Though imported components account for a major share in many of the systems and sub-systems in the Indian aerospace and defense (A&D) sector, imports are coming down (albeit slowly) due to the government’s indigenisation efforts. The size of A&D market that can addressed by small & medium manufacturers is anticipated to go up from Rs 216,000 crore in 2014 to Rs 340,000 crore by 2020. This offers humungous growth opportunity for SMEs, says Rakesh Rao.

 

On March 27 this year, India successfully launched an anti-satellite missile in Low Earth Orbit (LEO), thus demonstrating the capabilities of indigenously-developed aerospace technologies to carry out a critical mission with high degree of precision. With this, India became only the fourth country to test an Anti-Satellite (ASAT) weapon – used to attack enemy satellites or intercepting ballistic missiles – after the US, China, and Russia.

 

Speaking about the importance of ASAT at an event in April 2019, G Satheesh Reddy, Chairman of DRDO, said, all the critical systems, including the software and sensors, were developed by a team of scientists from various specialisations who worked in complete synergy day and night for six months, culminating in the successful launch.

 

Long road to indigenisation

India’s quest for indigenisation of aerospace & defense (A&D) is not new. The present and past governments have announced many steps to increase aerospace manufacturing capability of the country. So how close we are from becoming self-reliant in A&D sector? “We are far away from the target, however we have made steady progress in this field in the last few years,” answers Wg Cdr Venugopal Menon (Retd), Secretary & Senior Director, Society of Indian Aerospace Technologies & Industries (SIATI), Bangalore. SIATI, founded by Dr C G Krishnadas Nair (former Managing Director of Hindustan Aeronautics Limited) in 1991, has about 300 members across India with small and medium enterprises (SMEs) account for over 60 per cent.

 

While A&D electronics consumption is high in India, the domestic production is negligible, particularly in the advanced or specialised electronics space. One of the major challenges in making India self-sufficient in A&D manufacturing is the fact that Indian products work on different platforms compared to other developed countries. This makes them difficult to indigenise. 

 

Over the years, SIATI has been helping the government in its indigenisation initiative for the aerospace sector. Menon elaborates, “From the very inception, one of the main aims of SIATI was to achieve self sufficiency in aerospace. Towards this, we had encouraged all private sector and PSUs to have more and more items to be indigenised. SIATI has also constituted an award for “Excellence in Indigenisation” from its inception to few selected companies every year. The selection is made by an independent panel of Judges. So far we have given this award to 173 companies. This is specially for encouraging the indigenous development in India.”

 

Effects of the government’s indigenisation efforts in aerospace and defense (A&D) sector are visible on the ground with imports coming down, albeit slowly. While the share of imported components stood at 49 per cent in 2014-15, it dropped to 41 per cent in 2017-18. In the aerospace sector, the dependence on imports is much higher compared to defense equipment. 

 

Small contribution of SMEs

Aerospace, a niche sector, uses advanced technology and needs expensive inputs (raw material as well as machinery). This has kept SMEs away from aerospace sector for a long time. SME growth has taken place only in the last one decade due to some proactive steps taken by the government. 

 

Realising the importance of the SMEs in the development of A&D sector in India, the government framed Defence Procurement Procedure (DPP) 2016 to generate demand for Indian manufacturers (who in turn can bolster growth for SMEs). “The opening up the A&D sector to private players has greatly helped the small industries in getting more opportunities. This is also helping India to have a robust A&D sector. It is also heartening to observe the foreign OEMs are taking more and more interest in India,” observes Menon.

 

With the defence offset clause imbibed in the import orders, the opportunities for Indian companies have further opened up. As per the revised guidelines in the DPP 2016, any capital acquisition categorised as ‘Buy (Global) or ‘Buy or Make with ToT’ with a value of Rs 300 crore or more, is required to offset 30 per cent of the value of foreign exchange spent through Indian Offset Partners (IOP). This offset is discharged through various means such as purchase (of goods or services) and investments (FDI or through a transfer of technology). This clause has been fine-tuned to support the MSMEs through a multiplier clause. The revised Defence Offset Guidelines (DOG) for the first time added a multiplier clause to incentivise investment in select areas. In the case of MSMEs, a multiplier of 1.5 is allowed when an offset investment takes place in the form of: purchase from, FDI in, and investment in “kind” in these enterprises. A multiplier of 1.5 implies that a foreign company can claim credit up to 1.5 times the value of its actual offset investment.

 

“Presently there are good opportunities for the SMEs in A&D sector. Due to the mark up on offset, government proactive policies etc, SMEs are now finding more opportunities in this sector,” says Menon.With an objective to help SMEs, the Government of India has established ten Tool Rooms at Aurangabad, Ahmedabad, Bhubaneshwar, Guwahati, Hyderabad, Indore, Jamshedpur, Kolkata, Jalandhar and Ludhiana. High precision components and assemblies at Central Tool Room & Training Centre, Bhubaneswar, which is AS-9100 certified for aerospace component supply, are used not only by MSMEs but also by defence factories, aerospace sector (ISRO and HAL), aeronautical factories, etc.

