May - 2013 ISSUE

Force Magazine
Window of Opportunity - October 2012
The Indian private sector should contend for the AVRO replacement programme
By Atul Chandra

Indian Air Force’s (IAF) Rs 12,000 crore AVRO replacement programme for 56 aircraft offers a significant opportunity for the Indian companies willing to take up the project. The programme includes 16 flyaway and 40 to be built by a designated Indian Production Agency (IPA). However, the response to the IAF’s proposal has not been received with the level of enthusiasm that one would have imagined. The rather disappointing approach by India’s private sector could prove embarrassing for the IAF which had openly stated that it would prefer the project being given to a private sector company instead of Hindustan Aeronautics Limited (HAL).

India’s private aerospace industry is at least half a decade away from being able to graduate to complete assembly and systems integration for a medium-sized transport aircraft. While there is risk associated with the programme, the prize in terms of assimilating all the required know-how for license production would result in the company which steps forward to leapfrog existing competitors. The replacement for the outdated HAL built HS-748 is also probably the only IAF aircraft contract that can be offered to the private sector to be handled for license production. The last HS-748M was manufactured by HAL more than two and a half decades ago and the aircraft is essentially used for transport, communication and training duties. The fleet still has significant residual life which means that the IAF could be in a position to handle the eventual delays that would take place if license production was done by a private sector company for the first time. It is here that credit must be given to the IAF for thinking well into the future — a contract for 56 aircraft is certainly nothing to be sneezed at when global manufacturers fight for single digit aircraft orders.

The pre-qualification criteria for selecting an IPA calls for a public limited Indian company that has been registered for at least 10 years, with foreign holding not exceeding 26 per cent excluding Foreign Institutional Investor (FII). Companies will need to show capital assets in India, not less than Rs 100 crore and with a minimum turnover of Rs 1,000 crore for each of the past three years. To be selected as the IPA, it must be an engineering company with an established track record in manufacturing. The Transfer of Technology (ToT) calls for two phases that will be in the form of Semi Knocked Down (SKD) kits and Completely Knocked Down (CKD) kits. The IPA will need to produce 16 aircraft with a minimum of 30 per cent Value Addition (VA) to be achieved in India in the first phase. This will be followed by the second phase of production in which 24 aircraft are required to be produced with a VA of 60 per cent. This requirement is going to prove to be difficult to cater to, keeping in mind the low supplier base that is available within the country and the number of aircraft required. The IPA is also required to have Maintenance Transfer of Technology (MToT) to be provided by the Original Equipment Manufacturer (OEM). This will enable ‘D’ level servicing to be carried out by the IPA.

While there are a number of contenders, the frontrunners would be Alenia Aermacchi’s C-27J Spartan and Airbus Military’s C295 (originally made by CASA of Spain). The C-27J has emerged as a successful military transport, being operated by 10 countries including the US (38) and Australia (10). The aircraft is an advanced derivative of what was Alenia Aeronautica’s G 222 fitted with the engines and systems of the Lockheed Martin C-130J Super Hercules which the IAF also operates.

The C295 is a stretched version of Airbus Military’s CN235 and is used for a variety of missions such as tactical airlift, search & rescue (SAR), and maritime patrol. Airbus Military claims that the C295 has an optimised airframe for the medium-weight sector with the largest cabin volume and floor space in its class.

The official Request for Proposal (RFP) is expected by the end of this year. Once all the necessary steps are taken, it is likely that the actual license production will only begin towards the end of the decade. HAL will also be watching closely as to how the competition turns out as it is likely to be benefitted either way from this project. The company would retain its position as India’s only major aerospace player if the private sector is not able to manage the programme or in case of success it would then be forced to compete with another player, resulting in it becoming more efficient. The big winner in the AVRO replacement project will be the company that takes the risk to step forward. Major Indian industrial groups such as the Tata’s, L&T, Mahindra, Reliance have been waiting on the sidelines so far, but this programme should see them jumping into the fray whole-heartedly.

“As a Major Business Unit of EADS, We Are Able to Draw on a Wide Range of Industrial Activities and Technologies to Provide Opportunities to Indian Companies”

Regional Sales Director, Asia Pacific Airbus Military, Federico Lacalle

The Indian ministry of defence has approved IAF’s plan to replace its Avro fleet. When do you expect to receive the Request for Proposal (RFP)? Our understanding is that an RFP is likely before the end of the year but the important thing is that, whenever it comes, we are ready to respond, and we look forward to seeing the exact details of India’s requirements.

