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BW Businessworld

Is It Time For HAL To Buckle Up?

Is HAL capable of being the next generation aerospace agency that India needs it to be? Here’s a SWOT analysis of its strengths and weaknesses

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Hindustan Aeronautics Limited (HAL) has been accused of taking as long as 35 years to manufacture India’s first light combat aircraft (LCA), Tejas. Recently Union Defence Minister Nirmala Sitharaman held HAL responsible for the cancellation of the Medium Multi-Role Combat Aircraft (MMRCA) deal during the tenure of the United Progressive Alliance (UPA) government, casting aspersions on the capability of the defence public sector undertaking (DPSU).

Hindustan Aeronautics Limited’s ostensible ineptness justifies the present government’s decision to purchase the 36 Rafale aircraft from France in a fly-away condition. Perhaps, it it not entirely justified to blame HAL for the delays in delivering aircraft to the defence forces or to question the capability of this giant DPSU. BW Businessworld looks at the score board in a bid to assess HAL’s hits and misses over the years and whether it had what it takes to be the agency that could deliver the  next generation aircraft that India needs for its Armed Forces.

The Track Record
Hindustan Aeronautics Limited has a long track record of manufacturing 17 types of aircraft and a type of aero engine entirely from its in-house R&D. It is also the licensed manufacturer of 14 types of aircraft like the MiG 21 and over a thousand aircraft system equipment (avionics, mechanical and electrical), demonstrating a unique capability to work on many different platforms, types and makes. R. Madhavan, Chairman and Managing Director, HAL emphasises the company’s capability to produce “many generations of (license-based) fighter aircraft”.

The Rafale Deal

So, how come HAL was not considered competent for a licence to manufacture the Rafale fighter planes? “After rounds of negotiations with Hindustan Aeronautics Ltd., Dassault Aviation felt that the cost of the Rafale jets will escalate significantly if they were to be produced in India,” Defence Minister Nirmala Sitharaman has gone on record to say.

The fighter planes typically have a life cycle of 30 to 40 years. As former HAL chief, T.S. Raju points out, “You have to see the life-cycle costs and not the cost per piece of a fighter. Life-cycle costs would have definitely been cheaper. And ultimately it’s about self-reliance. There is a learning curve. If the French are making 100 jets in say 100 hours, I will take 200 hours as I am doing it for the first time. I can’t do it in 80 hours. It’s a scientific process”.

The NDA government has struck a deal to buy the Rafale fighter jets off -the-shelf, sacrificing its commitment to the Make in India mission. It justifies the decision, saying the deal would ensure a quick delivery of the aircraft necessary for India’s defence requirements. The 36 Rafale jets though, are scheduled to be delivered within 67 months of the signing of the agreement between France and India in October 2016. So, the first of these jets will not arrive before October 2019, which could actually have been ensured had HAL been the licensed producer of the jets.

Hindustan Aeronautics was committed to roll out 18 Rafale jets by 2015 in the previous government’s agreement with France’s Dassault Aviation. The notion therefore, that the MMRCA deal had fallen apart because HAL was not in a position to guarantee final delivery of Rafale jets is not quite foolproof. As Dassault Aviation’s chief has gone on record to say, the deal with HAL was almost through, when it was swept aside.

The Tejas Story 

The Indian Air Force has shown some concern about the delay in the delivery of the Tejas. “In between there have also been intermittent changes in the drawing board and suggestion from IAF,” says P. G. Yogindra, Executive Director, LCA, Tejas at HAL, “… but we are ready to deliver the remaining eight by March 2019 to the IAF.” He emphasises that the entire lot would be delivered to IAF by March next year as required, adding “As you see, the No. 16 at the assembly line is under full throttle.”

The HAL chief corroborates the information. “At present, LCA Tejas has a matured platform and production issues are being resolved with the active support of all agencies. An investment of Rs 1,381 crore has been finalised to increase the production capacity from eight to 16 aircraft per year by March 2020. A parallel production line is being established at the HAL Aircraft Division to expedite the production. Major assembly modules have been outsourced to tier-I vendors to enhance capacity. However, production of FOC standard LCA can progress after clearance from the Design Agency,” says Madhavan.

It is pertinent to mention here that manufacturing fighter jets require involvement of multiple agencies. Before HAL puts an aircraft on the assembly line for instance, it has to be appraised by the Aeronautical Development Agency for the design, which incidentally, is an important phase in the making of an aircraft. A fighter jet only lands at HAL for structure and assembly after it has been designed.

“There is some delay on LCA as FOC is not coming now.  Even though the order was placed with us in 2006, the IOC from the Aeronautical Development Agency was in 2013, and that is why we could not start the production at all,” admits Madhavan. “After IOC, there were a huge number of drawing changes and amendments so, we could hardly produce anything in the first two years. Now as we try to stabilise it, FOC has to come in December,” he says.

The Tejas is a 4.5 generation LCA of its class that has not failed or crashed the way the MiGs have. “Given the fighter jet’s long journey, its handing over to the Indian Air Force (IAF) in 2015 was certainly a noteworthy moment for the Indian aerospace in general and state-owned HAL in particular,” says  HAL chief N. Madhavan proudly. “Tejas, the supersonic fighter jet is likely to replace the ageing Soviet-era MiG 21 jets which the IAF plans to phase out eventually. It has been a great journey to build a four-and-a-half-generation fighter jet which is comparable with F-16 and better than MiG 21,” says Madhavan.

All said and done, one cannot ignore the fact that a PSU the size of HAL (with a manpower strength of 30,000) does have a daunting task of optimising resources at global standards. It does need new benchmarks of efficiency. Moreover, fighter jets are evolving and HAL will have to keep pace with the times.

STRENGTHS

* Basic trainer HT-2 made by HAL in the 1970s served the IAF successfully for nearly four decades n Its intermediate stage trainer HJT-16 Kiran has been in service since 1970
* Expertise in licence-based production
* The HAL-made Dornier 228 is India’s first indigenously built passenger aircraft
* Aerospace hardware and next gen research collaboration with ISRO

WEAKNESSES
* HAL has the most stretched working capital cycle vis-à-vis global peers
* Its outstanding inventories exceeded revenues for most of the past decade
* Poor quality output due to time-lapse leads error and technical failures
* Inordinate delays in delivery of Tejas and Sukhoi
* Quality issues with licence-based production - HAWK 132 engine failure; technical glitches in SU-30MKI; 50 per cent of the MiG fleet lost due to crashes
* Inability to provide a replacement for the trainer HPT-32
* Manpower versus productivity issue

OPPORTUNITIES

* Putting LCA Tejas Mk 1 on track
* LCA Mk 1A must be off the design board and in the assembly line
* Address flaws in the manufacturing process as well as deficiencies in the overhauling process
* Gear up for 110 MRCA partnerships
* Realise the potential offered by the first made-in-India passenger aircraft, the Dornier 228
* Drive private players and assimilate them to boost the aerospace ecosystem

THREATS

* Airbus-Tata Advanced Systems JV to produce the C-295 to replace IAF’s ageing Avro fleet
* Tejas’ future course and final clearance issue
* OEMs will take space and share
* Shrinking orders hrinking orders


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