1. Modernisation of the Indian Navy: Opportunities for the Indian Industry

(Published article in Defence and Security Alert Dec 2011)

Present Scenario

The vision for Indian Navy is fashioned by many factors, some of which are fairly constant and others dynamic.  The fragile peace that prevails in India’s extended neighbourhood, the geo-strategic significance of India as a rising world power and a stabilising power in the Indian Ocean is globally accepted.  One of the contributing factors of this recognition is undoubtedly Indian Navy, which has developed into a potent and capable maritime force, thanks to the vision of naval planners.

Today, Indian Navy faces a challenging operating environment due to a variety of factors which include geo-politics, emerging technologies and continuously evolving capabilities in India’s maritime neighbourhood.  Notwithstanding scenario – building exercises and other instruments of prediction, it is difficult to foretell with any degree of certainty, the challenges that the future may have in store. As a nation however less than adequate attention has been paid to the significance of sea power and its relation to broader strategic, diplomatic and operational objectives.

Vision of the Indian Navy

Indian Navy’s responsibilities include safeguarding a wide spectrum of the country’s maritime interests.  These include a coast line of 7,516 Km and an Exclusive Economic Zone (EEZ) of over two million sq km over which the country has the sovereign rights to explore and exploit economic assets.  Therefore, maintenance of stability, security, and safety at sea is in the Indian Ocean Region (IOR) and ensuring that the sea lines of communication are open at all times, are Navy’s constant endeavour.  The formally stated vision, therefore, is ‘To create and sustain a three-dimensional technology-enabled and networked force capable of safeguarding our maritime interests on the high seas and projecting combat power across the littoral’.   Apart from the combat role IN is also responsible for diplomatic role by using navy for building bridges of friendship and benign roles such as anti piracy, humanitarian aid, disaster relief, search and rescue.

Thus, India’s naval power and its evolving maritime profile and strategy are predicated on three significant trends. These are the process of globalisation in new economic – technological order, the accrual of strategic – technological strengths and finally the vision of enhanced military prowess in the Asia Pacific region.

Current Opportunities for Private Sector in the Indian Navy

Navy’s past experiences of sourcing military hardware from abroad have been varied, depending on the relationship between the source nation and India at different points in time. However, the common strain running through each and every experience has been, one of ‘technology denial’ and ‘post-procurement dependency’. Navy’s material preparedness has received setbacks due to these reasons. The only long-term solution to this problem is a much greater thrust towards indigenisation and transfer of technology. The Indian defence industry is gradually coming of age and India must, in due course of time, wean away from foreign dependencies. Measures to enhance the efficiency of  DPSUs as well as putting much greater premium on time and cost consciousness amongst all agencies concerned are long overdue. Whilst the ‘bottom line’ of ‘operational readiness’ should remain the determining factor for Navy’s ‘Buy’ or ‘Make’ decisions, Navy would need to pragmatically consider some present-day compromise for a more secure future.

To undertake the maritime security tasks and safeguarding the country from external aggression, the Indian Navy has an air craft carrier, fleet of ships, submarines and aircrafts.  These are fitted with various types of missiles, torpedoes, mines, depth charges, rockets and guns.  The Indian Navy is in the process of major modernisation through acquiring latest state of the art platforms like the Russian aircraft carrier ‘Vikramaditya’.  Though most of these platforms are imported, orders have been placed on the Indian shipyards for indigenous manufacture of about 40 ships which include stealth frigates, destroyers and ASW ships and ‘Scorpine Class’ submarines being manufactured in India through TOT from France. Naval Aviation is undergoing a huge revamp with MIG-29K aircrafts providing the requisite airpower and US state of the art ‘P8I’ with multi mission Long Range Maritime Surveillance capabilities.

To support these platforms, procurement of a huge inventory of armament is being undertaken.  The armament fit required for these platforms are being acquired through the route of import / TOT or through Consortium/Joint Ventures. For e.g. Barak missile system was imported The LR SAM is being jointly developed between DRDO, IN and M/s Rafael of Israel and Surface to Surface Brahmos Cruise Missile system has been developed by way of Consortium approach between India and Russia. Anti Submarine Warfare is another critical capability area where indigenisation has been a success. Airdropped torpedo TAL, developed by NSTL and being produced by BDL and various types of Sonars for underwater applications successfully developed by NPOL being produced by BEL are some examples.

In the field of mine warfare, the present mine counter measures capability has been outdated.  Therefore, the existing minesweepers are being upgraded into mine hunters through M/s Thales, France.

Navy is also building up its surveillance endurance through NCW capability to achieve real time Maritime Domain Awareness in the entire Indian Ocean Region.

A Combat Management System is an integral part of the weapon suite of any modern platform. The future CMS, developed by the Navy with the assistance from ‘Centre for Development of Telematics’ is being manufactured by BEL. This will form an important part of the C4I2SR.

Private Industry thus has a host of avenues open for participation in the defence production related to Naval Armament either independently or through constructive engagement with the PSUs and Ordnance Factories.

Speaking of volumes involved, the  Defence outlay for capital expenditure for the year 2010-11 was budgeted at Rs. 60,000 Crore, that is basically procurement. This figure indicates that there is a substantial outflow from defence budget for importing weapon platforms, systems and equipment and if India does not indigenise defence production it would remain forever dependant on foreign sources. Not only would the prevailing scenario impact India’s foreign exchange reserves, it would also have a crucial bearing on nation’s strategic economy.

Incentives for the Industry

Ever since the defence sector was opened for private participation with 26% Foreign Direct Investment and the offset policy enumerated in the Defence Procurement Policy 2006 (Now DPP 2010), the required impetus has been given and the stage set for Industry to contribute to the development of the defence sector on a large scale.