The government envisages maximum 60 per cent indigenous element in the programme. What would this mean for Airbus Military in terms of technology transfer?
At Airbus Military we are absolutely committed to working with the Indian government and Indian industry to develop offset arrangements in line with India’s technological aspirations in aerospace. As a major business unit of EADS, we are able to draw on a wide range of industrial activities and technologies to provide opportunities to Indian companies.

At the same time, there has to be a realistic assessment of the capabilities of the private sector in Indian aerospace. In terms of aerostructures, India has important capabilities but private sector companies still have some way to go before being ready to undertake full assembly and systems integration of aircraft. Nevertheless, we want to explore the capabilities of potential Indian partners and better understand their full potential.

What preparation are you doing to participate in this competition? Are you already in touch with the Indian private sector companies?
We are already talking to a number of Indian companies to get a good understanding of their capabilities and ensure that we form the right business relationships. In the case of the Avro replacement the number of aircraft potentially involved is quite substantial. That means that there are great potential benefits for both sides, but equally that it is extremely important that the most appropriate partnerships are created.

What makes the Airbus Military C295 an able contender for this programme?
The C295 is thoroughly proven in military transport role in some of the world’s most challenging operating conditions. It can carry up to 71 personnel in its long cabin and it is equipped with a ramp enabling rapid and efficient cargo operations as well as a full air-dropping capability for paratroopers and supplies. It has excellent short-field characteristics and ‘hot and high’ performance, and it has been showing outstanding reliability even on rough airstrips.

There are already more than 80 C295s in service and they are operating in all kinds of environments, such as hot and dusty conditions in Algeria and Jordan, the jungles of Brazil, and also icy weather in Finland and Poland. Some of the customers who originally ordered the C295 have now placed repeat orders after discovering just how well it performs in service. It also has among the lowest life-cycle costs in its class and the same airframe is used for maritime patrol, which could bring very substantial commonality savings.

“We Envisage the C-27J as the Backbone of the Future IAF Transport Fleet”

Alenia Aermacchi Spokesperson

The Indian ministry of defence has approved Indian Air Force’s plan to replace its Avro fleet. When do you expect to receive the Request For Proposal (RFP)?
Alenia participated in the meeting held at the MoD regarding the Avro replacement programme together with other aeronautics companies. We are not in a position to say when the RFP will be issued but we can confirm that we are on the list of the recipients when it will be formally issued.

The government envisages maximum 60 per cent indigenous element in the programme. What would this mean for Alenia Aermacchi in terms of technology transfer?
The 60 per cent requirement is a very ambitious target for both the producer and the customer considering the difficulties related to this kind of project. Regardless, Alenia Aermacchi considers the IAF Avro replacement a very important undertaking and the IAF as one of the most demanding customers, so this programme is considered a priority for us. Alenia Aermacchi is perfectly able to comply with the requirement and keen to follow all the obligations listed in the RFP, including this heavy share of transfer of technology.

What preparation are you doing to participate in this competition? Are you already in touch with the Indian private sector companies?
For the transfer of technology we are ready to follow the indications of the Indian government to transfer to the private sector companies, technologies and industrial capabilities in the aeronautics sector. We have already done this in other countries and we have a proven track record in this activity. We are in touch with a number of private sector companies and we are evaluating different ways of partnerships. We can say that quite soon we will be able to announce an Indian partner for this programme.

What makes C-27J an able contender for this programme?
We envisage the C-27J as the backbone of the future Indian Air Force transport fleet. The C-27J has been ordered by 10 countries, including the US and Australia that have chosen the aircraft thanks to its track record in operational theatres. That the aircraft is today the best medium tactical transport available is well known and we see it as the ideal solution for the Avro replacement programme, thanks to its operational capabilities in all climate and environment conditions. Also, the C-27J is the ideal platform to replace the An-32s in the future. The C-27J has a high commonality with the C-130J, which recently entered into service with the IAF and should be the choice for the Avro replacement programme that would make it a ‘natural’ successor for the An-32 fleet as well. You can imagine the benefits and the savings for the IAF by having a common transport fleet with the same engines and equipment and which are inter-operable with each other.


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