Karnataka exempts aerospace and defence firms from Covid-19 lockdown

SOURCE: Ajai Shukla / Business-standard.com

In a decisive measure to protect Karnataka based companies that manufacture parts and systems for the assembly lines of global aerospace and defence (A&D) majors like Boeing and Airbus, the state government has exempted local A&D manufacturers from the nationwide anti-Covid-19 lockdown and permitted them to resume manufacturing activities with immediate effect.

“…The State Government hereby [exempts] industries supplying to Defence & Aerospace manufacturing… from the purview of the Lockdown and further to relax the restrictions imposed on the movement of workers and staff working in these industrial units,” stated a circular issued on Wednesday by Gaurav Gupta, the principle secretary in Karnataka’s commerce and industries department.

It is unclear whether the Karnataka government’s action will be emulated by the governments of Telangana and Maharashtra, where A&D firms also have a significant presence. Tamil Nadu had declared A&D industries to be “essential public utilities” on March 24.

This comes as a relief to Karnataka’s A&D manufacturing firms, consisting mostly of medium, small and micro enterprises (MSMEs) such as Dynamatic Technologies, Rossell India Ltd and Sasmos, who are, for certain components and systems, the sole suppliers to Boeing production lines in the US and the Airbus assembly line in Toulouse, France.

For example, Dynamatic builds “flap track beam assemblies” for all 58 single-aisle airliners that Airbus assembles each month. Without the on-time delivery of this crucial system, Airbus’ assembly of A-318, A-319, A-320 and A-321 airliners in France (54 per month) and China (four per month) would grind to a halt.

Indian A&D firms believe that uninterrupted and timely supply remains critical for their credibility. In the US and France, A&D production continues, even as other factories and shops have been shuttered to stop the spread of Covid-19. The US federal government has ordered the A&D industry’s 2.5 million employees to continue reporting for work, after the defence industry lobbied Congress and the Pentagon for a special dispensation on the grounds of national security.

In France, too, Airbus was closed for four days last fortnight, but then resumed production and assembly activities with the government’s encouragement.

In these circumstances, Indian A&D firms are experiencing strong pressure to adhere to contracted supply schedules. This was highlighted over the weekend, when the highway police stopped a container truck transporting an Apache helicopter cabin, manufactured in Hyderabad by Tata Advanced Systems Ltd (TASL), to Mumbai for onward shipment to Boeing’s Apache helicopter assembly facility in the US. Eventually, the Union government was requested to intervene to allow the truck to proceed to Mumbai, where the cabin was shipped to the US.

“For Indian firms supplying global majors, Covid-19 is both a threat and an opportunity. We could shelter behind force majeure clauses in our contracts to justify failure in meeting supply obligations due to the pandemic. On the other hand, we could demonstrate that, despite serious difficulties, Indian firms will deliver on time,” says Udayant Malhoutra, chief of Dynamatic Technologies.

With this motivation, Malhoutra petitioned the Karnataka government to allow A&D production as a special exemption from the lockdown. “Karnataka’s reaction was swift and decisive. The state government took just five days to issue the exemption order. Now it is up to us to resume production quickly,” he said.

A&D firms such as Dynamatic have already implemented enhanced separation norms between workers and sophisticated Covid-19 awareness and prevention programmes. However, their workers, many of whom live within walking distance of the production plant, will have to obtain curfew passes from the police to travel to work.

Indian A&D firms are carving out a steadily growing space as suppliers to global “original equipment manufacturers” (OEMs) such as Boeing, Airbus, Lockheed Martin, Bell Helicopters and others. Last year, Boeing sourced over Rs 7,000 crore worth of components and services from over 200 Indian companies, while Airbus sourced over Rs 4,500 crore worth of components and services from some 45 Indian companies.

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