HAL turns to its past to navigate an uncertain future

  Despite setbacks, HAL remains India’s largest defence company by revenue, order-book size, and market capitalisation. In March, the Ministry of Defence (MoD) awarded HAL a contract for 156 Prachand light combat helicopters (LCH) — its largest order to date — valued at ~62,700 crore. The deal made up about 37 per cent of the ~1.69 trillion in MoD contracts awarded to domestic industry in 2024–25. Besides the 83 Tejas Mk1A already contracted for ~36,400 crore, an Acceptance of Necessity had also been granted for 97 more, worth ~65,800 crore. The government recently approved this deal too. Moreover, HAL’s profits have almost tripled between 2019–20 and 2023–24.

  So why has there been a spate of reports suggesting HAL could face a turbulent future? It’s not just the sharp criticism from the IAF leadership over HAL missing the original February 2024 deadline for starting Tejas Mk1A deliveries, primarily due to delays in the arrival of power plants from American engine-maker GE Aerospace. The more fundamental issue is the MoD’s renewed commitment to move away from procurement through nomination — a process by which a single government-owned company is given upfront approval for an acquisition, without competitive tendering or merit-based evaluation.  Nomination accounted for the lion’s share of domestic defence contracts by value last calendar year, despite a decade-old decision to end this practice. While other defence public-sector undertakings (DPSUs) have also benefited, HAL has been left with a monopoly in the manufacture of combat aircraft and remains the only Indian entity to have built them so far. It is this enviable position that now appears no longer assured.

HAL’s potential challenges stem from the MoD’s late-May approval of an execution model that gives both private and public Indian defence companies equal opportunity to compete for developing the prototype of the indigenous fifth-generation fighter — either independently, as joint ventures, or as consortia. The decision to open up the advanced medium combat aircraft (Amca) programme to competition is being seen as the first concrete step towards breaking HAL’s monopoly, and potentially paving the way for a private-sector fighter manufacturer.

  In June, the Aeronautical Development Agency (ADA) — the Amca’s design agency — invited expressions of interest for prototype development, followed by a key meeting in Bengaluru on July 4, attended by over two dozen companies, including private defence majors such as the Kalyani group, Larsen & Toubro, and the Tata group.

  Shortly after the meeting, at its headquarters in Bengaluru, the maharatna’s chairman and managing director (CMD), D K Sunil, expressed confidence that, despite speculation, HAL remained best-positioned to execute the prototype development — and, by extension, the series production — of the stealth jet. He pointed to the company’s manufacturing experience, infrastructure, and ongoing additions to production capacity. In effect indicating that rumours of HAL’s decline were exaggerated, Sunil argued that the logic of having two competing combat aircraft manufacturers did not hold, given what he described as modest order volumes — the IAF plans to induct 126 Amca jets. He added that HAL was nonetheless prepared to compete — in the stealth programme and beyond.

  To replace the IAF’s Russian-origin MiG-21s, the design and development of the LCA was sanctioned in 1983. In June 1984, the government constituted the ADA as a dedicated institution for the management of the project. Structured as a society under the MoD, the ADA today leads the design and development for the entirety of India’s manned combat aircraft programmes, including the Tejas Mk1A, Mk2, Amca, and the planned carrier-based naval fighter. Yet Sunil appeared undeterred, emphasising that HAL was becoming competition-fit by enhancing investment in research & development (R&D) and developing its own platforms.

  If successful, this would accelerate the reversal of a decades-long trend that has seen HAL absent from the design and development of major combat platforms — barring helicopters. HAL has not been entrusted with any major new design and development project for fighter aircraft since the HF-24 Marut — India’s first domestically developed jet fighter. Designed by the renowned German aeronautical engineer Kurt Tank, the ‘Marut’ was developed and manufactured by HAL. It made its maiden flight in June 1961, and the first production aircraft was handed over to the IAF in April 1967.

