INDUSTRY REPORT AEROSPACE AND DEFENCE 2018

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Tobias Ward
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1 INDUSTRY REPORT AEROSPACE AND DEFENCE 2018 Compiled for Knowledge partner November 2018

2 INDEX Overview of Aerospace & Defence Industry in India 03 Why Telangana & Andhra Pradesh? 04 Demand Drivers Existing conducive Ecosystem 08 Growing base of Maintenance Repair & Overhaul (MRO) 10 Initiatives and Policy Support by Government 12 Why Hyderabad as a Destination for Organizing Expos on Aerospace & Defence 13

Overview of Aerospace & Defence Industry in India Estimated market size of Aerospace & Defence is for FY 2017-18 US$ 50-55 Billion & expected to grow to US$ 100 Billion over the next 10 years.

3 Overview of Aerospace & Defence Industry in India Estimated market size of Aerospace & Defence is for FY US$ Billion & expected to grow to US$ 100 Billion over the next 10 years. A&D Civil Aviation Defence US $ 42 Billion US $ 16 Billion CAGR 12-14% CAGR 08-10% Aerospace & Defence in Telangana & Andhra Pradesh (refer as AP in report) Hyderabad is considered as the missile center of India with several public sector defence labs and missile manufacturing facilities located here. Telangana is targeting a share of 15-20% market share in the aerospace and defence sector in India. Presence of about 1,000 aerospace and defence related small and medium enterprises adds to its strength in the domain. Home for organizations like Defence Research and Development Organization (DRDO), Bharat Dynamics Limited (BDL) and Hindustan Aeronautics Limited (HAL) and multiple R&D labs, Hyderabad presents the ideal eco-system. Aerospace & Defence Cluster of Telangana & AP Proposed Aerotropolis at Bhogapuram UAV Cluster at West Godavari BEL facility at Machilipatna Aerospace and Defence Park at Ananthapuram Radar Test Bed Facility at Ananthapuram Defence corridors being planned Defence park in Eliminedu Aerospace cluster in Medak district 1) Telangana & Andhra Pradesh Government website 2) Andhra Pradesh policy and strategy:

4 Why Telangana & Andhra Pradesh? (1/4) Major strength of Hyderabad is the presence of 1,000+ (SMEs), some of which are making parts of missiles, launchers, satellites, aircraft, submarine and armaments Some crucial components of inter-planetary vehicle of ISRO s Mangalyaan were sourced from the city Over 70% of Akshay Missile s components are made in the city s SMEs Hyderabad also gets 30% of the outsourced work of ISRO on the space front Existing Partners 1) Telangana & Andhra Pradesh Government website 2) Andhra Pradesh policy and strategy:

5 Why Telangana & Andhra Pradesh? (2/4) Recent Investments Telangana has identified aerospace and defence as priority industries and has two operational Aerospace Manufacturing Parks near Adibatla region, besides an aerospace park operated by GMR adjoining the international airport The State is also planning to set up a larger aerospace and defence park in Eliminedu and create another aerospace cluster within the National Investments and Manufacturing Zone in Medak district with an investment of INR 2,500 Crore in next 3-4 years DRDO has proposed a Centre of Excellence for smart manufacturing in aerospace and defence sectors in and around the city. For this, they have planned invest INR 64,000 Crore by 2025 in Hyderabad TATA Advanced Systems Limited (TASL) has four units in partnership with aerospace giants Sikorsky, Lockheed Martin, Pilatus and RUAG Aviation. They invested INR 4,000 Crore so far. The cabin of the Sikorsky S-92 chopper that ferries the US President Donald Trump was made in Hyderabad TASL signed an agreement with Lockheed Martin in June to produce the F-16 Block 70 aircraft, the latest and most advanced version of the world s most successful, combat-proven multi-role fighter TASL is executing a mission control and communication center for a major missile defence programme of DRDO Hyderabad is expected to be the base for TASL and Airbus s joint venture to replace the Indian Air Force fleet of 56 Avro aircraft with the Airbus C-295 TASL and Boeing to collaborate and explore potential integrated systems development opportunities, including unmanned aerial vehicles French aerospace and defence equipment maker Safran Electrical & Power SAS is planning to set up shop in Hyderabad, and has signed a MoU with the government. The unit will be set up at a cost of INR 52 Crore and is expected to create employment opportunities for 250 people 1) Telangana & Andhra Pradesh Government website 2) Andhra Pradesh policy and strategy:

