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The Defence Acquisition Council (DAC)’s decision on Saturday to open the door to private sector players in manufacturing of military aircraft will help create a second line of aircraft production capacity in the country, complementing the capabilities of public sector players such as Hindustan Aeronautics Limited (HAL), said industry players.
Chairing the DAC, Defence Minister Arun Jaitley cleared the proposed Rs 13,000-crore project for manufacturing 56 transport aircraft by private industry players to replace the ageing AVRO fleet of transport aircraft of Indian Air Force. Following an innovative model under a new categorisation of “buy and make” with provision for transfer of technology to an Indian Production Agency (IPA), the first 16 aircraft will be bought from the foreign original equipment manufacturer, while the rest 40 will be manufactured locally by the Indian partner.
This opportunity to the private sector would strengthen the indigenous capability of Indian industry in aircraft manufacturing and encourages the growth of an Indian aerospace industry in the private sector, said A Didar Singh, secretary-general, Federation of Indian Chambers of Commerce and Industry. This proposal of private sector entry into aircraft manufacturing was first mooted under the United Progressive Alliance regime but the decision was put on hold following resistance from some public sector players. In a sense, the move signals the end of monopoly of public sector undertakings in domestic aerospace for military use. Several Indian private players such as the Tatas, Reliance, Mahindra and Mahindra, and L&T are keen to play a more active role in the aviation sector.
R S Bhatia, chief executive officer, Bharat Forge Defence, a key private sector player, said the government’s decision was a positive move, showing its intent to encourage more industry participation in defence production. However, industry players said on its own, a single contract may not be economically viable. “This move has to be followed up with more such contracts to private players to build a viable business case,” said Bhatia.
The new policy allows the foreign technology provider to evaluate and choose the Indian partner. For Indian players, the capabilities acquired through the transfer of technology will open opportunities for civilian spinoffs and export opportunities. The defence minister had noted that this will help the Indian private sector to become “a player” in aircraft-manufacturing, and will lead to “capacity-building” domestically.
