Tata Advanced Systems, which plans to increase its Hyderabad output to three Pilatus airframes a month from the current two, can’t take chances with the strict quality requirements demanded by customers. Even the smallest component is fully documented and can be traced back to the raw material stage in case of any problems later on.

This level of quality control may sound daunting, but for India’s emerging defence and aerospace industry the opportunity over the coming years is so big it is actively looking for solutions to the problems and pushing for more business.

Companies such as Larsen and Toubro Ltd (L&T), Tata group, Mahindra and Mahindra Ltd (M&M), besides recent entrants like the Reliance and Adani groups, are hoping that the appointment of a full-time defence minister in Nirmala Sitharaman will help propel their defence manufacturing mission.

“Till one-and-a-half years back we didn’t even have a level-playing field – that was brought in by then defence minister Manohar Parrikar in the form of new DPP (defence procurement procedure). However, he moved out within a year of that with many reforms and policy changes nearly complete but awaiting implementation. Now that Sitharaman has come in as a full-time minister it’s time for urgent action given that there is just one-and-a-half years left before the country readies for next general elections, and we are very hopeful that she will,” said Jayant Patil, head of defence and whole time director of L&T, referring to the defence public sector units which still control most of the defence business in India.

The private sector in India has less than 5 per cent (which is about Rs 5,000 crore annually) share of direct orders from the Defence Ministry for manufacturing and is gradually moving towards 10 per cent in tandem with the Make In India initiative. The expectation, says Patil, is that the private sector’s share will rise to 20-25 per cent in the next three-four years as major defence contracts in the decision pipeline enter the execution phase.

Under Parrikar, who left to become the Goa Chief Minister earlier this year, the Ministry of Defence drafted an out-of-the-box strategic partnership model by building on recommendations of several expert committees and groups.

Parrikar, who had earlier set up a small defence firm supplying hydraulic systems and parts to a defence public sector unit, had joked about his own experiences of the hardships faced by private sector companies and promised to streamline procurement.

According to the model, for each of these SP (strategic partnership) verticals—single-engine fighter planes, helicopters, air independent propulsion submarines and armoured fighting vehicles/main battle tanks – the government will choose a few foreign OEM (original equipment manufacturer) partners as well as local Indian firms. Indian firms will then team up with foreign OEMs and bid for RFPs (request for proposals) under the strategic partnership policy on a competitive basis. The bid winner will manufacture the products and service them through the life cycle, locally—creating jobs, and building infrastructure and indigenous capabilities.

Encouraged by these initiatives, even big Indian conglomerates with no real defence experience have made an entry.

For instance, Gautam Adani, head of Gujarat-based Adani Group, has announced a tie-up with Swedish fighter jet maker Saab AB, which produces the Gripen fighter jets, to bid for a multibillion-dollar deal. The $12 billion Adani Group has interests in energy, logistics, real estate and packaged consumer goods, among others.

“We are keen to play an instrumental role in helping transform India into a destination for world-class high-tech defence manufacturing,” said Adani, adding that the deal will be “historic”.

Tata Advanced Systems has already tied up with Lockheed Martin Corp, which manufacturers F-16 fighter jets, and is also pitching for the same Indian Air Force multibillion-dollar fighter jet deal that Gripen is lobbying for.

Tata group, which has already demonstrated its capability to build aerostructures like those for Sikorsky helicopters, Pilatus trainers and the Lockheed Martin C-130 tail, could also look at bidding for contracts for helicopters and armoured vehicles, besides fighter jets, through different group companies.

“We have built capability that when an Airbus comes to India or Lockheed looks for partners, we are the likely partner that they look for which can manage end-to-end and they have ended up choosing us. That I think is very satisfying because that means the best in class are auditing us and saying okay we are there,” Sukaran Singh, chief executive officer and managing director of TASL, said in an interview. “We are extremely excited about our Lockheed partnership for F-16s as well.”

Besides Tata Advanced Systems’s Hyderabad unit, other group companies also make parts of Boeing planes.

The cluster of Tata factories in Hyderabad, which all work for different aerospace and defence companies, are fully functional separate units with high-grade security. No photography is allowed on the premises.

Tatas, Singh said, will produce key aerostructures for 100 aircraft/helicopters in the next 12 months. “We today have pre-invested in human capabilities who actually have done final assembly of large aircraft,” he said.

To be sure, most of these deals with Tatas come as a result of the offset obligations foreign defence manufacturers have under which whenever India buys a defence product, foreign manufacturers have to source about 30 per cent of the value of the contract from India.

Could this mean that as offsets end, so will the contracts at the facility?

Once the offset obligation is over, the real test of the facility will start. Tatas, like others, will then have to compete with others in the global supply chain.

Pilatus, for example, moved its manufacturing to Tatas from Poland-based PZL-Swidnik as India turned out to be cheaper. The Swiss company has offset commitments emanating from the sale of PC-7 MkII training aircraft system to the Indian Air Force.

Similarly, Boeing is shifting its Apache attack helicopter manufacturing to Tata Advanced Systems from its current supplier Korean Aerospace in South Korea. The first Apache AH-64E multirole attack helicopter fuselage will be delivered by Tata Advanced Systems’s Hyderabad facility next year.

The Tata engineer cited above said when Lockheed reduced a certain portion of manufacturing from Hyderabad as its US facility was producing enough, it did not matter much because the space that was vacated can quickly be used for doing something else. Similarly, the entire facility could be reworked to produce products for another manufacturer.

Also, the Tatas are trying to move up the value chain. Currently some 3,000 parts come from the US to make the C-130 Lockheed Martin tail arrangements and assemblies. The next step is to manufacture some of those parts in Hyderabad which requires many levels of international certification.

Another Indian firm that is taking steps in aerospace is Mahindra and Mahindra. Known for its tractors and sport utility vehicles, it is the only private sector Indian company that can build a full plane today, thanks to its acquisition of the Australian firm GippsAero Pty Ltd.

It has also used its automotive base to enter the defence business and hopes to pitch for multiple contracts under strategic partnerships.

“While we have the capabilities to cater to all the three wings of our defence forces – Army, Navy and Air Force – our capabilities for producing large integrated platforms mainly lie in the armoured vehicles and aerospace domains,” said S P Shukla, group president (aerospace and defence sector) at the Mahindra Group.

Mahindra is also adding a 10-seater plane to its portfolio, besides its popular eight-seater GippsAero plane. It, however, does not plan to go for the big one yet.

“Capabilities for creating platforms have to be built in a phased manner. You cannot start producing a 200-seater aircraft from day one – it doesn’t work like that. You have to start and learn the basics as it is a very complex process to design, develop, produce an aircraft, and then get it certified in different countries. We began with an eight-seater utility aircraft and then moved up to a 10-seater Turboprop,” said Shukla.

Like the Tatas, Mahindra is also doing offset work including assembling Howtizer guns for BAE Systems Plc.

As the government allows the private sector to expand its footprint, dozens of jobs will be created outside the current state-run units, said Shukla.

L&T, among the oldest major private sector companies with a defence footprint, is considering bidding to manufacture submarines as well as armoured systems under strategic partnerships, besides continuing to bid for various procurement categories of programmes under land-based weapon systems, air defence and artillery systems and upgrades, communication, avionics and missile systems (70 per cent of the Akash surface-to-air missile airframe is produced at an L&T factory in Coimbatore and Talegon in Pune).

L&T’s Patil said the company would look to bid in all verticals in which it has proven capabilities.