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UN Development Organization (Unido) to help India’s aerospace component makers

Discussion in 'Indian Defence Industry' started by SpArK, Mar 7, 2012.

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  1. SpArK

    SpArK SorCeroR Staff Member ADMINISTRATOR

    Apr 1, 2010
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    Unido to help India’s small-scale aerospace component makers

    The programme will begin by lending technical assistance to help small parts makers in the aerospace sector raise the quality of their products to international standards.

    Chennai: With global aerospace equipment manufacturers looking to expand their supplier bases in India, the United Nations Industrial Development Organization (Unido), with funding from the UK government, is launching an initiative to bolster domestic small and medium scale component makers in the sector.

    “There is going to be a boom in the market here,†said Alejandro Vera Casso, investment promotion expert of the investment promotion unit, Asia and Latin America, at Unido. “Global OEMs (original equipment manufacturers) will be looking to have more and more of their sourcing done in India. So you have to start building up, or India will not be able to fulfil the demand.â€

    Without revealing the extent of the funding, Vera Casso said the programme will begin by lending technical assistance to help small parts makers in the aerospace sector raise the quality of their products to international standards.

    The recent growth in Indian commercial aviation as well as large defence orders have had foreign companies vying to supply to the Indian market. Commercial aircraft consumption in India is expected to reach $24 billion (Rs. 1.2 trillion) by 2016 with a compounded annual growth rate of 15% over the next five years, according to market research firm Lucintel. Defence expenditure between 2010 and 2014 is likely to reach $100 billion, of which $15-20 billion would be spent on military aircraft, consultancy firm PricewaterhouseCoopers estimated in a 2009 report.

    India’s defence offset policy–which also applies to civil aerospace and requires foreign vendors with contracts worth Rs. 300 crore or more to plough back at least 30% of the contract value into local production or research and development—has prompted global players to look for joint ventures and other modes of linkages to domestic manufacturers.

    For instance, the $12 billion defence contract for 126 medium multi-role combat aircraft, won by French firm Dassault Aviation last month, is expected to bring $6 billion in offset contracts to firms in India.

    “India is the biggest aerospace market after the US,†said Neelu Khatri, head of defence and security advisory services with consultancy firm KPMG. “Manufacturers both from Europe and the US are bullish about opportunities here.â€

    Evolution in government policies allowing greater private sector participation and the increased outflow of orders has prompted the interest, Khatri said. Deals worth $43.5 billion have been signed in the defence sector since 2007, and orders worth at least $60 billion are at various stages of procurement, according to Khatri.

    While the offset policy in defence and civil sectors could result in $10-15 billion worth of business for Indian aerospace component makers in the five years until 2014, their capacity to rise to the occasion remains in question.

    “Most of the suppliers are small Rs. 10-15 crore companies,†Khatri said. “They definitely need hand-holding. They need to learn the value of respecting intellectual property. They need to implement stricter project management protocols.â€

    In its new initiative in the aerospace industry, Unido will be tapping into lessons gathered from its work with the Indian auto parts industry, in which it has been helping more than 120 small and medium enterprises for about a decade, Vera Casso said.

    A 2007 PricewaterhouseCoopers study of the impact of Unido’s programme in the auto sector found that “many customer acquisitions, some of them big brands such as Caterpillar, Volvo, General Motors, Valeo, Ingersoll Rand, etc., may be attributed to the programme.â€

    Unido’s latest initiative, being launched in the aerospace components cluster in and around Bangalore, will aim to help suppliers set higher standards and work with lightweight composite materials, which international equipment manufacturers in aerospace as well as automobiles are moving towards, Vera Casso said.

    Unido also met auto component makers in Chennai this week to discuss opportunities in aerospace and gauge interest.

    “It makes sense,†said Khatri, adding that she often hears from a number of auto parts makers looking to manufacture aerospace components. “It’s all manufacturing. It’s just that you need to break your mindset.â€

    The product development and utility cycle in the aerospace component industry is generally four-five times as long as that in the auto industry, Khatri said. “But it’s a long-term gain.â€

    Some auto component makers have already made the leap. The Chennai-based Rane Group last year acquired a 26% stake in Bangalore-based SasMos HET Technologies Pvt. Ltd, which makes cable harnesses for defence and aerospace. Pune-based Bharat Forge Ltd is increasing focus on its aerospace parts business, which it set up in 2007. Delhi-based Anand Automotive Ltd is also looking to enter the aerospace and defence sectors.

    Unido to help India
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