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Defence Secretary Ajay Kumar has been driving policies and reforms in aerospace and defence to transform what is potentially marked as the most promising areas for industrial growth. As technology is at the centre stage for building next generation capabilities for the Indian armed forces, the policy thrust on R&D is the only mantra. In an exclusive interaction with Manish Kumar Jha of BW, the Defence Secretary outlines his key policy direction, that is, ‘Make in India’ in the field of defence. He talks about the major acquisition plans and strategic partnerships on crucial projects – 75I submarine, AK-203-joint production line, light tank and the critical aero-engine technology. He also clarifies the key policy aspects on offset and FDI in defence and is forthcoming about the need to create a more level-playing field, testing labs, certification processes and systems for other players.

Manish K Jha: Recently, the Indo-US Industrial Security Joint Working Group has been formed. MOD already has a working mechanism—DTTI—which is led by you. What is the role of the Joint Working Group and how will it collaborate on critical defence technologies?

Ajay Kumar: DTTI is a mechanism which is led by the Defence Secretary — Production from India and the Undersecretary from US Acquisition Department. There are several sub groups which are working in different areas. Each sub group is coordinated by respective services. Also, several projects are in the advanced stage. Although there was not much progress on DTTI, of late, there has been improvement. We have now been able to sign at least one major contract under the DTTI.

Today under the major defence partnership with US, both sides are looking to identify other areas of cooperation under DTTI. And we hope to see that more technologies will flourish. A great deal of development is taking place on swarm technology. There is in fact a sub group on aero engine which is engaged in such talks on critical technologies. This is under DTTI again which is led by DRDO from our side and a counterpart from their side (US).

Manish K Jha: This is about the key technology and acquiring advanced capabilities. The Indian armed forces is looking for 500 aircraft in the near future. Aero engine is the costliest part of any fighter aircraft so again here we save huge cost while having such advanced capabilities. Do you see it as a national mission as you have been leading many discussions on such advanced capabilities?

Ajay Kumar: The discussion is led by DRDO with several vendors including Rolls Rolls-Royce, Safran and GE among others. At the same time effort is being taken to develop the same capabilities by our lead R&D agencies.

It is incorrect to say that we don’t have any technology in this area. Helicopters’ engines are being made at HAL already. On 70 KN Engine technology or thereabout, DRDO has been able to develop.

It is now the ability -- what is called the hot process, technology and the materials that are required in the making of aero engine, which is what they are working on. So the indigenous effort is going on and at the same time, to speed up the process, discussions are going on with other vendors.

Manish K Jha: You were instrumental in issuing RFI for P 75I which is under the first strategic partnership program and it is conditioned on Fuel-Cell based AIP plant. When do you expect the final stage to commence? Is there any bottleneck?

Ajay Kumar: There is no bottleneck. We have had good response on P75I from the OEMs and the strategic partners as well. RFP has been floated. We will evaluate the bids and finalize everything very soon.

AIP is the important part of technology and all OEMs have to provide the AIP technology.

Manish K Jha: Could you throw light on AK- 203 assault rifles which is jointly owned by the Indian Ordnance Factory Board and the Russian firm, ROE? What is the nature of the technological transfer? Could you also tell us about the expected production timeline?

Ajay Kumar: As you are aware, the final negotiations of the contract are going on and very shortly the work should start.

Manish K Jha: The Finance Minister has announced the monetization plan to unlock the government assets for optimal usage. Do you see such scheme being implemented in the defence sector as it could generate good capital and lead to better utilization of assets?

Ajay Kumar: Defence is different. We don’t have any such announcement. Please don’t confuse it with other sectors. Ordnance factories are all about corporatization and bringing in professionalism. We have defence land and infrastructure for public which is based on the policies of the government. In terms of cooperation and collaboration with the industry, we have lots of such requests and we honour them. But there has been no decision to monetize defence land.

Manish K Jha: There have been structural changes in Ordnance Factory Board (OFB) as it has been converted into seven defence public sector units (DPSUs). It is indeed a landmark decision, but what about funding for incorporating next generation technological upgrades, smart assembly lines for production and efficiency?

Ajay Kumar: We have already given about Rs 6500 crores. Seven companies came into existence on October 1, 2021. As corporate entities, they are also supposed to raise money from institutional finances. They will work as a company now. Funds have been released. Corporate management structures have been created. So government is supporting the OFB in their initial phase to make way.

