Indian Defence Review

Given the opportunity, private enterprise is certain to outdo PSUs in the aerospace arena. If India is to achieve the status of an aerospace power, it has to radically alter its perception and treatment of aerospace players in the private sector. The first step in this direction is the provision of a level playing field for private and public sector players in the aerospace industry. The private entities mentioned above are the major ones involved in the aerospace industry. There are others too, but full-blooded  private sector participation is yet to come about.

Inarguably, the motivation to make India self-reliant in all sectors of industrial prowess, would have guided the Indian leadership’s cogitative processes at the time of India gaining its independence. With the benefit of hindsight, one can now say unequivocally and regretfully that the trust reposed in the public sector did not live up to the expectations of a fledgling country. Barring a few exceptions, the public sector continues to be afflicted by low productivity and high investment. Successive governments must acknowledge responsibility for permitting the Public Sector Undertakings (PSUs) to develop organisational cultures that did not encourage productivity. Government patronage, lack of accountability and unbridled bureaucratic mismanagement led to self perpetuating empires by the PSUs while the private sector with a lean, mean and keen approach, and thus a higher potential for efficiency, remained stunted.

After the Bharatiya Janta Party (BJP) came to power in 2014, Prime Minister Narendra Modi endeavoured to invigorate the concept of self-reliance by speaking about his vision on Independence Day 2014 from the ramparts of the Red Fort. Soon thereafter, he launched the ‘Make In India’ campaign in September 2014, and visibly gave it full governmental backing in addition to his personal support. The programme has 25 sectors of which Defence Manufacturing, Aviation, Electronic Systems, IT and Space impinge directly on the nation’s aerospace industry. Prime Minister Modi put his weight behind these when he inaugurated Aero India 2015 in Bengaluru. Under his direction, ‘Make In India’ was the theme of Aero India 2015 as also the underlying content of his inaugural speech. This was only the second time that the Bengaluru event had been inaugurated by a Prime Minister. More recently, Prime Minister Modi inaugurated DefExpo 2018 (the last edition of the Show during his current tenure in office). The DefExpo theme was ‘India: The Emerging Defence Manufacturing Hub’ and Prime Minister Modi’s parental pride in the ‘Make in India’ programme was manifest there too.

Reports from the Ministry of Defence (MoD) indicate that he is likely to inaugurate the next edition of the Aero India Airshow slated for February 2019, and thus the last one before general elections. The theme for Aero India 2019 is “The Runway to a Billion Opportunities” aimed at indicating the opportunities in the aerospace sector in India and a subliminal message about India’s aspirations to become a hub for the global aerospace industry. However, despite Prime Minister Modi’s personal patronage, ‘Make In India’ has not produced notable results and has largely remained a sloganeering device. This is especially so in the aerospace industry which is technology-intensive and needs substantial Transfer of Technology for meaningful self-reliance. The step-motherly treatment given for decades to the private sector in aerospace industry has meant that growth has been slow and unremarkable.

‘Make in India’ Woes

As far as the public sector is concerned, the impediments accosting ‘Make In India’ relate to the infirmities of the governmental mechanisms, frailties of policies, bureaucratic shackles over practices in implementing policies and lack of accountability in producing ‘bangs’ commensurate with the ‘bucks’ invested in public sector. From the defence point of view, the centre piece of the Indian aerospace industry is Hindustan Aeronautics Limited (HAL) which has been assembling Russian MiG 21s, MiG 27s and Su 30 MKIs, British Jaguars and more recently Hawk trainers and French Allouette helicopters for decades at its vastly spread out and hugely expensive infrastructure.

Although the related assembly lines have been ‘manufacturing’ aircraft under license, there is nothing indigenous about the process as there has been negligible Transfer of Technology which has been limited in scope and has not extended to design and development capabilities. Not only that, the cost of a HAL-produced Su-30MKI is reportedly Rs 60 crore more than the price negotiated with Russia. With government patronage, HAL was quite content to carry on in this manner and its own contribution in terms of an indigenous aircraft design is not proportional to the magnitude of resources invested in infrastructure and manpower. Consequently, after seven decades of independence, we are nowhere close to indigenously meeting the Indian Air Force’s (IAF) urgent and critical shortfall of combat aircraft squadrons; nor have we produced a transport aircraft of our own.

