India's R&D in Defence DRDO, PSUs and Private Sector

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somnath
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Re: India's R&D in Defence DRDO, PSUs and Private Sector

Post by somnath »

From

http://defense-update.com/features/2009 ... 30409.html
IAI and Russian aerospace companies have already cooperated in the past, in the modification of the Ka-52 Alligator helicopter gunship, proposed for the Turkish helicopter gunship program, and in the upgrade of Ka-32 helicopters delivered to the South Korean Navy.
I cant post the full article in a public website from Highbeam - its a restricted official-use webpage...Unless I get the article out from VOA-Jerusalem..But posting the bit of content that is in the free domain...
Russia's Defense Minister Pavel Grachev is on the first visit by a Russian in his position to Israel -- a five day visit which has included stops at several Israeli military bases and the signing of a defense cooperation agreement. The agreement provides for exchanges of military officers and Israeli upgrading of some old Soviet-made military equipment owned by Russia and other countries.
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Re: India's R&D in Defence DRDO, PSUs and Private Sector

Post by Viv S »

Rahul M wrote: why do you NOT expect that would yield a radically different result than the prevailing 26% cap? :eek:
per my unitary method calculation, there should be around twofold increase in 'radicality' by increasing FDI cap to 49 % from 26 % !
Lets assume there's a three fold increase. So instead of Rs 70 Lakhs we'll have investments of Rs 2 crore.
I guess you would argue for 100% FDI, am I correct ?
I'd argue for a majority stake.

jokes aside, the 49% number comes from two competing factors,
>> the need to raise the cap as much as possible to attract foreign firms
>> without giving them a controlling stake.
^^ Those are two conflicting factors.
> if 100% FDI is allowed foreign co's will find no reason to cooperate with Indian co's, whether public or pvt. admitted, a few handful of Indian citizens will gain access to cutting edge technology, however, all of that will be owned by the foreign co and there will be no development of 'institutional knowledge' in Indian co's, which is essential to growth. in fact even now there are many Indians with access to cutting edge tech (albeit most are not Indian citizens but nevertheless, many still have strong links with India), how has that helped our MIC in any meaningful way ?
They have absolutely no reason to cooperate with Indian cos. on R&D today. And domestic private companies aren't anywhere especially with regard to R&D today.
> foreign co's will have no reason to cooperate with domestic research bodies, for example if there is component X which is made by a domestic PSU/pvt co' for its own items, but it is also used some development project of DRDO/ISRO, GOI has to only ask for the component.
The Indian entity will be subject to all Indian laws. If its restricted by the parent company's home laws, it will not be transferred to the subsidiary, in which case its not an option and therefore not an issue for Indian R&D organisations(who will still have the domestic PSU/pvt co. option).
in a situation when it's a foreign co making it, they will be subjected to the laws of their own land and they might well refuse to cooperate. in fact they will most certainly refuse to cooperate with DRDO labs. whatever R&D capability we have developed will become unsustainable in the long run because of the disconnect between development and production.
Whichever company enters the market, its likely to compete with and not complement the DRDO products. What you effectively have is an Indian company that pays dividends to shareholders abroad. Its cooperation with its parent company can and will be regulated by the GoI. And its unlikely to be any less disbalanced vis-a-vis its parent than a true blue domestic company vis-a-vis its (inevitable) 'partner'.
> nothing will stop foreign companies to outbid and outbribe Indian co's to extinction
That was the original argument against opening up the economy. As of today private Indian companies have a fraction of the domestic defence market and are technology starved. And ToTs have a limited effect on ramping up domestic R&D capacity.
> once that happens it will become a monopoly situation and we will have absolutely no leeway in striking deals, whatever the suppliers come up with we will have to agree.
Another possibility is that you'll have left wingers in the US complaining about now defence companies outsourcing production to India. Also the question of monopoly doesn't come into the picture unless you let only a select few companies into the market.
> last but not the least, call me old-fashioned but I would much prefer an Indian co' to grow on Indian taxpayers money rather than a foreign one.
I agree 100%. But, when I see us evaluating foreign products for everything from carbines and artillery guns to patrol boats and submarines to basic trainers and 4th gen aircraft, that seems like a far-fetched idea at least for the foreseeable future.
Last edited by Viv S on 07 Apr 2010 20:14, edited 3 times in total.
somnath
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Re: India's R&D in Defence DRDO, PSUs and Private Sector

Post by somnath »

^^^^The question that is often forgotten is that market regulation and entity ownership are two very different things..the former is always, and always with the sovereign...And quality of regulation (by proxy, the extent of development of the industry for "public good") depends on the regulators, not on % FDI..Numerous examples...Banking has 100% FDI (in the form of foreign banks allowed to set up branches) - but very high quality regulation by RBI...Pensions (PFRDA), on the other hand, has had a disastrous run till now, though it allows no FDI...Telecom has 100% FDI allowed, but between TRAI and Min of Comms they make for the most terrible regulations (one case where the industry has prospered despite such corrupt and incompetent regulation-making)...Retail has had a terribly muddled set of regulations, and it allows 0% FDI...

the regulatory framework gets "better" in case the regulator is also the sole buyer! The other sector that has a problem in India is the Railways...It is the sole buyer of all rolling stock (or most, if you ignore the few private connection lines)..And it has spawned the most inefficient industry imaginable on rolling stock and engines...BHEL (old suspect!) makes locos under license (surprise, surprise!) from ABB - all very "indigenous" in their reports...But every succeedign generation of loco tech has to be imported from someone - and we are the second largest (or largest!) railways in the world....I startled the other day reading about the new Mumbai MEtro importing their rolling stock from China!!!!!! The Delhi metro of course runs on Korean rolling stock..

