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Govt Should Take SP Model With Private Sector To Logical Completion, Says Mahindra Defence Chairman SP Shukla
From manufacturing armoured vehicles for the Indian military, Mahindra Defence has expanded into surveillance solutions including aircraft mobile surveillance, and modern defence equipment for the armed forces. It is brimming with confidence in the wake of its collaboration with global OEMs like Boeing, Airbus, and Hindustan Aeronautics (HAL) for multi-role fighter jets and advanced naval helicopters. S.P. Shukla, Chairman, Mahindra Defence and Mahindra Aerospace & Group President (Defence, Aero & Agri), Mahindra & Mahindra, talks to BW Businessworld’s Manish Kumar Jha about the the strategic partnership model, the group’s R&D and design capability and the need for investments. Excerpts:
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From making advanced armoured vehicles, Mahindra Defence Systems is now building capability encompassing land, sea and air domains. Could you give us a glimpse of the defence technology and products being developed under Mahindra Defence?
Mahindra has had a long association with the Indian army. In fact, one of the first businesses of our group was procurement and marketing of war-surplus Jeeps after World War II. We have been the largest manufacturer of armoured vehicles in the defence domain for many years. So even though people tend to associate us with land systems, we have capabilities to serve all the three wings of the defence forces.
In land systems, we have developed capability for producing several variants of armoured tactical vehicles which can be used for various roles by the Army. In naval systems, we have built capabilities in the under- water domain catering to the Indian Navy. We are involved in the supply of torpedo defence solutions to the Navy, which is key for the defence of warships from incoming torpedoes. In the same facility we also produce systems / sub-systems from underwater to space applications.
In radar and avionics, we have capabilities at the systems level. We are the first Indian private sector company to export airborne radars from India. As for aerostructures, we have a state-of-the-art facility in Bengaluru which produces parts, components and subassemblies for all major aircraft OEMs. We also have units in the UAE and Jordan which provide armoured vehicles to our international customers.
For large programmes like the recently won LSV project, does Mahindra have an existing base of MSME vendors or did you have to create a new base of vendors from scratch?
We have a vibrant base of MSME vendors supplying to us. While we did not create a totally new vendor base, we did indeed have to create new capabilities with them. As with all developmental projects, the LSV project needed parts and components meeting the exacting standards of the product design and customer specifications.
As the OEM for the final product, we have worked with our vendors from the drawing stage to ensure that everything comes together to create the best products and platforms meeting stringent quality parameters of the customer.
For all such large programmes, OEMs like Mahindra Defence have a symbiotic relationship with the MSME vendors. Such indigenous development programmes are a win-win for both large companies and MSMEs.
Mahindra Defence Systems has received an order for 1,300 Light Specialist Vehicles for the Indian Army, at a cost of Rs 1,056 crore. Does it boost your capabilities in defence?
The recent order for supplying Armoured Tactical Vehicles to the Indian Army is an important milestone in our defence business. This is perhaps one of the first large orders placed with the private sector under the Make in India initiative. This armoured vehicle has been indigenously developed and designed by our defence team while meeting global standards.
Our vehicle has undergone gruelling trials on various terrains. In fact, it was the only vehicle which successfully completed all the technical and field trials.
This vehicle is future proof as it is of a modular design and hence different versions of the same can be customised for accomplishing various roles of the Army. Also, as the OEM of the vehicle, we have capabilities to modify all aspects ranging from development of variants to life cycle support.
In the long run, operating this family of vehicles by the Indian Army will be beneficial from both an operational and logistic standpoint. It is also important to note that such large scale adoption of Indian platforms with indigenous capabilities paves the way for exports from India to other friendly nations. Protection of Indian armed forces personnel through our armour protected platforms is an important capability that we have.
Compared to the tier-1 OEMs of the world, India’s defence industry spends much less in R&D. What is your take? How much do you spend?
We have a two-pronged approach towards making investments decisions. First is having trust in the team’s capability to develop a platform at competitive pricing and second is the ability to assess projects which have higher probability of winning. As far as R&D spend in the industry is concerned, we need to see it in a comprehensive manner. Even in developed countries, as a standard practice major development programmes are funded largely by the government as the product is usually for their sovereign use.
