for indigenized engines has very long-range ramifications at a macro level. Engine manufacturing is a complex, high-end, costly, capital intensive and time-consuming process. Lack of infrastructure, manufacturing and test facilities within the country and non-availability of skilled or technical manpower in the field of aero-engine technology are some of the other reasons why India still has a steep learning curve
• “Propulsion,” Council of Scientific and Industrial Research National Aerospace Laboratories, accessed 6 December 2016, http://www.nal.res.in/pdf/Propulsion.pdf
• “Jet engines and Thermal Barrier Coatings,” Applied Research Laboratories, accessed 5 December 2016, https://www.arl.psu.edu/documents/D_Wolfe_Poster_Jet%20engines%20and%20TBC%202%20(7_11_07)_MOD1.pdf
• “Powering the Aero Platforms,” Defence Pro Ac, accessed 5 December 2016, http://www.defproac.com/?p=3775, via Q-tech Synergy Newsletter
Way ahead
References
16 | Eye on Defence
17Eye on Defence |
Strategic partnerships: challenges and opportunities for Indian corporates
Background
Public sector units
Today, Indian Armed Forces find themselves at a critical juncture as far as their war preparedness is concerned, be it in terms of procuring new equipment or upgrading existing inventory. At the same time, the Indian defence procurement process is in an evolving phase where policies are being formulated to increase accountability and efficiency without further delaying decision-making and keeping the domestic industry in mind.
Observations from the Comptroller & Auditor General (CAG) have attempted to highlight the gaps that need to be filled within the defence establishment. India’s defence forces have faced a shortage of personnel and critical equipment because acquisition and modernization plans have taken more time than anticipated, resulting in significant capability gap. While India’s capital defence spending has increased, only a small part of it goes toward new equipment. A majority share of the annual capital budget is toward imports, mainly due to the paucity of technical know-how to manufacture complex systems. In order to plug this gap, the current Government has taken steps towards changes in procurement procedures — by introducing a new category “Buy (Indian - IDDM)” revising
The level of preparedness among DPSUs and Ordnance Factories Board (OFB), especially when it comes to supporting the Armed Forces, is limited and can be enhanced further. The Make in India drive aspires for an ecosystem wherein most mature technologies and their related equipment can be manufactured in-house. For this to become a reality, recent policies have tried to bring about fast-paced changes and introduced industry-friendly practices.
There is a time in the national growth process of a country when the traditional mindset must give way to change to allow the “best” to flourish. Now is arguably the most opportune time for both the public and the private sector to improve and further develop their existing infrastructure
the defence products list, issuing industrial licenses to the private sector and relaxing FDI norms. India’s Defence Minister, Shri Manohar Parrikar, has been leading from the front to address the sluggishness in the country’s defence preparedness.
In 2015, CAG observed that the Indian Army’s availability of authorized stock against War Wastage Reserve (WWR, which measures war preparedness) is low. Thus, against a WWR of 40 intense war days, in 50% of the total types of ammunition the availability was “critical,” i.e., fewer than 10 days.
India’s annual capital defence spending has averaged US$11billion1 per annum over the past four years. However, less than 10%2 of this capex goes toward ordering new equipment; the rest is scheduled payments for committed liabilities for the equipment and systems procured in the yesteryears. Also, the defence forces face shortages of critical equipment, in both high–tech equipment and wartime necessities.
and manufacturing capabilities. This is the time to evolve and allow the OFB and DPSUs a free hand, to act as independent entities within a regulatory boundary of course and with the Government retaining a golden share. These establishments should be allowed to manage their own houses.
Our OFB and DPSUs have performed well, have done their best, in the limited manner they could, and now they enjoy a definite lead over the private industry in terms of infrastructure, skills, experience and the working environment. The potential is there — what is required is a free hand.
1 http://www.defproac.com/?p=2079
2http://www.idsa.in/issuebrief/IndiasDefenceBudget2015-16_lkbehera_020315
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If we were to follow the traditional methods of procurement as we have been doing thus far, the results might not be any different. The ambitions of the political leadership to institute a corrective mechanism and the vision of the Government can be matched only if we adopt new and innovative methods while also embracing the private sector. The Government could do well to match the competencies in the corporate sector with that of the public sector and find collaborative arrangements. The idea here is to mesh the efficiencies in the private sector with the infrastructure in the public sector for a win-win situation.
DPP, an evolving document on India’s procurement policies, has become an inclusive document, with both the private sector and the MSMEs. The document, however, does not delve much into defining the process through which
This is the first time that the Ministry of Defence (MoD) has made the effort to consult all industry stakeholders to create an all-inclusive document. From seeding the idea of SPs to building a consensus, the journey has not been smooth, with plenty of opposition from various stakeholders, some out of fear of the unknown and some because of perceived notions of unfair play.
Once notified, SPs present a tremendous opportunity for the corporates to “walk the talk.” From advanced missile systems to guns and ammunition, from surface ships to subs, aircraft and materials, the entire spectrum of the strategic systems of the Armed Forces will be opened for the large corporates that qualify as SPs. A very critical aspect of creating SPs is to create a meritocracy system wherein the competencies of the private players are fully utilized. This is fundamental to growth.
Procurement plans would ideally be shared by the Government with the SPs, who would participate in shaping these plans to provide the best possible effect. The Defence Forces will be involved at every stage with the corporates, like they currently are with the OFB and DPSUs, for handholding as necessary. The Armed Forces may do well to revise their HR policy to enable their best
How, then, will the Armed Forces get equipped to protect us? Or, in other words, when will the Armed Forces get what they need?
Opportunities for corporates
the procurement of strategically sensitive systems can be undertaken. Strategic partnerships hold the key and probably provide a hope of a near-hassle free induction of procured equipment. The Committee of Experts3 constituted for the formulation of the present DPP recommended a recognition of the abilities and intent within the private sector to contribute to the nation’s defence industry through strategic partnerships. A broad criterion for strategic partners (SPs) was indicated by the Committee, further refined by the successor Committee, to draw up detailed pre-qualifications.
The Government is currently working on the final chapter of the progressive DPP 2016, which is expected to be released soon.
talent to be posted with large corporates for better synergy. As partnership with private players at the topmost level is a first for the Armed Forces in India, it will be paramount that the modus operandi is well documented for future reference.
The addressable market for the corporates should add up to at least US$10billion equivalent in the first three years. Major systems on the map will yield more. The cascading effect it would have on the industry at large could well be in the range of 3x times the investment, if not more. Cash flows will demand setting up of new infrastructure, best business ethics, global best practices, greater efficiencies, hiring of fresh talent, universities revising their curriculum to include aerospace and defence, tiering of the industry and so on.
The greatest opportunity is to be able to participate in the strategic affairs of the nation by equipping the Armed Forces with the best systems in the world. The current ask is to reverse the present import-export ratio through indigenous development and production and thus the opportunity is to increase defence exports to such levels as to be able to shape foreign policy. Military diplomacy will have a new flavor.
