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S E C T O R P R O F I L E : A E R O S PA C E

Welcome to Karnataka - The Knowledge Hub of Asia

Hon'ble Chief Minister

Welcome to Karnataka, the Knowledge Hub of Asia. It gives me immense pleasure and pride to showcase Karnatakas potential at the Global Investors Meet 2010. The States entrepreneurial spirit in innovations and R&D has given us recognition world over. Our rich natural resources, proactive Government policies, talented workforce and a strong economy have propelled the State to become a preferred investment destination. I have a dream, a vision for this one State with many opportunities. Vision 2020 for Karnataka seeks to propel a holistic growth by promoting equitable development of sectors and districts, by providing employment to all sections of people and regions of the State. It will also focus on ensuring excellent infrastructure, quality education, decent living conditions and life security for all our citizens. This vision, combined with our passion for excellence will drive the economy to greater heights. Karnataka is a State of action. We have witnessed rapid and unparalleled growth across our knowledge-based sectors. Each of our 30 districts is unique in its own right, offering investment potential like no other State in the country. Over 700 MNCs are already reaping the advantages of making Karnataka their home. One new global company moves into our State every week and a new industrial unit is approved every day. Supported by rich natural resources and progressive policies, the State presents its investors with the right blend of strengths and opportunities. We would like to assure all investors that the State Government would extend the fullest cooperation and support for the timely implementation of their projects. I would like to congratulate the investors for choosing our State and wish them grand success in their ventures. With best wishes, B. S. Yeddyurappa Chief Minister of Karnataka

Karnatakas capital Bangalore is a brand the world identifies India with. It is also the single biggest reason why India has become such a hot investment destination. Manmohan Singh Prime Minister of India

KARNATAKA: LAND OF PLENTY Snapshot Economic Growth
Hon'ble Minister for Large & Medium Industries

06 07 07 08 08 08 09 11 12

Agriculture Manufacturing

MESSAGE On behalf of the Government of Karnataka, I welcome you to The Global Investors Meet 2010. This meet brings together leading entrepreneurs, investors and experts to showcase the potential of Karnataka. Our Honble Chief Minister desires that this mega event results in doubling of investments and employment opportunities with accelerated industrialisation across the State in the next few years. This will get us a step closer to fulfilling the States Vision 2020 for holistic growth. I would like to take this opportunity to share with you some of the salient features of the aerospace sector that would further accelerate growth in the State. Karnataka has over 60 years of experience in this Sector and attributes to more than a quarter of Indias aircraft - and - spacecraft manufacturing. Bangalore has been the home of aviation and aerospace manufacturing, and cutting edge R&D in India. Karnataka has over 100 R&D institutes, including Defence Research and Development Organisation and Indian Space Research Organisation, Indian Institute of Science, National Aeronautics Limited, Hindustan Aeronautics Limited, which lends it a coveted space in the sector in the country. By providing for the countrys first Aerospace SEZ, the government has shown its clear intent in supporting the growth of this industry. Availability of highly skilled and technically qualified human resource has been the key force driving the Aerospace manufacturing segment in the State I invite all of you to explore opportunities of mutual growth and invest in our State. Come lets join hands and build a prosperous Karnataka.

Services Karnatakas contribution to Indias economy Infrastructure and resources Skilled manpower Karnataka Policies: Calling investors AEROSPACE: ON A HIGH The global scenario The Indian scenario Advantage Karnataka Investments in aerospace Strengths and Opportunities The high-fliers LAND BANK APPENDIX Contact us Websites

14 16 18 21 24 26 29 30 30 31 31

With best wishes, MURUGESH R. NIRANI Minister for Large & Medium Industries


Karnataka: Land of Plenty

Industrialise or perish
Sir M Visvesvaraya, Karnatakas world-famous engineer Industrial Revolution alone can spur economic growth of India. This, in turn, will impact literacy rate, lifestyle and income levels for our future generatrion. The Government of Karnataka, therefore, has organised the Global Investors Meet in Bangalore on June 3-4, 2010, showcasing the investment opportunities in the State. Kar nataka is one of Indias fastest-growing States, with a vast and diversified industrial base. Apart from nurturing the globally recognised Silicon Valley of India Bangalore the State has emerged a prized destination for not only Information Technology, but also Aerospace, Biotechnology, Heavy Construction Machinery and Equipment, Sericulture and Floriculture. Karnataka: Snapshot Capital
Area Population (Census 2001) Population density (per sq. km.) Per capita income Percentage of urban population Literacy rate Number of districts Number of towns Number of villages Prominent cities

Gold and Renewable Energy. The entrepreneurs here have already ventured into these sectors, the result of which has seen the emergence of Karnataka as the Knowledge Hub of Asia. Further, salubrious climate, vast natural resources, proactive and growth-intensive Government policies lend the State an edge. Eighth-largest State in the Union of India. Located in the South-Western part of the country; shoreline along the Arabian Sea. Situated on the convergence of the Western and Eastern Ghat ranges, between 74 E and 78 E longitudes, and 11 N and 18 N latitudes. Area: 191,976 km2. 5.8% of Indias land area and is home to 5.1% of the population (around 52 million). Borders Goa (N-W), Maharashtra (North), Andhra Pradesh (East), Tamil Nadu (S-E) and Kerala (S-W). Economic growth One of Indias fastest-growing States, Karnataka has a strong industrial base and a vibrant service sector. Software is States star performer; software exports form 35% plus of countrys software exports. Secondary sector contributes more than a quarter of GSDP State contributes 5% of national income. Since 2003-04, the State growth has pushed the levels of per capita income higher than the national average. Agriculture Sustains about 63% of the population. The State is pushing to diversify agricultural activity; horticulture and agro-processing are important activities being encouraged by State Government. Karnataka is one of the countrys largest producers of fruits and vegetables and No. 2 in floriculture. Karnataka is the second-largest producer of milk in India. The State has the largest sericulture in the country.

