Showing posts with label Def Ind Base. Show all posts
Showing posts with label Def Ind Base. Show all posts

6 July 2017

Defense Industry in a Race to Buy Into Hot Startups


In just one year, the nation’s largest defense contractor has injected close to $20 million into tech startups. And more investments are coming, says Chris Moran, executive director and general manager of Lockheed Martin Ventures.

Moran spent three decades in Silicon Valley before joining Lockheed Martin in June 2016. The company’s $100 million venture capital shop had been dormant for a few years and Moran was hired to revive it.

His most recent pickup is Terran Orbital, a manufacturer of tiny spacecraft known as nanosatellites.

Space companies have been popular targets of investors. Defense contractors are especially attracted because of the crossover appeal for military and commercial options. Lockheed became an early financer of New Zealand's Rocket Lab, which is building a carbon-composite rocket to launch small satellites into orbit for less than $5 million.

Other markets the defense industry is pursuing feverishly are cybersecurity and artificial intelligence. Lockheed last year struck a deal with Cybereason, whose machine learning software helps detect network attacks as they happen. This is a huge breakthrough compared to traditional cyber defenses that are the equivalent of closing the barn doors after the horses left. “Artificial intelligence looks for pattern changes to prevent attacks before significant damage occurs,” Moran says in an interview. “Cybereason was one of the early practitioners in this space.”

29 June 2017

* Setting up the defence industrial ecosystem


Last week was an interesting one for Indian defence manufacturing. On Monday, Tata Advanced Systems Ltd and US plane-maker Lockheed Martin Corp. signed an agreement at the Paris Air Show to produce F-16 fighter jets in India. On Tuesday, in Delhi, Reliance Defence entered into a strategic partnership with Serbia’s Yugoimport for ammunition manufacturing in India. On Wednesday, back in Paris, Reliance Defence joined hands with France’s Thales to set up a joint venture that will develop Indian capabilities in radars and high-tech airborne electronics.

In Moscow, on Friday, defence minister Arun Jaitley and his Russian counterpart signed off on a road map for strengthening bilateral military ties. Meanwhile, at home in India, the army rejected, for the second year in a row, an indigenously-built assault rifle after it failed field tests—a pointed reminder of how the country’s sub-par defence industry continues to damage the military’s operational preparedness.

12 June 2017

Let the Strategic Partnership policy weaponise make in India

By Richard Heald

With the announcement of the Strategic Partnership policy, the Indian ministry of defence (MoD) has rolled out a significant initiative aimed at revitalising the ‘Defence Industrial Ecosystem’. This announcement could be ground-breaking. Cementing partnerships with Indian companies is already recognised as an important opportunity for big foreign defence manufacturing companies, providing an impetus to ‘Make in India’.

The British defence sector, with its unique expertise and already established long-term commitment, is looking at these developments with attention. The devil will be in the details.

But to date, the plans are radical and make the elusive target of 70 per cent indigenous manufacturing, which MoD is committed to, realisable.

It’s been over a decade since India’s private sector was directly involved in defence manufacturing. Citing security concerns, India’s defence procurement has largely been driven by various defence public sector undertakings (DPSUs) and the Ordnance Factory Board. While defence manufacturing was ‘liberalised’ in 2001and opened up to not just Indian private players but also to foreign entities (49 per cent FDI), a defence production base outside of the DPSUs and the OFB has not yet been prevalent.

7 June 2017

An Assessment of the Strategic Partnership Model in Defence Industry

Laxman K Behera

In a major policy reform intended to promote Make in India in defence manufacturing, the Ministry of Defence (MoD) announced on May 31, 2017 the much-anticipated Strategic Partnership model for the Indian private sector.1 The model, whose concept was first suggested by the Dhirendra Singh Committee in its July 2015 report, populates Chapter VII of the Defence Procurement Procedure 2016 (DPP 2016). It visualises designating a few private companies as Strategic Partners (SPs) that would not only assume the role of system integrators but also lay a strong defence industrial foundation by making long-term investment on production and R&D infrastructure, creating a wider vendor base, nurturing a pool of skilled workforce, and making a commitment to indigenisation and technology absorption. The ultimate aim of the model is to enhance India’s self-reliance index in defence procurement which continues to remain at an abysmally low level despite a huge defence industrial complex much of which is managed by state-owned Defence Public Sector Undertakings (DPSUs) and the Ordnance Factory Board (OFB).

