Khemkas key to deciding between HAL & Reliance in chopper contract

By Ajai Shukla

Kazan, Russia

Business Standard, 29th Aug 15

The Khemka’s of the Sun Group will be key arbiters in the billion-dollar decision on whether Russian Helicopters would partner Hindustan Aeronautics Ltd (HAL), or Anil Ambani’s Reliance Group, in building 197 Kamov-226T reconnaissance and observation helicopters in India.

Nand Khemka, whose Sun Group has done successful business in Russia for decades is close to Moscow’s power centres, including President Vladimir Putin. He is a member of the Russian prime minister’s “Foreign Investment Advisory Council”. His son, Shiv Khemka, is on the board of Russian Helicopters.

Business Standard learns that Shiv Khemka, who is advising Russian Helicopters on this proposal, has assembled a team of experienced Indian experts in helicopter manufacture. They are evaluating whether it would be better to go with HAL’s tried and tested record of working with Russia, or with Ambani’s new company, Reliance Defence and Aerospace (RDA), which has no experience, but enjoys the advantages of the private sector.

Contacted for comments about the role played by Sun Group, Russian Helicopters declined to comment, but did not deny its involvement.

Recent media reports in the Economic Times and Times of India have reported that Russian Helicopters --- an umbrella corporation that includes all Russian helicopter building companies --- has chosen Anil Ambani’s Reliance Group as its partner. In fact, no such decision has been taken.

Russian Helicopters has valid memoranda of understanding (MoUs) with both Indian entities. The MoU with HAL undertakes to partner the Indian aerospace monopoly in an earlier Indian enquiry for vendors to build 197 light helicopters in the “Buy & Make (Indian)” category. This required Indian vendors to bid, supported by a foreign technology partner.

Simultaneously, Russian Helicopters signed a generic MoU with Anil Ambani’s Reliance Defence and Aerospace, under which the Reliance Group is pursuing most of its defence ventures. This MoU is not directed towards any specific contract, but speaks of broad-ranging cooperation in helicopter building.

The Reliance MoU with Russian Helicopters is much like the shipbuilding MoUs that Anil Ambani’s newly acquired Pipavav Shipyard has signed with Russian shipbuilders. Defence industry experts point out that, while such MoUs are useful in generating a speculative media buzz, there is no certainty they would culminate in actual defence contracts.

Even as Russian Helicopters evaluates its options, advised by Sun Group experts, decision-makers in Moscow say New Delhi will have the final word on the Indian partner. Says Sergey Chemezov, Rostec CEO, who oversees Russia’s high-technology industry and is a close associate of President Putin: “We expressed our commitment to work with either of two companies – Reliance of Mr Ambani and HAL, and it is up to the Indian government to decide who to grant this project, who they feel is better suited for this. For us this is no different, we could work with either.”

Vadim Ligay, the deputy chief of Russian Helicopters says, while the contract is still being negotiated, “On behalf of Rostec, Russian Helicopters and Russia I believe we are ready to work with any company that will be chosen by the Indian side.”

Individuals close to the Russian evaluation indicate they are inclined towards HAL. They visualise the Bangalore-based company responsible only for assembly and final integration of the Kamov-226T, while a range of carefully chosen private sector Indian companies, identified as Tier-1 and Tier-2 suppliers, would build key components like the transmission, rotors, and cockpit. HAL would assemble these into a helicopter.

This would ease the path for HAL, which is already awash with Indian military orders for more than 200 indigenous helicopters, including the Dhruv, the Light Combat Helicopter and the Indian rival to the Kamov-226T, the Light Utility Helicopter.

Ligay of Russian Helicopters confirms that the Kamov-226T contract would include a provision for offsets, in addition to the “Make in India” aspect.

For now, the Reliance Group is powering ahead with its defence initiative. On Friday, the Maharashtra government handed over 290 acres for a facility that RDA intends to build near Nagpur.

The procurement of 197 light helicopters dates back to the late-2000s and was cancelled after Eurocopter was selected as winner in circumstances that were later deemed suspicious. It was re-tendered as a competitive contract, but then, in December 2014, at an Indo-Russian summit meeting in Delhi, President Putin asked Prime Minister Narendra Modi, and was granted the contract on an inter-governmental basis.

In May 2015, the apex Defence Acquisition Council approved the purchase on nomination of the Kamov-226T.

The Kamov-226T is a 3.5 tonne, two-pilot, light helicopter that is specially modified with a new engine for Indian requirements, primarily high-altitude operations along the Himalayan borders. Like all Kamov helicopters, the Kamov-226T has contra-rotating rotors --- or two main rotors that rotate in opposite directions. This does away with the need for a tail rotor, making the helicopter lighter, and improving manoeuvrability in the mountains.

Even as 197 Kamov-226T helicopters are built, HAL will build 187 Light Utility Helicopters. The IAF will, thereafter, be managing a two-type fleet of light helicopters, in addition to the existing Cheetah/Cheetal helicopters until they are phased out of service.