Self-reliance has been a prominent agenda for Prime Minister Narendra Modi since his ascent to the Prime Minister’s chair in 2014. Later that year, he introduced ‘Make in India’ as a programme and a national slogan and proclaimed his personal support to it. Aerospace and defence are salient components of that programme and Prime Minister Modi highlighted this aspect by making ‘Make in India’ the theme of the 2015 Aero India Air Show, India’s international aerospace and defence event. He even inaugurated the show personally – only once before had a Prime Minister done so in the past. His personal support kept ‘Make in India’ a loud and clear refrain in public discourse but, regrettably, the lip service failed to turn into tangible and laudable results. In May 2020, while announcing a COVID-related economic relief package, Prime Minister Modi introduced a new slogan, the ‘Atmanirbhar Bharat Abhiyan’, purporting to hail a new economic stimulus to a COVID-smothered nation. Again, Prime Minister Modi used it as the theme for the 2021 edition of the Aero India Air Show.
Atmanirbhar has now subsumed ‘Make in India’, as also the establishment’s agenda of self-deception associated with the latter. At regular intervals, strident announcements are made about banning import of some items or indigensiation of some others. A pliant media then hypes these up into extraordinary and remarkable achievements for Atmanirbhar, studiously avoiding incisive investigation. The latest instance is of Ministry of Defence (MoD) notification (accessible at https://srijandefence.gov.in/DPSU%20Indigenization%20List.pdf) listing 2,500 items ‘successfully indigenised’ and not required to be imported any more. The list makes for amusing, if not hilarious, reading. It includes 109 types of bolts, 209 types of sealing rings, 27 types of bushes and 31 types of plugs, nozzles, valves, rivets, hoses, clamps, gaskets, washers, screws, bushes and other commonly available wares bloat the list to 2,500. The moot question is – if these have been indigenised now, why was India importing them so far? Or is the list a dishonest attempt that caricatures Atmanirbhar? This article takes a critical look at Atmanirbhar in the arena of aerospace and defence.
Public Sector Inefficiencies
When Prime Minister Modi announced Atmanirbhar, he listed five pillars – economy, infrastructure, system, vibrant demography and demand. As far as the aspect of economy is concerned, the `20 lakh crore-package mentioned by him in his speech as the stimulus for Atmanirbhar turned out, in effect, to be only about a tenth of that figure in actual terms. Due to COVID and other reasons, the Indian economy is not in a great shape and there is not much optimism about growth in defence and aerospace industry despite the upturn in the share market. Defence budget allocations are depressing and display the government’s inability to invest heavily in Atmanirbhar projects for aerospace and defence that are capital-intensive and have long lead times.
These segments of the industry had been abdicated to the public sector when India gained independence, a necessity for a fledgling nation. However, this turned out to be counterproductive as the public sector nourished a culture of internal inefficiencies and developed a predatorial lobby that asphyxiated the private sector and continues to do so. Hindustan Aeronautics Limited (HAL) is more than eight decades old now, having been formed in 1940 as Hindustan Aircraft Limited. To its credit, in 1967, it produced a combat aircraft, the HF 24 Marut, which was a commendable debut aircraft. However, HAL failed to build on that notable success and progress to more complex designs, being content to indolently produce aircraft under license thereafter. Interestingly, of the 2,500 ‘successfully indigenised’ items mentioned above, the credit for indigenising 1,861 items has been given by the MoD to HAL. One wonders why the humongous real estate and infrastructure invested in HAL is being squandered on such pedestrian projects.
HAL’s next fighter aircraft, the Tejas, is still maturing after four decades of development. The Indian Air Force (IAF) has 40 Tejas Mk 1 on order and contract for another 83 Mk 1A was signed during the Aero India 2021. The Tejas is yet to be fully operationalised. The Tejas Mk 1A is powered by a GE 404 engine from the United States (US) while the radar is sourced from ELTA, Israel. The first 16 Mk 1As will have the Israeli ELM-2052 AESA radar while the rest are expected to have an indigenously-developed Uttam AESA radar that has five percent imported components.
The fifth-generation Advanced Medium Combat Aircraft (AMCA) is yet to fly although, under Atmanirbhar pressure, the IAF has said it will induct it when available. These two are indigenous combat aircraft from with HAL being the only industrial complex large enough to handle the Tejas, AMCA, Multi-Role Fighter Aircraft (MRFA) and any future orders for the Rafale jets. HAL is also the production agency for the SARAS Mk 2 transport aircraft designed and developed by the National Aeronautical Laboratories (NAL). As and when this aircraft goes into production, the IAF is ready to buy 15 of these. Reportedly, HAL’s order books at current production capacity are bespoken till the late 2030s. Moreover, its recorded history has not been very encouraging and it is unlikely that for HAL, it will be an unadulterated Atmanirbhar success story.