 

Winning strategies 

With the number of aircraft deployment in India going up, the supply chain needs to improve. In their bid to tap the burgeoning aerospace market in India, domestic companies are eyeing for collaborations with international players. For example, in April 2019, Rialto Enterprises (a part of the Rs 600 crore Rayala Group) entered into a joint venture with the US-based Carr Lane Manufacturing to make aerospace tooling components in India. Carr Lane has customers like Boeing, Lockheed Martin and other majors in the global aerospace sector. While Carr Lane India (the JV company) plans to make tooling components and special alignment devices for the start, plans are afoot to produce very niche products which have high demand in the aerospace industry.

 

Aerospace is considered to be a risky sector to operate in due to stringent regulations, high-tech equipment, heavy dependence on government orders, etc. Hence, it is important for MSMEs to focus on their core competence and not to stretch themselves thin by manufacturing multiple un-related products.  

 

Take the example of SANPAR Industries Pvt Ltd, which has been catering to the Indian industries with clean and dry compressed air for their machineries used in production since 1994. SANPAR has developed a niche for itself in the refrigeration technology that serves even the aerospace industry. The company is certified to AS 9100 D that qualifies it to design and manufacture for aerospace industries. With A&D production opening up for domestic manufacturing, SANPAR expects to gain major orders. 

 

“The company has been supplying air chillers for ground based radars for last 10 years. Now the company supplies compact liquid cooling systems (LCS) for airborne radars, which are fitted into Tejas - the Light Combat Aircraft (LCA). The company supplies airborne liquid cooling systems for the airborne radars which have been hailed by the aviation and defence industry. With innovative products and solutions, we want to make our presence felt in aerospace sector,” said K S Sudhakaran, Managing Director, SANPAR Industries Pvt Ltd, during his earlier interaction with IPF.

 

Similar is the case of Hind High Vacuum Co (HHV) – an expertise in the vacuum technology in India. In September 2018, Hind High Vacuum was selected by ISRO to supply thin film metallised circuits for its satellites. Thin film metallised circuits developed by HHV are unique and have resulted in a significant business growth for HHV. “This have been developed over years of investment in process optimisation and developing a very stable process has allowed world class thin film circuits to be developed indigenously. These supplies are largely met by imports and are seen as very important indigenisation requirement keeping in mind the aggressive growth in the space sector and defence sector. For the Make in India initiative, the need to have these capabilities is enormous and we see the growth in business will be substantial. Our satellite program has almost doubled in capacity and the need for ensuring constant indigenous supply continues to grow,” informs Prasanth Sakhamuri, Managing Director of Hind High Vacuum Co.

 

HHV is not only helping India to become self-reliant but is also exporting its solutions to other countries. “Our exports in this area were extremely good and we have grown in our exports towards the Far-East, China and in Europe. Our coating and optics have also seen growth in our export markets and in applications related to aerospace technologies,” says Sakhamuri. 

 

Skilling for future

As domestic production of aerospace components goes up, the need for more skilled employees is rising and so is their training requirement. To push for reskilling and up-skilling in the industry, SIATI has worked with National Skill Development Corporation (NSDC) and Hindustan Aeronautics Ltd (HAL) to create aerospace and aviation sector skill council in Bengaluru. As of today, 92 job roles had been identified in these segments and approved by the Government of India. 

 

As small and medium scale companies prove their manufacturing prowess in their areas of expertise, global manufacturers are also undertaking training programme for SMEs to be a part of OEMs’ supply chain. For example, in October 2018, Pratt & Whitney, a division of United Technologies Corp, launched its Industry Capability Enhancement Programme to support SMEs. These SMEs serve global aerospace majors through precision manufacturing and highly specialised engineering services from India. The programme has been designed to help industry participants develop expertise on aircraft propulsion systems and identify ways to improve productivity while meeting quality goals, and plan for scalability thus ensuring more efficient, reliable and cost-effective supply base.

 

A hub for aerospace manufacturing 

India aims to achieve indigenisation in the aerospace and defence sectors as imported components account for a major share in many of the systems and sub-systems in the Indian A&D sector. It is estimated that there are around 1,000 SMEs operating in the aerospace and defence space today. With the government launching two defence production corridors, one in Tamil Nadu and the other in Uttar Pradesh, it is hoped that the eco-system will give a substantial boost to MSMEs and aerospace manufacturing. 

       

With the size of aerospace and defence market that can addressed by small & medium manufacturers anticipated to go up from Rs 216,000 crore in 2014 to Rs 340,000 crore by 2020, sky is the limit for SMEs. “As per my assessment, there is a tremendous scope for improvement in growth of A&D manufacturing in India. Major private players with the help wof government policies should be able to attract more and more manufacturing for India. The country has the potential to be a major hub of aerospace manufacturing,” concludes Venugopal Menon of Society of Indian Aerospace Technologies & Industries.

 

Major private players with the help of Government policies should be able to attract more and more manufacturing for India. The country has the potential to be a major hub of aerospace manufacturing.

Venugopal Menon, Secretary & Senior Director, Society of Indian Aerospace Technologies & Industries (SIATI)

 

Our exports in this area were extremely good and we have grown in our exports towards the Far-East, China and in Europe. Our coating and optics have also seen growth in our export markets and in applications related to aerospace technologies.

Prasanth Sakhamuri, SMD, Hind High Vacuum Co

 

The company has been supplying air chillers for ground based radars for last 10 years. Now the company supplies compact liquid cooling systems (LCS) for airborne radars, which are fitted into Tejas - the Light Combat Aircraft (LCA).

K S Sudhakaran, MD, SANPAR Industries Pvt Ltd