Context

A manufacturing facility for C-295 transport aircraft will be set up at Vadodara in Gujarat by Tata Advanced Systems Ltd. (TASL) in partnership with European aviation major Airbus.

About

About C-295 aircraft

• The C-295 is an aircraft of 5-10 tonne capacity used for tactical transport of up to 71 passengers or 50 paratroopers.
• It will be used for logistic operations to locations that are not accessible by current heavier aircraft.
• It can operate from short or unprepared airstrips.
• The C-295 has very good fuel efficiency.
• India has become the 35^th C-295 operator worldwide.
• It will replace the legacy Avro aircraft in the Indian Air Force (IAF) procured in the 1960s.
• Of the 56 aircraft contracted, 16 will come in fly-away condition from Spain between September 2023 and August 2025.
• The first made-in-India aircraft is expected from September 2026 and completed by 2031 at the rate of eight aircraft per year.

Impact of the C-295 manufacturing facility on the Aircraft Industry

• Start of an entire ecosystem: The foundation of the aircraft plant is the start of an entire ecosystem for the aviation sector. This facility will act as the regional maintenance, repair, and overhaul (MRO) hub for all C-295.
• Entering into global aircraft manufacturing domain: This is the first time a private sector company would be manufacturing a full aircraft in the country. This is a huge step forward for India in the global aircraft manufacturing domain.
• Employment opportunities: The C-295 project is expected to create more than 15,000 skilled direct and indirect jobs across the aerospace ecosystem.

Aircraft Industry in India

Defense aircraft Industry

• India has the third largest armed forces in the worldand plans to spend billions of dollars on defense articles over the next several years. 
• India’s resolve to drastically reduce its reliance on imports is referred to as “Aatmanirbharta” (self-reliance).

Civilian Aircraft Industry India has a much bigger footprint in civil aviation manufacturing than defense, in addition to being a market itself. India is currently the 7th largest civil aviation market in the world.

 Policy Support to the Sector

• Foreign investment of up to 49% is allowed under the automatic route.
• Under Union Budget 2021-22, the government lowered the custom duty from 2.5% to 0% on components or parts, including engines, for the manufacturing of aircraft by public sector units of the Ministry of Defence.
• The Ministry of Civil Aviation (MoCA) launched Regional Connectivity Scheme (RCS) – Ude Desh ka Aam Nagrik (UDAN) in 2016.
• “Digi Yatra”, intends to give a seamless, hassle-free, and paperless journey experience to every domestic air traveller in India. With Digi Yatra, passengers will no longer need to show their tickets/ boarding passes and their physical Identity cards at many of the checkpoints at the airport.
• In 2016, the Ministry of Civil Aviation released the National Civil Aviation Policy (NCAP).
• Two Defense Industrial Corridors in the Indian states of Uttar Pradesh and Tamil Nadu were announced in the 2018-2019 budget, which will attract manufacturers and suppliers.
• India’s total 2022 defense budget is $70 billion. Sixty-eight percent of the budgeted defense capital expenditure is earmarked for the procurement of domestically manufactured weapons and military platforms.
• India is formulating the 10-year Integrated Capability Development Plan, which would be the basis for future defense procurement. 
• Recently Made-in-India light combat helicopters Prachand' has been inducted into Indian Air Force.

Growth Drivers

• NABH (NextGen Airports for Bharat): Nirman is a government initiative to expand airport capacity more than five times to handle bn trips a year, in the next 10-15 years.
• GIFT City Advantage for Aviation Sector: Aircraft Leasing and Tax Incentives available in GIFT city
• Regional connectivity Scheme: Boost air connectivity to smaller cities & northeast states.

Way Forward

The private defence sector is still nascent and a conducive and stable regulatory and policy environment will be an important enabler. A realistic roadmap and enabling policy framework can be scripted to make the country a hub for aircraft manufacturing.

Defence procurement is tightly regulated, timelines are often long, and transparency is limited.  Substantial payment delays are common.  India should work towards mitigating these issues and facilitating deals, particularly in the case of government procurements.