3Shri Dhirendra Singh committee and Dr V.K. Aatre committee
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The Experts Committee set up by the Ministry of Defence deliberated on the important aspect of improving the efficiency of the procurement process and helping the Armed Forces to be able to induct strategically sensitive systems at a desirable pace. The concept of strategic partnerships emerged because this would be different from the standard procurement process. Also, the concept of Raksha Udyog Ratna (RUR), fielded in the DPP 2006, never took off; therefore, it was important that the identified pitfalls were addressed. The concept is being revitalized now. The concept was carefully crafted, with overriding stipulations such as only one SP per segment. To quote the report, in concept, “Having considered the nature of defence material and the configurations of defence industry worldwide we have come to the inevitable conclusion that if the strengths of private industry are to be harnessed then they must be done under well-defined models depending upon the strategic needs, quality criticality and cost competitiveness. Whenever the vendor base is large and competition is feasible, the competitive bidding process must be followed. There are cases, however, where certain platforms are of strategic importance. For these, we are recommending the “Strategic Partnership model” for creating capacity in the private sector on a long-term basis. Such a capacity will be created over and above the capacity and infrastructure that exists in public sector units. This is expected to spur the sectors toward a more efficient and effective mode of operation. Likewise, there are cases where quality is critical and vendor base is very narrow. For these we are recommending a model of “development partnership.” These models would depend upon the systems and products within the ambit of the requisite model.”4
The industry was, however, keen that the market forces take over the decision of the SP in each of the segments and that they be allowed to be eligible for all segments. It was argued extensively in the Committee’s report that adequate opportunity must be given to the private industry to enable enhanced defence production. While in the present context, the “buy and make” category of procurement invites the choice of the Indian production partner basis the market forces and best combined bid, the situation was sought to be reversed in the case of SPs considering the importance of self-reliance in the core segments of the nation’s war-fighting strength.
Intent behind the strategic partnership model
The selection/nomination could be either (i) after a G2G negotiation, (ii) through competition, (iii) prior to the G2G negotiation or (iv) ab-initio selection for all segments. On the point of a company’s eligibility for SP status in more than one segment, the committee felt otherwise and in the report wrote, “… having been declared a Strategic Partner in any one platform, or a family of complex weapons or a major network programme that entity or its associate or subsidiary should not be eligible to be chosen as a Strategic Partner for any other purpose under this dispensation. This is to prevent conglomerate monopolies emerging at the very start without production even having commenced. Likewise, they will also not be allowed to have cross-holdings in each other’s companies. The available capability and capacity in the concerned public sector unit will be an additional safeguard against any monopolistic tendency on the part of the Strategic Partner.”5
While the Experts Committee deliberated on the strategically important segments, it also called for a well-defined protocol to identify the SPs, the primary focus being to identify capabilities for sustained improvements in platforms through technology insertions. The selection procedure is central to the success of the scheme, and therefore the Ministry formed a successor committee, which actually developed the parameters for selection. These were thereafter deliberated by the Minister with his staff and with the industry at large on a number of occasions.
The draft is now ready to be placed before the apex body of the ministry for its consideration.
4Committee of Experts for Amendment to DPP-2013 Including formulation of policy framework” from July 2015
5Committee of Experts for Amendment to DPP-2013 Including formulation of policy framework” from July 2015
20 | Eye on Defence
The greatest challenge we have today is one of “mindset.” An aggressive mindset with a clearly defined roadmap is the need of the hour.
While the present nascent state of the defence industry is a challenge, the corporate sector is capable of rising to the occasion to make the necessary investments and initiate winner collaborative arrangements. Technology transfer agreements will usher in a fresh outlook with immense scope, and will be minutely looked into by the stakeholders themselves. The Government’s interference in negotiating technology transfer arrangements or at least overseeing them will be a major challenge the industry must resist and overcome.
Corporates need to gear up and get ready to face the challenges of time and space. Delivering the desired strategic system within the timeframe and conforming to the highest quality standards while dealing with restricted availability of military grade raw materials
The idea of strategic partnerships is indeed good, and consensus on the criteria has largely been evolved — implementation now is the key. Timely decision-making is paramount for any policy or program to succeed.
1. “Committee of Experts for Amendment to DPP-2013 Including formulation of policy framework” from July 2015
2. Report of the Task Force on Selection of strategic Partners” December 2015.
3. Report of the Comptroller and Auditor General of India on Ammunition Management in Army, May 2015
What, then, are the challenges?
Conclusion
References
and an unorganized defence industry will challenge their supply chain. Corporates must map the existing industry in terms of their preparedness quality and capacity. Gaps in the supply chain must be identified discipline-wise and developed, wherever necessary.
Development and sustenance of a quality supply chain will determine success in production. Involvement from the design and development stage and handholding the supply chain in terms of processes will remain a challenge for some time and must be addressed head-on.
Many corporates have made investments in multi-discipline sub-sectors of defence. However, the policy is indicative of just one SP per discipline. What, then, must the corporates do with the investments made in other disciplines? Collaboration is the keyword. SPs must collaborate among themselves for sourcing and work both as competitors as well as collaborators.
