Friday, 21 March 2008

L&T: engineering a major role in defence

video
The Nag Missile Carrier (NAMICA) firing Nag missiles at a tank target during recent Nag trials

by Ajai Shukla
(Business Standard, 21st March 08)

On 26th January 2007, when the sleek, indigenously developed Nag Missile Carrier (NAMICA) rolled down Rajpath in the Republic Day parade, L&T executives and workers watched with satisfaction. The NAMICA, based on a BMP-1 armoured vehicle, had been integrated by India’s biggest private sector engineering company, a project that had begun years before defence manufacturing was thrown open to the private sector in 2001.

That opening, boast L&T executives, off the record, was for lesser companies. L&T, they point out, has been manufacturing for India’s strategic sector since the late 1960s, in nuclear power generation, as well as the space programme. The Mumbai based engineering giant is one of just nine companies worldwide that is cleared to export nuclear power generation equipment to the US and to Europe.

Those decades of association with the strategic sector are now being leveraged, as L&T jockeys for a share of the Rs 2,00,000 crores of business that India’s Ministry of Defence (MoD) is likely to generate over the next five years. Unlike other private entrants into defence production, say senior L&T executives, its business strategy is not based on project-specific tie-ups of convenience with foreign defence majors. Instead, L&T sees itself as having covered the learning curve over decades, and now has its own experience and expertise on offer.

Mr MV Kotwal, Senior Executive Vice President of L&T’s Heavy Engineering Division, gives an example from shipbuilding, when L&T was asked to mount the Dhanush missile (the naval version of the Prithvi) on a warship. Kotwal explains how the company grappled with, and overcame, a range of problems, “It was engineering in the most difficult circumstances. A ship rolls heavily, so we developed new technologies in stabilised platforms. We gained experience in mechanical, hydraulic, electrical, electronic, pneumatics… all kinds of technologies. We started integrating those into one, so we became a one-stop integrator. That is the key differentiator for us; we always said we must be a total solution provider, not just one part of a system.”

For pursuing this strategy of building up L&T as a “systems integrator”, or a company that integrates sub-systems and components, often manufactured by other companies, into a complex weapons platform, the company has set up a dedicated manufacturing facility. Last Sunday, L&T inaugurated its spanking new Assembly, Integration and Testing Facility at Talegaon, 20 kilometers from Pune. The company has invested almost Rs 100 crores into the new facility.

The Talegaon plant will eventually be L&T’s manufacturing centre for all land systems. The Pinaka multi-barrel rocket launcher (MBRL) system, radars, missiles, and components for the Brahmos cruise missile will roll out of this facility. L&T hopes that Talegaon will produce Rs 100 crores worth of defence equipment during 2007-08.

This will be the first private sector manufacturing unit set up exclusively for defence. The L&T strategy in setting up dedicated facilities contrasts with the Tata Group’s strategy to spread defence manufacture across the existing manufacturing facilities of 11 group companies.

L&T is also taking a different route from the Tata Group by focusing strongly on naval systems. Besides the Dhanush missile integration and various torpedo systems, L&T is also playing an important role in building India’s hush-hush nuclear submarine project, officially dubbed the Advanced Technology Vessel (ATV). Now, the company is supplementing its largely civilian shipyard at Hazira, with a major new Rs 2000 crores shipyard on the east coast of India.

Commodore Mukesh Bhargava, Head of Marine Business, L&T says, “We hope the Indian Navy will be our prime customer. The shipyard will be geared for the modular manufacture of warships and submarines. But maintenance, repair and overhaul (MRO) will be a major revenue stream, including major repairs for bigger ships. The new dockyard will have dry docks for an aircraft carrier sized ship of up to 550 metres long.”

L&T was also exploring the purchase of the public sector Hindustan Shipyard Ltd (HSL). Now, however, with the Vishakapatnam-based yard likely to be handed over to the MoD, L&T’s Marine Division is likely to be asked to run HSL on a government-owned-company-operated (GOCO) basis. Sources in the MoD say the ATV project could be moved to HSL, and L&T would continue to work on the hull in partnership with the other organisations that are involved in the nuclear submarine project.

8 comments:

Abhiman said...

Mr. Shukla, I think we must ensure that the Indian jawan is not relegated by some to being merely a "customer" or "client" only. The state-run 'dinosaurs' and 'behemoths', the DRDO and OFB may be, but somehow trust, faith, and 'standing by' can be offered better by them than any private company.

We must not allow privatization to be widespread. As an example, the rescue operation during Hurricane Katrina was contracted to Messrs. Blackwater Inc. The US Army, Navy did not take part in any rescue ops. In Iraq also, most private security is being handled by this company with its own helicopter gunships, etc.

India is fortunately very far from such degeneration of its armed forces (in USA, the armed forces are not at all venerated as much as India's are).


However, we must think that will the Indian jawan, or sailor or pilot be held hostage to unpaid bills to a private company, or prolonged contractual negotiations, or contractual obligations, or price escalations ? I think that there must be a limit to the privatization of defence production and that state-run agencies must be the prime contractors with Indian private companies being sub-contractors only.

Thank you.

Anonymous said...

Mr Ajai Shukla, thanks alot.. look forward to the next article..

and regarding this NAMICA, is it a BMP-1 that's just 'assembled in India by L&T'

or..

is it developed and manufactured fully here, based on the BMP1? i.e. a reengineered vehicle that required no ToT from the Russos? Please enlighten me.

-Joss, Chennai

Ajai said...

Joss, the NAMICA is a BMP that is manufactured by the Ordnance Factory, Medak... and then handed over to L&T.

L&T then integrates the missile launcher, the electronics, the monitors, the sighting system, the missile stowage etc... everything that is needed to make the NAMICA a fully integrated missile platform.

Anonymous said...

Ohh i c.. Thats what I thought. why can't we make our own own sort of armoured vehicle?

Even for the Pinaka MBRL, why must we use Tatra trucks when we have world class truck manufacturers like Tata and Ashok Leyland?

India has to indegenise. We can no longer depend on imports.

Joss, Chennai

Anonymous said...

and thanks for your replay Mr. Ajai. Keep up this great blog!

Abhiman said...

Joss, what you have suggested is what TATA does not seek practice, i.e. it foresees itself to be a licence producer only. As per the article itself I quote, "The Tata Group has no plans yet to set up manufacturing or R&D facilities specifically for defence."

The article claims that "in a bold show", the TATAs have asked the govt. not to procure TCS from abroad, but from a private consortium of which TATA is a part. The consortium itself has EADs and Raytheon as 'technology partners', which implies a purchase of foreign technology itself.

It is in this context that TATA must make sure it does not become a "point man" of foreign companies in India. It should be a developer of systems that are designed in-house and not licence produced from abroad.

Thank you.

Anonymous said...

yea.. perhaps they only wanna distribute foreign equipment as its easier and less risky.. LOOSERS~~!


Joss, Chennai

Abhiman said...

Joss, I agree with your view. Corporate management practices may in fact emphasize on what you said, rather than R&D, which is risky.

In my view, the "rules of the game" don't change, only the "players" may change. During the Cold War, the licence producers were the State-owned companies like OFB, HAL, BEL, and even DRDO. Today the same is sought to be done by new private entrants.

Thanks.