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Tech Synergy
Defence & Security Sector in IndiaChallenges & Opportunities &
Procurement Policyby
Maj. Gen. (Retd.) Dr. B. Yadav, Q -Tech Synergy
Tech Synergy
Presentation Outline Defence Procurement
Defence Budget and Needs
Process and Procedures
Doing Business
Future Opportunities
Guidelines for Doing Business with Indian Defence
Sector
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India is one of the largest military spenders. India emerges as one of
the biggest markets in the world for defence and aerospace products
and the topmost importers.
Nearly 70% of Indian military hardware is imported. Indian exports
are a modest US $75mn annually.
India has 8 Defence Public Sector Undertakings and 40 Ordnance
Factories which account for almost total indigenous production of
military goods.
The Defence industry has been opened for Private Sector.
Indian Defence Industry- Some Facts
Tech Synergy
Defence budget has been increasing at a steady rate of more than 8%. It
spends around 2.4% of GDP. Likely to increase as Indian economy is
growing at over 7.5 % annually.
The capital head allocation to cater for modernisation and new
equipment acquisition plans. The major portion of Indian defence
budget (Approx 43-44%) has been earmarked for capital acquisition
amounting to more than $10 billion during the current FY.
$ 100 billions to be spent in next 5 years for Indian Defence and
Homeland security.
Indian Defence Industry- Some Facts
Tech Synergy
0
10,000
20,000
30,000
40,000
2006-07 2007-08 2008-09 2009-10 2010-11
21,49724,090
26,484
35,50036,836
in R
s m
illion
Indian Defence Budget
Tech Synergy
Increased focus by Government
of India on allocation to defence
sector in India over years
It is expected to grow at 7 to 8
percent annually over the next
five years
Revenue & Capital Expenditure
8.71 9.39 11.57 13.75
12.39 12.10
14.91
21.75
0
5
10
15
20
25
30
35
40
2006-07 2007-08 2008-09 2009-10
in$
Bill
ion
RevenueExpenditure
CapitalExpenditure
48.28
56.31
41.4035.50
0
10
20
30
40
50
60
2009-10 2011-12 2013-14 2015-16
in $
bill
ion
Indian Defence Industry
Tech Synergy
Currently, about 70% of Capital
procurements are from foreign
suppliers and balance 30% is sourced
from Indigenous sources.
The cumulative value of the India
defence procurement for the next 5
years would be approximately US$ 45
Bn, which makes it one of the most
attractive markets in the world
Main suppliers of military equipment to
India include Russia, Israel, France,
Germany, other European Union
countries, United States of America,
South Africa etc
Defence Market Growth: 2008-2013 ($ Billion)
170
2510 13
150
45 4515
0
50
100
150
200
US China India UK
2008
2013
India: Market Spread
Other25%
Land15%
Naval15%
R&D10%
Air30%
C4ISR5%
Anticipated Defence Expenditure 2013
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Modernization of the Indian Armed Forces is considered to be lagging behind by 10 years. The current profile of equipment held by Indian Armed Forces is:
State-of-the-art: 15% vs. required 30%
Mature: 35% vs. desirable 40%
Obsolescent: 50% vs. acceptable 30%
It is expected that India will spend about US$ 100 billion during the 11th five-year plan (2007-2012)
Market Growth: Indian Defence Industry
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Procurement - Planning Process
DM’S Operational Directive
15 Years Long Term IntegratedPerspective Plan
5 Years Defence Plans
5 Years Services Capital (New)Acquisition Plan
Annual Acquisition Plan
HeadquartersIntegrated Defence
Staff (IDS)In consultation
With the ServiceHeadquarters
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Categorization
Buy
Buy Global
Foreign & Indian vendors
Buy Indian
Indian vendors with 30%
indigenous content
Buy & Make
Purchase from foreign vendor
followed by licensed/indigeno
us production
Buy & Make Indian
RFP to be issued only to Indian
vendors
Make
High Tech complex
indigenous systems
Capital Acquisitions
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Buy Global Outright purchase from OEM
Foreign as well as Indian vendor
Normally for one time procurement
Buy & Make Purchase from a foreign vendor
Followed by licensed production/indigenous manufacture in the country
Private sector can participate
• Buy & Make (Indian)
• Def Production Policy
• Indian Company
• 50% indigenous contents
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RFP only to OEM, authorised vendors and Government sponsored export agencies.
