Thursday, November 29, 2018

India must renegotiate plan for HAL to build Rafale aircraft

The political controversy surrounding the procurement of the Rafale aircraft against a long-standing requirement of the Indian Air Force drew in its wake one more victim, with the president of the principal Opposition party addressing a gathering of past and present employees at the Hindustan Aeronautics Limited in Bangalore.

The three pillars on which national air power rests are the IAF, research and development and associated aeronautics’ manufacturing infrastructure and, to a lesser extent, civil aviation. The growth of HAL since Independence has been linked to that of the IAF: not only has the IAF been its biggest customer, but it has also provided test pilots, engineers, test facilities and three managing directors/chairmen who then moved on to become the chief of air staff. On the financial front, in the initial years, HAL billing to the IAF was on a cost plus basis. In later years, while fixed costs were quoted, HAL budgets were bridged by IAF and HAL mutually adjusting the annual man-hour rates to cover deficits.

As aeronautics and space activities expanded in the country, there was the welcome entry of private enterprises in the small and medium sector. This continues to expand with offset obligations for imports and Make in India efforts. HAL has been listed on the stock exchange and government holding diluted to nearly 90 per cent. These are welcome steps towards larger private ownership. In the long run, HAL must stand on its own to compete internationally, unshackled from the control of the ministry of defence and its dependence on the IAF, its one major customer.

The political debate surrounding the reasons why the previous proposal to manufacture Rafale aircraft at HAL was dropped has turned into one in which HAL finds itself on the back foot. The reasons why no agreement was reached are as follows: Dassault’s unwillingness to take responsibility for the quality of aircraft produced at HAL and, second, enhanced costs associated with HAL production man-hours being 2.7 times those of Dassault.
29/11/18 Brijesh D. Jayal/Telegraph