New Delhi: Commercial and military jet engine maker GE Aviation, a unit of General Electric Co., plans to spend some $300 million (around Rs1,368 crore) in India ahead of deadline to fulfil its obligations for engine purchases by flag carrier Air India, said country director Nalin Jain.
The so-called offset obligation is part of an order placed by Air India for 111 Airbus and Boeing aircraft in 2005 and 2006, valued at $11 billion at list prices. GE Aviation is the key engine supplier for these aircraft together with CFM International, its 50:50 joint venture with France’s Snecma SA.
GE Aviation undertook to source aircraft engine components from Indian suppliers and invest in India part of the value of the deal to the tune of $300 million.
“We have close to $300 million in offsets. The timeline is till 2020 or so, but we will be able to surpass that,” Jain said in an interview on the sidelines of the India Aviation 2010 air show in Hyderabad earlier this month.
Jain said GE had tied up with a dozen manufacturing firms, including Godrej Group and state-owned military plane maker Hindustan Aeronautics Ltd, to source aeronautical components for engines to meet the offset obligations. These include parts for CFM engines.
It has also, in the past 18 months, certified and trained some of these firms to align their standards for components to meet GE requirements. It has tried to bring in foreign firms to develop partnerships with local firms to build a steady supply chain.
Chennai-based Kerns Manufacturing India Pvt. Ltd, an affiliate of US-based Kerns Manufacturing Corp., with stakes owned by south Indian business groups Shivkumar Reddy Group and Babu Group, is a case in point. The facility came up in 2007. In 2009, GE Equity bought a 30% stake in Kerns Manufacturing India for around $2 million. The firm is now a key supplier of GE.
GE and CFM engines are powering 400 aircraft flying in India. They have orders for around 250 engines from Indian carriers.
Ratan Shrivastava, director for aerospace and defence at market researcher Frost and Sullivan, predicted original equipment manufacturers (OEMs) such as GE Aviation would gradually invest more in Indian aerospace manufacturing.
“OEMs, which would require to deliver as part of their deals in civil aviation, would like to build upon the capability on the industrial base present in India—such as design, electronics, avionics, aerospace structures and product maintenance,” Shrivastava said. “In future, as they would have to invest more in India, as a natural progression, they will move up the engineering value chain.”