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Conference on EPC contracts Tax, Legal and Commercial Imperatives 8 - 9 June 2006 | Hotel Intercontinental The Grand | Sahar Airport Road | Mumbai | India
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EPC
Construction Erection, commissioning, testing and completion of the facility Correction of defects
Procurement Provision of equipments Procurement from third parties Clearing of goods at ports Delivery to the site Provision of spare parts
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CONTRACTORS CONCERNS
Full pass-through of the taxes No risk appetite for taxes Certainty of taxes Minimal or no compliance obligation Consolidation of expertise and consortium operation, if needed
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During the course of the next one and half day, some of the critical aspects of EPC contract would be discussed in detail
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Insert picture stock here Economic growth an opportunity forfrom EPC contractors
Conference on EPC contracts Tax, Legal and Commercial Imperatives 8 - 9 June 2006 | Hotel Intercontinental The Grand | Sahar Airport Road | Mumbai | India
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CONTENTS
Background
India growth path Sectoral growth Core infrastructure growth Service sector Foreign trade FDI Inflation
Attempt to recoup a lost decade Infrastructure investment: looking up Roads: in the right lane Power: going slow but moving Telecom: private initiatives pick up
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CONTENTS
Future outlook
Way forward
Road ahead
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The Big I, has the potential to push or logjam growth, improve or lower quality of life and make India shining or dull on the world stage
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India is awakening to a huge untapped opportunity and has the potential to deliver more than you and I can imagine !!
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India
World
China
USA
7 .3
8 7 .5
5 .9 5 .1
5 .8
5 .1 4 .3 3 .9 3 .8 2 .7 4 .2 3 .5 4 3 .3 4 .3
e h T
1 .3
g i B
4 .8
e r u t c i P
6 .5 6 .1 4 .4
6 .9
5 .8
1 .6
Liberalization initiated
2 0 0 3 -0 4 2 0 0 4 -0 5 2 0 0 5 -0 6 2 0 0 6 -1 0 (E )
199192 199293 199394 199495 199596 199697 199798 199899 199900 200001 200102 200203 200304 200405 200506
2 0 0 1 -0 2
2 0 0 2 -0 3
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SECTORAL GROWTH
Changing pie of GDP contribution
200405 2005-06
20.8 !.!
53.2 26
5" 26.
2 .7
Agriculture (%)
Industry (%)
Services (%)
2 0 0 1 -0 2 2 0 0 2 -0 3 2 0 0 3 -0 4 (P ) 2 0 0 4 -0 5 (Q ) 2 0 0 5 -0 6
10 6 .2 3 .9 0 .7
2 0 0 1 -0 2 2 0 0 2 -0 3 2 0 0 3 -0 4 (P ) 2 0 0 4 -0 5 (Q ) 2 0 0 5 -0 6
S e r v ic e s (% ) 7 7 .3 8 .2 1 0 .1 10
2 0 0 1 -0 2
2 0 0 2 -0 3
20030 4 (P )
2 0 0 4 -0 5
2 0 0 5 -0 6
-6 .9
Source: GoI data, BMR Research
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SECTORAL GROWTH
In d u s tr y (% )
7 2 .7 A g r ic u ltu r e (% ) 7 .6 7 .4 7 .6
10 6 .2 3 .9 0 .7
2 0 0 1 -0 2 2 0 0 2 -0 3 2 0 0 3 -0 4 (P ) 2 0 0 4 -0 5 (Q ) 2 0 0 5 -0 6
2 0 0 1 -0 2
2 0 0 2 -0 3
20030 4 (P )
2 0 0 4 -0 5 (Q )
2 0 0 5 -0 6
-6 .9
S e r v ic e s (% ) 7 7 .3 8 .2 1 0 .1
1 0 .3
2 0 0 1 -0 2
Source: GoI data, BMR Research
2 0 0 2 -0 3
20030 4 (P )
2 0 0 4 -0 5
2 0 0 5 -0 6
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INDUSTRIAL GROWTH
Inde. o+ Industrial Production 8.! 2005$06 %A&ril$'e()%/)
