Antony calls on under-fire HAL to restructure

By Ajai Shukla

Business Standard, 1st March 12

Defence Minister AK Antony today called on under-fire aerospace giant, Hindustan Aeronautics Limited (HAL), to strengthen itself with strategic alliances and joint ventures, and to invest more in R&D to remain globally competitive.

There is growing recognition that HAL, the Bangalore-headquartered, Rs 13,000 crore, defence public sector undertaking is under-prepared for the major challenges it faces. These include the ongoing projects to design and build the Light Combat Helicopter (LCH); Light Utility Helicopter (LUH); the Intermediate Jet Trainer (IJT); the Medium Transport Aircraft (MTA); Basic Trainer Aircraft; and the Fifth Generation Fighter Aircraft (FGFA) with Russia. In addition, HAL is required to set up new production lines for the Tejas Light Combat Aircraft (LCA); and the Rafale Medium Multi-role Combat Aircraft (MMRCA).

The Parliamentary Consultative Committee for Defence, which met Antony today, criticized HAL for production delays in the Tejas, which had led to the MiG-21 remaining in service beyond its service life; and for HAL’s singular lack of success in the export market.

Addressing these concerns, the MoD today confirmed that an expert group, under BK Chaturvedi, a Planning Commission Member, would shortly recommend measures to restructure HAL. The expert group has already met twice.

According to the MoD, the expert group will suggest ways of involving the private industry in assisting HAL to meet its bulging order book commitments; and in creating synergy between HAL, private defence players, and non-defence private industry. The expert Group is also required to assess HAL’s future technological and human resource requirements.

Antony told the Parliamentary Consultative Committee on Defence that HAL needs to partner with design laboratories from the DRDO and CSIR in developing indigenous aircraft, engines and systems. He also urged HAL to adopt global best practices in project management, quality control, vendor deployment and supply chain management.

The defence minister, however, did not mention that HAL has functioned without a permanent CEO for the last four months. The MoD has not yet cleared a new chairman, even though the previous chairman, Ashok Nayak, retired last October. HAL currently functions under an acting chairman, PV Deshmukh.

Antony informed the Consultative Committee that permitting the private sector into defence production, and the defence offset policy, would bring the private sector into military aerospace. In fact, the private sector has made only tentative forays into aerospace, even though its entry was permitted in 2001; and the offset policy has been in place since 2005.

At the same meeting, Minister of State for Defence, MM Pallam Raju said that HAL would increasingly play the role of system integrator. This would bring in the private sector as Tier 1 and Tier 2 suppliers to HAL.

But the CEO of a major private sector defence company told Business Standard that major private sector participation would remain unlikely, as long as the playing field remained tilted against it, and special privileges were granted to public sector enterprises like HAL.

The MPs who attended the Consultative Committee meeting today included Manish Tewari, Naveen Jindal, Suresh Kalmadi, Brijbhushan Sharan Singh, Kalkesh N Singh Deo, Murli Manohar Joshi, SS Ramasubbu, Shashi Tharoor, Bal Apte, Mahender Prasad, HK Dua and Ishwar Lal Jain.