Paris Air Show 'Make in India' Push Means More Open Offsets

Neelam Mathews
June 15 2015

As part of the "Make in India" initiative, Tata Advanced Systems links up with Airbus to produce C-295 transports in country. Airbus said every one of its programs includes parts from India

Defense manufacturing in India is undergoing a transition from a traditional buyer-supplier relationship to a more open and transparent one. Easing of licensing policy, an increase in foreign direct investment from 26 to 49 percent and a forecast that envisions a 10-fold increase in exports (presently at a miniscule 0.3 percent) are drivers propelling a defense sector currently riding high on the “Make in India” program. The initiative was launched and promoted widely by new Prime Minister Narendra Modi.

An attempt to boost GDP, Make in India sees aerospace and defense (among other industries) as its focus to enhance skill development and build an efficient manufacturing infrastructure. Transparent policies and speedy implementation are also vital ingredients.

“MAKE IN INDIA”

Since India’s defense requirements are largely based on imports, Make in India encourages private-sector participation and alliances with OEMs for internal use and to bolster exports. As India’s procurement gets a kick start with mega projects such as the 36 Dassault Rafales, M777 ultra-light howitzers, medium transporters and light utility helicopters, among others, opportunities are increasingly opening up for aviation- and defense-product manufacturing and supply-chain sourcing.

Defense offsets are expected to generate $4 billion over the next eight years. The policy (which stipulates the mandatory offset requirement of a minimum 30 percent for procurement of defense equipment), once introduced in capital purchase agreements with foreign defense players, should ensure that an eco-system of domestic suppliers grows rapidly.

“The Make in India policy has thrown open a new arena of opportunities for businesses…the imperative to innovate, driven largely by global opportunities,” said Samir Yajnik, president of sales, Asia Pacific, and COOAsia Pacific at Tata Technologies (Hall 4 B84, Hall 3 B80). “Intense competition and technological advances are leading to a need to tap global knowledge resources. This will better assist in shortening production cycles and reducing development costs, while allowing products to be developed for local market with differing customer preferences, geographic conditions or regulatory requirements,” he said.

Tata Technologies has a joint venture with government-owned Hindustan Aeronautics Ltd (HAL, Chalet 128). Tata HAL Technologies addresses the entire virtual value chain for aerostructures and related aero systems. Based in Bangalore, the JV delivers engineering, design, optimization, and manufacturing solutions for major aerospace OEMs and Tier 1 suppliers in North America and Europe.

Under the twin pressures of financial austerity and environmental constraints, frugal innovation will become critical over the next few years, said Yajnik. “For example, the Indian aviation industry is expected to show significant growth, which will usher in opportunities in the maintenance, repair and overhaul [MRO],” he added.

“Indian aerospace is leapfrogging into a new era of strategic autonomy,” added Air Vice Marshal S.J Nanodkar, assistant chief of air staff, operations. However, glitches remain in the policy. In an effort to streamline defense procurements, the Ministry of Defense is set to make changes in the soon-to-be-announced Defense Procurement Procedure (DPP) 2015. A major change expected is the option to migrate from offset obligations to a ‘Buy and Make’ category, where products being manufactured in India will be considered as meeting offset obligations, providing a boost to ‘Make in India.’

“I want our offsets policy not as a means to export low-end products, but to acquire state-of-the-art technology and skills,” said Modi. The new policy draft, that AIN has reviewed, says that transfer of technology (TOT) will be made to the Defense Research & Development Organization (DRDO) so that it can assess the demands on the industry. “This is a bit far-fetched. The role of the OEM ends once TOT is done, and why should DRDO decide which Indian Production Agency should receive the technology?” a private sector official told AIN.

“There is also the question of liability. We need the OEM to share liability for the product that comes under TOT,” said Puneet Kaura, chairman and managing director, Samtel Group, which recently signed a cooperation agreement with General Dynamics to co-produce digital displays in India for a range of military and non-military vehicles worldwide. Samtel has a lot at stake. It has supplied display shipsets for 500 civilian aircraft, via Honeywell, and hopes to export about 1,000 shipsets by next year. More than 100 Indian Air Force Sukhoi Su-30 fighters are fitted with Samtel displays. “We have also gotten into the electronic warfare area which we have started to develop with a foreign partner,” said Kaura. Moving forward, Samtel is looking at multiple line replaceable units (LRUs).

A request by the industry to include services in the policy has not been acted upon yet. “This puts MRO off the list,” said the official.

On reforms in the offsets policy, Modi has said candidly: “I am acutely aware that it still needs a lot of improvements. We will pursue them in consultation with domestic industry and our foreign partners.”

“Unfortunately, some official in the MoD has just done a ‘cut and paste’ on Modi’s announcements without seeing the practical aspects,” said an industry official.

C-295S IN INDIA

During Modi’s visit to Toulouse in April, Airbus Group (Hall 17, Stand C4) CEO Tom Enders said, “India already takes a center-stage role in our international activities and we want to increase its contribution to our products. We support Prime Minister Modi’s ‘Make in India’ call and are ready to manufacture in India, for India and the world.”

