Aerospace & Defence

Outline

Global Aerospace & Defence Outlook1

India Scenario2

Advantage Gujarat3

Dholera Special Investment Region4

Opportunities Galore5

Global Outlook

Source: Stockholm International Peace Research Institute (SIPRI) 2020 Fact Sheet

USA, 38

China, 13.6

India, 3.7

Russia, 3.4

Saudi Arabia, 3.3

Germany, 2.6

Japan, 2.5

South Korea,

2.3

Others, 31

Global Aerospace & Defence (A&D) market is estimatedto be valued at US$ 1600 billion by 2025

Share of world military expenditure (2019)

Source: https://www.weforum.org/agenda/2019/04/4-charts-that-show-the-state-of-global-military-spending-now-at-its-highest-since-the-cold-war/; SIPRI Military Expenditure Database, Apr. 2020

Global military expenditure was US$ 1917 billionaccounting for 2.2% of global GDP in 2019

The top five spenders in 2019 were the USA, China, India,Russia, and Saudi Arabia accounting for 62% of global militaryspending

Average military spending was 1.4% of GDP for countries inthe Americas, 1.6% for Africa, 1.7% for Asia and Oceania andfor Europe and 4.5% for the Middle East

India Scenario

Source: Ministry of Defence, Govt. of India; Make in India; World Military Balance 2016 Report – International Institute for Strategic Studies;

1 US$ ~ INR 70

2nd largest armed forces in the world

3rd largest in military expenditure US$ 71.1 billion (2019)(2.4% of GDP and 3.7% of the global military expenditure)

Defence budget US$ 66.9 billion (INR 4,71,378 crore) for 2020-21 (15.5% of total budget and growth of 9.4% over 2019-20)

FDI worth US$ 8.82 million (INR 61.74 crore) in Defence Sector (Apr 2000 – Dec 2019)

`

The Indian A&D market is estimated to reach around US$ 26 billion by 2025

Key Facts

US$ 1.5 billion worth

of exports 2018-19

15%share in

Global arms import market

US$ 5 billion export target

by 2025

Ministry of Defence, Govt. of India; DIPP; Institute for Defence Studies and Analyses (IDSA)

US$ 7.3 billion worth of

ongoing DRDO projects

Make in India - Defence Production

Source: Ministry of Defence, Government of India; Institute for Defence Studies and Analyses (IDSA) reports

• 52 offset contracts signed by MoD worth US$ 11.79 billion till March 2019

• 452 industrial licenses issued for manufacturing of Defence items till October 2019

• By 2030, US$ 13.5 billion worth of defence offset obligations would be discharged by foreign OEMs

Defence Production Policy 2018

• Defence procurement from Indian vendors worth US$ 10.56 billion (INR 73,918 crore) in 2018-19

• 41 Ordnance Factories and 9 DPSUs contributing to defence production of more than US$ 8.29 billion (INR 58,000 crore)

• Defence procurement from foreign vendors worth US$ 23.66 billion (INR 1,65,590 crore) in 2018-19

Defence Offset Policy

List of Products and Services eligible for Discharge of Offset Obligations

Defence Products Small arms, mortars, cannons, guns, howitzers, anti tank weapons and their ammunition including fuzes, etc.

Products for inland/ coastal security

Arms and their ammunition, Specialised Protective Equipment, etc.

Civil Aerospace Products

Design, Development, Manufacture and Upgrade of all types of fixed wing and rotary wing aircraft or their airframes, aero engines, avionics, instruments and related components

Services (related to eligible products)

(a) Maintenance, repair and overhaul.(b) Up gradation/life extension(c) Engineering, design and testing(d) Software development(e) Quality assurance(f) Training(g) Research and Development services

Robust Value Chain

Source: Ministry of Defence, Government of India; https://www.maiervidorno.com/industry-expertise/aerospace-defence/

• Innovation for Defence Excellence (iDex) hubs across the country• US$ 15.4 million allocated to set up Technology Development Fund for R&D

• Defence Production Policy 2018 to promote domestic production and assembly by public sector, private sector and MSMEs

• India’s current MRO market size is estimated to be around US$ 750 million• Indian MRO spending is worth US$ 1.5 billion