Vendor must possess proven technical competence of the level sought & have
credible past track record. In TOT cases, ability to transfer requisite technology for
licenced production is essential.
Export policies of vendor’s country with respect to high-tech items need to be
ascertained, especially for TOT.
Issuance of RFP is an expression of confidence in the capability of the vendor. Once
RFP is issued, no vendor can be eliminated summarily for suspect competence.
Short listing of vendors…
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Short listing of vendors… RFP issued by Technical Managers after vetting by all concerned including production
agency (for TOT). AON lapses if RFP not issued within two years.
TOT may be negotiated either with purchase package or as a follow up later-on, but
availability of TOT would be a pre-condition. RFP to include trial methodology.
No addition to vendors is permitted once RFP issued. Single vendor RFP only with
permission of DAC.
Single stage two-bid system is followed. Technical and commercial proposals are
submitted in separate sealed envelopes, to be valid for 18 months. Maximum
extension of time for submission up to 8 weeks – 4 by DG Acquisition and further 4 by
Defence Minister.
Technical proposals are opened by Technical Managers while commercial proposals
are kept sealed.
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Defence Technologies India Needs Command and Control Architecture
Digital technology is being built into aircraft, tanks, artillery and individual soldier systems
with the intention of providing commanders with “situational awareness” –an instantaneous
and complete picture of battlefield
Area Missile Defence and Remote Warfare
Platform with stealth technology carbons composite and fibre
Technologies to enhance survivability, awareness connectivity and war fighting capability of the soldier
Electronic warfare, direction finding and deception technologies
Space technology to exploit applications of real time meteorology, navigation, communication surveillance, weapon guidance, cartography, synchronization.
High speed data processing
Nano technology
Cryptography and crypto analysis
Artificial Intelligence and Robotics
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Defence Technologies India Needs Precision Guided Missions (PGMs)
Cruise Missiles-guided by GPS
Tactical Missile System
Sensor Fuzed weapons and joint stand off weapons carrying sub munitions
Low thermal and ‘Acrostic Signatures’ than its predecessor.
Battle Space Awareness:
Sensors in satellites, manned aircraft or UAVs
GPS satellite navigation Network and Air Borne Warning and Control System (AWACS)
UAVs for strategic roles, medium attitude long endurance (MALG) and low altitude
UAVs
Night vision devices
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Thermal Imaging & Image Intensification.
Sensors / Detectors / Radars.
Trajectory Correction System /Missile Guidance.
Advanced Rocket Technology.
Active Tank Protection Systems.
Metallurgy / Forging Techniques for Guns.
Automotive Technologies.
Surveillance, Communications and Navigation Technologies.
Miniaturization / Nano Technology.
Networking Technologies for Seam Less Integration.
System Simulators.
Defence Technologies India Needs
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Ministry of Home Affairs is responsible for India’s internal security
Law and order is a state subject
Number of central police forces under it for special tasks and to supplement
states’ resources
The 11/26 attack on Mumbai in November 2008, caused an approximate loss of
over USD 800 mn to the financial capital of India
15 terrorist attacks in India in the last two years
Government has a modernisation plan for 6 Central Police Forces with an outlay
of $ 900 mn up to 2010 to counter the asymmetric threat
Programme Management Home Land Security
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Putting a number of pending procurements onto the fast track option.
A $ 10 bn Homeland Security market by 2016.
Indian Navy and Coast Guard $ 4.5 Billions
Sea Port Security $ 0.5 Billions
A $3.2 bn market for Airport security by 2016.
Special Events $ 1 Billions
Sizable expansion of the Indian Coast Guard and the Indian Navy by 2012
Weapons and protection systems, both for individuals and vehicle such as
–100000 Auto Carbines to replace 303/SLR rifles INRs 5000 crore ( $1.250 bns)
–100000 Level III Bullet- Proof Jacket INR Rs 300 crore ($ 75 mns)
–100000 Kevlar Helmets INR 100 crore ( $ 25 mns)
Market Opportunities
Tech Synergy
Sights and night vision devices, Thermal Imagers & Infrared based equipment
Commns, data transmission systems and mobile command & control centres.
