Rs 8,300 Cr. Investment for National Civil Aircraft Project

Introduction

The National Civil Aircraft Development Project is set to be launched by January next year, and the total investment for the project is estimated at Rs 8,300 crore.

According to the financial feasibility report for the project, the first phase, or the design phase, is expected to start by January 2012 and would entail an investment of Rs 4,400 crore, which would be spread over a period of three-five years. The second phase, or the production phase, is expected to start within three years of the launch of the design phase, and would require an investment of Rs 3,900 crore.

Last year, National Aerospace Laboratories (NAL), which spearheads the National Civil Aircraft Development Project, commissioned a survey to assess the potential market for India’s proposed regional transport aircraft. The Bangalore-based aerospace research laboratory had then appointed consultancy firm AT Kearney to conduct the survey, while IDBI Capital Market Services Ltd and SBI Capital Markets Ltd were entrusted with the financial feasibility study.

“Currently, the project is at a pre-design stage and awaits the government’s final approval. NAL has already invested Rs 50 crore and put in place a civil aircraft design bureau, which is expected to develop five prototypes,” said a source involved with the feasibility study. The project involves developing 70-90 sitter ‘short haul aircraft’ to facilitate air transport in Tier-II and Tier-III cities.

“There are 450 airstrips across the country. Currently, only 95 are being used, since the others are not equipped to handle Boeing or Airbus aircraft, which are generally used by the commercial airline industry.

This project aims at tapping the growing domestic demand for air travel by building a plane that can land on a shorter runway and one that which is better suited to Indian conditions, besides being fuel efficient and thereby, cheaper to operate,” said a source.

The feasibility report also recommended that the government fund the entire design phase of the project and rope in a domestic private partner for the production stage. According to sources, Tata Group, Reliance Industry, Mahindra & Mahindra and L&T could be in the fray when the government issues tenders later this year.

The production stage would initially start with a capacity of five aircraft a year, which would be scaled up to 36 aircrafts in five years.

“The domestic private partner should be roped in at the design stage itself, so that they have an idea about the design and technical aspects of the aircraft being developed. In the production stage, the private player should be given a controlling stake,” the source said.

Source

India Brand Equity Foundation, May 31, 2011