Kerala - Thiruvananthapuram   

First full-fledged arms unit in Kerala

THIRUVANANTHAPURAM: The proposed takeover of Kerala Hitech Industries (Keltec) here by BrahMos Aerospace is expected to usher in an era of exciting growth and progress at the former, now engaged in production of high-end hardware in the aerospace sector.

BrahMos is an Indo-Russian joint venture under the Ministry of Defence and the takeover will certainly ensure that much-needed capital and product orders will flow to Keltec, which was heading for a difficult period because of constraints on those two fronts.

Keltec was conceived and set up on the initiative of a group of scientists from the Indian Space Research Organisation (ISRO) and the Defence Research Development Organisation (DRDO) in 1989.

The objective was mainly to cater to the high-technology mechanical system requirements of the Indian aerospace domain, especially the space and defence programmes.

It was designed to be an integrated single-stop work centre with multi-disciplinary capabilities and state-of-the-art facilities suitable for undertaking the manufacturing programmes for the Defence and Space departments. Keltec’s mission included development of aerospace products right from the stage of conception, to testing and manufacturing. Besides ISRO and DRDO, institutions such as the Gas Turbine Research Establishment (GTRE) and the Bhabha Atomic Research Centre (BARC) were supposed to be able to make use of the products from Keltec.

Though the company could achieve remarkable strides in terms of technical excellence, it met with several roadblocks in achieving financial stability owing to several reasons in the early years. Its products were of development nature which had long gestation periods in the development and marketing phases. High interest burden on capital investments was another unbearable financial pressure.

The company was set up with a total cost of nearly Rs 40.6 crore, and out of this, Rs. 13 crore was extended by the State government as equity.

The banks and financial institutions had sanctioned about Rs. 27.6 crore as long-term loan to the company, and at one stage, its interest burden was as high as Rs. 52 crore.

As a result of all these, the company which had started commercial production in 1994 was referred to the Board for Industrial and Financial Reconstruction in 1999. A revival package was announced later, and accordingly, the banks agreed to waive the interest rates and recoup only the principal amount under a one-time settlement scheme.

The company could receive Rs.10 crore each from ISRO and the DRDO as advance for the products to be delivered in a period of five years. The State government committed Rs.7.6 crore to the company from its Kerala Industrial Revitalisation Fund (KIRF). All these enabled the company to come clear of its debt burden and with the implementation of this turnaround strategy, it could make significant progress in terms of order position, profit and technological capabilities.

However, it was clear that the company’s survival was at stake in the long run unless it was able to update technology and add sufficient manpower, considering the intense competition in the aerospace industry. But the modernisation and expansion of such a high-end hardware industry was bound to involve huge capital investments, which the State government was finding hard to mobilise.

It was in this context that the proposal to hand over the company to the Ministry of Defence was mooted. The initiative launched by the State government received the active backing of Defence Minister A.K. Antony. A comprehensive proposal was then prepared for the takeover.

With the takeover to be formally effected on Monday, Keltec will be rechristened as BrahMos Aerospace (Thiruvananthapuram) Ltd. BrahMos, with its headquarters in New Delhi and units at Hyderabad and Nagpur, is the manufacturer of supersonic cruise missiles meant for the Navy, the Army and the Air Force of the country.

The officials said BrahMos was planning to set up state-of-the art facilities for the full assembling and testing of supersonic cruise missiles at the Keltec unit.

Simultaneously, it will continue to be engaged in the existing product mix meant for ISRO, DRDO, GTRE and BARC.

According to the officials, this will be the first full-fledged defence production facility in the State. BrahMos was reportedly targeting to invest Rs. 125 crore in the first phase of its infrastructure development programme to be rolled out in one year at this new unit.

Six acres of land adjacent to Keltec had been acquired for the expansion plans, and more land would be acquired for future projects. All the 225 personnel in Keltec will be absorbed into BrahMos.

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