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Introduction
The Indian Defence sector is growing at an unprecedented unprecedented rate with the country now
ranked as the 10th largest investor in defence globally. India established itself as the Worlds largest arms s importer in 2011 with 70% of its defence procurement coming from foreign companies. Russia, Israel and United states remain the top suppliers of defence equipment to India. The threat threat from China and Pakistan and their growing defence capabilities has led to a modernisation moderni drive with the official defence budget amounting to $36.54 billion in 2011 (1.8 1.8 per cent ce of GDP). Private sector participation participati has seen significant growth in Indias indigenous defence production and a move from being suppliers of raw materials and parts to full scale licensed production. Military expenditure in India is forecasted casted to grow at a CAGR of 8.3% 8.3% and is expected to exceed $ 75 billion per year by 2020.
aircraft (FGFA) Advanced Medium Combat Aircraft (AMCA) Multi Role Transport Aircraft (MTA) Tejas Mk1 Tejas Mk2 Tejas Naval version C-17 40 180 44 10 Contracted with an option to purchase 6 more P-8I Poseidon 8 Contracted with an option to buy 4 more. 12 more are planned for future bringing overall fleet to 24 Mig 29K Carrier based Multi Role fighter for Navy Sukhoi Su30 MKI and upgrade to Super Sukhois C-130 J 6 delivered, 6 more to be acquired Mi-17 Helicopters 80 ordered, second batch of 71 more to be ordered AH 64 D Helicopters 22 ordered, option to purchase 22 more S-70 Bravo or NH-90 16 ordered, 44 more to be acquired IL 70 Phalcon AWACS 3 Evaluation completed, contract to be finalised Induction in progress, One delivered PC-7 Pilatus Trainer Kamov 226T OR Eurocopter AS550C3 Some high value indigenous defence projects include HJT-36 Sitara (73 contracted, 127 more to be ordered) ; Combat air trainers (57) ; Basic Trainer aircraft (106) ; Light combat helicopters (114) ; Light utility helicopters (187) 75 to be ordered 197 Approval Pending Contract to be finalised Induction in progress 42 29 (Second batch) RFI Issued Deliveries to begin in 2012 For Navys third aircraft carrier to be commissioned in 2018 Induction in progress Induction planned by 2013 Induction planned by 2013 Induction planned in 2012 45 Induction planned by 2016 250 Induction planned by 2020
the lowest bidder in the $11 billion contract for 126 aircraft. Dassault Aviation will now be involved in cost negotiations with the Indian government and if the contract is finalised, it will be supplying the first 18 aircraft in fly away condition while the remaining 108 will be manufactured in partnership with Hindustan Aeronautics Limited. The cost of the deal is expected to escalate to $16-17 billion. The primary reason cited for Rafales selection by India is its lower direct acquisition cost as well as the life cycle cost over a 40 year period compared to Eurofighter Typhoon1. Both aircraft were found to be compliant on technical parameters after field trials by Indian air force. Interestingly, Rafale was the winner in a technical evaluation by Swiss air force according to a recently leaked report but despite that, Gripen was chosen due its low costs. Indias familiarity with the current fleet of French aircraft, Rafales Carrier based capability, weapons and nuclear capability are the other reasons why Rafale was preferred over the Eurofighter.2 Dassault Aviation will have to invest around $8 billion in offsets in the Indian industry which is going to provide a major boost to the original equipment manufacturers as well the small and medium enterprises. France has also ensured significant transfer of technology taking place as part of the deal. Dassaults partners Thales and Safran will also benefit from the deal as they supply the avionics and engines for Rafale. Avionics and embedded systems provided by Thales amount to 25% of the total value of the aircraft while Safrans subsidiary (Snecma) supplies the engines. Hindustan Aeronautics Limited will be the primary manufacturing partner of Dassault aviation in India. Offset Contracts will be awarded to the Indian companies by Dassault and its partners and this will lead to the continued growth of domestic defence manufacturing. Currently, the small and medium sized enterprises supply around 20-25% of the sub-assemblies and components to public sector units like Hindustan Aeronautics Limited.