Besides combat aircraft, the IAF has decided to do away with the option to buy 40 more Hawk and 38 more PC-7 trainers due to financial pressures and has decided to procure 106 HTT-40 basic trainers developed by HAL. A Request for Proposal (RFP) was issued to HAL during Aero India 2021 for 70 HTT-40 trainers with an option for 36 more. As an aside, the aircraft will be powered, like the Tejas, by a foreign engine (Honeywell turbo-prop engine TPE-331-12B). While the RFP may score a point for Atmanirbhar, as far as the IAF’s training infrastructure is concerned, it is a retrograde step as the HTT-40 is nowhere near the PC-7 as a trainer. According to Chairman and Managing Director (CMD), HAL, the Intermediate Jet Trainer (IJT) being developed by HAL for IAF’s Stage II training, requires two years of further testing. HAL’s ambition encompasses the entire range of trainer aircraft — HTT-40 basic trainer, IJT, Hawk Advanced Jet Trainer (AJT) and the Lead-in Fighter Trainer (LIFT) being conceptualised based on the Light Combat Aircraft (LCA) Tejas twin-seat trainer aircraft.
The IAF is also processing a case for procuring the Light Utility Helicopter (LUH) from HAL. In December 2015, India and Russia had entered into an inter-governmental agreement to manufacture 200 Kamov-226T Light Utility Helicopters in India. However, the deal is reportedly stuck in the technical evaluation stage over the low level of indigenisation being offered by Russia. There is speculation that the plan to produce the helicopters in India would be shelved in favour of buying 60 in fly-away condition.
Private Sector Participation
The Defence Minister, addressing the Annual Convention of Federation of Indian Chambers of Commerce and Industry (FICCI) in December last year, stated that India’s aerospace and defence manufacturing sector would grow from the present `85,000 crore to `1 lakh crore in 2022, and to `5 lakh crore by 2047. He called the role of the private sector important and said its contribution would rise from `18,000 crore to `1 lakh crore by 2047. However, analysts are not so sure. Ironically, Indian private sector participation in aerospace and defence has been driven more by international patronage while being kept at bay in the Indian market by HAL.
Nonetheless, private companies have made impressive inroads over time and have demonstrated leading edge capabilities and technology levels. The Tata Group has been making Apache AH-64 fuselages in Hyderabad for Boeing while in December last year, Lockheed Martin has approved the manufacture of F-16 wings by Tata-Lockheed Martin Aerostructures Limited (TLMAL). The first F-16 wing was certified and delivered in December last year. Aequs Pvt. Ltd. and Dynamatic Technologies produce components for the aerospace industry and have Airbus and Boeing as their clients. Last year, L&T won a contract from Airbus India to manage its avionics software development, validation, verification and data analytics. It already has a joint venture with Thales, the French aerospace major. The first set of doors covering the engines of Rafale aircraft have been produced by a joint venture between Anil Ambani’s Reliance Defence and Dassault of France.
The above is not a comprehensive list of India’s private sector prowess and their Original Equipment Manufacturer (OEM) client list is impressive. However, this growth fades into nothing when one considers that India’s start up ecosystem is the third-most extensive after the US and the UK. Motivation in terms of government policy is just inadequate. The big names mentioned above have neither the infrastructure nor the technological intellectual property to produce a complete combat aircraft although Tata Advanced Systems, Adani Defence, Reliance Defence, Mahindra Defence and Bharat Forge Limited have expressed interest in doing so. HAL is gradually coming around to outsourcing up to a third of Tejas production to the private sector and there would be significant tie-ups under the strategic partnership scheme for private companies to participate in the upcoming MRFA deal.
The replacement for IAF’s HS-748 Avro is the C-295, to be produced jointly by Airbus and Tata in India. A total of 56 are planned and the deal is under process at the acquisition department of the MoD. Once commissioned, this would be the first real Atmanirbhar programme in aerospace manufacturing by a private player with Airbus installing manufacturing, final assembly line and testing capabilities in India. It would be the first time a private company could make a full grade military aircraft in India.
In the field of Unmanned Aerial Vehicles (UAVs), agencies under the Defence Research and Development Organisation (DRDO) such as Aeronautical Development Establishment (ADE), NAL, HAL and Bharat Electronics Limited (BEL) have been working on projects, but are yet to produce noteworthy results. Private organisations such as Israel Aerospace Industries (IAI), Idea Forge Technology Pvt. Ltd. and Edall Systems are involved in the development or part manufacture of UAVs in collaboration with DRDO. Coming years will show if Atmanirbhar will help Indian UAVs to come closer to global standards.