Strategic Partnership: The Model

The strategic partnership model seeks to identify a few Indian private companies as Strategic Partners who would initially tie up with a few shortlisted foreign Original Equipment Manufacturers (OEMs) to manufacture big-ticket military platforms. In the initial phase, the selection of SPs would be confined to four segments: Fighter Aircraft, Helicopters, Submarines, and Armoured Fighting Vehicles (AFV)/Main Battle Tanks (MBT). In each segment, “only one SP would generally be selected”, says the new DPP chapter.

6 June 2017

Private Defense Firms Are Here To Stay – What Does That Mean For National Security?

By Charles Mahoney

June 1 (UPI) — Share prices of many military and intelligence contractors have risen sharply since President Donald Trump‘s election.

Investors are betting that an increase in defense spending will provide a windfall for these firms. For instance, General Dynamics, a large contractor that develops combat vehicles and weapons systems for the U.S. military, saw its stock price jump by more than 30 percent in the months after the election. Likewise, Kratos Defense and Security Services, a smaller firm that builds drones for the U.S. Air Force, saw its shares soar more than 75 percent between November 2016 and May 2017.

This trend may be short-lived. Congress still must decide whether Trump’s proposed 10 percent increase in defense spending is practical given current budget constraints.

5 June 2017

Fog clears over industrial licensing for defence industry but questions remain

Amit Cowshish

The notification issued by the Ministry of Home Affairs (MHA) on May 19, 20171 delegating the power to issue licences for the manufacture and sale etc. of arms and ammunition to the Secretary, Department of Industrial Policy and Promotion (DIPP) raises more questions than it provides answers.

The powers and functions delegated through this notification are the ones that are exercisable by the MHA under the following provisions of the MHA-administered Arms Act, 1959: sub-section (1) of section 5 (dealing with licences for manufacture, sale, etc. of arms and ammunition), clauses (b) and (c); section 7 (dealing with prohibition of acquisition or possession, or of manufacture or sale, of prohibited arms or prohibited ammunition); and, Chapter III (containing provisions relating to licenses).

The notification also says that the delegated powers are to be exercised in respect of the category of arms and ammunition and defence items specified in the schedule that forms a part of the notification. This would have been alright but for the fact that the items mentioned in this schedule are actually defence items that were notified by the DIPP vide Press Note 3 of 2014 series 2 with a view to bringing about absolute clarity about the defence items that require industrial licence under the provisions of the DIPP-administered Industrial (Development and Regulation) Act, 1951.

20 April 2017

Mapping the World's Biggest Weapons Exporters – and their Best Customers

By FRANK JACOBS


War kills. And war sells. These maps show the world's four biggest arms exporters and their major clients.

While they reveal a lot about who mongers weapons to whom, the sequencing on this graph is a bit misleading.

11 April 2017

Defence acquisition reform in limbo

With former defence minister Manohar Parrikar’s return to the position of chief minister of Goa, the global defence industry is asking one big question: What will happen to the defence reforms announced by him?

India faces a significant shortage of critical defence equipment, including fighter aircraft, submarines and helicopters, which India’s defence public sector undertakings (DPSUs) have been unable to address. This reality was publicly stressed yet again in March by a parliamentary standing committee on defence.

If the Indian military is to manage this challenge, critical policy issues such as defence procurement reform need to be finalized.

To address this issue, Prime Minister Narendra Modi and Parrikar introduced the concept of nominating “strategic partners” in defence production. The idea appears to be that the government should designate vetted private Indian companies to specific areas of national security importance, such as manufacture of fighter aircraft, tanks or submarines, to develop technologies and systems.

20 March 2017

Defence Expenditure: A Challenge for Defence Economists

Amit Cowshish

The only sub-theme that vies for pride of place alongside the debate on the alleged shenanigans of an inept civilian bureaucracy is the gross inadequacy of defence outlays. Governments have come and gone since 1947, but the sluggish trajectory of annual defence budgets continues, interrupted only by pay commissions and wars. It does not require any great power of prophesy to rule out a steep hike in the defence budget in the coming years. The history of the defence budget over the past seven decades should be enough to drive home this truth.

