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We Have Met Defence Export Target Of Rs 10,000 Cr: Defence Secretary (Production) Ajay Kumar

In a freewheeling chat with BW Businessworld, he talks of an emerging defence production hub in India, among other things

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Aprospective $650 billion defence and aerospace industry stares investors in their face as the defence manufacturing ecosystem in India moults from a stodgy public sector driven space to one where private and overseas partners are wooed. Massive policy changes have been effected to give a fillip to defence production in India. Spearheading these changes is Defence Secretary (Production) Ajay Kumar. In a freewheeling chat with Manish Kumar Jha , he talks of an emerging defence production hub in India, among other things.

Excerpts:


What were your major achievements in building capability and capacity in defence production?
I think, there has been a significant increase in overall defence production in the country. We are today producing (defence equipment) worth about Rs 80,000 crore. The focus has been on promoting private industries in this area, as well as supporting public sector undertakings (PSUs). The production of  the public sector has touched record heights overall. Some four or five PSUs of  the nine PSUs we have, recorded the highest turnover ever. At the same time domestic industries are also growing very fast.

Our exports, which were negligible, have been growing at an explosive pace year after year. They were worth Rs 1,500 crore three years back, Rs 4,500 crore two years back, and in 2018-19, we were hoping to touch Rs 10,000 crores, but have in fact touched Rs 11,000 crores. This Rs 11,000 crore of exports have been for the SCOMET (Special Chemicals, Organisms, Materials, Equipment and Technologies) list items, which are in a restricted list of export procedure and require prior permission of the defence ministry. In items for which our permission is not required, our estimate is that between Rs 15,000 crore and Rs 16,000 crore worth of exports is happening.

So, India is now turning into one of the fastest growing defence and aerospace hubs. We have traditionally followed the transfer of  technology (TOT) model in the defence production ecosystem. We now recognise the fact that TOTs can only take us thus far. We need to have more control on technology and so today we have several defence platforms that are totally indigenous.

You have been a driving force for startups in  the defence sector and now the Army and the Air Force want  them to resolve problems ...
An interesting thing that has happened within the defence ecosystem has been the active participation of startups since last year. In just the last one year about 500 startups have begun actively working in the defence and aerospace area. We have six incubator partners to what we call the IDEX (Innovation in Defence for Excellence) programme. The IDEX challenges have been defence startup challenges and this has created a very active startup community for defence and aerospace. This is the most powerful part of our technology development ecosystem.

How can startups leverage the research and testing facilities?

The first Defence Startup Challenge was issued in August 2018. So we have to take this forward. We are giving the startups a financial grant of up to Rs 3 crore, depending on the size of the problem and the actual assessment of the size of the grant, which is decided by  the screening committee. But I think what is really important is that these startups get an opportunity to work closely with the Armed Forces and understand the problems of  the Armed Forces.

By 2025 the share of manufacturing in India’s GDP is targeted to grow from 17 per cent to 25 per cent. Do you see the defence sector playing a role in this process? 
Of course! This sector is very technology-intensive and growth in defence is contingent upon our ability to innovate and create technology. Defence is big business and aerospace is an over $500 billion business  and growing. Secondly, software is becoming a more and more important part of defence.

Could the defence sector be a game changer for creating jobs, skills and capability in our country? 
See, earlier a lot of defence used to be driven by engine power. You know of the mechanical things in defence, but in the last five to ten years more and more software-based intelligence and other software-based capabilities have become part of the defence ecosystem, like electronic warfare, unmanned artificial intelligence (AI), IoTs and robotics.

Indian software companies are already at the global level of competencies, so the capability exists in India today. It is now a question of  being able to leverage it and integrate it. And therefore, like I said, defence and aerospace is roughly $500 billion plus industry. We have $10 billion to $12 billion of production today. We have a big opportunity to catch up with.  

The Draft Defence Production Policy 2018 has not been finalised yet. Do you see the absence of clarity on building the indigenous defence ecosystem as a hurdle? 
Most of the Make II has been implemented and suo motu proposals have been accepted. Export rationalisation has been implemented and defence corridors have been implemented. The IDEX Startup Challenge and IDEX scheme have been implemented. These are all part of the defence policy.