The modest success we have had in helicopters is a small consolation. The Tejas is the only fighter aircraft produced by HAL indigenously based on a design by National Aeronautical Laboratory (NAL), but it has already taken three and a half decades to fly. A non-operational version has been thrust down a reluctant IAF’s throat more as a Public Relations exercise rather than to meet the IAF’s requirements. The Indian Navy resisted staunchly and has kept its options open. The very fact that the IAF is procuring 36 Rafale jets from Dassault and the selection process is on for another 114 fighter aircraft is a sad comment on HAL, the recognisable face of the Indian aerospace industry. Despite tall claims and hyped publicity about HAL’s achievements, it does not enjoy a position of respect internationally. Harking back to the sordid story of 126 Medium Multi-Role Combat Aircraft (MMRCA) selection, it was reported that Dassault’s favoured partner was not HAL but a private company (Mukesh Ambani’s Reliance Industries Limited) and that Dassault refused to provide time and maintenance standard guarantees if HAL was going to be its partner. The implication is clear for all to see.

Coming to commercial aircraft, as a nation we have failed miserably to design and produce even a small civil aircraft for commercial use. NAL had reached the prototype stage with the Saras twin turbo-prop aircraft, but, after losing one prototype in a crash in March 2009, on the outskirts of Bengaluru, the programme had come to a grinding halt. At the beginning of 2018, it was rejuvenated after a gap of nine years and has completed five flights since then. The 19-seat aircraft is ideal for regional connectivity, but the problem, as always with the public sector, is inordinate delays expected in the three-year time projection given by NAL for the aircraft to be available for commercial use.

The Mahindra Group which started producing Airvan-8 at an Australian facility and is developing the Airvan-10 (8 and 10 seater transport aircraft respectively) has received Director General Civil Aviation (DGCA) certification for Airvan-8 in May last year. The company has also developed the C-NM5, a five-seater utility aircraft in collaboration with NAL. Another aircraft designed by NAL is mentioned here for its private linkage; the HANSA-3, designed by NAL is produced by Taneja Aerospace and Aviation Limited (TAAL) mainly for use by air clubs for training, but also usable for private transportation. For the sake of completing the picture, it may be mentioned that HAL had sent out a Request For Information (RFI) for a collaborator to build a 50 to 80 seater “medium-sized twin turbofan/turboprop” termed as Regional Transport Aircraft (RTA) to serve regional and remote area connectivity needs of civil aviation. In the department of engines, India lags behind miserably as without an indigenous engine making capability, civil airliner design would be toothless.

While on the topic of civil aircraft, the Dornier Do-228, a 19-seater twin turbo-prop aircraft needs to be mentioned. HAL has produced 130 of the type under license while Tata Advanced Systems Limited (TASL) had to truncate its deal with RUAG (discussed later). Transfer of related technology is not part of the deal in either case. The laggard nature of India’s civil aircraft design and development is in sharp contrast with China’s leaps and bounds in aerospace industrial effort. Having started its aerospace industry almost at the same time as India, it has produced three commercial aircraft and its latest product, the 168-seater C-919 twin-jet airliner, is slated to make an entry into the single aisle space in 2021, when it is expected to start nibbling at the Airbus A-320’s and the Boeing 737’s share in single-aisle commercial airliner space. China’s success and India’s failure are both owed to national enterprise. The earlier we recognise this and accept that HAL’s internal inefficiencies are incurable and open the gates for private participation, the better it is for the nation’s aerospace industry.

Private Participation

The 1990s saw the ushering in of liberalisation and removal of controls and at the turn of the century, the reservation for public sector in defence equipment manufacturing was done away with. Progressively, Foreign Direct Investment (FDI) rules were also relaxed. However, the years lost since the nation’s birth had taken their toll and private participation has been slow and insignificant so far in defence and aerospace sector, a capital and infrastructure intensive one characterised by long lead times. Currently, private sector participation is meagre; even that is more for foreign Original Equipment Manufacturers (OEMs) than for Indian entities. However, many industrial houses had the vision and foresight to enter the aerospace domain, their primary interest of course being profit related as in the case of any business.

