Privatization of India’s Aerospace Industry: Pros and Cons
The Indian Aerospace Industry: Changing Fortunes
After decades of policy paralysis the time looks like changing for the Indian aerospace industry. It appears that the fortunes of the various aerospace engineering companies in India are about to change for good at last. The reason for this burst of hope is fairly apparent and it lies in the seemingly innocuous Aero India, an air show India hosts every alternate year in the capital city of Karnataka, Bengaluru.
India has been hosting its air show every other year steadily since 1996. The venue so far has been Yelahanka Air Force Station, IAF. Today Aero India is known as the second largest air show in the world, only after the Paris Air Show that is held in Le Bourget Airport in the north of that city.
The organizers of the Aero India show include representatives from the Indian Air Force and the Defense Ministry besides the Department of Space and the Civil Aviation Ministry. Among the visitors are hundreds of delegates from the world’s premier aerospace companies as well as representatives from aircraft parts manufacturing companies in Bangalore and aerospace components manufacturers in India. The steady growth of these aerospace related companies has its own story to tell. Privatization of the aerospace industry in India is alive and doing well although it could do much better.
This year the 11th Aero India air show will be held at the same venue in Bengaluru between 14th and 18th February. While the popularity and importance of the air show has been steadily growing since the first air show was held in 1996, something dramatic happened in 2015, at the 10th air show.
The Significance of the Tenth Air Show
The tenth Aero India air show that was held in Bengaluru between 18th and 22nd Feb 2015 drew delegates from 33 countries and from 326 companies. The air show was attended by representatives from 318 domestic companies. The majority of these were amongst the aerospace engineering companies in India. This air show was hosted by the Indian PM Mr. Modi who elaborated on the Make in India program. It is the fallout of this program which will benefit the indigenization of the defense status of India and hasten the process of modernization of the defense industry and the aerospace industry in particular.
According to the PM, the object of the Make in India program was to expand the defense industry in India with the help of both foreign and domestic investors. He stressed on the fact that hereafter it would be very easy for all types of investors to manufacture defense equipment in the country. The transformation, he said was because of certain positive changes that had been made to the policies that governed the procurement of defense stores.
The Future of the Indian Aerospace Industry
The future of a privatized Indian aerospace industry seems rosy. There is after all a ray of hope to this industry after a decade of sluggishness. So far it was the public sector that had dominated this industry with a slothful attitude. It appears that the transparent policy put forward by the Indian PM and his government’s Make in India program will ultimately change the dynamics of the aerospace business.
Presently the country thrives on the production of low grade components. It appears that this situation is about to change and products that are high in technology will be manufactured in future. Hereafter, the prime will now be the Indian company in the new Make in India program while the partner company will be the one that will produce in India keeping the cost and value in mind. The liability for the standard of production will now shift to the Indian partner while both the partners will jointly share the cost of the risk.
There are certain cons too. There is skepticism that aerospace manufacturing in India is still too fragmented. If one sees the Tejas aircraft, the best example of a high technology project in India, the bulk of components has been imported. The policy introduced expects 60% indigenous content. It will take some time for the indigenous aerospace industry to grow to the status unless the private sector invests in R&D.
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