The Indian public sector aerospace industry, protected by successive governments, does not have much to show as results for all the money spent in the last seven decades. On the other hand, the private sector has been denied the opportunity and indeed, there is more achievement by private sector in collaboration with foreign manufacturers than in relation to Indian clientele, be it civil or military. ‘Make in India’ can be a path-breaking movement in the right direction to placing India advantageously on the global aerospace industry map. Its intention to spend on acquisitions and on infrastructure has sent the right signals to big aerospace players worldwide and there is considerable interest in ‘Make in India’. However, as of now the visible momentum is not very encouraging. The environment in which Indian and foreign manufacturers are constrained to conduct their business is still straitjacketed although, it may be said in defence of the government, that efforts appear to be afoot to improve things, albeit at a painfully slow pace.
The time has come to encourage private entities to introduce efficient productivity into the civil aviation industry through ‘Make in India’…
Prime Minister Narendra Modi’s exhortation of ‘Make In India’, reiterated tirelessly since its launch in September 2014, has managed to evoke low levels of enthusiasm amongst the small and medium players in the private sector, excited some of the big players and managed to conjure up for the populace at large a vision of a future in which it could feel pride at India’s indigenous ‘making’ prowess. However, sloganeering aside, the results on the ground are not very heartening. As Bharat Karnad put it in a recent comment in the Hindustan Times, Modi is “relying on the existing decrepit apparatus of the State, unimaginative policy establishment and the government’s usual lackadaisical way of doing business to deliver results.” There is also some obfuscation about the legally acceptable definition of ‘making’ or ‘manufacturing’.
In the past, the Supreme Court was constrained to express its angst thus through a bench comprising Justice S.H Kapadia and Justice H.L Dattu, “Repeatedly this court has recommended to the department, be it under Excise Act, Customs Act or the Income Tax Act, to examine the process applicable to the product in question and not to go only by dictionary meanings (of manufacture). This recommendation is not being followed over the years.” This admonition was addressed to the Revenue Department but serves to highlight the gray tenor of the ‘Make’ component of the slogan under discussion. Various laws of the land define manufacturing differently and leave scope for legal action, protest, ambiguity and assorted interpretations.
Hindustan Aeronautics Limited (HAL) has been assembling Russian MiG 21s, MiG 27s and Su 30 MKIs, British Jaguars, Hawk Advanced Jet Trainers and French Allouette helicopters for decades on Indian soil but there is nothing indigenous about the associated assembly lines although they are ‘manufacturing’ aircraft under licence. The design and technology are not available to HAL, have not been in the past and are unlikely to be in the future. The evolution of the public sector aerospace industry has led to this sorry state. However, at the 8th Annual Manufacturing Conference conducted by Confederation of Indian Industries (CII) in December 2015, the general sentiment expressed was that aerospace and defence manufacturing sectors would lead the innovation field in the next five years.
Perhaps the most ignominious endnote to the Tejas saga is the failure of the Indian R&D machinery to produce an engine indigenously…
Indigenous Military Aerospace Industry
For the last 75 years, HAL has been the face of Indian aerospace industry although its management was taken over by the government after India became independent. Perhaps the texture of the Indian aerospace industry would have been entirely different and vastly more productive had HAL been nurtured as a private concern. In fact, it started as a private limited company in 1940. Our political leadership at the time of gaining independence reposed faith in the public sector model for all heavy and investment intensive industries and hence the present state of HAL. Afflicted by internal inefficiencies and process frailties, its brand of indigenous manufacturing has kept genuine indigenous capability in aerospace out of our reach. Meanwhile, the patronage HAL enjoyed at government behest and at the cost of the private sector being kept out, has led to a situation which will take a long time to be undone.
After seventy five years of existence, HAL is not anywhere near bringing forth a frontline combat aircraft acceptable to the Indian Air Force (IAF) or the Indian Navy. Despite the publicity by HAL and the Ministry of Defence (MoD) about the Tejas which has been under development since 1983, it is not a leading edge aircraft. The IAF and the Indian Navy privately express distaste for it but publicly are forced to accept it as an MoD imperative. The Tejas may add to the numbers of the two services, but will certainly not make a significant enhancement to the combat capabilities of the two services. The fact that the Tejas has taken more than three decades of R&D to reach this state, is a sad and unremarkable anticlimax.
In November 2015, the IAF pruned down its list of outstanding maintenance issues with Tejas to 43 but even that number is disquieting. Despite that, the IAF, under pressure from the government and anxious to build up its reducing strength of frontline squadrons, is expected to order 100 Tejas Mk 1A aircraft and HAL is gearing up to meet that requirement. An earlier order for 20 Tejas Mk1 aircraft is for a non-combat worthy version with no operational use. Capacity augmentation plans including the setting up of a second production line, are likely to crystallise by February 2016 and are expected to be funded only to an extent of 50 per cent by HAL, the rest being shared by the IAF and the Indian Navy. Two different aircraft types are being considered, one a single engine, lighter version and the other a medium category, twin engine fighter with enhanced firepower.