# 5 2.# 5.# 8
! 5.3 0.5
2000$0
200 $02
2002$03
2003$0"
200"$05
* ining
* +g
Ele ctricit,
-e ne ral
1 6 .5
1 1 .7
1 4 .1 11
6 .4 2 .5
B a s ic G o o d s
Source: DIPP, BMR Research
C a p ita l G o o d s
In te r m e d ia te G oods
C onsum er G oods
Consum er D u r a b le s
C onsum er N o n -D u r a b le s
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1 2 .3 6 .4 6 .8 2 .1
5 .1
E le c tr ic ity
Coal
P e tr o le u m -5 .3
S te e l
Cem ent
R e fin e r y P r o d u c ts
he si! core infrastructure sectors registered an average gro"th of #$ %&&#' &( vis a vis #)*$ in corresponding year +verall gro"th of (),$ in -pril %&&(
Source: Ministry of Finance, BMR Research
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SERVICE SECTOR
S e r v ic e s (% ) 1 0 .1 7 7 .3 8 .2 1 0 .3
2 0 0 1 -0 2
2 0 0 2 -0 3
20030 4 (P )
2 0 0 4 -0 5
2 0 0 5 -0 6
'inancial Ser5ices
India accounts for .)/$ of the "orld0s service trade 1ervices account for #&$ of the country0s 2DP today 2ro"th in 1ervices sector pegged at around 3)*$ 4ey contri5utors of gro"th 5eing6 7eal estate elecommunications Construction
.5 !.# #.8
200 $02
2002$03
2003$0"
200"$05
2005$06%A)
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FOREIGN TRADE
India7s 'oreign 1rade %In US8 9illion) Im&ort 9rea6$u& 4 1rade 9alance %In US8 9illion)
E.&orts Im&orts
P:;
<on$ P:;
1rade 9alance
9 6 .4
1 4 0 .2 109 6 3 .9 78 8 0 .5 1 0 0 .6
77 5 7 .6 2 0 .6 29 4 3 .8
2 0 0 3 -0 4
2 0 0 4 -0 5
2 0 0 5 -0 6 ( A p r il- M a r )
2 0 0 3 -0 4
- 1 4 .5
2 0 0 4 -0 5 -2 8
2 0 0 5 - 0 6 ( A p r ilM ar) -3 9 .6
E!ports have gro"n 5y over %/),.$ over previous year Imports have registered a gro"th of over 8.)#%$ over previous year Petroleum products registered a gro"th at /()*/$ over previous year 9on'Petroleum Products registered a gro"th of %#)#($ over previous year E!ports e!pected to gro" at C-27 of 3)#$ for the a5ove period
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2000$0
.25
200 $02
2002$03
2003$0"
200"$05
2005$06 %A&ril$=an)
".!2 2.08
.!!
2.06
.5#
*auritius
Source: DIPP, BMR Research
USA
<etherlands
=a&an
U?
-erman,
Singa&ore
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INFLATION
%&&#'&( has "itnessed a slo" do"n in inflation to around /)&%$ 4ey contri5utors 5eing6 In+lation %/)
W PI
il ay pr
W P I 2 0 0 5 -0 6
ne ly pt ug ov Se Ju Ju ec D ct ay M
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7 .2 5 .9 5 .5 5 .5 4 .3 4 .3 3 .7 3 .6 3 .4 4 .1 4 .7 4 .3 4 .4 4 .3 2 3 .9 6 6 .5
:o"ever, fuel, lu5es and petroleum "itnessed an inflation rate of around *$ Price situation 5eing closely monitored and measures taken to control price rise 5y the 2overnment Inflation for %&&('&, to remain #'#)#$
(RBI Estimates)
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1hermal
3,dro
<uclear
"3!3
1300 1 0 th p la n t a r g e t
590 C o m m is io n e d
"#!" 2030
U n d e r e x e c u tio n
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3 8 .4
4 1 .6 6
4 2 .9
1 1 .5
1 2 .8 4 6 .2
1 3 .9 6 5 0 .2 !0. 4 1 .3 2.2
52.2 33.# 2 0 0 3 -0 4 2 0 0 4 -0 5 2 0 0 5 -0 6 2 0 0 6 -0 7 *
6.5 0 .0 2 2 0 0 2 -0 2
1 .9
3.0
2 0 0 2 -0 3
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Financial snapshot
T o ta l T e le c o m R e v e n u e (U S D B n ) 1 9 .3 1 5 .9
34% 39.7
2 0 0 4 -0 5
2 0 0 5 -0 6
2004-05
2005-06
2 0 0 3 -0 4
"8/
2 0 0 4 -0 5
2 0 0 5 -0 6 * 2383 2514
2715
2.52/ 2.# / S h a re in G D P
Source: TRAI, BMR Research
118
C o n tr ib u tio n b y G o v t Co. C o n tr ib u tio n b y P v t Co.