More specifically, the growth in annual defence allocations since 2014 only indicates that it is naive to expect that the gap between the demand projected by the Ministry of Defence (MoD) and the actual allocations made for defence in the union budget will soon be a thing of the past.

Defence analysts never tire of mentioning the year 2004 when the then outgoing government made a provision for a defence modernisation fund in the interim budget, seen till date as a bold step to address the problems besetting the modernisation of the armed forces. But it is the same political dispensation which, despite being in power now for almost three years, not only has not revived the defence modernisation fund but has also failed to cut the mustard when it comes to raising the defence expenditure.

28 February 2017

Building Deterrence

by Manmohan Bahadur

In war, and more importantly, in preparing for war, uncertainties abound. The spectrum of conflict is becoming larger and time compression due to computing technology and the opening up of the aerospace frontier demands acquisition of knowledge. The arena too has expanded from land/sea/air to the cybersphere, space and the electromagnetic domain. Call it new generation or hybrid warfare, it is incumbent on decision-makers to plan India’s approach towards capability building to meet the threat of war.

While casualties have a deleterious impact on society, it is the country’s standing in the comity of nations that is at stake. The mantle falls on people charged with the brief of war prevention, war planning and war making; the political executive has a major part in all three since policy formulation directly effects the creation of deterrence.

There are two macro issues that demand attention. First, the restructuring of the Higher Defence Organisation (HDO), characterised presently by the incessant demand for a Chief of Defence Staff linked with theatre commands, a la the US, and now China. Clinical analysis is necessary to tackle this issue, which has become an emotive one. Second, for too long have we pussy-footed on the need to develop an indigenous defence manufacturing base — changes are happening, but just about.

17 February 2017

"Breaking the Norm": A New Acquisition Approach

Source Link
By George Landrith

It may have been easy to overlook, given the steady stream of news coming out of Washington of late, but one of the more significant developments for the defense industry in quite some time is currently unfolding in the acquisition policy sphere.

In the last month, two defense industry giants have pulled out of one of the few major new acquisition competitions the Pentagon currently has running – with an expected business opportunity north of $16 billion. The reason why may surprise you.

Defense Department procurement generally follows a well-worn path: one of the services identifies the need for a new or upgraded platform; contractors pour time and research and development dollars into their offerings without official guidance on the necessary capabilities and requirements expected; the service issues a formal Request For Proposal (RFP) late in the game; and the service eventually settles for whichever one of the offerings most closely resembles what they were actually looking for. Thus wasting a lot of time and money, without necessarily providing the best outcome.

The Air Force, to their credit, has taken a different path for their 2017 T-X trainer competition, which seeks to replace the existing and rapidly aging 1960s-era T-38 trainer fleet with an initial 350 new aircraft and accompanying ground-training systems. The new trainers, with an expected initial operating capability scheduled for 2024, will help future pilots learn to fly the fifth-generation aircraft that now populate fighter wings.

10 February 2017

India’s Submarine Choice


As Donald Trump begins his Presidency, leaders in India face the question of whether to sign two long-delayed agreements to facilitate closer security cooperation with Washington. In New Delhi last week U.S. Pacific Commander Admiral Harry Harris offered a useful illustration of why the deals matter. Without them, he noted, India and the U.S. won’t be able to share vital information about China’s intensifying submarine presence in the Indian Ocean.

Chinese submarines have become a regular sight in the ocean in the past...

7 February 2017

*** Rescuing India’s defence spending from oblivion

Source Link
Pavan Srinath

When you exclude defence pensions, the defence budget drops to a meagre 1.6% of GDP, a drop from last year’s low of 1.74%. Photo: Abhijit Bhatlekar/Mint

Last year, finance minister Arun Jaitley did something different in his budget speech. For the first time in decades, he entirely skipped mentioning defence spending in his speech.

This year, he did a slightly better job of discussing defence. Apart from mentioning a few minor things about a defence travel system and an online pension disbursement system, he had this one sentence to say: “For defence expenditure excluding pensions, I have provided a sum of Rs2,74,114 crore including Rs86,488 crore for defence capital.”

Between what was said and unsaid, there are many implications for defence expenditure in the country.

The first thing left unsaid was that the budget estimate of defence pensions this year is a whopping Rs86,000 crore. When you include defence pensions, the overall defence budget amounts to Rs3.59 trillion, or 2.1% of gross domestic product (GDP). When you exclude defence pensions, it drops to a meagre 1.6% of GDP— a drop from last year’s low of 1.74% of GDP.


