“L&T expects order inflows of upto Rs 50,000 crore over the next 3-4 years from major Defence programs,” Jayant D Patil.

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EXCLUSIVE INTERVIEW of Jayant D Patil With Anupama Airy, Founder&Editor of DefenceAviationPost.com.

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As India gears up to place some major orders in the Defence sector in the coming days, which includes the $3 billion order for four LPDs or the assault warships for the Indian Navy under the Make in India initiative, DefenceAviationPost.com ( a leading news portal on Defence and Aviation) has decided to bring for its readers a special series that will include visits to various facilities of leading public and private sector players in the defence sector as also detailed interactions and interviews with the who’s who in the Defence sector.

Under this initiative, DefenceAviationPost.com visited the shipbuilding facilities of L&T at Kattupalli near Chennai. During the day long visit, the Founder&Editor of DefenceAviationPost.com, Anupama Airy met with the senior hierarchy of the company both at the facilities and at L&T Shipbuilding headquarters in Chennai. 

We bring to you a detailed account of this visit and meetings with the L&T brass, through our coverage that includes interviews, a detailed presentation on the company’s shipbuilding facilities, as made by DefenceAviationPost.com and a collection of pictures that we took during this visit.

L&T’s journey in the defence sector, began three decades ago and has evolved from product development to serial production over this period to building ‘System of systems’ such as submarines and warships. L&T has delivered various successful projects in the Defence sector and its shipping manufacturing facilities at Kattupalli near Chennai and in Hazira Near Surat (Gujarat) leverage the latest design and manufacturing technologies.

Following the visit of DefenceAviationPost.com to Kattupalli, we interacted with the man steering L&T’s defence capabilities—Mr Jayant D Patil, the Senior Vice President, Head of Defence & Aerospace, L&T. Patil is responsible for the entire defence and aerospace strategic business sectors of L&T. He is also member of the Board of L&T Heavy Engineering as also Member of the National Executive of FICCI and Chairman of FICCI’s National Defence Committee. In a free-wheeling interview with the DefenceAviationPost.com, Patil—an Alumnus of IIT, Powai spoke in detail on the company’s plans and strategies to meet the challenges and opportunities in India’s strategic shipping space.

Excerpts Of The Interview 

1. Your comments on the opportunity or workload share with GoI owned shipyards? 

The procurement by the ministry of defence (MoD) continued to be nominated to defence public sector undertakings (DPSUs) ever since opening of the Defence Sector and licensing it in 2002. On the warship and submarine building front ~93% of the domestic capital procurement contracts have been nominated to Govt. Owned Shipyards. Over the same time frame, six frigates and one refitted Aircraft Carrier (from Russia), two logistic tankers (from Italy), and one LPD (Second hand ship from USA) have been imported at cost of billions of dollars.

Recently policies have been instituted assuring level playing field to Private sector players. In the interim, however, in keeping withearlier decisions, contracts for Seven P17A frigates (45000 Cr on MDL and GRSE), Twelve Mine countermeasure vessels (32000 Cr on GSL), five Fleet Support Ships and two midget submarines (14000 Cr on HSL) have been awarded during past two and a half years.

In addition to the huge existing order books of the DPSU yards, these orders provide a huge opportunity for Private Shipyards to partner and help accelerate execution of these platforms. This however was impaired by a policy issued in 2012 for joint venture / teaming between DPSUs and Industry at large.

This has now been abolished in July 2016. Instead, Guidelines issued by the Department of Public Enterprises (DPE) and Ministry of Finance (MoF) from time to time, which are uniformly applicable to all Central Public Sector Enterprises (CPSEs), will be applicable for the DPSUs to set up JV / Partner with Private Sector.

The DPSU yards are now unshackled to forge such partnerships to enhance self-reliance and secure best outcomes in the interest of national security.

The last operating policy guidelines to DPSUs that do not allow them to partner with a Private Company for nominated contracts on negotiated basis and require competitive bidding process, needs review since that rarely allow mature partners to team up and add efficiencies to deliver faster and thus save on cost escalations.

At L&T, we believe that complementing the capacities of DPSU yards and Private Sector in a trust based model can meet Nation’s requirements to accelerate induction as well as harness exports leveraging the track record of DPSUs and agility of Private sector yards. In any mature relationship the partners work together on some segments / programs while compete in another to create efficiencies for the end user.