1 3 0 .7
201
Y e a r W is e F D I F lo w s ( U S D C u m ila t iv e F D I fo r T e le c o m Mn) (U S D M n )
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FUTURE OUTLOOK
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I!al" Franc
China
US
India
Japan
Brazil Russia
UK
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DEMOGRAPHY
*edian Age %in Aears)
/# 83 8& %/ 8, 8& 83 /# #& /%
+ur population ' .)&* 5illion, constituting .,$ of the "orld0s people Population gro"ing at the rate of .)/ $ per annum ,,. million literates in the .# plus age group in the "orld
<1
India
Europe
@apan
A+ter 5 ,ears
?iteracy rate in %&&. "as (#)/$ /&$ of the population constitutes the "ork force %)8$ of "ork force is currently unemployed
Currently, the median age of India0s population is %/ years -fter .# years India is e!pected to have a huge "orking population of around *&& million
INTRODUCTION TO EPC CONTRACTS
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Growth momentum sustained by higher infrastructure spending India also benefiting from global economic upswing
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3 9 .5
World class domestic gas discoveries LNG import terminals Transnational pipeline Refinery Hub
4 1 .8
2 5 .7 2 1 .6 1 5 .1 9 .2 5 .9
Pow er Gas W a te r R a ilw a y s R oads P o rts
9 .1 4 .2
A ir p o r ts
2 .5
S to ra g e Com m u. O th e rs
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Bore than .#& ne" applications for setting up 1EAs in the pipeline +ver I97 .&&& 5illion ;appro! <1D %/ 5illion> to 5e invested in India through the 1EA route ?arge scale foreign investment 5eing attracted upon the passing of this legislation
Navi Mumbai
Kulpi, West Positra, Gujarat Bengal Adityapur, WB Kolkata Dahej, Gujarat Ranchi Gopalpur, Nagpur Orissa Khopata, Paradeep Maha Mumbai Visakhapatanam, Andhra Pradesh Baikampady SEZ, Karnataka Chennai Hassan, Ennor SEZ, Karnataka Tamil Nadu Vallarpadam, Kerala Nanguneri, Tamil Nadu
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G DP 5%
768
829
46 2 0 0 6 -0 7
58 2 0 0 7 -0 8
72 2 0 0 8 -0 9
87 2 0 0 9 -1 0
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Several projects behind schedule Cost overruns for companies Severely impacts economic growth
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Structural impediments
INTRODUCTION TO EPC CONTRACTS
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>7%
Gujarat, Goa, Tripura Delhi, Maharashtra, Sikkim, Karnataka, TN, WB, HP, Kerala
5-6%
6-7%
4-5%
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Interpretation of contracts and concession agreements is in itself very challenging No single agency to deal with. Need for liaising with hybrid agencies both at the Central and the State level Adds time and costs to projects leading to time and cost overruns
Bureaucracy
Coalition at the Centre Litigious environment coupled with glacial pace of litigation Slow project delivery process
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Lack of hinterland connectivity National highway network lagging behind Waterways not leveraged well Railway connectivity limitations Inadequate supply of electricity, water etc
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WAY FORWARD
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Need to create conducive environment Reducing entry regulations Reducing multi-level clearances Expanding infrastructure
Regulatory reforms
Infrastructure reforms Governance reforms Fiscal reforms driving towards making India globally competitive
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capital
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CONTENTS
Background
Passenger and cargo trends India Defence sector Developments in aerospace Aerospace Industries association Opportunities in the Defence sector Offset in the civil sector Way forward
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BACKGROUND
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AVIATION
Boom in aviation