The government has raised FDI in defence to 49 per cent which can be further raised to 100 per cent in special cases…
There is a space there for ‘Make In India’ to flex its muscles there as these two production lines are envisaged under strategic partnership or through government-to-government dialogue. Major military aviation companies in the world are likely to be invited to participate in this ambitious programme which will bear a ‘Make in India’ stamp but the rankling fact about the aircraft is that its indigenous content is only about 30 per cent, a figure that a CAG audit brought out in contradiction of HAL claims. Perhaps the most ignominious endnote to the Tejas saga is the failure of the Indian R&D machinery to produce an engine indigenously. The ‘Make in India’ label is thus destined to be misleading for the Tejas as long as 70 per cent content including the flight control system actuators, radome and engine remain imported.
Even in the licensed production domain, HAL has not been praiseworthy. In 2012, when the IAF projected a requirement of 42 Sukhoi 30 MKIs, the unit cost of production by HAL was estimated at Rs 60 to 70 crore more than the price negotiated with Russia. What ‘Make in India’ needs to do first and foremost is to negate the inefficiency of HAL through private competition on a level playing field.
The Dhruv helicopter programme has had marginally better record than the Tejas but has had several setbacks by way of accidents that blot its record. As far as a transport aircraft is concerned, HAL has not progressed much beyond the licensed production stage. In December 2015, HAL publicly showed one turbofan engine (HTFE 25) and one turbo shaft engine (HTSE 1200) but their actual industrial use is unclear. A second helicopter production facility near Tumkur was inaugurated in January 2016 by Prime Minster Modi.
Russia has found the opportunity for a forceful comeback as India’s strategic partner…
Civil Aviation Industry
India and China entered the aerospace domain at almost the same time but China has shown considerable initiative in its ‘Beg, Borrow or Steal’ approach to designing and producing new aircraft. Our technology absorption has been negligible and, even in the civil domain, we lag far behind China. The reason is that in the civil domain also, private participation has suffered while public sector was encouraged and sustained without producing results commensurate with the investment. We have not been able to produce a single aircraft for commercial purposes while China has three large aircraft on its sale list, the last one being a narrow-body, 168-seat airliner that appears set to challenge the Airbus A-320 and the Boeing 737. In India, HAL and National Aeronautical Limited (NAL) are planning to build a 70 to 90-seat aircraft on a Public Private Partnership (PPP) model with a Special Purpose Vehicle (SPV) formed to steer this project. However, their earlier venture to produce a 14-seat Saras has been a dismal failure and nothing much is expected from HAL/NAL in the form of an indigenous aircraft design. Perhaps the time has come to encourage private entities to introduce efficient productivity into the civil aviation industry through ‘Make in India’.
Mahindra Aerospace has been in the utility aircraft and aero structure manufacturing business and has its utility aircraft business based in Australia. It currently produces the Airvan 8 capable of carrying seven passengers and is developing a 10-seat turboprop, the Airvan 10. In June 2015, the company was awarded a large aero-components production contract by Germany-based Airbus Group company, Premium Aerotec. The multi-year contract envisages the manufacture and supply by Mahindra of a variety of metallic components for several Airbus aircraft programmes as part of assemblies produced by Premium Aerotec. Airbus Group has aerospace supplier partnerships with Indian entities and expects to increase its presence in India in the coming years, hopefully contributing to the furtherance of ‘Make in India’.
The India joint venture established between Tata Advanced Systems Limited (TASL) and Sikorsky Aircraft Corporation, recently acquired by Lockheed Martin, has been producing S-92 helicopter cabins 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.
The Indo-Russian proposal to jointly produce FGFA is expected to soon take off as a result of Prime Minister Modi’s recent visit to Russia…
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.
While big players have the advantage of deep pockets and strong lobbies, Micro, Small and Medium Enterprises (MSMEs) tend to lag behind although their potential is recognised. At a recent Global SME Business Summit 2015 organised by Confederation of Indian Industry (CII) in association with the Ministry of MSME, Indian MSME Minister Kalraj Mishra stressed on the importance of global SME partnerships for the growth of Indian SMEs as well as for the success of ‘Make in India’. The importance of SMEs has been stressed and reiterated at various forums; but the general business conditions are not very helpful for realisation of their potential as contributors to ‘Make In India’.
Prime Minister Modi’s earnestness about ‘Make in India’ and his personal foreign jaunts have spawned interest abroad for the opportunities that are implicit in the programme. Suitable changes in Foreign Direct Investment (FDI) policies have also accompanied the push for indigenous manufacturing. The government has raised FDI in defence to 49 per cent which can be further raised to 100 per cent in special cases. The fond hope underlying this initiative is that strategic partnerships will compensate for our technological inadequacies and generate genuinely indigenous industry. The aerospace industry is in dire need of such nourishment and fortunately, foreign collaboration appears to be forthcoming.
Russia has found the opportunity for a forceful comeback as India’s strategic partner. Prime Minister Modi’s visit to Russia in December 2015 served to reinforce this fact. In Russia, the Prime Minister said, “Russia has been India’s foremost defence partner through decades, accounting for a majority of our defence equipment. Even in the current environment, despite India’s improved access to the world market, Russia remains our principal partner.” A total of 16 agreements were signed during the visit.