InvestorQ : Can you tell me about the project planned by Tatas and Airbus in India?
Katherine Gonsalves made post

Can you tell me about the project planned by Tatas and Airbus in India?

rhea Babu answered.
1 month ago

In the recent week, the state of Gujarat once again got the better of Maharashtra in attracting mega FDI into the state. After losing out on the Vedanta Foxconn microchip project to Gujarat, even the Tata Airbus project to manufacture aircraft for the Indian Air Force (IAF) has gone to Gujarat instead of Maharashtra. But, first a look at the nuances of the project. Tata and Airbus will jointly manufacture the C-295 aircraft in India, marking the first foray of a private sector company into this space. Hitherto, only HAL used to manufacture aircraft for the defence services. This is likely to mark the big bang expansion of the Tata group into the defence space.

Tatas and Airbus will jointly manufacture a total of 56 numbers of C-295 transport aircraft in India to cater to the needs of the IAF. It will incorporate the technology expertise and best practices of Airbus with the Tata expertise in handling manufacturing process, assembly line management and domestic sourcing and servicing. It may be recollected that the Tata group has already grouped all the defence franchises under various companies under Tata Advanced Systems Ltd (TASL). Once the 56 aircraft requirements of the IAF are met, then the joint venture of Tatas and Airbus is free to sell it to airlines and even export it.

Currently, India does not manufacture civilian aircraft and hence most airlines have to still depend on Airbus or Boeing for their aircraft needs. This entails forex outflows and regular lease payments in foreign currency. That can be reduced. However, it would take time since the first rollout from the plan is only expected around September 2026, four years from now. Incidentally, on Sunday ,the foundation stone for the proposed project in Gujarat will be laid by the prime minister, Narendra Modi. Gujarat has seen some mega projects of late.

Ministry of Defence has underlined that this will be the first project to make military aircraft in India by a private company. The project value is $2.7 billion or approximately Rs22,000 crore. This also opens the doors for more such joint ventures in the technology-intensive and competitive aerospace segment. Firstly, this addresses the IAF problem of aircraft obsolescence and will replace its ageing British Avro fleet. Once that is done, it will help boost defence exports to 4-fold current levels. Above all, there are spill-over benefits since it will be fitted with advanced equipment manufactured by BEL and Bharat Dynamics.