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Private Sector Participation in Indian Defense Industry

Private Sector Participation in Indian Defense Industry 2020

Report code: SDMRAE1545626 | Industry: Aerospace and Defense  | Published On: 44013

In May 2001, the Indian defense sector, which was only reserved for the public sector, was allowed 100% participation by the Indian private sector, bound by licensing. Since then, the Government of India has taken initiatives to achieve higher levels of indigenization and self-reliance in the defense sector, by harnessing the capabilities of public and private sector industries in the country.
In order to further encourage procurement from local Indian suppliers, in May 2020, the central government issued a Public Procurement Policy to encourage the Make in India initiative, and promote manufacturing and production of goods and services indigenously in India. As a part of the Aatmanirbhar Bharat Abhiyan, initiated by the Government of India in June 2020, the Indian defense ministry has proposed to ban the import of defense weapons that can be indigenously manufactured. These steps by the government are expected to boost private sector participation in the defense manufacturing industry

Market insights:

Indian companies’ share in the total value of contracts awarded by the Indian Union Defence Ministry for the procurement of defense equipment has increased steadily over the last five years, and stands at ~75.03% in FY 2020 (as of January 2020). According to the Ministry of Defence, over the last four years, from FY 2016 to FY 2020 (up to January 2020), a total of 158 contracts were signed with Indian vendors, which include private sector defense manufacturers/MSMEs/SMEs and start-ups, against 100 contracts with foreign vendors for the capital procurement of defense equipment for the armed forces.
In July 2020, the Indian Defence Acquisition Council (DAC) approved an amount of INR 389 Bn for the capital acquisition of various platforms and equipment required by the Indian Armed Forces. The DAC has announced that, focusing on indigenous design and development, INR 311.3 Bn worth of equipment acquisitions, out of INR 389 Bn, will be obtained from the domestic defense manufacturing companies, while the rest will be acquired from global OEMs. Several Indian MSMEs will be the prime tier vendors in this manufacturing project, along with other major government defense organizations.

Orders placed, over the last five years, by the Indian Ministry of Defence to private sector defense manufacturing vendors such as Titagarh Wagons Ltd., Force Motors Pvt. Ltd., TATA Power SED, Tech Mahindra Ltd., TATA Motor Ltd., Ashok Leyland Ltd, Bharat Forge Ltd, MKU Ltd, SMPP Delhi, and Alpha Design include items like 1,000 tons of fuel barges, light strike vehicles, portable diver detection sonar (PDDS), RFID-based SMART Card, 6×6 and 8×8 High mobility vehicle with material handling crane, dual technology mine detector, ballistic helmet, bullet proof jacket (BPJ), and integrated gunnery.

Impact of COVID-19:

The Indian defense industry witnessed a slackened growth momentum, owing to the restrictions in global trade following the outbreak of COVID-19 in the country. Imposition of a strict nationwide lockdown from March 24th to May 31st 2020, had halted the production/service cycle, disrupting the supply chain, and eventually impacting company inventories in the Indian defense manufacturing industry. According to the Indian Ministry of Defence, Indian defense companies have suffered a loss of around INR 225 Bn worth of potential revenue during the nationwide lockdown period. However, the Indian Ministry of Defence has announced financial packages and reforms to strengthen the MSME sector and generate employment. Corporatization of the Ordnance Factory Board (OFB), indigenization of imported spares, and setting up of realistic qualitative requirements for weapons to support local industries are other measures taken by the government to revive the Indian defense industry, post the pandemic.

Challenges faced by private sector Indian defense manufacturing companies:

India has failed to attract substantial private sector investments in the defense manufacturing sector. This has happened mainly due to delays in taking decisions on the part of the government, placing unsystematic orders, canceling tenders, and placing of unreasonable qualitative requirements by the Indian Armed Forces. Many Indian private companies had invested in enhancing their defense production capabilities with a view to receive government support and orders, but have been left disappointed. In May 2020, Tonbo Imaging, a private sector defense equipment manufacturing start-up, wrote an open letter to the current Prime Minister of India, highlighting the cancelation of orders and delays in making payments by the government.

Companies covered:

• Reliance Naval and Engineering Limited
• Kalyani Strategic Systems Limited
• L&T Defence
• TATA Advanced Systems Limited
• TATA Power Strategic Engineering Division (SED)
• Axio Biosolutions Private Limited
• CRON Systems Private Limited
• ideaForge Technology Private Limited
• Tonbo Imaging Private Limited
• Viz Experts India Private Limited

Chapter  1:  Executive  summary

Chapter  2:  Socio-economic  indicators

Chapter  3:  Increasing  localization
3.1.  Key  highlights
3.2.  Defense  capital  expenditure  on  procurement  of  equipment  (FY  2016  –  FY  2020)
3.3.  Defence-related  business  allocation  split  (FY  2019)
3.4.  Defense  items  to  be  procured  from  local  suppliers

Chapter  4:  India  defense  budget  –  overview
4.1.  Key  highlights
4.2.  Defense  capital  budget  (FY  2019  &  FY  2020)  
Chapter  5:  Private  sector  participation  in  the  Indian  defense  industry
5.1.  Overview  of  projects  of  major  companies
5.2.  Overview  of  projects  of  other  companies

Chapter  6:  COVID-19  impact  assessment
6.1.  Impact  of  COVID-19  on  the  Indian  defense  industry  

Chapter  7:  Government  initiatives
7.1.  Initiatives  taken  by  the  government  to  increase  private  sector  participation  in  Indian  defense  manufacturing
Chapter  8:  Industrial  licenses  –  overview
8.1.  Industrial  licences  issued  to  major  private  sector  players  for  manufacturing  defense  products
o Year  of  license  issuance
o Items  to  manufacture
o Capacity

Chapter  9:  Defense  export  scenario
9.1.  Key  highlights
9.2.  Total  export  value  split

Chapter  10:  Challenges

10.1.  Challenges  faced  by  private  sector  defense  manufacturing  players

Chapter  11:  Competitive  landscape
11.1.  Major  established  companies
11.1.1.  Reliance  Naval  and  Engineering  Limited
-  Company  information
-  Business  description
-  Products/services
-  Key  people
-  Financial  snapshot
-  Key  business  segments
-  Key  geographical  segments
Note:  Financial  data  and  segment-wise  data  is  available  for  public  companies  only
11.1.2.  Kalyani  Strategic  Systems  Limited
11.1.3.  L&T  Defence
11.1.4.  TATA  Advanced  Systems  Limited
11.1.5.  TATA  Power  Strategic  Engineering  Division  (SED)
11.2.  Major  start-ups
11.2.1.  Axio  Biosolutions  Private  Limited
11.2.2.  CRON  Systems  Private  Limited
11.2.3.  ideaForge  Technology  Private  Limited
11.2.4.  Tonbo  Imaging  Private  Limited
11.2.5.  Viz  Experts  India  Private  Limited

Chapter  12:  Recent  developments  
12.1.  Key  recent  developments

Chapter  13:  Appendix

13.1.  Research  methodology
13.2.  About  Netscribes
13.3.  Disclaimer
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