60000 50000 40000 30000 20000 10000 0

Per Capita Income (Rs.) at Current Prices

Karnataka India

50974 46731 41902 42749 37969 33684


36327 29678






Source: CSO Directorate of Economics and Statistics, Bangalore

191,791 sq. km. 52,850,562 276 Rs. 40,309 35% 66.6% 30 270 27,028 Ankola, Bangalore, Bagalkot, Belgaum, Bidar, Bijapur, Chikmagalur, Chitradurga, Dandeli, Hubli-Dharwad, Davangere, Gadad-Betageri, Gulbarga, Harihar, Kolar, Mandya, Mangalore, Mysore, Raichur, Shimoga, Tumkur and Udupi Bangalore, Mangalore New Mangalore, Karwar

Prominent airports Prominent ports



Manufacturing It is well-diversified. Main industries are engineering, chemicals, electrical, automobilie, textile, aeronautics and food processing. Industrial growth up from 6.2% in the Nineties to 8.9% per annum since 2000.
Sectoral Composition Of Income
38% 56% 25% 28%

1993-1994 2008-2009

36% 16%

Services The engine of growth in the State. Bangalore, the State Capital, the powerhouse of IT in the country. State was the first in India to set up a Software Technology Park in 1991. Karnataka is the first State to bring the private sector into higher education. State has the highest number of medical colleges in the country and is a hub of medical tourism. Karnataka leads in biotechnology and nanotechnology. The Karnataka Governments Vision 2020 seeks to remove the sectoral and regional disparities by encouraging diversified economic activity in all regions of the State, and by raising upgrading skills in the labour force through vocational training. States contribution to Indias economy No. 1 Investment Destination. One of Indias most progressive states. Contributes 8% to Indias industrial income. Contributes 9.8% of Indias product exports. More than a third of Indias software exports from State. State has the second-largest iron ore reserves in India. More than half of Indias biotech companies in State. States Hutti mines are the only primary-gold producing source in the country. Third-largest producer of steel in the country. Seventh-largest producer of cement in the country, 6.5 % of Indias production. Third-largest producer of fruits and fifth-largest producer of vegetables in the country, produces 12% of fruits and 8% of vegetables grown in India. Contributes 70% of Indias coffee production. Largest area under horticulture, third-largest production in the country.

Second in area and third in production of plantation crops in the country. Second-largest producer of tobacco in the country. Largest producer of spices, aromatic and medicinal crops. Fourth among States in foreign technology transfer approvals. Third-highest FDI inflows among States in India with 6.5% of all FDI inflows into the country. Capital Bangalore is the worlds fourth-largest technology cluster. Popular tourist destination, has second-largest number of protected monuments in India.

Karnataka: Third Highest FDI Inflows (in USD million)

5369.62 6397.63 6850.95 22101.96

Source: CSO

Infrastructure and resources Its the goal of State to double investment from the present 4.5% of GSDP in infrastructure to meet the needs of a fast growing economy. Private sector partnership actively sought by an investor-friendly Government more than 88 projects worth Rs. 87,000 crore are in various stages of implementation.
Status of Infrastructure Projects (as on May 2010) Sector Transport logistics Urban and Municipal Infrastructure Tourism Energy Industrial Infrastructure Agri-Infrastructure Total Number of Projects 52 6 8 4 10 8 88 Value (Rs. Cr) 35,432 253 1,224 8,400 41,231 854 87,394


Source: DIPP (inflow from April 2000 to February 2010)

Share Of Employment
23% 26.3% 10.6% 17.9%
1993-1994 2006-2007

Source: IDD, Govt. of Karnataka

66% 55.9%

Source: NSSO

Power Karnatakas three areas of concentration are: Energy Sufficiency; Energy Efficiency; Green and Clean Power. The first hydel power station in India was set up in Sivasamudram in 1902 and the longest transmission line at the then highest voltage in the world, was constructed to meet the needs of Kolar Gold Fields. With a transmission network of 36,542 CKMs and 1205 stations, the State distributes power to 1.7 crore consumers. As the demand for power rises with the groth of the economy, Karnataka intends to meet the projected demand and make the State power-surplus by 2014 through a rapid expansion of power schemes.



Karnataka is well connected with rest of the world; while the existing air, road, rail and sea connections already cater to high volumes of traffic in passengers and freight, they are in the process of expansion and upgradation. Air traffic International airports at Bangalore and Mangalore. Bangalore International Airport Limited can handle 3,000 passengers per hour and is the first private airport in the country. Airports at Hubli and Belgaum cater to North Karnataka. Mysore airport has been upgraded for commercial traffic. Hubli, Belgaum and Mangalore airports being upgraded. Airports planned at Hassan, Shimoga, Bellary, Bijapur & Gulbarga. Karwar and Bidar defence airports being opened for civil traffic. A helipad each is planed for all 30 districts. Shipping Long shoreline of 300 km. Major port in New Mangalore handled more than 36.02 MT. traffic in 2007-08 or 7% of the countrys total traffic in major ports. 10 minor ports in Karwar, Belekeri, Tadri, Honnavar, Bhatkal, Kundapur, Hangarkatta, Malpe, Padubidri and Old Mangalore; handled 8,893.64 MT of cargo in 2007-08 or 4% of Indias traffic in minor ports. Tadadi and Haldipur ports set for expansion on PPP basis. Roadways More than 150,000 km road network in State. Targetted to add another 10,000 km. 96 projects, under various stages of implementation. Monorail projects in Bangalore. Railways 3,300 km railway line across State. Konkan Railway links Mangalore with Financial Capital of India, Mumbai, and Northern States. High-speed rail link to the Bangalore airport on the cards. Two mono rail projects in State Capital to decongest city traffic. Communication 27.7 million wireless subscribers in the State, adds more than a million new subscribers each year. State possesses the fourth largest Internet subscriber base in the country. Mobile towers in the State will go up from 3,000 to 6,000 towers by September. 3G services mean greater convergence between mobile and Internet services in the future, ushering mobile TV, online gaming, video call, movie on demand, faster downloads and other services.