In products and systems offerings, L&T built a spectrum of products in Naval Engineering domain including range of Weapon launchers, Fire Control Systems, Systems for Sonar, Radar (Sensors), Electrical Systems, Control Systems, Engineering systems and logistics equipment, etc.

We participated in Naval indigenisation programs over past three decades and partnered with all the Govt. owned shipyards for delivery of indigenously developed equipment and systems. These have been fitted and operational on board 70 ships in Indian Naval and coast guard service and 43 ships under-construction ships across Indian Yards.

In this domain L&T works closely with DPSU shipyards in an enduring partnership to enhance indigenisation through import substitution as well as ab-initio developed equipment and systems indigenously.

2. Your visualisation of future when there will be strategic partners also in the fray? 

Strategic Partnership model is a forward looking recommendation by the Dhirendra Singh committee of experts to the MoD leadership to promote Make in India. This is akin to the trust based partnership model adopted by most advanced economies towards building their own self-sustaining defence industry and attaining near complete self-reliance also leveraged for exports as part of Military Diplomacy to promote strategic foreign relationships. We believe that the SP model in addition to the DPSU capacities and capabilities would empower India with such strategic abilities and choices.

SP model, we believe will target to address large, multi-disciplinary and complex programs for System of Systems or Platforms which would otherwise be imported and their complexities do not make them amenable to selection process on competitive basis. Thus we have seen flourishing G to G deals that dominated India’s imports in the past as fully built systems or through licensed production model. Under SP model GoI would select the most matured, competent and financially strong Private Industry for Realisation of these in India by leveraging technology partner selection through G-G relationships.

Such trust based long-term partnership model for indigenously manufacturing complex systems and platforms would bring in long term competence building, assure business continuity for two decades to indigenously produce new systems and providing through life support. This would facilitate investments towards building sustainability for the nation and speeding up the acquisition process besides building technological capabilities, skills, and build sustainable ecosystem through tierised Industry.

A spin-off of such a model would be stretching the defence budgets to buy more through force multiplier by leveraging of frugal engineering and innovation for which India is best known.

Today, there exist few Private Sector players who have built “Systems Capability” by partnering either with DRDO in realising complex system of system programs in the strategic sector, or through teaming with Global Partners. Both routes have produced multiple success stories that go on to reinforce the capability of Indian Private Sector to be trusted by MoD for building system of systems and platforms.

With this Industry in Private Sector is capable of building Submarines, Warships, Artillery & Air Defence Gun Systems, Armoured Systems, Missile Systems, C4I, Electronic Warfare, Radars and Fire Control Systems.

Thus under SP model Industry capable of providing a viable options to building sensors to shooters to platforms either indigenously or in technology relationship with a foreign technology player. The only domain in which Industry has not matured to even a near Tier 1 level, thanks to sustained protection, continued nomination and not mandating tierisation, is in Aerospace domain.

3. Your views on the cost competitiveness when compared to Govt owned Shipyard where fundamentals not factored since provided by Government?

Let us travel back one and a half decade when Indian Navy announced continuing and substantial fleet augmentation Plan. From the time frames taken for inducting the ships ordered on Govt owned yards, inspite of leadership & talent availability from the Navy and experience and skills within, it may be inferred that the yards lacked technology & modern construction methods (processes), and (dated) infrastructure,  that did not keep in tune with times. While the Naval designers were designing most competitive and potent platforms, the construction delays created a vicious spiral as the designer would finalise weapons and sensors suite far too late in the construction stage to avoid obsolescence and in turn crafting further delays.

Besides the delays, spiralling cost overruns have been reported by CAG, program after program, impacting operational fleet strength while the Indian Ocean turned more and more potentially hostile.  In Nov 2007, the then Chief of the Naval Staff, publicaly announced Urgent steps need to be taken to drastically expand the capacity of existing shipyards and more shipyards need to come up“.

Considering the national agenda of achieving self-reliance, L&T took the lead in setting up a Modern and Globally Benchmarked Shipyard for construction of Defence Vessels on India’s east coast for its geo-strategic advantages in addition to its existing shipyard and heavy engineering complex on west coast at Hazira, near Surat engaged in Naval construction since 1990.

However, since inception the shipyard and port complex, created at an investment of over a billion dollar, remained grossly underutilised with continued nomination of all major shipbuilding programs to DPSUs and issuing only auxiliary vessel RFPs to Private and Public Ship Yards in competitive mode. Combined with drying shipbuilding global markets, this created a grossly unhealthy market environment of gross undercutting to survive for the day in-spite of looming danger of perpetual sickness in long run.