A word about the Offset policy enumerated in DPP, it stipulates a reinvestment of 30 percent of the total purchase amount in terms of components and services from India. The offset policy applies to imports by defence PSU’s, ordinance factories, and private participants of the industry. In case of joint venture where the bid is made by the Indian vendor, it will be for the foreign vendor to discharge the offset obligation. This has acted as a driver to create market-entry opportunities for mid-rung companies, which are looking at investing in research and development and manufacturing of defence goods.

Indigenous  Armament Production

In our country, even today,  armament production  remains largely confined to Defence Public Sector Undertakings (DPSUs) and Ordnance Factories with design and development responsibility completely resting with DRDOs.  The private participation is miniscule and relates, by and large, to supply of raw material and low technology produce save a few high end technology items. However, whilst the indigenous content may not be very significant in terms of percentage, OFBs and DPSUs, jointly procure materials, sub assemblies and components from the private sector worth over Rs 3100 Crores.  Thus there is a need to harness the core competence and capabilities of Indian private sector to realise indigenous armament production.  With the defence industry gradually opening up to the private sector, many large corporate houses like Tata Group, Mahindra Group, Kirloskar Brothers Ltd, L&T have begun contributing significantly in the past few years.

Naval Indigenisation Plan

The Navy’s long term commitment supporting indigenisation has been often reiterated as it believes that indigenisation is fundamental to its growth plans.  This not only reduces foreign dependence while minimising costs, but also assists in the capacity build up of the local industry.  A 15 year indigenisation perspective plan forecasting Navy’s requirements in new and emerging technologies to aid modernisation and act as capability multipliers were highlighted in the Indian maritime strategy which include:-

(a)          Information & Communication Technology

(b)          Nano Technology

(c)          Emerging Power Sources

(d)          Propulsion

(e)          Space

(f)           Weapons

(g)          Precision Navigation and Targeting

(h)          Modern Materials and Stealth

(i)            Unmanned Vehicles Including combat capable

(j)            Computing

(k)          Simulation

Global Outlook 

Foreign firms are now looking at India as an attractive destination to forge alliances for more cost-effective production of Defence items. Global players are outsourcing work orders to Indian companies given the latter’s high degree of skill and cost competitiveness.

Sadly, the state of the art technology  which gives the cutting  edge is not available in India and import is the  only option for meeting the operational requirements of the Services.  Since, a very significant portion of the Naval Defence Budget is spent on imports, even a 10 – 20% reduction in imports will not only help in saving precious foreign exchange but also have a spiralling effect on the economy. This will increase growth rate in the manufacturing sector and create job opportunities not only in large industries but also in small scale ancillary industries that are supporting the units.

Modernisation Plans of Indian Navy

The Indian Navy requires long range air defence and anti –missile defence (AMD) capability, long range anti-surface warfare capability using precision guided weapons including land attack capability; Anti submarine warfare capability to counter potential submarine threat both from conventional and nuclear with a capability mix for operations in deep waters and littorals, amphibious capabilities for provision of security to the inlands territories and also for power projection role and  mine warfare through augmentation of mine sweeping and mine hunting operations.

The Government of India has shown keenness in allowing international collaboration for the production of these weapon systems. The production of the following weapon systems are expected to be promoted in the future: –

(a)             Technologies/equipment for Counter terrorism

(b)             Surveillance, Communication equipment, and Sensors for border management

(c)              Cyber Security -Synergies in the field of information technology

(d)             Devices to neutralise improvised explosive devices (IEDs)

Suppliers and manufacturers of the above-mentioned weapon systems are expected to be some of the chief beneficiaries of the increased indigenisation of the production process in the Indian defence industry.  Key areas of growth identified within the industry are expected to arise from the up gradation of the production capacity expansion, technology transfer, and modernisation of defence infrastructure.

As the Armament production is a state of the art technology, the involvement of  the industry in the development and production  of armament  could be  basically in following ways:-

(a)       Specification and design by services and R&D organisations and production by industry.

(b)    Specification by Service/ R&D agencies, design and production by industry.

(c)        Specification, design and production undertaken by industry and offered to the services.

Public Private Partnerships – Way ahead

The IN has therefore taken a three pronged initiative towards realising self reliance in the field of armament. These are: –

(a)       Development of indigenous technology for strategic self sufficiency.

(b)       Collaboration with Foreign Vendors in production

(c)   Participating with DRDO and PSUs in joint ventures with foreign firms for technology development.


The Indian Navy, by decentralising financial powers, has been able to outsource many activities for the purpose of inducting modern technology and increasing levels of synergy and co-ordination. At present, these areas broadly include: operational requirements like ship refit and overhaul, ship engineering, and engine overhaul; technical support related to maintenance of equipment, building conservancy, IT, and dredging of channels; administrative support for ferry service, etc. The areas which the Navy would want to see some progress being made are weapons and sensors production, the entire gamut, including R&D, trials and testing of the equipment.


Based on the aspects brought out above, it is apparent that there are numerous opportunities for Indian Industry to contribute towards high degree of Maritime Preparedness of the Nation. However, the maritime services need to be assured that the Industry would provide guaranteed product support for their systems, in terms of logistics as well as technological upgrades, over a period of its specified operational utility. The Industry also needs to allay the fears pertaining to specified Quality Controls, which are quiet stringent and would be implemented throughout the production process.

Further, in order to augment the participation of private industry in development of indigenous weapon systems, there is a need to make conscious efforts towards a paradigm shift from the “Buyer – Seller” relationship to a healthy “Partnership” between the Industry and the Maritime Service. Since the end product of this joint venture is vital to both, there is a need to share the responsibilities equally too and meet up half-way.