Prime Minister Narendra Modi’s ambitious ‘Make in India’ campaign, aimed at making the country a manufacturing hub for foreign and domestic companies, is all set to get its biggest brand ambassador in the President of the United States of America. The cabins of the new set of ‘Marine One’ helicopters, for the US President’s exclusive use, will be made in India by Tata Advanced Systems, the sole global supplier of these airframes for the S-92 choppers, built by American aerospace firm Sikorsky Aircraft While these choppers are for the USA, firms like Sikorsky are eyeing the Indian market for helicopters, estimated, over the next 25 years, at $24 billion.
India is not a new sourcing destination for Sikorsky but while it is looking to set up base here, that could be some time away. Air Vice Marshal (retired) Arvind Walia, regional executive – India and South Asia at Sikorsky Aircraft Corp, believes foreign global equipment makers need to be allowed more direct equity participation before they see India as a manufacturing destination for finished products. “Hiking the FDI limit in defence to 49% is a welcome move but at that level a foreign partner will not have control,” Walia explained in an interview to FE asking “Why should an OEM (original equipment maker) share years of innovation and technology, worth billions of dollars, with a venture that it can’t control?”
While certain defence requirements, entailing mass production, could persuade equipment makers to bring production lines to India, those “numbers were not in play yet,” Walia said.
Nevertheless, Sikorsky expects the various requests for information(RFI), issued by the Indian armed forces and companies like Hindustan Aeronautics, to materialise into concrete contracts soon.
The Stratford, Connecticut-based company is looking at business worth $7-11 billion from India over the next ten years, Walia said.
Sikorsky, a unit of United Technologies Corp, won a $1.24- billion contract in May to build and deliver six new US presidential helicopters, a first step towards a new fleet of 21 choppers to be delivered by 2023.
Not just the cabins but also the various parts that go into building the airframes for the S-92 will be sourced from India through a company called Tata Sikorsky Aerospace Systems, a joint venture between the Tata Group and Sikorsky in which the latter holds 26%,Walia said. Both the facilities are located in Hyderabad.
“This will put India on the global map as a supplier of repute, providing world-class cabins for the S-92 choppers that will be used by the US President,” Walia said. “US Presidents, since Dwight Eisenhower, have been flying in Sikorsky helicopters, but it would be the first time that they fly in a helicopter with a cabin made in India.”
The company is in contention to bag a contract to supply 16 multi-role Sea Hawk helicopters to the Indian Navy, in a deal valued at over $1 billion. Though the commercial bid is yet to be opened, a Reuters report dated September 26 filed from Washington cited sources to state that Sikorsky was ahead in the race. Sikorsky was earlier edged out by Anglo-Italian chopper manufacturer AgustaWestland to supply 12 choppers to the Indian government for use by VVIPs including the President. The Rs 3,600 crore-deal was marred by a bribery and corruption scandal and finally cancelled in January. Though a fresh tender is yet to be issued for the helicopters, Sikorsky would be interested to participate again if the Indian government invited bids.
Before and during the Indian Prime Minister’s official visit to the US in September, where he also met President Barack Obama, the two countries have agreed to step up bilateral defence cooperation. One of India’s objectives is to develop indigenous capabilities of manufacturing high-technology defence goods, which is why the FDI limit in defence was hiked. The government is also expeditiously moving towards granting licences to important joint ventures that were in the pipeline to manufacture defence goods and allowing some others to start manufacturing through the automatic route.
With US’ own defence expenditure falling, defence equipment makers like Boeing, Lockheed Martin and Sikorsky are looking at countries like India to offset declining sales in their home market. India, with a defence budget of around $38 billion, is the largest importer of defence equipment in the world, including arms. In August, defence minister Arun Jaitley revealed in Parliament that US was the largest exports of defence good to India.
If regulations governing the entry of foreign companies into the Indian defence space become further conducive, companies may look at using India has a manufacturing hub to cater to the Asia Pacific region, which according to Walia, is the “next basket of bread” for companies catering to the defence sector.
Aveek Datta | The Financial Express