India's Quest to Build its own Lockheed Martin: Potential Cost Overruns in Private Sector Fighter Jet Production A Key Hurdle

As India's defence sector pushes towards modernization and self-reliance, the potential role of private companies in manufacturing military aircraft, particularly fighter jets, has become a subject of intense debate.

A key question looms: if the private sector is entrusted with producing fighter jets, will the Indian Air Force (IAF) be willing to pay a premium for these indigenously assembled aircraft?

Defence analysts have raised concerns about the potential cost implications of such an approach. While the idea of fostering domestic production of fighter jets under the "Make in India" initiative is appealing, the IAF may face challenges in accepting aircraft from private manufacturers at premium prices.

One analyst cautioned, "We want to follow the US model and create Lockheed Martin and Boeing of our own military aerospace majors. But to achieve this, we would need to buy their aircraft at prices that will be controlled by them, and also be ready to fund them as they demand."

This perspective highlights the complexities of achieving self-reliance in defence production. While the "Make in India" program has ambitious goals, there are concerns about the costs associated with establishing local manufacturing infrastructure and sustaining long-term partnerships with private players.

Analysts point to the ongoing C-295 aircraft project, undertaken by Tata Group in collaboration with Airbus, as a case in point. This project, a significant milestone in India's defence manufacturing efforts, aims to produce medium transport aircraft domestically.

However, analysts question the value proposition of private sector involvement in larger-scale military projects, such as fighter jets, and whether the industry can mature quickly enough to handle such complex undertakings.

Concerns have been raised about the premium India is paying not just for the local infrastructure but also to cover the profit margins of private entities like Tata Group.

"In the name of Make in India, we are paying an extra premium for the infrastructure costs required to set up these facilities. There's also an additional margin that has to be paid to the Tata Group," one analyst explained.

Furthermore, analysts question the long-term sustainability of such an approach. They raise concerns about whether companies like Tata, after fulfilling the current order of C-295s, will be able to independently develop and produce medium transport aircraft without foreign collaboration.

This reflects a broader concern about the capability of private sector companies to transition from assembling foreign designs to developing entirely new and technologically advanced platforms that meet the stringent requirements of the Indian Armed Forces.

The true test will be how the private sector responds to these challenges. The success of initiatives like the C-295 program could provide valuable lessons for future projects, but much will depend on whether the sector can scale, innovate, and maintain the quality and cost-effectiveness demanded by the IAF.

 

[Andy13]

Using it's muscle, US sold jets all over the world. Thats what makes pvt set up possible. Not practical for India.

 

[rcbharatmahan]

No where within the major defense aircraft manufacturer's a govt entity is involved - there are all private players who produce them. So this discussion is leftist theory. Our best example should be ISRO - we were denied ToT for Cryogenic Engines and lo we got the knack of making it domestically. So why can't our engineer's not produce defense aircrafts. Once the aircrafts are designed and prototyped, tested and ready for production the Gov't should step in to control and sell export variants to friendly countries thereby recovering cost of R&D production. In fact our incompetent HAL did the opposite they failed to for see the engine issue and went to Malaysia and other countries to market Tejas. It's time to dismantle HAL and make it accountable.

 

[R. Singh]

TATA could become our Lockheed Martin starting with making F-36 and its Indian version as Medium weight fighter (MWF) ,then F-35 and NGAD !

 

[Foxbat]

In my opinion I am uncritical to the points raised in this article. The crucial point of concern is sustainability. Will the private sectors has the human resources, gained adequate knowledge and technical know how to independently develop and produce future complex undertakings. If the private sectors has the necessary advanced technical skills to face challenges as an independent player it would be a great to have private sector involvement.

 

[KVS]

I believe that we must bear the cost of premium price of private players' involvement in Defence sector until they stand themselves in a reasonable time to compete with the international players. As the public sectors are mired with bureaucracy and responsibility issues in addition to the paltry financial incentives extended to scientists & Engineers, the professionally managed private players like Tatas, Kalyanis, Mahindras free from such issues can definitely raise up to the challenges fast while assured of good profits. After all when we are ready to pay heavily to the Americans and French, etc., helplessly why not we do that to our Indian Private companies?🙂

 

[Rajeev]

I strongly recommend that only private players can be the winners in this arena. History is evident, any aircraft design project taken up by public sector companies like NAL is a shear waste of money from accountability perspective. Even many of the HALs are not performing the way they have the infrastructure, simply white elephants.

 

[sanket]

That's what I always highlight. Will private players be able to design and develop their own aircraft even after doing copy-paste work? All profit plus an additional premium would be paid for local assembly, but at last, what private players will contribute to the future of the aerospace industry with gained experience, infrastructure & profit is a big question mark.

With higher profit margins, they should be able to spend on R&D costs; no need to beg from the government, plus the infrastructure already exists for assembling aircraft. Initially, private players can run the business as long as they have government orders, then after tapping the export market & coming up with their own design, developing and launching new aircraft. At the moment, even Dassault doesn't have a production rate over 13.

 

[Prateek]

Yes, the private sector can make it. But measly orders of 40 units or 20 units don't give them enough incentive to set up an advanced manufacturing facility, and training workers to work in those factories takes a lot more money. The HAL factory looks like a 90s scooter factory compared to Lockheed Martin or Dassault's manufacturing facilities.

 

[abhinav srivastava]

Indian private sector, especially big companies, are largely very risk-averse. They won't spend their reserves on R&D. A consortium can be formed by including sector leaders in the tech space. L&T, BHEL, BEL, Bharat Forge, etc., can be invited to float a new company that can design and develop jet engines and make civilian aircraft. Highly incentivize them. Provide them with very cheap infrastructure for a 25-50 year lease. Don't levy any taxes on their purchase of machinery for 10-15 years, etc. It should not be a "come and screw drive in India" kind of company. Provide an option of exit to these companies with nil taxes at the end of 10 years or so.

Where there is a will, there's a way. Since our babus have the will to import, they have many ways.