Manish K Jha: There are concerns on the offset policy. Industries share the note which is released by Deference Offset Management Wing (DOMW) that “a wholly owned Indian subsidiary of an Indian vendor is not eligible as an Indian Offset Partner (IOP) to discharge offset obligations for the same foreign vendor”. There is an ambiguity about it. It hinders their program as they cannot discharge through their own subsidiaries. There should be flexibility on that. Could you share your thoughts on this?

Ajay Kumar: Our focus is increasingly on ‘Atmanirbhar Bharat’. As you are aware, this year, two third of our budget is going for such initiatives under Atmanirbhar Bharat. Some of it goes into buying spares, on maintenance and MRO for the foreign platforms which we have. Offset is only attractive if the procurement is above Rs 2000 crores. Given our focus on Atmanirbhar Bharat, offset will not be the big part of procurement.

We are focusing on ‘Buy Global, Make in India’. With our new FDI policy, foreign companies can come and ‘Make in India’ and supply to the forces. So, there is no need for the offset in that case. In old cases which have been there, the contract has been signed as per the policy of that time (DPP or DAP). Any change in policies will not be feasible, keeping the sanctity of the contract. Therefore, companies who signed those contracts need to align with the contractual obligations for that period. But anyway, in future, offset requirement will continue to decline progressively.

Manish K Jha: The Indian Army has issued the RFI for the Light Weight Mountain Tank under 25 ton. Could you give us update as this is marked as a key project under Make in India? Besides, it is to be noted that China has developed and deployed the Type-15 light tank (ZTE-15) along the border in the Tibet-Qingdao Plateau and the Gobi Desert.

Ajay Kumar: There is a fast track process and there is an emergency procurement process. So all that is there. If there is a need to go for fast track the forces can go through these processes.

In any case, we are striving to complete all normal processes within two years.

So it is not that long a period. So this is the concerted effort and all services are working hard to achieve this as well. The average procurement time used to be 5-6 years, which we have now reduced drastically. We are trying to reduce it to two years in the near future.

Manish K Jha: Could give us some clarity on FDI in aerospace & defence?

Ajay Kumar: Defence is not like IT. In defence, government is a major buyer. So people will invest linked to government procurement decision and I am sure it comes in different forms. If you look at C-295 (Airbus military aircraft) where majority of aircraft will be manufactured in India, they have found partners in India. So investment is also coming from Indian partners.

So in the defence sector, FDI can come from different forms.

Nevertheless, you see how Safran has invested in India in the components of aero engine. Boeing is setting up a huge facility in India, investing in the research, design and development. Lots of OEMs have created supply chain partners in India. There are over 100 of them in India.

Manish K Jha: What is your plan for iDEX in terms of funding and grant for the Indian defence start-ups? Does it fund directly to the start-ups or through the evaluation by other agencies?

Ajay Kumar: I think we did not give focus adequately on R&D.

Under the Raksha Gyan mission, we started the drive that all OFBs and DPSUs should create their own IPs. In the first year itself (2018-19), there were about 750 IPs which were created by these entities. This is the first time that DPSUs are filing IPs.

Then, we started the system where we asked them to create new technologies where you can partner with industry and start-ups. All of them had tie-ups with academia, start-ups and industries so that they could create products of their own—even without getting orders from the services. So all of these measures have started. Some of them are working on artificial intelligence, explosives etc. So the real value is in the technology. Production is also very important but that focus on technology is well understood.

The second part is, why only be limited to DRDO, DPSUs and OFB? We have the whole gamut of our industry, start-ups ecosystem and our academia. So why not use their knowledge and expertise? Industry is working on so many new technologies without any funding from government and we can create more products.

The only assurance that we give is — if you make the products, we will buy them. Under iDEX, many start-ups have created technologies. So the larger point I am making is that technology is the key. Also, we have to strengthen all the hands we have, including DRDO, DPSUs, industry and academia. Many countries are looking towards India for defence production. There are more things to be done — we need to create a more level-playing field, testing labs, certification processes for other players.

We need to make all such systems available to other players. We will see significant change in aerospace and defence in India. DRDO has come out with the Development cum Partners - Production policy and iDEX is the policy in this direction. DRDO has a list of 100 items that industry will develop on their behalf. This is significant progress. And, it will take another two to five years for advanced capabilities to be available in India.