New Delhi: Pawan Munjal-run Hero Motors Ltd plans to tie up with a German firm to manufacture two-seater sports planes at a special economic zone, or SEZ, it wants to set up in Madhya Pradesh, a senior company official said on Tuesday.
The joint venture will mark the expansion of Hero Group, India’s biggest maker of motorcycles, into aerospace- and defence-related manufacturing. Hero Aviation Pvt. Ltd, a unit of Hero Motors, will be the partner in the alliance.
Hero Motors general manager for projects Ashish Gaur said the 300-acre SEZ the group wants to build at an undisclosed site in Madhya Pradesh will also allow international defence companies to set up shop in the country and take advantage of tax breaks.
The deal with the German company is being readied and is likely to be signed by the end of next month, said Gaur, who didn’t identify the potential partner. India’s defence industry is likely to receive an estimated $10 billion (Rs44,100 crore) of foreign investment over the next five years, according to the defence ministry.
The government requires military manufacturers to channel 30% or more of the value of the contracts they win from India back to the country in the form of investment or local procurement.
Diversification move: Hero Motors’ Pawan Munjal. The firm intends to manufacture the planes at an SEZ in Madhya Pradesh. Photograph: Ramesh Pathania / Mint
Hero Motors has nearly two dozen firms under its fold. Its proposed new SEZ, which is awaiting government approval, will house the joint venture for light sports planes besides an aircraft maintenance, repair and overhaul centre. The SEZ is expected to begin operations early in 2009, the company’s website said.
“This is one of the businesses and others will follow,” Gaur said, adding that a formal announcement will be made in the next few weeks. This will also be the first project by Hero Motors in central India; most of the company’s facilities are based in the north.
An analyst said issues related to flight safety and air space will need to be addressed before regulatory approvals are given for small, light aircraft that can land even on small air strips.
“If they can pull it off, it will be a start of a new era for India’s individual aircraft ownership aspirations,” said Mark Martin, analyst at consultancy KPMG’s India offices.
The price of such an aircraft could start from Rs10 lakh to Rs16 lakh if it is manufactured in India or built in the country under licence from an overseas company, Martin said.