Water Seven river systems Krishna, Godavari, Cauvery and their tributaries, North Pennar, South Pennar, Palar and the West flowing rivers in the Western Ghats: Kali, Gangavali (Bedthi), Aganashini, Sharavathy & Netravati. River systems together yield on an average 3475 TMC. About 50% of this water is available to the State. Hydel constitutes one-third power generation of the State. Mineral resources Geological setting for the State from Precambrian to recent formations provide 40,000 of green stone belts. Minerals found: Gold, silver, copper, iron, manganese, limestone, dolomite, chromite, magnesite, granite etc. 174 mining leases have been issued by the Government for iron ore covering 18,670 hectares. A progressive State with a forward-looking mineral policy since 2000, which was later revamped in 2008. Policy emphasis on modern technology, transparency in granting mineral concessions, emphasis on value addition, sustainable development in eco-sensitive areas, like the Western Ghats. Skilled manpower Third-largest pool of engineering graduates; Karnatakas share of engineering degree and diploma holders is 10% in the country after Andhra Pradesh and Maharashtra. Globally recognised higher-education centres. Leading hub of research and development institutes. Low-cost skilled manpower makes value-added manufacturing almost 60% cheaper than in Western Europe and the USA. Educational atmosphere in the State enhanced by institutes like the only 100-year-old Indian Institute of Science (IISc) and the Indian Space Research Organisation (ISRO). With 1,162 ITIs, Karnataka has 15% or the largest number of such institutes in the country.
Karnataka Technical Skill Development Number of institutions 172 114 273 69 1162 103 Karnataka Non-Technical Skill Development Number of institutions 22 25 13 83 9 350

Engineering Colleges Medical, Dental, Ayurvedic and Unani Colleges Polytechnics Pharmacy Colleges Industrial Training Institutes R&D Centres

Universities National Institutes International Schools Law Colleges Foreign Language Training Nursing Schools/ Colleges



KARNATAKA POLICIES: CALLING INVESTORS The Government has targeted a balanced regional growth by creating development corridors in the State, linking major industrial areas by national highways and rail links, and matching natural resource capabilities. Every part of the State is set to be supported with infrastructure projects to boost growth and employment. Steel Zone: Bellary, Koppal, Bagalkot, Haveri, Gadag & Raichur Cement Zone: Gulbarga, Bagalkot, Chitradurga, Belgaum & Others Food Processing Zone: Bangalore Rural, Kolar, Belgaum, Gadag, Koppal, Shimoga, Bagalkot, Bijapur, Davangere, Mandya & Dharwad IT/BT Zone: Mysore, Mangalore, Hubli-Dharwad, Belgaum, Shimoga, Gulbarga, Kolar & Mandya Automobile Zone: Ramanagara, Shimoga, Dharwad & Kolar Readymade Garments Zone: Bangalore Rural, Tumkur, Kolar, Mandya, Belgaum, Bidar, Dharwad & Others Sugar and Co-gen, Power Zone: Bidar, Belgaum, Bagalkot, Shimoga & Mandya Pharmaceutical/BT Zone: Bangalore, Mysore & Hassan Power Generation Zone: Raichur, Bellary, Bijapur & Chitradurga Media & Entertainment Zone: Bangalore Rural & Ramanagara Karnataka State Government Policy 2009-14 Karnatakas investor-friendly and responsive administration has worked towards easing administrative procedures and implementing policy measures for faster and smoother industrial growth. An investor-friendly responsive administration includes the Karnataka Udyog Mitra, set up more than a decade ago. KUM is a single contact point for all investors from receiving a proposal to ensuring its implementation. The State-level Single Window Clearance Committee and the State High Level Clearance Committee facilitate clearance of proposals in a speedy manner. Karnataka State Industrial Policy 2009-14 enhance all such previous policies for a comprehensive, investor-friendly approach. Land Bank More than 3,000 acres in each district acquired by the Karnataka Industries Areas Development Board (KIADB) for industrial development, ironing out difficulties in creating the basic infrastructure before operationalising production facilities. Suvarna Karnataka Development Corridor programme connects most of the Tier II cities through a network of highways, with cluster development in designated zones. Under the SKDC programme, 25 km on both sides of the corridor will be developed for industrial clusters, townships, satellite towns and sector-specific industrial zones.

The planned four major industrial corridors, connected by eight-lane roads, are: * Bidar-Bangalore via Chitradurga * Tumkur-Honnavar via Shimoga * Chitradurga-Mangalore via Shimoga-Udupi * Bangalore-Belgaum along National Highway 4 * Bidar-Gulbarga-Bellary-Hiriyur * Chitradurga-Hospet-Bagalkot-Bijapur Sector-specific industrial zones and SEZs that match the natural resources and capabilities of a region with the industry requirements. Special focus on skill development to enhance generation of technical manpower. Creation of world-class ready-to-use infrastructure through investments in power, roads, water, warehouse and logistic facilities, connectivity through rails and ports etc. The State Governments packages of incentives and concessions for new industrial investments, include: - 75% to 100% stamp duty exemption on land sale deeds and loan documents registration. - Land-conversion fine reimbursement of 75% to 100% for converting agricultural land to industrial use. - 100% exemption on entry tax on plant and machineries for 3 years during implementation of the project. - 100% 5-year exemption on entry tax on raw materials, inputs, components etc. during operation period. - 50% limited to Rs.1 crore subsidy for effluent treatment plants. - Interest-free loan to an extent of 50% of the value of fixed assets at 25% of the assessed gross VAT for a period of 7 years extendable to 12 years. - A State Policy for Special Economic Zones formulated as per Central SEZ Act 2005 & Rules 2006, with a view to provide a hassle-free environment for export production and to attract FDI. The objectives of this policy are to set up a single-point clearance to SEZ developers and units, to facilitate and expedite establishing of SEZs, to delegate the powers of the Labour Commissioner to the Development Commissioner of SEZs and to extend incentives as below: Exemption from State Taxes for all purchases from Domestic Tariff Area Exemption from Stamp Duty Exemption from Electricity Duty Capital subsidy for common effluent treatment plant (maximum Rs. 1crore per SEZ)