Anyways, back to the topic, ownership does not define regulation - it has been proved comprehensively....When India signed on to TRIPS, people shouted that foreign pharma will a) take-over Indian pharma with its sheer weight, and b) medicine prices will go through the roof...Neither of the two happened...If anything, India is becoming the key hub for foreign companies for their future (example - Daiichi)...

Back to the topic, the current situation of "non-control" FDI and offsets commitment has meant only one thing...Foreign companies are sourcing more and more CCS (cutlery, cutains, storage) type stufff from India - notice the increased orders of doors from HAL as an example...And second, JVs creating better versions of the current DPSUs are being setup - they will keep screw drivering stuff, creating a chimera of "indigenous development", but no Indian (rather the Indian ecosystem) will not get the benefit of working on the truly cutting edge....
Last edited by somnath on 07 Apr 2010 19:58, edited 1 time in total.
Katare
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Re: India's R&D in Defence DRDO, PSUs and Private Sector

Post by Katare »

somnath wrote:This is a performance analysis of DPSUs from IDSA (by Laxman Behera)..

http://www.idsa.in/system/files/jds_3_4_lkbehera.pdf

I am not entirely sure yet on some of the variables used here - for example, the use of the "Value Add" number..Laxman said that he has picked it up from individual company annual reports (which I strangely couldnt find), so I asked him to clarify what they really mean by "value add", especially given what the financial numbers show - he said he'll check and come back...

Anyhow, the trends established are clear...

By their own admission, DPSU value-add as a % of their "Value of Production" has been showing a near secular decline for the 8-9 years used in the analysis..

Labour productivity, another indicator of operational efficiency, is in the 25 lac rupee range, which is about 55k USD...Very very low by any indicator, even if one uses Laxman's "global top 5" benchmark...

Finally the analysis talks of exports, the pathetic record there doesnt need any analysis at all..

Also key are little nuggets like these (this one's on HAL:
For production of these items along with its other
activities, the company's dependence on raw materials, components and spare
parts, and capital goods is to the extent of 74 per cent, of which import content
is about 80-90 per cent. In last two years (2005-06 and 2006-07) its value of
imports totalled Rs. 4,753 crore and Rs. 6,715 crore, which are nearly 73 and 80
per cent of its total cost of VoP, respectively
In a manner of looking, the study doesnt say too much that we didnt know, but at least its another compendium..

The discussion is not about "pvt-good, public-bad"..I had quoted a number of examples earlier of performing public sector companies around the world..

The issue is with Indian DPSUs...And the ideological proclivity/comprehension of those who mask the macro big picture under qualifications, cliches and the occasional bright spark is the challenge...

the number of cliches (read excuses) used is so routine that one can rattle them off without even looking at a specific project:

1. Sanctions - never mind that they pertained to, when they did, they did only to Americans..
2. Tech denial - this is the biggest oxymoron - as if for some reason other countries had tech donation schemes from others

When faced with facts of course (the efficiency ratios of HAL for example), the standard response is to pull out some occasional bright spark - "hey but HAL has done a superb upgrade of of the Mig27 avionics!"..
Somnath,
You have a point and almost everyone agrees with it that PSUs are not all hunky dory. India needs and deserves a much better and more competitive MIC supported by innovation, govt and entrepreneurs. Where you are wrong is in judging and comparing HAL or BEL who operate in a different system under different rules to companies like LM or Boeing. Until system changes, competition kicks in and PSUs are empowered to compete at global scale, expecting them to be as competitive as best in massa land is not going to happen and you know that very well. You also know why the system is taking so long to change and who opposes it and why.

I still think and agree with you that even within current system DPSUs have large room for improving their performance/ For instance HAL who is sitting on Rs20K corer cash pile could have invested a couple of hundred corer on its own on developing a successor to Dipak but it didn't.

Couple of more things -

Value added (and value added per employee) is an standard statistics that is given by every PSU in its quarterly balance-sheet/Profit-loss report. So there is no need to calculate it unless you want to use non standard definition of value add. What you calculated for HAL is "profit earned from value addition" not the net value addition.

Sales per employee for HAL is pretty low but again there are reasons for it. Besides usual hangover of older socialist era of "employ as many as you can" to SC/ST reservations to hiring non critical employees like drivers, peons and gardeners as mandated by govt rules, HAL is mandated for a low value add/low profit activity of license manufacturing of foreign products for a captive customer. But it still doesn't hurt since labor is so cheap so even after so many support staff HAL can make enough profit. Even top new age companies like Infosys/Wipro would have 1/10 of sales/employee of say EDS and IBM. In short there is nothing sinister about having more employees if the cost/benefit justifies it.
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Re: India's R&D in Defence DRDO, PSUs and Private Sector

Post by Rahul M »

somnath wrote: IAI and Russian aerospace companies have already cooperated in the past, in the modification of the Ka-52 Alligator helicopter gunship, proposed for the Turkish helicopter gunship program, and in the upgrade of Ka-32 helicopters delivered to the South Korean Navy.
sorry, that's a separate issue. allow me to jog your memories a bit.
somnath wrote: In fact its ironic that Israel has bulk of the global market for upgrading legacy Russian systems, not us (the largest operator of such equipment)!
...
Rahul M wrote: this of course is yet another case of missing the woods for the trees, israel can afford to do so and antagonise the OEM because it is not a major or even a minor operator of russian origin aircraft. we do not have that luxury.
somnath wrote: Really? Israel and Russia are now marketing these upgrade packages together....Wonder why it isnt India and Russia?