http://articles.timesofindia.indiatimes.com/2012-02-10/india/31045422_1_rafale-mmrca-complex-project http://media.aerosociety.com/aerospace-insight/2012/02/08/rafale-wins-mmrca/6231/
Potential Companies vying MMRCA offset contracts Companies Opportunity area Turbomeca Aero Engines Remark Both are Safrans ventures in India Airborne assemblies, Systems and equipments for aircrafts Established industry player, Already into full scale
SNECMA India
HAL,
licensed production Mahindra Satyam, Wipro Large scale systems Integrator , Manufacturing Established industry
Wipro with EADS Mahindra aerospace Aerospace, Max Manufacturing, Aero structure components, Assembly of Mahindra is a new Player in this area, while Max
aircraft sub systems Tata Power, Tata advanced systems, Rolta Thales Avionics, Network Centric
Warfare,airborne C4ISR
assemblies,
Magnum aviation
Aircraft,
Maintenance repair, overhaul Punj Lloyd aviation, Maini Precision aerostructure Parts aircraft and manufacturing, components accessories , of SMEs SEC industries from for had DCNS won of
Precision
Products,
contract France
scorpene Maini is
submarines.
providing components for P8 Poseidon Infotech aerospace, engineering services Halbit Display Avionics, systems, Samtel Data Avionics, Simulator systems Aircraft and displays, training Samtel display systems Enterprises, Axis Safran Life cycle support, Engineering and design SMEs
have a joint venture with Thales. Won the contract for Mirage 2000 upgrade
Patterns, Avantel
sector units (PSUs) to establish joint ventures with private firms. Some of the recent joint ventures and partnerships in India are listed below.
Recent Defence Joint Ventures / Partnerships in India ( Starting 2010) Companies Wipro, CAE Augusta Westland, Tata Sons Rolls Royce, HAL Mahindra & Mahindra, BAE systems HAL, United aircraft corporation, Rosoborn export Diehl Remscheid, India Forge Combat Vehicles, Development and production of Diehl system tracks Ashok Leyland, Paramount Group Lockheed Martin, Tata Advanced systems Tata advanced systems, HBL Elta Avionics Bharat Electronics Limited, Terma Manufacture of Mine Protected vehicles Aero structures manufacturing, design and development Radar, Communications, Electronics warfare Naval Radar and aircraft self-protection technologies Axis Aerospace, Rosoboron export Manufacture of avionics equipment for MiG aircraft Northrop Grumman, Pipavav Shipyard MOU signed to explore potential business relationships Mahindra & Mahindra, Telephonics Radar, surveillance and communication systems Area of Collaboration Simulation, C4ISR Assembly of AW 119 helicopters Manufacturing Land Vehicles for Indian army Multi role transport Aircraft
The best strategy is to work on individual programs by becoming offset partners with foreign defence manufacturers entering the Indian market. A recent example
is the tie up between Wipro infrastructure engineering and EADS for a component manufacturing unit.
With the strong hold of public sector undertakings in the Indian Defence market, joint ventures are likely to be the common entry strategy. One recent example is the joint venture between Lockheed Martin and Tata advanced systems The Indian Air Force is trying to bring together a consortium of domestic firms to compete for the manufacture of medium transport aircraft. Formation of such consortiums is strongly advised to promote collaboration between domestic companies. MoUs are likely to lay the road for future joint ventures. Such agreements are strongly encouraged to explore business partnership opportunities. Recently, Eurocopter has struck long-term agreements with Mahindra Satyam and Mahindra Aerospace - the engineering and aircraft manufacturing subsidiaries of Mahindra group. Developing research and development or training centres is a strategy to build long-term relationships in the industry, and establish a sustainable presence in the market. A recent example is of SAAB India technology centre in partnership with Mahindra Satyam. Frost & Sullivans new report on Indian Defence Market is available now. To know more about this report please contact andrew.thorndyke@frost.com or balaji.srimoolanathan@frost.com.
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