Falling expenditure on defence is of concern in the world seen in 2017. This year has an increasingly belligerent China, a new president in the US who wishes to be more insular about American interests and a Russia that is playing footsie with Pakistan. The deterrent effect of defence spending is needed more now than in the last few years.

The song remains the same on the capital acquisitions budget. As the government has done repeatedly, there was a 9% slash in last year’s revised estimate, compared to the budget estimate. This year, there is a nominal increase of 10% in the capital acquisitions budget over last year —but this is a net reduction in capital spending once you account for inflation and slashed expenditures in the revised estimate.

While Rs86,000 crore on capital acquisitions might sound like a large number, close to 90% of it is allocated to paying off instalments of money for past purchases of Sukhoi fighter craft, aircraft carrier Vikramaditya, transport planes like the C130J Super Hercules and more. The available budget for future acquisitions will be about Rs10,000 crore and no more.

22 January 2017

BEML Disinvestment: What about the other DPSUs and OFs?

Laxman K Behera

The Cabinet Committee on Economic Affairs (CCEA) has taken a major decision to privatise some government-owned companies. One of the companies listed for privatisation is BEML (formerly named Bharat Earth Mover Ltd., which functions as one of the nine Defence Public Sector Undertakings (DPSUs) under the administrative control of the Department of Defence Production of the Ministry of Defence (MoD). As per the CCEA’s in-principle approval, 26 per cent of BEML’s equity shares would be sold to a strategic buyer, bringing down the government’s share in the company from 54.03 per cent currently to 28.03 per cent. The offloading of the government’s equity shares in BEML, which would simultaneously involve the transfer of management control from the government to the ultimate buyer, is likely to bring in an estimated Rs. 1,000 crore to the central exchequer. In the light of this unfolding development, two questions arise: What is the significance of BEML’s disinvestment? Is it a one-off affair or should the government disinvest in other production entities functioning under the MoD?

The significance of the BEML’s strategic disinvestment lies in the fact that it would be the first time that the MoD will lose management control over one of its own companies. This is pertinent given that some perceive DPSUs to be too strategically important to be owned by the private sector. It may appear that the singling out of BEML for disinvestment could be due to the company’s dwindling exposure to the defence market post the controversy over the purchase of Tatra trucks. In 2015-16, the defence business (consisting primarily of sale of high-mobility vehicles) contributed a mere 11 per cent (as opposed to nearly 30 per cent a decade before) of BEML’s total gross revenue of Rs. 3426.02 crore. With such a low exposure to defence, the company’s rightful claim to be a defence company had come under question. The decision to privatise the company through the route of strategic sale instead of shifting it to another ministry, (as was done in case of loss-making Hindustan Shipyard Ltd., which was acquired by the MoD from another ministry), conveys the strong message that the government believes that it has no business in business.

It is worthwhile to note that BEML’s privatisation is not related to its performance. Unlike some other DPSUs, BEML is a highly competitive company, with 88 per cent of its sales in 2015-16 coming through the open tendering process. Besides, the company has a good track record of generating profits; it has registered a profit in 15 of the last 16 years. Poor performance of commercial entities, which had been the main driver of disinvestment decisions in the past, is not the main criterion for the government’s decision to disinvest in BEML.

Should the government now follow the BEML decision and move towards disinvesting in other defence production entities? The unambiguous answer is yes. DPSUs and Ordnance Factories (OFs) are the part of the larger set of Central Public Sector Enterprises (CPSEs) and other departmentally run production entities. These have outlived the utility of the Nehruvian model of industrialisation, under which the Government of India assumed the role of the largest industrialist in the country. But the running of businesses by the government has been accompanied by bureaucratic, administrative and decision-making inefficiency, manifested in the poor performance of these companies, including DPSUs and OFs. In fact, as suggested by the 1991 Statement on Industrial Policy, the CPSEs, given their inefficiency, have become a drag on the Indian economy.

