Tuesday, October 19, 2021

DEFENCE TECH HUB: STRONG CASE FOR KARNATAKA

Jagadish Shettar, Karnataka Minister of Large & Medium Scale Industries in conversation with Vijay Grover.

Karnataka Government, in a letter addressed to the Union Minister of State for Defence Rajnath Singh recently sought the announcement of defence technology hubs in the state.

Making a strong case for its request, Karnataka has said that The Central Government has been promoting sev-eral projects in the country, in areas such as defence and aero-space. The Defence Corri-dor Project is in the pro-cess of promoting six and five nods respectively in Uttar Pradesh and Tamil Nadu. In addition to building new defence corri-dors, we also want to promote areas that already have an aero-space and de-fence manufacturing environ-ment.”With an increased defence budget and the Indian aerospace sector, including commercial aviation, being one of the fastest growing aerospace markets in the world, India remains an interesting location with abundant technological expertise, knowledge and skilled work force it remains attractive for investments in the sec-tor. The rapid growth of this industry has attracted major global aerospace companies to India and domestic aerospace players continue to expanded operations. 

Karnataka has earned a name in the IT Sector and has been eyeing the aerospace sector for a while. The establishment of Hindustan Aeronautics Limited (HAL) in Bangalore in 1940 laid a firm foundation for the sector in Karnataka . The State is comfortably positioned as an aerospace destination due to the activities of numerous aerospace companies and PSUs engaged in manufacturing, design and development, and Maintenance, Repair and Overhaul (MRO) activities in Bengaluru and other parts of the state. 

The biggest asset that Karnataka has is its several premier educational, scientific and technical educational institutions. Mr. Shettar said the De-fence Technology Hub in Karnataka has several advantages and a good environment with some of the best re-search and development centres in the state. “The state has a strong presence from the public sector companies like HAL, BEL, and DRDO’s laboratories DARE and ADE as well as internation-al companies like Airbus, Boeing and GE Aviation. This has made our state a forerunner in aerospace and de-fence”, he said.

The Minister said, “More than 25 per cent of the country’s aircraft and spacecraft industries have their pres-ence in the state. Nearly 67% of all aircraft and helicopter manufacturing for defence services is carried out in Karnataka, over 65% of India’s aero-space-related exports are from Kar-nataka and more than 2000 MSMEs are capable of carrying out niche sub-contracting work operate from.

He said Bengaluru is the only Indian city to feature in the top 10 glob-al Aerospace cities ranked by the FDI index. “We are the first state in the country to implement the Aerospace and Defence Policy under the leadership of chief ministers”, he added. Mr. Shettar said hubs in Bangalore, Mysore, Tumkur and Chamarajanagar already have the infrastructure ready for the aerospace and defence Ecosystem. Karnataka will continue to play a key role in boosting domestic produc-tion in the country’s aerospace and defence manufacturing sectors in the coming days, he added.

Industries Commissioner Gunjan Krishna spoke on the draft aerospace and defence policy 2021-2026. “The main goal is to continue attracting investments in the aerospace and de-fence industry and steps will be taken to make it even a more attractive proposition for investors in order to implement defence hubs in the state”, she said.

Indian Aerospace & Defence Bulletin in an exclusive conversation with Hon. Minster for Industry Shri. Jagadish Shettar

  1. Recently you wrote to the Raksha Mantri pitching for Defence Technology Hub in the state of Karnataka, what prompted this? How will Karnataka benefit?

The Central Government has been promoting defence manufacturing through the establishment of the two Defence Industrial corridors, one in Uttar Pradesh (with 6 nodes) and Tamil Nadu (5 nodes) to catalyse indigenous production of Defence and Aerospace related products. In addition to setting up new defence corridors, leveraging the existing Aerospace & Defence industrial ecosystem is also essential to promote defence production in the country.  

