NEW DELHI — Indian defense companies may have lost $3 billion in potential revenue during March 24-May 31 amid a nationwide lockdown in response to the coronavirus pandemic, according to a Ministry of Defence official.
Those affected include more than 100 large defense firms and some 4,000 small and medium aerospace and defense businesses. The lockdown has also impacted the supply of local and foreign material for 50 major defense projects.
Currently, every Indian-made weapon and platform is designed to use 10-20 percent of imported components. The COVID-19 pandemic is expected to disrupt the supply of such components for at least a year, which could cause delays and cost overruns for major defense programs, according to a senior executive with the Society of Indian Defence Manufacturers, a defense industry advocacy body.
Speaking on condition of anonymity, he said local defense industry factories are operating at 30-50 percent capacity and that the outlook is grim.
“This will lead to a direct hit in the first-quarter revenue of all defense companies operating in India, which will also seemingly struggle for cash flows for operation costs,” he said, adding that those costs could increase in the second quarter of the current fiscal year.
Another MoD official told Defense News that some of the ongoing major defense projects — such as licence production of French Scorpene submarines, Project 17A destroyers, Indo-Russian BrahMos cruise missiles and license production of Russian T-90MS main battle tanks — will take a major hit because foreign engineers are unwilling to come to India to supervise the projects.
Due to disruption in the supply chain, the SIDM exec warned, the cost of material and components will increase sharply — possibly an extra 10-15 percent — and Indian defense companies will have to spend more if fluctuations in the exchange rate between the Indian rupee and the euro or U.S. dollar harms India’s purchasing power.
Vivek Raghuvanshi is the India correspondent for Defense News.