In the space arena, the establishment of IN-Space within Indian Space Research Organisation (ISRO) for collaboration for use of infrastructure, sharing of expertise and technology transfer with the private sector is a significant step. Indian start-ups such as Bellatrix, Agnikul and Skyroot are collaborating with space ecosystems like ISRO and Vikram Sarabhai Space Centre. As an aside, eyebrows have been raised on ISRO’s entry into an MoU with Oppo India (parent company China-based Oppo) to develop a national Navigation with Indian Constellation (NavIC) messaging service. The arrangement with an inimical and belligerent neighbour hardly bodes well for the Atmanirbhar ethos.
Foreign Collaboration and Make in India
In 1956, the Industrial Policy Resolution passed by the Indian Parliament rendered defence manufacturing sector the exclusive domain of defence PSUs and ordnance factories. However, it was only in 2001, that it allowed the private sector to participate 100 percent in defence manufacturing, capping Foreign Direct Investment (FDI) at 26 percent. However, 26 percent FDI did not encourage any major OEM to start manufacturing in India. In 2006, an offset policy was announced to leverage India’s princely acquisition to get outsourcing, export orders and critical technology from major global defence manufacturers. The FDI limit was raised to 49 percent in 2015 and to 74 percent in 2020, but technological progress in pursuit of Atmanirbhar has remained dismal.
Much of the hype about Atmanirbhar is self-deception and assembly in India is touted as ‘Making in India’. This is especially so in case of aerospace where power plant, weapons payload, avionics, fire control systems and radars are imported from foreign collaborators and their assembly on Indian soil is labelled indigenous production. The figures of up to 80 percent indigenous content are misleadingly bandied about while the value of imported critical components and assemblies could be actually close to that figure. In the case of the Su-30MKI, HAL proudly declares it produces the aircraft from raw material stage but, according to estimates, value addition of HAL in Su-30 production is less than 20 percent.
The MRFA quest has got the hot contenders making the right noises about ‘Make in India’ and Atmanirbhar content if their aircraft is selected. The US has offered three frontline fighters, namely, the F-15, the F-18 and the F-21 to India. Lockheed Martin says the F-21 if selected, will be produced in conjunction with Tata Group in India. In fact, the company has offered that the F-21 will not be sold to any other country and has also offered to help in the AMCA and LCA Mk 2 projects if F-21 is selected. Boeing likewise promises to set up manufacturing facilities in India in the event of the F/A 18 being selected as the MRFA.
Saab has a matching offer of building the 96 of 114 aircraft required to be built in India from scratch. However, the texture and proportion of the Transfer of Technology (ToT) associated with these offers is not clear. Unless there is significant ToT, the objectives of Atmanirbhar would remain elusive. The Defence Procurement Procedure (DPP) alludes to “comprehensive” and “complete” ToT in its text and there has been some noise about replacing these with “full”. However, meaningful ToT has eluded India so far while indigenous aerospace technology development has failed to show the vigour seen in India’s space endeavours. The offset model has also not been satisfactory from the point of view of promoting Atmanirbhar. India has had to impose a fine on Dassault Aviation in November last year over delay in discharging offset obligations under the 36 Rafale deal signed in 2016 with 50 percent offset content, to be executed by Dassault, Safran and Thales over seven years.
India’s most embarrassing failure is its inability to produce an aero-engine for any of its design programmes. India is in talks with British company Rolls-Royce, French company Safran, which powers the Rafale fighter and American company GE, which powers the Tejas, for a possible collaboration to manufacture a fighter engine in India. Last year, HAL had signed a deal with GE for 99 F404 engines and related services for Tejas Mk1A and a similar deal for F414 engines for Tejas Mk 2 is likely. HAL and Safran are in talks to indigenously manufacture a new engine to power a future medium weight military helicopter, but the helicopter and the engine are both nebulous as of now. Until and unless the Indian aerospace industry can attain leading edge power plant technology, the noises it makes about its aerospace power ambitions are mere drivel.
In 1993, Dr Abdul Kalam, the then Scientific Adviser to the Defence Minister, headed a committee that underscored the need to improve India’s self-reliance quotient from 30 percent in 1992 to 70 percent by 2005. He had identified critical areas such as the focal plane array, passive seekers, stealth, AESA radar, RLG and carbon fibres but we are still far from that target. PSUs have achieved good standards in integration of imported assemblies and sub-assemblies, but not progressed much beyond that in most spheres. Despite the government’s generous indulgence in HAL, it has not distinguished itself. HAL does not feature even in the first 20 aerospace and defence industries in the world (https://ieee-aess.org/industry-relations/top-20-aerospace-industries).