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TASL has perhaps come closest to acquiring the capability to manufacture full aircraft, radars and Unmanned Aerial Vehicles (UAVs). It has become a significant player in the global aerospace and defence market, becoming the premier manufacturing partner for global OEMs, including Boeing, Airbus Group, Sikorsky Aircraft Corporation, Lockheed Martin Aeronautics, Pilatus Aircraft Ltd, Cobham Mission Equipment and RUAG Aviation. It had set up a manufacturing line for the Dornier 228 aircraft for RUAG, but could not meet the deadlines and the deal had to be abrogated. It has tied up with Airbus for the manufacture of C-295 transport aircraft (a 71-troop carrying replacement for the AVRO HS 748) and has a contract with Boeing to manufacture aero-structures (components of an airframe including fuselage, wings and flight surfaces) for Boeing’s CH-47 Chinook and AH-6i helicopters.

The India joint venture established between TASL and Sikorsky Aircraft Corporation (now acquired by Lockheed Martin) has been producing S-92 helicopter cabin in India since 2012 and the project has been 100 per cent indigenous since 2013. The India operation assembles cabins and also produces all parts needed for the assembly, before shipping the cabins to the US for aircraft completion and customer delivery. The S-92 helicopter cabin and more than 5,000 associated precision components are made at Hyderabad through a strategic collaboration between Sikorsky and TASL. In pursuit of the ongoing proposal to provide for 110 single-engine fighters for the IAF, TASL has entered into a partnership with Lockheed Martin in a bid to produce the F-16 in India and Adani Group hopes to produce the Saab Gripen.

Reliance Group (Anil Ambani) is an important entrant in the defence and aerospace sector and has obtained 27 industrial licenses for the defence subsidiaries of its company Reliance Infrastructure Ltd. (R-Infra) for making helicopters, aircraft, missiles and UAVs among others. Reliance Defence Limited, another Reliance Group company, has set up the Dhirubhai Ambani Aerospace Park spread over 400 acres at Multi-modal International Cargo Hub and Airport at Nagpur (MIHAN) planned with an aim to create a comprehensive eco-structure through backward integration for indigenous manufacturing of aerospace components. Its long term plans include creation of a centre of excellence in aerospace structures, engine design and manufacture, fabrication and platform integration, development of UAVs and an aerostat segment. It has signed an agreement with the Ukraine-based, state-run Antonov Company for cooperation on a 50 to 80-seater transport aircraft for military, para-military and civil use. The plan is to manufacture the aircraft at MIHAN.

The Mahindra Group entered the aerospace industry in 2008, through its company Mahindra Aerospace and acquired Gipps Aero and Aerostaff (both Australian entities) in 2010. Indeed, it is the first one in India to go into full aircraft production, albeit a small one (Airvan 8/10) and that too, outside India. Airbus has shown interest in having the company forge aircraft parts in India for some Airbus aircraft. With manufacturing in Australia and India, it has inked sourcing and partnering deals with aerospace majors such as Premium Aerotec and GE Aviation. Mahindra Defence has also signed a “statement of intent” with Airbus Helicopters for forming a joint venture to produce military helicopters in India.

Bharat Forge is another company that Airbus is looking at to have some of its aircraft parts forged in India as the next logical step to expanding its supplier base and outsourcing activity in a fast growing market. Bharat Forge already has a similar arrangement with Boeing wherein it is supplying titanium flap-track forgings for Boeing 737 NG (a first for any Indian company) and will be supplying the same for the 737 MAX. Bharat Forge Limited has also entered the aerospace sector by signing four contracts. It has also entered into an agreement with Rolls-Royce Plc to supply critical and high integrity forged and machined components for a range of aero-engines including Rolls-Royce’s flagship Trent engine.

Another company worthy of mention here is Dynamatic Technologies which partners Ministry of Defence and HAL, as well as major international aerospace companies. Dynamatic-Oldland Aerospace, India, produces the wing and rear fuselage of Lakshya – India’s Pilotless Target Aircraft, the ailerons and wing flaps for the Intermediate Jet Trainer HJT-36 and major airframe structures for the Sukhoi Su-30 MKI besides working closely with EADS and Spirit AeroSystems to assemble Flap Track Beams for the Airbus single-aisle A-320 family of aircraft on a Single Source basis. The manufacture of a functional aero-structure of a major commercial jet by a private sector company is laudable and demonstrates the potential for ‘Make In India’ given the right conditions and the right environment.