Research & Development

Engineering Design

Manufacturing

Assembly

Aftermarket

MRO

• Potential of US$ 1 trillion by 2025 in the defence manufacturing sector • Development of Manufacturing Clusters & Parks

• Defence industrial corridors to promote participation of startups and SMEs• Introduction of Indigenously Designed, Developed and Manufacture (IDDM)

FDI limit increased to 74% from 49% under automatic route to attract MNCs and give an impetus to the sector under ‘Make in India’

Industry Trends

Source: https://reports.weforum.org/manufacturing-growth/aerospace-industry; https://defproac.com/?p=1438

‘Make in India’ Focus

100% FDI in defence sector

Defence Production Policy 2018

Growing defence budget

Great potential of MRO Market

Gro

wth

D

rive

rs

Europe33%

Americas41%

Asia26% Europe

33%

Americas33%

Asia34%

MRO Market Share shifts to Asia

2012 2025

• Asia will be the largest market, accounting for 34%

global value

• Global MRO spending to cross the US$ 110 billion mark

by 2025

• Indian MRO industry is expected to grow to over US$

4.33 billion by 2025

India plans to spend US$ 130 billion on military modernization by 2025

Competitive Landscape

Defence Public Sector Undertakings Private Sector International Investors

Advantage GujaratManufacturing Powerhouse

Source: Socio Economic Review, Gujarat (2019-20)

Gujarat’s Gross State Domestic Product (GSDP) at current prices grew at 13.1% in 2018-19

State contributes 36% to manufacturing sector

State contributes 16.85% to India’s total industrial output

More than 3.3 million MSMEs in Gujarat (NSS 73rd round, 2015-16)

INR 1450 Crore allocated towards development of Industries including MSMEs

US$ 26.66 billion worth of FDI

inflow (Apr 2000–Mar 2020)

10% contribution to India’s factory establishments

16.85%14.86%

10.70%

6.55% 6.38%

Gujarat Maharashtra Tamilnadu Karnatka UttarPradesh

Percentage share in India's total output

Establishment of GUJSAIL to enable the growth of the air hub and aviation industry

17 operational airports and airstrips and upcoming International airport at Dholera

Strategic location for MRO activities and proximity to Delhi-Mumbai Industrial Corridor (DMIC)

Gujarat - Favorable Destination for A&D Sector

Presence of engineering clusters and MSMEs to support state’s A&D plans

MRO - A growing Segment

Indian MRO industry is

worth US$ 750 million

(2018-19)

Global MRO Industry is

worth US$ 45 billion

(2018-19)

MRO in Gujarat

• GUJSAIL has recently set up a General Aviation MRO in Ahmedabad

• It has parking facilities for two aircraft and is equipped with repair shop, store for parts and

equipment, offices and other facilities

• It can handle airframe heavy maintenance, component services, line maintenance and

inspection of private business aircraft and also planes used for other purposes

• A Legacy 650 was one of the first aircrafts to come to this MRO

1

2

3

4

Source: Civil Aviation Department, Government of Gujarat

Dholera Special Investment Region

Dholera

Vadodara

150 km

100 km

50 km

200 km

Ahmedabad

Dessa

Kandla

Porbandar

Keshod

Rajkot

Mundra

Mithapur

KhavadaChasbet

Radhanpu

r Mehsana

Drangadhara

Wadhwan

Limbdi

Amreli

Morvi

Wankaner

Parsoli

Bhuj

Jamnagar

Nalilya

Chela

Khambalia

Bhavnaga

r

Vadsar

L&T Shipbuilding @ Hazira

Reliance Naval and Engineering Limited @ Pipavav

L&T Ranoli Manufacturing facility

Passenger and Cargo

Private Airstrips

Existing private sector defence facilities

Defence Airports

Airforce Base State Govt. Airstrips

Advantage Dholera

1. Potential of Defence and Aero Manufacturing Clusters• Provision of Helipad• Adequate space for Testing Airstrip /

Runway• Strategic location of Ancillary Industries• Future expansion of industries possible

2. Proximity to Dholera International Airport• Proposed International Passenger and

Cargo Terminal• Two runways for smooth operation• Great potential to setup MRO

3. Presence of over 35 R&D facilities across state focusing on manufacturing sector

4. Availability of contiguous land parcels for testing range

Incentives (Aerospace & Defence Policy 2016)