Integrated Security Systems
GPS, GSM based Tracking Systems, Interception /Monitoring Systems
X-ray Systems, Cargo/Container Screening Solutions
RFID systems
Explosives sensors and disposal equipment.
Early warning security and surveillance systems.
Radio interceptors, Jammers & IED neutralisers.
Decontamination systems.
Simulators for training.
CBRN systems
Market Opportunities
Tech Synergy
Request for Proposals will contain Offset obligation.
Vendor has provide a simple undertaking of accepting Offset obligations with his
Technical Proposal.
Technical Offset Offer and Commercial Offset Offer to be submitted in two separate
covers to Technical Manager by the date specified in RFP which will not be later than 3
months of submission of main offers.
Vendor has to accept that failure to meet obligation will disqualify him at any stage
from further participation.
Offset
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Requirements established to ensure competition of at least 2 vendors. Requirements can’t be weighted towards a single supplier. Procurement procedures… are rigid BUT fair. No “YES we are compliant BUT/Subject to/etc.” - either YES or NO. Unsolicited proposals are not acceptable. Lowest bidder after all stages of procurement cycle wins. Common flaws noticed in proposals Adequate attention NOT paid to the specified requirement - Standard brochures are
enclosed. In-production items are offered with total disregard to what is being sought. Incomplete technical data. New terms and stipulations are suggested making the proposal a conditional offer. Replies are given in ‘yes’ or ‘no’ without technical amplifications.
Response to RFPs - Key Points
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Make a long term Commitment & High Integrally
Plan for steady investments.
Leverage India as a Resource. Defence Production Base for to begin with regional
needs and not just for India.
Products to provide Customer value at optimum cost.
Localise high /Technology high value components aggressively.
Have a clear path to ownership. No Partnership just to hedge the risks.
Invest in creating a high-caliber local team with enough flexibility.
Indian Specific Model-lessons from the past
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A producer always knows his product better than the buyer, it is a good practice to
be frank and candid in all aspects.
Indian offset policy is highly undemanding and pitched Iat a base level. View it as
another business opportunity. level. View it as another business opportunity.
Enter ‘Buy Indian’ segment through joint ventures with Indian companies. Equipment
must have minimum 30 percent indigenous content. Percent
Collaborate with Indian companies for the development of ‘Low Technology Mature
Systems’ with minimum 50 percent indigenous content.
Develop Long Term Association
Tech Synergy
Major General (Retd) Dr. Bhupinder Yadav Major General (Retd) Dr. Bhupinder Yadav is the Managing Director of Q-Tech
Synergy. Prior to retirement, Dr. Yadav was with Department of Defence Production, Govt of India. He is a Fellow from Institution of Engineers India, MBA, M.Sc. (Quality Management) from Cranfield University, UK, and holds a PhD in Operations Management
He has more than 30 years experience with technology management areas such as Planning and Co-ordination, project planning, product development and improvement, export promotion, vendor development, quality planning & assurance in engineering hardware, process etc
He played an active role in supply chain of defence products with a focus on self reliance through indigenisation, technology absorption, product upgrade with participation of Public /Private Sector and has been associated with important committees on defence production
He has a number of papers on quality, reliability and process improvement in various international seminars and publications to his credit
Tech Synergy
Tech Synergy
Ministry of Defence
Department of Defence
Defence Secretary
Inter-Services
Organisation
Integrated HQ
Army Navy Air Force
Department of Defence Production
Secretary DDP
Defence
Finance
Department of Defence R&D
DRDO Others Programmers
Programme Management- Defence Procurement
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Acquisition Wing
DEFENCE ACQUISITION COUNCIL (DAC)
DefenceProduction Board
DefenceR & D Board
DefenceProcurement Board
Land System Maritime &System
FA (Acquisition)
Air System
AcquisitionManager
FinanceManager
TechnicalManager
DG (Acquisition)
Defence Acquisition Organisation