India has embarked on an ambitious growth trajectory. Indias GDP grew at 7.5 percent, 8.1 percent and 8.4 percent in 2004, 2005 and 2006 respectively. Reportedly, Indias GDP grew at 9.5 percent in the second half of fiscal 2007. Increased economic activity is being witnessed in across every sector The civil aviation sector too has been witnessing a boom as the domestic passenger carriage, cargo movement and international air traffic have shown exponential growth. This growth has been largely fuelled by the policy of increased liberalization, which has been followed by Government on both domestic as well as international side After dismantling of monopoly of national carriers on the domestic skies in 1994, the civil aviation sector has seen increased competition resulting in significant growth. The competitive tendencies have, in turn, resulted in adoption of aggressive, innovative pricing strategy and low cost model by the upcoming new airlines On the international side, Government has taken several initiatives to increase the availability of seats as well as better connectivity by entering into several bilateral agreements The year 2006 has been especially remarkable for the growth witnessed in passenger traffic. The airlines have carried nearly 29 million domestic passengers till November, 2006, which is a growth of 47% over the corresponding period of 2005. Further, the scheduled domestic air services are now available to / from 75 airports as against nearly 50 in the year 2000
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Comprises of purchase of 68 aircrafts Net project cost of approx Rs 34,615 crore (USD 8 billion) Construction, upgradation and operation of new and existing airports including cargo related infrastructure. Outsourcing of some of the operation and maintenance functions such as cargo handling services and commercial development Consulting opportunities for airport design and architecture, traffic studies and project supervision Setting up of non-aeronautical activities like shopping complex, golf course, entertainment park and aero-sports near the airport
Further investment opportunities emerging out of this sector are primarily in terms of:
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AVIATION DEFENCE
Since year 2001 when Government of India has developed policy initiatives to engage a greater participation of private players in Defence production by way of either a Joint Production Ventures or Outsourcing and is earnest in taking inherent benefits of the competitive environment From being primarily a supplier of raw materials, semi-finished products, parts and components to DPSUs, OFs, Base Workshops of Army, Base Repair Depots of Air Force and Dockyards of Navy, the private sector today is engaged in development and production of several hi-tech Defence equipments. Today private sector has become a partner in the manufacturing of complete advance equipment or systems Indian Defence Industry is today determined to facilitate greater participation of private sector in Defence Growth in passenger and air cargo traffic over the years is attracting global aerospace players to enter into the Indian market
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MEDIA REPORTS
Passenger nos to grow from current 16 mn to 50 mn by 2008. Passenger load in Delhi & Mumbai to go up to 43 mn and 52 mn by 2024. Budget carrier Air Deccan has signed a $150 million agreement with Lufthansa Technik for repair and overhaul of its Airbus fleet of aircraft Cochin International Airport (CIAL) to set up an international MRO facility and an aviation training academy
Air Sahara to place firm orders for 10 Boeing 737800 aircraft worth around $700 mn with US aircraft major Boeing
Starting from July 2005 and until 2021, Airbus to deliver an aircraft a month to India
During 2004-05, total passenger traffic grew at 21.7% while the cargo traffic grew by 19.9%
Airbus to invest about $1 billion in various projects in India over the next ten years Additional $40 bn opportunity for the Indian IT industry by 2020 from offshoring of engineering services alone
At International Aerospace Exhibition held in Germany, India is not only being looked as a 'Key Market' by Aerospace OEMs but also as a "Key Destination.