Incentives offered as per policy

Capital Investment Subsidy to MSME A&D enterprises

1. Micro units: 25% of eligible fixed capital investment with ceiling of ₹ 12.5 lakh2. Small units: 25% of eligible fixed capital investment with ceiling of ₹ 1.25 crores3. Medium units: 25% of eligible fixed capital investment with ceiling of ₹ 2.5 crores

Land 100% reimbursement of the stamp duty as well as registration fee paid to Government towards lease/sale/transfer of land. Government will support A&D testing ranges/sites in State for testing of Products

Interest Subsidy 1. Mega A&D - ECB or DB - maximum of 2-5% or 50% of interest rate whichever is lower; upto ₹ 10 Crores per annum for 5 years

2. Large A&D - ECB or DB - maximum of 2-5% or 50% of interest rate whichever is lower; up to ₹ 5 Crores per annum for 5 years

3. MSME - ECB or DB - maximum of 2-7% or 50% of interest rate whichever is lower; up to ₹ 1 Crore per annum for 5 years

GST Reimbursement

SGST will be reimbursed subject to overall ceiling of 90% of GFCI as maximum eligibility for reimbursement. It will be allowed for 10 years from the date of production.

Source: Gujarat Aerospace & Defence Policy 2016; https://www.makeinindiadefence.gov.in/admin/writereaddata/upload/files/Gujarat%20State%20policy.pdf

Incentives (Aerospace & Defence Policy 2016)

Incentives offered as per policy

Power Tariff andElectricity Duty

1. Power tariff subsidy at ₹ 1 per unit in the billed amount for period of 5 years2. 100% reimbursement for electricity duty paid by it for period of 5 years from the

date of commencement of production

Skill Development 1. Mega A&D - 50% of cost of training up to maximum of ₹ 1 lakh per employee per annum for 25 employees

2. Large A&D - 50% of cost of training up to maximum of ₹ 1 lakh per employee per annum for 20 employees

3. Large A&D - 70% of cost of training up to maximum of ₹ 10000 per employee per annum for 10 employees

R&D Support 50% capital subsidy to maximum of ₹ 5 Crores

Equity Support Government may participate in the equity share capital of Mega orLarge A&D enterprise directly or through State PSU

Patent Assistance Assist MSMEs in patent and copyrights

Quality Certification Assistance in obtaining quality certification

Source: Gujarat Aerospace & Defence Policy 2016; https://www.makeinindiadefence.gov.in/admin/writereaddata/upload/files/Gujarat%20State%20policy.pdf

Success Stories

Private companies have received 20 licenses for setting up A&D manufacturing units in Gujarat

• It has established a new green-field manufacturing – integration – testing complex at Hazira, Gujarat

• Currently executing the ‘K9 VAJRA-T’ Self-Propelled Howitzer Guns program - the largest contract awarded to an Indian private company by the MoD

• Company has already invested more than INR 250 crore and employs more than 800 people

Larsen & Toubro Ltd Jaivel Aerospace Pvt Ltd

• It is a manufacturing, technology, processes and tooling organization set up in Sanand, Gujarat

• It has invested more than INR 20 crore and employs over 140 people

Source: Industries Commissionerate, Government of Gujarat

Unique Forge (Guj) Pvt Ltd

• It manufactures Bomb Body, Pistol Body, Gears, Driving Flange and other forged products and supplies to Ministry of Defence

• Investment of INR 3.5 crore and employs over 35 people

Opportunities Galore

Aircraft Assembly and Manufacturing

Artillery Combat Vehicles

Shipbuilding

Defence-tech fabrics and Composites

Casting & Forging

Products

Maintenance, Repair & Overhaul

Research & Development

Ammunition & Small Arms

A&D Electronic

Systems

Industries Commissionerate

Block No. 1, 2nd Floor, Udyog Bhavan, Gandhinagar, Gujarat, India - 382 010http://ic.gujarat.gov.in/ Phone: 079-23252683E-mail: comind@gujarat.gov.in

Industrial Extension Bureau (iNDEXTb)

Block No. 18, 2nd floor, Udyog Bhavan, Gandhinagar, Gujarat, India – 382 010www.indextb.com Phone: 079-2325 6009E-mail: md.indextb@gmail.com

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