BharatShakti team comprising Founder Nitin A Gokhale and Editor-in-Chief Brig S K Chatterji (Retd) had interviewed Mr J D Patil, Sr VP, Head – Defence & Aerospace, Larsen & Toubro. L&T has been a major player in the area of defence equipment development and manufacture for decades. The frank and open interview is being presented in 2 parts.
In Part I, the major issues discussed included naval, air and land based platforms on which the company has been working. In Part II, Mr Jayant D Patil goes on to elaborate on L&T’s strategy for missile systems, communication networks, the Strategic Partnership concept that the MoD is likely to introduce, measures that L&T enforces to encourage MSMEs and how does it retain trained manpower.
INTERVIEW WITH J D PATIL, SR VP, HEAD – DEFENCE & AEROSPACE, LARSEN & TOUBRO
Brig SK Chatterji (SKC): You have been part of the Prithvi project. Please let us know about your current participation in similar strategic systems.
J D Patil (JDP): Our association with Prithvi program was part of the path we had chosen to work with DRDO for development of launch systems for across the range of missile projects under the Integrated Guided Missile Development Programme (IGMDP).
Our contribution to Prithvi program spans from, land based launchers (PII, PAD), missile & warhead containers, Dhanush ship based stabilised weapon System and weapon handling system complete with fire controls and command control integration. The Dhanush system was a complete solution from L&T built in Built-to-Requirement mode with seamless team work between L&T, DRDO and the Navy.
Prithvi is now out of production. We have also partnered DRDO in building Launch systems for Agni series missiles.
Leveraging L&T’s submarine pressure hull building capability, we were also entrusted with building underwater launch platform for submarine launched missiles.
SKC: Give us an idea about your role in the Tactical Military Network Communication System?
JDP: L&T led Special Purpose Company (SPC) has been shortlisted as one of the two development partners for the TCS programme. The SPC has L&T, Tata Power, and HCL coming together for the program in 56.67:33.33:10% equity share. Once developed, we plan to have L&T and Tata Power SED as 50:50 delivery centres with HCL as Tier 1 subcontractor.
The SPC has proposed a state-of-the-art all IP secure communication framework that will provide integrated voice, video and data communication services to the field force spread up to 100 km range in Tactical Battle Area (TBA) with suitable interfaces or gateways to legacy systems and networks.
Nitnin Gokhale (NG): How do you view the proposed government initiative of Strategic Partners in the Defence Sector? Where do you think your strengths lie given the likely constraint that the government will want to have different partners for the major systems?
JDP: Let me be absolutely candid. This is the way to go forward. You can’t hold a child back, once it has grown to maturity. Having been a player in this sector for three decades and built a track record of complex system integration, we believe Strategic Partners is the way MoD would tap agility, innovation and management practices to unleash private sector players to be system integrators. It is a role, which can be played by the mature to complement / augment the DPSUs capabilities and capacities, cut imports and make Make-in-India surely happen.
With certain number of mature defence players in Private Sector we can see that they have system engineering and integration capabilities in multiple segments. Take L&T’s case. We are in Naval (Submarines and Warships) segment, we have qualified with two artillery gun programs and awaiting the RFP for yet another program, we are in both the “Make” programmes (TCS & BMS) on C4I, and we have built launch systems across the range of Land and Naval weapons (missile launchers, rocket launchers and torpedo launchers) as also complete Radar / Electro-optical & Thermal Imaging fire control solutions.
This capability and track record has been built over the years painstakingly, based on a multi-pronged approach by partnering with DRDO, ISRO, in-house technology and product development, ab-initio deep dive development of few systems, Working with Foreign OEMs on “Build to Print” to joint development programs and leveraging learnings across programmes to build system capability backed with engineering and manufacturing repository across chosen sectors.
These approaches have given us the ability to look at a complex platform as a mesh of various sub-systems, and over the years, we realise that we have capability across technologies not only in terms of design, but also in terms of manufacture, integration and more importantly ability to scale up. L&T’s contribution, and capability spectrum across the value chain complemented by the ability to innovate has been the major strength.
With this we look forward to Strategic Partner model to get operational. We also believe that merit will prevail over quota and mature players will not be restricted to just one segment as a strategic partner. This does not happen globally and also visible in DPSUs who play across segments. Private players deserve to be given level playing field.
NG: There are apprehensions in the MSMEs that the modernisation budget will primarily be cornered by the big players and they will continue to flounder. What is your opinion?
JDP: I see this differently. In the past we depended on imports for India’s Defence preparedness. The Ordnance Factories have existed since before independence and have grown in later years to produce a variety of defence goods and consumables. The DPSUs were created as system integrators. The Govt companies have consistently grown their output but so is our import dependence as our needs outgrew their output growth.
There is thus urgent and growing need for identifying system integrators among the Indian industry. Such system integrators would primarily focus on overall solution building and system engineering and integration. It is evident from a look at operations of industry majors in mature segments that system integrators only focus on final assembly and integration and produce just a few key subsystems what they believe is their core competence while outsourcing the rest through tierised supply chain. Defence system integration by Indian private companies would not be any different as they would not have unconditional Govt support as visible in historic and massive investments in DPSUs and OFs.
“Make in India” mission is a huge unfolding opportunity for the Indian Industry. Market growth would necessitate large players to focus on platforms or system of systems as integrators and build a tiered eco-system across the industry. MSMEs would thus see massive unfolding opportunity as tierised players in the eco system. In generally their specialised offerings would not be sourced by the user directly.
