Indian Defence Industry Corridors

The establishment of the Defence Industry Corridor is an important step both for the security of the nation, as well as for the development of Tamil Nadu and UP

Issue: 2 / 2020By Air Marshal Sukhchain Singh (Retd)Photo(s): By PIB
Prime Minister Narendra Modi addressing the audience at the inauguration of UP Investors Summit 2018, in Lucknow

A vibrant defence industry is a crucial component of effective defence capability as also to achieve national sovereignty and military superiority. In the Budget for the financial year 2018-19, the Government of India had announced plans to bring out an industry-friendly Defence Production Policy 2018 to promote domestic production by both the public and private sector of the Indian defence industry. In pursuance of the above, the Government has formulated a draft Defence Production Policy 2018. Success of the policy is dependent on a genuine partnership with the industry, which helps to build a robust defence eco-system and creates jobs across the country. Towards this end, two Defence industry Corridors are being set up in collaboration with the involved States to provide state-of-the-art infrastructure and facilities for setting up defence production units. A Defence Industry Corridor refers to a route or a path along which domestic production of defence equipment by units in both the public and private sector are lined up to enhance the operational capability of the defence forces.

LOCATION OF DEFENCE INDUSTRY CORRIDORS

The Defence Industry Corridors will be built as new industry clusters to create a synergistic supply chain of Micro, Small and Medium Enterprises (MSMEs) and original equipment manufacturers (OEMs) with necessary testing and certification facilities, export facilitation centres, technology transfer facilitation etc. The Government of India on its part will contribute 50 per cent of assistance subject to a ceiling of 3,000 crore to the Special Purpose Vehicle (SPV) set up for development of each Defence Industry Corridor. The SPV will take up projects for creating necessary eco-system for defence production in these Corridors. In each Defence Industry Corridor, one major cluster of defence production units around an anchor unit will be developed in one of the Nodes.

The location of these Corridors are strategically decided by the MoD taking into account the natural ecosystem that could be utilised for enhancing the existing defence network

The location of these Corridors are strategically decided by the Ministry of Defence (MoD) taking into account the natural ecosystem that could be utilised for enhancing the existing defence network. The then Minister of Defence, Nirmala Sitharaman had asked the government of Tamil Nadu to plan a Defence Industry Corridor connecting Kattupalli port, Chennai, Tiruchirapalli, Coimbatore, Hosur and Bengaluru. The proposed Defence Industry Corridor in the Bundelkhand region in Uttar Pradesh (UP) was announced during the Investors Summit-2018 in February this year by Prime Minister Narendra Modi himself. The Corridor will link Agra, Aligarh, Lucknow, Kanpur, Jhansi and Chitrakoot.

UP CORRIDOR

The Uttar Pradesh Cabinet has approved the proposal to promote the Defence Industry Corridor which is projected to spur an investment of 50,000 crore and generate 2.5 lakh jobs in the state in the next five years. The Chief Secretary of UP, Anup Chandra Pandey, said that in the first mega project, 1,000 crore would be invested where the companies can build fixed-wing aircraft, tanks and helicopters while the other one would be Anchor unit which will have an investment of 200 crore in Bundelkhand and Poorwanchal areas, 300 crore in Madhayanchal and 400 crore in Western UP. In his address, the Chief Minister of UP, Yogi Adityanath said that the state had identified about 4,000 hectares of land near Jhansi flanking the proposed route of the Bundelkhand Expressway for the Corridor and the survey work had already been completed. “We have also identified 263 hectares of land in Aligarh for the Defence Industry Corridor to leverage the inherent strength of the district in industrial manufacturing of locks and other hardware.”

The Union Minister for Defence Rajnath Singh at the Society of Indian Defence Manufacturers (SIDM) Annual Session 2019 titled ‘Make in India’ Marching towards $26 Bilion Defence Industry by 2025, in New Delhi on September 17, 2019

DEFENCE INDUSTRY CORRIDOR IN TAMIL NADU

The five nodes of Tamil Nadu Defence Industry Corridor will be Chennai, Hosur, Coimbatore, Tiruchirappalli and Salem. Chennai which is the capital of the State, also hosts more than 50 engine manufacturing factories, 200 heavy vehicle factories and more than 550 vendors of Bharat Electronics Limited. Coimbatore on the other hand, boasts of a presence of more than 45000 factories in Tirupur-Erode economic corridor and also has four economic zones in the city. Tiruchirappalli also acts as a major node for the Corridor as the presence of BHEL and Ordnance factories is going to give a powerful impetus to the Defence Industry Corridor. And lastly, with Salem having mineral deposits, power grids and steel plants as also with Hosur being a major player of the automobile industry, the Defence Industry Corridor aims for the robust launch of the Make II Procedure, the new import substitution under the revised Make in India initiative. The State has mobilised an armada of small and medium enterprises keen on making components for large equipment manufacturers. “Given the large number of units showing interest, we are advising them to form a consortium, pool together their capabilities and bid for projects,” said M. Ramesh, Chairman, Confederation of Indian Industry (Coimbatore zone). The work for preparing project reports has been initiated by the Department of Defence Production. Stakeholders in Coimbatore and other regions along with officials of the MoD and industry representatives, meet every month to thrash out the details.