6 Why Telangana & Andhra Pradesh? (3/4) Adani will start a new plant in Hyderabad to manufacture composite aero structure in tie-up with Elbit Systems of Israel, with an initial investment of $15 million, which will go up to $100 million depending on the order from the government Kalyani Rafael Advanced System (KRAS), a joint venture between Israel s Rafael and Kalyani Strategic Systems, will produce the third generation Spike anti- tank guided missile (ATGM) for the Indian Army. The state of art facility is the biggest FDI in Defence valued about $1billion Pratt & Whitney, a leader in aircraft engine manufacturing has set up its training center in Hyderabad, the third such after the US and China Air India also recently set up an MRO facility at Hyderabad airport to service its aircraft The country s first Defence incubators will come up in Hyderabad, and will be housed at T-Hub, which has already got recognition as one of the country s major centres for nurturing start-ups and creative ideas The incubator will be funded through the Ministry s Innovation for Defence Exellence (idex) scheme (The idex will be funded and managed by a Defence Innovation Organisation (DIO). Initially, a corpus of INR 100 Crore has been created by two PSUs -HAL and BEL, each contributing INR 50 Crore. More defence PSUs will join in with financial contributions when required. Similarly, the Ministry of Defence also will extend funds when necessary Telangana is keen to become a skill hub for aerospace industry Government of Telangana is keen to establish an Aviation University in Hyderabad and have begun talks with the Ministry of Civil Aviation Discussions are also going on for setting up of specialized Aerospace Schools/ Centre of Excellence (COE) in Hyderabad, to meet the growing demands of A&D industries in Hyderabad. The state government has signed a MoU with UK-based Cranfield University to create an aviation university in Hyderabad 1) Telangana & Andhra Pradesh Government website 2) Andhra Pradesh policy and strategy:

7 Why Telangana & Andhra Pradesh? (4/4) Andhra Pradesh Andhra Pradesh Key Highlights 6 existing airports; 1 major and 3 nofrills airports planned Eastern Naval Command HQ in Visakhapatnam Presence of ISRO, Hindustan Shipyard, Bharat Electronics, and other defence PSUs Upcoming naval shipbuilding facility by Reliance Defence at Rambilli, Visakhapatnam Upcoming weapons integration facility in West Godavari district Dedicated A&D park near Palasamudram, Anantapur district Missile testing facility planned in Nagayalanka, Krishna district World-class MRO facility and air cargo complex planned at proposed Bhogapuram Mega Aerotropolis Existing Partners Andhra Pradesh policy and strategy: Upcoming Partners Key Policy Targets 2020 A & D Industry INR 20,000 Crore 5,000 New Jobs Major Clusters / Parks Aerospace and Defence Park (on PPP basis) in Anantapur and Chittoor/ Nellore districts World-class Maintenance, Repair and Overhaul (MRO) facility as a part of proposed Bhogapuram Aerotropolis near Visakhapatnam Air Cargo complex near isakhapatnam Aerospace and Defence industrial park in Palasamudram, Anantapur Key Initiatives Establishment of Aerospace & Defence clusters for ecosystem development Permission to Aerospace and Defence manufacturing industry for 24x7 ( three shift operations ); employment of women in night shift A&D manufacturing industry declared to be a Public Utility under the Industries Disputes Act, 1947

Demand Driver (1/4) Existing conducive Ecosystem - Growing Electronics Industry Hyderabad, currently, is marching towards establishing itself as one of the leading electronic hubs globally.

8 Demand Driver (1/4) Existing conducive Ecosystem - Growing Electronics Industry Hyderabad, currently, is marching towards establishing itself as one of the leading electronic hubs globally. It houses over 250 companies, both large and small which together employ greater than 50,000 professionals By 2020, Telangana State targets to achieve more than INR 120,000 Crore worth of IT exports by growing at a CAGR of 16% and create more than 4 Lakh of direct employment and 20 Lakh of indirect employment Growth in IT/ITES Exports % All India (Projected by NASSCOM) 7 to 9 Telangana 9.32 Note: The statistics were provided by Director of Software Technology Parks of India (STPI) and Development Commissioner, SEZ) T-Works, Government of Telangana s initiative, acts as a prototyping centre for electronics, semiconductors and hardware start-ups At 250,000 sq. ft., T-Works will be one of the world s largest hardware prototyping facilities Phase-1 consists of ~70,000 sq. ft. area and equipment worth INR 10 Crore Launched IoT Policy 2017 to create an atmosphere conducive for IoT specific businesses and manufacturing units to thrive in the State Attract investments worth 10,000 Crore & generate direct employment Existing Partners 1) Telangana & Andhra Pradesh Government website 2) Andhra Pradesh policy and strategy:

Demand Driver (2/4) Existing conducive Ecosystem - Growing Electronics Industry Cyient global providers of engineering,

(TASK) It will be based on train-and-hire model for fourth-year students in TASK registered engineering colleges Government

to be the next big tech hub after Hyderabad, on the lines of Bengaluru-Mysuru Cyient has already set up a campus, where it

will be employing 500 IT professionals The Telangana government has identified five locations - Warangal, Karimnagar,

state government is in advance talks with 3-4 more tech majors to set up centres in the city and hopes to formalize talks

9 Demand Driver (2/4) Existing conducive Ecosystem - Growing Electronics Industry Cyient global providers of engineering, networks, digital and operations management solutions signed an MoU with the Telangana Academy for skill and Knowledge (TASK) It will be based on train-and-hire model for fourth-year students in TASK registered engineering colleges Government is also projecting tier 2 & 3 cities as an attractive destinations for startups and tech companies in this sectorv Warangal to be the next big tech hub after Hyderabad, on the lines of Bengaluru-Mysuru Cyient has already set up a campus, where it will employ around 1,000 people in phases in Warangal Tech Mahindra too, will be soon setting up a campus in Warangal and will be employing 500 IT professionals The Telangana government has identified five locations - Warangal, Karimnagar, Nizamabad, Khammam and Mahabubnagar The government has sanctioned INR 25 Crore in each of these towns to set up IT hubs The state government is in advance talks with 3-4 more tech majors to set up centres in the city and hopes to formalize talks and have them set up operations by the end of this year 1) Telangana & Andhra Pradesh Government website 2) Andhra Pradesh policy and strategy:

10 Demand Driver (3/4) Raw Material Defence PSU Midhani eyeing to cut dependency on Chinese imports. The Mishra Dhatu Nigam (Midhani) Limited is reducing dependency on China for the strategic metals used in defence. Detailed project Report for the proposed joint venture with Nalco to manufacture aluminum alloys at Nellore. It has partnered with another PSU NMDC Limited, is in discussions with Vietnam-based Masan Resources to acquire minority stake in a Tungsten mine. Centre of excellence mooted for work on composites. Telangana and Andhra Composites Manufacturers Association (TAACMA) and FRP Institute with the support of Telangana government has organized the two-day international conference in Hyderabad. This centre of excellence will be working in the futuristic areas - smart composites, self diagnostic composites or self healing composites, nano composites, lean composites & high performance carbon fibers. Defence and aerospace sector is one of the 14 thrust sectors identified for growth by the State government. A composite manufacturing cluster on 123 acres was being set up in Ibrahimpatnam F-16 production can make India fighter jet export hub: Lockheed Martin Global aerospace giant Lockheed Martin intends l to manufacture custom-built F-16 fighter jets in India will make the country an export hub and give it access to an estimated $165 billion fighter aircraft market over the next few decades. Tata Lockheed Martin Aerostructures Limited (TLMAL), a joint venture between Tata Advanced Systems Limited (TASL) and Lockheed Martin, inaugurated India s first-of-its-kind metal-to-metal bonding facility at Adibatla in Hyderabad. 1) Economic Times The Hindu Telangana Today

11 Demand Driver (4/4) 2. Growing base of Maintenance Repair & Overhaul (MRO) GMR Aero Technic, (GATL), a 100%, a subsidiary of GMR Hyderabad International Airport Ltd (GHIAL) has received the Federal Aviation Administration (FAA) approval on popular Narrow Body Aircraft (B737 and A320), Making it an authorized MRO services provider for all C checks for FAA registered B737/ A320 aircraft and for NDT (Non Destructive Testing) inspections Currently, GATL holds the largest share of the market for outsourced airframe Base Maintenance MRO business in India, and approved by the following certifications from across the globe GATL is the first third party MRO in the South Asia region to have carried out C-checks on the latest Airbus A320neo variant Only Authorized Service Facility for Bombardier Q400 aircraft in the region GATL s other focus areas include Defence MRO, smaller component maintenance and various specialized services along with aircraft livery painting Embraer, Air India to set up MRO facility in Secunderabad Brazilian aerospace major Embraer has partnered with state-owned Air India to set up a maintenance and repair MRO facility to maintain its brand of private and business jets in the entire Southeast Asian region The proposed facility is expected to come up at the Begumpet airport in Secunderabad in Telangana 1) Telangana Today, Livemint

