With aerospace firms outsourcing their work to India to cut product development and manufacturing costs, a whole vista of opportunities has opened up for companies catering to the aerospace sector, Aravind Melligeri, chairman and co-founder, QuEST Global, tells Praveen Bose. Edited excerpts:
Why do global aerospace companies want to source from India?
With about $25 billion worth of aerospace orders signed by the ministry of defence in the last four years, and $40-45 billion more in the pipeline, India is a very big market for the defence aerospace segment. Add to that the size of the commercial aerospace market ($130-140 billion worth of commercial aircraft over the next 20 years) and India represents a huge aerospace market for global aerospace OEMs. Government-mandated offset requirements of 30-50 per cent of order values means that there would be huge demand for aerospace services and products to be sourced from India.
What kind of state support does the Indian aerospace sector need?
A start would be for the Indian government to come up with a national aerospace policy that will clearly state what India’s goal should be as a player in the global aerospace world, and how to get there. Another area where the government can help is to get the latest technology to India. The government can create a fund that can be used to acquire technology. It should also be willing to participate in risk-sharing partnerships with global OEMs, to get technology to India. Also, being part of multinational aerospace programmes (for example, the Joint Strike Fighter and the A400M military transport aircraft) will help get work into India.
What kinds of companies are getting offset contracts?
Augusta Westland, Boeing, Lockheed Martin and Textron, among others, have all received contracts from the ministry of defence, ranging from a few hundred million dollars to billions of dollars. In order to comply with the offset requirements, they have correspondingly sub-contracted some activity within India. Pretty much all defence offset contracts flow through HAL, which in turn could further subcontract these orders to Indian private sector players. These private sector players consist of a couple of large business houses, many mid-size companies, and a large number of SMEs, typically promoted by ex-PSU and ex-defence services employees.
What target have you set for your Belgaum SEZ?
QuEST’s vision is to add $500 million in economic value to the region through the SEZ by 2020. We are working with various partners to bring in capability and bridge the industry gaps with respect to the aerospace supply chain.
How big is the aerospace engineering services outsourcing market?
A market study by Booz & Co. conducted in 2010 on behalf of Nasscom put the aerospace engineering services industry’s size in India at $375-500 million in 2009. It estimated that this would grow to $3.6-4.2 billion by 2020.