In real terms, private sector participation is meagre and largely oriented towards meeting small, piecemeal requirements of global OEMs. Even after private companies manage to make significant headway into ‘Make In India’ manufacturing, it will take them possibly a decade or more to build the infrastructure and to absorb the technologies involved. Airframe and structural requisites would not be very difficult to master, but power plant technology would remain elusive for longer periods due to its more complex nature and due to the time lost so far by HAL and our R&D in that field led by Gas Turbine Research Establishment (GTRE). The ideal solution would be for private participation in a joint venture with a leading edge aircraft and engine manufacturer which includes provisions for Transfer of Technology.

The offers of SAAB and Lockheed Martin to build modern combat aircraft in India are possible opportunities, to be weighed against other considerations – economic and political. In the case of the Rafale deal, pruned down from 126 to 36 aircraft, Dassault Aviation has already made it clear to India that it will not be able to go for full Transfer of Technology and create an industrial eco-system by manufacturing the planes here under the ‘Make In India’ programme unless it is given an order for at least 100 aircraft. The much hyped up offsets associated with the Rafale deal, when looked at incisively, reveal that the aerospace technology transfer content is non-existent.

Given the opportunity, private enterprise is certain to outdo PSUs in the aerospace arena. If India is to achieve the status of an aerospace power, it has to radically alter its perception and treatment of aerospace players in the private sector. The first step in this direction is the provision of a level playing field for private and public sector players in the aerospace industry. The private entities mentioned above are the major ones involved in the aerospace industry. There are others too, but full-blooded  private sector participation is yet to come about.

Concluding Remarks

According to Stockholm International Peace Research Institute (SIPRI) 2018 Year Book, India is the largest importer of major weapons with a whopping 12 per cent of the global share. However, ‘Make In India’ has so far not done much to redress that situation. Indeed, some policies of the government tend to be regressive. As an illustration, in June last year, it decided to shift some high technology, complex systems from ‘Make’ category to ‘Make 2’; the implication was that while in the ‘Make’ category, the MoD was financing development costs, under ‘Make 2’ the private entities will have to bear their own costs of development. It is difficult to defend this government decision at a time when there is so much noise about a level playing field for private and public sectors.

Speaking at the Military Literature Festival last December, Former Chief of the Army Staff, General VP Malik (Retd) had lamented that a nexus between MoD bureaucrats and Defence PSUs was causing harm to the private players’ interests and that there was no indication that the government wanted private players to ‘Make In India’.

At the time of writing this, there are reports that, in a confounding move, nearly four lakh defence personnel belonging three major defence unions, namely, the All India Defence Employees Federation (AIDEF), Indian National Defence Workers Federation (INDWF) and the Bharatiya Pratiraksha Mazdoor Sangh (BPMS) have resolved to launch an indefinite strike between January 23 and 25, 2019, to express their discontent over moves to privatise the defence sector. The decision is a manifestation of the malaise that threatens privatisation i.e. the unholy desire by PSUs to perpetuate a culture of inefficiency and not let the more efficient private sector enter the picture. This culture, typified in HAL, is so deeply ingrained that an evolutionary change is impossible to imagine; only a radical transmutation will probably make our aerospace industrial complex productive.

The aspiration for India to be an aerospace power is commensurate with the fact that it is the fourth largest Air Force in the world and aiming to become the third largest commercial market globally in the next decade. However, we remain quite distant from becoming a global aerospace power. Indeed, no official iteration has aimed at 100 per cent indigenous self-sufficiency, the highest figure ever mentioned being 70 per cent. One of the valiant objectives of ‘Make In India’ was to increase indigenous manufacturing share of the GDP from 16 per cent to 25 per cent by 2022, and the other, to create a hundred million jobs by that year. The progress in both these directions has been depressing. Indeed, the non-creation of a substantial number of new jobs has been talked about in the media frequently while ‘Make In India’s’ incremental contribution to GDP has been unremarkable.

A lot of hype was created during DefExpo 2018 regarding the bold intention of turning India into a manufacturing hub for military equipment and goods. The objective of achieving a turnover of Rs 1,70,000 crore and export of Rs 35,000 crore in defence goods and services by 2025, was flaunted liberally. This projection is also lodged in the Defence Procurement Policy 2018 (DPP 2018) released as a draft just short of the event. However, a policy is not a plan; some strategic planning, possibly driven by the PMO so as to preclude inter-Ministerial shenanigans, is the need of the hour. In the interim, the Indian aerospace industry trundles along waiting for ‘Make In India’ to be transformed from a slogan to a defined strategy.