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BW Businessworld

Defence: Riding The Growth

The Modi government’s ‘Make In India’ initiative in defence production is more significant now than ever

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Tata Motors’ defence business is presently on a high-growth trajectory. It is perhaps, the only Indian company with a full-range of wheeled-defence mobility solutions across segments. The company’s order book is packed with recent gains, including a host of orders that promote ‘Make in India’ initiative under the new Defence Procurement Procedure (DPP) of the central government. Tata Motors Defence Solutions has thus made a transition from being a supplier of defence-logistics solutions to a front-line combat-mobility solutions provider.

The company is presently working on a big order from the Indian Army for over 1,800 units of 6x6 multi-axle vehicles with material handling crane application. While the order was confirmed shortly before, between June 2015 and April 2016, the company is already rolling out the units for delivery. It is also developing the 8x8 and 12x12 versions of multi-axle vehicles for the armed forces.

Tata Motors Defence has successfully indigenised, designed and developed India’s first amphibious infantry combat vehicle ‘Kestrel’ in partnership with the Defence Research and Development Organisation (DRDO). “It will now be offered by the DRDO to the mechanised forces of the Indian army for user-assisted technical trials (UATT), to replace the Indian army’s Soviet-built amphibious armoured patrol car BRDM,” says Vernon Noronha, vice-president (Defence Business) for Tata Motors.

The total indigenisation is a significant move for Tata Motors and other Indian defence manufacturers in the wake of change of guard in the United States of America. President Donald Trump’s administration is re-looking at proposals from defence manufacturers that want to shift the manufacturing to India to promote the Make-in-India initiative of the Indian government. This includes a proposal from Lockheed Martin to move production of its F-16 combat jets to India. Other global defence manufacturers too are upbeat about ‘Make in India”. For instance, UK-based BAE Systems has jointly developed what it calls ‘Advanced Hawk’, the world’s most successful jet trainer, in collaboration with Hindustan Aeronautics (HAL).

Push To Indigenisation
After manufacturing a range of multi-axle vehicles for the Indian army, Tata Motors successfully demonstrated its capabilities with the ICV-Kestrel, a combat vehicle developed with DRDO. Tata Motors is now eyeing the Rs 60,000-crore Futuristic Infantry Combat Vehicle (FICV) programme of defence ministry. As part of this programme, Tata Motors will have to indigenously design and develop tracking systems for Infantry Combat Vehicles (ICVs) in partnership with Bharat Forge and General Dynamics Land Systems (GDLS). How confident is the company of bagging this prestigious order? “The FICV is mobility-oriented and is established by the fact that 3 of the 5 core technologies and 19 of the 34 critical technologies are mobility related, such as engines, transmission and running gear. With land systems being Tata Motors’ core competency, we are best placed among other EoI (expression of interest) holders for the FICV programme,” says Noronha. Tata Motors and four other companies are competing for the order to supply 2,600 units of FICV. Others in the race include Mahindra & Mahindra, L&T, Reliance Defence, and the Ordnance Factory Board.

In the last three years, Tata Motors has clocked revenues of about Rs 1,000 crore every year. It’s current order book stands at Rs 1,500 crore. For the current year, the company has already made Investments for the development of the defence vehicles, which is part of the larger investment of Rs 3,500 – 4,000 crore made by Tata Motors for the year.

While the company is gearing up for steady growth, industry experts feel the modest increase in the overall budgetary allocation for defence for 2017-18 can make a dent in the growth story of local manufacturing. “Stagnancy in capital expenditure can also impact investments in ‘Make in India’ in aerospace and defence,” says Amber Dubey of KPMG, commenting on the modest outlay on capital expenditure for defence in the recent Budget.

But Tata Motors is unfazed. It says its defence business is “viable” and “ready” as its manufacturing facilities are spread wide across India. “We design and develop our military vehicles in Jamshedpur and Pune and put them to test through our robust 360 degree testing programmes,” says Noronha. Tata Lockheed Martin Aerostructures, a joint venture between Tata Advanced Systems and Lockheed Martin, is already manufacturing large aero structures for the global supply chain of C-130J in Hyderabad. The C-130JSuper Hercules is a four-engine turboprop military transport aircraft.

Gypsy To Storme

Tata Motors Defence has submitted a proposal for an order for 3,192 units of the Safari Storme from the Indian Armed Forces, under a new category of vehicles - GS800 (General Service 800), for which the results are yet to be announced by the MoD. The order size is pegged at over Rs 400 crore. The Indian Army wants to replace around 35,000 units of GS 500 (general service 500kg platform) vehicles with diesel-run vehicles that offer more power, higher carrying capacity, hard top, climate control and additional safety features. Both M&M and Tata Motors had qualified with their respective 800kg payload offerings. “But Storme provided an option of a diesel variant with a 2.2-litre four-cylinder engine — a good package of power. It comes with both 4x2 and 4x4 options, which help the SUV to wade through marshy lands, desert, snow, gravel and every kind of terrain in our country,” states Noronha as the reason why Safari Storme won the bid. Additionally, Tata Motors also bagged orders for 500 Xenon pick-up troop carriers from paramilitary forces such as the Border Security Force and the Indian Air Force. Powered by a diesel engine, Tata Xenon has higher carrying capacity and is loaded with airbags and air-conditioning. “An additional carrier at the back has also made it popular with foreign armies. The Myanmar army is placing an order for over 1,200 units,” says Noronha.

Thanks to government’s focus on developing road infrastructure in the border states of North East India, the company has also bagged a contract to supply 350 units of its SAK 32 4x4 tipper model to the Border Roads Organisation (BRO).

Tata Motors has also been exporting its range of specialised defence vehicles to the Saarc, Asean and African regions. The company is also supplying to leading missile original equipment manufacturers (OEMs) across the world.