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Expanding footprint: Prospects of Indian aerospace industry
The Indian aerospace industry is all set to follow the auto sector way which started its foray into the international auto market almost two decades ago as spare parts and equipments supplier for auto giants worldwide.

Indian auto sector is now posing a big challenge to the international auto majors. Similarly, the Indian aerospace sector has all the potentials to emerge as a hub for supplying equipments and systems to the international aviation giants.

In fact, the experiences of aerospace will prove to be one of the pillars to boost India’s manufacturing base.

Since India’s military and civil aviation sector will continue to surge ahead in the coming years with rising demand from the armed forces and the airlines, the international aerospace industry is betting on India for its growth.

Since emerging Indian aerospace companies have sufficient technological base to acquire the skills from the international companies, they are upbeat on their plans in India, which they expect to be very cost effective.

However, at the bidding of the international aviation giants, the policy changes in the offset guidelines under the DPP-2011 have dampened the spirits of the Indian military aviation sector.

Production facilities

The offset provision has been relaxed and the companies winning the bids from Indian armed forces will now be able to fulfill the offset requirement also from internal security, aircraft design and engineering services, civil aerospace and relevant training as products and services.

This will spare the companies winning the contracts for aviation systems from investing specifically in aerospace industry to fulfill their offset requirements under that particular system.

However, since the MMRCA tender was invited before the release of the DPP-2011 with amended offset guidelines, half of the equipments worth USD 5 billion will have to be sourced from Indian companies.

Thus sourcing of more than USD 5 billion worth of aviation products from the domestic sources will require Indian companies to set up production facilities in technical collaboration with the company executing the supply contract and thus acquire technologies and skills for manufacturing the same.

Analysts said that the single MMRCA USD 5 billion offsets will have the potential to revitalize the Indian aerospace industry which will be a magnet for production of other aviation systems also.

The demand for aerospace products will increase because India’s continued territorial and boundary disputes with neighboring China and Pakistan along with India’s enhanced responsibilities to safeguard its maritime interests in the Indian Ocean and beyond will not only fuel increased defence expenditure especially in the aerospace sector but the rising economy is also boosting demands in the civil aviation sector requiring civil aircrafts worth USD 100 billon in next decade.

Also with increasing dependence on the infrastructure in space for telecommunication and broadcast requirements, the space industry is also flourishing in the country and has developed a good technological base. In the face of international sanctions, the Indian space industry has learnt to grow on its own and has almost met the requirements domestically.

However, the focus of the international aerospace majors is on the Indian aviation sector, which is receiving very positive growth assessments from various quarters. The Indian military and civil aviation acquisitions in the coming decade will be more than USD 150 billion.

The big question is that whether the nascent Indian aerospace industry has the necessary wherewithal and policy support to help Indian military and civil aerospace demand to be fulfilled domestically.

However, the international aerospace industry is upbeat over the huge prospects of doing business with India in military and civil aviation. In order to position themselves well in advance in the Indian aerospace sector, the aviation companies and conglomerates are trying to find a foothold in the country.

Companies like EADS, Honeywell, Boeing, Agusta Westland, Sikorsky and Lockheed Martin and so on have already tied up with Indian HAL and newly emerging giants like Tata, Mahindra, Taneja Aerospace, etc.

Manufacturing base

Associated with them are the Indian software firms like HCL, Infosys, Infotech, TCS and Wipro etc, who have already marked their presence in the aerospace sector. Those companies including Boeing and EADS have already set up joint ventures and sourcing aviation equipments from India which has put them in advantageous position.

Tata Group has already declared its plans to set up aerospace production facility at its forthcoming special economic zone in Hyderabad. Sensing huge demand in India the Tata Group has also signed a contract with Agusta Westland to assemble AW 119 Helicopters in India.

They also plan to assemble Sikorsky S-92 Helicopter cabins in India. The European consortium EADS has already started outsourcing USD 126 million worth of aero infrastructure and engine components from India each year.

In fact, EADS helicopter subsidiary Eurocopter has maintained longest partnerships with Indian industry which has worked with Hindustan Aeronautics since 1962 and produced more than 600 Alouette-3 and LAMA (Cheetah and Chetak helicopters) in India.

The European firm now plans to invest USD 9-10 billion in India. Similarly, the Rolls-Royce Defence Aerospace has also maintained its 50 years partnerships with India and now has plans to expand its footprint in India.

Thus, the USD 10.5 billion MMRCA deal, for which the winner is likely to be announced by the end of this year has all the potentials of propelling the Indian aerospace sector to new heights, which will utilize the DPP-2009.

But the new DPP needs to be sustained by a well coordinated policy framework guiding coordinated actions between various stakeholders and concerned ministries. Since Indian aerospace industry is still in a nascent stage, the offset conditions will force the arms major to source the equipment from India for which they will have to aid the Indian manufacturers in setting up facilities with transfer of technology.

The rapid induction of modern fighters will also require the modernization of the airfields for which the MoD has initiated a modernization program, worth USD 243 million which has been awarded to the Tata Power SED who will source a range of navigation equipment from companies like Northrop Grumman.

The equipments will include instruments landing systems, doppler radars and so on. The MAFI project of the IAF has a mandate of revamping all the airfields in the country to facilitate the easy operation of all the modern jet fighters that are being inducted in the IAF in the coming years.

For the modern fighters the airfields need advance air traffic management, navigation and landing systems, meteorological and communication facilities. In the first phase of the project, almost 30 airfields will be upgraded which will include airfields on the Sino–Indian border.

In the second phase 30 more strategically important airfields will be taken up for upgradation of facilities. Thus the acquisition plans of modern fighters have resulted in airfields modernization which will further propel the aerospace industry in the country to new heights.

In the military aviation the next decade will see the induction of almost 200 MMRCA, 51 upgraded Mirage-2000s, 250 fifth generation fighters, more than 500 helicopters of various categories, more than five squadrons of maritime fighters, modern long range radars, scores of ballistic missiles and anti-missile systems, long range transport planes to be jointly manufactured in India with Russians.

In the civil aviation the Indian airlines companies will be acquiring around 1000 aircrafts which will result in the need for large numbers of MROs. All these new acquisitions will sow the foundations of a flourishing aerospace industry in the country.

The maintenance, repair and overhaul facilities will also have to be upgraded to meet the requirements of the modern fighters which will generate constant demand for aviation equipments from the armed forces and airlines in India.

Many companies have chalked out plans to expand and set up MRO facilities in India. All these will thus activate the Indian aerospace sector and invite not only investments from international aerospace giants but also the latest technology will also flow to India.

Till now, HAL has developed sufficient technology and production base to absorb the technology and investment from abroad in the aerospace sector. The HAL has been manufacturing Russian and British fighters and European helicopters under license which has aided the Indian aerospace manufacturing with new technology and capacities.

India now hopes to leverage on this manufacturing base developed by HAL, which in fact will also assist the other Indian private aviation companies to develop and flourish.