clearly, the reference is to russian origin weapons "we" have operated, IOW systems like the migs.

in any case, the ka-52 was a new development, not an upgrade of legacy equipment as you indicated. similarly, the ka-32 was the sale of the ka-32 fitted with off-the-shelf israeli avionics, not a 'jointly marketed' upgrade package as you claimed. if that can be called jointly marketed then the su-30mki was also 'jointly marketed' by russia france israel and India itself, which obviously isn't the case.

in short, I'm still waiting for the sources for your claim. :wink:
____________________________
somnath wrote: Of course, the same set of arguments were forwarded in 1991......
somnath, I've followed your posting for quite a long time now and unfortunately I've come to the conclusion that in spite of your vast knowledge, you do not usually stick to accepted 'rules of engagement', to put it mildly.
as a mod, I prefer not to moderate issues in which I'm involved and that binds my hands when you respond with similar tactics to me. given BR's lack of mods in mil forum that creates a major problem. hence, I would much prefer not to engage you in arguments and would rather appreciate it if you can extend the same courtesy to me.
thank you.
__________________________

@ viv, I'll need some time to go over your reply. tomorrow may be ?
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Re: India's R&D in Defence DRDO, PSUs and Private Sector

Post by somnath »

Rahul M wrote:hence, I would much prefer not to engage you in arguments and would rather appreciate it if you can extend the same courtesy to me.
Sure, given that expertise of the supercillious variety is a bit too heavy to handle for a "non-expert" like me!
Katare wrote:Value added (and value added per employee) is an standard statistics that is given by every PSU in its quarterly balance-sheet/Profit-loss report
Katare,
Can you let me know what goes into the "value added" piece? (Its not a rhetorical question)..
Even top new age companies like Infosys/Wipro would have 1/10 of sales/employee of say EDS and IBM.
Well, Infy/Wipro are in the 50-55k range...EDS/IBM Global Services are in the 125k range..And mind you, the gap is redcing every year as both IBM and EDS are offshoring more of their work and their clients are asking for "Indian billing rates"!!

But yes, your point is valid:
Until system changes, competition kicks in and PSUs are empowered to compete at global scale, expecting them to be as competitive as best in massa land is not going to happen and you know that very well. You also know why the system is taking so long to change and who opposes it and why
That is precisely why we need to have as much "expertise" as we can in the country, be it public, private or foreign...rivate sector doesnt have it in them (in defence), the public sector is leashed and inefficent, we need foreign capital, tech etc the works, in order to kickstart the system...nothing wrong in that...For all we know, in fact I am pretty certain, the likes of HAL/BEL will actually benefit from that...
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Re: India's R&D in Defence DRDO, PSUs and Private Sector

Post by Sriman »

somnath wrote: Well, Infy/Wipro are in the 50-55k range...EDS/IBM Global Services are in the 125k range..And mind you, the gap is redcing every year as both IBM and EDS are offshoring more of their work and their clients are asking for "Indian billing rates"!!
I haven't really kept up with the discussion, but FWIW both Infy and TCS are 100K+ each now.
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Re: India's R&D in Defence DRDO, PSUs and Private Sector

Post by Katare »

Somnath,

Just from top of my head very roughly...
Value add = value of production (which is gross Sales adjusted for WIP/inventory etc) - input cost

Input cost = includes everything except employee cost

When salary etc taken out from value add you get EBITDA

When Taxes, depreciation, amortizations etc taken out from this EBITDA you get net profit.

Sales/employee for IBM on world wide level is $240.10K/employee ($95.8B in sales for 399K employees) and Infy $51K/employee but that includes employees from developing world for IBM. IBM India alone has almost as many employees as Infy so the argument looses its value. IBM USA has more than 10X sales/employee than Infy/wipro because labor cost for IBM USA alone is way more than what infly employees value adds for Infy.

But the kicker is, even with that little value add per employee Infy has higher profit margin, growth and market valuation per unit sales because labor arbitrage. HAL/BEL can do most of it if the defense sector is opened up in a phased and orderly manner for competition from domestic private sector and foreign capital.
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Re: India's R&D in Defence DRDO, PSUs and Private Sector

Post by somnath »

Katare wrote:Just from top of my head very roughly...
Value add = value of production (which is gross Sales adjusted for WIP/inventory etc) - input cost

Input cost = includes everything except employee cost

When salary etc taken out from value add you get EBITDA
Understood...Basically, EBITDA gross of employee cost...But in that case we have a situation where for most DPSUs, all (or most of) the "value add" is being spent on employee salaries! We need to benchmark "like-to-like" against international firms, but I suspect that given how the EBITDA/Sales comparisons stack up, and the % of employee cost to sales of PSUs, the numbers, if at all will look even worse comparatively..And as Laxman BEhera says, it is trending downwards almost ona secular basis..
Sales/employee for IBM on world wide level is $240.10K/employee ($95.8B in sales for 399K employees) and Infy $51K/employee but that includes employees from developing world for IBM. IBM India alone has almost as many employees as Infy so the argument looses its value. IBM USA has more than 10X sales/employee than Infy/wipro because labor cost for IBM USA alone is way more than what infly employees value adds for Infy.
You are not comparing like-to-like here - IBM globally has a large hardware/enterprise solutions business apart from IBM Global Services...Infy/Wipro are in the IBM Global Services domain..And the comparative data is here:

http://www.in.all-biz.info/news/index.php?newsid=303
In 2007, revenue per employee of IBM, Accenture and EDS was $146,910, $130,200 and $154,340 respectively. That was much higher than the revenue per employee of TCS at $51,320, Infosys' $45,800 and Wipros', $41,310 in the same year.
This data is slightly dated - mind you the financial crisis hit the EDSs a lot more than they hit Indian vendors...But as you can see, the numbers are within some sort of "touching" distance, not a 10X differential..

