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Interview with Mr Ashok Nayak, Chairman, HAL

Issue: 04-2009By SP's TeamIllustration(s): By Ashok_Nayak.jpg

SPG: Having taken over as the 15th Chairman of HAL, what broadly is your plan of action for the organisation and what specific areas are you going to focus on during your tenure?

Chairman: With a sales turnover of over $ 2 billion (Rs 10000 crore), HAL has witnessed a growth of 22 per cent in the last five years. Considering the fact that barring the top 10 companies, most of the others have a turnover in the range of $ 2 to 3 billion (Rs 10000 to 15000 crore), the growth of HAL is indeed a commendable achievement. With a comfortable order book position, the focus will be on consolidation and customer focus.

For IJT we need to focus on the limited series production (LSP) and getting orders for series production; for LCA focus on LSP, initial batch of series production and development of LCA Mk II; production of Hawk with a possible follow on order; compressed delivery schedule and delivery of phase-3 and phase-4 of Su-30 MKI and completion of production; timely execution of the orders and exploiting the export potential of ALH; and the actual realisation of the first flight of LCH are some of the focus areas.

SPG: What in your perception are the major strengths and weaknesses of the organisation and what steps do you propose to take to propel the organisation up the ladder in ranking of global aerospace industries

Chairman: The world over, the aircraft industry has the unique microeconomic characteristic of being oligopolistic in nature with high entry and exit barriers due to extremely high capitalisation and large cash flows. The industry, which has high technology content not only in the products themselves but in production processes as well, is global in nature.

In India, HAL has been the leading light of the Aerospace Sector. Participation of the private sector has been by way of supplies to HAL. The company has been at the forefront of product and technology development, manufacturing and assembly, system development and integration, and repair and overhaul. Over the years, HAL has acquired the necessary skills, experience and intellectual capital for these activities. As a complex high-tech systems engineering industry, HAL is a user and driver of advanced product and process technologies. Around 2,000 Design Engineers are working in its 10 R&D Centres on new aircraft design, aircraft upgrades, small engine design and on development of various accessories and avionics systems. Extensive infrastructure has been built for design, and human skills have been nurtured to address the fine points of design and technology.

Over the six decades of its existence, carefully planned investments have been made to build sophisticated manufacturing capabilities for military and transport aircraft, helicopters, their engines, accessories (hydraulic, pneumatic, fuel aggregates and instruments) and avionics systems (RADARs, navigation system, communication systems, etc). These are our core strengths.

There are multiple projects now which we did not have earlier. There is a need to have a very strong Programme Review and Programme Management concept taking root in the Company. We have embarked upon many new design projects simultaneously, which will again require a very strong Programme Management and Programme Review.

Global processes such as Enterprise Resource Planning (ERP) and Lean Management need to take deeper root than now. These things normally have a fairly long period for implementation. We need to be impatient and patient at the same time. I hope it's understood in the right sense. Impatient means, we need to drive ourselves towards implementation, and patience means, we have to give it a minimum time to take root.

Basically, we need to jointly work on strategies, hone work practices and introduce modern techniques and technologies. In short, we should evolve a work culture which will successfully see us through and propel us to excellence in our endeavours in the years to come.

SPG: The vision statement of HAL reflects the intent to transform HAL into a commercial organisation. How do you propose to achieve this objective given its deep-rooted PSU culture, antiquated labour laws, narrow customer base in a fiercely competitive global market, poor economy of scale, lack of autonomy in choosing your direction and rigid bureaucratic control?

Chairman: I strongly believe that identifying the teams, sharing the dreams and vision and helping the team to articulate the vision is the essence of the transformational process. Efficiency of this process is a function of management and not that of the ownership. As such, transformational success does not depend whether the organization is a PSU or a Private Industry.

SPG: In your assessment, does the private sector have the technical capability, financial strength and the will to invest in the infrastructure required for aerospace industry where the technology is advanced, funds required are huge, economy of scale is unfavourable, gestation period is long, returns are slow in coming, quality control is stringent and the procedures involved are infinitely complex to the point of being a deterrent?

Chairman: Investment in Aircraft Industry essentially depends on predictability and stability of program requirements to protect adequate long-term investment funding and financial flexibility of the industry. Aerospace technologies also call for constant upgrade of its facilities. Equipment is usually very expensive because of the stringent technical conditions that are to be consistently maintained. Profit margins in new products are comparatively low due to high cost of development and competition with global players. All the above factors could be a disincentive for the private firms with a wide portfolio of products giving higher returns. Under such an environment sustenance of private sector in Indian Aircraft Industry with extremely high capitalization, large cash flows, highly complex technologies with long gestation time for returns & relatively lower profit margins is a matter of concern.

SPG: How far has the HAL been successful in penetrating the global market?

Chairman: HAL’s mission is to become a globally competitive Aerospace industry. Towards this, HAL is focusing its efforts for widening its scope of business activities. HAL has established itself as a quality supplier by securing orders from leading aerospace Companies from USA ( Boeing, Honeywell), Canada (Pratt & Whitney), France (Airbus, Eurocopter, Snecma, Turbomeca), Germany (Ruag), UK (Rolls Royce), Israel (IAI, Elbit) etc. With established proven track record for supply of components to Airbus & Boeing, follow on orders have been received from them which reinforces the confidence in HAL’s capabilities.

Presently, HAL’s major thrust is on marketing of Dhruv Advanced Light Helicopter. HAL is aggressively promoting Dhruv in identified target countries including in Latin America. HAL has recently won a contract for the supply of seven Dhruvs to Ecuador through a global competitive bidding process. Five helicopters have been delivered in March 2009, well ahead of the agreed scheduled delivery. A product support base at Ecuador is being set up to facilitate establishment of dedicated repair/ maintenance facilities which would be utilised to extend the services to the entire Latin American region. HAL is also supplying a Dhruv to Mauritius Government against the contract concluded recently.

HAL has formed strategic alliance/ Joint Ventures with leading global Aerospace Companies to tap the vast business opportunities for cooperation in design, development & production in aviation sector.