AN APPROACH TO ESTABLISHMENT OF TAMILNADU INDUSTRIAL CORRIDOR (TANDICO) By LT GEN P R SHANKAR (RETIRED)

General

The Tamil Nadu Defence Industrial Corridor Defence was inaugurated by our Defence Minister, on 20 Jan 2019. It comprises of industrial hubs in Chennai, Hosur, Salem, Coimbatore and Tiruchirappalli. Next week, during the Tamil Nadu Global Investors Meet at Chennai, aerospace and defence along with the defence corridor featured prominently.  At the outset it is a great initiative and a laudable step to achieve self-sufficiency in defence production. It was also great to participate in a discussion with yesterday between some MSMEs and the Dassault team as to how offsets can be discharged through the Corridor and how to prepare and train for the future. However, it emerged that there were many blanks to be filled. These need to be addressed for tangible realisation on ground and long-term sustainability.

In order to establish the Corridor, Ernst & Young have been hired to carry out an assessment and submit a report. Why Ernst & Young? Cannot we do it on our own? For instance during WW2, in the face of the German onslaught, Nikita Khrushchev relocated a major part of Soviet arms industry East of Volga and had it up, running and producing seriously huge war waging capacities to defeat the Germans in three to four years flat. He did not have Ernst and Young! If Microsoft, Google, IBM and others can use our brains to set up world class facilities in India certainly I think we have enough capability within.  Let’s leave it there and look ahead.

The Purpose

The Corridor must serve a purpose which is well defined. In my opinion it must be beyond achieving self-sufficiency in defence production or be an Aerospace and Defence Industry hub. This corridor must be multipurpose in nature with dual use technologies catering for needs of the Security, Defence, Aerospace and Disaster Management establishments at national and International levels. Security represents the larger canvass. Climate change combined with resource scarcity has brought disaster management on par with Security. The response mechanism and capabilities required for Security, Defence, Aerospace and Disaster Management are similar. Militaries and societies are preparing accordingly. Hence, Security, Defence, Aerospace and Disaster Management must be treated  as one compact and dealt with from an industry view point. 

Identity

An enterprise of this nature requires an identity. The start point is a suggested acronym - TANDICO (TAMILNADU DEFENCE INDUSTRIAL CORRIDOR). Next is to institute a suitable logo which can be designed in due course. Very importantly TANDICO must be a physical interactive institution with an address, building and people. It must be an autonomous body with an ability to execute the idea through a single-window, single point of contact approach. The structure includes a HQ based in Chennai with regional centres in Salem, Trichy, Coimbatore, Sivakasi and Hosur. Sivakasi is the new entrant which is explained later. It should have a CEO dedicated to furthering the Corridor. TANDICO must weld and hold together all the stake holders in the system. At present this is sorely lacking and that came through loudly during the interaction with Dassault. It must be understood that TANDICO cannot be run from South Block or Fort St George or by any industry body as is being done now.

     

Stakeholders and Structure

The primary stakeholders in TANDICO are visualised to be the MOD, Govt of Tamil Nadu, Industry, Consumers, Financial institutions and Knowledge Centres. A structure of participation and work must be evolved with an equity model like the TIDEL Park in Chennai so that it is a self-sustaining and growing body. It should have an organisation and hierarchy suited to the purposes mentioned earlier. MHA and NDMA must be incorporated as secondary stake holders in TANDICO. At some stage ISRO and DAE will also have to be co-opted. All these need mil grade or near mil grade sourcing.

Additional Hub

Besides existing hubs of TANDICO, Sivakasi the hub of fireworks industry should also be included as a part of TANDICO.  Sivakasi needs to be converted into a source for explosive materials required for Defence and Space purposes. With emphasis on environment, the fireworks industry is facing a wind down. The resident structure and experience in handling explosives should be reoriented towards national requirements of explosive and propulsion material which is growing geometrically. It serves a social purpose besides enhancing traditional expertise.

  

Role Definition

MOD.  MOD must be the major stake holder of this corridor. They will be the policy makers, enablers of TANDICO and its licencing and monitoring agency. They will have to set stage for it by providing manufacturing benchmarks in scale and range, providing consumers and markets with some degree of assurance, infusion of technologies, spurring export. DRDO must be incorporated to provide research assistance. Armed Forces will have to give direction and pointers to the Industry. In essence, MOD will be the sheet anchor of TANDICO.

