'Protectionism won't benefit Indian defence industry'

New Delhi, March 30 (IANS) Protectionism - capping FDI at 26 percent in the Indian defence industry - wouldn't benefit the sector and this should be raised to a minimum of 49 percent, a leading European helicopter manufacturer said Friday even as it asserted it was in this country for the long haul.

"Protectionism is not to the benefit of the Indian defence sector. You don't realise the benefits of the multiplier effect. Development will be faster if higher FDI is permitted. This should be at least 49 percent if not 51 percent," Lutz Bertling, president and CEO of the Eurocopter Group said at a press conference at the DefExpo international exposition here.

"But then, it is not just a question of raising the cap to 49 or 51 percent. There are issues of substance like the appointment of a CEO and COO, among others, otherwise it makes no sense," Bertling added.

Nonetheless, Eurocopter, which has had a presence in India for the past 40 years - albeit in a different avatar - intends to have a presence in India for a very long time.

For one, it is a contender for an Indian Army-Indian Air Force order for close to 400 light utility helicopters for which it has fielded the AS550 C3 Fennec.

Should it get the order, initially for 197 machines off the shelf for the Indian Army, it would be open to setting up a production line with Hindustan Aeronautics Limited for the remaining helicopters.

In any case, since the company intends to "involve Indian industry in the global supply chain", the fuselage for the Fennec would be produced in India in partnership with Mahindra and Mahindra, Bertling said.

This, in spite of the fact that he found India's offsets policy, under which 30 percent of all defence deals worth over Rs.3 billion has to be reinvested in the country, "restrictive".

When this clause was first mandated in 2006 the investments had to be in the defence sector but this has now been extended to civilian companies in the military hardware sector.

"I would say this is still restrictive," Bertling said, echoing demands by many foreign manufacturers that the offsets obligations should be redeemed across the industry spectrum.

This apart, Eurocopter also hopes to sell 56 H-65 light-medium helicopters to the Indian Navy and 16 to the Coast Guard, from which it is also hoping for an order of 18 of the heavier Super Puma/Cougar rotorcraft.

The Fennec, in fact, has had a chequered history in India. A contract for 197 machines was on the point of being signed in 2007 when the process was abruptly terminated for reasons that are still not exactly clear.

The re-tendering process began in 2008, extended field trials were completed in 2010 and the evaluation reports submitted a year later but till date, the defence ministry is yet to decide on opening the commercial offers. The Russian Kamov is the other helicopter in the running.

While the Eurocopter Group was formed in 1992 with the merger of the helicopter divisions of Aerospatiale and Daimler-Benz Aerospace AG, Aerospatiale (then known as Sud Aviation) has had a presence in India for the past 40 years with its Alouette II and III rotorcraft that were manufactured in India by Hindustan Aeronautics Limited.

It is to replace these machines, which have undergone upgrades but are nearing the end of their service life that India is looking at the Fennec and the Kamov choppers.