india defence & aviation
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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
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
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
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
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 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
Copyright 2015, Lakshmikumaran & Sridharan / Confidential
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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Our Offices
Copyright 2015, Lakshmikumaran & Sridharan / Confidential
L&S and Aviation
IP
Purchase, Finance and
Leasing
Commercial Agreements
Insurance
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Dispute Resolution
Foreign investment
and Regulatory
Environmental Law
Competition law
Tax
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on
Joint Ventures
Private Equity
Capital Markets
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 anuroop.omkar@lakshmisri.com , visit us at www.lakshmisri.com
Lakshmikumaran & Sridharan
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