Date of issue RFI details Response date Issued by Remarks
11-Nov-16 Hand-held satellite phones; Qty: ~150 12-Dec-16 Dte Of Plans For IAF
07-Nov-16 Indigenous development of Helo Deck Communication System (HDCS) for Indian Navy ships; Qty: 30
09-Dec-16 Directorate of Indigenisation For IN
04-Nov-16 Passive surveillance system (PSS); Qty: ~10 09-Dec-16 PD ASR For IAF
04-Nov-16 Multi-purpose power tractor (MPT) 15-Dec-16 E-in-C Br For IA
01-Nov-16 Construction of two 100-men accommodation barge
29-Nov-16 The Principal Director of Ship Production Directorate of Ship Production
For IN
28-Oct-16 Refurbishment of the AVRO aircraft 28-Nov-16 Southern Air Command Communication Flight
For IAF
27-Oct-16 Harbour crafts; Qty: 02 15-Dec-16 Directorate of Ship Acquisition For ICG
26-Oct-16 Major software project 20-Dec-16 Directorate General Information System
For IA
25-Oct-16 Integrated EW suite for Mi-17V5 1; Qty: ~15 25-Nov-16 Dte Of Plans For IAF
18-Oct-16 Interactive fire arms training simulators (IFATS); Qty: ~142
02-Nov-16 Dte Of Plans For IAF
06-Oct-16 Seven Next Generation Corvettes (NGCS) 18-Nov-16 Dte of Ship Production For IN
05-Oct-16 Spotter scope with digital camera 15-Oct-16 Northern Command (Arty) For IA
04-Oct-16 Light bullet-proof vehicles; Qty: 160 to 200 04-Nov-16 Provost Marshal (Air) For IAF
29-Sep-16 Eight missile cum ammunition barges 27-Oct-16 The Principal Director Directorate of Ship Production
For IN
29-Sep-16 QR for Battle Field Surveillance Radar (BFSR) --- DG BSF For BSF
28-Sep-16 Mobile Decontamination System 04-Nov-16 E-in-C Br For IA
26-Sep-16 Assault rifles 07-Nov-16 Dte Gen of Infantry For IA
26-Sep-16 Technical demonstrator for Akash missile 17-Oct-16 Army AD College For IA
26-Sep-16 Training version of upgraded L/70 gun 17-Oct-16 Army AD College For IA
26-Sep-16 High Power Radar (HPR); Qty: ~12 08-Oct-16 Dte Of Plans For IAF
23-Sep-16 Remote actuator of influence mines 03-Nov-16 E-in-C Br For IA
16-Sep-16 Geo-Spatial Information System (GIS) related aeronautical software and hardware
17-Oct-16 Dte Of Plans For IAF
15-Sep-16 Simulator for integrated platform management system with motion control for Project-75 Scorpene submarines
17-Oct-16 Directorate of Information Tech For IN
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Request for information (September 2016—November 2016)
Date of issue RFP details Response date Issued by Remarks
11-Nov-16 Communication equipment 02-Dec-16 C IT For IAF
10-Nov-16 Quad rotor test platform (UAV) for autonomous mission control of cooperative algorithms testing
30-Nov-16 Aeronautical Development Establishment
Issued By DRDO
09-Nov-16 Radar KH-2007 30-Nov-16 Material Organization, Ghatkopar For IN
09-Nov-16 NIT for hiring consultancy services for construction of Indian Navy and Indian Coast Guard jetty
08-Dec-16 Director General, Naval Project Visakhapatnam
For IN
08-Nov-16 Torpedo Ignition Cartridges 12-Nov-16 Ordnance Factory, Dehuroad Issued By OFB
07-Nov-16 Power Cartridge under GO-CO as per specifications
24-Nov-16 ARDE Issued By DRDO
07-Nov-16 Night vision device binoculars; Qty: 138 05-Dec-16 Controller of Procurement For IN
07-Nov-16 Global positioning system (GPS) -- DG, BSF For BSF
07-Nov-16 Fuze Antiremoval Mine AT 2B ND 18-Nov-16 Ordnance Factory, Bolangir Issued By OFB
05-Nov-16 Light bullet-proof vehicle (LBPV); color: white; Qty: 183
08-Dec-16 Commandant (Proc) Dte. General For CRPF
04-Nov-16 NBC mask; Qty: 12 15-Nov-16 Air Force Station, Adampur For IAF
04-Nov-16 Sports weapons (.22 free/standard rifle, big bore free rifle, .22 Standard Pistol, .32/.38 center fire pistol and .22 free pistol)
25-Nov-16 DG AR For Assam Rifle
04-Nov-16 W-Band reflector antenna with positioning system
13-Dec-16 DEA, Dehradun Issued By DRDO
03-Nov-16 HHTI with LRF with 1.5X extender 15-Nov-16 Instruments Research & Development Establishment
Issued By DRDO
03-Nov-16 Night vision monocular; Qty: 06 15-Nov-16 Air Force Station Tezpur, Assam For IAF
03-Nov-16 COTS radar; Qty: 03 and COTS navigational radar; Qty: 19.
25-Nov-16 CPRO Kochi For IN
03-Nov-16 Development, engineering and supply of target acquisition system for man portable anti-tank guided missile
15-Nov-16 Instruments Research & Development Establishment
Issued By DRDO
02-Nov-16 Fuze mine A/T 4A ND (empty assembly) 11-Nov-16 Ordnance Factory, Badmal Issued By OFB
02-Nov-16 Jet ski and water scooter; Qty: 02 each 28-Nov-16 INS Kadamba For IN
01-Nov-16 Sand goggles; Qty: 5,000 14-Dec-16 Provisioning Directorate (Procurement Cell)
For BSF
Request for proposal (September 2016—November 2016)
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Date of issue RFP details Response date Issued by Remarks
01-Nov-16 Cockpit camera; Qty: 40 18-Nov-16 Air Force Station Hakimpet For IAF
31-Oct-16 Modification of vehicle for installation of signal equipment
23-Nov-16 Eastern Command For IA
31-Oct-16 Combustible cartridge case (CCC), propellant retaining device (PRD) and igniter tube (IT) for M-92(HZ) of 155 MM BMCS
08-Nov-16 Ordnance Factory, Nalanda Issued By OFB
29-Oct-16 Night vision device (NV binoculars); Qty: 96 08-Nov-16 Material Organization (Mumbai) For IN
29-Oct-16 Detonator plug for bomb No.56 MK2; Qty: 2,990
15-Nov-16 Ammunition factory, Kirkee Issued By OFB
28-Oct-16 MTU Engine Model 16V4000M90 08-Dec-16 For IN
27-Oct-16 EoI for an industry partner to design and develop fully automated, pilot level eco-friendly disposal facility of ammunitions for different calibers
12-Dec-16 Centre for Fire, Explosive and Environment Safety
Issued By DRDO
26-Oct-16 Anti-ballistic goggles (protective eyewear for range firing); Qty: 50
11-Nov-16 CO 610 GARUD For IAF
26-Oct-16 Oxygen mask HM-2000 (MK-I); Qty: 30 02-Nov-16 Station Logistics Section For IAF
26-Oct-16 Optical imaging system (Nomarski microscopy)
15-Nov-16 DMRL, Hyderabad Issued By DRDO
26-Oct-16 Slim tripod turnstile integrated with bio-metric access control system and biometric access control system with associated magnetic lock
22-Nov-16 Security Officer Air Force Station For IAF
22-Oct-16 Bullet resistant jacket; Qty: 1,187 15-Dec-16 DG CISF For CISF
21-Oct-16 Optical imaging system 15-Nov-16 Defence Metallurgical Research Laboratory
Issued By DRDO
19-Oct-16 CAMC for MBT tank simulators — troop training
15-Nov-16 CVRDE, Avadi Issued By DRDO
18-Oct-16 Fuze mine comb. M605 assembly empty etc. 21-Oct-16 Ammunition Factory, Kirkee Issued By OFB
18-Oct-16 Global Mapper and Compe GPS software 21-Nov-16 HQ CAC, Bamrauli For IAF
18-Oct-16 Manufacture and supply of empty assembly of ND MK III BAR anti-tank dummy mines
07-Nov-16 RDEE Issued By DRDO
18-Oct-16 Realization, supply and installation of early warning and advance response network system
07-Nov-16 RDEE DIGHI Issued By DRDO
18-Oct-16 High frequency electromagnetic field simulator
08-Dec-16 TBRL Issued By DRDO
17-Oct-16 Electro galvanized steel barbed wire 16-Nov-16 HQ South Bengal Frontier For BSF