12 Initiatives and Policy Support by Government (1/2) Telangana government is preparing a policy for Defence and Aerospace sector The Telangana government has taken a number of initiatives to develop a Defence & Aerospace segment by developing an exclusive Hub, Aero Skills Academy in collaboration with Aerocampus Aquitaine, France and Aerospace Incubation Centre in collaboration with IIT, Hyderabad Aerospace and Precision Engineering SEZ at Adibatla: The Aerospace SEZ at Adibatla, Ibrahimpatnam Mandal of Rangareddy spread of 500 acres is fully functional Telangana government is proposing to set up three more Defence and Aerospace parks on the outskirts of the city here over the next four years with an investment of INR 2,500 Crore Andhra Pradesh Attract at least 4 anchor unit investments of over INR 1000 Crore each in the sector in the policy period Attract orders for at least 10% of all offset obligations discharged by companies in India over the policy period 1. Tax Incentives Net VAT/CST/SGST reimbursements for MSME and large A&D units shall be as per the new Industrial Development Policy % exemption from Entry Tax on Plant & Machinery and capital goods for an initial period of 3 years (or policy validity period, whichever is earlier) from the date of commencement For aircrafts which are brought in specifically for MRO in Andhra Pradesh, 100% reimbursement of VAT/CST/SGST on all input material (excluding Aviation Turbine Fuel) 2. Capital Subsidy Anchor unit subsidy of INR 10 Crore each shall be offered to first 10 aerospace and/or defence OEM enterprises established during the policy period GoAP aims to attract at least one DPSU into AP in the next 5 years Fiscal Incentives provided: 1) Telangana Today, Livemint

13 Initiatives and Policy Support by Government (2/2) 3. Patent Cost/ Quality Certification cost reimbursement Government will provide financial assistance limited to 75% of the cost, subject to a maximum of INR 25 Lakh for obtaining patent registration and 50% of all charges, subject to a maximum of INR 5 Lakh paid for obtaining quality certification 4. Promotion of Defence Public Sector Units and R&D Centers R&D investments in defence above INR 10 Crore would be eligible for a 10% subsidy on investments subject to a maximum of INR 10 Crore per investment AP Government website Why Hyderabad as a Destination for Organizing Expos on Aerospace & Defence Why Hyderabad? Hyderabad is the missile center of India with home to public sector defence labs and missile manufacturing facilities located here The presence of about 1,000 aerospace and defence related small and medium enterprises adds to its strength in the domain. As the home to campuses of organizations like Defence Research and Development Organization (DRDO), Bharat Dynamics Limited (BDL) and Hindustan Aeronautics Limited (HAL) and multiple R&D labs Hyderabad presents the ideal eco-system Industry leaders say that the city has become the ground for implementing the Make in India initiative as several global giants have joined hands with Indian players to set up manufacturing units Hyderabad is a well connected location for Exhibitors as well as Visitors Road connectivity: The density of notified national highways in Telangana is 2.90 km/100 sq.km against the national average of 2.84 km/100 sq.km Strong railway connectivity: The State also has an integrated railway network with railway terminals such as - Nizamabad, Mahbubnagar, Kamma Reddy, Bodhan, Jedcherala, Gadwal and, Balanagar Access to world class airport facility: Rajiv Gandhi International Airport (RGIA), Shamshabad is one of the largest 7 modern airports in India Government of Telangana has entered MoU with Ministry of Civil Aviation and Airports Authority of India for development of small airports at Kothagudem and Warangal Government of Telangana is ranked no 1 in Ease of Doing Business given by Department of Industrial Policy & Promotion (DIPP) and World Bank State of Telangana has unique geographical advantage. It geographically placed in close proximity to major consumer markets such as Bangalore, Mumbai, Kolkata, Chennai etc.

Contact: Sambit Kumar Mund +91 7337518888 HYDERABAD INTERNATIONAL TRADE EXPOSITONS LTD.

14 Contact: Sambit Kumar Mund HYDERABAD INTERNATIONAL TRADE EXPOSITONS LTD. Trade Fair Office Building, First Floor, HITEX Exhibition Centre, Izzat Nagar, Hyderabad Phone: /22 Fax:

Airbus signed MoU with NSDC to set up Centre of Excellence in Aerospace Skill Development Feb 15, 2017 Skill Reporter

Airbus signed MoU with NSDC to set up Centre of Excellence in Aerospace Skill Development Feb 15, 2017 Skill Reporter Bengaluru : Airbus today signed a Memorandum of Understanding (MoU) for establishing