  Although the Marut never achieved its intended performance benchmarks, it did see combat during the 1971 India-Pakistan war. Fewer than 150 units were built in total, and the type was gradually phased out through the late 1980s. Throughout its service life, the HF-24 was hamstrung by critically underpowered engines, after the power plants it was originally meant to fly with failed to materialise. That shortcoming would become the jet’s Achilles’ heel — an irony not lost on those tracking the Tejas programme, which has grappled with the indigenous Kaveri engine’s inability to meet performance parameters, along with delays in the delivery of American power plants. 

  It is this historic programme that HAL’s CMD referred to while articulating his vision for the future: “The Marut shows we can be more than just a licence manufacturer of platforms designed by foreign original equipment manufacturers (OEMs).” Sunil also cited the HT-2 trainer aircraft, designed and produced by the company in the early 1950s and supplied to the IAF in notable numbers. Between then and the late 1960s, as its design capabilities gradually improved, HAL went on to develop four other aircraft — the two-seater HUL-26 Pushpak basic trainer used by Indian flying clubs; the HAOP-27 military observation aircraft, inducted by the Indian Army; the Marut; and the HJT-16 Kiran intermediate jet trainer, inducted by both the IAF and the Navy. “HAL has a long history of in-house design and development,” Sunil stressed.

  The company was originally incorporated as Hindustan Aircraft Ltd in December 1940, and eventually saw the pre-Independence government take over its management in 1942. It began manufacturing foreign aircraft such as the Harlow trainer, Curtiss Hawk fighter, and Vultee bomber during the Second World War. Placed under the administrative control of independent India’s MoD in 1951, HAL would continue to build aircraft of foreign design under licence, such as the British de Havilland Vampire and Folland Gnat jet fighters. Even as it moved to design its own aircraft, the same decade saw the Soviet-origin MiG-21 inducted into the IAF in 1963.  HAL would go on to licence-produce the MiG series jets, the last of which will retire from the IAF in September 2025. And this was followed by the licence-manufacturing of other Soviet (MiG-27 ground-attack aircraft), Russian (Su-30 MKI), and European (British-French SEPECAT Jaguar attack aircraft) platforms, along with French-origin Chetak and Cheetah helicopters starting in the 1970s. However, Sunil contended that the desire to invest in R&D and its own designs remained in the company. “HAL established the first avionics R&D centre (Avionics Design Bureau) at Hyderabad in the 1970s. Subsequently, the Rotary Wing Aircraft R&D Centre was established in Bengaluru for the design and development of platforms such as the LCH, light utility helicopter (LUH), and Indian Multi-Role Helicopter (IMRH). These are our own designs and we are seeing that segment has paid rich dividends,” he added.  

At present, HAL’s advanced light helicopter (ALH) Dhruv, which has four military variants, is type-certified for both military and civil operations. As of late 2024, more than 335 military Dhruv helicopters were in service. That same year, its civil variant, the Dhruv-NG (Next Generation), secured its first contract. In 2023, the upgraded Dhruv had also received a type certificate from the European Aviation Safety Agency (EASA). Meanwhile, the LUH for the armed forces has faced delays, though key flight trials are already complete. HAL remains confident that the outstanding issues will be resolved shortly, and has already built 10 units. The company remains bullish about the future of its rotary-wing aircraft, despite a January 2025 ALH crash triggering a months-long, fleet-wide grounding.  

“Foraying into newer areas is another pillar of our future strategy. For the ALH, we are targeting certification from the Directorate General of Civil Aviation this financial year for Oil and Natural Gas Corporation’s offshore operations,” said Sunil. While HAL is also pursuing EASA certification for an earlier variant of the ALH, he emphasised that the domestic civilian market remained the priority. “There is likely to be a demand for hundreds of civilian helicopters in India. It’s not a coincidence that Airbus wants to come and produce helicopters here.”