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Date of issue RFP details Response date Issued by Remarks
17-Oct-16 Telemetry module with 1W transmitter for proximity fuzes
03-Nov-16 MMD,ARDE Issued By DRDO
15-Oct-16 Binocular 7X50 BSL type; Qty: 30 10-Nov-16 CPRO KOCHI For IN
13-Oct-16 Goggles flying (anti-ballistic goggles); Qty: 35 24-Oct-16 Logistic Section For IAF
13-Oct-16 Bracket to Drg.No.675-54-183 for BMP-II; Qty: 200
08-Nov-16 Machine Tool Prototype Factory Issued By OFB
12-Oct-16 Long-term autonomous underwater acoustic recording system; Qty: 03
09-Nov-16 Naval Physical Oceanographic Laboratory
Issued By DRDO
12-Oct-16 Country boat with 10 HP engine; Qty: 02 16-Nov-16 IG BSF Meghalaya Ftr For BSF
10-Oct-16 Video surveillance system with 60 cameras 31-Oct-16 Station Logistic Section For IAF
07-Oct-16 Medium bulletproof vehicle; Qty: 65 16-Nov-16 Dte. Genl CRPF CGO Complex For CRPF
06-Oct-16 QR for flexible fiber scope --- Dg BSF For BSF
06-Oct-16 Design, development and testing of electric gun and turret drive system
06-Dec-16 CVRDE, Avadi Issued By DRDO
05-Oct-16 QR for Gun Shot Detection System (GDS) -- Dy Commandant (MoD) For BSF
04-Oct-16 Goggles; Qty: 30 14-Oct-16 Airmen Training School of plant and equipment
For IAF
04-Oct-16 GPS track; Qty: 12 21-Oct-16 OIC ATG For IAF
04-Oct-16 TWT of air surveillance radar 16-Nov-16 --- For IN
03-Oct-16 Coaleser cartridge Type-M; Qty: 26 and Separator Cartridge Type-M; Qty: 20
20-Oct-16 AF Stn Gorakhpur For IAF
30-Sep-16 Missile hardware simulator 20-Oct-16 Defence Research & Development Laboratory
Issued By DRDO
30-Sep-16 Turret electric equipment 15-Oct-16 Ordnance Factory, Medak Issued By OFB
30-Sep-16 Design, engineering and supply of plant and equipment; erection; and commissioning of combustible component plant on turnkey basis
01-Dec-16 Ordnance Factory Nalanda, Rajgir Issued By OFB
28-Sep-16 Indigenous development of cockpit familiarization and ground running simulator
10-Nov-16 Dte of Indigenisation For IAF
28-Sep-16 Twin engine fast patrol boat speed boat; Qty: 50
10-Nov-16 DG BSF For BSF
28-Sep-16 Digital VHF radio repeater set (DMR) along with essential accessories; Qty: 05
10-Nov-16 DG BSF For BSF
28-Sep-16 Aluminum boat with 40 HP OBM; Qty: 17 10-Nov-16 DG BSF For BSF
27-Sep-16 PJI helmet 05-Oct-16 Officer In Charge Local Purchase For IAF
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Date of issue RFP details Response date Issued by Remarks
26-Sep-16 GPS 03-Oct-16 Station ATG Cell For IAF
26-Sep-16 Digital VHF radio repeater set (DMR) along with essential accessories; Qty: 05
11-Nov-16 Provisioning Directorate (Procurement Cell)
For BSF
23-Sep-16 Safety Fuze No.20 etc. 27-Sep-16 Ammunition Factory, Kirkee Issued By OFB
22-Sep-16 Global positioning system (GPS) --- DG BSF For BSF
22-Sep-16 Radar display 05-Oct-16 CPRO KOCHI For IN
22-Sep-16 Laser range finder 20-Oct-16 Centre for High Energy Systems and Sciences
Issued By DRDO
20-Sep-16 Light weight man portable high frequency sets; Qty: ~216 sets
20-Oct-16 Dte Of Plans For IAF
20-Sep-16 Modeling and simulation for improvement of accuracy of artillery rocket
13-Oct-16 ARDE Issued By DRDO
19-Sep-16 Diving items 18-Oct-16 Controller of Procurement Material Organization
For IN
16-Sep-16 NBC filter type — FAS 200M (for filtration unit) on single bid system
08-Oct-16 Controller of Procurement For IN
16-Sep-16 Bullet-proof helmets; Qty: 1,728 04-Nov-16 Dte of Ops (Off) For IAF
16-Sep-16 Pyro Cartg.YDP 1-3 Drg.Nai (MB) 9553 etc.; Qty: 387
14-Oct-16 Ammunition Factory Khadki Issued By OFB
16-Sep-16 Decontamination suit 05-Oct-16 Defence Bio-Engineering & Electro Medical Laboratory
Issued By DRDO
14-Sep-16 Mask oxygen MK I (Qty 300) and II (Qty: 400) 06-Oct-16 DTE of Procurement For IAF
14-Sep-16 LWI Helmet for MI 17 V5 aircrew (size 1; Qty: 26 and size 2; Qty: 104)
06-Oct-16 DTE of Procurement For IAF
14-Sep-16 Explosive trace detector 20-Oct-16 DG CISF For CISF
12-Sep-16 Hexacopter-based aerial platform etc. 20-Oct-16 Centre for High Energy Systems and Sciences
Issued By DRDO
12-Sep-16 Consultancy contract for design and development of supercavitating projectile
07-Oct-16 Naval Science & Technological Laboratory
Issued By DRDO
09-Sep-16 Bullet-proof jacket (Level III+) as per annexure-“A”
30-Sep-16 Ordnance Factory, Ambajhari Issued By OFB
09-Sep-16 90 HP two stroke OBMs and 75 HP four stroke OBMs
--- DTE General BSF For BSF
09-Sep-16 Infrared vision system 27-Sep-16 Advanced Numerical Research & Analysis Group
Issued By DRDO
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Date of issue RFP details Response date Issued by Remarks
08-Sep-16 7.62 x 39mm API BZ ammunition and 7.62 x 51mm AP(WC core) ammunition; Qty: 2,000 each
25-Oct-16 Defence Metallurgical Research Laboratory
Issued By DRDO
08-Sep-16 Impact delay fuse for penetrator warhead 13-Oct-16 ARDE Issued By DRDO
07-Sep-16 Day sight for LMG 7.62 04-Oct-16 Small Arms Factory, Kanpur Issued By OFB
05-Sep-16 Tactical vest; Qty: 1,398 30-Sep-16 DIGP, GC For CRPF
05-Sep-16 40 mm to 25 mm Schunk adaptor 04-Oct-16 IRDE Issued By DRDO
04-Sep-16 CBRN items for CT course 22-Sep-16 Training Centre National Security Guard
For NSG
01-Sep-16 Low-tech ammunition ((a) Bicat Strip; Qty: 15,504, (b) Grenade No.90; Qty: 45,466 and (c) Matches Fuzee; Qty: 2,268)
22-Sep-16 DG AR For Assam Rifle
01-Sep-16 Solid carbide ground rod 30-Sep-16 Gun and Shell Factory, Cossipore Issued By OFB
01-Sep-16 Design and development of prototype locking mechanism for Su-30 helmets with the supply of 5 prototypes
21-Sep-16 Defence Bio-Engineering & Electro Medical Laboratory
Issued By DRDO
01-Sep-16 Armor-piercing incendiary bullet; Qty: 126,194 + a 50% option clause
16-Oct-16 Ordnance Factory Khamaria Jabalpur
Issued By OFB
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Application no. and date
Name of applicant Item of manufacture
103 01/11/2016
M/s Inmet Technology Solution Pvt. Ltd. Forging, pressing stamping and roll-forming of metal powder metallurgy
102 01/11/2016
M/s Jyoti Explosives Pvt. Ltd. Class 2.0 explosives (slurry/emulsion explosives/bulk SME)
101 01/11/2016
M/s Ganesh Explosives (P) Ltd. Site mixed bulk emulsion explosives class 2
100 01/11/2016
M/s DCM Shriram Industries Ltd. Bullet-proof vehicles
99 01/11/2016
M/s CoreEL Technologies Pvt. Ltd. Design, development, upgrade, assembly and manufacture of airborne, land and naval radar systems
98 01/11/2016
M/s Space Era Materials & Processes Pvt. Ltd.
Manufacture of part and accessories of aircraft, including EW equipment and instrumentation
97 01/11/2016
M/s Ananth Technologies Ltd. Manufacture of part and accessories of aircraft, including EW equipment and instrumentation
96 01/11/2016
M/s Mehrana Industries Ammonium perchlorate
95 01/11/2016
M/s Jyoti Explosives Pvt. Ltd. Ammonium perchlorate
94 01/11/2016
M/s Minerva Special Purpose Vehicle Pvt. Ltd.
