india defence & aviation

Copyright 2015, Lakshmikumaran & Sridharan / Confidential

Anuroop Omkar & Kritika Krishnamurthy, Attorney,

M&A, JV, PE & Commercial Laws Practice

Regulations & Sector Policies governing Defence & Aerospace Sector in India


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

Make in India: Civil Aviation/ Aerospace9th 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

Legal Roadmap: Defence & Aerospace

Entering the Indian Market

Import / Export Regulations

Commercial considerations and contract management

Regulatory Environment


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


Foreign Trade Policy (FTP)

Trade dispute redressal

Digitization

Make in India

Reduced export obligations for import duty waiver schemes

Minimum DocumentationOnly Online FilingOnline 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


Seek approval

(CAR 145 – Civil Aviation Requirement

s)

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

In some states – single window clearance

Proposed – federal level single window clearance

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 with30% indigenous

content

Purchase from Foreign Vendor

Followed by Licensed/ Indigenous

Production

RFP to be issued only to Indian vendors

High Tech ComplexIndigenous systems

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

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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

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