  If the scale of the aforementioned LCH order is any indication, HAL’s renewed focus on in-house platform development is driven by clear commercial logic. “The role of manufacturing based on transfer of technology will diminish for us. Our balance sheet will increasingly depend on what we design in-house, and the core of our future strategy is indigenous design,” said Sunil. “Take the IMRH, for example. Work on this is already being funded by the HAL board. In fact, the board has allocated about ~17,000 crore for investment in R&D across several projects over the coming years. This is funding from within HAL itself, notwithstanding external funding from the government that will come for ventures like the Sukhoi upgrade.” 

The CMD also noted that the company was benchmarking its R&D spending against global majors, which typically invest 7–8 per cent of their revenues. “At about ~2,500 crore, we spend a similar proportion on R&D — perhaps the highest in the country,” said Sunil. Depending on the number of projects secured, he added, HAL could raise this figure to 10 per cent in the coming years. HAL is competitive with global defence and aerospace majors in R&D intensity — the ratio of a firm’s R&D spend to revenue — but its revenues are only a fraction of those of global OEMs.

  In line with global developments in air power, the company is also actively pursuing manned–unmanned teaming solutions — referred to by the armed forces as MUM-T— a system-of-systems wherein manned jets operate alongside unmanned aerial vehicles in a networked and coordinated manner. A key component of such systems is the collaborative combat aircraft — a “loyal wingman” capable of taking off, navigating, evading or engaging threats, making tactical decisions, and landing autonomously, while serving as the manned fighter’s “sidekick”. Apart from India, at least eight other nations — notably the United States (US), China, and Russia — are pursuing such programmes. 

HAL’s programme — the combat air teaming system (CATS) — is in the design and development phase. It envisages a manned fighter acting as the “mothership” to a suite of assets that can be controlled by human warfighters or operate with varying degrees of autonomy — including swarming unmanned aerial vehicles, loitering munitions, a high-altitude pseudo-satellite, and an unmanned combat aerial vehicle that will function as a loyal wingman. Even as the CMD outlined these details at HAL’s headquarters in Bengaluru, engineers at the company’s Aircraft Research and Design Centre, also located in the city, were continuing work on the loyal wingman — named CATS Warrior — at an evidently rapid pace. In January, HAL conducted the first engine ground test of the CATS Warrior using a full-scale demonstrator — no mean feat, considering that work on CATS was initiated in the second half of 2018 and gathered momentum only in late 2019 to early 2020. “The CATS Warrior will have the range to keep up with our manned combat aircraft. Also, its power plant is an updated version of the indigenous PTAE-7,” explained Sunil.

  Chief of Defence Staff (CDS) General Anil Chauhan in August highlighted MUM-T as a key element in the IAF’s effort to dominate the future battlespace. Notably, the CATS Warrior is an independent initiative by HAL, undertaken without a formal request for proposal. Whether this will prove to be a risky wager or a prescient bet remains to be seen. Yet it reflects the entrepreneurial spirit increasingly evident in the US and Europe, where venture capital-backed military-technology firms have surged in recent years. These companies are challenging incumbents by moving beyond cost-plus contracts — privately funding R&D, developing products without firm orders or defined user requirements, and marketing them off the shelf.

Perhaps the most critical initiative undertaken by HAL is the development of engines. The DPSU is no stranger to producing them under transfer of technology and is executing a contract worth over ~26,000 crore for 240 Su-30MKI power plants. However, having been burnt by delays in receiving foreign engines for the Tejas, HAL is now looking to mitigate this risk for the platforms it is developing.

  “Engine is the one technology area where India still lacks capability. HAL is executing two programmes to address this gap,” said Sunil. One is the Hindustan turbo shaft engine, designed to power an ALH-class platform. The other is the Hindustan turbofan engine, intended for training aircraft and larger UAVs. “The indigenous helicopter engine is progressing well — its first run was conducted in 2018. I expect certification within the next three to four years,” he said. In contrast, the jet engine remains under development. “It will take more time. While we have built and are testing it, there are still technical issues being addressed.” Sunil said that HAL had invested close to ~700 crore in its engine projects.