Boeing projects $72 bn market in India in the next 20 years; could bring in offsets worth $21.6 bn. CAS to invest up to $100 mn in MRO facility for Boeing airplanes
Go Air has signed an agreement with Airbus Industries to acquire 10 A320 aircraft with an option of purchasing 10 more
Kingfisher Airlines has signed contracts to acquire 10 A-320 aircraft on firm order with options to buy another 20 until 2008 at a cost of up to $1.8 bn or Rs 8,100 crore
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Barket potential for outsourced engineering services from India is estimated at $7/12 billion. The
worldwide market for outsourced engineering is expected to reach a whopping $123.9 billion in 2006
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In million
2 0 0 3 -0 4
2 0 0 4 -0 5
2 0 0 5 -0 6 74 59
80
60 40 40 17 19 23 32
51
49
20
0 In te r n a tio n a l D o m e s tic T o ta l
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2 0 0 3 -0 4
In ooo tonnes
2 0 0 4 -0 5
2 0 0 5 -0 6 1382 1280
1600
1069
400
0
I n t e r n a t io n a l D o m e s tic T o ta l
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India's Defense Budget rose 7%, to $20.11 bn - among the biggest defense budgets in Asia-Pacific. Third largest spender in the world next only to the US and China. GDP. The official defense expenditure of Rs 83,000 crores is just over 3% of GDP
HAL has been outsourcing smaller components for its various projects. As per industry estimates the outsourcing exercise expected to reach US$ 1 billion in next four or five years from a level of approximately $150 m currently
Total imports exceed an estimated $15 bn per year and expected to grow to $50 bn by 2015. Imports also grew by 42.8% to USD 15.8 bn in Nov 2006 from USD 11 bn a year ago. A comparison with the provisional earnings (USD 9.9 bn) shows a sharp 60 % rise in imports in Nov 2006
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Evolution of Indian Defence Industry with large infrastructure for Defence Ordnance and equipment consisting of 39 Ordnance Factories (OFs), 8 Defence PSUs (DPSUs) and 49 R & D Laboratories
India's Army will receive $9.26 bn, Air Force will receive $5.65 bn & Navy will receive $3.39 bn. An increase of 7.2 %, allocating a whopping Rs 89,000 crore for the fiscal year 2006-07. Of this, Rs 37,458 crore or 42 % of the total outlay has been earmarked for new arms purchases. The Defense Research & Development Organization (DRDO) is expected to receive $1.81 bn
In the aero engines domain, solution providers include QuEST, Infotech Enterprises, TCS, Snecma Aerospace India, while avionics has the likes of HCL Technologies, Silver Software, AK Aerotek, Accord Software, CG Smith, Tata Power, Spectrum Infotech, BAe-HAL, Honeywell and L&T IT
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QuEST
Infotech Enterprises
TCS
A5ionics
HCL Technologies
Silver Software
Honeywell
L&T IT
Aero Structure
Infosys
QuEST
Genser aerospace
Taneja Aerospace
HCL Technologies
Tata Power
Nest Avionics
L&T IT
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Medium MultiRole Combat Aircraft (MRCA) medium combat aircraft fighter deal, for 125-200 aircraft and $10-15 billion (Majority of those jets will be built by state-owned HAL following the transfer of technology) Indian Air Force (IAF) aims to acquire 126 "medium" multi-role fighters from 2008 onwards, to bolster the arm even as its MiG-21s are phasing out The $500-700 million contract for new utility helicopters with high-altitude capability The long, long delayed purchase of new 155mm howitzers, worth up to $2 billion
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In USD Billion 6
C o m m e r c ia l A e r o M a r k e t
D e fe n s e
2 .7 4
2 1 .2 8 0 .6 0 2010 2020 3
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Scouting for
Current assignments
Already working for HAL and Bharat Electronics Ltd; in touch with other 30 companies including the Tata group, Infosys, Wipro and Maini
Held a conference of its 25 global vendors to talk about the LM supply chain to about 50 Indian companies picked from the defense ministry's list of `champions of industry' to be potential contractors in the MRCA offset Prospective supplier of Integrated Platform Management System (IPMS) for Indian Navys ship building program, which includes one aircraft carrier and over 30 ships for various applications Partnered with
India has sought information on buying what would be its first US military aircraft, six Lockheed Martin C-130J Super Hercules cargo planes, US Air Force officials and others
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Current presence
Thales (49%), Rolta India Ltd (51%) JV for development of Aviation related software Capital base of $11 million Development of state-of-the-art Command, Control, Communications, Computers, Intelligence, Surveillance
Scouting for
Joint ventures in air traffic management industry expects Larsen & Toubro to be one of them
Future plans
Recent contract: Thales, UK to supply of three new Full Flight Simulators to Kingfisher
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Airbus to set up an MRO in India with an investment of $100 million Infotech sets up CoE for Airbus Opening of EADS Technology Centre in India leading to creation of 2,000 jobs in the aerospace and defence sectors in India Over next 15 years, the volume of investment and high-tech activities generated including the Airbus Engineering Centre will reach approx. INR 11,000 crores ( 2 billion) Signing of Authorized Sales Representative contract between EADS Socata and IndUS Aviation been announced - IndUS Aviation Inc. is an American-Indian Aircraft manufacturing company with headquarters both in Dallas, Texas and in Bangalore, India.
