India defence & aviation
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This document summarizes regulations and policies governing India's defence and aerospace sectors. It notes that India imports 60% of its defence equipment and spends over $40 billion annually on defence. The government's policies aim for self-reliance in defence production and making India a defence sourcing hub. The aerospace sector is also growing and aims to be the largest civil aviation market globally by 2030. The document outlines the legal roadmap for entering these sectors including market entry regulations, import/export rules, and regulatory environments for civil aviation MRO and defence procurement.
India defence & aviation
- 1. Copyright 2015, Lakshmikumaran & Sridharan / Confidential Regulations & Sector Policies governing Defence & Aerospace Sector in India
- 2. Copyright 2015, Lakshmikumaran & Sridharan / Confidential Make Defence Equipment in India 60% of defence requirements met by imports Third largest armed forces in the world & largest importers of conventional defence equipment Spends 31.5% of its total defence budget on capital acquisitions 2015-2016 budget estimate: Expenditure of USD 40.4 billion excluding defence pensions and civil expenditure World Bank Data : Spends 2.5% of GDP on defence Approximately INR 250 billion to be invested in 7-8 years Government policy: Self- reliance, technology upgradation, enhance exports & make India defence sourcing hub
- 3. Make in India: Civil Aviation/ Aerospace 9th largest civil aviation market, 3rd largest by 2020 & potential to be number 1 globally by 2030 Size of USD 16 billion with 60 Million international passengers by 2017 Maintenance, Repair and Overhaul (MRO): USD 750 million & expected to increase at 7% CAGR for 7 years reaching USD 1.2 billion by 2020 Aviation is still a dream for nearly 99.5 per cent of Indian population Next generation of aviation growth in India to be triggered by regional airports Around 450 used/un- used/abandoned airports and airstrips spread all over the country East India has started taking pro-active measures to promote air connectivity
- 4. Legal Roadmap: Defence & Aerospace Entering the Indian Market Import / Export Regulations Commercial considerations and contract management Regulatory Environment
- 5. Copyright 2015, Lakshmikumaran & Sridharan / Confidential Market Entry Aerospace • Setup 100% subsidiary or acquire up to 100% stake in existing Indian entity • No government approval Civil Aviation • Greenfield- 100% automatic • Brownfield- 74% automatic; beyond government approval Defence • Automatic route: Up to 49 % • Government Approval: 49% and above Documentation • Investment Agreement • Share Purchase Agreement • Shareholders Agreement
- 6. Copyright 2015, Lakshmikumaran & Sridharan / Confidential Foreign Trade Policy (FTP) Trade dispute redressal Digitization Make in India Reduced export obligations for import duty waiver schemes Minimum Documentation Only Online Filing Online Meetings 5% of net foreign exchange earnings under some circumstances Export rewards Reduced duty (0-3%) on imported capital goods subject to specified export obligations Import rewards
- 7. Copyright 2015, Lakshmikumaran & Sridharan / Confidential Seek approval (CAR 145 – Civil Aviation Requirements) Renewal Director general of Civil Aviation Max. 5 year term Approval Recommendation Report Global standards Based on EASA 145 and SARI 145 Compliance Report Inspection by DGCA Regulatory Overview – Civil MRO Regular state level and federal level approvals for running a business apply. E.g. • Environment law • Industrial licenses • Companies Act
- 8. Regulatory Overview - Defence Defence Procurement Policy (DPP), 2013 Buy Buy & Make (TOT) Buy & Make (Indian) Make Buy Global Buy Indian Foreign & Indian vendors Indian vendors with 30% indigenous content Purchase from Foreign Vendor Followed by Licensed/ Indigenous Production RFP to be issued only to Indian vendors High Tech Complex Indigenous systems
- 9. Defence – Transfer of Technology and Offset MRO by Indian entity Buy and make with Transfer of Tech. • Transfer technology for maintenance to an Indian entityBuy (Global) category MRO by Indian entity Defence Procurement Policy 2013 • Purchase of MRO services qualifies for the offset policy • For outright purchase of any defence equipment • Covers both Indian and Foreign vendors • Local content requirement applicable • Application of Defence Offset policy
- 10. CHANDIGARH NEW DELHI AHMEDABAD MUMBAI PUNE CHENNAIBENGALURU KOLKATA HYDERABAD GENEVA Our Offices
- 11. Copyright 2015, Lakshmikumaran & Sridharan / Confidential L&SandAviation IP Purchase, Finance and Leasing Commercial Agreements Insurance Corporate Labour and Regulatory Dispute Resolution Foreign investment and Regulatory Environmental Law Competition law Tax
- 12. Copyright 2015, Lakshmikumaran & Sridharan / Confidential Founded by V. Lakshmikumaran and V. Sridharan in 1985, Lakshmikumaran & Sridharan (L&S) is one of the largest integrated law firms in India with `more than 500 professionals . The firm has eleven offices located across India in New Delhi, Gurgaon, Mumbai, Bengaluru, Chennai, Hyderabad, Ahmedabad, Pune, Kolkata and Chandigarh. In Europe, the firm’s office is in Geneva. It specializes in the areas of Corporate law, Private Equity, Mergers & Acquisitions, Customs & International Trade, Taxation, Anti- Trust, Environmental Law and Intellectual Property. For more information, mail us at [email protected] , visit us at www.lakshmisri.com