The decision makers of those days missed out treating the investments made by the Private Industry also as National Assets and be looked at with trust on-par with DPSUs, as Nation-Builders. On the contrary, support the DPSUs continued including for modernising their infrastructure and induct new technologies over and above the spiralling program costs without serious technology & process audit (except CAG audit) to turn them to being systemically efficient.

This created yet another anomaly. While competing with Private sector, DPSUs could leverage these Govt funded and depreciated assets, pushing the Private Shipyards further in tight corner and forced them in to gross price undercutting.

This is today visible in the Shipbuilding Industry in Private Sector with quite a few private yards that have ended up in financial distress, mounting NPAs and resorting to Corporate Debt Restructuring or put on block for sale / led to acquisition.

4. Your views on the integral R&D capabilities…for L&T Defence in general and L&T shipyard in particular. 

Thanks to the World War II coming within 15 months of incorporation, L&T built its capabilities indigenously although with many collaborations and technology tie-ups over the early decades of existence. By the turn of the century L&T was nearly technology independent on its own.

Today, L&T has more than a dozen R&D / technology centres which are accredited by DSIR Govt. of India to carry out research in diverse areas of operation which are critical for nation building such as Defence, Nuclear Power, Space,Supercritical Power plants, Electrical & Automation, Construction, Material Handling, Industrial Machinery, Valves as well as Hydrocarbon sectors.

Over decades, L&T remained committed to Nation Building primarily through indigenous technologies with leadership in most of operating domains including the Strategic Sector and Programs of National Priority.

As to Defence and Strategic Sectors, we built indigenous technologies, know-how and system engineering skills by engaging with National R&D (BARC, ISRO, DRDO) organisations and harnessed R&D culture. Besides Technology centres in Systems Domain, and Elemental Technologies, today, L&T has two independent platform design centres for design of warships and submarines.

Our Product & Technology Development Centres focus on new product development and development of improved technologies related to Defence systems spanning across engineering disciplines and efficiently producing them in serial production mode. These focus specifically on the technology domains of Welding & Metallurgy, Advanced Composite materials, Heat transfer, Hydrodynamics, Computational Fluid Dynamics, Stress analysis, Drives, Microwave & RF, Embedded systems, High Availability systems and Military Communication Systems.

In-house funded Initiatives have yielded development of Gun technologies, Ballistics, Radar, Unmanned Autonomous systems and mobility solutions. Having collaborated with DRDO across Defence technologies, Products, Systems and Platforms, we are today engaged in being lead integrator for an Air Independent Propulsion System for Submarine based on technology developed by DRDO, concurrent to development of pump-jet propulsion solutions to building autonomous underwater vehicle through in-house development programs.

The Technology Centres are certified to CMMI Maturity Level 5 for its systems & processes, an indication of the organization performing at an “optimum” level and continually improving its processes based on a quantitative approach to understand.

L&T has to its credit nearly 200 products and systems for Defence Sector designed indigenously. A third of them developed in collaboration with DRDO and having gained maturity while being hand held by DRDO in early days, the rest have been through in-house efforts and resources.

L&T’s dedicated Submarine Design Centre, specialises in total digital design, developing digital mock up integrated with Virtual Reality, PLM and ERP, matching with global best standards. L&T’s Warship Design Centre is evenly equipped with high end design tools and we have built track record in-house design of Interceptor Boats, Offshore Patrol Vessels, Floating Dock besides inhouse designs for Corvettes, Fast Patrol / Attack crafts.

Besides, design of L&T’s Kattupalli shipyard, specially designed for modular construction of warships and submarines and integral with a 21500 Ton Ship Lift and Traversing system is yet another example of in-house designs. Needless to verbalise, the yard is built with in-house expertise and constructed within the house from waterside and marine works to construction of workshops and special facilities like ship lift and traversing system.

5. How about your competitors emerging in the shipbuilding segment?

As engineers to the Nation, L&T runs businesses where we focus on core competencies and build differentiated offerings. We have been the largest and the most mature system integrator in Defence among Private sector. Our business model to focus on future and latest technologies, gain core competence in them and scale it, has proven to be sustainable over long run inspite of competition across our business operations. Long term leadership development in People, Processes and Technologies has enabled us grow continually.

We entered Defence Sector three decades back and worked extensively with DRDO and the Indian Navy in their indigenous design and development programs across Fight, Move and Float segments in that sequence. Over the years for the Navy alone we developed a wide portfolio of Weapon Systems, Engineering equipment, logistics equipment, life support systems, Automated Power Distribution and Control Systems, Platform Control Systems, Degaussing Systems, Radar and Sonar related systems, etc.