Manufacturing of armored vehicles
93 01/11/2016
M/s Elcomponics Aerob Tech (I) Pvt. Ltd. Manufacture of airplanes
92 05/10/2016
M/s Pranav Vikas (India) - Private Limited Heating ventilation air conditioning system for military shelters
91 29/09/2016
M/s Serial Innovations India Private Limited
Manufacture of optical instruments and equipment
90 28/09/2016
M/s Ideal Detonators Private Limited Manufacturing of S.M.S/S.M.E explosives
89 15/09/2016
M/s Ideal Industrial Explosives Ltd. Unit II Manufacturing of S.M.E /S.M.S explosives
88 14/09/2016
M/s EHES, a unit of Essar - Project(I) Ltd. Manufacture of nuclear reactors, except isotope separators
List of industrial licenses (ILs) filed for September 2016—November 2016
28 | Eye on Defence
Name of entity Project details Value*
Defence AcquisitionsCouncil (DAC) andIAF
• DAC has approved procurement of 83 LCA Tejas MK1A along with simulators and ancillary equipment from HAL for the IAF.
• Tejas MK1A aircraft will feature AESA fire control radar, in-flight refueling probe, electronic warfare jammer on pod and improved serviceability.
INR500 billion
DAC and Indian Army • DAC has cleared purchase of 10 light combat helicopters (LCHs) from HAL for the Indian Army in addition to six regiments of indigenous Pinaka rocket launchers (developed by DRDO for delivering superior combat performance) and 464 T-90 tanks from OFB for the Indian Army in a deal worth INR280 billion.
• DAC has also approved a number of other deals for the Indian Army, including the procurement of 598 mini UAVs for INR11 billion, an electronic warfare system for low intensity conflict in Jammu and Kashmir for INR19 billion, and a proposal to buy INR4 billion worth of anti-tank guided missiles for training purpose.
INR314 billion
MoD and Boeing • Boeing has been awarded a contract to supply all-weather, over-the-horizon, Harpoon anti-ship missiles to India. The missiles will be employed on the Shishumar class submarine (Type-209) to provide enhanced capabilities for defence of critical sea lines of communication and are expected to be delivered by June 2018.
INR5 billion
RDEL • RDEL has won a contract worth INR3 billion for the refit of three naval warships at its facility at Pipavav in Gujarat. The project is expected to be completed by April 2017. The three warships are survey ship INS Jamuna, fleet tanker INS Deepak and patrol vessel INS Savitri.
INR3 billion
Safran and DRDO • Safran has signed a consultancy agreement for the development of India’s own fighter jet engine in order to revive the Kaveri project, which was stalled in 2014 after the Kaveri gas turbine engine was unable to provide the required power thrust.
• This agreement is expected to ease the export of the light combat supersonic aircraft Tejas, as it will not require a separate export clearance pact with foreign engine suppliers.
INR134 million
New projects/investments/contracts
29Eye on Defence |
Name of entity Project details Value*
BEL • BEL has laid the foundation of a state-of-the-art factory in Andhra Pradesh’s Krishna district to cater to the country’s requirements for night vision products. The plant will be built in stages and will be complete in four years. 87% products manufactured at the plant will be supplied to the Defence Forces.
INR3 billion
Godrej & Boyce • Godrej & Boyce has inaugurated a facility for manufacturing rubber and composite materials for the defence sector in order to enter the non-metallic aerospace industry, which in turn will enable the company to manufacture more value-added assemblies and systems. The facility will manufacture rubber and composite components such as ablative lining, reinforced airframe seals, conductive seals, composite motor casing, and other high-temp aero-engine parts.
NA
*The following conversion rate has been used: 1US$ = INR67.
30 | Eye on Defence
1. “DAC clears purchase of 83 Tejas MK1A, 464 T-90SM, 15 Light Combat Helicopters and Pinaka MBRLs”, The Economic Times, 8 November 2016, via Q-tech Synergy Newsletter
2. “Defence Ministry finalises new blacklisting policy“, Indian Defense Research Wing, 7 November 2016, via Q-tech Synergy Newsletter
3. “Manohar Parrikar chaired Defence Acquisition Council clears proposal worth Rs 1,900 crores”, Indo-Asian news, 30 September 2016, via Factiva
4. “Reliance Defence To Refit 1 Navy Ship Shortly, 2 Others By April 2017”, NDTV news, 22 September 2016, via Q-tech Synergy Newsletter
5. “Tatas get Boeing job order for interior panel supply to four Poseidon-8I”,The Economic Times, 7 September 2016, via Q-tech Synergy Newsletter
6. “Boeing to supply Harpoon missiles to India from US”, The Economic Times, 24 September 2016, via Q-tech Synergy Newsletter
References
7. “Defence startup Tonbo Imaging inks $100 million export deal with Peruvian army”, The Economic Times, 12 October 2016, via Q-tech Synergy Newsletter
8. “French boost to jet engine plan, Kaveri project being revived”, The Economic Times, 30 November 2016, via Q-tech Synergy Newsletter
9. “Andhra Pradesh signs two shipbuilding MoUs with Russia at BRICS”, The Indian Express, 15 October 2016, via Q-tech Synergy Newsletter
10. “Russia Supplies Indian Navy With Over 100 Engines for MiG-29 Fighter Jets”, Sputnik Times, 27 September 2016, via Factiva
11. “Bharat Electronics Limited sets up factory to cater to demand for night vision products”, Tech first post, 19 September 2016, via Factiva
12. “Godrej delivers 50th motor casing for long range surface-to-air missile”, The Economic Times, 25 November 2016, via Factiva
31Eye on Defence |
Name of the entities Nature of transaction Value
RDEL and Dassault Aviation
• RDEL and France-based Dassault Aviation have entered into a 51:49 JV Dassault Reliance Aerospace to execute the offset obligations for the 36 Rafale fighter jets purchase.
• The partnership will also focus on promoting research and development projects under the MoD’s “Buy (Indian - IDDM)”.
INR300 billion
HCL Technologies and Butler America Aerospace LLC
• HCL Technologies has acquired Butler America Aerospace LLC to strengthen its position in the aerospace and defence engineering services space.
INR6 billion
RDEL and Kalashnikov Israel
• RDEL has entered into a joint agreement with Kalashnikov Israel Company with 51% stake.
• RDEL will manufacture Kalashnikov class of weapons for the Indian Armed Forces through the JV.
NA
Tata Motors and PT Pindad
• Tata Motors has inked an MoU with Indonesia-based PT Pindad to explore the market potential of Tata armored vehicles in Indonesia and other agreed regions of ASEAN.
• The MoU meets Tata Motors’ aim of creating long-term value in the Indonesian market and strengthening the export base of the Indian defence industry.
NA
Adani Enterprises and Elbit Systems
• Adani Enterprises has entered into a 51:49 JV with Israel’s Elbit Systems, named Adani-Elbit Advanced Systems India Limited, for the manufacturing of UAVs in Ahmedabad for the Indian military from early 2017.
• The Indian UAV market is expected to reach INR28 billion by 2021.
NA
RDEL and Allrig USA • RDEL has signed an agreement with US-based Allrig to develop the RDEL shipyard at Pipavav in Gujarat as a one-stop-solution venue for all the service needs of upstream firms, such as dry docking, inspection, repair, overhaul, upgradation, rectification, maintenance and spare services. The contract has a market estimation of INR70 billion by 2026.
• The agreement is expected to provide strategic advantages of high quality services at competitive costs and lower turnaround time to upstream companies operating in the Indian subcontinent.
