Defence sector holds lot of business potential for MSMEs: Geomardy MD

In the forefront of the demand for establishing an exclusive MSME park, a defence industrial complex with plug and play facility in Visakhapatnam, J Srinivasa Raju, Managing Director of Geo Marine Dynamics (India) Pvt Ltd (Geomardy), involved in earth sciences and offshore engineering services, feels there is immense potential to explore in the field for the MSMEs.

He says the defence expenditure constituted 2.9 per cent of India's total GDP with approximately $72.9 billion spent on defence in 2020. India has the second largest armed forces in the world creating the requirement for ammunition, personnel safety equipment and other defence equipment/systems. The 'make in India' initiative provides impetus for self-reliance, aiming for indigenous production of 70 per cent of India's defence needs.

Defence exports in the country have grown nearly seven fold in the last two years from Rs1,521 crore in FY17 to Rs10,745 crore in FY19. India has set for itself an ambitious target of $5 billion in defence exports to be achieved by FY24. There are various projects worth almost $7.3 billion being executed under DRDO. Various defence PSUs and defense organisations have listed around 1800 components and spares through the government portal itself, Raju told Bizz Buzz in an exclusive interview.

How are the opportunities in the defence sector for MSMEs with thrust on self-reliance?

Under the 'Atmanirbhar Bharat' campaign, Ministry of Defence (MoD) has announced various policies and introduced mandatory measures like the positive indigenisation list, at least 25 percent of defence organisations' procurements from MSMEs, mandating the defence organisations' to list their vendors on Government e-Market place (GeM) portal, etc. DPEPP (Defence Production and Export Promotion Policy) and DPP (Defence Acquisition Procedure) released by the MoD provide impetus on indigenously designed, developed, and manufactured defence systems. The 'Strategic Partnership (SP)' Model envisages establishment of long-term strategic partnerships, wherein the global OEMs would tie up with Indian MSMEs to set up domestic manufacturing infrastructure and supply chains. To support defence modernisation, in the budget 2021-22 the defence capital outlay has been increased by 18.75 per cent from the preceding year, the highest increment in the last 15 years. Thus, to accomplish India's vision of achieving a turnover of $25 billion including export of $5 billion in aerospace and defence goods and services by 2025, the Government of India (GoI) through various initiatives is creating ample opportunities and fostering MSMEs' participation in the defence manufacturing and services' sectors.

How the MSMEs are getting benefited and what is the viewpoint of you with respect to GoI's role to extend the benefit to more local players?

With an intention to take forward 'Make in India' initiative, GoI has laid emphasis to address three major aspects (i) funding and providing various incentives (ii) strengthening demand of products and services (iii) removing some of the bottlenecks and challenges in terms of government clearances. The most important ones also included: Rs 3 lakh crore collateral-free automatic loans for MSMEs to buy raw material, meet operational liabilities and restart businesses, revision of MSME definition to extend maximum benefits to the sector, disallowing global tenders in procurements upto Rs 200 crore to create attractive opportunities for domestic players and clearing of MSME dues by the government and PSUs within 45 days.

The various schemes, policies and incentives can be accessed through different GoI websites like the https://msme.gov.in, www.makeinindiadefence.gov.in, etc.

Despite having immense potential, in terms of know-how and technical expertise, lack of clarity on the policies and organised hand-holding has prevented the full exploitation of MSMEs. GoI has to organise frequent events like conclaves and vendor meets to create awareness on the policies. To provide support to the MSMEs, focus should be to address common issues such as access to technology/skills, create/upgrade infrastructure and promote setting up of common facilities such as testing, training, raw material depots, complementary production units, etc. In my view, this cluster development approach is a key strategy for creation of a sustainable environment fostering the productivity and competitiveness as well as capacity building of MSMEs.

You have been pitching for establishing MSME park for defence related units in Visakhapatnam. If the request is accepted, how will it help saving freight cost and help locals in getting job opportunities?

Visakhapatnam, the only natural harbour on the east coast, has the largest naval base. The city has continued to expand in diverse ways and new industries, both government and private, have been established. The city is well connected through rail, road and airways.

'Amtanirbhar' initiative and presence of defence organisations create ample opportunities for the participation of MSMEs in manufacturing and supply of defence equipment/systems and services. The MSME Park will have a plug and play facility, to create a manufacturing cluster generating employment on almost all fronts of the industry. Presence of common facility centers (such as defense laboratories, accredited testing centers, ports, etc.) and manufacturing units within Visakhapatnam will help reduce the product cost. Presence of technology centers and renowned universities provide easy access to technology as well as skilled resources thus providing gain in capital to the MSME units. The MSME park would accommodate various industries providing a plethora of opportunities for the job seekers.

What are the good signs for MSMEs in the defence equipment manufacturing industry?

MoD has set a target to engage with over 16,000 MSMEs in the next two years and is continually taking steps towards a higher degree of indigenisation. GoI and MoD have specified that all the DPSUs should outsource a minimum of 25 per cent of their work and minimum of 30 per cent of procurements to MSMEs only. Other governmental policies and regulations mandate the industries (government and private) to engage MSMEs. Thus, I expect a minimum contribution of 40 per cent in India's GDP by MSMEs.

Quality and timely delivery are two important aspects for getting any contract. Are the MSMEs able to meet these prerequisites?

To unlock the potential of the MSMEs located across India we need to provide them with relevant information about the GoI's 'Make in India' program in defence and the quality requirements as well as to strengthen the financial system providing funding and incentives and encourage digitalisation and industry-academia interaction with spiral learning and state-of- the-art technologies and equipment (Industry 4.0). Information on GoI's schemes on utilisation of services of the defence testing laboratories and allied facilities will help the MSMEs meet the quality standards and timely delivery. With this kind of approach, over a period, our MSMEs will fill the gap of standards.

Visakhapatnam is the headquarter for ENC. Hindustan Shipyard Ltd and Ship Building Centre are located in Visakhapatnam. The second naval base and BARC centre are coming up. So, how do you see the future for defence equipment and spare part manufacturers in the region?

The 'Make in India' initiative pushed for self-reliance, aiming for indigenous production of 70 per cent of India's defence needs. So, we are expecting great demand for MSMEs for execution of defence projects, and supply of defence equipment and spares. There will also be demand for MSMEs services in augmentation of infrastructure, and in integration projects involving new components and advanced technology systems.

What are your suggestions as the founder for Geomardy to improve the opportunities for MSMEs mainly during and after the pandemic going by your success in the field of earth sciences and off-shore engineering fields in the past two decades?

Recent government's initiative like the deep water mission, are creating more opportunities for unmanned maritime systems and other advanced technologies. During pandemic, we have focused more on futuristic technologies and digitalisation of our SOPs utilising the time during the crisis/lockdown to convert as an opportunity to prepare our organisation to cater to the upcoming projects by expanding skill-sets, imparting training to employees and in-house software development. My suggestion of start-ups, young entrepreneurs and MSMEs is to focus more on capacity building during lockdowns and making use of the opportunities during windows. Focused approach and consistency along with team work as well with the help of digital technologies will help them to survive and sustain adverse conditions like Covid pandemic. Foreign collaborations to get knowledge transfer will help gain quick technical expertise. Focus should be on such KPIs for the success of your organization. This will help us meet the domestic demand as well cater to the global markets (exports).