Broadsword interview: Ashok Nayak, CMD, Hindustan Aeronautics Ltd

Nayak says: "It will be very difficult for an outsider to manage HAL"

by Ajai Shukla

HAL Bangalore

Business Standard, 31st Oct 11

After 38 years with Hindustan Aeronautics Ltd, the aerospace giant’s chairman and managing director, Ashok Nayak, will step down on October 31. There has been controversy on his successor, with the Air Force proposing an air marshal, a sidelined HAL director going to court, and the government finally choosing R K Tyagi, the current chief of Pawan Hans Helicopters.

Q. After you retire, HAL will be led by someone from outside HAL. Would an outsider be well placed to lead it into a technologically challenging future?

It will be very difficult for an outsider to manage HAL. The variety and the challenges are vast and not easily comprehensible even to insiders, at times. It will definitely be a challenge to an outsider, especially given the level of indigenisation (that we aspire to) and our efforts to manufacture aircraft inside the country.

You cannot come from outside, change the basic principle of indigenisation that we follow and then claim HAL has become a more efficient organisation. You have to have the same principles when anyone else comes.

Q. With a number of senior directors retiring in your wake, is HAL facing a leadership crisis?

Retirement is a law of life and we saw these bunched retirements coming. We proposed a restructuring plan to the government to control the sudden efflux of senior officials. We had proposed that the retirement age be raised from 60 years to 62 years for a short period of time, for a particular level of officers. This is under the government’s consideration.

Q. What have been the main achievements and highlights of your tenure as chief?

Our biggest achievement has been to keep up the tempo of our order book. On order with HAL today are 57 Hawk trainers, 73 Sitara Intermediate Jet Trainers, a second batch of 20 more Tejas Light Combat Aircraft and 12 Dorniers for the Coast Guard. An additional order for 42 additional Sukhoi-30MKIs is at an advanced stage (of processing).

The structural legacy that I will leave HAL is a strong ERP system for our manufacturing operations.

Q. HAL’s critics charge it is content as a licensed builder of foreign aircraft. It has built 600-700 MiGs, but does not design Indian planes.

This is a harsh judgement. HAL designed the HT-2 trainer years ago. We designed the Kiran, which the IAF aerobatics team (Surya Kiran) is flying… more than 250 Kirans have been built. We developed the HPT-32 trainer, which has flown more than 400,000 hours. Today it has problems and has been grounded (by the IAF), but that is a different issue.

Then, we developed the HF-24 Marut fighter, and built more than 120 Maruts for the IAF… pilots reminisce about these even today. It was prevented from being a thumping success by foreign countries, which ensured it was not supplied with a suitable engine. And, from the Marut, we went on to develop the Tejas and the Sitara trainer.

Now we will co-develop the Fifth Generation Fighter Aircraft (FGFA) with Russia. That is more daunting than all the other projects combined. So, we must be given due credit.

Q. HAL must now cope with a rush of licensed manufacture: Hawk, Su-30 MKI, the MMRCA, LCA, IJT, a whole stream of helicopters… and then the MTA and the FGFA. How will you manage all this?

The Hawk production line is well set… as also the manufacture of the Su-30 MKI. We will build the Sitara IJT in Kanpur, while a dedicated division in Bangalore will build the Tejas LCA. The production line of the Dhruv Advanced Light Helicopter is also well set. We are building 25-30 helicopters per year and eagerly awaiting further orders.

Our basic plan is to raise our manufacturing capabilities by sub-contracting and outsourcing many more components to private vendors. In fact, we are trying to graduate into the outsourcing of entire sub-assemblies. For the Sukhoi-30 MKI line at Nashik, we have sub-contracted larger components, including the empennage and the control surfaces. But, there are limitations — this requires more investment from the sub-contractors and a longer-term commitment from them.

Q. There is a school of thought that HAL is too big and should be broken into smaller, nimbler companies to unlock its potential.

The global trend in defence corporations is towards consolidation, rather than breaking into smaller companies. Look at how many big companies have merged to form Boeing, Lockheed Martin and BAE Systems.

Besides, HAL is a highly interwoven and interrelated company. To build a Dornier in Kanpur, the landing gear and the engine have to go from Bangalore. Many other components are being built in Lucknow. A centralised HAL brings all this together. Otherwise, with two or more different managing directors involved… remember, we are dealing with equals. If we break down into ‘nimble’ companies, we might find this synergy gone.

Q. HAL always complains about orders being placed piecemeal...

Our disadvantage is small numbers, because we cannot buy parts in bulk or set up large facilities in anticipation. For example, we have just received an IAF order for 20 Tejas fighters. I know that we will finally build some 200 Tejas, but can I set up, at this stage, a factory that can build 20-30 LCAs per year? I can’t, and so my unit price will be higher than it could be if a bulk order was placed. These are the systemic challenges.

Q. There has been criticism of HAL’s management of its huge cash reserves; this year, these will cross '10,000 crore. Why are they are not productively deployed?

It is true that we are conservative in deploying reserves to set up our facilities. This will all change for the big manufactures coming up: the Dhruv helicopter, the Light Combat Helicopter, the Light Utility Helicopter, and the MMRCA (medium fighter). New facilities are required to be set up and we will use our reserves for that. We intend to make systemic changes, improving our design facilities by bringing in tools like rapid prototyping.

Q. Looking back, how has HAL evolved over the years?

During my 38 years in HAL, we have grown into a far more professional aerospace organisation. Earlier, the thrust was on areas like maintenance, repair and overhaul (MRO). Now, it is on high-tech areas like composites and engine technologies. The Su-30 MKI’s engine, the AL-31FP that we build at Koraput, is in a class of its own in complexity. Finally, we have grown the Indian aerospace sector by developing a network of suppliers.

Q. Has HAL’s working environment changed as the company grew?

HAL has actually grown smaller. In the mid-1980s, it had 40,000 people. Now, we’ve right-sized to 34-35,000 people, with more turnover being achieved by less because of continuous improvements in the processes of design, manufacture and production.

Q. What are your plans hereafter? Will you remain in the aerospace industry?

I’m not supposed to do anything for a year, so I will relax after 38 years of work. When that ‘cooling down’ period finishes, I will see. Some people have approached me, but I have not made any commitment. And, whatever I do will be far removed from HAL.