Generically, per employee cost is not the key driver in total employee cost - employee productivity is...Germany would have some of the highest per employee costs in the world, but its engineering products are the most competitive, precisely for this reason...
Sriman wrote:I haven't really kept up with the discussion, but FWIW both Infy and TCS are 100K+ each now.
Is it? Rough and read, Infy has revenues of 5 billion, and an employee headcount of about 100k(?) - so thats around 50k per employee isnt it? (BUt I dont track Indian IT companies closely anymore, so maybe I am way off)...
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Re: India's R&D in Defence DRDO, PSUs and Private Sector

Post by Rahul M »

somnath wrote: Really? Israel and Russia are now marketing these upgrade packages together....Wonder why it isnt India and Russia?
I'm still waiting for the sources. need I mention that I can't wait indefinitely ?
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Re: India's R&D in Defence DRDO, PSUs and Private Sector

Post by amit »

Slight off topic, but I think the tenor of arguments here mirror the kind of debate that went on during the initial years of liberalization and the stance taken by the so-called Bombay Club stalwarts like Rahul Bajaj. Both sides in the argument were convinced they were right and both sides wanted the best for India.

In this case too folks who want more foreign participation/majority participation in JVs feel that's the way to get the Indian MIL out of its slumber while those who oppose this are convinced that India's interests are best served by restricting foreign participation.

Here's an interesting analysis of the Bombay Club and where they went wrong

Worth a read IMO, especially in the context of the arguments and counter arguments going on here.

Some excerpts:
The Bombay Club argument

In 1992, the `Bombay Club' led a lobbying effort by domestic industrialists against removing trade barriers. It was a seductive argument. They said they are in favour of removing barriers to imports, but they first required `fair' competition with imports on a `level playing field'. Indian companies must get access to reliable and trustworthy electricity, high quality ports and airports, a sensible framework of labour law and a sound GST, a good financial system, etc. Only when all these things are done would Indian companies have a level playing field when competing against imports made by foreign companies. Only when these preconditions are met, it be fair to remove trade barriers.
What happened to the domestic companies, the supposedly helpless ones who were hobbled with bad electricity, bad ports, bad airports, bad labour law, etc.? There was no calamity -- the Indian economy got dramatically better through globalisation. Even though the argument of the Bombay Club sounds reasonable, there is something fatally wrong with it. With the benefit of hindsight, we can identify five mistakes in the logic:

1. There are many inputs to production and every location in the world has a different set of price advantages. While a location in India fares badly on some inputs (such as electricity or roads) it fares well in others (such as the price of labour). Overall competitive advantage reflects the cost of all inputs. In India, some inputs like electricity are costlier, but other inputs such as labour are cheaper.
2. The exchange rate is a great equaliser. When a country removes trade barriers, imports get cheaper and the current account deficit tends to go up. But as long as the exchange rate is allowed to fluctuate, a currency depreciation results, which makes exports more competitive and imports costlier.
3. When India opened up, many firms died. Their death freed up capital and labour which went into other firms, often in other industries. So while India's opening up was a calamity for many individual firms and also some industries (e.g. computer hardware), it worked well for India, by rearranging the utilisation of labour and capital.
4. The Bombay Club, and old Indian economic policy makers, were pessimistic about what Indian firms are capable of. The events have belied this pessimism. When competitive pressure came upon Indian firms, they worked wonders on reshaping themselves, absorbing new technology, recruiting talent including foreigners, etc. The malleability of human behaviour exceeds the expectations of practical people.
5. Once the pressure of imports came on, political lobbying by Indian companies started pushing politicians on reforms -- e.g. cutting restrictions on foreign inputs such as coal or debt capital, building highways, breaking the grip of DOT over telecom, etc.


IMO the bolded portion in the above is important. And there's no reason to believe that entities like HAL, BEL, L&T, Tatas etc (in the defence arena) etc will not only get better if they are exposed to international competition.

JMT
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Re: India's R&D in Defence DRDO, PSUs and Private Sector

Post by somnath »

Rahul M wrote: I'm still waiting for the sources. need I mention that I can't wait indefinitely ?
I thought we agreed that there's no point discusing with each other...

I provided my sources - to me they are clear enough examples of how Russia cooperates actively with Israel to upgrade its own equipment used by third parties (somehow they dont have to do that with us, cooperating with us in an upgrade of Syrian Mi8s as a hypothetical example)..In case they are not good enough for you, well, draw your own conclusions!

this is just an internet blog!!!!And mods are not my bosses?!!!
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Re: India's R&D in Defence DRDO, PSUs and Private Sector

Post by Rahul M »

I'm not "discussing" with you. I'm entirely within my mandate as a mod to ask someone to present the sources backing their points.

as to your sources, they have nothing to do with what you posted originally as I indicated in an earlier post. I take your last post to mean that you have no sources for that claim and you were indeed 'bluffing' hoping no one will notice.
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Re: India's R&D in Defence DRDO, PSUs and Private Sector

Post by amit »

Marten wrote:Note: I will politely decline to engage in discussions with bankers that use google rather than a keen understanding of our defence needs.

You are making too many assumption aren't you? Is this a defence mechanism? And what's your qualification which gives you a "keen understanding of our defence needs", pray can I ask you that?

Added later: I would like to see if your comment about bankers is labeled as a strawman as well. :)

If defence is so critical and the Indian govt so gullible and Indians who would work in foreign owned defence firms so untrustworthy, why even have 49 per cent. Surely even then we can have a lot of hanky panky if that's the intention?