Thus we not only build a Warship or Submarine as a platform, we also build major equipment, systems & controls in-house. That gives us a special ability to compete as well as handle complex platforms and integration, having done the same with DPSU Shipyards as equipment and systems suppliers who must provide installation and integration support till commissioning of the platform. It is noteworthy that our equipment and systems are installed across 70 operational and 43 under construction Indian Naval & Coast GuardPlatforms. In addition, L&T made equipment have also been exported to few friendly nations.

With the Government targeting indigenisation of this vital sector we see more and more Industry players entering defence sector; of course attaining the maturity for these industries would consume time.

6. On Technology partnership with foreign R&D or OEM?

L&T Shipbuilding had entered into a comprehensive technical collaboration with Mitsubishi Heavy Industries, Ltd. Japan, for design & construction of commercial ships. While we did this in absence of Defence contracts, this helped us deliver customized solutions to Maritime Industry at competitive prices.

The cross learnings through this collaboration enabled L&T Shipbuilding to access a wide range of state-of-the-art design solutions and technical know-how, ensuring that our Design Centre delivers eco-friendly, efficient and highly customized solutions.

L&T Shipbuilding has also tied up with Zvezdochka yard of United Shipbuilding Corporation of Russia for refit of EKM submarines in India.

On the Land segment we have partnered with Samsung Techwin (now Hanwha Techwin) of South Korea and Nexter Systems of France for co-development of two artillery systems, the Tracked Self Propelled Gun Systems and the Towed Gun Systems, respectively. We have also partnered with Global majors in program based teaming relationships in the Radar, Electronic Warfare and Electro-optical systems domain.

7. On the Capacity enhancement planned in the light of emphasis on maritime responsibility as National power increases?

L&T has already put in place huge investments of the order of Rs 8000 Cr to serve Defence, Aerospace and Nuclear (strategic) sectors. While our focus today is to sweat the world class facilities already created at six new locations (Talegaon near Pune, Coimbatore, Bangalore, Vizag, Katupalli and New Mumbai) in addition to work centres at three of our older existing plant locations (Powai, Hazira and Vadodara), we are not averse to further incremental investments on as-needed basis. Having created new production centres we have huge growth potential as each of the new locations have room to grow manifold. Of course, this would be dependent on the ordering time frames for the Defence segment, by the Government.

8. About your company’s civilian/commercial ship building plans?

Although we have concurrent capabilities and capacities for defence & commercial shipbuilding as well as repairs and refits, we are focussed on defence shipbuilding for the new build segment. We are bullish on the Navy’s future ship building plans and believe that as a custom designed and built Shipyard for Defence Shipbuilding and refits, we are most competent to do that especially with our offerings across the Fight, Move and Float segments.

9. On L&T’s Export plans?

Presently, L&T is pursuing multiple Defence export prospects in SE Asia, in the Bangladesh, Sri Lanka, Middle East, besides few other friendly nations in keeping with Govt’s Look East Policy. We already have few significant contracts at hand besides some offset manufacturing relationships and hope that current initiatives will build volumes progressively.

We believe that Private Sector can contribute using their agility and nimble footedness in export business. This however necessitates that they build a track record through orders from Indian Armed Forces. This can however be addressed through Public-Private partnership for exports. The recent policy directives in repealing JV policy for teaming between DPSU and Private companies is a step in the right direction to repeal restrictive policies of the past.

Building Export business at subsystems and component level requires that India takes a pragmatic view on “End-Use” certification.  A way forward is to trust friendly countries that place these orders, have robust export control policies & elaborate processes and are signatories to the Wassenaar agreement.

Defence exports are a part of Military diplomacy and our National Leadership seems to be engaged in making India the emerging regional superpower. The early signs of providing military aid / export credit financing to friendly nations is now visible.

With all these steps, the annual export targets should certainly be achievable over next three financial years.

10. Your Vietnam experience and the road ahead with focus countries or regions?

I would say, the Government’s Act East Policy has opened up several export avenues for mature players like us. L&T has been actively pursuing export opportunities in Vietnam related to requirement of high speed interceptor boats for coastal surveillance amongst others.Serious discussions for the high speed interceptor boats started early last year although initial forays were made three years back. On our side we had an excellent product in the high speed interceptor boats being built for Indian Coast Guard, what Vietnam needed was someone who was a capable designer and builder to handhold them construct some of the boats in their own country.

