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Hindustan Aeronautics Limited (HAL), the state-owned aerospace and defence giant, has historically been central to India's military aircraft manufacturing efforts since its establishment in 1940.
Envisioned as the primary agency for designing, developing, and building aircraft for the Indian armed forces, HAL's long-standing dominance is facing a significant challenge.
Recent shifts in India's defence sector landscape suggest HAL's role is evolving, potentially moving towards assembly rather than comprehensive production.
This change coincides with the increasing prominence of private companies in defence manufacturing, driven by government initiatives like 'Make in India' and 'Atmanirbhar Bharat' (Self-Reliant India).
While this trend fosters private sector growth and innovation, it also raises questions about HAL's future identity and the broader financial and strategic outlook for India's defence capabilities.
Historically, HAL managed projects from start to finish, including the design and production of key platforms like the Tejas Light Combat Aircraft (LCA) and the Dhruv Advanced Light Helicopter (ALH).
However, the government's push for self-reliance has actively encouraged private sector participation over the last decade. Firms such as Tata Advanced Systems, Mahindra Defence, Larsen & Toubro (L&T), and Adani Defence are now winning significant contracts, sometimes collaborating with international defence manufacturers on projects previously considered HAL's territory.
A notable example is the contract for producing C-295 transport aircraft for the Indian Air Force (IAF), awarded to a joint venture between Tata and Airbus, where HAL's involvement is limited.
Private companies are also increasingly manufacturing critical components, subsystems, and complete systems like unmanned aerial vehicles (UAVs) and missiles.
Consequently, HAL is often tasked with assembling kits imported from abroad or integrating subsystems developed by others, as seen with the licensed production of Sukhoi Su-30 MKI fighter jets and Hawk advanced jet trainers.
This transition is partly influenced by concerns regarding HAL's efficiency, including past delays in delivering major projects like the Tejas LCA and ALH. Quality concerns, such as a swashplate issue that led to the temporary grounding of the ALH Dhruv fleet, have also been noted.
The government aims to leverage the private sector's perceived advantages in agility, innovation, and attracting foreign investment to diversify and strengthen domestic defence production. However, this strategy risks diminishing HAL's role from a primary production agency to a supporting player.
The expansion of the private sector into defence has yielded clear benefits. Companies like Tata and L&T have proven their capabilities, supplying high-quality components for global aviation leaders like Boeing and Airbus, and partnering with international defence firms like Lockheed Martin and Thales.
These collaborations bring advanced technology, improve supply chain management, and generate employment. The profit-oriented nature of private firms often encourages faster innovation and stricter adherence to project timelines, addressing areas where HAL has faced criticism.
Furthermore, private Indian defence companies are seen as potentially better equipped to compete internationally, which could enhance India's defence exports – reported at Rs 21,083 crore ($2.5 billion approx.) for the fiscal year 2023-24.
Policy frameworks like the Defence Acquisition Procedure (DAP) 2020 and the creation of defence industrial corridors in Uttar Pradesh and Tamil Nadu further support the growth of private entities in this sector.
However, concerns exist regarding the implications of this shift. Unlike HAL, whose revenues contribute to government funds, private companies operate on a profit basis, potentially increasing costs for the armed forces through licensing fees, proprietary technology charges, and profit margins. This contrasts with HAL's structure as a Public Sector Undertaking (PSU), where earnings support national development objectives.
The C-295 aircraft deal, valued at Rs 21,935 crore (approx $2.6 billion) for 56 planes, is cited by some critics as an example where costs might have differed if HAL had a larger role. Such potentially higher costs could put pressure on India's defence budget, which stood at Rs 6.21 lakh crore (approx $74.5 billion) for 2024-25.
Reducing HAL's involvement in core production activities could also undermine its original purpose of driving indigenous defence development. The company, with its workforce of over 28,000 and 11 research and development centres, has a significant legacy, including developing the Tejas fighter, Dhruv helicopter, and Prachand Light Combat Helicopter.
A diminished role in new, high-profile projects could affect HAL's financial health and technical expertise. There is a risk that HAL could lose out on future contracts, such as the Indian Navy's requirements for Naval Utility Helicopters (NUH) and Multi-Role Helicopters (MRH), where private firms are competing strongly.
The Defence Research and Development Organisation's (DRDO) increasing collaboration with private partners on advanced projects like the Indigenous Technology Cruise Missile (ITCM) further underscores this trend.
This evolving landscape could lead to a loss of specialised knowledge and skilled personnel from HAL, potentially migrating to the private sector. HAL's research capabilities, vital for projects like the co-developed Shakti engine for the ALH, might also face challenges without sufficient projects and funding, potentially impacting India's long-term self-reliance goals.
Strategically, relying heavily on private firms, particularly those partnered with foreign manufacturers, raises questions about strategic independence, control over intellectual property, and supply chain security during conflicts.
There's also a concern that profit motives might lead private companies to focus less on essential but potentially less profitable areas like the maintenance, repair, and overhaul (MRO) of older equipment, a service HAL has traditionally provided extensively.
Finding a Balance
To navigate these changes effectively, experts suggest a balanced strategy that utilises the strengths of both HAL and the private sector:- Support HAL's Strengths: Continue investing in HAL's research, development, and manufacturing facilities to maintain its leadership in developing indigenous platforms. Prioritising HAL's role in future key projects like the Advanced Medium Combat Aircraft (AMCA) and the Indian Multi-Role Helicopter (IMRH) could be crucial.
- Promote Collaboration: Foster partnerships where HAL handles complex design and system integration, while private firms contribute through component manufacturing and efficient supply chains.
- Manage Costs: Implement mechanisms, possibly through competitive bidding and clear performance metrics, to ensure cost-effectiveness in defence contracts awarded to private companies.
- Boost HAL's Efficiency: Encourage HAL to adopt modern industry practices, enhance workforce skills, and improve operational efficiency to remain competitive.
- Strategic Allocation: Ensure HAL retains a leading role in projects critical to national security, while allowing the private sector to drive innovation and production in other appropriate areas.