Measured in terms of innovation, productivity, exports and customer satisfaction, the performance of DPSUs and OFs has been anything but encouraging. Some statistics testify to this sorry state of affairs. The combined R&D expenditure of the DPSUs, an indicator of their innovation performance, is a mere five per cent of their turnover. In the case of OFs, it is less than one per cent. Compared to this, some global companies spend up to 20 per cent of their turnover on R&D. Given such a poor focus on R&D, it is not surprising that they have designed and developed very few products. The average labour productivity of DPSUs is less than one-fifth of that of major global defence companies. Exports, a measure of international competitiveness, accounts for a meagre five per cent of their sales, whereas many international companies generate over 70 per cent of their revenues from international customers. The 40-odd OFs, which employ more than 95,000 workers, do not meet even 50 per cent of the product target set for the Indian Army, leaving a big hole in the latter’s preparedness.

More importantly, DPSUs and OFs have not succeeded in their primary mission of making the country self-reliant in defence procurement. Instead, they have become a conduit for large arms imports, albeit indirectly. This indirect arms import is made in the form of purchase of parts, components and raw materials from the international market and for which a large amount of foreign exchange is incurred. In just five years ending 2014-15, the nine DPSUs spent a whopping Rs. 78,740 crore on indirect imports, which amounts to nearly three-fifths of their total sales.

The only way that these entities can be made to function better is by putting them under an efficient management. And that can be achieved only through privatisation. The BEML model of disinvestment needs to be applied to the rest of the DPSUs. For the privatisation of OFs, the first thing that needs to be taken is to convert them from their present avatar of being a departmentally run organisation to a corporate entity. Disinvestment in these entities will not only make them function efficiently and contribute to the country’s self-reliance efforts but also enable the government to generate resources for meeting the fiscal deficit target as well as fund the critical modernisation requirements of the armed forces.

19 January 2017

HARSH TRUTH Inside Ike’s Farewell Warning: The Military Industrial Complex


BRET BAIER

With just days until he would hand over the reins of power to the young JFK, Dwight Eisenhower was faced with one final mission—to send his country forth with the proper guidance.

The speech had already been sent to the mimeograph machine to be copied and distributed to reporters. But sitting at his desk in the Oval Office, the president was still rewriting. Reporters who were used to Ike’s tendency to edit his speeches up until the very last minute had learned not to take the “official” version as final. Those tempted to file their stories before the actual speech risked waking up red-faced when Ike’s delivery veered off in another direction. 

At 8:30 p.m., millions of Americans would miss their Tues- day night episodes of The Many Loves of Dobie Gillis, The Red Skelton Show, or Alfred Hitchcock Presents to watch the president bid goodbye. Earlier, some of his friends had urged him to give the address before Congress and make a big display of it. He’d replied, “No, this is the president-elect’s show. I’ll just do it quietly from the White House.” 

Ike had been at the final editing since before eight that morning, with a strong sense of purpose. In the background he could hear pounding and hammering as the inaugural parade viewing stand was erected outside. It was, he thought, like be- ing a condemned man in a cell listening to the scaffold going up. Now the hour was nearing when the final script would have to be handed to the technicians to set up the teleprompter. (As it turned out, he would bypass it that night, deciding at the last moment to keep a paper copy on his desk and to turn the pages as he read—while the teleprompter scrolled pointlessly along.) 

16 January 2017

Army Looks to Change the Conversation With Defense Industry

By Sandra I. Erwin

The storyline on the Army’s bid to modernize its aging equipment has been one of fits and starts.

A litany of fruitless weapon development efforts over the past decade has cost the Army billions of dollars but delivered little in the way of advanced equipment. Congressional leaders have hammered Army officials amid fears that U.S. forces are losing technological ground to adversaries.

Army leaders insist they are forging a new path forward, and promise to get more bang for their limited procurement bucks. Notably, they have concluded that past failures partly were brought on by poor communications with defense contractors.

“We have identified several problems,” said Maj. Gen. Robert Dyess, deputy director of the Army Capabilities Integration Center, who discussed the Army’s latest thinking on how it plans to recover from its modernization slump.

Dyess summed up the situation in blunt terms: “Industry doesn’t know what the Army wants. There is no forum to address these needs. And small businesses don’t have a chance to present their ideas to the government.”

28 December 2016

The SIPRI Top 100 Arms-Producing and Military Services Companies, 2015

By Aude Fleurant

This SIPRI Fact Sheet lists the top 100 arms-producing and military services companies in 2015 and describes the international arms sales trends that unfolded during the year. Although there was a slight decrease in arms sales revenues when compared to the previous year, profits in 2015 were still 37 per cent higher than in 2002, when SIPRI began recording such data.