The EOI which is an equivalent to a firm tender, stipulated in-house design experience, number of similar Aluminium High speed Boats designed and constructed by the yard, available experienced manpower in design and construction for Aluminium high speed boats, infrastructure for building Aluminium Boats, defence license for building Aluminium high speed Boats, QC processes etc. as part of technical pre-qualification.

Apart from this, company’s financials, working capital, turnover etc. were also called for. Amidst competition from other shipyards both from Govt. and from private Sector, Vietnam MoD finally shortlisted 3 yards. The Vietnam MoD team, having witnessed our infrastructure, expertise, design and construction facilities and processes shortlisted L&T for $99.7-million contract from Vietnam Border Guard to design, construct and supply high-speed patrol vessels. The contract also provides for L&T to transfer design and technology along with supply of equipment and material kits for construction of follow-on vessels at a Vietnam shipyard.

11. What kind of orders are you eyeing over the next 2-3 years and please specify land systems, navy or air force?

L&T has an established track record in the domains of Warships, Submarines, Artillery & Air Defence Guns, Weapon Launch and Fire Control Systems, Communication systems for Network Centric warfare, Radar Systems, Missile subsystems, Naval Engineering & Electrical Systems, Military Bridging systems.

With the current policies under implementation, we are bullish and expect to see order inflow of up to Rs. 50000 Cr over the next 3-4 years.  We expect some Major programs to fructify soon, viz. Tracked Gun System, LPD, Towed Gun System, Military Communication Station Project, Akash missiles propulsion airframes and launchers for Air Force & Army, Army Bridging Systems, Naval weapon launch systems, ASW Crafts, Diving Support Vessels, EKM submarine Refits, etc.

In Missiles domain, engineering systems and weapon Launchers domain, with huge order books of DPSUs due to past decision making, the tierised partner role will continue to be played by L&T over foreseeable mid-long term period while we will compete for specific platform or system of systems opportunities.

Having been part of consortiums for the Make programs under Military communications domain – the TCS (Tactical Communication Systems) and BMS (Battlefield Management Systems) programs as well as having fielded the only indigenous solution for the FICV program, we expect to undertake development of all the three make category programs with independent teams concurrently. These, we believe will create revenue traction and sustainability in the long run.

12. How about L&T shipbuilding- what kind of orders are you expecting from the Navy and the Coast Guard in the next 2-3 yrs. 

Major shipbuilding programmes likely to be ordered during the next two years include P75 (I) Submarines, Landing Platform Dock (LPD), ASW Corvettes, Large Survey vessels, Multi-purpose vessels, Diving support vessels, refit of EKM submarines. These offer a combined potential of about Rs 80-90K Crores. We are also looking forward to major refits of submarines and warships. We have so far delivered 28 Interceptor Boats and 6 commercial ships till date. In addition, 18 Interceptor Boats and 5 commercial vessels are ready for delivery.  Further, 8 Interceptor Boats, 7 Offshore Patrol Vessels and a Floating Dock are under various stages of production.

Also Read Other Stories Of This Special Package:

Showcasing L&T’s shipbuilding capabilities through a detailed presentation by DefenceAviationPost.com

Please click on the link below:

http://defenceaviationpost.com/wp-content/uploads/2016/11/LT-Slides_GIF.gif

Interview of L&T Shipbuilding’s MD &CEO, Vice Admiral (Retd) B Kannan, who says L&T’s Two Shipyards Together have ample capacity to take on emerging defence and commercial opportunities.

Pl click on the link below to read more.

http://defenceaviationpost.com/interaction-with-the-md-ceo-lt-shipbuilding-ltd/

A compilation on on ground pictures through a presentation following the visit of DefenceAviationPost.com to L&T’s Kattupalli Shipyard (Chennai).DefenceAviationPost

Pl click on the link below to read more.

http://defenceaviationpost.com/wp-content/uploads/2016/11/DA-Post-Picture_GIF.gif

L&T Gets Additional Orders To Build High Speed Interceptor Boats for The Indian Coast Guard

Pl click on the link below to read more.

http://defenceaviationpost.com/lt-gets-additional-orders-to-build-high-speed-interceptor-boats/

Watch the Videos on L&T’s Shipbuilding Capabilities

Pl click on the link below to read more.

http://defenceaviationpost.com/seeing-believing-watch-videos-lts-shipbuilding-capabilities/

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