NA
JVs and alliances
32 | Eye on Defence
Name of the entities Nature of transaction Value
The Andhra Pradesh Economic Development Board (APEDB) and JSC United Shipbuilding Corporation (USC), JSC Alexeev’s Central Hydrofoil Design Bureau, JSC Radar MMS, JSC Morinsis — AGAT and Elcom Systems Private Limited
• APEDB has signed two MoUs with Russian firms. The first MoU is with Russia’s JSC United Shipbuilding Corporation (USC) for construction of a shipbuilding facility in Andhra Pradesh.
• The second MoU is with JSC Alexeev’s Central Hydrofoil Design Bureau, JSC Radar MMS and JSC Morinsis - AGAT and Elcom Systems Private Limited for setting up manufacturing and servicing facilities in the respective areas of specialization.
NA
33Eye on Defence |
1. “Reliance Defence, Israeli company to make Kalashnikov weapons “,Business Line, 14 November 2016, via Q-tech Synergy Newsletter
2. “Tata Motors inks pact with Indonesian entity on defence business”, The Indian Express, 3 November 2016, via Q-tech Synergy Newsletter
3. “Reliance Group sews up accord with USA’s Allrig”, The Economic Times, 7 October 2016, via Q-tech Synergy Newsletter
4. “Largest ever contract: Reliance, Dassault form JV to execute Rafale offsets”, The Indian Express, 4 October 2016, via Q-tech Synergy Newsletter
5. “Adani Enterprises to make drones with Israeli firm”, Business Standard, 9 November 2016, via Factiva
6. “Adani forms UAV joint venture with Elbit Systems”, HIS Jane’s Defence Industry, 9 November 2016, via Factiva
7. “HCL Tech to buy Butler America Aerospace for $85mn”, The Indian Express, 21 October 2016, via Factiva
References
Country Nature of transaction Additional details
Israel • During the visit of Israeli President Reuven Rivil to India, contracts worth INR94 billion were signed between Israel and India for the purchase of two Phalcon/IL-76 Airborne Early Warning and Control Systems (AWACS) and 10 Heron TP UAVs. The deliveries are expected to be made within the next two to three years.
• Israel has also offered India a secure border solution.
• Israel has given a proposal to India’s DRDO to jointly develop an advanced version of Heron UAV in India.
Russia • The Indian Army, during the visit of Russian President Vladimir Putin to India, signed a contract worth INR134 billion with Russia to buy 464 advanced T-90 battle tanks for deployment on its western borders with Pakistan.
• During the 16th Intergovernmental Commission on Military-Technical Cooperation, co-chaired by Indian Defence Minister Manohar Parrikar and his Russian counterpart Gen. Sergei Shoigu, India and Russia agreed to double the range of the BrahMos supersonic cruise missile from the current range of ~300 km.
• The deployment of T-90 battle tanks is expected to strengthen the Army’s fire power during night battles.
• The increased range of the BrahMos will double the standoff engagement range to 600 km for practically every platform that uses the cruise missile.
The US • During Defence Minister Manohar Parrikar’s recent visit to US, US-based Boeing offered India high-end jet engine technology, in order to manufacture American combat aircraft under the Make in India initiative.
• India signed the Letter of Agreement and Acceptance (LOA) with the US for a contract worth INR49 billion to purchase 145 M777 ultra-light artillery guns, through the Foreign Military Sale (FMS) route.
• With Boeing’s offer, India will now be able to evaluate two proposals from US companies Boeing (F/A 18 Super Hornet) and Lockheed Martin (F16 Super Viper) to make jets in India.
• Out of 145 M777 ultra-light artillery guns, BAE Systems will deliver 25 guns and the rest 120 will be assembled in India by Mahindra
Japan • Following Prime Minister Narendra Modi’s visit to Japan, India has agreed to sign a deal worth INR110 billion with Japan for the purchase of US-2i amphibian planes.
• The deal is expected to deepen India’s strategic partnership with Japan and enhance the surveillance activities in the Indian Ocean Region.
The UK • During British Prime Minister Theresa May’s India visit, India and the UK agreed to strengthen their defence cooperation through technology transfer and joint research on new capabilities, under the Make in India initiative.
• The two countries are also expected to strength their existing international counter-terrorism legal framework through the adoption of the Comprehensive Convention on International Terrorism (CCIT).
Country-level deals and initiatives
34 | Eye on Defence
35Eye on Defence |
1. “India, Russia ink pacts that will lead to defence deals worth Rs 72,000 crore”, Times of India , 16 October 2016, via Q-tech Synergy Newsletter
2. “India Signs $1.4 Billion Deal To Purchase AWACS, Drones From Israel”, Defence world, 24 November 2016, via Q-tech Synergy Newsletter
3. “Army to have Russian T-90 tanks with ‘Make in India’ element as Pakistan threat looms large”, India Today, 1 November 2016, via Q-tech Synergy Newsletter
4. “India To Double BrahMos Cruise Missile Range”, Defense News, 27 October 2016, via Q-tech Synergy Newsletter
5. “Uri attack: Israel ready to help India with cutting-edge technology to secure borders”, Zee News, 23 September 2016, via Q-tech Synergy Newsletter
6. “US links future of joint jet engine development project to manufacture fighter plan”, Economic Times, 7 September 2016, via Q-tech Synergy Newsletter
7. “India inks pact with US to purchase 145 M777 artillery guns”, Business Standard, 1 December 2016, via Factiva
8. “US-2i: India’s plan to buy these Japanese planes that can land on water sends a message to China”, The Financial Express, 7 November 2016, via Factiva
9. “Theresa May’s India visit: India, UK agree to strengthen defence and cyber security cooperation”, The Economic Times, 7 November 2016, via Factiva
References
Industry buzz
DAC clears blacklisting policyThe MoD has approved a new “blacklisting” policy for suppliers to tackle cases of corruption in defence deals without adversely affecting the procurement process. The new policy does away with blanket blacklisting of conglomerates and companies found guilty of violating norms.
(Source: “MoD clears new blacklisting policy”, The Indian Express, 8 November 2016, via Q-tech Synergy Newsletter)
India conducts twin trial of Prithvi-II missileIndia successfully test-fired its indigenously developed nuclear-capable Prithvi-II missile twice in quick succession from a test range at Chandipur in Odisha as part of a user trial by the Army. The missile was randomly chosen from the production stock and the entire launch activities were carried out by the specially formed Strategic Force Command (SFC) and monitored by the scientists of DRDO as part of the training exercise.
(Source: “India successfully test-fires twin trial of Prithvi-II missile”, Business Line, 21 November 2016, via Factiva)
India test-fires Agni-V missileThe Agni-V missile was successfully test fired for the fourth time in a row from Wheeler Island off the Odisha coast - this time from a canister mounted on a Tatra truck. This was the final version which will be delivered to the Army. The missile has a range of more than 5,000 kms and can carry a nuclear warhead of 1.5 tonnes.
(Source: “Agni-V successfully soars yet again”, The Hindu, 26 December 2016)
India’s first BVR missile Astra on verge of commercial productionThe IAF is expected to receive country’s first indigenous beyond visual range air-to-air missile (BVRAAM) Astra by December 2016. The Astra will allow IAF jets to hit aerial targets up to 60 km away and will replace some of the French, Russian and Israeli air-to-air missiles.
