It's a known fact that the Indian government is working hard to increase defence and aerospace procurement from indigenous sources – from the current 40% to 70%, in the next 10 years. The Dollar Business recently caught up with Pratyush Kumar, President, Boeing India, to understand how manufacturers in India can leverage growth opportunities and what makes India a preferred sourcing destination for the American aircraft-maker.

Niladri S. Nath | February 2017 Issue | The Dollar Business

TDB: “India has to make a decision whether it wants to keep buying from France or wants to create industrial capacity.” This is what you said last year when the Indian government placed an order of 36 fighter jets with French defence major Rafale. Has the outlook of the government changed?

Pratyush Kumar (PK): It was pretty clear at that time that India was going to place orders with Rafale. But, the question was what would happen beyond that. After that, the government made it quite clear that they need 200 more fighter jets. However, at the same time, the government also made it clear that the approach for sourcing would be 'Make in India'. It’s evident that the government doesn’t want to keep buying from outside and wants to create a domestic capacity to manufacture advanced fighter planes. What we have been hearing is that the first step to that end would be to create a model for selecting domestic strategic partners. After that, they will come up with the methodology for moving forward. Will the government follow Request For Proposal (RFP) model or will go for a government-to-government collaboration? We don’t know the answer as of now. But, the gating factor is the process of selecting the strategic partnerships.

TDB: Has 'Make in India' and opening up of the defence sector augured well for the industry?

PK: They certainly have augured well for the sector. Thanks to that, we now have a joint venture with Tata Advanced Systems Limited (TASL) to manufacture fuselage for the Apache, the world’s most advanced attack helicopter. We have more than doubled our sourcing of components from India in the last two years. Today, Boeing is sourcing components worth more than $500 million from India every year. And the most important aspect of these government initiatives is that they have clarified the strategy to operate in India. Now, I don’t have to explain as much as I had to before at board meetings. The mandate is pretty clear – if you want to do business in the Indian defence sector, you have to make in India. It is a simple message.

TDB: How important is India for Boeing as an equipment manufacturing and sourcing destination? What is your outlook for India and what benefits does sourcing from India offer?

PK: When we manufacture a high technologically intricate product such as an aircraft, we are always under pressure from our customers to do more for less. Our clients want more range, more fuel efficiency, etc., at a lower price. That means we need to have competitive sources across the globe and go for more collaborations. And, with its vast pool of engineering talent and affordable labour cost, India presents an exciting opportunity which doesn’t exist elsewhere. All these make India the right place for us to source components from. We  plan to continue to increase our sourcing from India and to double the present $500 million worth of sourcing within 2-3 years.
 
TDB: What opportunities can companies in the aerospace and defence manufacturing sector in India explore to scale up exports and become a major global hub? And what should be their first step towards that goal?

PK: The first step towards that is to develop the right skillset in aerospace manufacturing. So, the companies in the India need to train their frontline
factory workers and engineers. They need to have the right certification such as NADCAP (National Aerospace and Defence Contractors Accreditation Program – a cooperative industry initiative). In addition, they should be willing to invest in the long run. Sometimes, Indian companies focus only on offset opportunities. This is not the right thing to do. They should focus on creating value for original equipment manufacturers (OEMs). If they create value for an OEM by reducing cost and maintaining quality and delivery, they will be in the global supply chain for the long haul. That can be the game changer. There are great opportunities for Indian companies in this sector.

TDB: How has your association with TASL and Hindustan Aeronautics Limited (HAL) been so far?

PK: TASL had been our supplier before they became our joint venture partner for manufacturing Apache fuselage. Our collaboration with HAL is also over two decades old. They have been supplying parts for Boeing 757 and now they are supplying equipment for F16. We see the relationships growing in strength.

TDB: Are there any new projects that you are working on with your Indian partners?

PK: Oh, many! We are trying to source wire harnesses. Towards the end of last year, we announced 4-5 names of tier-one suppliers of Boeing India. And, our aim is to keep the number growing. We can see huge opportunities in India in both narrow-body and wide-body aircraft manufacturing. On the defence side, we can see opportunities in everything from helicopters to fighter jets,  from transport aircraft to tankers, etc.
 
TDB: What is your opinion on government policies related to the sector?

PK: I think the government should make it easier to discharge offset obligations. For example, the government has moved towards e-governance. Why can’t we have electronic submission of all documents? Right now, we submit mountains of paperwork for offset obligations. They should automate the process.  

TDB: What is the company’s plan for diversification?

PK: We are very much a pure-play aerospace company. We reckon there is a lot of opportunities in this segment. Our goal is to connect, protect, explore and inspire. We would like to continue exploring our world and the world beyond – from the deep sea to Mars.

TDB: There is a thought floating around that the rise in protectionism around the globe will benefit defence manufacturing. What is your opinion?

PK: I think that’s true to some extent. But, we need to wait and watch!