The Korean Defence Minister, Song Youngmoo evinced avid interest in investing in the Indian Defence Industry Corridors in Tamil Nadu and UP

EARLY INVESTMENTS IN CORRIDORS BY PSUS

Hindustan Aeronautics Limited (HAL) became the top investor in the Defence Industry Corridor. The erstwhile Chairman and Managing Director, HAL, T. Suvarna Raju, announced that the organisation had invested 1,200 crore in the Corridor, which will create local investment for the next 25 years and employment. T. Suvarna Raju said that 700 crore had been invested in Lucknow for the Light Combat Aircraft, Tejas and upgrade of the Sukhoi fighter jets. Even the 200 crore investment in Korwa is for the same purpose. In Kanpur, 200 crore had been invested for manufacture of transport aircraft, while 30 crore is for Naini Aerospace Limited in Allahabad, which is a subsidiary of HAL. “At Naini we are making harnesses for the Light Combat Aircraft, Tejas and the Dhruv Advanced Light Helicopter. With Boeing, we will train locals for manufacturing harnesses,” he said. Meanwhile, Ordnance Factory Board Chairman said that it has committed 1,076 crore project investments in the next five years in the Defence Industry Corridor in UP. Bharat Electronics Limited has committed 200 crore for the modernisation of its facility in Ghaziabad and 40 crore for setting up a regional support centre in Agra. Private company Bharat Forge announced investment of 200 crore for setting up an ammunition factory, while another company, MKU, will be investing 900 crore in an electro-optic facilities in Noida, upgrading its armour facility and manufacturing small and large calibre arms in Kanpur.

FOREIGN INVESTMENT: KOREA EARLY BIRD.

The Korean Defence Minister, Song Young-moo, while addressing the India-RoK Defence Industry Business Forum organised by FICCI and the Embassy of the Republic of Korea, evinced avid interest in investing in the Indian Defence Industry Corridors in Tamil Nadu and UP. Young-moo said the the Korea-India defence industrial cooperation falls within the ambit of Korea’s ‘New Southern Policy’ and India’s ‘Act East’ policy. He assured Indian companies of a conducive business and legal environment to develop synergies between the companies from the two countries. The Business Forum witnessed presentations by seven Korean companies on possible areas for defence cooperation. The companies included DI Optical, Doosan Infra Core, Hanhwa Defence, Hanhwa System, GyundaiRoten, Korea Aerospace Industry and LIG Nex1.

This sector does not generate enough revenues even for those in the West and hence defence manufacturing in most parts of the world, receives budgetary support from the Government

SOUTH CORRIDOR SELF SUSTAINING.

Chennai and Bengaluru are traditionally two cities whose engineering resources availability are plentiful since last five decades. Most of the design and prototype building centres are concentrated in Bengaluru and Chennai. The experience in such activities since last five decades is the logic for choosing this region for a Defence Industry Corridor. Hyderabad is the hub of defence industry manufacturing building missiles, artillery guns, ammunition and designing nuclear devices. The Chennai Bengaluru Defence Industry Corridor will have a natural extension towards Hyderabad. Chennai-Bengaluru-Hyderabad are traditional partners in defence research, design, prototype, command systems and production. There are no alternatives for these facilities in India. Chennai has a large ordnance manufacturing facility and there is talk that they might be privatised. Bengaluru has units of DRDO and HAL which are also on the verge of losing budgetary support due to reduction in the budgetary allocation for defence for capital expenditure. The Government thinks that instead of budgetary support, if these units are given to private entities, they might get what they want minus the allocations. The country has many such units but these two cities are quite well known internationally and by choosing the two for establishing Defence Industry Corridorsw, investments might come in for the existing units to run without any Governmental support.

INVESTMENT BY PRIVATE PLAYERS

Tata has expressed his interest in the defence and aerospace sector including manufacturing in UP of Unmanned Aerial Vehicles and defence equipment. The Minister of Industry of UP highlighted other investment opportunities for the Tata Group in the State such as in the housing sector and development of miniairports and providing aviation services under the Regional Connectivity Scheme of the government. In July this year, Mukesh Ambani has invested 10,000 crore in Reliance JioInfocomm to expand the optical fibre network in UP. Investment by private players in defence manufacturing is a different game altogether. This sector does not generate enough revenues even for those in the West and hence defence manufacturing in most parts of the world, receives budgetary support from the Government. Maybe a few manufacturers might be able to break-even; but that depends on what they produce. This would be far and few and would be restricted to the Indian market alone.

REALITY CHECK QUESTIONS

The success of any endeavour depends on purpose, product, people and processes. Let us examine the current status of the proposed Defence Industry Corridor from these four perspectives. Is there clarity both at the Centre and State levels on the purpose of the corridor? Who are the stakeholders in the Central and State Governments? Have all the stakeholders of the proposed corridors been identified? Has any effort been made to get all the stakeholders on the same page regarding the purpose? Is there a monitoring system in place to evaluate success parameters in conversion of need into satisfaction, both at the battlefield and shop floor levels? Who is to design this monitoring system? Who is to implement it?

Are all the above elements dealing with the corridor manned by qualified, skilled, experienced, motivated people in their respective spheres of activity? Do they have continuity in office for a reasonable period of time? More importantly, do they speak to each other, cutting across organisational barriers, speeding up processes that will ensure the security of the nation? Is someone, somewhere, keeping track of the cycle time in which the end user gets what he wants, viz the weapons to wage war, when required and the industrialist gets his return on investment? Is this input being made available to the policy makers in South Block?

SUMMING UP

The establishment of the Defence Industry Corridor is an important step both for the security of the nation, as well as for the development of Tamil Nadu and UP. Its success cannot be achieved by merely conducting seminars, making public announcements, drawing up of project reports by experts. It demands hard core proven experience in the related areas of the programme namely defence and industry. In addition, it needs the dedicated involvement of the MSMEs who are the backbone of industry and a greater and more direct interaction between them and the end users viz the Indian Armed Forces. Most importantly, the establishment of State Defence Industry Corridor cannot be driven from New Delhi. It needs the expertise of professionals with hands-on experience in defence, industry and last but not least, in the administration of Tamil Nadu as well as of UP.