In a move that is seen as more strategic than just commercial, India plans to rope in a private sector player to manufacture 90-seater passenger aircraft over the next five years. Having received an in-principle approval from the Planning Commission earlier this week, the Department of Science and Technology will soon move a Cabinet note proposing series production of the aircraft at a total cost of Rs 7,555 crore.
According to senior government officials, the overall configuration of the aircraft has been finalised and specifications of the three major sub-systems — engine, avionics and control systems — drawn up. “While the commercial viability of the project has been confirmed, the design and development phase — estimated to cost Rs 4,500 crore over three years beginning January 2012 — is proposed to be fully funded by the government,” the official told The Sunday Express.
The officials said the project would be executed by a joint venture company with majority participation by the private player. “The Cabinet’s approval is being sought for releasing an expression of interest to rope in an Indian company or a global original equipment manufacturer (OEM) as a JV partner. It is proposed that the CEO will be from the private sector. He will work under an institutional governance structure chaired by an eminent technocrat, probably appointed by the Prime Minister himself,” the official said.
When contacted, Planning Commission Deputy Chairman Montek Singh Ahluwalia confirmed the development. “With India expected to become the largest economy over the next 30 years or so, it is important we enter such complex manufacturing areas,” he said. Plan Panel member Arun Maira said a private sector player would bring “management expertise and appropriate technology” — two key ingredients for success of such a “daring” venture.
According to Maira, aircraft development — a sophisticated and complex activity — will stimulate the domestic manufacturing sector and spawn a new set of ancillary industries. This is seen as a big spin-off benefit that will come with such a project. “The Tatas and Mahindras have demonstrated that we can produce quality cars at a low cost. India is still quite competitive when it comes to manpower and design costs,” he said.
The government also considers this as an appropriate time to foray into civil aircraft production given the domestic industry’s growth projections of 10-15 per cent over the next 15-20 years. It is estimated that revenue passenger kilometre will witness a five-fold growth till 2025. During the next two decades, India is estimated to see a demand for 500 aircraft, much of it in the 70-100 passenger segment. This space is currently catered to by Embraer that has a history of over 40 years.
In the presentation made by the Council of Scientific and Industrial Research - National Aerospace Laboratories, the primary partner for the project, it is projected that the JV company would produce at its peak 36 aircraft every year. It is expected to break even in the second year of reaching full capacity by 2022 with revenues of Rs 5,000 crore and profits of Rs 15 crore. The company is expected to start production with about five aircraft as early as 2017, the fifth year after the project launch in January 2012.
India Market
* Civil aircraft requirement will be over $100 billion for India over the next 20 years
* Air traffic in India, the next most important market after China, is growing 10-15%
* India is the only BRIC country that does not have a civil aircraft programme
* India is estimated to require 500 aircraft over the next 15 years, the world 7,000
The New Venture
* Private sector to have majority stake in proposed joint venture company
* CEO from private sector to be supported by an institutional governance structure
* Project to cost Rs 7,555 crore, of which Rs 4,500 crore in design & development phase
* First aircraft to take off in 2017; peak production of 36 aircraft expected in 2021
Source: http://www.indianexpress.com
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