Outsourcing will be key to HAL growth strategy

A combination of in-house buildup of ability to integrate and assemble some of the best fighter aircraft in the world and the timing of "offset work" from civil aviation orders India placed with global firms is proving to be fortuitous for Hindustan Aeronautics Limited.

Deep aeronautics expertise and orders to match are giving HAL a never-before chance to farm out work to smaller players and make India a truly global aircraft making hub. Key strategic projects include the Sukhoi 30 MkI for the Indian Air Force and the Advanced Light Helicopter, of which a combat version will soon be launched.

Important offset projects include orders to make a host of parts for the large number of civilian passenger aircraft Boeing and Airbus have contracted to supply to both government owned and private run airliners in India.

The challenge is to not lose these opportunities to China, Poland or the Czech Republic, and the way forward will be through an unprecedented engagement of the country's private sector, HAL's chairman A K Baweja said here on Thursday. HAL currently outsources a small part of its work to some 800 component and service providers.

From Rs 90 crore two years ago, outsourcing of engineering alone grew to Rs 200 crore last year. "This year we aim to outsource components worth Rs 600 crore. This value is not important right now, but the need to institutionalise the concept of outsourcing within HAL is," Baweja said at the inauguration of a two day meet on public private partnership in aeronautics, here on Thursday. The meet was organised by the Confederation of Indian Industry and HAL.

"We are looking for committed firms," willing to take on long gestation projects. Take HAL itself. It took the firm 10 years to stabilise the process of building doors for large passenger aircraft. Making aircraft parts, sub assemblies and ultimately entire assemblies, such as the airframe, needs "patience, deep skills and strict adherence to targets in terms of technology, quality, cost and delivery schedules."

HAL has had problems with some projects on one or more of these counts. An important project has been delayed two years because some outsourced components "didn't match our quality benchmark," Baweja said, without identifying the project or the company that had supplied the components.

HAL would also no longer hand-hold private firms at the business end of outsourcing. "We will no longer buy any material for you. We will give you the list of vendors and suggest target prices. At some point, you must cut the umblical cord," he said.

Private firms must also commit investment and build their own infrastructure, such as the vital heat-treatment facilities. On the technology front, "we are willing to support private industry all the way. We will position our brightest engineers with you for as long as it takes."

HAL has also put in place a policy on "how to outsource design work" on an equal opportunity and competitive basis. "We urge you to look at it on our website." Private firms should also register themselves with HAL and have their capabilities and capacities assessed, he said.