Private sector in plane production welcome, but mindset change needed, too

India has long planned to build an indigenous fifth-generation fighter plane, in a project called the Advanced Medium Combat Aircraft, or Amca. Since 2010, when the first feasibility study for a twin-engine stealth plane was launched, it was assumed that it would be manufactured primarily by Hindustan Aeronautics Ltd (HAL), the state-owned firm headquartered in Bengaluru. The Ministry of Defence this week, however, approved an execution model for the Amca programme, which says that the Defence Research and Development Organisation’s Aeronautical Development Agency will supervise the project, but include both the private and public sectors in its execution. In other words, Indian companies will be permitted to bid for tenders related to both developing and manufacturing the aircraft, though currently only a prototype will be expected. They are also permitted to form joint ventures or consortia before they bid. The ministry thinks that this is “a significant push towards enhancing India’s indigenous defence capabilities and fostering a robust domestic aerospace industrial ecosystem”, and this seems an accurate estimation.

 

The end of HAL’s automatic monopoly is a good thing, and it is welcome news that the ministry has moved so quickly on the recommendations of a report submitted in March, suggesting increasing the private sector’s role in manufacturing military aircraft. While the military’s brass has made no secret of its dissatisfaction with HAL, this is the first time that the highest levels in the ministry have moved in tandem with this sentiment. In any case, HAL should have its hands full at the moment making up the backlog in deliveries of the Tejas; it could not deliver any of the 80-plus fighters promised last financial year. It has also just received an order for 156 Prachand light combat helicopters, its largest ever order.

 

This major shift from treating HAL as the default execution agency for government aeronautical requirements was long overdue. A broader ecosystem for aviation manufacturing in the country is vital for national security, and will also provide major positive spillovers for manufacturing in general. It is not as if some expertise in precision engineering does not already exist within the country: Indian companies have demonstrated their ability in the past to build quality automotive components, for example. Many components for Tejas are also being built in the country. The manufacture of planes is almost unique in its complexity, though it has positive externalities on manufacturing in general.

 

It must be noted, however, that HAL’s delays are not always or completely the company’s fault. Sometimes, it faces problematic supply chains — for example, for the GE engines that go into the Tejas. On other occasions, it has to deal with a customer, the military, which changes its requirements unpredictably or asks for more than what is reasonably possible. This too must change. Attempts have been made by other branches of the military to expand private-sector involvement in the provision of arms platforms. But these have not always been successes because the government tends to be cautious about handing out contracts with the size and timing required to justify large investment by companies. Dealing with the private sector requires its own set of norms, beyond just formally opening up procurement. A change in mindset is also required, and it is to be hoped that this too will take hold in the defence ministry.