NO Substitute to Privatisation

To what extent the stated objectives of HAL have been achieved over the last five decades since its creation is a matter for scrutiny

Issue: 04-2015By Air Marshal B.K. Pandey (Retd)Illustration(s): By Anoop Kamath

The origins of The Indian aerospace industry can be traced to the pre-independence era when the Hindustan Aircraft Company was incorporated in Bengaluru on December 1940 as a private company. The Indian Government that was a minority stakeholder in the company with an investment of Rs. 25 lakh, took over its management after independence. In 1960 the Government of India established under the Indian Air Force (IAF) at Kanpur, a facility called Aircraft Manufacturing Depot to produce under licence, the airframe for the HS-748 Avro transport aircraft from Hawker Siddeley of the United Kingdom. In August 1963, the government established another facility, a wholly-owned company called Aeronautics India Limited (AIL) to undertake licensed manufacture of the MiG-21 aircraft.

In June 1964, the Aircraft Manufacturing Depot at Kanpur was merged with AIL to form a consortium. Soon after, on October 1, 1964, following the amalgamation of the two companies i.e. Hindustan Aircraft Company and AIL, a new company in the public sector called the Hindustan Aeronautics Limited (HAL) as it is known today, emerged on the scene. The aim of the consolidation as enunciated by the government then was “to conserve resources in the field of the aeronautical industry where the technical talent in the country was limited and to enable the activities of all the aircraft manufacturing units to be planned and coordinated in the most efficient and economical manner”. To what extent this stated objective has been achieved over the last more than five decades through the creation of a behemoth in the public sector is a matter for scrutiny.

It was expected that HAL would lay strong foundations to make the nation self-reliant in the regime of the military aerospace industry. The initial successes recorded by HAL, which is perhaps the largest defence public sector undertaking (DPSU) in the country today, were encouraging. As early as in the 1950s, HAL successfully produced the Hindustan Trainer-2, a basic trainer aircraft of original design that served the IAF for four decades. Thousands of trainees of the Indian armed forces were initiated into flying on this aircraft. The other major success recorded was the HF-24 Marut, a combat aircraft designed at HAL with assistance by Dr Kurt Tank who is credited with designing a number of successful combat aircraft for the Luftwaffe before World War II and the Hindustan Jet Trainer 16, Kiran intermediate jet trainer. In the recent past, HAL has registered moderate success in the rotary-wing regime with the advanced light helicopter dhruv.

While the track record of HAL in respect of indigenous design, development and production has been punctuated with the occasional success, bulk of the aerial platforms provided by the DPSU to the Indian armed forces are through licensed manufacture. Despite colossal investments and over three decades long and tortuous journey, the indigenous effort to produce and operationalise the light combat aircraft Tejas Mk I remains couched more in hype than reality. The major setback for the IAF is that the Indian aerospace major has not even been able to provide in time both a basic and an intermediate trainer aircraft to replace the retired or retiring fleets. To meet with urgent operational requirements, the Indian armed forces have had to depend on direct imports, an option that apart from being decidedly far more expensive, impinges seriously on the strategic autonomy of the nation.

Over the years, instead of climbing to the heights of excellence, this DPSU which was placed in the category of ‘Modern Temples’ by Pandit Jawaharlal Nehru, the first Prime Minister of India, has in fact, progressively degenerated. It has been pervaded by all the ills that afflict most if not all the PSUs in the country such as lack of strategic vision, questionable work culture, indiscipline, mediocrity, inefficiency, stranglehold of trade unions and lack of accountability. The government is currently embarked on privatisation of loss making PSUs as it is not fair that the taxpayer continue to bear the financial liabilities generated by these behemoths. Prime Minister Modi’s ‘Make in India’ campaign is expected to provide strong incentive to the aerospace industry in the private sector to emerge as a viable alternative to the monopoly that HAL has enjoyed so far. It is not difficult to see that with the state the DPSU is currently in, there is little or no possibility of it being transformed into an organisation capable of meeting with the goals of self-reliance in the aerospace industry.

While this may be a politically sensitive issue for the government, the Indian aerospace major in the public sector has no future without unless it is privatised.