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After Prime Minister Narendra Modi's visit to Moscow last month yielded an Inter-Governmental Agreement (IGA) on supplying the Kamov-226T light helicopter to India's military, both sides are struggling to meet the challenging 'Make in India' requirement of building 50 per cent of the helicopter in India.
Neither side is willing to speak on the record, but Russian sources tell Business Standard that Moscow has accepted responsibility only for indigenising Russian components, which would fall short of the indigenisation level required.
These sources say the IGA requires New Delhi to negotiate separately with third country vendors for indigenising their components and systems, which make up about two-third of the Kamov-226T. Russian Helicopters, which has developed the Kamov-226T, has sourced its twin engines - which constitute one-third of the chopper's cost - from French company, Turbomeca. Other key systems and avionics have been sourced from the global market.
HAL sources confirm: "We will have to work with third-country suppliers and co-co-opt them into the indigenization effort to meet the "Make in India" goals.
Adding to the difficulty, the IGA permits Russian Helicopters to deliver the first 60 helicopters in flyaway condition.
These would be assembled entirely in Russia, with little scope for indigenisation. That would also be the case with the next 40 or so helicopters, shipped as kits from Russia to be assembled in India.
That leaves just 100 helicopters for meeting the 50 per cent 'Make in India' goals over the entire fleet of 200.
HAL, along with other Indian manufacturers, is negotiating with third-party suppliers outside Russia to build Kamov-226T components and systems in India. Bharat Forge is understood to be in talks with Turbomeca to part-build the Kamov-226T's engines in India.
Russian sources say the Kamov-226T indigenisation has been complicated by an unusually detailed IGA. Traditionally, IGAs consist only of broad statements of intent.
This IGA, unprecedentedly, mandates an Indo-Russian joint venture for building the helicopter, with a 50.5 per cent stake for HAL, and a 49.5 per cent stake for Russian Helicopters. HAL is permitted to co-opt an Indian vendor with part of its stake.
According to Russian sources closely involved in negotiating this IGA, "It forms a new model of cooperation between India and Russia, developed specifically for the Kamov-226T.
The IGA specifies a nine-year period for delivering 200 Kamov-226T helicopters, which begins from the signature of the contract. That amounts to an unambitious 22 helicopters a year.
The defence ministry believes that India's military, and civilian users like ONGC, Pawan Hans and corporates, will require about 600 new light helicopters when the venerable Chetak/Cheetah fleet is phased out. But the Kamov-226T will have to compete for this market with HAL's new Light Utility Helicopter (LUH), which is ready to make its first flight.
Business Standard found, during a recent visit to HAL, that the LUH is on track to make its first flight by February. According to HAL projections, the LUH would complete flight certification by mid-2017 and enter production by the year-end.
The defence ministry has assured HAL it will buy about 200 LUH. With the IGA assuring Russian Helicopters that India would buy 200 choppers, the bulk of the order for the remaining 200 would fall to whichever manufacturer delivers 200 helicopters first.
With HAL's helicopter close to its first flight, planning has begun for production. On January 3, the prime minster laid the foundation stone for HAL's new facility in Tumkur, where the LUH would be built. Modi declared that the first helicopter built there would take flight by 2018.