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Domestic firms can expect swift take-off with Boeing deal

Amrita Nair Ghaswalla Mumbai | Updated on January 22, 2018 Published on December 15, 2015

Done deal Defence Minister Manohar Parrikar (right) and US Defence Secretary Ash Carter during a visit to the USS Dwight D Eisenhower in the Atlantic Ocean (file photo) PTI

Aircraft maker’s local procurement clause may give $1-b business to defence cos

Aircraft manufacturer Boeing’s sale of 22 AH-64E Apache attack helicopters and 15 CH-47F Chinook helicopters to India, and the subsequent teaming up with Tata Advanced Systems Ltd (TASL) in early November, to produce Apache fuselages in the country, are a precursor to the exciting times for domestic defence companies.

Over the past three months, bilateral trade with the US has increased by well over $5 billion with the conclusion of Boeing’s $3.3-billion helicopter deal. In the last year, bilateral defence trade amounted to $14 billion.

During his maiden trip to the US last week, Defence Minister Manohar Parrikar met up with Admiral Harry Harris, Pacific Command commander in Hawaii, and then flew with Defence Secretary Ashton Carter to the carrier USS Dwight D Eisenhower, to witness carrier strike group operations, as part of discussions to deepen security relations between the two countries.

India has also tabled 10 high-tech items — including force multipliers which would enhance the nation’s fighting capacity — which it wants the US government to clear for sale.

Offset clause

At a recent ‘Make in India’ meet, Parrikar had reiterated that the Boeing contract, which comes with a 30 per cent offset clause, will bring in business worth about $1 billion for the Indian defence industry.

Criticism over the deal has been rife, admitted the Minister. The Defence Ministry was “bombarded with 38 unsigned anonymous letters questioning the Apache deal”, he recalled, adding: “We decided to go ahead, despite the delay, after taking into consideration the many offsets that were involved.”

To accompany its helicopter sale to India, Boeing has been working on a wide-ranging offset programme.

To discharge its offset obligations, it will look to leverage its network of Indian partners. It may look at local suppliers that it has worked with in the past, such as TASL, Hindustan Aeronautics Ltd, the Kalyani Group, Bharat Electronics Ltd and L&T.

Positive development

“The recent Cabinet clearance (of the purchase of Apache and Chinook helicopters) will add to the local procurement that Boeing will make in India,” Sukaran Singh, MD and CEO of TASL, told BusinessLine.

“Towards this, TASL and Boeing have agreed on work that will be done in India. Therefore, this is a positive development for the local industry.”

“As the Cabinet clears similar pending projects, Indian industry will get a further boost,” he added.

Singh further pointed out that TASL is among the few in the Indian private sector undertaking manufacturing and assembly of both aircraft and helicopters.

“The resulting scale and expertise at which the company now operates make it well positioned for large-scale systems integration work in India’s aerospace and defence sector,” he said.

The company has also been working on other Boeing programmes. “Boeing and TASL in July 2015 signed a framework agreement to collaborate in aerospace and defence manufacturing and potential integrated systems development opportunities, including unmanned aerial vehicles,” he said.

Precision engineering

Speaking about the might of domestic firms, Kabir Bogra, Associate Partner, Khaitan & Co, a legal and research firm, said: “Indian companies have a particular precision in engineering standards, which is a major draw for defence multinationals.

“These resultant offsets will help in building specialised capacities at home, since the standards will get more exacting. And, if domestic companies want to participate, they will need to deliver to those exacting standards.”

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Published on December 15, 2015
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