Defence production: How HAL can counter pessimistic narrative and demonstrate more competence

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New Delhi | Published: October 19, 2018 2:19:27 AM

While HAL has demonstrated technological and production competence, it may not survive the Centre's pessimism if it doesn't counter this narrative.

hal, defence, defence sector, defence industryHAL possesses requisite resources to undertake complex programmes across eras

Allegations of irregularities in major military purchases take little time to get politicised. Politicisation, especially before an election, causes much confusion in the minds of citizens while actors and stakeholders involved in the particular case take time to receive their dues—fair or unfair, depending on how the case plays out. Whether allegations are proved in due course of time (normally a long period), thanks primarily due to unfathomable nature of such transactions, a few stakeholders invariably bear the brunt at the end of the day while others get away.

That’s how the Rafale controversy is currently playing out and the biggest fall guy from this is undoubtedly the Hindustan Aeronautics Limited (HAL), whose very credentials and existence are being questioned, even by government figures. One can always dismiss blunt statements from retired military personnel or some veteran journalists about HAL’s capabilities and contributions, bulk of which are either personal observations or pure lack-of-fact analyses, but statements from ministers like V K Singh and even the defence minister defy logic. This has happened for the first time that the entire government machinery appears to be gunning for its own entity in such a manner. This is problematic and worrisome, as it will denote disastrous consequences for HAL. Bagpipers like the Air Force chief and deputy chief, singing praises of Rafale, add insult to injury for HAL.

In order to have a more nuanced perspective on the changing military industrial dynamics in India in current times, three fundamental issues are examined here: a) Dassault’s non-selection of HAL as the prime point of share of manufacturing responsibilities (either as a nominated government entity or as an offsets partner); b) Dassault’s reported position on HAL’s refusal for a guarantee; and c) last but not the least, the Centre’s own pessimistic position on capabilities of HAL in fulfilling manufacturing requirements. All three inter-related issues, taken together, point to the assumption that HAL appears unfit to undertake the desired responsibilities for the state. Answers to these issues have been adequately provided by T Suvarna Raju, recently retired CMD of HAL.

Once the state goes against its own creature, which it has nurtured for decades, the latter may write its own obituary. HAL appears helpless at the moment: a) it is a silent spectator in this political slugfest, where it can not intervene on its own (Suvarna Raju spoke blunt, initially, and he appears to be silent now); b) its own bosses are pessimistic (MoD top brass along with IAF); c) it can’t even defend its position publicly as it is a government-owned enterprise (whereas, IAF chief and vice-chiefs can make public statements on Rafale and even the government decision); and d) last but not the least, it is precariously positioned to carry out regular orders from higher-ups for responsibilities beyond its jurisdictions, which it is too weak to refuse (for example, HAL deploys several hundreds of its officials and employees for several months just to manage events like Aero India, which is actually the responsibility of the Defence Exhibitions Organization; even major works for Def Expo 2018 in Chennai were performed by the HAL). HAL gets occasional pats from MoD babus for successfully organising such shows, while its legitimate dues (one such event costs around Rs 150 to 200 crore) are not paid in time or even denied by the citing of some excuses by babus. In sum, it is unfortunate that from aspiring to become a global OEM, HAL appears to be degenerating into an event management entity. HAL can take all negativities with a pinch of salt. But, when its existence, relevance and expertise are questioned (based on perceptions or otherwise), it should stand and speak up. If it does not, as assumed before, its demise appears to be on the cards.

Here is a contrarian narrative on HAL: a) HAL possesses requisite resources to undertake complex programmes across eras (managing from MiGs, LCA Mark I and IA, Su 30 MKI, LCH, UAVs, all licence productions and mid-life upgrades of types like Mirage, Jaguar, HAWK AJT, etc.); b) reasonable amount of expertise available within HAL to undertake complex programmes (unfortunately, such talents are not seamlessly accommodated properly in programmes, directed by DRDO’s ADA); c) as a recently listed entity, it has already made impressive gains in terms of revenue and profits for the current financial year; d) its enhanced capacity will be doubled with dedicated LCA division within Bengaluru complex and the new assembly line will soon increase production of aircraft to 16 from 8 per annum; e) last but not the least, its top leadership is confident of its future performance, only if the state allows.

One is at a loss to explain why a company like HAL, which has demonstrated capacities to manufacture (under license) frontline fighters like Su-30 or advanced jet trainers (AJTs) like Hawk (which can also perform the role of fighters, if needed), undertake complex mid-life upgrade of Mirage 2000 or indigenously develop LCA and LCH, among others, be perpetually questioned about its capabilities. Further, one is at a loss to explain why the LCA, which has been flown by senior Indian Air Force officers from time to time, including current IAF chief, deputy chiefs and others, is pilloried time and again. If LCA was such a bad product, even the chief of staff of the US Air Force, General David Goldfein, would have been hesitant to fly Tejas at the Jodhpur Airbase in February 2018 during his maiden visit to India. In the recently held AGM of now listed HAL, its CMD, R Madhavan, said: “We have recorded the highest ever turnover of Rs 18,283.8 crore in 2017-18 FY, compared to previous year’s turnover of Rs 17,603.79 crore. Profit before tax for the current year was Rs 3,322.8 crore as against Rs 3,582.5 crore in previous year, while the Profit After Tax (PAT) for the year was Rs 2,070.4 crore. In the given period, it has produced 40 aircraft and helicopters covering Su-30 MKI, LCA Tejas and Dornier Do-228 in fixed wing and ALH Dhruv and Cheetal Helicopters in rotary wing, while in addition, it produced 105 new engines, overhauled 220 aircraft, helicopters and 550 engines and even 146 new aero-structures for space programs”. Such impressive financials are also diluted by political considerations: “in the last three years between 2015-16 and 2017-18, HAL’s money, to the tune of Rs 5,205 crore, has been given to the government through two rounds of buybacks—of 25% of the share capital and free reserves, which did not include interest component. Financial insults have been added to technological and perceptional injuries for HAL, thanks to political considerations.

The beauty of arms production is its intertwined complications at technological, economic, structural, political and perceptional levels. HAL, unfortunately, is a victim of all such dynamics. If it is to survive, it has no other way but to search its soul, pull up its socks, stick to its ground and fight it out. A tall order, indeed.

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