The point is not 100 per cent FDI, 49% or even 26%. One needs to understand that if any defence firm comes to set up shop in India that will be because of economic reasons and the same reason which operate in other non defence sectors. And that is huge internal market and a place to get cheap, high skilled labour to sell in the international market.

If the fear is foreign firms would come only to take India for a ride, then there's no point in letting even one of them in with whatever percentage of ownership. We can keep producing doors for Boeing in the meantime.
Last edited by amit on 08 Apr 2010 08:14, edited 2 times in total.
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Re: India's R&D in Defence DRDO, PSUs and Private Sector

Post by somnath »

Rahul M wrote: as to your sources, they have nothing to do with what you posted originally as I indicated in an earlier post. I take your last post to mean that you have no sources for that claim and you were indeed 'bluffing' hoping no one will notice.
Take it whichever way you want to..I dont "bluff", though there is nothing that I need to "prove" to you...(in the same way as I dont think you are trying to bluff when you say that HAL is still in the Entity list)..

Last bit, learn to disagree without being disagreeable......
Last edited by Rahul M on 08 Apr 2010 08:08, edited 2 times in total.
Reason: user warned for posting misleading information, time and again.
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Re: India's R&D in Defence DRDO, PSUs and Private Sector

Post by arnab »

amit wrote:
Marten wrote:Note: I will politely decline to engage in discussions with bankers that use google rather than a keen understanding of our defence needs.

You are making too many assumption aren't you? Is this a defence mechanism?
I think Marten raises an interesting point (albeit tangentially) :) What are our defence needs?

Do we want DPSUs to:
(1) develop cutting edge defence related products?
(2) absorb imported technology and in time substitute the imports by producing the systems (and sub-systems) within the country?
(3) be a low cost (however measured) assembler of imported products (but still critically dependent on imported systems)?
(4) be a supplier of defence products unfettered by 'international political complications'?

We can also take the long view (over the next 10 years) or the short view (if war breaks out tomorrow).
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Re: India's R&D in Defence DRDO, PSUs and Private Sector

Post by Rahul M »

somnath wrote:Limited Jag upgrades (and the govt is again looking at BAE for a deeper and more extensive upgrade programme)

source for this please.
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Re: India's R&D in Defence DRDO, PSUs and Private Sector

Post by negi »

Arnab

HAL does all of the above i.e. maintaining and upgrading IAF fleet , overhauling and manufacturing entire gamut of aero engines (western and soviet some of them 50's vintage) , doing screw driver giri for Boeing and Airbus , manufacturing every IAF aircraft for which MoD has the license from the OEM , provides key spares and parts for vintage soviet aircraft to foreign countries and finally does its share in the development of new projects like ALH,LCH,Sitara and even the LCA.

It seems there is simply too much on HAL's plate . :-?
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Re: India's R&D in Defence DRDO, PSUs and Private Sector

Post by Rahul M »

amit boss, I've tried to explain as well as I could, if you have some queries please don't hesitate to ask.
amit wrote:And regarding your point about HAL being able to build a medium haul in 10 years, sure it can, afterall we have the expertise to build such a fine aircraft like Tejas. However, if we make a point like that, one also needs to ask if Embraer, if needed, can do or could do all the things HAL has achieved, also within a 10 year period? I would tend to think yes. Also note that Embraer made it known in 2007 that they would build the plane and in 2009 actually signed the deal with the Brazilian air force.

going by how this industry develops I don't think that's necessarily a very valid assumption.

compared to fighters, transports and airliners are much simpler affairs, especially if you do not go for an uber-futuristic design like the 787. of course, HAL hasn't been the lead developer of LCA but it has been the principal partner and contributed substantially.
that it learned a lot from the experience is evident from the story of the IJT which was developed in a record time of 4 years.
another thing though, in this type of comparisons, it makes more sense to compare country to country, rather than HAL to embraer, since no co' makes everything that it needs to put in an aircraft. neither HAL nor embraer would be able to make even one complete aircraft if they were restricted to in-house items only. embraer would of course be hit harder since they lack many of the niche skills HAL has.
coming to India's work in fighters and helo's, it takes quite a long time for the industry to mature to be able to develop those, rather than it does for transports or airliners. the quite large number of such aircraft that have been and are being developed is a proof of this statement. and mind you, none of these transports from tier-2 aerospace powers are in any way much inferior technologically to their tier-1 cousins. the reason for that is quite simple, military transports have stayed more or less stagnant tech wise from the 50's. that is the reason why you see the C-130 (first flight 1954) and the B-52's (first flight 1952) and the russian bear family (first flight 1952) still going strong after all these years.
the only reason why new families of airliners get developed is because airline operators put a much higher premium on safety and fuel economy, which are obviously much better in newer designed aircraft due to better manufacturing methods and optimisation of design with CAD.

especially in case of fighters, brazil will be hard pressed to produce a contemporary fighter without substantial and I mean very substantial outside assistance. and I'm talking of 4th gen fighters, not even 5th gen ones, which HAL/ADA will be starting shortly.

just look around at how many 4th gen fighters are flying and the record of their countries of origin, barring India and China, all the others have 50 or more years of history of continuous fighter development. and in case of china, they got an almost ready design from israel (which in turn was assisted substantially by US) and all they did was change the dimensions to accommodate the larger al-31 engines which was again done with russian help. (oversimplification but correct in essentials)

the point I'm making is, (again :P ) embraer is excellent in one niche and is superlative as a commercial enterprise while HAL is good in a lot of tech areas but poor as a commercial enterprise. but due to its multi-area skills HAL can catch up with embraer in the short term at least product wise given the necessary mandate but embraer can't catch up with HAL in the short to medium term.
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Re: India's R&D in Defence DRDO, PSUs and Private Sector

Post by Sanku »

amit wrote:Slight off topic, but I think the tenor of arguments here mirror the kind of debate that went on during the initial years of liberalization and the stance taken by the so-called Bombay Club stalwarts like Rahul Bajaj. Both sides in the argument were convinced they were right and both sides wanted the best for India.
I am sorry its repeated comments like this, trying to brand all those you do not agree with in a particular mindset or whatever that causes most of the threads to go down hill.