Karnataka offers the best ecosystem for aerospace and defence, 25% of India’s aircraft and spacecraft industry is based in Karnataka and more than 67% of all Aircraft and Helicopters manufacturing for defence services is done in Karnataka. The state contributes to 65% of the country’s aerospace related exports from India and have an aerospace focused special economic zone by Aequs in Belagavi, which has been in operation for over 10 years with more than 6500 employees working in the campus in various sectors of Aerospace, Defence and engineering products. OEMS like Boeing and Airbus are some of the marquee units within this SEZ, which also has units servicing the Indian Space Research Organization (ISRO). It is commonly said that any new commercial aircraft manufactured might have at least one product from Belagavi.

It is my firm belief that Karnataka is best suited for establishing Defence technology hubs given its strong ecosystem, R&D, IT and technical innovation culture, presence of leading DPSUs such as HAL, BEL and laboratories such as DARE and ADE of DRDO. 

Establishing the Defence technology hubs in Karnataka which receive the same benefits as Defence corridors such as enhanced multipliers under the Defence Offset Policy, support for supporting infrastructure for Testing and Certification of defence platforms and products will further catalyse the growth of aerospace and defence sector in the state and provide catalytic impetus to India’s ‘Atmanirbhar Bharat’ vision. 

  1. Karnataka has a robust infrastructure in HAL, BEL and other PSU’s engaged in defence production. Is there any new requests from aviation and defence production sector?

Since Karnataka is the leading state for Aerospace and Defence, there is a lot of investment interest from companies. In the recently concluded Aero India 2021, the Govt. of Karnataka signed 34 MoUs worth INR 2,464 Cr. with companies such as Gopalan Aerospace, Alpha Design Technology, Abhyuday Bharat Mega Defense Cluster, to name a few. In spite of the difficult environment due to the pandemic, over thirty companies are close to formalising their investments in Karnataka further highlighting the preference for the state as the leading investment destination for the Aerospace and Defence sector. 

Recently a roundtable discussion on the new Draft Karnataka Aerospace and Defence Policy (2021-26) was organised and the draft policy presented identified key focus sub-sectors for strengthening the Aerospace and Defence manufacturing ecosystem. The objective of the roundtable was to receive and discuss inputs on the draft policy in order to develop an industry friendly policy. This was attended by leading companies such as Boeing, Lockheed Martin, Pratt & Whitney, Raytheon, Mahindra Aerospace and GE Aviation. The participants expressed their suggestions for improving the skill development ecosystem and broadening the applicability of financial benefits being offered by Govt. of Karnataka.  These are to be evaluated and the merits of each being incorporated into the new Aerospace and Defence policy.

  1. The most important resources the industry requires are skilled work force, land and power. What steps are being taken to ensure that these resources are not scarce? 

The government has taken multiple steps to ensure that these basic but most important needs and many steps have already been taken to ensure efficient handling of the three most basic but also the most important resources. 

Karnataka is developing the second phase of Aerospace and Defence Park in Haralur with a total land area of 1,200 acres next to the Bengaluru International airport and in close proximity (10 kms) from existing Devanahalli Aerospace and Defence Park. The government has taken the initiative to encourage the development of more such spaces for the aerospace and defence sector with comprehensive infrastructure facilities including captive power generation, water supply, facilities for R&D/testing, common training & warehousing facilities, plug n play facilities, to name a few. Importantly the government has amended section 109 of Karnataka Land reforms Act, through which any industrial project approved by single window clearance committees will be allowed to procure land directly from the landowners Payments and loans are being processed through leading banks to facilitate lending of up to fifty percent of the land cost for investors. 

Specific action as highlighted below have been taken to ensure efficient management of these resources 

Skilled Manpower

  • The Government of Karnataka has set a target to skill 18.8 million youth between 2017-2030. With a robust infrastructure to boost skills and qualifications, which include over 7000 training institutes, Karnataka is well positioned to achieve this target. 

In addition, the Skill Development Department is evaluating the provision of additional on-the-job training subsidies to Industries. 

With respect to specific initiatives for the aerospace and defence sector, some of the key interventions that the Govt. of Karnataka is focusing on are: 

The state shall constitute a vision group comprising representatives from leading Aerospace and Defence companies in the private sector, Defence PSUs, Academia. The government will formulate a detailed five-year skilling roadmap for the aerospace, defence sector, and develop curriculums for aerospace related courses in government and vocational training institutions. 