One major impediment is the apprehension about intellectual property rights in aerospace and defence in India. As a result, there has been no aerospace R&D by Indian private companies while R&D by the public sector has been mediocre. Gas Turbine Research Institute (GTRE), a sprawling infrastructure in Bengaluru has not been able to produce an engine for indigenous aircraft programmes in more than six decades since its inception in 1959. So, if the public sector cannot produce and the private sector is inhibited by the risks involved, how does the nation get to achieve innovation? Clarity in enunciating policies should be one step while the other could be making available public sector R&D infrastructure to private entities, at least until they attain prosperity levels to set up their own R&D facilities.
A globally competitive aerospace industry will be possible only if the nation invests in R&D. For a long time, the nation’s R&D as a percentage of GDP has been less than one percent. There is a need to increase it to at least two percent of GDP for India to innovate in aerospace to the extent that it approaches the leading edge of technology. It might be a good idea to include this as an expenditure head of R&D in annual budgets to ensure it is used accordingly. The DRDO currently operates 51 laboratories. It is time to start privatising some of these so that their efficiency and productivity can be brought to acceptable levels and budgeted R&D funds utilised maximally.
Innovation, the impelling force behind progress, would come from a nourishing start up ecosystem which India has, entrepreneurship of which India has no dearth and collaboration with global industry which has to come from the way India’s foreign procurements are structured in terms of ToT. Collaboration will help the Indian industry to imbibe global best practices – an essential step towards becoming an acknowledged aerospace power.
Competing globally would require the nation’s aerospace and defence workforce to achieve the prescribed skills and certifications. There is a need to stress zero-defect philosophy, quality conscious attitude and a constant endeavour to move up the value-chain from components to Shop-Replaceable Units to Line-Replaceable Units to Sub-systems. For the last mentioned, possibly there is a need for the Micro, Small and Medium Enterprises (MSMEs) to collaborate so as to achieve synergies needed to grow. Government projects such as Innovation for Defence Excellence (iDEX) and Technology Development Fund (TDF) have been reserved mainly for start-ups and MSMEs but their contribution to aerospace and defence is stunted.
In 2004, the Aeronautical Society of India (AeSI) had proposed a National Aeronautics Policy under which a National Aeronautics Commission was to be set up but it is yet to happen. Back in the 1970s also, a similar proposal had been made by Vikram Sarabhai for several National Commissions. While the National Space Commission was set up, an Aeronautical one was not. The difference between how the nation’s space and aerospace programmes have developed, is there for all to see. While aerospace has had to suffer bureaucratic bungling and mismanagement, ISRO has prospered under direct patronage of the PMO with no budgetary and red-tape snarls. The time has come to shake up the public sector aerospace ensemble, put the PMO in the loop and privatise HAL.
The penchant for announcing at regular intervals, lists of what cannot be imported any more, is laughable. The first one or two such announcements may have caught the attention of the gallery it was meant for but continual repetition is pointless. What is needed is enabling the nation’s industry to produce those items at competitive rates so that market forces push the Atmanirbhar trend. If banning import of some items implies that we have to now accept Indian items but with lowered quality standards, that would be dooming the nation’s aerospace industry to mediocrity, a high price to pay for Atmanirbhar sloganeering politics. Dynamatic Technologies, one of the finest aerospace success stories, had to outsource part of its manufacturing activity to the UK because of the problems in India.
Despite HAL’s long experience in aerospace manufacturing, its technology base is mediocre as most production has been under license. Thus, even if the offset policy brings in ToT, there are limitations to what can be absorbed and how quickly. At the higher end of technology, it would thus be a good idea to involve private houses already engaged in aerospace manufacture as their absorption will be better than that of HAL. This can be done through joint ventures with the foreign OEM contracted with.
According to Stockholm International Peace and Research Institute’s (SIPRI) Yearbook 2021 – Armaments, Disarmament and International Security, India ranks second in the world as an importer of major arms. The fundamental flaw in the nation’s approach to indigenisation has been the dependence in manufacture and R&D on the public sector whose performance has been mediocre, sluggish and not cost-effective. On the other hand, the private sector has been wary of investing in the absence of enduring and incentivising policies. HAL’s work culture cannot be changed nor can it be shut down due to the huge investment already made. Its presence and lobbying power is an inhibiting factor for private enterprise to propel the Indian aerospace and defence industry to its true potential.
Private enterprise can be encouraged by policy changes and by the government levelling the field for public and private players. Leading edge aerospace technology can only come through technology transfer built into new aircraft deals including engine technology which has eluded the nation’s R&D so far. If India is to become a global aerospace power, it can only be through private participation and through privatisation of HAL. Otherwise, Atmanirbhar in this context may boast of ‘Made in India’ in contrast to the ‘Make in India’ notion but self-reliance, the essence of Atmanirbhar, will remain elusive.