Asheesh Agarwal, Innovation Norway New Delhi 26 ... - FSI · Asheesh Agarwal, Innovation Norway New Delhi ... 2012 Revised offset guidelines issued wherein ToT included in list of

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Indian Defence Sector

Asheesh Agarwal, Innovation Norway New Delhi

26 September 2013, FSI

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Demography – a large domestic market

• World’s largest democracy – 714 million electors

• 28 Union States and 7 Union Territories

• Passing China’s population ~ 2030

• 50% of the population below 25 years

• Literacy rate: 63% (only ~ 50% for women)

• A large domestic market

• 60% of GDP is related to India's domestic market,

which still is in early development.

Photo: IN New Delhi


Nuclear Submarine Reactor Critical

3

• August 9 2013 • 83 MW Nuclear

reactor • 6.000 tonne • Shipyard near

Vishakhapatnam


Newly Launched Aircraft Carrier

4

• August 12 2013 • Select club of US,

Russia, UK & France

• Made by CSL • 37.500 tonne • 36 fighter planes • Extensive trials by

2016 • Induction in Navy

by 2018


Indian Submarine Explodes

5

• 2.300 tonne, Kilo class, diesel electric, launched in 1997, 52 crew, 19 knots, 300 m diving depth

• Refurbished from Russia

• 18 crew members dead


SHARE OF GDP IN INDIAN DEFENCE BUDGET

Defence Budget


Am

ount

in $

billion

Defence Budget


Defence Budget


59 58

45 41 42

55

0%

10%

20%

30%

40%

50%

60%

70%

Navy Army Air Force

Indigenous Imports

Import Vs Indigenous in %


ALLOCATION OF DEFENCE BUDGET SERVICE WISE

2012 - 13 2013 - 14

24

19 1

50

27.9

0.5 48.9

Defence Budget


0

20

40

60

80

100

120

140

Am

ou

nt

in $

Bil

lion

Total Budget

Capital Exp.

Forecast – India’s Defence Budget


Growth Drivers

• Changing geopolitical scenario on India’s borders

• Replace obsolete equipment

• Demand for homeland security

• Strong economic growth will allow increased spending by

the government

• Entry of new companies would increase competition and

innovation, further driving growth

12


Defence Sector Manufacturing

• DPSU – 9

• 63% manufacturing

• CAGR 14% 2002 - 12

• HAL, BEL, MDL, BEML, HSL, etc.

• Ordnance factories - 41


• 125,000 employees

• 26 locations

• Private sector


• L&T, M&M, Tata,Wipro, etc.

13


Year Development

2001 • Defence sector opened to private industry.

• 26% FDI permitted.

2002 • Defence Acquisition Council (DAC) created.

• Buy category introduced.

2003 Buy & Make category with ToT introduced.

2004 Kelkar committee constituted for revision of DPP and participation of

private sector.

2005-09 • Defence offset policy formulated (2005) and Defence Offset Facilitation

Agency (DOFA) created.

• Make and Buy & Make Indian categories (2006 & 2008) introduced.

2011 Offset scope enhanced to include aerospace & internal security.

2012 Revised offset guidelines issued wherein ToT included in list of offsets.

2013 Preference to be given to indigenous production and public release of

Long Term Integrated Perspective Plan (LTIPP).

Timeline


Defence Procurement Procedure (DPP)


Long Term Integrated Perspective Plan (LTIPP)

Services Capital Acquisition Plan (SCAP)

Annual Acquisition Plan (AAP)

Defence Research and Design Organisation

(DRDO)

Department of Defence Production (DDP)

Ministry of Defence (MoD)

Ministry of Defence MoD (Finance)

Service Headquarters

Request for Information (RFI)

Staff Qualitative Requirements (SQR)

Statement of Case (SOC)

15 years

05 years

01 year



Categorization & Acceptance of Necessity (AoN)

Civil Industry Participation

Defence Acquisition Council (DAC)

Defence Procurement Board (DPB)

Service Capital Acquisition Plan Categorisation Higher Committee (SCAPCHC)

Service Capital Acquisition Plan Categorisation Committee (SCAPCC)

Commonality & Interoperability Issues are discussed at Headquarters Integrated Defence Services (HQIDS)



Sanctioning Authorities

• For Acceptance of Necessity

• SCAPCHC – up to $ 10 mn

• DPB – up to $ 20 mn

• DAC – beyond $ 20 mn

• For Award of Contract

• Vice/Deputy Chiefs/CISC/DG CG - $ 10 mn

• Defence Secretary - $ 15 mn

• Raksha Mantri - $ 100 mn

• Finance Minister - $ 200 mn

• Cabinet Committee on Security - Above $ 200 mn

Sanctioning Authorities


Defence Procurement Manual (DPM)


Under New Management Strategy (NMS) Indian Government

decentralised decision making.