Aerospace: On a high
The Global Scenario
Global Aerospace Market
1% 5%

military aircraft is also on the rise, with increased military expenditure across the world. Space Industry: There has also been considerable rise in the global space industry, estimated currently at US$ 250 billion, that comprises satellite manufacturing and launching, to imaging, navigation and telecommunications. For many years, government expenditure on space and satellite programmes was the sole driver of the space industry. However, with rise in commercial applications that touch consumer homes directly through GPS receivers and satellite television, there has been a surge in the market size as technology works to change the way the common man accesses information and makes his decisions. Total revenue for space products and services was estimated at US$ 91 billion in 2008, up 10.4% from the previous year. The highest revenue earner within the commercial satellite service sector was the direct-to-home television, which generated US$ 69.6 billion. Fixed satellite services were the second highest earner at US$ 16.8 billion, showing a strong growth rate of 31% over the previous year. Commercial space infrastructure, including launch vehicles, satellites, ground stations, in-space platforms etc. yielded an estimated revenue of US$ 83.1 billion, with 69 orbital launches, of which 28 carried commercial payloads. The United States and Russia continue to dominate the launch space, while China has been rising in importance with record domestic launches. India ranks amongst the top ten players in the space industry with its significant achievements in satellite launches, moon mission etc. Prominent Global Companies: Boeing USA EADS Netherlands Lockheed Martin USA Northrop Grumman USA BAE Systems UK General Dynamics Raytheon United Technologies General Electric Finmeccanica Among the largest users of aerospace technology are the Department of Defense (USA), National Aeronautics and Space Administration (NASA), European Space Agency (ESA), Ariane France and others.

12% 29%


Global aerospace industry enjoys high growth as military expenditures continue to rise and emerging economies take the lead in the civil aviation industry. While dominant players are based in Western Europe and the US, Asia Pacific, including India is set to gain from outsourcing of manufacturing as well as MRO activity. The global aerospace industry has come a long way since the first flight was undertaken in 1903; market size of commercial and defence aircraft was estimated at US$ 97 billion in 2007 . Defence sales account for more than 80% of the total market typically dominated by the Government and public sector, while the growing private sector civil aviation has led to a broad-based expansion of the industry across the world. In addition there is sizeable MRO activity -- Maintenance, Repair and Overhaul -which is a major component of operating aircraft. On an average, the aerospace industry spends more annually on MRO than on manufacturing or development. The global aerospace market has five main components, each with distinct market structures and drivers military aircraft and light combat aircraft make up the bulk of the market, while jets and helicopters account for less than 20% share. In the past decade, military expenditure has been rising with the international war on terrorism, while civil traffic has seen a spurt due to robust economic growth, rising incomes, globalisation and falling air fares. Changing landscape in civil aviation: Though the recession in 2008 in advanced countries has been a setback for the civil sector, emerging economies have taken charge of leading global growth by recovering faster China, India and the Middle East are the most promising drivers of the civil aviation market. According to research by Boeing, the fastest growing economies in Asia will lead change in the market space, with Asia-Pacific set to be the largest air transport market in the world with 45% share of air travel. Commercial airplane market is estimated to be a huge $ 3.2 trillion by 2027, with Asia-Pacific accounting for 37% of the total market. Moreover, while presently the industry is dominated by US and EU based companies, there has been an increasing trend in outsourcing as firms look out for low cost manufacturing locations. MRO outsourcing is set to rise from 52% in 2006 to 65% by 2016. Here again, the Asia-Pacific is set to gain with its efficiency, expertise and labour cost advantages. Demand for

Source: PwC, 2009

Regionwise Demand In 2027 Number Of Commercial Airplanes

Total Market Size: $ 3.2 trillion

Source: PwC



The Indian Scenario The Indian aerospace industry is one of the fastest growing aerospace markets in the world. With a long history spanning six decades, the country has an excellent pool of resources matching global standards. Indias liberalised economy offers sound opportunities for international companies look to outsource manufacturing and MRO activities. Globally, Indias position in civil aviation improved from tenth to ninth position in 2007. Air traffic has been growing at almost 25% annually. The country has been upgrading its airports to international standards, catering to heavier cargo and passenger traffic. It is in the space industry that India has made even more significant strides it is one of the six countries in the world that undertakes space launches with commendable work put in by Indian Space Research Organisation (ISRO) through its commercial arm, Antrix. The genesis of research and development capabilities of the country lie in the establishment of the institutes like Defence Research and Development Organisation (DRDO) Indian Institute of Science in Bangalore and Council for Scientific Industrial Research (CSIR) offer opportunities in research and training for aeronautical graduates The Aeronautical Society of India formed a platform where engineers, industrialists and professionals could work together for the industry ISRO has successfully operationalised two major satellite systems namely Indian National Satellites (INSAT) for communication services and Indian Remote Sensing (IRS) satellites for management of natural resources. Polar Satellite Launch Vehicle (PSLV) for launching IRS type of satellites and Geostationary Satellite Launch Vehicle (GSLV) for launching INSAT type of satellites are some of the Indian space programmes notable successes. Private airlines now account for 75% of domestic aerospace market. Opening up the skies led to a boom in air traffic, both passenger and freight, which was reversed in 2008 with the global slowdown. However, as the graph below shows, recovery has begun and the aviation sector is set to continue on its high growth trajectory. The Future: Going ahead, growth in air traffic is expected to outperform the global average till 2025. In military aviation, India is expected to spend about $35 billion over the next 20 years as it replaces its existing fleet. Indian MRO segment has been growing at 11 percent and has not been affected significantly by the slowdown.This market is expected to grow at an average of 10% and reach $ 2.6 billion by 2020. The Government recognises the need for massive investment to meet these growing needs: The Ministry of Civil Aviation estimates investment of $ 200-300 billion over the next 25 years, till 2034. The Airports Authority of India has planned investment of $ 3.04 billion to upgrade airports across the country, even as the sector is open for public-private partnerships (PPPs). According to Boeing, India needs 856 airplanes worth $ 72.6 billion over the next 20 years to meet the surging demand. Investments in the Indian Space Programme to the tune of Rs. 39,750 crores during the period 2007-2012, under the Governments Planning Commission programmes. Policy initiatives: The Indian Government has liberalised the framework for operating in the aerospace industry considerably: Manufacturing and R&D activity is allowed 100% Foreign Direct Investment on automatic route in all areas, except air traffic services. While 100% domestic private investment is allowed in the defence sector, there is a limit of 26% FDI in the manufacture of defence equipment, which is also subject to licensing requirements. 100% FDI permitted under automatic route for MRO, flying training institutes and technical training institutes. 100% tax exemption for airport projects for a period of 10 years. Defence Offset Policy, effective from September 2008 has a mandatory offset requirement of a minimum of 30% for procurement of defence equipment in excess of Rs. 3 billion, only direct offsets are allowed, banking of direct offset credits permitted for up to two years, transfer of technology not counted towards offset calculation and vendor is free to choose Indian offset partner. Tax incentives are given for investing in Special Economic Zones.



