Window of opportunity in 2005 for India

Aggressive policy to boost aircraft manufacturing needed

The year 2005 could be the beginning of a make-or-break period for India's aeronautics industry, dominated by the public sector firm Hindustan Aeronautics Ltd (HAL), close observers of the industry say.

HAL will have to engage proactively the global aeronautics industry to globalise its brand. It will also have to partner domestic private companies to scale up its many capabilities rapidly.

Key to this happening is an aggressive policy to boost aircraft manufacturing "" both civil and defence "" of which India today finds herself with such a comprehensive range.

HAL and others must urgently lobby to get aircraft building its due in the country if the company is to emerge as the globally competitive aerospace firm C G K Nair envisioned it to be.

Two years ago, N R Mohanty, HAL's then chairman, said one of his aims was to reach total sales of Rs 5,000 crore, by 2005. Nair, Mohanty's predecessor and HAL's first civilian chief executive officer and chairman, had his own target "" exports of Rs 500 crore by the year 2007.

Both seem like nearing reality: HAL finished last fiscal with total sales of some Rs 3,800 crore and exports of Rs 215 crore. Sales grew 22 per cent and exports doubled over the previous fiscal.

But, they don't tell the whole story. Roddam Narasimha, a former director of the National Aerospace Laboratories (NAL) who popularised the idea of boom time for Indian aerospace, warns that unless the present window of opportunity is fully exploited, that boom time may never happen.

Nair and Mohanty too, recognised but never said openly, while still heading HAL, that aggressive backing by the government through a focused policy is required.

When the advanced light helicopter, now called Dhruv, was cleared, a letter of intent for 300 aircraft was given and the first batch of 12 production aircraft found a buyer in the armed forces. Subsequently, the letter of intent has remained just that and HAL has struggled to sell any more, though just about everyone agrees that the Dhruv is a superior aircraft.

This 'timidity of orders' will not do, says Narasimha. Nair says the same in his book, Flight 99 HAL (working together). The Light Combat Aircraft (LCA), named Tejas, was perhaps the most cost-efficient fighter aircraft in its class, Narasimha says. "An order of some 200 LCAs will make all the difference to HAL... unfortunately, that seems to be not happening," he says.

The reason, he says, that large orders are imperative is they alone will bring HAL the resources to engage domestic and multinational private companies to exploit global opportunities stemming from many challenges.

The challenges include consolidation on the business front, and the demand for safer, cheaper and cleaner aircraft on the technological front.

"With Airbus in Europe and Boeing in the US dominating the field, even two are looking to be too many."

Something else that has changed is, "Ten years ago, we were not in a position to take advantage of international opportunities. We were seen as junior partners at best, and most companies were only interested in selling, rather than partnering us. Now, American firms realise Indian capabilities, which are very broad-based."

HAL has produced 23 types of aircraft, including 11 Indian designs, "Dhruv is matchless in its class, the LCA is likely to be the most affordable high performance supersonic fighter," an intermediate jet trainer, the HJT-36, is projected to enter service in 2005 and SARAS, the medium sized civilian aircraft built by NAL, is getting ready to fly.

There is also an opportunity to build a 60-100 seater aircraft, if the right partners are found, he says.

"China with bigger rockets, Brazil, with a more vigorous civil aircraft industry, or Israelis with their fancy technologies, don't individually cover as broad a spectrum as India: After many years, we now find ourselves with an unusually sound base of research, development, design and manufacturing in the country."

The task at hand then, is to scale these activities to levels where they will become attractive to private companies, and back it with the right policies.

R&D and industry also have to be able to define projects with development times of the order of five to eight years. That means involving private enterprise.

"If the Tatas were non-commital on commercialising the Saras when the prime minister asked them, it was because a clear policy that made things attractive to them was not in place," Narasimha says.

Large orders, will also trigger other technology markets and help the development of a much more robust downstream vendor base for components and services than what exists now. HAL has submitted a draft policy to the centre on outsourcing its requirements to private vendors. Mohanty says, to start with, the focus will be on low-tech components.

HAL plans to spend some 2 per cent of its profits on research and development. While these are small amounts today, the move still indicates, HAL wants to focus on technology development and/or acquisition, while production would be through private partners.

Last year at a seminar organised by HAL and the Confederation of Indian Industry (CII), Atul Kirloskar, chairman of CII's national committee on defence, said the government must identify two or three firms to manufacture each of a list of strategic items needed by the defence forces. These should include weapon delivery systems, air defence systems and radars, and even submarines.

The government must also fund the prototype development, validation and testing of these products by these companies, he said. The defence purchase policy must be changed to help the domestic industry; "imports must be only through tie-ups and technology transfers with the pre-selected Indian firms", he said.

The seminar had 130 participants from the industry, discussing such topics as manufacture of airframe and engine of the Sukhoi 30 Mark I, airframe equipment and avionics, the Advance Light Helicopter, airframes for the LCA, Jaguar, IJT and aerospace vehicles, engines of western origins, quality and commercialisation.

Partnerships will also have to be sought abroad. Indian aerospace products now have no global brand equity and the best way to acquire it quickly is to team up with international companies that already have it.

The BrahMos cruise missile, built with the Russians, and the avionics and marketing agreement between HAL and Israel Aircraft Industries are pointers in this direction.

HAL has also offered to build components for foreign firms. These include helicopter tail parts for helicopter maker Bell, forgings for engine maker Rolls Royce, and other aircraft parts for a Russian consortium led by Sukhoi to make a regional civil jet aircraft for that region.

It has also set up a joint venture with French defence aerospace firm Snecma. HAL's new chairman Ashok Baweja faces the exciting challenge of building on these opportunities.