Defence Procurement Manual (DPM) promulgated in 2009 and

presently under revision.

As per Rule 91 of General Financial Rules 2005 following can be

procured under DPM:-

• Maintenance and Working expenses.

• Renewals and Replacements.

• Assemblies/Sub assemblies to maintain and operate already

sanctioned assets.



Staff Qualitative Requirements (SQR)

Acceptance of Necessity (AoN) and Quantity Vetting

Two Bid System

Single Bid System

Proprietary Article Certificate (PAC) and

Rate Contract Technical Evaluation Contract

Negotiations Contract

Negotiations

RFP Vetting and Issuance of RFP

Contract Negotiations

Total duration for this process after SQRs are formulated is approximately 22 to 25 weeks



S No DPP 2013 DPM 2009

(a) For capital procurement For revenue procurement

(b) Only done by Service Headquarters and Ministry of Defence

Delegated to Command Headquarters up to unit level

(c) Two bid system only Procured under various methods

(d) Only OEMs can participate Agents/ Distributors/ Authorised Representatives can participate

(e) Time duration longer Time duration truncated

Difference Between DPP and DPM


Defence offset obligations are applicable to all capital acquisitions where: • Indicative cost is INR 300 Crores ($55.81 million approximately) or more. • Schemes are categorized as ‘Buy (Global)’ and ‘Buy and Make with Transfer of Technology (“ToT”)’ i.e. purchase from a foreign vendor followed by licensed production in India. • Value of the offset obligations prescribed under is 30% of the estimated cost of the acquisition in ‘Buy (Global)’ category acquisitions and 30% of the foreign exchange component in ‘Buy and Make with ToT’ category acquisitions.

Defence Offsets


Avenues for discharge of offset obligations may be done by any one or a combination of the following methods: • Direct purchase of eligible products manufactured by Indian Offset Partners (IOP) and Indian enterprises, i.e. Defence Public Sector Undertakings (DPSU), Ordnance Factory Board etc. • Executing export orders for, eligible products manufactured by, IOP and Indian enterprises. • Services provided by IOP and Indian enterprises. • FDI in Joint Ventures (JV) with Indian enterprises (equity investment) for the manufacture and/or maintenance of eligible products and provision of eligible services.

Defence Offsets


• Investment in ‘kind’ through ToT to Indian enterprises for manufacture and/or maintenance of products and services through JV or through the non-equity route for co- production. • Investment in ‘kind’ in Indian enterprises by providing equipment through non-equity route for manufacture and/or maintenance of products and services. • Provision of equipment or ToT to government institutions and establishments engaged in the manufacture and/or maintenance of products and services, including DRDO. • Technology Acquisition by the Defence Research and Development Organization in areas of high technology.

Defence Offsets


Products and Services those are eligible through offset discharge are: • Defence products (including small arms, mortars, cannons, guns, anti tank weapons, bombs, torpedoes, rockets, missiles, jamming/detection equipment, energetic materials, explosives, propellants/pyrotechnics, tracked/wheeled armoured vehicles,, armoured or protective equipment, vessels of war, special naval systems etc.). • Products for inland and coastal security (includes all types of close quarter weapons, protective equipment for security personnel, vehicles, riot control equipment, specialized equipment for surveillance and UAV, night visions devices, navigational and communications equipment etc.).

Defence Offsets


• Civil aerospace products (includes all types of fixed wing and rotary wing aircraft or their airframes, aero engines, avionics, instruments and related components, composites, forgings and castings for the products training aids viz. simulators, associated equipment, software and computer based training modules, guidance and navigation equipment, test facilities, related software etc.). • Services related to the above eligible products (includes maintenance, repair and overhaul, up gradation/life extension, engineering, design and testing, software development, quality assurance, training etc.).

Defence Offsets


• Original Equipment Manufacturer (OEM) are free to select the IOP for implementing the offset obligation provided the IOP has not been barred from doing business by the MoD. • Agreement between the OEM and the IOP is required to be governed by the laws of India. • Acquisition wing in the MoD is responsible for technical /commercial evaluation and approval of offset proposals. • Obligations is to be discharged within a time frame that can extend beyond the period of the main procurement contract by a maximum period of 02 years. Period of the main contract includes the period of warranty of the equipment being procured under the main contract.

Defence Offsets


• Defence Offsets Management Wing (DOMW) under Department of Defence Production (DDP) is responsible for formulation of discharge of offset and all matters relating to post contract management. • Functions of DOMW include monitoring offset obligations, participation in technical/commercial evaluation of offset proposals and administration of penalties under offset contract. • Assisting vendors in interfacing with Indian industry. • Progress reports and claims relating to discharge of offsets are required to be submitted to DOMW.