ADVANTAGE KARNATAKA Karnataka produces more than a quarter of Indias aircraft and spacecraft, it is the base for all global players in this industry. Excellent support from the government has come through in the form of centres, including Hindustan Aeronautics Limited (HAL), National Aerospace Laboratories (NAL), Aeronautical Development Agency (ADA) and Gas Turbine Research Establishment (GTRE). The State continues to draw huge investments in this Sector as it gears up to meet the rising global demand. The history and background of Indias aerospace industry owes much to the state of Karnataka; home to Indias aerospace industry, the state is all set to reap dividends of the potential in this sector. Starting from 1940, when Indias first private aircraft factory Hindustan Aircraft Ltd. began its operations in Bangalore, the state has created a conducive environment that has nurtured the growth of the aerospace industry. The hub of manufacturing, research and development, the state produces more than a quarter of the countrys aircraft and spacecraft. HAL, has 19 production units and 9 research and development centres in 7 locations across India, of which, 8 production units and 4 R&D centres are located in Bangalore. Ranked 40th in Flight International's list of the Worlds Top 100 aerospace companies in 2008, HAL has a total turnover of Rs. 10,400 crore. It has manufactured 12 types of aircraft with in-house R&D and 14 types under licence. While it has built more than 3,550 aircraft and 3,600 engines, over 8150 aircraft and 27,300 engines have been overhauled at its facilities. Bharat Electronics Ltd. is another public sector firm working in this industry, which has entered into MOUs with international companies like Lockheed Martin, Boeing, EADs etc. NAL was set up in 1959 under CSIR in Bangalore. The aeronautical lab consolidated its position as a major player with the approval of Indias Light Combat Aircraft project in 1983. NAL, the only civilian aerospace laboratory in the country, is a leader in civil aviation design. Though in the public sector, these aerospace centres have grown in stature, registering international standards of technical excellence and capabilities. They work with many firms in the private sector to raise technological skills, technical and managerial processes etc. Private sector suppliers to the defence sector and the public sector firms were exposed to high standards, raising their capabilities as well. While industrial

liberalisation has been underway since 1991, reforms have been gradually spreading through to all sectors and the defence sector was opened to the private sector in 2001. For instance, Air Works India Engineering Private Ltd, established in 1951, became the first DGCA-approved independent Airline MRO in November 2008 for its facility near Bangalore. Private firms registering a major presence in the industry include: QuEST Global, the engineering company, set up base in Bangalore in 1998 and moved into the aerospace manufacturing in 2006, having entered into a 10-year strategic relationship with Magellan Aerospace. In 2007, the firm set up the countrys first special processing facility for aerospace manufacturing, delivered the first set of A-380 components to SABCA and achieved Airbus and AS 9100 certification. The very next year, it became the first Indian private sector player qualified to offer end-to-end solutions to European Aeronautic Defence and Space Company N.V. (EADS), and set up a dedicated sheet metal fabrication facility for aerospace. In 2009, QuEST established Indias first aerospace SEZ in Belgaum, 300 acres dedicated to offering an aerospace customer all from design to manufacture of components and systems in one place. QuEST Global has a manufacturing facility in Bangalore that does precision machining. Capabilities have been enhanced in the Belgaum SEZ to include additional precision machining capabilities, sheet metal work, and aerospace special processing (through a JV with Magellan Aerospace). The company has signed MoUs with 3 major players in the aerospace manufacturing space: SABCA, Belgium: Airbus A-350XWB Flap track mechanism metallic parts manufacturing and assembly work from SABCA Magellan Aerospace: to evaluate setting up an aero-engine focused manufacturing facility with annual revenues of $50m Farinia SA: MOU to evaluate the establishing of an aerospace forging facility



