HAL talks big game but can it walk the talk?

The military-political leadership has traditionally considered equipping the Indian armed forces with modern weapons and military equipment a top priority. Special attention has been on developing the country’s own aircraft manufacturing base.

HAL talks big game but can it walk the talk?
Images Credit: Rosoboronexport

By Girish Linganna

The military-political leadership has traditionally considered equipping the Indian armed forces with modern weapons and military equipment a top priority. Special attention has been paid not only to importing fighter jets but also to developing the country’s own aircraft manufacturing base.

The burden of this initiative has always been under the constant control of the Indian state. This made it possible to combine the capabilities of individual manufacturers and create the required scientific and industrial base necessary for the industry’s development. Further, it unified almost all the leading manufacturing enterprises and research centres of the aircraft industry into the state military-industrial corporation: Hindustan Aeronautics(HAL).

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At all stages of the corporation’s development, the Indian leadership was directly involved in forming its structural divisions. It also provided constant and practical support and regulated the industry’s production activities. Accordingly, the state of the HAL research and the base for aircraft production fully characterises the development level of the entire aviation industry in India.

The torch bearer of the indigenisation crusade has recorded a bullish run in the stock market. The largest Indian defence Public Sector Undertaking has doubled its year-on-year revenue and tripled its profits. The hefty order book filled with IAF orders and export prospects keeps this blockbuster run going. However, this titanic is headed for multiple icebergs like fierce competition while exporting the LCA Tejas, delays in delivering to the IAF and a graver fundamental issue.

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Will HAL be able to correct its course to carry forward the positive momentum?

The corporation was formed in 1964 by merging three Indian companies- Hindustan Aircraft, Aircraft Manufacturing Depot, and Aeronautics of India. Initially, Hindustan Aircraft, a private company formed in 1940 by order of the British colonial government, owned the main production facilities. It was created to carry out the maintenance and licensed production of American-designed light aircraft. The subsequent nationalisation and transition to state control made it possible to expand the company’s capabilities by mastering the processes of developing and designing certain aircraft types and choppers for the country’s armed forces. 

Winds Under HAL’s Wings

Under the conditions of state planning, HAL had virtually just one customer during the 1950s-1990s – the Indian Air Force (IAF).

However, in the 1990s, the country’s economic liberalisation policy provided the corporation’s management with great opportunities to diversify its activities and participate in foreign orders. That, in turn, required an inevitable restructuring of its management system and production process.

In 2019, a decision was made to privatise it partially to expand the corporation’s capabilities. After reducing the share of state-owned shares to 90%, the remaining securities were passed into the hands of private shareholders. This has added another feather in HAL’s cap as its share prices have soared over 100 per cent and will likely increase.

HAL traditionally occupies a leading position among the state-owned military-industrial enterprises and research centres (R&D centres), which form the core of the Indian military-industrial complex (MIC). It is a natural partner for a variety of defence subsystems. The engine from GE Marine that powers the first Indigenous Aircraft Carrier INS Vikrant, LM2500 gas turbine, is also manufactured in India in partnership with HAL.

Long due culture overhaul

While HAL’s structure kept changing, its culture did not. Even today, the company does not have a full-time chairperson. In 2018, HAL faced an uncomfortable situation where several board members were much more senior than the chairman. Such disparity necessitated the need to streamline future Chairman appointments. However, the Public Enterprises Selection Board (PESB) did not get the memo.

HAL has been under financial constraints with a glaring lack of a sense of responsibility. Hence, the gems of defence research policy such as Tejas have suffered delays. HAL’s issues stem from the structure that any Public Sector Undertaking is likely to suffer from: a public sector workforce with top management being the target when the ball drops. The organisation is replete with bureaucratic red tape and needs restructuring even at the middle and junior levels. HAL suffers from what every government organisation in any country has, a strict setup that promotes plausible deniability. If the government must step in, it must exude a sense of collective responsibility towards the nation. The government must dictate changes yet allow HAL independence to find its way to inculcate them.

Alongside this, time and cost overruns in many projects undertaken by HAL remain a problem. There must be an audit of the timeliness of the actions of each department. Such an affair would have to focus on punctuality, whether it is timely orders or even timely payments to the suppliers. Also, it must be carried out by private external auditors. If the ordering is tardy and the payment to suppliers is irregular, it will reflect in the production of the aircraft. Auditing suppliers and their deliveries are also an area for irregularities and must be audited. It will be unwise to completely rule out financial abnormalities in defence Public Sector Units. However, anomalies in the accounts, purchases and quality can happen in any company, be it a private or public sector. While it may seem counterintuitive to the issue of inspiring the ranks and files of the organisation, auditing can formally allow HAL to adopt a corporate avatar. This means improving within to act cutthroat when dealing with issues internally and upholding partners to the same level of quality. After all, quality begets quality.

Another upcoming concern is regarding security. A recent breach at a highly secure DRDO facility showcased how arrangements in that regard are lacking. The possibility of HAL facing such a threat is not zero. Prompt preparations need to be made in this field, too.

For the unknown, HAL is the torchbearer of aerospace innovation in India. However, IMM (Integrated Material Management), Shop Floor, inside accounts and those working with the HAL underline the urgency for course correction. Right now, IAF has placed a lot of orders, and there are more in the pipeline. Moreover, the Indian services are not the only customers HAL wants to have in the future- it is looking to export its products and services. In the competition are countries like South Korea, Turkey etc. They are all nifty and trying to bag sales for their products. Unless there is a change in the corporate and working culture within the organisation, HAL will miss the bus.

The Prime Minister’s speech motivates the nation to become a developed nation in the next 25 years. And for this, the Prime Minister urged all citizens to shun the lackadaisical attitude, which has been commonplace thus far. Actions speak louder than words, and defence PSUs like HAL can set an example for the world to be a world-class manufacturer.

Author is an Aerospace & Defence Analyst.

Disclaimer: Views expressed are personal and do not reflect the official position or policy of Financial Express Online. Reproducing this content without permission is prohibited.

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