Defence Offsets


• Major Procurements those are at various stages worth $ 3.56 billion are

Assault Rifles for Infantry.

Modern Artillery Ammunition.

Light Utility Helicopters.

Tank Ammunition.

Bullet Proof Jackets/Helmets.

Tactical Communication System (TCS).

Indian Army



Medium Multi Role Combat Aircraft (MMRCA).

Pilatus Basic Trainer Aircraft.


Installment for upgrade of Mirage 2000, C 130J, C17.

Attack Helicopters.

Heavy Lift Helicopters.

Indian Air Force



Multi Role Maritime Helicopters (MRH).

Mine Counter Measure Vessels (MCMV).


Project 75 Submarines.

Installments for Indigenous Aircraft Carrier (IAC).

Installment for Advance Technology Vessels (ATV).

Indian Navy


• Anti missile Doppler radar for Indian Army - $ 70 million. • Night vision sights for tanks and BMPs for Indian Army - $ 400 million. • 120 Naval Multi Role Helicopter (NMRH) for Indian Navy - $ 7 billion. • 56 Medium lift transport aircraft for Indian Air Force - $ 2.4 billion. • Future Infantry Solider as a System (F – INSAS) for Indian Army worth $ 1.1 billion.

Major Procurements - Defence


• 05 Fleet Support Ships (FSS) for Indian Navy – RFI issued. • Mobile Communication System for Indian Army - $ 170 million. • 06 Project 75 I submarines for Indian Navy - $ 11 billion. • 171 Light Strike Vehicles (LSV) for Para Special Forces of Indian Army and Indian Navy - $ 16 million . • 04 Special Operations Vessels (SOV) for marine commandos of Indian Navy - $ 340 million. • Relief and rescue equipment for Indian Air Force - $ 200 million.



• Light Machine Guns (LMG) for Indian Army – $ 105 million. • 3000 Light Support Vehicles for Indian Army - $ 300 million. • 3000 Hand Held Thermal Imagers (HHTI) for Indian Army - $ 160 million. • 02 truck scanners Indian Army - $ 11 million. • Anti Tank Guided Missiles for Indian Army - $ 03 billion. • 2600 Future Infantry Combat Vehicles (FICV) for Indian Army - $ 01 billion.


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Future Procurement - Army


37

Future Procurement – Air Force


38

Future Procurement - Navy


39

39

Future Procurement - Electronics

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Shipyards in India

Main Public Shipyards

Main Private Shipyards

Cochin Shipyard

Mazagon

Hindustan Shipyard

Alcock Ashdown Gardenreach

• There are 8 public sector and 20 private sector shipyards in India • Out of 28 shipyards, 2 are under the Ministry of Shipping, 4 are under

the Ministry of Defence, 2 are under the control of State Governments and rest in private sector

• ABG, Bharati, L&T and Pipavav are the main private sector shipyards in India**

Goa Shipyard

Hooghly Docks

*List on Map not comprehensive ** Shipyards Depicted on Map

Shalimar


Maritime Strategy Demands

41

Standing Committee

• Desired force level of 138 ships for the Indian Navy in 1964

• Even in 2010 Indian Navy only had 129 ships.

• Today the present strength of Indian Navy is 135 ships

Maritime Capabilities Perspective Plan 2005-22 - Overview

• Plan aims at a 3 dimensional force with satellite surveillance and networking to provide force

multiplication

• The Indian Navy is projected to be equipped with 160 warships, including 3 AC groups, as

follows:

3 Aircraft carriers

60 Combatants

a) 12 Submarines

b) 7 Destroyers

c) 13 Frigates

d) 2 Tankers

e) 4 LPDS

f) 12 Corvettes

g) 8 MCMB ships

a) 37 warships still not specified

Conclusion: There is a need to acquire over 100 new ships by 2022


Naval Platforms – An Overview


0

0,5

1

1,5

2

2,5

3

3,5

4

4,5

2008-09 2009-10 2010-11 2011-12 2012-13 2013-14

Am

ou

nt

in U

SD

bil

lio

n

Naval Capital Expenditure


0

0,5

1

1,5

2

2,5

2008-09 2009-10 2010-11 2011-12 2012-13 2013-14

Am

ou

nt

in U

s $

Bil

lio

n

Naval Revenue Expenditure


Submarines 16 % Aircraft Carriers

8 %

Spl Op Vessels 1 %

Destroyers 7 %

Frigates 10 %

Corvettes 3 %

MCMV 2 %

OFV/Fast Attack 10 %

LPD/LCU 4 %

Futuristic Stealth Corvettes

8 %

Aircrafts 13 %

Helicopters 10 %

Others 8 %

Likely Spend Naval Systems


Vintage Naval Platforms


0

5000

10000

15000

20000

25000

2012-13 2013-14 2014-15 2015-16 2016-17

8348

12161 13530

18211

23161

Tu

rno

ve

r V

alu

e in

Cro

res

Warship Turnover in 12th Plan 2012-17


0

100

200

300

400

500

600

2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14

Capital Exp.