Gensar Aerospace & IT Pvt Ltd set up a decade ago by aerospace experts providing high-end aeronautical design services (in association with Aeroconseil of France and Bertarandt of Germany), and manufacturing services, including supporting OEMs in their manufacturing outsourcing, contract manufacturing, operational consultancy and strategic consulting, and aviation services that include consulting, global procurement and product support. Dynamatic Aerospace, which has the largest infrastructure in the private sector for manufacturing exacting Air Frame Structures and Precision Aerospace Components Taneja Aerospace and Aviation Ltd., the only private sector company manufacturing entire aircraft in India.Ltd., concentrating on three divisions Aerostructures, Airfield and MRO division and Aircraft Sales and Services division. Karnataka is also headquarters of Indias Space programme ISRO is located at Antariksha Bhavan in Bangalore. There are excellent backward linkages with suppliers coming in from a wide base of more than 2000 SMEs in the auto components manufacturing industry. With exposure to global auto majors in the state, these firms are well geared to meet the exacting needs of the aerospace industry. The Society of Indian Aerospace Industries and Technologies (SIATI) was formed in 1991 and is located in Bangalore. The society has about 300 small and medium scale industries as its members and enjoys the patronage of leading aerospace organisations, including of those in R&D. SIATI conducts seminars and workshops of topical interest in aerospace technologies. R&D management strategies, production, quality and also leads delegations to participate in national and international airshows, exhibitions and interactive workshops with overseas aerospace organisations and societies. SIATI also encourages entrepreneurs for joint ventures, co-development and co-production in the sector. DRDO aeronautic centres in Bangalore: Aeronautical Development Agency (ADA) Centre for Air Borne Systems (CABS) Gas Turbine Research Establishment (GTRE) Defence Avionics Research Establishment (DARE) Centre for Military Airworthiness and Certification (CEMILAC)

Investments in Aerospace While QuEST Global set up the countrys first aerospace SEZ in Belgaum in November 2009, the State Government has also planned an Aerospace SEZ in 250 acres of land at Devanahalli, near Bangalore International Airport, both these have attracted significant interest. Udyog Mitra, the governments single window agency for industrial projects and the apex body for SEZ projects, has given clearances to majors like US civil and military aviation companies and the European Aeronautics and Defence Systems or EADS (Rs. 11,700 crore investment); Sobha Nadathur Aerospace Pvt Ltd (Rs 200 crore) and hydraulic equipment manufacturer Dynamatic Technologies (Rs 466 crore). Five proposals worth Rs. 135.98 crores were cleared by the State Level Single Window Clearance Committee (SLSWCC) in June 2009: Systems Controls, G.L. Polyurethane Company Private Ltd., Micron Engineers, Priyaraj Electronics Limited and Pacific Natura Biotech Private Limited are ready to invest in aerospace component units in the aerospace SEZ at Devanahalli. HALs proposal to set up a Rs. 2,095 crore unit in Devanahalli to manufacture aero-engines and provide MRO facilities was approved by the SLSWCC. In January 2010, British engine maker Rolls-Royce Group Plc announced that it is setting up its first joint venture (JV) firm in India in a tie-up with HAL to make civil aero engine components and sub-systems locally for export. The firms will initially invest $4 million (Rs.18.4 crore) each in a unit in Bangalore, through which Rolls-Royce will step up sourcing of components and systems for most of the engines it makes.
New aerospace projects approved by Karnataka Government

Hindustan Aeronautics Limited

TPE 331 engine and engine components, ring rolling, fan cases, welded structural assemblies, maintenance and repair Aerospace components Manufacturers of aircraft components/assemblies and MRO activites related to aersopace applications

Devanhalli, Bangalore

Dynamatic Technologies BEML Limited

KIADB Industrial Area Devanhalli Taluk SEZ, near Bangalore International Airport, Devanhalli



Several new ventures have been set up recently in this space: Airbus Industries has located its Airbus Engineering Centre in India at Bangalore The first public private JV in aircraft design was signed between Mahindra and Mahindra, NAL and the Government of India in 2007. In 2008 Boeing signed a collaboration with IISC, Wipro and HCL to develop wireless and other network technologies for aero space related applications. Air Works India Engineering Pvt. Ltd. set up in 2009 a MRO facility at Hosur with an investment of $25 million, to carry out C checks for various aircraft. In February 2010, it announced the acquisition of a 85% stake in the British company, Air Livery. Air Works aims to utilise the technical know-how of Air Livery to help airlines bring down their maintenance costs. Other prominent MNCs operating in this sector in Karnataka include GE, Rolls Royce, BAE, Turbo Meca, EADS etc. Many global and large private companies are now building on the base that public sector units like HAL and NAL have laid in Karnataka, most notably in the area of design services, but increasingly also in manufacturing. The state has emerged as a major global design centre, with international majors like Airbus, Boeing etc. having set up their India operations and outsourcing their engineering design requirements either to in-house centres or to third party engineering services partners like Quest, Infosys etc. Air Traffic and Airports in Karnataka
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Hassan, Shimoga, Bellary, Bijapur and Gulbarga. The government plans to add 12 airstrips in the State, has opened Karwar and Bidar Defence Airports for civil traffic and is in the process of setting up 20 helipads to provide easy access to all districts and give the necessary infrastructure boost to helitourism. The State Infrastructure Policy aims to provide a fair and transparent policy framework for the facilitation of the process of economic growth and encouragement of PPP in the infrastructure sector in the State. Apart from duty exemptions, assistance in land acquisition etc. for the aviation sector specifically, the government has given a tax concession on aviation fuel, at 4%, for the first three years of operation to district headquarters. Air traffic was hit by the global slowdown in 2008, though the subsequent year saw a revival in Asia, trends are still not very strong for the Western countries. Bangalore and Mangalore followed these trends in traffic, which have now picked up to pre-crisis levels once again. AeroIndia It is an International Aerospace and Defence Exhibition organised by Ministry of Defence biennially at Bangalore. Seventh event of Aeroindia was held during 2009, in which, 600 exhibitors including 300 exhibitors from 25 countries were participated. Exhibitors from India and overseas had 54 chalets for high-profile meeting with various dignitaries. Aircraft manufacturers from India and other countries has 46 aircrafts, participating in the static and flying displays in addition to IAF aircrafts. The aircrafts included, the Cessna, Eurofighter, F16, F18 Hawker Beechcraft, Legacy 600, Super Hornets, MIG 35, etc., in addition to the Hawk, Tejas and Dhruv from India. Official delegation from 50 countries participated in the event. In addition, there was B2B meetings, HR workshops, etc.