Even in India, the government is spending over Rs 11,000 crore this year in R&D through various programmes budgeted by the DRDO which is almost 16 per cent of the domestic procurement budget for the year. This is a large sum of money.
Our government is cognizant of this process and therefore have announced Make 1 programmes where the government and private players contribute in 70:30 ratio for developmental programmes. In addition, the DRDO will work with the private industry under the DCPP (Development Cum Procurement Partner) model going forward.
It must be noted though that Make 1 and DCPP procedures are relatively new processes and they are yet to mature. But sure enough, we will reap dividends of the R&D spends over time as we continue to invest.
What is your take on military strategy and planning using next-generation technologies including artificial intelligence (AI) and robotics?
Technology has always shaped warfare. With advancement in technology, all military forces globally are adopting technology to improve the outcome of their war effort.
The capability of defence forces is increasingly becoming a function of connectivity and is not just limited to firepower. For military and manufacturing organisations in the defence sector, this means getting ahead of the curve and putting in place solutions that manage this change.
We should, however, note that while inevitable, this advancement is still work in progress and changes will happen gradually over time. We are also taking steps to build capabilities which remain relevant in the era of digital transformation of defence which includes AI, robotics and data analysis.
Can you tell us about the advance systems developed by Mahindra at the underwater systems and naval applications manufacturing facility in Chakan?
Our naval systems unit has been a front-runner in underwater domain. We are in the process of supplying the advanced torpedo defence system to Indian warships in partnership with our foreign technology partner. This is a key requirement going forward to protect our warships.
While the Navy may start by fitting 20-25 major warships with the torpedo defence systems, in the coming years almost 80 per cent of Indian navy ships would be carrying equipment designed and developed by Mahindra Defence.
Protection of Indian warships will remain a key focus area for us.
Mahindra Defence Systems is looking to manufacture 111 naval utility helicopters under the strategic partnership model in collaboration with a foreign technology provider. How is it unfolding? What are the commitments from Mahindra Defence?
Mahindra Defence is fully committed to the strategic partnership model. This model is advantageous to the Indian defence ecosystem as it will bring investment from the private sector and FDI without the need for investment from the government. Further, the strategic partnership model will create an ecosystem that will foster the growth of MSMEs.
A direct benefit of this would be creation of tens of thousands of jobs in the country, reduction in the import bill and a major boost to the manufacturing sector.
The strategic partnership model will also create the much-needed second pillar for manufacturing large platforms in India and will add to the capabilities we already have with our DPSUs. We will move to a muti-source model in the long run thereby bringing in competition and driving costs down.
Our partnership for the NUH is progressing well. The government has sought technology which is hitherto not available in the country. With the help of our partner, we are committed to bring this technology to India so that the platforms can be built not only for Indian defence forces but also for exporting to friendly foreign nations.
DAP 2020 allows for a bit more of private manufacturing but DPSUs still receive the bulk of the orders. What more is required to boost the private defence ecosystem in India?
The government is fully cognizant of the need for boosting the private sector ecosystem in defence. There have been several key announcements last year including the one on a separate head under Defence budget for domestic procurement and another on defence purchases that will only be domestically procured. These steps have been welcomed by the private sector as well.
At a recent defence symposium, the Defence Minister said the share of procurement from the private sector would be increased to 15 per cent of the total domestic procurement and to 25 per cent in the coming few years.
Other than these regular orders, the government can further take necessary steps to take order placement through strategic partnership with the private sector route to its logical completion.
Can you throw some light on Mahindra’s global outreach and export portfolio? Does a line of credit boost your export potential? What are the challenges in defence export?
We have recently supplied our Armoured Tactical Vehicles and Mine Protected Ambush Resistant vehicles for deployment with the UN Peacekeeping Forces. We have been winning by bidding at competitive prices. The process for a line of credit for exports has been opened to the private sector only recently and it is yet to be operationalised fully. We have already seen foreign interest in our Armoured Tactical Vehicles.
We remain committed to contributing to the government’s target of achieving $5 billion in defence exports from India.
Mahindra Defence is clearly positioned to be a dominant player in the defence sector. We are already in a dominant position in the land systems in India and we are likely to see an increase in the number of armoured vehicles deployed globally. Further, with the implementation of the Atmanirbhar Bharat vision, our products will find quicker adoption both in India and in friendly foreign countries.