Tax rationalisation and the GST has been implemented. So, a lot of things have been implemented, either as part of the defence policy, or as part of the strategy to promote the private sector, which is a very important part of defence policy. So if you look at it this way, the individual components of the defence production policy are already under implementation.

The Defence Production Policy (DProP) 2018 announced in March, has set ambitious goals for 2025 like Rs 1, 70, 000 crore worth of production, Rs 35,000 crore of exports, and investment to the tune of  Rs 70,000 crore. How optimistic are you?
Absolutely (optimistic). In fact, we have exceeded the target. We had put a very ambitious target of Rs 10,000 crore for exports. For 2018-19, the target is Rs 11,000 crores.  And like I said, this number is only for SCOMET items, of which people take our permission, but apart from that lots of other defence items also get exported.

Economic Survey 2017-18 says India’s spending on R&D is about 0.6 per cent of GDP, which is well below that of major nations such as the US (2.8 per cent), China (2.1 per cent), Israel (4.3 per cent) and Korea (4.2 per cent). Do we have any policy roadmap for R&D in defence?
 This is not something that I deal with in the ministry. But I’ll tell you something. Artificial intelligence (AI) is for example, a new area of work and we have now mandated that each force and each DPSU and the Defence Research and Development Organisation (DRDO) will earmark a certain sum of funds for projects to be taken under AI.

And if you remember, a taskforce was constituted last year under the chairmanship of  Tata Sons Chairman, N. Chandrasekaran, which made some recommendations. Based on these recommendations, the government has issued the necessary order and now, action is being implemented.

So I don’t know whether that is classified as R&D or not, but to my mind that is very much R &D. We have made special efforts for indigenisation of all the PSUs and any level of indigenisation is continuously increasing.
 
So coming back to the OFB, corporatisation was a cure-all solution offered by various Ministry of Defence-appointed committees, from the one headed by Vijay Kelkar in 2005 to that headed by Vice Admiral Raman Puri in 2016, but was never implemented. Do you see a crying need to re-fit and modernise all 41 of India’s ordnance factories? 
There are a lot of things that need to be improved in the Ordnance Factory Board (OFB) and work has been going on, both in terms of cost, quality and timely supply. These are the three things on which we have to continuously focus on to improve its performance. And, recently, as you are aware, we decided that the Korva factory was not on the mark. It had been set up to create assault rifles. So, we decided to set up a joint venture with Kalashnikov there, which will now be turning out state-of-the-art assault rifles.

Several other administrative measures have been taken to improve the functioning of the OFB. At the same time, it is a fact that the OFB was acting as a single source supplier (to the defence forces) for a lot of things.  Now, 275 items have been denotified. For these items, the OFB has to compete with other industry players. Now we are sending people from the OFB to do Masters and other higher degrees in areas related to research in ordnance development and in areas related to their production, which has never been done before.

Defence Technology & Trade Initiatives (DTTI) is crucial to further Indo-US defence partnerships and you have been instrumental in reviving it. What is the progress on the EMALS carrier launch technology? 
It’s progressing very well. Discussions are going on. The United States government has shown a willingness to work on it and I think the necessary approvals are underway. I don’t think there’s a cooperation issue here. It’s more of an approval issue. Each government has to take approval and to the best of my knowledge, there is no issue.  

Could you elaborate on the role of  the DTTI in the realm of  Indo-US defence relations? 
You know, in the last one year, we have been able to get several things through this platform. We have now more or less finalised the industry security annexure which will enable US companies to pass on to Indian industry knowhow, including sensitive and classified information. All the arrangements have been made. We have also agreed to act as an industry-to-industry division of the DTTI. So, in the future, the DTTI, which is in the final stage, will include industry participation from both sides.

We have been able to set up nodal officers to facilitate industries’ presence and activities in each country. We have been able to resolve a lot of  issues through this channel.


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