Participation in Aero India rises, sales yet to pick up

by Ajai Shukla

Yelahanka, Bengaluru

Business Standard, 22nd February 15

Driving on Saturday to Yelahanka along Bengaluru’s notoriously crowded roads, one has no doubt that Aero India 2015 has finished its “business phase” and is open to the public. Instead of black Audis and Mercedes conveying sharply dressed foreigners in lightweight business suits, the highway is a melee of small cars, crammed with families headed for a day at the air show.

Inside Yelahanka Air Force Base, the tarmac is abuzz with some 50,000 visitors calling out excitedly as a Sukhoi-30, a Tejas fighter, a F-16 and a Dassault Rafale in turn scream through the skies. The display halls are packed with local visitors, jostling for freebies like caps and keychains and for getting their photos clicked with airplane models.

Going by the babel on the public days, Aero India 2015 is the world’s premier air show. If one were to measure its success in terms of business done or sales announced, there is far less cause for satisfaction.

The claim of the show organisers --- the Defence Exhibitions Organisation (DEO) --- to have masterminded yet another success is based on rising participating. The DEO says 328 foreign companies participated this year, up from 212 in Aero India 2013; Indian participation rose even more steeply --- from 156 companies to 266.

Ask the exhibitors, however, and the complaints pour forth, though in a business where so much depends on government favour, few will speak on the record. Most exhibitors, foreign and Indian, complain Aero India is run as a profit-making venture rather than as an opportunity to bring potential partners together.

Even in dollar terms, Aero India has become an extremely expensive show. Foreign exhibitors pay the equivalent of Rs 50,000 per square metre for display stands. Indian companies pay about Rs 35,000.

The bitterest complaints stem from the micro, small and medium enterprises (MSMEs). They ask why they must pay so exorbitantly to be present at this event, when the government claims to support them in defence production.

CGKD Nair, the founding chairman of the Society for Indian Aerospace and Technology Industry (SIATI), points out Aero India is a significant opportunity for MSMEs, who cannot afford to display in foreign air shows.

“Aero India 2015 must showcase Indian defence capability, much of which lies in the MSME sector. Foreign vendors would like to tie up with many of these small units, but the MSMEs get priced out because the DEO’s emphasis is on profit, not business”, says Nair.

“What use is this tiny space that I can ill afford? If the aim is to promote MSMEs, why are we not being showcased before foreign vendors?” demands the owner of a small precision engineering firm, who has paid lakhs for his tiny stall.

Why then is there such a substantial turnout? Most exhibitors say they are there in the expectation of future business. Visibility is important, they say.

“The ‘Make in India’ buzz has brought us to Aero India 2015. We were hoping the prime minister would announce substantive measures to promote our business”, says the owner of a medium-sized software engineering firm.

Ask whether those expectations have been met, and there is a mixed response. While the prime minister gladdened many hearts by publicly recognising the problems faced by the defence industry, he had no solutions to offer. The defence minister, Manohar Parrikar, continues to grapple with procurement reform.

Aerospace expert, Pushpindar Singh, notes the almost complete absence of high profile signings and deals. “There was practically nothing in the $100 million region. The air shows at Farnborough and Paris see deals being struck that are in billions”, he says.

Singh admits that many of the really high value deals are in civil aviation, since defence contracting follows a negotiation cycle that is unlinked to air shows. Aero India has almost no participation from civil aviation, since former civil aviation minister, Praful Patel, began a separate biennial civil air show in Hyderabad --- India Aviation --- supposedly because he was not treated with enough respect at Aero India.

The bulk of the deal-making saw companies positioning themselves for military contracts. Foreign vendors, conscious of the implications of “Make in India”, continue talking to multiple Indian companies, selecting suitable partners for building in India under technology transfer.

Yet, many Indian majors are watching and waiting. The high profile “CEOs’ Forum”, which met Parrikar, featured only two high-profile chieftains --- Kalyani Group’s Baba Kalyani and Reliance Group’s Anil Ambani. Others such as Larsen & Toubro’s AM Naik and the Tata Group’s Cyrus Mistry remain watching from the sidelines.