Revenue Exp.

Cr. INR

Indian Coast Guard Budget


• Relatively new concept in India, in the limelight more after 9/11 attacks in the US and 26/11 Mumbai attacks. • One of the most aggressively pursued sectors with both government and industry investing heavily to provide the best technology to our security agencies • Major Threats Infiltration from Eastern & Western borders, illegal migration, terrorism in Kashmir and North East, Maoist insurgency in parts of Central India, Rise of Urban Terrorism are major challenges confronting the country. • The Ministry of Home Affairs (MHA) is tasked with major homeland security-related functions through a multitude of agencies working under it. • The Homeland Security market which currently stands at about USD 8 Bn is likely to reach USD 16 Bn / Year by 2018.

Homeland Security


Defexpo 2014

• 6th to 9th Feb 2014 at Pragati Maidan, New Delhi

• 8th edition

• Biennial event

• 232 companies from 32 countries

• 30.760 sq m area sold in 2012

• Large number of official delegations – 63 from 58

countriesexpoind

• Rates of 2012 – per sq.mexpoindia.in/

50

Foreign Indian

Indoor Raw Space $ 570 INR 9702

Indoor Shell Scheme $ 709 INR 13508

Outdoor Space $ 292 INR 5148

http://defexpoindia.in/p:/defexpoindia.in/

http://defexpoindia.in/p://defexpoindia.in/


What can we do

• Tailor-made advisory service

• BMMP

• Business culture training

• Door opening

• Liaisoning and lobbying

• Network of consultants

• Delegations and networking events

51


JWG Maritime

Joint Working Group – Maritime

• Established in October 2010

• Focus areas

• Energy efficient shipping

• Coastal shipping

• Shipbuilding and ship equipment

• Small scale LNG distribution

• Education & Training

• Good response from Norwegian and

Indian companies

• Study Tour alongwith the meeting

• Networking event 52


INMEX India 2013

53

• Venue: Bombay Exhibition Centre, Goregaon East, Mumbai

• Workshop/seminar on naval procurement on Monday October 7

• Networking Event (seafood dinner) on Monday evening October 7

• Study tour to Goa, Timblo and L&T shipyards


Programme of Workshop

54

Time Programme Remarks

0930- 1000 Registration/Tea

1000-1005 Welcome and Setting the Context Innovation Norway

Session-I

1005 -1100 Short introduction by participants on their companies’ domain expertise, capabilities in

about 1-2 minutes each.

All Participants

1100-1130 Defence Procurement regulatory and market changes and the impact. Broader view of Govt

policies and procedures with focus on Indian maritime capabilities and gaps. Equipment

Procurement System relevant to system/sub system vendors. How to get associated at

RFI/RFP stage. Offsets

Salient changes DPP-2013, Technology Perspective & Capability Roadmap (TPCR) Defence

Production Procedures and JV Guidelines.

Experts from the navy and

defence sector

1130-1200 Tea

Session II

1200-1300 Requirements for Navy and Coast Guards –Opportunities Short, Medium and Long term

Impact Focus on domestic manufacturing. Reorienting the Market Entry Strategy

Experts from the navy

and defence sector

1300-1315 Open House Interaction All

1315-1330 Way Forward in Doing Business in India Expert panel and

Innovation Norway

1330-1345 Corporate Social Responsibility Innovation Norway

1345-1430 Networking Lunch All


Programme for Study Tour 10th Oct (Thursday) – Travel to Goa by an evening flight (GoAir flight G8 373 at 1905 hrs). Stay at hotel Vivant by Taj Holiday Village Goa. 11th Oct (Friday) - Visit to Goa Shipyard Ltd. http://www.goashipyard.co.in/ - Visit to the head office of Timblo Shipyards Pvt. Ltd. www.timbloshipyards.com 12th Oct (Saturday) - Travel to Chennai (Air India flight AI 976 at 0735 hrs) - Visit to L&T Shipbuilding Limited =P_SHIP - Return to Mumbai (Jet Airways flight 9W 468 at 1755 hrs) to catch late night flights from Mumbai to Europe. Chennai also has an international airport so participants coming from Europe can take flights from Chennai as well.

55

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L&T Shipyard at Kattupalli

56


Networking Event

57


In the Bus

58


Simulator at Bharati Shipyard

59


Adani’s Port at Hazira

60









Documents

Asheesh Agarwal, Innovation Norway New Delhi 26 ... - FSI · Asheesh Agarwal, Innovation Norway New Delhi ... 2012 Revised offset guidelines issued wherein ToT included in list of