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L&T eyes offset clause windfall in aviation

By BS Corporate Bureau
April 04, 2006 12:20 IST

Larsen & Toubro is in talks with aircraft makers Airbus and Boeing to provide sub-assembly services and components, depending on clarification on the 'offset clause'.

Domestic air carriers Air-India and Indian, have placed aircraft orders worth over $10 billion with Boeing and Airbus. It is still not clear about the terms of the 'offset clause'. The clause specifies that industry of the country placing orders should get a part of the business.

As in the case of defence order, for example, if the order is over Rs 300 crore (Rs 3 billion), nearly 30 per cent of the contract should be procured from the country which places the order, according to the clause.

In any case, L&T is well positioned to pick up orders from the aircraft majors, once they start buying components from India. One of the products the company is ready with is `advanced composites', or reinforced metals, used in aircraft applications.

On the sidelines of the inauguration of `Technology Centre-II' at L&T's Manapakkam campus, A M Naik, chairman, L&T, said that even a 15 per cent supply of assembly service and components in the offset programme to Airbus and Boeing, will mean good growth potential in the aviation segment, into which the company has been a recent entrant.

M V Kotwal, senior executive vice-president-heavy engineering, L&T, said that the company has been partnering with Indian Space Research Organisation in the area of aerospace. The company has been building main segments for rockets.

He said the company was a recent entrant in the aviation sector (nearly three years old). The company manufacturers sub assembly and composites.

Naik said the company would be recruiting about 2,000 persons for its manufacturing division and another 2,500 people for its engineering and information technology division this year.

The chairman expressed distress over paucity of talent in the manufacturing sector as most of the youngsters prefer employment in software and BPO companies, therefor negatively impacting the manufacturing sector.

He pointed out the company would be raising $300 million for its projects during the current financial year.

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BS Corporate Bureau
Source: source