(Source: “India’s First BVR Missile Astra on Verge of Commercial Production”, Indian defence news, 26 November 2016, via Factiva)
DRDO delivers four naval systems to Indian NavyDRDO delivered four naval systems (Abhay: compact hull-mounted SONAR for shallow water crafts, Humsa UG: upgrade for the Humsa SONAR System, NACS: Near-field Acoustic Characterisation System, and AIDSS: Advanced Indigenous Distress SONAR System for submarines) to the Indian Navy. All the four systems were locally designed and built by DRDO’s Kochi-based Naval Physical and Oceanographic Laboratory (NPOL) to support indigenization.
(Source: “DRDO to deliver four naval systems to Indian Navy”, The Indian Express, 17 November 2016, via Factiva)
DRDO carries out the maiden flight of TAPAS 201DRDO successfully carried out the maiden flight of TAPAS 201 (RUSTOM – II), a medium-altitude long-endurance (MALE) UAV from the Aeronautical Test Range (ATR), Chitradurga, 250 km from Bangalore. The flight accomplished the main objectives of proving the flying platform, such as take-off, bank, level flight and landing.
(Source: “Successful Maiden Flight of Rustom – II”, Ministry of Defence, 16 November 2016, via Factiva)
IAF test-fires the MICA missileThe IAF successfully fired the long range air-to-air MICA missile on a maneuvering target from the Mirage-2000 Upgrade combat aircraft with an operational range of 50 Km. With the success of this mission, the IAF has become one of the few air forces in the world with the capability of such long range BVRAAM.
(Source: “Indian Air Force successfully test fires long range air-to-air MICA missile”, Business Standard, 24 September 2016, via Factiva)
36 | Eye on Defence
Indian Navy launches its second ship of Project 15B destroyers “Mormugao”The Indian Navy launched its guided missile destroyer Mormugao in Mumbai. It is yet to undergo another round of tests. The vessel supports indigenization. Mormugao will be one of the most advanced warships of the force. The warship has a displacement of 7,300 ton with maximum speed of over 30 knots. It is equipped with surface-to-surface missiles, surface-to-air missiles and anti-submarine rocket launchers and can carry two anti-submarine warfare helicopters. The Indian Navy currently has five ships in its fleet and has a target to have 212 ships by 2027.
(Source: “Mormugao, Indian Navy’s advanced guided missile destroyer, launched in Mumbai”, The Indian Express, 17 September 2016, via Factiva)
The Government of India proposes to export the LCA Tejas to other countriesThe Government has proposed to export the LCA Tejas to cost-conscious Asian countries, using low maintenance cost and simple design of the aircraft as its unique selling proposition. Currently, HAL has established facilities for the manufacturing and delivery of 8 LCA per annum. There is a plan to progressively ramp up the production rate from 8 to 16 aircraft per annum by 2019—20.
(Source: “Export of LCA Tejas”, Ministry of Defence, 18 November 2016, via Factiva)
Goa Shipyard Ltd. delivers first fast-patrol vessel for MauritiusGoa Shipyard has delivered its first fast-patrol vessel MCGS Victory to Mauritius Coast Guard. The vessel is primarily designed for coastal patrolling, anti-piracy, anti-smuggling, anti-drug surveillance, anti-poaching operations, and search and rescue operations. The delivery has strengthened defence relations between India and Mauritius.
(Source: “Goa Shipyard delivers first fast patrol vessel for Mauritius”, Business Line, 27 September 2016, via Factiva)
37Eye on Defence |
The US to guard its weapons from cyberattack
The US DoD is hardening its weapons against cyber threats
• The US DoD is collaborating with hackers to find out security vulnerabilities and get a chance to fix soft spots. It announced one-year contracts to HackerOne and Synack, a pair of cyber security firms specializing in bug bounty programs.
• The US Air Force (USAF) is accelerating efforts to strengthen its computer networks, which control everything from warplanes’ navigation to weapons systems, from cyber threats.
• The USAF has recently given a US$22 million contract to Technica for airborne networking, systems, processes and operations, and network defence to support cyber readiness and cyber security of the USAF.
A&D developments in foreign countries
Japan to accelerate defence spend, purchases and upgrades in wake of rising regional tensions
• Japan’s Ministry of Defence proposed a 2.3% hike in its defence budget of FY17, to US$51.5 billion from US$50.3 billion in FY16. This decision was driven by the growing ballistic missile threat from North Korea, as well as China’s assertive moves in the East China Sea.
• Japan will accelerate planned spending of ~US$1 billion to upgrade its ballistic missile defence to counter any threat of attack from North Korea.
• It will also lease additional land to expand its military base in Djibouti, Eastern Africa, as a counterweight to the growing Chinese influence in the region.
• It is also planning to acquire four KC-46A aerial refueling aircraft, an additional P&W turbofan engine as well as other supporting systems in a deal worth US$1.9 billion.
China to boost its indigenous defence capabilities through its new fifth generation stealth aircraft and aircraft carrier
• China showcased its fifth generation Chengdu J-20 stealth fighter during the China Air Show. The aircraft is essential for the Chinese Air Force as it takes on a more assertive stance on territorial disputes with neighbors in the East China and South China Seas.
• Furthermore, China’s first indigenous aircraft carrier, CV-17, is nearing completion.
• China has also established a new state-owned aircraft engine maker, Aero Engine Corp. of China (AECC), as it plans to become a major player in global aviation.
The USAF to replace its intercontinental nuclear arsenal for US$86 billion
• The USAF is planning to replace its 400 units of Minuteman nuclear missiles (established in 1960s) with new missiles known as the Ground Based Strategic Deterrent (GBSD).
• The GBSD will be introduced in 2020 and will be installed till 2030s. The cost of introducing new missiles is expected to be around US$86 billion. The GBSD will have a life cycle of about 50 years.
Germany plans to increase its defence expenditure
• Germany plans to increase its defence spending by 0.8% of the total GDP (~US$65.8 billion) by 2020, from 1.2% to 2%.
• The proposal came after criticism from the US that fellow NATO members do not contribute enough to mutual defence.
The UK to start manufacturing new anti-submarine warships from 2017
• The UK’s Ministry of Defence will commence manufacturing of eight new anti-submarine warships from June 2017.
• BAE Systems will be the prime contractor for the submarines, and the final contracts are still under negotiations. The total deal is expected to be worth US$10 billion.
Global industry buzz
38 | Eye on Defence
Major updates from US-based defence contractors
Lockheed Martin wins key contracts worth ~US$12.5 billion driven by a key contract for military transport aircraft
• Lockheed Martin has been awarded a contract by the USAF to deliver up to 100 C-130J transport aircraft and offer services and support equipment to US and foreign customers in a deal worth US$10.2 billion.
• Other key contracts for the company include a modification contract to a previously awarded contract for F-35 Lightning II aircraft (worth US$743 million), a contract for F-22 sustainment services (worth US$536 million), a cyber support contract with the Homeland Security Department (worth US$395 million), the production of two GPS III satellites (worth US$395 million) and the development of the Hypersonic Air-Breathing Weapon Concept program (worth US$171 million).
Northrop to provide radars, drones and helicopters to the US Armed Forces
• The US Navy has awarded a US$375 million contract to Northrop for procurement of the Ground/Air Task-Oriented Radar.
• Northrop has also been awarded a US$108.1 million contract to procure 10 Fire Scout unmanned helicopters.
• Northrop will also support work on the MQ-5B Hunter drone program for the US Army in a contract worth US$190 million.