Despite being pointed critical differences between the opposition to liberalization in 90s and the discussion where inane comparisons are being made between HAL and Hundai, all Somnath comes up with is, oh its like this before.

That is another debating technique, reductio ad hitlrum; compare everything you dont like to Nazi's and if anyone objects you get labeled as a Nazi.

Then comments about bankers et al start flowing freely.

It would be good if such unsubstantiated allegations against fellow posters were not made, all the posters here can present their position, and those not agreeing with them are not particularly suited to decide on others behalf what the opposing parties position really is. :roll:

Please stick to saying "WHAT YOU HAVE TO SAY" and avoid interpreting and pigenholing OTHERS views.

Thank you very much.
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Re: India's R&D in Defence DRDO, PSUs and Private Sector

Post by Sanku »

Marten wrote:Are any of the areas where 100% FDI was allowed as critical as defence? Why would 49% not be good enough for these firms?
Lest we forget, Telecom began with 26% FDI and then grew from there.
Thats actually a very good point, in all the segments in Indian society, where ever the govt has created and rolled out the regulatory framework in a slow steady and regular manner (telecom) the success are visible.

To take another unrelated example (to defence) the land redistribution was done overnight, in a shock and awe great leap forward manner. The resultant chaos completely destroyed the value of the land, even to those who got bits of it.

We dont need Yelstin like "wake up one fine morning and start selling off" approaches. We need structured slow and steady moves.

Yes it will take time but be better in long term.
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Re: India's R&D in Defence DRDO, PSUs and Private Sector

Post by amit »

Rahul M wrote:amit boss, I've tried to explain as well as I could, if you have some queries please don't hesitate to ask...
Rahul Boss,

Good post and fair assessment. I've no rigid views on this matter save for one, which I'll explain in a while.

I agree that HAL has built up a lot of expertise as have other major entities like BEL and a host of other defence labs. I for one do not for a moment think that foreign investors should be allowed into these companies, thought I wouldn't mind Indian investors, like say the Tatas buying a stake.

However what I'm convinced about, and that's the point about a rigid view, is that things cannot go on the way it has. I'm not in a position to specify how but I think there has to be a change in management focus in say for example HAL and there has to be more market orientation. You made this point and so did I think Negi bhai, that HAL has its plate full. I think that's something companies the world over in any sector would welcome. HAL should then ramp up capacity, hire more people, invest in new facilities, the works. Is this being done? I doubt it. As you pointed out in another thread, they've even fired the Public Relations guy who was doing a good job publicising the Tejas. This kind of attitude cannot go on IMO.

If you'd noticed in my example about Embraer, it was for much of the time a Govt owned entity. That means HAL doesn't need to go private to become a better managed company. It just needs a change in management culture.

And why shouldn't HAL enter civilian aircraft manufacture? It's a profitable enterprise but to do that it has to be weaned away from its single customer mentality.

A more competitive MIL in India IMO would act as a catalyst to bring about these changes. And that's the point I was trying to make with the Bombay Club's example. Even Rahul Bajaj's company emerged much stronger once it started to face real competition and it wasn't wiped as Mr Bajaj probably feared?

Hope I've explained where I'm coming from. Each person has a different POV and it doesn't help to bunch/pigeon hole folks who apparently seem to be coming from the same direction. :D
Last edited by amit on 08 Apr 2010 10:32, edited 1 time in total.
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Re: India's R&D in Defence DRDO, PSUs and Private Sector

Post by amit »

Sanku wrote:
amit wrote:Slight off topic, but I think the tenor of arguments here mirror the kind of debate that went on during the initial years of liberalization and the stance taken by the so-called Bombay Club stalwarts like Rahul Bajaj. Both sides in the argument were convinced they were right and both sides wanted the best for India.
I am sorry its repeated comments like this, trying to brand all those you do not agree with in a particular mindset or whatever that causes most of the threads to go down hill.

Despite being pointed critical differences between the opposition to liberalization in 90s and the discussion where inane comparisons are being made between HAL and Hundai, all Somnath comes up with is, oh its like this before.

That is another debating technique, reductio ad hitlrum; compare everything you dont like to Nazi's and if anyone objects you get labeled as a Nazi.

Then comments about bankers et al start flowing freely.

It would be good if such unsubstantiated allegations against fellow posters were not made, all the posters here can present their position, and those not agreeing with them are not particularly suited to decide on others behalf what the opposing parties position really is. :roll:

Please stick to saying "WHAT YOU HAVE TO SAY" and avoid interpreting and pigenholing OTHERS views.

Thank you very much.
Aha Sanku Bhai, you've outdone yourself here. :D

I can understand you are scolding someone but I'm not sure who exactly, Me, Somnath or Marten. :-?

Anyway, just to be on the safe side and to escape righteous wrath, I'll act suitably crestfallen from now on, on this thread.