Tamil Nadu Govt.  Tamil Nadu Govt will be the hosting and executing partner. They will provide basic infrastructure, deal with coordination and day to day running of the corridor. They could also assist in providing consumer and export related support. The state government must provide a conducive environment for TANDICO to grow.

Industry. The industry will be the backbone of the corridor. Heavy defence Industry in TN like OFB factories, BEL, L&T and Ashok Leyland will be the showpiece industry. The bulk of the industry in TANDICO will be MSMEs. Industry will also be represented by associations like CII, SIDM, FICCI, ASSOCHAM and AIDAT. Effort must be made to get OEMs to set shop through the FDI route.

Knowledge and Skilling Centres. Knowledge centres in Tamil Nadu must be co-opted into the Corridor. This include R&D establishments like CVRDE and CSIR labs as also Educational institutes like IIT Madras, Anna University, NIT Trichy, and PSG Tech Coimbatore for higher research and learning.  Skilling and training centres must be established to support the new emerging manufacturing and service industry. This needs active participation and action by the Tamil Nadu Education Department. Lot of tweaking must be done if the skilling centres are to be of international standards. For example, knowledge of working English is mandatory in the Aerospace Industry. The French hate this but have no choice. Tamil blue-collar entrants to skilling have to be taught working level English as part of their primary educational curriculum.  

Incubation. IIT Madras and TIDEL Park, Chennai will have to establish an incubation centre. This will make the Corridor vibrant in technology infusion and promoting new ideas. Start-ups must be incubated and mentored specially in emerging disruptive technologies to convert them into deployable weapon systems. Also, forward area familiarisation and orientation programs must be run for constituent members as part of the incubation process.

Testing and Certification. There will be a requirement to establish testing and certification facilities for TANDICO. It is visualised that IIT Madras and TIDEL Park must evolve a system to set up such a centre though the IIT Madras Research Park. Resources can be drawn from under-utilised capacity of IIT Madras and new capacities established by TANDICO which are complimentary to each other. IIT Madras is already in the process of incubating a start up for this purpose. IIT Madras with the experience it has in this field should should establish an accredited Certification Centre.

R&D.  It is also visualised that a certain amount of R&D must commence in TANDICO with the assistance of DRDO, ISRO, DAE, CSIR and IIT Madras. Currently it can commence with industrial process research and later expand into certain niche areas. Might appear farfetched but one must have a vision.

     

Avenues of Entry and Sustainability

Avenues of Entry. Industry in the Corridor can enter the defence procurement environment through the capital or revenue routes. While Tier1 industry will vie for major products, MSMEs need facilitation to enter DRDO, OFB, DPSUs, OEMS, Base Work Shops, Ordinance Depots, DGQA and Services as suppliers and Tier 2/ 3 contractors. A process of entry must be defined for each route.

Incentivisation and Sustainability.  TANDICO must be sustained through incentives and assurances. Governments at state and central level can offer any of the following incentives or many more to sustain TANDICO: -

•              Govt owned defense establishments across India can be mandated to source 4-5% of their procurement budget from TANDICO.

•              Government can offer tax rebates / concessions to members of the Corridor.

•             Export oriented incentives should be held out.

•             Assured infrastructure can be earmarked in clusters.

Roles.  All MSMEs can adopt one or more of the following roles in the defence environment: -

•           Technology partner

•            Development partner

•           Component supplier

•           Material supplier

•           Offset partner / global source partner

•           Direct product sales or      AMC partner

•           Service Provider

•           Skill / training Provider

Facilitation. Facilitation must be done largely by MOD. Facilitation will be at multiple levels. At one level MOD must harmonise the defence procurement and defence production imbalance. Procurement drives production. Hence a certain amount of assured clairvoyance in procurement must kick in. At another level a certain amount of revenue procurement, sourcing by Tier 1 suppliers or sourcing for offset obligations from the TANDIC must be mandated. Sustainability will be further facilitated by incorporating MHA, NDMA, DAE, ISRO and other national players who will have a stake in the TANDICO ecology. Their leverages should also contribute to strengthening TANDICO.

Conclusion

This is not an effort to reinvent the wheel or a throw a red herring. This is an effort to reinforce the wheel set in motion so that TANDICO becomes as a major national capacity multiplier in more ways than one. It is also realised that this approach has holes and is sketchy. It could also be said that it is too simplistic. For a start that’s how it can be.  Any comments- good , bad or ugly are welcome so that they can be made use of to make TANDICO stronger.