Wednesday, September 27, 2023

Karnataka: India’s Premier Aerospace Hub & Home of Aero India

By Aritra Banerjee

The aerospace industry in India is crucial for the nation’s strategic and economic interests. It is characterised by high growth potential due to its status as one of the fastest-growing markets in the world. The state of Karnataka is considered the hub of the aeronautics industry in the country. It is home to numerous defence research and development and public sector institutions. The government is positioning Karnataka as a significant investment destination for the IT, automotive, steel, and aerospace industries.

The state has a rich aerospace legacy, too. In 1940, Hindustan Aeronautics Limited (HAL) was established in Karnataka, marking a significant moment for the aerospace industry in the state. Since then, Karnataka has been a pioneer in developing aircraft and helicopters for defence and civilian use. 

In 1960, the National Aerospace Laboratories, a leading aerospace firm established by the Council of Scientific and Industrial Research, was moved to Bengaluru. The Aeronautical Development Agency, formed in 1984 and managed by India’s Ministry of Defence, also remains headquartered in the city. It is responsible for designing and developing the country’s Light Combat Aircraft programme, with support from commercial partnerships with industry leaders such as Airbus, Boeing, Dassault Systemes, and Parametric Technology Corporation.

Presently the state houses many critical public sector units involved in the aerospace industry, such as the Aeronautical Development Agency (ADA), National Aerospace Laboratories (NAL), Bharat Heavy Electricals Limited (BHEL), Gas Turbine Research Establishment (GTRE), Bharat Earth Movers Limited (BEML), Indian Space Research Organisation (ISRO), and Aeronautical Development Establishment (ADE). Companies are also setting up operations in key industrial belts on the outskirts and in north Karnataka.

Karnataka continues to make strides in the aerospace industry. In 2013, it became the first Indian state to declare an aerospace policy. Under its latest Aerospace and Defence policy, the state will develop five aerospace and defence hubs in Belagavi, Bengaluru, Chamarajanagar, Mysuru, and Tumkur.

The state offers proximity to key vendors, deep aerospace expertise, and a network of Small and Medium Enterprises (SMEs) that provide niche subcontracting work for PSUs. Capital city Bengaluru, also known as India’s Silicon Valley, offers a high density of mature IT services firms and a large number of engineering graduates that comprise the human resource pool.

Karnataka is also an attractive destination for simulation and R&D. Leading aerospace firms such as Honeywell have engaged with their Indian counterparts to enhance these capabilities. They have set up R&D centres in Bengaluru. The state’s maintenance, repair, and overhaul (MRO) segment has also been growing, with large MRO firms enhancing their presence in Karnataka.

Karnataka also offers opportunities for affiliated services like ground handling and excellent telecommunications networks, with government support playing a crucial role. The government has an investor-friendly approach, simplified procedures, a single-window clearance mechanism for fast-track business approvals, and land and financial incentives packages. Additionally, the government has allocated land close to Kempegowda International airport and earmarked 1000 acres of land for Phase 1 of a Hi-tech Aerospace and Defence park. Important industries like Boeing, Magellan Aerospace, Wipro Enterprises, and Safran-HAL are investing in it.

Karnataka’s favourable aerospace landscape and supportive policies have attracted heavy investments in the state. Global leaders in aviation simulation products and training services, such as CAE, have made Karnataka their base in India and operate from owned facilities near the new Bangalore international airport. Companies such as Boeing, European Aeronautic Defence and Space Co (EADS), Honeywell, Rolls-Royce, and HAL have also established research and development, engineering, and manufacturing facilities in the state.

In 2009, Boeing launched the Boeing Research and Technology-India centre in Bengaluru to continue its collaboration with indigenous R&D organisations, including universities, government agencies, and private sector R&D providers. That same year, EADS, the parent company of Airbus, began research operations in Bengaluru by opening an innovation centre. This centre is engaging with the Indian Institutes of Technology around the country to design simulators and develop software.

More recently, 34 aerospace and defence firms signed an agreement with the government to invest Rs. 2.4 crores in setting up their facilities in the state. HAL and Safran Helicopter Engines, too, signed a deal to form a joint venture firm–Safran-HAL Aircraft Engines– in Bengaluru.

The state’s capital city, Bengaluru, now houses one-fourth of India’s aircraft and spacecraft industries and produces 67% of planes and helicopters for the country’s defence services.

Global aerospace sales are expected to reach $2 trillion over the next two decades. The Asia-Pacific region is the fastest-growing aerospace region, as the fleet size of narrow-body aircraft is estimated to double by 2031. The strong domestic demand for air travel and large defence requirements in India have led major aerospace players to recognise India as an important future market.

India’s Offset policy, which requires 30% of all deals above Rs 300 crore to be reinvested into the country, obliges aerospace partners to set up subsidiaries, enter into joint ventures, or outsource some work to the Indian aviation industry. This policy can play a significant role in catalysing the development of aerospace maintenance, repair, and overhaul (MRO) and manufacturing activity by providing added incentives for global aerospace majors and their suppliers to establish a strong presence in India.

With its ample resources and infrastructure, Karnataka is an ideal location for firms looking to capitalise on this booming industry while fulfilling offset obligations. The state can aim to gain global recognition for program management, engineering, maintenance, material, and information systems support and provide overhaul services for rotary and fixed-wing aircraft.

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