Indian MSMEs set to battle it out for Rs 18,000-cr defence pie

Defence Procurement Policy 2013 and Make in India campaign trigger paradigm shift

The Defence Procurement Policy 2013 and the Make in India campaign have created a staggering Rs 18,000 crore ($3 billion) opportunity for the Indian defence MSME (micro, small and medium) sector as numerous offsets in the three wings of the armed forces are expected to be executed in the next five years.

According to defence MSMEs, the two key initiatives have opened up an estimated Rs 90,000 crore offset opportunity for the defence players in defence public sector undertakings (DPSUs), enterprise as well as for the MSME sector over the coming five-year period.

Of this, the MSME sector is expected to land offset business worth Rs 18,000 crore, which is 20 percent of the overall projection for the defence sector.

According to Samtel Avionics, Rs 72,000 crore looms from the Indian Air Force with the Indian Navy presenting another Rs 13,500 crore possibility, while the prospect from the Indian Army is anywhere around Rs 4,500 crore.

"The total value of the defence offsets contracted in the last few years is valued around Rs 28,800 crore. The Indian Air Force has signed contracts worth approximately Rs 21,600 crore, the Indian Navy worth Rs 5,064 crore and the Indian Army Rs 144 crore", Samtel Avionics Executive Director Puneet Kaura told IANS.

Indigenous manufacture of parts and sub-assemblies used in non-critical ground-based systems as replacements during maintenance of original imported equipment, and indigenous design, development and manufacture of complete equipment as a replacement for obsolete original equipment, through a process of reverse engineering, are encouraging MSMEs in the defence segment.

"Now that serious efforts are being made to attract MSMEs into this sector, there is no doubt that they will rise to the occasion by raising their standards of quality and reliability of parts and assemblies that they manufacture and supply to the larger players", G. Raj Narayan, founder and managing director of the diversified Radel Group, told IANS.

"This will lead to a significant reduction in costs as well as time of execution of projects since outsourced work can actually happen in parallel in multiple efficiently managed MSME organizations," he added.

Narayan was of the view that ensuring business sustainability by assuring MSMEs of long-term business for at least eight years and provision of special incentives for their investing in research and development, reverse engineering and indigenisation of defence equipment will boost the scenario for the sector.

At least 30 percent of the value of each programme is in electronics, or avionics as far as an airborne platform is concerned. Opportunities for MSMEs exist in a large number of segments such as armoured vehicles, aircraft, helicopters, submarines, tanks, ships and UAVs, among others.

"There are EW (Electronic Warfare) suites to be bought, as well as radar systems, optronic systems, displays and other LRUs which have to be procured. Requirements exist in segments ranging from space to underwater (submarines)", Kaura added.