NEW DELHI: European defence major Airbus Group today cautioned that 49 per cent FDI limit in defence sector cannot fetch India the industry or the right original equipment manufacturer that it is eying under ‘Make in India’ initiative.
Follow @ETDefence Twitter handle for comprehensive coverage on other buzzing Defence stories
The firm, which is in negotiations with India for several defence projects worth billions of dollars, also made it clear that they would be able to invest in the domestic defence sector only if they get contracts as it takes “two to tango”.
The group also admitted that the nearly $1.4 billion project of the Indian government to acquire six Airbus mid-air refuellers has “stagnated” even as it offered to transfer the final assembly line of Panther helicopters if it gets an order from the Navy for the same.
“..forget about 49 per cent. It is not going to get an industry and it is not going to get OEMs (original equipment manufacturer) of quality. You may get a few but not the right ones,” Pierre de Bausset, President and Managing Director of Airbus Group India, said.
Pitching for “fair business”, he said that in the beginning, their Indian partners will need them a lot before they become the real champions that India has in mind.
“And when they need us a lot in the beginning, I want fair business. Fair business means that we need to have levels of controls that are appropriate for the risks that we are taking.
“So setting the limit at 49 per cent or whatever amount is not… you have to think in terms of how do you attract us, how do you attract talent, how do you make it a good win-win partnership and not a very straight-jacket in the beginning,” he said addressing reporters here ahead of the Defence Expo later this month.
He said that if an OEM is bringing in investment or if they are bringing a product which is part of their own product line world wide, “you do understand that we want to have some control over it”.
He added that 49 per cent is not a “good limit” and that it is “at odds” with the policy that has been stated by the government “recently”.
“But we are faced with a moving environment,” he said.
He mentioned about his company’s focus on Make in India and said if the contracts come in, they can make investment as high as Rs 5,000 crore in India.
He spoke about the industrial development works undertaken by the firm in other countries.
“We are ready to do the same but it take two to tango. We need the government to actually give is contract,” he said.
There is a cap of 49 per cent holding for foreign companies involved in defence equipment manufacturing. This means 51 per cent stake has to be held by an Indian company.
The FDI cap was raised from 26 per cent to 49 per cent in August 2014, months after the BJP-led NDA coalition was voted to power in May that year.
Talking about the “stagnated” deal for buying six A330 refuelers, Venkat Katkuri, President of Airbus Defence and Space Division here, said they are awaiting “guidance” from the Defence Ministry about the next step to be taken.
Meanwhile, Pierre pointed out that ‘Make in India’ does “not just mean a plant in India with Airbus written over it”.
“People want us to have our very own plant with Airbus written over it,” he said, adding that its partnerships with various domestic companies like companies TATA and Mahindra is also part of ‘Make in India’.
Pierre said that every Airbus commercial aircraft produced today is partly ‘Made in India’ as they are procuring from India.
He underlined that in 2015, the company had exceeded the USD 500 million annual procurement mark and the plan was to cross USD 2 billion by 2020. He made it clear that this figure is mostly driver on the commercial side and not the defence.
Talking about the Airbus-TATA bid to replace India’s aeging Avros transport planes with C295 aircraft, the top Airbus executive said field evaluation trials will take place in the future.
He said the Group will set up a final assembly line for C295 and process is on to identify the state where it would be based.
The government had in last May cleared the lone bid of Airbus-Tata consortium for replacing Avro transport aircraft fleet for Rs 11,930 crore.
As per the tender, while 40 aircraft would be manufactured in India, 16 would be bought off-the-shelf.