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Policy is improving, but at a painfully slow pace: L&T

Q&A with MV Kotwal, Larsen & Toubro

MV Kotwal

MV Kotwal

N Sundaresha Subramanian Mumbai
Larsen & Toubro’s association with the defence sector dates back two decades. Through the years, the  diversified major has developed wide range of capabilities catering to the needs of all three forces, it is now all set to scale up volumes, says MV Kotwal, president, heavy engineering, Larsen & Toubro. In an interview with N Sundaresha Subramanian , Kotwal, who is a member of L&T board, talks about  recent investments in shipbuilding, upcoming major defence orders and the slow pace of reforms.
 
How has L&T’s defence business evolved over years?
 
The entire involvement started with DRDO (Defence Research and Development Organisation). That was the only avenue open to companies like us to get into this domain. That time there was no question of involving ourselves in production. We have had a healthy relationship with DRDO because alongwith them we were able to develop a lot of prototype systems in those days…a wide variety but not enough quantity. Then, we got into Pinaka multi-barrel rocket launchers. At Rs 150-170 crore, that helped us get into the quantity game.
 
 
You were closely associated with the INS Arihant submarine project. How are you placed to leverage this?
 
While this was going on for several years, we started talking about only after the submarine was officially handed over to the prime minister. L&T involvement is extremely deep. It has been a difficult exercise to develop technology in this area. It is something we are proud of. Today, we have capability to completely construct submarines.  The real core of technology is something that is not seen visibly that is already there with L&T.  
 
How are your investments in shipbuilding faring?
 
We started off with Hazira, but the major investment is in Katupalli, near Chennai.
 
What is the total investment in Katupalli?
 
Total investment in Katupalli is Rs 4,000 crore. Out of this, shipyard alone may be around Rs 2000 crore.  Part of it is due to container port. 750 acres of 1250 acres is shipyard. This shipyard is the largest facility of its kind anywhere in the country. We have got a waterfront of 2.2 km. All the workshops were versatile. When it came to the actual ship lift, we designed and built a shiplift. All other companies will buy a ship lift. There are only two or three companies in the world that make it. It is a complex device as we are talking about lifting a weight of over 20,000 tonne out of the water and the whole ship is rolled into land and moved sideways. It can work on several ships simultaneously.
 
All these are operational?
 
All this is operational. Only thing that is missing is defence orders.  This is kind of situation we are in. It doesn’t mean we are idle. Shiplift is great asset when it comes to ship repair.  We do a lot of repairs. Ships come and go. We are in midst of negotiation where one defence ship which is coming for repair.
 
Where does the defence portfolio stand today within the group in terms of revenues and prospects?
 
Numbers can be misleading. Today, we are in the order of Rs 2500 crore- Rs 3000 crore. But how it will pan out in the next year is uncertain. We are restricted to the Indian programme. What we have been telling the government is that we need proper thrust on exports.  Then at least, some element of buffering will occur. You know how long it has taken for the toad gun to come to this level, it is not a secret anymore – when we required it and when are the tests going on. These are not going to change suddenly. You have big orders and a period where nothing happens. India has the capacity and we have the capabilities. In non-defence areas, we export to over forty countries. That has not happened by accident. We have established ourselves, today we are counted among top 5 in the world high quality fabrication. We have in fact taken up very strongly with the government.  Don’t enter into private or public debate –private sector taking away orders from DPSUs, this is totally diversionary thinking.  We are not talking about what is 30% (DPSUs share). We are looking at the 70% (Imports). It is a simple thing.
 
What are the upcoming contracts you are looking forward to in the near future?
 
As far as Navy is concerned, there is an RFP (Request for Proposal) for landing platforms docks (LPD). That is a proper complex naval vessel with huge number of parts. There is an open competition. Private players are to participate. There will be proper competitive bidding. It is a change from past, but not the ideal way. Four LPD vessels required. Then there is this Famous AVRO replacement programme , where as a departure from past, RFP was restricted to non-HAL players. It will be led by a foreign player. It is a beginning. We will be a definitely participant.
 
What about the Army?
 
In the case of the Army, one is of course Pinaka multi barrel rocket launcher, which is going on in batch production. Apart from this, there are two. First is track gun. One of the competing products is led by L&T with Korean partnership.  Second system is Toad gun system. We are not leading. The French partner is leading. Competitor is an Israeli company with Bharat Forge as the Indian partner. Tests are underway. The Tactical Communication System bid under the Make India programme saw a lot of enthusiasm in the industry.  Top two were selected. First is BEL (Bharat Electronics) Second is the consortium we are leading with Tatas. It is three party consortium where HCL has a smaller role to play. Being the first time, it takes time for whole thing to materialize into real action, which we expect to happen in the next few months. In that both parties, BEL and consortium led by us, will be given a chance to develop a prototype in 18 months.
 
18 months after it starts?
 
This is really the pain area for us. We have no doubts about the intent of the government. We also appreciate the fact the policies have come with some incremental improvement. Our problem is the speed of change. We have not seen backtracking of policy, which is good.
 
It is painfully slow…
 
Yes, it is painfully slow. In a commercial organization, we find it more painful because investments are involved, shareholders are involved. We have to explain. These are the pressures. Incrementally, we see some positives. Nomination which used to be the only known policy has disappeared except in the area of ship building. Even there we expect DPSUs will be told that they have to be competitive.
 
How does the road ahead look for you?
 
India will have a lot of need for defence equipment. If this thinking (indigenisation) prevails it slowly gets turned into actionable items. Gradually, lot of work will be done in India as various combinations emerge. It will not be a single company claiming to do everything. It is futile to even think that. There will be partnerships and collaboration. We have done successfully some products in collaboration and in some products, we compete. This is what we hope will happen. Step by step, we have built the strategy. It has always been ahead of actual filling up of orders. But, that is how it is.

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First Published: Feb 13 2014 | 4:19 PM IST

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