Damn! There's no jumping back into the bunker icon here!
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Re: India's R&D in Defence DRDO, PSUs and Private Sector

Post by arnab »

amit wrote:
Rahul M wrote: If you'd noticed in my example about Embraer, it was for much of the time a Govt owned entity. That means HAL doesn't need to go private to become a better managed company. It just needs a change in management culture.
Actually, Amit - ownership (public or private) has nothing to do with achieving efficiencies, it has more to do with competition. People have been mentioning the Telecom Sector. Do note however that the 26%-49%-74% - 100% FDI route was only one insignificant part of the Telecom success story. The telecom story began in the 1980s when Rajiv Gandhi invited Sam Pitroda to set up DOT. Then the 1994 Telecom Policy ended the monopoly of DoT as the sole service provider for internal telephony. The 1999 Telecom policy allowed 49% FDI and so on. The critical thing to note is that deregulation in the telecom sector has been a slow but continuous process. Unlike DPSUs. Yes there have been internal restructurings - but the monopoly power of the DPSUs remained. So even good DPSUs like HAL have been forced to do 'juto shelai theke chandi path' (loose translation: doing everything from sewing shoes to performing puja), rather than focus on a few core competencies.

Yes Indian private sector was allowed to participate in defence tie-ups, but unlike telecom, where say Reliance could buy CDMA technology easily off the shelf, the defence industry is probably a bit more cagey about parting with technology. This is probably because the two markets are different.
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Re: India's R&D in Defence DRDO, PSUs and Private Sector

Post by Rahul M »

boss, I agree completely about the competition thing, with a rider that at least for the time being it should be Indian controlled. IMO, GOI has to take the lead in trying to bring desi companies up to speed, both for them to compete with and supplement HAL.

for example, GOI could have split HAL's koraput division and merged it with GTRE as a complete engine maker and developer with one focus. I believe our engine scenario would have been much different if that happened. it still is a good idea if you ask me.

even now, IAF's requirement for the turbo trainers is a perfect opportunity to boost a pvt co dedicated to such aircraft. off the top of my head there are two candidates :
> taneja aerospace which is building the moderately successful hansa, designed by NAL
> mahindra aerospace which is developing a 5-seater derivative of the hansa called NM-5 in partnership with NAL.

mahindra has also bought two aussia aero co's recently and anand mahindra is inspired by embraer and wants to build small civilian airliners. :wink:
NAL is also designing a 70-seater but I do not know if GOI has given the go ahead yet.

as the situation now stands, I don't think there's any alternative to more aero co's in India, some in same sector. the competition will be good for both sides of the public pvt line.
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Re: India's R&D in Defence DRDO, PSUs and Private Sector

Post by Rahul M »

Actually, Amit - ownership (public or private) has nothing to do with achieving efficiencies, it has more to do with competition.
perfectly said.
So even good DPSUs like HAL have been forced to do 'juto shelai theke chandi path' (loose translation: doing everything from sewing shoes to performing puja), rather than focus on a few core competencies.
valid point too IMO, see my post about HAL's engine division.

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Re: India's R&D in Defence DRDO, PSUs and Private Sector

Post by negi »

I don't know about Koraput but definitely Bangalore engine division , I guess the latter makes and overhauls western aero engines while Koraput Russian ones.
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Re: India's R&D in Defence DRDO, PSUs and Private Sector

Post by Rahul M »

negi, if I'm not wrong b'lore engine div also makes helo engines, which has had a relatively better performance, which is why I didn't speak of splitting it.
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Re: India's R&D in Defence DRDO, PSUs and Private Sector

Post by amit »

Arnab, Rahul, both good points. Yes competition is the key. And Rahul, you're probably right that it should initially at least be Indian driven. However, that bring in a problem of technology infusion. There has to be some of that initially, especially if small local guys want to get in.

But it's good news about Anand Mahindra's dream. :D He's a sort of guy who can make that happen.

I think the key is to let companies who have the muscle and some expertise, like L&T, Tatas and even Mahindra Aerospace go out and source technology not only from around the world but also from DRDO labs. However, to do that they should, at least initially be given firm commitments about orders. I know L&T has started building some small vessels at a their shipyards but IMO things need to move much faster.

But the elephant in the room is our opaque procurement system. Just look at the Arjun saga. Arjun being a DRDO baby means that even if it's not accepted by the Army, DRDO will probably do a collective shrug of its shoulders and carry on with its business. But such a rejection could be disastrous for a pvt company. Of course this is not to say that substandard products must be accepted just to keep the companies alive. However, the system needs to be transparent enough for people to understand that a product is accepted or rejected purely on merit.

So it's just not a question of tweaking managements of DPSUs and allow pvt competition, there has to be a culture/mindset change over the entire spectrum starting from the government.
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Re: India's R&D in Defence DRDO, PSUs and Private Sector

Post by amit »

Rahul M wrote:__________________________
Sanku and amit, DO NOT respond to each other (whether directly or indirectly) under ANY circumstances. (you both know why :wink: ) please, I've no intention of warning you.
Boss,

I've no interest to respond and if you've noticed over the past couple of pages I haven't. But really I was at a loss to understand whom the post was directed at. Please have a look and let me know if you can understand.