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While liberalisation in the aviation sector, private sector airlines began operations in the country in the nineties and Bangalore was a natural hub for the southern region, given its high prominence in the IT and Auto sectors in the country. Infrastructure is being upgraded and expanded across the state to meet the growing demand of air travel. Mangalore and Bangalore are the two international airports in the State. The Bangalore International Airport Limited, the first private airport in the country, has the capacity to handle 3,000 passengers per hour. There are also two domestic airports catering to the northern part of the State at Hubli and Belgaum and the airport at Mysore is in the process of being upgraded, while new airports have been proposed at



Strengths and Opportunities Karnataka, the home of Indias aerospace industry, has a strong framework providing all requisite resources for this industry research and development capabilities, leading information technology and engineering services, manufacturing expertise with global firms located in the state and a huge pool of skilled manpower. While Bangalore is the natural destination for all players in the aerospace industry, the countrys first aerospace SEZ has been set up in Belgaum in November, 2009. There is a proposal to set up an Aerospace SEZ in a 250-acre space in Devanahalli, near the new airport in Bangalore. There is also a proposal to set up a Defence Manufacturing Hub over 500 acres in Chellakere Taluk in Chitradurga district, adjacent to the HALs 200 acre component manufacturing site. Further, with the IT giants like Wipro, Infosys and Voit of Germany getting into software and intelligent applications related to the Sector, theres more opportunities waiting to be harnessed. As the home of the aerospace industry in India, Karnataka scores high on every part of the ecosystem of the aerospace and defence industry. This is amply demonstrated by the fact that the state hosts the first aerospace SEZ in the country and is set to leverage its strengths to become the aerospace hub of the region. At the basic level of raw materials needed, Karnataka is an important producer of aluminium, a critical raw material input for the aerospace industry. The Belgaum unit of Hindalco houses an alumina plant, a world-class research centre for alumina, and a carbon paste and block plant. The alumina plant started operating in 1969 with an initial capacity of 75,000 tpa of alumina hydrate. It currently produces around 380,000 tpa. Since the 1990s the plant has become predominantly an export-oriented unit of metallurgical alumina, while producing several grades of special aluminas and hydrates for non-metallurgical applications, like refractories, ceramics, polishing, fire retardant plastics, alum, zeolite, etc. Over the years, the plant has expanded its capacity of speciality products to around 138,000 tpa, with approximately 120 different grades, serving more than 600 customers across 35 countries. It is also the third-largest producer of steel in the country, providing location advantage to the auto and engineering industry in the state. There is a concerted effort by the state to raise the capacity of power generation in the state to cater to the growing demand of industry. In last 4 years, 16 power projects are approved in the State which would add 10,760 MW power to

the State grid in near future. Solar power projects are also been planned in Belgaum and Raichur districts. At the same time, connectivity is being improved upon by expanding airports, road and rail network and upgrading ports on the coast. With experience for more than six decades, the state has built up considerable resources and talent pool that is available to all companies working in the aerospace sector. At the very base of the aerospace industry lies research and development and engineering design, capabilities that are well developed in the state through its pool of skilled technical manpower, backed by presence of internationally renowned institutions HAL, DRDO, ISRO, NAL, IISC all based in Bangalore. More global manufacturers are comfortable outsourcing to India, particularly Karnataka, because of the presence of electronic and technical skills and fluency in the English language. Add to this the fact that Bangalore, as the IT capital of the country, brings with it a concentration of the best IT capabilities Karnataka has the highest number of CMM Level 5 certified software companies providing solutions to the aerospace industry. The IT industry brings to aerospace the high technology capabilities that are vital for cost reduction. As explained by Infosys, older aircraft in general suffer from a problem of over-design, done to meet safety and other regulations that result in extra metal weight, higher fuel consumption etc. Software and engineering expertise works to innovate to create new tools and solutions that obviate such over-design and yet ensure the same levels of safety. Such design changes have been effected by Infosys for almost all recent commercial aircraft programmes, including business jets, and all parts of an aircraft, including landing gear, fuselage, wings, avionics, inflight systems, and electrical systems (an exception being the engine). Further, Karnataka is the manufacturing base for all major auto firms and auto component manufacturers. High end technical support and suppliers experienced to handle complex orders matching global standards are therefore easily available in the state. QuEST Global, the company which has set up the countrys first aerospace SEZ in Belgaum, points out its capabilities in the aerospace sector in the flowchart below, characteristics that are replicated in other firms operating out of the state.



Creating an enabling environment is the goal of the states investor friendly and responsive government, which has put in place policies to assist investors at every step upgrading infrastructure, providing easy availability of land through its Land Bank, setting up the countrys aerospace SEZ etc. There are many challenges ahead ensuring a steady stream of manpower to meet the growing requirements, ready availability of raw materials, complex tax system which the government is working towards mitigating. The high fliers The Aerospace Sector in Karnataka abounds with examples of PPP. By providing for the countrys first aerospace SEZ, the government has shown its clear intent in supporting the growth of this industry in the state. While there are a slew of success stories in the aerospace sector in Karnataka, the most striking example is that of Hindustan Aeronautics Ltd., which began operations as a private company in 1940 as Hindustan Aircraft Limited in Bangalore. With a string of achievements to its credit, the company which has been supplying for Boeing successfully since 1991, is set to produce flaperons for Boeings 777 series of commercial jetliners. This represents a significant leap forward in technological capability - the 777 flaperon is a highly complex composite assembly, referred to a control surface working both as an aileron to control roll and as a flap to control lift. With a JV announced with Rolls Royce in January 2010, the company has taken another step forward. HAL supplies components to several global engine companies and has nine JVs six of them formed in the past three years with companies such as Canadas aircraft simulator maker CAE Inc., Israels Elbit Systems Ltd and Safran unit Snecma SA. Airbus set to transfer majority of engineering work to India LiveMint, October 9th 2009 There is a big push at the top level to grow business in India in the next three to four years, Eugen Welte, head of operations at Airbus Engineering Centre India Pvt. Ltd., said at an aerospace symposium in Bangalore on Saturday. Around 60% will be done internally, 40% local outsourcing.

