Bangalore: South Asia’s biggest airshow opened here on Wednesday with aerospace firms from 25 countries showcasing their latest hardware, including six aircraft makers pitching for the biggest fighter-jet contract up for grabs in the world.
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Despite the global economic slowdown, 592 armament and aerospace companies—half of them Indian, up from 41% in 2007—are taking part in this year’s Aero India event in Bangalore. This year’s edition of the biennial event also features home-grown aerospace component and software firms scouting for international partners and deals.
The level of interest illustrates the significance of India as a market for makers of military hardware. India’s military is forecast to spend at least $30 billion (Rs1.46 trillion) by 2012, a significant portion of it on the purchase of 126 fighter jets for which it has floated the world’s largest military tender in recent years.
The contract is estimated to be worth at least Rs42,000 crore. The Indian Air Force is expected to invite six firms—Lockheed Martin Corp., Boeing Co., European Aeronautic Defence and Space Co., Saab AB, Dassault Aviation SA and Russia’s MiG Corp.—to test their aircraft from April to evaluate their capabilities.
“There is no question of scaling down our defence expenditure...or compromising with our acquisition programmes despite the economic recession,” defence minister A.K. Antony said. “India has emerged as an attractive market and a key outsourcing hub for global aerospace firms due to low-cost, skilled engineers, good organizations, software and technology.”
US defence firm Raytheon Co., which last year signed deals with eight local firms to develop military electronics, has offered its Airborne Standoff Radar systems to help India reinforce its coastline defences. India began beefing up offshore security after the November terrorist siege of Mumbai in which the attackers travelled unnoticed by sea.
“After the Mumbai attacks, we’re making all-out efforts to prevent similar kind of incidents by making our Armed Forces and intelligence agencies work together as a team and equipping them with the latest arms,” the defence minister said.
Besides the 126 fighter jets, transport aircraft and airborne warning and control system, India plans to buy 700 helicopters worth $3.5 billion along with artillery, warships and other hardware.
India also wants the winner to reinvest some of the funds from the deal in developing the country’s aerospace and defence sector by sourcing components and services locally in a requirement known as an offset.
The offset policy has opened up a potential opportunity for firms such as Sigma Electro Systems Ltd, a maker of test equipment for aircraft and aircraft systems based in Nashik, Maharashtra. For at least a decade, Sigma has been reengineering the test equipment that comes with Russian aircraft and making it locally.
“The opportunities are increasing and we have more enquiries from foreign vendors for offsets delivery,” said Vijay Patil, chief executive of Sigma, which employs around 70 people.
V.B. Athmaram, managing director of Varisis Advanced Engineering and Software Technologies India Pvt. Ltd, a Bangalore firm that makes radars and electronic warfare systems, said he is signing joint ventures with firms such as Selex Galileo, a unit of Finmeccanica, for offsets deals.
“Going forward, we will be a source for strategic sourcing for radar and EW (electronic warfare) system and equipment,” said Athmaram, a former military official, who had a stint in India’s Defence Research and Development Organization (DRDO) before venturing on his own five years ago.
Most of these small Indian companies are located in clusters in Bangalore, Chennai, Hyderabad and Pune, to make components and systems for public sector defence units such as Bharat Electronics Ltd, DRDO and Hindustan Aeronautics Ltd.
“They start with being low-end component and system makers, gain knowledge and become strategic partners. For foreign companies, it is a good place for them to outsource them at low cost from India, which has trained technical people,” said Ratan Shrivastava, director for aerospace and defence at researcher Frost and Sullivan.
Naseeb Chand is with AFP. Bloomberg also contributed to this story.