Recent plans: Cooperation between its Eurocopter subsidiary and India's HAL to develop a new army helicopter
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Current presence
JV signed between Pratt & Whitney (51%) and Infotech (49%) - named as Infotech Aerospace Services). To invest $ 7.3 million in Infotech
Future plans
To outsource over $100 million worth of components and design work to Indian vendors over the next five years with L&T, HAL, Infotech Enterprises Ltd (IEL) and Tata Advanced Materials Ltd (TAML) With HAL to manufacture engine components, and to set up a Rs 100 crore plant for this at Koraput in Orissa, from which it expects an annual business of USD 500 million in 10 years UTC to open a Mfg. & Maintenance (M&M) facility. Pratt & Whitney to set up an aircraft engine workshop in India National Aerospace Laboratories (NAL) in Bangalore signed an R&D cooperation agreement with Boeing, as also setting up two testing facilities for Pratt & Whitney Signed a contract for engines to power Kingfisher's new fleet of Airbus A330 aircraft
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Future plans
Setting up an R&D center in India To invest $118 million to set up a MRO facility in Maharashtra as part of US aerospace firms India commitments, following the Rs 35,000-crore deal with Air-India MRO facility to serve the Boeing family of airplanes for the entire South-East Asia Air Sahara placed order for purchase of Boeing 737-800 passenger jets worth $700 million on Boeing Company HCL Technologies been selected as a software development partner for 787 Dreamliner Jet Airways to buy 10 aircraft from US-based aerospace major Boeing to expand its international operations
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Exisiting tie-up
Existing tie-up with Coimbatore-based Lakshmi Machine Works (LMW) for its casting and casing requirements
Future plans
France's Snecma plans a (50:50) joint venture with HAL to make engine parts, with an initial investment of $6.5m Snecma is eyeing new joint ventures with private Indian companies To approach players like L&T and Godrej and Boyce for joint ventures
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Existing tie-up
Signed a $ 5 million contract with state-owned HAL to manufacture tail rotors for its hugely successful 206 model ied up "ith several Indian la5oratories for research in cutting edge technology HAL and Bell Helicopter, a Textron Company, have signed a MoU for cooperation in the areas of supply of airframe sub-assemblies and product support Developing futuristic "Fancraft" for anti-terrorist operations and emergency medical services in heavily built-up urban areas In the race for the Indian Army's plan to buy 200 helicopters for deployment in the high altitude areas in the Himalayas
1miths aerospace
Smiths has set up a dedicated Offshore Engineering Centre (OEC) in QuEST Bangalore
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Involved in HAL in its E-2C Hawkeye program (sourcing aircraft assemblies and components, digitization) Signed an agreement with HAL to identify projects of mutual benefit by way of sourcing aircraft assemblies and components, digitization and other related service
2oodrich Corp
Aircraft interior products manufacturing facility in Bangalore , Local sourcing of hardware; Engineering design and support. Selected to supply wheels and brakes to SpiceJet's fleet of Boeing Next Generation 737 aircraft. Spice Jet launched 737 NG service within India in May 2005. Plans are to expand this new fleet to 25 aircrafts Opened the emergency escape slide manufacturing facility in India; ties up with Satyam & TCS for IT support
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Provides employment to over 18,000 direct and 7,000 additional employees through sourcing activities with leading software suppliers ADA awarded an engineering development contract valued at $105 million to GE Aircraft Engines (GEAE) for engines that will be used for Tejas Looking at establishing relationships with Air-India and Indian Airlines for local engine MRO facilities. GE had early committed $20 million investment in an engine shop as part of a $8.1 billion deal by Air-India to acquire 68 airplanes from Boeing It is enhancing its overall engine production by more than 60 per cent between 2007 and 2009 due to growing demand for its large commercial engines, the GE90 and GEnx, as well as continued growth of CFM56 and CF34 engines Air India had ordered GE engines valued at more than $2.2 billion at list price to power its new Boeing 777 and 787. For Jet Airways, GE has committed initial deliveries of the CF680E engine for the Airbus A330 fleet by March 20
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Current presence
Honeywell Technology Solutions Lab (HTSL) is a corporate arm of Honeywell International headquartered at Bangalore. HTSL provides support and development to Honeywell International Business worldwide and responds to customer and societal needs
HTSL has operations in Bangalore and Madurai, India, Shanghai and Beijing, China, Minneapolis and Phoenix, USA, Singapore and Brno (Czech Republic) Honeywell business presence in India is about US$ 400 million (approx Rs.2000 crores)
Future plans