Another global major Airbus SAS is set to move 20% of its engineering design activities to low cost countries, most of it to India, to be better able to compete with its main rival, Boeing Co. Currently, it has located its 120 people engineering centre in Bangalore, which will be expanded to more than 400 employees by 2012. It outsources work to around 20 Indian IT and engineering service providers including Infosys Technologies Ltd., Quest, HCK Technologies etc . Its Bangalore engineering centre is the only one outside Europe that does what is called `non-specific work. These are works that are not specific to an aircraft part, but involve issues related to aerodynamics, aerothermics (temperature, ventilation), aeroelastics (effect on structure, such as vibration etc), and simulation of flight management, developed new tools to create better aircraft and speed up aircraft development. Interestingly, in 2005, Airbuss top supplier auto engine maker Snecma SA set up a subsidiary in collaboration with HAL in Bangalore. QuEST Global that has set up the countrys first aerospace SEZ in Belgaum in November 2009 is in fact a prime example of the fast track that industry works at and achieves in the state. The Belgaum SEZ is expected to yield aerospace-related business worth around Rs 2,500 crore in 10 years and could be the next big bet in this sector outside Bangalore. The SEZ is expecte to create more than 7,000 jobs for local talent and infuse $ 500 million (in)to the economy in ten years. Belgaum has many location advantages: hundreds of foundries and low-cost engineering talent, well-connected with Bangalore, Hyderabad, coastal Mumbai and Goa, and is already a source for auto components for the auto industry in Bangalore, Pune and Hyderabad. Quest, a company begun by two engineering graduates from Karnataka, is in the supply chain for Airbus A80 and A350 that is due in 2013; provides landing gear shackles for Boeing 777, 787 and 737 aircraft programmes through its partner, Magellan a Boeing and Airbus supplier. EADS, Rolls-Royce, GE Aviation, Toshiba and UTC are among its clients. In November 2009, it entered into a contract with Airbus vendor SABCA of Belgium to supply flap track mechanism metallic parts from out of the SEZ for the prestigious A350 programme.



In the March 29th 2010 meeting of the State High Level Clearance Committee. 34 investment proposals worth Rs. 94000 crore were cleared. These included the proposal for a 250-acre SEZ in Devanahalli Aerospace Industrial Area. The SEZ is an effort to provide all solutions related to avionics in a concentrated manner, from a comprehensive range of technologically advanced precision milling machines, to productivity enhancing software and engineering solutions, engineering and process optimisation projects and a wide range of special tools for customers in the aerospace sector. Clearly, India is one of the worlds most sought after markets; with all its inherent strengths and opportunities, Karnataka is the destination for all global players in the aerospace industry.


Land notified u/s 3(1),1(3) & 28(1) : 46,734 Acres. Land notified u/s 28(4) : 12,379 Acres. Land to be submitted for Government approval : 41,748 Acres. Total :100,861 Acres


(as on 15th May 2010)









Bangalore: Meeting ground for space & air industry Indias first space exhibition, Bangalore Space Expo 2008 was organised by ISRO, CII and Antrix Corporation Ltd. The exhibition saw huge participation from domestic and foreign companies Hindustan Aeronauticals Ltd. Arianespace (France), Infinisat (USA), European Space Agency, Israeli Space Agency etc. Bangalore also hosts Indias international aerospace and defence exhibition, AeroIndia, which witnessed unprecedented participation in 2009 592 exhibitors including 303 from 25 countries showcased their potential in technologies, products, innovation and aircrafts. Aircraft manufacturers had 46 aircrafts participating in static and flying displays; the exhibition attracted more than 50,000 business visitors and 2 lakh general visitors. The Indian Air Force also organised a workshop on aerospace sector and aviation to students from nearly 200 schools.




District boundary Taluk boundary NH STATE_RAIL Land bank status Lands notified under sec 3(1),1(3),28(1) Lands notified under sec 28(4)









Lands to be submitted to Govt approval















Websites Karnataka Udyog Mitra Karnataka Industries Area Development Board IBEF Karnataka Tourism Government of Karnataka Government of Karnataka Water Resources Department Karnataka Power Transmission Corporation Ltd. Karnataka State Horticulture Department Indian Space Research Organisation Hindustan Aeronautics Ltd. Gensar Aerospace & IT Pvt. Ltd. Taneja Aerospace and Aviation Ltd. References Economic growth data from Central Statistical Organisation, Government of India Changing Dynamics: Indias Aerospace Industry, PricewaterhouseCoopers, 2009 The Space Report 2009, Space Foundation, available at Karnataka A Global Aerospace Hub, CII 2007 Newspapers quoted: Hindu, Machinist, Hndu Business Line, Financial Express Communique March 2009, Journal of CII Planning Commission, Government of India, Eleventh Five Year Plan documents GTRE Bangalore Changing Dynamics:Indias Aerospace Industry, PricewaterhouseCoopers, 2009. All revenue projections for global space industry from The Space Report 2009, Space Foundation, available at ILO, Project on Youth Employment and Social Dialogue in Southern India, December 2008. Boeing India President, quoted in the Financial Express, October 23rd 2009.

CONTACT US The Principal Secretary to Government Commerce & Industries Department Government of Karnataka Vikasa Soudha, Bangalore 560 001, Karnataka, India Ph: +91 80 2225 2443 / 22203 4340 E-mail: Commissioner for Industrial Development and Director of Industries & Commerce 2nd Floor, Khanija Bhavan No.49, Race Course Road Bangalore 560 001 Karnataka Udyog Mitra Managing Director Karnataka Udyog Mitra 3rd Floor, Khanija Bhavan (South Wing) No.49, Race Course Road, Bangalore 560 001 Other agencies supporting investors in Karnataka Karnataka State Industrial Investment Development Corporation Karnataka Industrial Areas Development Board Karnataka Small Scale Industries Development Corporation Technical Consultancy Services Organisation of Karnataka




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