KEY FACTS 

The arms sales of the SIPRI Top 100 arms-producing and military services companies (excluding China) were $370.7 billion in 2015. This represents a decrease of 0.6 per cent compared with 2014 and is the fifth consecutive year of decline.
 
US-based companies’ arms sales for 2015 fell by 2.9 per cent to $209.7 billion, due to ongoing limitations on government spending, including military spending. However, with a 56.6 per cent share of the Top 100 arms sales in 2015, US companies’ arms revenues remain way ahead of those of other countries. 

16 November 2016

Transfer of Defence Technology to India: Prevalence, Significance and Insights

October 2016

Transfer of technology has been prevalent in numerous forms across the world, both in the civil as well as defence domains, and India is no exception. These transfers, primarily in the form of licenced manufacture, have provided a significant boost to the production capabilities and self-reliance of developing nations in the past and hold great promise, in the future, for nations that do not have a well-developed science and technology base. This article addresses transfers in the defence domain and delves into some of its fundamental aspects through a coverage of its prevalence in India; whether it contributes to the attaining of national goals; understanding its core fundamentals and connected nuances; and finally, benefits and costs, including restrictive issues.


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22 October 2016

The Challenges That Remain In The Burgeoning Indo-US Defence Ties

October 19, 2016

India and the US have been forging a strategic relationship with each other, and defence is a critical component of it.

Even as the defence ties reach unprecedented levels, some challenges remain that have to be tackled.

This will propel the strategic relationship between the two into the long term.

India and the United States (US), and the emerging strategic partnership between the two, is directed with shared strategic logic, which includes the rise of China, Islamic fundamentalism and extremism and mutual agreements on various international issues. The two countries have been forging closer defence cooperation, which is one of the crucial engines of the strategic partnership. The US has emerged as the largest defence supplier to India in terms of value. A number of initiatives, agreements and forums have been designed and created in order to further boost military-to-military cooperation, defence co-production and co-development as well as collaboration in R&D in defence technology. The June 2015 Defence Agreement signed between US Defence Secretary Ashton Carter and Indian Defence Minister Manohar Parrikar envisions further strengthening of the defence relationship.

There are, however, certain obstacles that have prevented full exploitation of the true potential of defence cooperation between the two strategic partners. Though the US has emerged as the largest defence supplier in terms of value, Russia continues to be India’s single-most important supplier of defence hardware as far as the number of units is concerned. Moreover, India remains wary of the reliability of the US as a defence partner because of historical suspicions. Americans, on the other hand, find it difficult to comply with India’s defence offset policy.

11 October 2016

Role of Small and Medium Enterprises in Defence

PIB Press Release
Aug 13, 2016 
The Government has taken several initiatives to enhance the role of MSMEs in the defence sector. Augmenting the role of MSMEs in defence sector is one of the defining features of Defence Procurement Procedure (DPP)-2016. In the DPP-2016, the ‘Make’ procedure has been recast wherein greater impetus has been provided to MSMEs, by reserving certain categories of ‘Make’ Projects exclusively for them. The eligibility criteria for Shortlisting Indian Vendors, for participation in ‘Make’ projects, has been made liberal for MSMEs. Besides this, a multiplier of 1.5 is permitted for discharging of offset obligations through MSMEs as Indian Offset Partner.

In addition, the Government has launched various schemes for supporting MSMEs so that they can supply their products to various organizations including defence sector. The Lean Manufacturing Competitiveness Scheme was launched to improve the quality of the products of MSMEs. The MSMEs can upgrade their machinery under Credit Linked Capital Subsidy Scheme (CLCSS) and Technology Up-gradation Scheme (TEQUP). The units can also avail credit guarantee trust fund for MSEs to raise loan without collateral security for enhancing their competitiveness. MSMEs can also participate in Domestic and International Trade Fairs under Marketing Assistance and Technology Up-gradation (MATU) scheme.

The Government of India has notified Public Procurement Policy for Micro and Small Enterprises (MSEs) Order, 2012, under which a minimum of 20% of the total annual procurement from Micro & Small Enterprises by Central Ministries / Departments / PSUs has become mandatory w.e.f. 1st April, 2015. The same is also applicable to the defence sector.