A wintry January morning in Bengaluru saw the coming together of two very unlikely sets of people. Bharat Electronics Ltd (BEL), Hindustan Aeronautics Ltd (HAL) and Bharat Earth Movers Ltd, all suppliers of various defence equipment to the armed forces, were hosting an event at the BEL Officers Club. It was a mission to woo startups—an officious sounding seminar called ‘Role of startups in defence’ where about 50 startups showed up. Senior officials in ill-fitting suits from these three companies took turns to talk about their companies, their R&D prowess and how their guns protect the borders. In the middle of this three-hour PR pitch, there was one very cautious voice that said it like it is.
“Control your aspiration and expectation,” advised Ajit Kalghatgi, BEL’s director for R&D, to a room of expectant and bright-eyed startups. Kalghatgi—a post graduate in microwave and radar engineering from IIT Kharagpur and a PhD from Leeds University—did not, even for a minute, want to entertain the thought that the startups could expect to work with such bellwethers and become the next Facebook.
India imports nearly 60% of its defence equipment, spending close to $6.4 billion every year. And the government’s incessant messaging to Make in India, which is reflected even in the Defence Procurement Policy (DPP), released in 2016, was the stimuli that jolted the PSUs into action.
Moreover, the sector stares at a tantalisingly delicious $15 billion offset opportunity in backlogs. Offsets are a way by which the government brings back some business that local manufacturers lose due to imports. And according to the new DPP, foreign manufacturers securing orders worth more than Rs 2,000 crore from India need to source components worth 30% of the order value from India. But to absorb it, PSUs would do well with the new technology that startups bring to the table.
“We began looking at startups only after the government’s mandate, and now we are looking at ways to support them,” said A Selvaraj, general manager, indigenisation at HAL, from the sidelines of the event. He says startups were not on their radar earlier because, for the kind of equipment they were making, the capability just did not exist in India so they relied on imports. And once they began importing, they didn’t look to break that cycle as they would have to go through the cumbersome process of getting it re-certified, he said.
They were some hard habits to break, and only a mandate from the very top could make them do it.
Even the seminar was the result of a nudging from the ministry of defence, says a senior official, who was a part of the event.