“Land, labor and capital are essential for the Make in India campaign,” said Arijit Ghosh, president of Honeywell Aerospace in India (Chalet 100). A focus on developing an entire learning ecosystem around aeronautics and training would, “boost capabilities of domestic employees and suppliers,” he added. In partnership with Tata (Hall 4, Stand B84), Ghosh said the first phase this year of the licensing agreement with Tata Power’s strategic engineering division to produce Honeywell’s tactical advanced inertial navigator (TALIN) in India will include production kits, training and expertise to assemble the system. “By 2016, we plan to move into the second phase where Tata Power manufactures these build kits under license from Honeywell,” said Ghosh.

Airbus Defense & Security, which has emerged as a single vendor for India’s medium transport bid, has linked up with Tata Advanced Systems Ltd to produce C-295s in India. It is also active in aerospace manufacturing, having 35 suppliers working across the Airbus supply chain, contributing $400 million to turnover in 2014. “Every Airbus program is now partly made in India,” said Dwarakanath Srinivasan, managing director of Airbus India.

Airbus has 196 commercial passenger aircraft flying in India, a fleet that creates further opportunities. “Airbus has been a major driver for commercial aerospace manufacturing in India in the past decade,” said Aravind Melligeri, CEO of Aequs, which manufactures landing gear components and ships them to Airbus for final assembly.

Another agreement in India is with Dynamatic Technologies, and Airbus has made the Bangalore-based company the single-source supplier of flap-track beams for the wide-body A330 family. Others, such as IT giant Infosys, help mmanufacturers worldwide to take advantage of the talent pool in India. “So when you are doing some part of manufacturing or real ‘Make in India,’ you need integration, IT and intelligence to be integrated together, and that is how we are facilitating…[by] bringing to manufacturers the quality and knowledge horsepower of India to bind the things together,” said Nits Bansal, vice president of manufacturing for Infosys.

LEVEL PLAYING FIELD

To enable OEMs to commit long-term capital to India and to establish/expand their presence in the country, “It is imperative the emerging policy framework provides for integration of their manufacturing footprint in India into their global supply-chain network. The larger objective of making it easy to do business in India will be achieved when the government is able…[to] alleviate concerns around foreign direct investment, investor protection, land acquisition, licensing issues [and] taxation regime,” said a report by law firm Khaitan & Co.

 “We have to create a level playing field to drive the private sector…Exports need to liberalize…[and] certificates for exports take too long…,” acknowledged Amitabh Kant, Secretary, DIPP (the Department of Industrial Policy& Promotion).

Defense manufacturing in India is undergoing a transition from a traditional buyer-supplier relationship to a more open and transparent one. Easing of licensing policy, an increase in foreign direct investment from 26 to 49 percent and a forecast that envisions a 10-fold increase in exports (presently at a miniscule 0.3 percent) are drivers propelling a defense sector currently riding high on the “Make in India” program. The initiative was launched and promoted widely by new Prime Minister Narendra Modi.

An attempt to boost GDP, Make in India sees aerospace and defense (among other industries) as its focus to enhance skill development and build an efficient manufacturing infrastructure. Transparent policies and speedy implementation are also vital ingredients.

“MAKE IN INDIA”

Since India’s defense requirements are largely based on imports, Make in India encourages private-sector participation and alliances with OEMs for internal use and to bolster exports. As India’s procurement gets a kick start with mega projects such as the 36 Dassault Rafales, M777 ultra-light howitzers, medium transporters and light utility helicopters, among others, opportunities are increasingly opening up for aviation- and defense-product manufacturing and supply-chain sourcing.

Defense offsets are expected to generate $4 billion over the next eight years. The policy (which stipulates the mandatory offset requirement of a minimum 30 percent for procurement of defense equipment), once introduced in capital purchase agreements with foreign defense players, should ensure that an eco-system of domestic suppliers grows rapidly.

“The Make in India policy has thrown open a new arena of opportunities for businesses…the imperative to innovate, driven largely by global opportunities,” said Samir Yajnik, president of sales, Asia Pacific, and COOAsia Pacific at Tata Technologies (Hall 4 B84, Hall 3 B80). “Intense competition and technological advances are leading to a need to tap global knowledge resources. This will better assist in shortening production cycles and reducing development costs, while allowing products to be developed for local market with differing customer preferences, geographic conditions or regulatory requirements,” he said.

Tata Technologies has a joint venture with government-owned Hindustan Aeronautics Ltd (HAL, Chalet 128). Tata HAL Technologies addresses the entire virtual value chain for aerostructures and related aero systems. Based in Bangalore, the JV delivers engineering, design, optimization, and manufacturing solutions for major aerospace OEMs and Tier 1 suppliers in North America and Europe.

Under the twin pressures of financial austerity and environmental constraints, frugal innovation will become critical over the next few years, said Yajnik. “For example, the Indian aviation industry is expected to show significant growth, which will usher in opportunities in the maintenance, repair and overhaul [MRO],” he added.