  This is an ambitious list of ventures — some in areas that are still being defined, such as the loyal wingman, and others, like engines, where India has not had much success. Suffice it to say that there are differing views on whether HAL can take on the challenges it has set for itself.

  A former MoD official asserted that HAL could compete with any player — including private ones and even without nominated orders — if allowed to do so through a transparent process. Advocating reduced government control, he said: “HAL should be allowed to function as a board-run company. Many of the challenges it faces are externalities, and some of the structural adjustments being suggested could break the synergies of the large ecosystem HAL has built.” Describing HAL as still the country’s best bet for building much-needed aerospace capabilities, he added: “We will be doing a great disservice if we meddle with HAL, especially given the scores of micro, small, and medium enterprises that have benefited from its handholding in developing aircraft parts.” Supporting a pivot towards greater investment in design and development, he said: “HAL has what it takes, and the long-term payoff will be worth it.” 

Laxman Kumar Behera, associate professor at the Special Centre for National Security Studies, Jawaharlal Nehru University, agrees that government rules and regulations constrain DPSUs — including a maharatna like HAL, which enjoys certain freedoms owing to that status — in matters of innovation. “The rules are more stringent, and the impact, compared to more agile private firms, is felt across the board — from speed and flexibility in selecting foreign technology partners and consultants when a project is stalled, to hiring and firing practices when the right talent has to be found quickly.” Behera recounts how a private-sector defence major, when faced with a problem in a critical army project, flew down experts from its US technology partner — a global defence giant — almost overnight to resolve the issue. “HAL simply cannot do that at the same speed.” However, where he differs is in his assessment of the scope for reform. “The checks and balances may be a limitation, but they are also necessary. No government can do away with the General Financial Rules, for example.” 

Behera, thus, takes a more pessimistic view of HAL’s future: “While orders for legacy platforms — including the under-development Tejas Mk2 — will still go to HAL, it will face significant headwinds if Amca production moves to the private sector.” Series production of the Amca remains nearly a decade away, and while the government’s aim is to build the stealth fighter through industry partnership — potentially establishing a private-sector fighter jet production line — there remains many a slip between the cup and the lip. But even if HAL clinches the Amca tender, he remains sceptical of the firm’s future: “DPSUs often struggle to translate R&D in the lab into substantial orders.”   

The former MoD official, however, is more sanguine: “HAL possesses decades of experience, well-trained engineers, and infrastructure that will be costly for the private sector to replicate.” HAL’s prospective competitors agree, with private-industry insiders welcoming the Amca execution model but also expressing concern over the absence of a level playing field. A key reason is HAL’s existing assets, including government-funded aviation facilities for testing and development. This means the DPSU does not bear significant asset-creation or servicing costs. HAL also accounts for over a third of the total capital expenditure allocation of all 16 DPSUs. 

Ultimately, Behera says, competition is the future. Despite his doubts, he concedes that DPSUs could prove aggressive when confronted with competition. He points to how, in June, HAL won a coveted transfer-of-technology deal to build, own, and commercialise the small satellite launch vehicle, designed by the Indian Space Research Organisation — beating two consortia, one of which was led by a defence manufacturer backed by the Adani group.  

HAL’s  idea of looking to its past to shape its future becomes clearer when seen through the lens of the Marut project. If a suitable engine had been developed or sourced from abroad, India’s aerospace landscape might have been completely transformed. Combined with insights from the ongoing Tejas programme, those lessons are shaping HAL’s design and development approach:  The company says it is embedding risk-mitigation safeguards from the outset, identifying alternatives, and ensuring that no single company, component, or delay can stall programmes. Whether HAL’s new flight plan will lift it to new heights or echo the fate of the Marut — ambitious, well designed, yet ultimately grounded — remains to be seen. For now, the last word rests with the chairman and managing director: “We’re not just aligned with the government’s vision to broaden aerospace participation — we’re actively enabling it, and will remain a key driver of that momentum.”