I can add that L&T as a system integrator, sources at least 50-60% of its input components and subsystems from dedicated partners (within top 5% of L&T’s registered vendor list), most of them being MSMEs. This creates an interdependence of sorts in which they become partners to share the risks as well as gains. The sourcing partner dependence and share only grows larger in systems entering serial production. The geographic spread also shrinks with larger and larger scale of production. This is visible in auto clusters wherein larger the output by numbers the entire ecosystem shrinks in to a co-located cluster.
SKC: What measures do you take to strengthen the MSMEs in you logistics chain?
JDP: At L&T, primarily we carry out system design, detailed engineering. After doing detailed engineering, we go to dedicated MSMEs partners and get sub-systems realised including manufacturing design to the matured ones; of course ensuring that the security sensitivities and quality assurance procedures are consciously kept in focus. To be competitive we cannot do all sub-systems in-house. Integration and overall system level work certainly happens within the company. But most of the component manufacturing is outsourced. In exceptional systems that have requisite scale we do insourcing wherein the partner moves in to L&T factory and produces his goods within our premises under our continuous inspection cover thus cutting down delays and rejections.
On an average if we sell 100 Rupees, about 40-50 should have come from MSMEs. It is a very sizeable part, as compared to the PSUs who still – like HAL want to carry out Tier I, Tier II as well as Tier III work – target it from within the company. Out sourcing by them is on variable cost model keeping the overheads within. We don’t do that. We truly go out, and build a partnership model — a win-win model.
Incidentally, every six months, my entire supply chain team sits with such partners – and there are 200 of them. It happens in Pune, in Mumbai – and the partners come and freely express their concerns and plans in the presence of the supply chain leadership. They speak about their experiences – good, bad, ugly. We believe that only through candid feedback can we improve our processes. We may be good, but we can aim to be better. And that is exactly how we look at MSMEs – as partners. We’ve been doing a lot of work with MSMEs. We also use such partner meets for sharing our plans, upcoming programs and opportunities to create a pull effect from the trusted partners to build supply reliability. We also leverage them, wherever the MSME partner is ready to leapfrog, we extend a hand; “Why are you giving me only manufacturing – can you also do associated piece of engineering” and extend our partnership to the next level to include engineering in their scope. We stipulate to such select MSMEs partners basic system constraints in terms of what is required to be done within what limits. They come back a couple of times with ideas and solutions… we brainstorm and hand-hold them, and leave it for them to take it forward.
SKC: Any views that you have on the aspects of Offsets as being spelled out in the new DPP?
I see a clear logic in the recent announcement by Hon’ble RM on applicability of Offsets to programmes over Rs 2000 Cr, and get them targeted for a specific purpose. With the Government having actually categorised more and more programmes under the Buy Indian, Buy and Make Indian category, the extent of Offsets for the new programmes will dramatically reduce over coming times.
Of course, for the programmes already ordered / under ordering, Offsets would continue to offer healthy potential for about a decade, and this, would be primarily for the MSMEs to serve, thus helping build our defence industrial capabilities.
NG: Are your End-Users, the Services primarily, sharing enough information about their future equipment and technology requirements for you to plan and prepare yourself to provide quality products? How critical do you think such a relationship is and what is the model that you suggest?
JDP: Sharing of the detailed Long-Term Perspective plan with the Industry associations, would go a long way in preparedness of the Industry to look at the trends, and invest in a planned & systematic manner. Of course, the plan needs to be followed through with the procurement actions within some certainty and time frames, else the whole exercise would be a purely academic one. Today strategic / long term acquisition plans are not shared by users except for Indian Navy. What is shared is Technology Perspective and Capability Roadmap (TPCR) that tends to be too abstract for actionable plans.
With Defence being a strategic sector, it is understood that sharing of plans in public domain would not be possible. However users / MoD need to examine, how to share the same with system integrators or Strategic Partners as also long term partners with impeccable track record in integrity and confidentiality. This select group sharing would keep the information secure, while giving a fillip to timely investments, few of which could be quite substantial, especially those toward long term technology development and acquisition of technology as well as strategic resources.
NG: The knowledge gained by you in the production of various systems surely is one of your company’s treasured assets; however, often the projects do not see fruition for up to a decade. How do you retain your human resource assets during this long period of lull? To what extent do es it increase the cost of the project?
JDP: Talent retention and nurturing people in this segment poses stiff challenges. Earlier the attraction for the personnel was from other segments viz. IT, consultancy etc. However, with the competition in the domestic defence segment increasing, the options available for talented personnel in the similar segment have increased manifold. New companies in the sector can target and source ready-to-use personnel with the relevant experience from mature players, and are thus able to attract people.
L&T had consciously straddled across segments in the defence sector, as also in adjacencies to partly offset the cyclic nature of ordering by MoD / its agencies. Broadly, we are working in strategic programmes, weapon delivery & engineering systems for land and naval applications, missiles & related areas, and in military communications. Besides taking care of the external environment, this also gives an opportunity to personnel to leverage their skill sets across the segment more effectively thus providing them with challenges to overcome, in a continuous manner.
L&T fosters continued innovation and excellence. We have compulsive philosophy of sorts to better what we did previously. These continue to nourish L&T’s sheer track record to be the ace business incubator; add to that our structural need (widely held – employee run) to target and build future leadership within also provides unmatched opportunities to our people to grow, and add value to their career.