ACMA's 2nd Aerospace & Defence Summit

— Raksha Mantri, Manohar Parrikar assures Defence PSUs procurement process reforms

May 17, 2016 Photo(s): By ACMA
Manohar Parrikar, Honb'le Union Minister of Defence,
Government of India addressing media at ACMA's 2nd
Aerospace & Defence Summit.

With the objective of facilitating its members diversify into the fast growing Aerospace & Defence sector, the Automotive Component Manufacturers Association of India (ACMA) organised its second Aerospace and Defence Summit on May 15 2016. The Aerospace and Defence sector is one of the closest adjacencies of the automotive sector, and with liberalization, it offers tremendous opportunities to the Auto Component sector in India. Luminaries from leading global Aerospace and Defence sector addressed the Summit, while over 100 focussed participants made it a premier business event.

India is in the process of replacing 50% of its ageing defence equipment, and is expected to invest over USD 100 billion in the next 5 years in capital equipment purchases across Air Force, Navy and Army. India and other emerging markets are expected to generate aircraft demand estimated at USD 5 trillion in the next 20 years. According to a joint ACMA-KPMG study, 70% - 80% of the defence equipment cost is used in maintenance and upkeep, an opportunity worth Rs. 20,000 crore, growing at a CAGR of 9%. 15%-20% of this will accrue from Air Force Maintenance, Repair and Operations (MRO) activities covering sub-assemblies, components, spare parts etc.

The Chief Guest for the occasion, Mr. Manohar Parrikar, Honb'le Union Minister of Defence, Government of India, delivering his inaugural address commented, "I am delighted that we have been able to meet one-hundred per cent of defence offset obligation last year, and I am setting a target for achieving USD 2 billion worth of exports through offset in the next two years. With world-class quality practices and manufacturing capabilities, the auto components industry in India is well poised to partner with the Defence Sector to achieve this goal. The government will also create the necessary framework by June 2016, to reform purchasing processes of Defence PSUs, which would benefit all suppliers, especially the MSMEs. This will help realise the Government's vision of Make in India for the Defence sector."

Commenting on the future of the Aerospace and Defence sector, Mr FR Sighvi, Chairman, ACMA Aerospace, Defence & Railways Committee said, "The time is ripe for the auto component industry to amplify its defence production capabilities. Joint efforts between the auto component industry and Ministry of Defence can help enhance India's self-reliance and conserve foreign exchange. The positive approach displayed by the government, including liberalisation of FDI norms in the defence sector and clearer licencing requirements, will provide a thrust to the domestic manufacturing."

Mr. Vinnie Mehta, Director General, ACMA, said, "The vast opportunities offered by the Aerospace and Defence Sector can be an inflection point in the growth for the auto component industry in India. The Indian Auto Component industry is well poised to meet the requirements of the global players in this sector who have set up a manufacturing base in the country."

To help the auto component sector harness the Aerospace and Defence opportunity, the ACMA-KPMG study, recommends the following:

  • Improve Ease of Doing business with DPSUs
    —L1 system of selection of suppliers needs to be revisited. Vendor Selection process as followed by in Automotive Industry, a combination of technical audits, quality and delivery and cost, could be considered.
  • Fostering Skill Development
    —Government with the support of global aerospace players should spearhead structured skill development programs for SMEs
  • Support MSMEs
    —A conducive business environment where gestation period should be short & hassle free as MSMEs do not have the resources to invest & wait.
  • Infrastructure
    —India should have 5 to 6 word class Aerospace & Defence clusters for key sub systems with plug & play infrastructure
  • Defence offsets
    —Offset multipliers for sourcing commercial Aerospace components from Indian players & MSMEs
  • Other enabling factors
    —Key Policy expectations to boost "Make in India" for aerospace & defence components would capture:
  • Create SEZs & Clusters that are plug & play model to attract global investments & encourage component players
  • Developing common Infrastructure Create a technology development fund
  • Offset multipliers for the component manufacturing JVs created in India by the global suppliers (both commercial aerospace & defence)
  • Permit 100% FDI for investments by Tier1s & OEMs for setting up their assembly facilities in India - Promote local sourcing from SMEs
  • Right tax & fiscal incentives to Defence & Aerospace component players - improving their competitiveness vis-a-vis global suppliers.