The State shall conduct Industry connect workshops and Skill gap studies around identified aerospace and defence clusters to understand the growing needs of skilled and semi-skilled manpower in this sector. 

The vocational and technical training courses shall be upgraded basis skilling gaps identified from the industry connect workshops and skill gap studies on the recommendations of the Aerospace & Defence Vision Group 

Private sector companies in the aerospace and defence sector shall be encouraged to adopt vocational training institutes whereby they can use the facility infrastructure to provide training in skills relevant to the sector

The government shall encourage PSUs such as DRDO, BEL, and NAL to collaborate with academic institutes and impart skill training in the identified areas to boost such skills and will be encouraged to provide internships. 

The government will further incentivise establishment of Centres of Excellence by providing 25% capital subsidy up to INR 25 Cr. as subsidy. 

For in-plant training provided by the industries, the cost of training would be subsidised by way of offering stipend up to 50% of the cost of training subject to a limit of INR.10, 000/- per month per trainee. This incentive shall be available for maximum of 50 trainees per industry per annum. The benefit shall be available for 1000 candidates per annum.

Electricity

The power tariff for Industries shall be reduced by INR.1.00 per unit

The government will focus on maintenance measures and coordinate strongly between different divisions to minimize power outages for industries. Multiple measures are being taken by the Energy Department to improve ease of doing business and simplify rules for power supply.    

  1. Karnataka accounts for a major chunk of defence production in India, how does the Karnataka government see the contribution growing?

The Indian defence market presents an attractive and significant investment opportunity for Indian and foreign companies across the supply chain in the defence sector. The opening of the defence manufacturing sector for private participation has helped foreign original equipment manufacturers to enter into strategic partnerships with Indian companies and leverage the domestic markets. 

Further, The Defence Ministry has set a target of 70% self-reliance in weaponry by 2027, creating huge prospects for industry players.  Karnataka already has a well-established ecosystem in for defence through the established presence of leading companies like Raytheon and Alpha Design technologies. 

Additionally, the state has more than 2000 SMEs and are home to 70% of India’s supplier base, which execute niche subcontracting work for the Defence PSUs. 

Karnataka expects to receive the largest share of investments in the sector as the aerospace and defence sector grows to be a ~$70 billion market by 2030. 

5: Karnataka, especially Bengaluru has emerged as a major aviation hub. What steps are you planning to give it a boost for activities like setting up MRO’s?

We realise that Aviation and related sub-sectors such as MRO have a high potential and, in this regard, we have identified them as focus sub-sectors in our upcoming aerospace and defence policy. 

These focus sub-sectors shall receive additional capital subsidies to further encourage such industries to setup in Bangalore. Besides incentives, there is a focus on providing a holistic ecosystem through creation of aerospace and defence parks, robust skilling infrastructure and enhanced ease of doing business. 

The recently passed Affidavit Based Clearance (ABC) system is one such measure. With the Affidavit Based Clearance (ABC) System, any approved project can start the next day without waiting for any downstream approvals. With this amendment, investors are not required obtain approvals/clearances from different government agencies, for a period of 3 years or until commercial operations begin. The moratorium exists for various approvals such as Building Plan approval, Factory Plan approval, non-agricultural conversion of land, etc.

There is a plan in place to digitise the entire process of labor law compliance and enhance the single window system for approvals. Further, it is planned to create a dedicated Aerospace and Defence cell within Invest Karnataka Forum to promote & facilitate investments in A&D sector

In the recent roundtable, multiple companies lauded our initiative to designate Aerospace and Defence sector as “Essential services” which allowed them to operate without any disruption during Covid-19 pandemic. This was most appreciated by their global supply chain partners as well. Karnataka thrives in providing such an enabling environment helping industries function even in difficult times. 

Most Popular

Subscribe to our newsletter

To receive the latest news on Indian aviation and defence.