For its presence in Hyderabad, Honeywell has business plan of making an investment of Rs 45 crores achieving a turnover of Rs 700 crores and employment of 5500 by 2009 Honeywell to expand its R&D centre in Bangalore by doubling its headcount Tata Honeywell Ltd (THL) is a joint venture between Tata Industries and Honeywell Inc, USA. Tata Consultancy Services (TCS) has announced a strategic agreement with THL
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TCS, under an outsourcing agreement, will manage THL's entire IT infrastructure operations, spread across India, with its hub at Pune, and nine regional offices Air Deccan selects Honeywell Avionic suite for supply of air safety equipments for A320 Aircraft Honeywell Turbo Technologies is setting up a new plant in Pune to manufacture state-ofthe art turbochargers for automobiles
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Likely to consider outsourcing IT work to India Has a 50 year strong and evolving partnership with HAL Looking for partnerships with Indian varsities, under its university technology centre programme for research and technology; invests $1 billion annually on research and technology, focusing on areas of innovation Doing business in India for over 60 years with more than 1000 aero engines in service with the military and civil operators. On the industrial side - has more than 100 gas turbines engaged in off-shore oil and gas pumping ; more than 140 diesel engines powering the marine crude oil pipelines in India
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Manufacturers and suppliers of civil, military, and business aircraft Helicopters Unmanned aerial vehicles Space systems aircraft engines Missiles Materiel, and related components Equipment Services; and Information technology
Founded in 1919 and now has 105 regular member and 182 associate member companies (January 8, 2007) AIA brings together the experience and expertise of its Regular Member and Associate Member companies' CEOs and senior executives
INTRODUCTION TO EPC CONTRACTS
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Coverage
Capital acquisitions under three categories:
Buy decision which includes Buy (global) and Buy (India) Buy and Make decision with transfer of technology (TOT) Make decision
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Applicability of Offsets: Proposals above INR 300 crores or more % of Offset obligation : To the tune of 30 % of defense deals Integrity Pact : in deals worth over INR 1 billion
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Public sector undertakings and private companies in the defense sector (subject to their obtaining of
industrial licence) Facilitation agency
Defense Offset Facilitation Agency (DOFA) under the department of defense production For facilitation and implementation of the policy & assisting potential vendors in interfacing with Indian
defense industry Authority for grant of approvals
Full discretion to main vendors / OEMs to select Indian offset partner Indian offset provider to be eligible offset provider only
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Eligible companies to approach the vendor directly Parties to negotiate the commercial deal Vendor to submit the technical and commercial offset offers RFP to MoD Committees formed under MoD to scrutinize and accept the main and offset offer Offset obligation to be coterminous with the main contract of procurement
Discharge of obligations
Direct purchase of, or executing export orders for, defense products and components manufactured by,
or services provided by, Indian defense industries
Direct foreign investment in Indian defense industries Direct foreign investment in Indian organizations engaged in defense research and development
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All Indian companies Indian companies with 100 % foreign equity participation
Ministry of Commerce to grant approvals for participation in the offset framework All offset applications to first receive the nod of the State Trading Corporation of India Limited
(STC) before it is considered by the Ministry of Commerce
Selection of offset providers subject to approval of STC Vendors to select Indian offset partner and refer to STC for approval
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Direct Offsets - to mean contracts for goods or services which are directly utilized in the manufacture of
an aircraft
Indirect offsets to mean contracts, which may result in indirect benefits to aviation sector, for instance
modernization of airports/seaports, construction of roads/bridges etc
Indian companies to approach the vendor and make a presentation before the STC with a description of
its service offerings
Vendor to approach STC for receiving their nod to the proposal STC to refer the case to Ministry of Commerce for grant of approval
| 85
| 86
WAY FORWARD
| 87
IT and ITES*
SAP Implementation Engineering Tools Network Infrastructure Management PLM/PDM BPO Order Management etc
| 88
POSSIBLE APPROACHES
Strategic alliance; go to market as prime contractor Merger & acquisition Provide service to prime contractors
Intended life span
New business
Co-operative ventures
Consortiums
One time
Low
High
| 89
| 90
Challenge Us
| 91
| 92
Challenge Us
| 93