OEMs seek higher control of business
Ram Prasad, Managing Director, Rockwell Collins India
SP’s M.A.I. (SP’s): What do you think about the 49 per cent FDI limit increased from 26 per cent recently? Ram Prasad: While the limit increase is not a major difference to Rockwell Collins and other investors, the changed mind set of the government is encouraging. As the FDI limit increases, it helps Rockwell Collins, and other companies, who want to invest more in India for development versus having to import directly and then work for offset credit. In the previous arrangement with only 26 per cent FDI, it was harder to justify investing in key technologies. Now that the limit has increased, we can begin to be more assured that we will benefit more from the investments, have more control of the products and manage our intellectual property more closely. Rockwell Collins welcomes this change and we are looking forward to even more favourable FDI changes in the future. SP’s: What all can your company offer to our country with this change, now, versus the past limit? Prasad: Although it probably does not change the type of products we would sell to India, the change in the FDI limit could change the amount of work we do in country, the type of work, and the structure of our business arrangements.
We believe strongly in our strategy to partner with Indian companies to bring products and solutions to India. We are working with partners in India to customise and add value to our products, solutions and services to meet Indian customers’ specific needs. This change in the FDI limit enables more equitable partnerships and allows us to explore different options for business models as we do in other countries, such as JVs, consortiums, teaming relationships and 100 per cent owned subsidiaries. This change is a step in the right direction.
The types of products we are bringing to India include: communications upgrades, network-centric warfare, avionics, commercial aircraft systems, business aircraft systems, aviation passenger processing systems, simulation and training, and service solutions. SP’s: As on date can you brief us about your joint activities with Indian industry? And the business arrangements involved in these joint activities? Prasad: In India, for defence applications, we are focused on communications, avionics, situational awareness solutions for helicopters, SATCOM, EW, and networking systems. Today we have radios, GPS and EW equipment on multiple military aircraft, including the following example customers: • Our pArtnErsHIp wItH ElECtronICs CorporAtIon oF InDIA, LtD (ECIL)
for electronic counter-counter measure (ECCM) radio modules • DO 228 CommunICAtIons AnD nAvIGAtIon EquIpmEnt For HInDustAn Aeronautics Limited for Indian Navy, Coast Guard and Air Force VArIous AvIonICs AnD ElECtronICs pACkAGEs For InDIAn AIr ForCE C-130, C-17 and future helicopter programmes CommunICAtIons AnD AvIonICs on tHE InDIA NAvy’s P-8I mArItime patrol aircraft and new generation helicopter programmes Teaming with Indian partners has been and will continue to be a key element in our strategy. During Aero India 2013, we announced our teaming with the TATA Strategic Electronics Division (SED) on pursuits related to Software Defined Radios. During Defexpo 2014, we announced that India-based Park Controls & Communications (P) Ltd. selected Rockwell Collins’ new 721S Fixed Site Ground radio as an integral part of an advanced telemetry system for the Indian Air Force. Again, this is a good example of how we are partnering well with local companies.
In addition, with our acquisition of ARINC last year, we are also providing our suite of passenger processing technology to Terminals 1D and 3 of Indira Gandhi International Airport. India’s Bureau of Immigration also uses Rockwell Collins’ ARINC eBorders Advanced Passenger Information System (APIS) which allows them to review passenger information even before the aircraft lands at their destination airport, optimising efficiency and passenger flow and enhancing overall border security and control.
• SP’s: Why there seems to be a demand for 51 per cent FDI limit, still? Is that justified? Why? Prasad: As I understand it, the demand is not for a higher number, but instead it is for higher control of business activities and decision making. For example, if FDI is 100 per cent then the decision making process is the easiest as it would lie entirely with one company’s board to make all the decisions. It is important to also note that FDI inflow would be at its best if FDI limit is 100 per cent. On the flip side, we understand this is not ideal for the Government of India when at crucial times the decision made by a foreign OEM may not be completely in line with their interests. This is particularly of concern if the technology is critical to the country’s security. So a solution is the one which lies in between these two limits. There are several proposals one can think of ranging from 51 to 76 per cent, having the key decision maker CEO be of Indian origin, build non-retraction clauses, etc. Here is an example that would work well for both the OEM and the government: 100 per cent FDI would qualify the OEM for an offset obligation through a local company. As long as the employees of the company are from the local population, and key deliveries are made for local consumption with clauses built in for non-retraction from business, then both the company and the Government of India benefit.