Also IMHO this thread could do with a bit of light heartedness. I have no wish to enter into a serious debate with Sanku Bhai. I've learnt my lesson, I always come out second best. :D
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Re: India's R&D in Defence DRDO, PSUs and Private Sector

Post by Sanku »

Rahul M wrote: Sanku and amit, DO NOT respond to each other (whether directly or indirectly) under ANY circumstances. (you both know why :wink: ) please, I've no intention of warning you.
Not even to agree with him (which I also do often you know) :(
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Re: India's R&D in Defence DRDO, PSUs and Private Sector

Post by amit »

Sanku wrote:Not even to agree with him (which I also do often you know) :(

Peace Brother, Peace. Having a "heated" argument doesn't mean enmity for life you know. :D

At the end of the day we - and everyone who takes the trouble to come to BRF to discuss, learn, share, rave/rant - all belong to one team: Mother India. Jai Hind! :)
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Re: India's R&D in Defence DRDO, PSUs and Private Sector

Post by Sanku »

Peace indeed bhai saheb, Jai Hind.
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Re: India's R&D in Defence DRDO, PSUs and Private Sector

Post by Gerard »

PUNJ LLOYD TO START WORK ON NEW WEAPONS FACTORY IN INDIA
"We are setting up a land systems factory in Gwalior. We have got the possession of the land and now we will start making capital expenditure for the project... It will be done in phases and the total project will cost US$100 million," Punj Lloyd Director Corporate Affairs Luv Chhabra said.
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Re: India's R&D in Defence DRDO, PSUs and Private Sector

Post by Sanku »

Gerard wrote:PUNJ LLOYD TO START WORK ON NEW WEAPONS FACTORY IN INDIA
"We are setting up a land systems factory in Gwalior. We have got the possession of the land and now we will start making capital expenditure for the project... It will be done in phases and the total project will cost US$100 million," Punj Lloyd Director Corporate Affairs Luv Chhabra said.
When the 100% FDI ballon was first floated, one of my first reactions was, are they mad, how will the land acquisition be handled.

It was met with "land? What land?"

Now I wonder why does Punj lloyd, in their very first sentence of their brief makes a point to mention that they have land for the same. Wonder why?
:twisted:
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Re: India's R&D in Defence DRDO, PSUs and Private Sector

Post by Ashish J »

BHEL units plan to re-enter defence business
http://www.business-standard.com/india/ ... ss/391377/
The Tiruchirappali (Tiruchy) and Ranipet units of power and transmission equipment manufacturer Bharat Heavy Electricals Limited (BHEL) is planning to re-enter the defence business.

Talks are on for supplying certain types of equipment for the Armed forces,” said BP Rao, chairman and managing director, BHEL.

The two units would produce battle tanks, missile launchers and water desalination facilities for submarines.

A Chandrababu, general manager in-charge, BHEL Ranipet, which manufactures boiler auxiliaries, said the unit had initiated taks with the Navy to re-enter the defence business in a “big way”.

The unit, which used to manufacture missile launchers for the Navy, has started discussions for the same apart from a desalination water facility for submarines. “We have tested one such facility in Vishakapatnam and are now planning to showcase this model to the Indian Navy,” said Chandrababu.

The Ranipet unit has also received a Rs 3-crore order from the Indian Space Organisation (Isro) to build fuel tanks for its project Chandrayan II. These tanks will be supplied by the end of this year.

AV Krishnan, executive director, BHEL – Tiruchy, which used to produce battle tanks, said they had initiated dialogue with the Army to re-enter this space. “We have the capability and capacity to manufacture in our unit,” he added.

Currently the defence business accounts for less than one per cent of the total revenue for the unit, he said.

BHEL, in the defence space, will have to compete with private players such as Larsen & Toubro (L&T), Tata Power, Mahindra & Mahindra, Godrej Industries, Kirloskar Brothers, Ashok Leyland, Jindal, Max Aerospace & Aviation and Ramoss India.

According to Assocham, the Centre procures around Rs 55,000 crore of defence equipment every year.

BHEL along with Italian conglomerate Finmechanica may supply as many as 30 heavy duty 127-mm naval guns. With each gun costing Rs 130-150 crore, this means an order worth Rs 4,500 crore.

“We are already supplying 76-MM guns to Navy and now the defence ministry wants to us to make the 127-mm guns,” Rao said, adding they were also implementing an integrated platform system for naval ships.
It seems efforts for indigenisation/Joint Production is gaining momentum...
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Re: India's R&D in Defence DRDO, PSUs and Private Sector

Post by shukla »

Ashish J wrote:It seems efforts for indigenisation/Joint Production is gaining momentum...
They seem to live by the motto: 'Slooooooooooow and steady wins the race'.. but I guess ' better late than never'... On a more serious note.. thats good news..
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Re: India's R&D in Defence DRDO, PSUs and Private Sector

Post by shukla »

X-post

Mr P S Subramanyam honoured with National Aeronautics Award by the Aeronautical Society of India (AeSI) for work on LCA.
The award was given away by Karnataka Governor H R Bharadwaj. Dr Vijay Mallya, business tycoon, was also present. The award was conferred on him for his contributions towards successful development leading to more production of the Light Combat Aircraft (LCA), 'Tejas'.
A DRDO official said the scientist Mr Subramanyam aims to achieve weapon integration trials and induction of additional LCA Vehicles into Flight Trial Phase, Initial Operational Clearance(IOC) and Final Operational Clearance (FOC) of Tejas aircraft within the stipulated time frame.

He was also spearheading the design and development of LCA Naval Variant and production of Tejas aircraft for operational service.
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Re: India's R&D in Defence DRDO, PSUs and Private Sector

Post by Suresh S »

hats off to air marshall Barbora for saying everything right about how best to develop the aerospace industry in India. I feel good today that someone with brains and guts is at the helm of IAF. I am going to have some masala chai now. Thanks air marshall.

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Re: India's R&D in Defence DRDO, PSUs and Private Sector

Post by tejas »

82% of BHEL's products are screwdriver tech. ( see my post in the power thread). Unless you want to asphyxiate, I wouldn't hold my breath waiting for any indigenous weapon system coming out of this parasitic state undertaking (PSU).
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