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.

 

[Harsh]

Nothing wrong with Indian companies making profit for their entrepreneurship, skills and management as long as they are able to deliver on-time and budget.

 

[D'souza]

Start with something small, Just try and qualify an aero engine hot section engine blades with the thermal coating,that will show us where we stand.

 

[alpha numeric]

Can't blame him. Even the people clamoring for "let the private sector do it" don't know how building a new industry from scratch works. Absolutely clueless folks. India doesn't have German-style export-focused SMEs, nor does it have the state organizational brilliance of the Chinese or the corporate competence of the Koreans.

Investing in the four basic factors of production (land (location determined by industrial infrastructure, access to material inputs, distance from international borders), labor (skilled technical talent, which India sorely lacks and is inarguably the most crucial factor), capital (cheap credit made available preferably by state-supported banks), technology (this is hard to obtain and harder to master)) is the very first step. Then comes the long slog where you have to fuse them together to create an internationally competitive domestic industry.

As long as the corporation is market-oriented, it doesn't matter if it's private or government-owned. The only difference is the layoff policy.

 

[s.chakrabarti]

We must build and encourage the right ecosystem for manufacturing advanced fighter jet components in the country. There is no point in finding fault with PSU/government-controlled industries, which have performed commendably thus far in various sectors like nuclear power with PHWR and FBR, thermal power stations with state-of-the-art, most efficient supercritical temperature and pressure, hydropower and RE power, gigantic scale steel production, oil exploration and production of all cuts including ATF, fertilizer production, mining of important fossil fuels and minerals and their processing, shipbuilding, construction of roads, ports, highways, bridges, mammoth civil structures, and railway track and power grid construction crisscrossing the country, including the most difficult terrains at high altitude, sub-zero temperature, or at high sea, and production of all industrial intermediates and chemicals on earth, including the most advanced biochemical and biotechnological products from research labs. These are still performing with spectacular output, which largely caters to the total needs of our countrymen, so much so that we didn't even feel the pinch of the oil supply crunch ever due to the Russia-Ukraine war in current times, which has caused tremendous distress to Europe and many countries in the northern hemisphere. Private sector companies in all the above sectors have complemented the efforts of nation-building, and today we have the right ecosystem.

Coming to the specific issue of manufacturing fighter jets in the country, we need to re-look at our policy of relying heavily on western countries for buying some sets of aircraft suiting our needs and assessment by policymakers based on threat perception from time to time in the past and still now, without realizing the strong need to create a manufacturing base and ecosystem within the country itself. It should have started long back, as this type of project has a long gestation period and needs the best brains in the country, including those Indians educated at the best western universities and working in reputed jet aircraft manufacturing companies/research labs/fluid dynamics labs abroad. We need to offer them very lucrative salaries and a conducive work culture here, without a speck of bureaucracy but with reasonable target achievement, which will surely turn out good aircraft and fighter jets of our own pretty soon.

HAL engineers and technologists will be the best available persons to act as change agents in the country to spearhead such advanced projects or programs in a team of motivated technologists. For this, if one needs to go for long-term collaborations with companies like Lockheed, Dassault, Raytheon, etc., the country should do it, in my opinion, however costly it may be and however high the cost of each fighter jet delivered to our Airforce. You cannot follow the principle of space exploration or nuclear fusion research or plasma research, etc., which are purely scientific, for a high-end advanced industrial product. That will be like discovering the wheel all over again, let alone when such an advanced India-manufactured jet will be a reality—hope we will be living then!

China has followed the above model, and today they are proudly crisscrossing the sky with 6th-generation JK 35/JK 36. It is food for thought!

 

[Bhupesh Desai]

Development is still done by DRDO and GTRE, ADA etc. But final assembly and integration is done by private player. Thus only the assembly cost and spare parts cost is from Private sector rest is public sector. This is the price approved by ADA, SEDO, and GTRE.

 

[sishir]

Have anyone made any calculations to what we pay for assembled fighter jets to HAL? One engine the main component have not been done for last few decades. Let us do via private companies. They are Indian companies even if they are higher in price then HAL they must be cheaper then foreign vendor. Look at our automobile industry. Over years they are trying to catch up. Government should only be a facilator not producer.