Boeing receives final clearance from the US DoD for its aerial fueling tanker
• The US DoD has cleared Boeing’s new aerial fueling tanker KC-46 for production. The clearance by the DoD has enabled Boeing to pursue the initial production contract worth US$2.8 billion.
• The program is already behind schedule and has incurred financial losses worth US$393 million as Boeing has worked through design and manufacturing issues with the aircraft.
39Eye on Defence |
40 | Eye on Defence
1. “Updated B61 Nuclear Bomb to Cost $8.25 Billion”, Defense News, 19 October 2016, via AIA Daily News.
2. “US Air Force Set to Replace Intercontinental Nuke Arsenal”, Military Daily News, 25 September 2016, via AIA Daily News.
3. “USAF releases draft call for bids on $6B surveillance deal”, Flight Global, 15 September 2016, via AIA Daily News.
4. “Air Force investing $12B in F-15s”, CNN, 2 September 2016, via AIA Daily News.
5. “Collapse in Defense R&D Spending Hits Contractors Hard”, National Defense, 12 September 2016, via AIA Daily News.
6. “Pentagon hires firms to create new bug bounty programs”, The Hill, 20 October 2016, via Factiva.
7. “Technica gets $22 million U.S. Air Force cybersecurity contract”, UPI, 20 October 2016, via Factiva.
8. “India could shell out $12 billion for new fighter jets”, CNN, 26 October 2016, via AIA Daily News.
9. “India and Russia Ink S-400 Missile Air Defense System Deal”, The Diplomat, 20 October 2016, via Factiva.
10. “India signs deal to buy 36 Rafale fighter jets from France”, Hindustan Times, 23 September 2016, via Factiva.
11. “China debuts J-20 stealth fighter in flypast at Zhuhai”, Reuters, 1 November 2016, via Factiva.
12. “China Establishes New State-Owned Aircraft-Engine Maker”, The Wall Steet Journal, 28 August 2016, via AIA Daily News.
13. “China’s first indigenous aircraft carrier nearing completion”, IHS Janes, 17 August 2016, via AIA Daily News.
References14. “Northrop Grumman gets $375 million G/ATOR radar
contract”, UPI, 1 September 2016, via AIA Daily News.
15. “Northrop Grumman receives $190 million Hunter drone contract”, UPI, 31 October 2016, via AIA Daily News.
16. “USAF opens path to order up to 100 more C-130Js”, Flight Global, 25 August 2016, via AIA Daily News.
17. “Lockheed Martin gets $287 million C-130J contract”, UPI, 29 August 2016, via AIA Daily News.
18. “Lockheed scores $395m DHS cyber contract”, Next Gov, 14 September 2016, via Factiva.
19. “Lockheed gets $171 million hypersonic cruise missile contract”, UPI, 26 September 2016, via Factiva.
20. “Japan’s military seeks record spending to counter N Korea, China moves”, UPI, 31 August 2016, via Factiva.
21. “Japan to expand Djibouti military base to counter Chinese influence”, Reuters, 13 October 2016, via Factiva.
22. “Japan may accelerate missile defence upgrades in wake of N.Korean tests-sources”, Reuters, 17 October 2016, via Factiva.
23. “Germany Buys Lockheed C-130 As Airbus A400 Delays Continue”, Investors Daily, 31 March 2016, via Factiva.
24. “Merkel says Germany to give big boost to defense spending”, Reuters, 16 October 2016, via Factiva.
25. “BAE, UK govt agree start date of 2017 for building of new warships”, Reuters, 4 November 2016, via Factiva.
26. “Defense Department Clears Boeing Airborne Tanker for Production”, Wall Street Journal, 12 August 2016, via Factiva.
41Eye on Defence |
Analysis of M&A trends
42 | Eye on Defence
A&D highlights: 20161
Deal value• 3Q16 deal value was 95% less than the 3Q15 value:
US$2.3 billion versus US$44.2 billion.
• In 2016, the US$8.2 billion paid by Rockwell Collins for B/E Aerospace is the largest transaction till date.
• The deal value in 3Q15 was significantly high due to Berkshire Hathaway’s US$31 billion acquisition of Precision Castparts.
• GE terminated its US$733 million bid for 3-D printing company SLM Solutions Group AG after activist investor Elliott Management Corp acquired 20% of SLM and opposed GE’s bid.
30,696
11,4979,708
15,625
56,655
15,520
235 240
215
250234
151
0
10,000
20,000
30,000
40,000
50,000
60,000
0
50
100
150
200
250
300
2011 2012 2013 2014 2015 2016
A&D Value (US$billion) A&D deals
A&D deals yearly view (2011—YTD2016*)
1Source: Thomson One (01 January 2011 — 07 November 2016)
43Eye on Defence |
0
10
20
30
40
50
60
70
80
90
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
45,000
50,000
1Q11
2Q11
3Q11
4Q11
1Q12
2Q12
3Q12
4Q12
1Q13
2Q13
3Q13
4Q13
1Q14
2Q14
3Q14
4Q14
1Q15
2Q15
3Q15
4Q15
1Q16
2Q16
3Q16
4Q16
*
Num
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Deal
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A&D Value (US$billion) A&D deals
A&D quarterly view (1Q11—2Q16*)
For more information , please contact:
K. Ganesh RajPartner and LeaderAerospace and Defence PracticeErnst & Young Pvt. Ltd.Tel: + 91 120 671 7110Email: [email protected]
Ankit TyagiAssociateCorporate Finance Strategy Aerospace & DefenceErnst & Young Pvt. Ltd.Mob: + 91 9711132596Email: [email protected]
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3rd & 6th Floor, Worldmark-1IGI Airport Hospitality DistrictAerocity, New Delhi - 110 037Tel: + 91 11 6671 8000 Fax + 91 11 6671 9999
4th & 5th Floor, Plot No 2B Tower 2, Sector 126 NOIDA - 201 304 Gautam Budh Nagar, U.P.Tel: + 91 120 671 7000 Fax: + 91 120 671 7171HyderabadOval Office, 18, iLabs CentreHitech City, MadhapurHyderabad - 500 081Tel: + 91 40 6736 2000Fax: + 91 40 6736 2200
Jamshedpur1st Floor, Shantiniketan Building Holding No. 1, SB Shop Area Bistupur, Jamshedpur – 831 001Tel: +91 657 663 1000BSNL: +91 657 223 0441
Kochi9th Floor, ABAD NucleusNH-49, Maradu POKochi - 682 304Tel: + 91 484 304 4000 Fax: + 91 484 270 5393
EY offices
Kolkata22 Camac Street3rd Floor, Block ‘C’Kolkata - 700 016Tel: + 91 33 6615 3400Fax: + 91 33 2281 7750
Mumbai14th Floor, The Ruby29 Senapati Bapat MargDadar (W), Mumbai - 400 028Tel: + 91 22 6192 0000Fax: + 91 22 6192 1000
5th Floor, Block B-2Nirlon Knowledge ParkOff. Western Express HighwayGoregaon (E)Mumbai - 400 063Tel: + 91 22 6192 0000Fax: + 91 22 6192 3000
PuneC-401, 4th floor Panchshil Tech ParkYerwada (Near Don Bosco School)Pune - 411 006Tel: + 91 20 6603 6000Fax: + 91 20 6601 5900
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EY refers to the global organization, and/or one or more of the independent member firms of Ernst & Young Global Limited
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