“Indian aerospace is leapfrogging into a new era of strategic autonomy,” added Air Vice Marshal S.J Nanodkar, assistant chief of air staff, operations. However, glitches remain in the policy. In an effort to streamline defense procurements, the Ministry of Defense is set to make changes in the soon-to-be-announced Defense Procurement Procedure (DPP) 2015. A major change expected is the option to migrate from offset obligations to a ‘Buy and Make’ category, where products being manufactured in India will be considered as meeting offset obligations, providing a boost to ‘Make in India.’

“I want our offsets policy not as a means to export low-end products, but to acquire state-of-the-art technology and skills,” said Modi. The new policy draft, that AIN has reviewed, says that transfer of technology (TOT) will be made to the Defense Research & Development Organization (DRDO) so that it can assess the demands on the industry. “This is a bit far-fetched. The role of the OEM ends once TOT is done, and why should DRDO decide which Indian Production Agency should receive the technology?” a private sector official told AIN.

“There is also the question of liability. We need the OEM to share liability for the product that comes under TOT,” said Puneet Kaura, chairman and managing director, Samtel Group, which recently signed a cooperation agreement with General Dynamics to co-produce digital displays in India for a range of military and non-military vehicles worldwide. Samtel has a lot at stake. It has supplied display shipsets for 500 civilian aircraft, via Honeywell, and hopes to export about 1,000 shipsets by next year. More than 100 Indian Air Force Sukhoi Su-30 fighters are fitted with Samtel displays. “We have also gotten into the electronic warfare area which we have started to develop with a foreign partner,” said Kaura. Moving forward, Samtel is looking at multiple line replaceable units (LRUs).

A request by the industry to include services in the policy has not been acted upon yet. “This puts MRO off the list,” said the official.

On reforms in the offsets policy, Modi has said candidly: “I am acutely aware that it still needs a lot of improvements. We will pursue them in consultation with domestic industry and our foreign partners.”

“Unfortunately, some official in the MoD has just done a ‘cut and paste’ on Modi’s announcements without seeing the practical aspects,” said an industry official.

C-295S IN INDIA

During Modi’s visit to Toulouse in April, Airbus Group (Hall 17, Stand C4) CEO Tom Enders said, “India already takes a center-stage role in our international activities and we want to increase its contribution to our products. We support Prime Minister Modi’s ‘Make in India’ call and are ready to manufacture in India, for India and the world.”

“Land, labor and capital are essential for the Make in India campaign,” said Arijit Ghosh, president of Honeywell Aerospace in India (Chalet 100). A focus on developing an entire learning ecosystem around aeronautics and training would, “boost capabilities of domestic employees and suppliers,” he added. In partnership with Tata (Hall 4, Stand B84), Ghosh said the first phase this year of the licensing agreement with Tata Power’s strategic engineering division to produce Honeywell’s tactical advanced inertial navigator (TALIN) in India will include production kits, training and expertise to assemble the system. “By 2016, we plan to move into the second phase where Tata Power manufactures these build kits under license from Honeywell,” said Ghosh.

Airbus Defense & Security, which has emerged as a single vendor for India’s medium transport bid, has linked up with Tata Advanced Systems Ltd to produce C-295s in India. It is also active in aerospace manufacturing, having 35 suppliers working across the Airbus supply chain, contributing $400 million to turnover in 2014. “Every Airbus program is now partly made in India,” said Dwarakanath Srinivasan, managing director of Airbus India.

Airbus has 196 commercial passenger aircraft flying in India, a fleet that creates further opportunities. “Airbus has been a major driver for commercial aerospace manufacturing in India in the past decade,” said Aravind Melligeri, CEO of Aequs, which manufactures landing gear components and ships them to Airbus for final assembly.

Another agreement in India is with Dynamatic Technologies, and Airbus has made the Bangalore-based company the single-source supplier of flap-track beams for the wide-body A330 family. Others, such as IT giant Infosys, help mmanufacturers worldwide to take advantage of the talent pool in India. “So when you are doing some part of manufacturing or real ‘Make in India,’ you need integration, IT and intelligence to be integrated together, and that is how we are facilitating…[by] bringing to manufacturers the quality and knowledge horsepower of India to bind the things together,” said Nits Bansal, vice president of manufacturing for Infosys.

LEVEL PLAYING FIELD

To enable OEMs to commit long-term capital to India and to establish/expand their presence in the country, “It is imperative the emerging policy framework provides for integration of their manufacturing footprint in India into their global supply-chain network. The larger objective of making it easy to do business in India will be achieved when the government is able…[to] alleviate concerns around foreign direct investment, investor protection, land acquisition, licensing issues [and] taxation regime,” said a report by law firm Khaitan & Co.

 “We have to create a level playing field to drive the private sector…Exports need to liberalize…[and] certificates for exports take too long…,” acknowledged Amitabh Kant, Secretary, DIPP (the Department of Industrial Policy& Promotion).