Tuesday, 22 July 2014

Midwifing new aircraft


An Avro-748 of the IAF's Communications Squadron

By Ajai Shukla
Business Standard, 22 July 14

With no discernable hand at the tiller, the defence ministry seems directionless and inept. The caretaker minister, Arun Jaitley, appears to have neither the time nor experience to chart a bold, new direction. Mr Jaitley’s first defence Budget is his predecessor’s last Budget, a token hike of 2 per cent failing to mask the resemblance. Worse, the new government’s first big acquisitions are marked by a familiar lack of planning and direction, suggesting that the old, blinkered officialdom calls the shots in South Block rather than a new, visionary leadership.

On Saturday, the Defence Acquisition Council (DAC), the apex decision-making body that the minister chairs, cleared acquisitions worth Rs 21,000 crore. This includes an Rs 11,897 crore project for 56 transport aircraft to replace the obsolescent Avro-748 (given the rupee’s fall since when the project was sanctioned, the eventual cost would be closer to Rs 14,000 crore). Former defence minister, AK Antony told parliament in 2012 that this aimed to “encourage development of the Indian private sector in aircraft manufacture”. His blunt-speaking Indian Air Force (IAF) chief then, NAK Browne, said the aim was to develop a competitor to Hindustan Aeronautics Ltd (HAL).

The international vendor that wins the Avro-replacement tender must choose an Indian private company to build 40 aircraft, while delivering the first 16 off-the-shelf, all within eight years. The favoured contenders are European multinational Airbus Defence & Space, Antonov of Ukraine and Alenia Aeromacchi, all of which have aircraft that meet India’s specifications. The Tatas, L&T or the Mahindras could be chosen as the “Indian Production Agency”.

Indigenisation is laudable, but this project has downsides that the defence ministry has ignored. Firstly, the IAF is wasting Rs 14,000 crore on replacing the Avro-748, which has been a bits-and-pieces aircraft without any real operational role. Secondly, the production agency would incur exorbitant costs for a new production line, airfield and ancillary infrastructure that cannot possibly be amortised over 40 mid-sized aircraft. Thirdly, the Avro-replacement programme duplicates two indigenous programmes already under way to develop transport aircraft.

Ask IAF officers why the Avro-748 was bought and you will hear an embarrassed clearing of throats. It is a “staff communications and light logistics” aircraft, which means ferrying around senior officers, not destroying the enemy. Today the IAF’s Avros mainly transport air marshals; six Avros in the Communications Squadron flew senior VIPs before plush executive jets arrived in recent years. Yet, the IAF wants the passenger-carrying Avro replaced by a transport aircraft with a rear-loading ramp. Senior IAF officers admit the purchase is hard to justify, except as a means of developing a private sector alternative to HAL.

That is acceptable but the cost is worrying. Besides the cost of technology, of developing aerospace suppliers and building an assembly line, the vendor would spend another Rs 1,000-1,500 crore on an airport near the assembly line. Then there is the cost of testing and certification to international standards, essential for aircraft that might be exported or operated in a civilian environment. The MoD counters that the production run could be much larger --- besides the initial air force order for 40 aircraft, commercial airlines will snap up the Avro-replacement for non-metro sectors.
Such optimism overlooks rival projects that target the same market. The National Aerospace Laboratory (NAL) --- which functions under the Council for Scientific and Industrial Research (CSIR) --- is collaborating with HAL to develop a 70-90 seat regional transport aircraft (RTA) by 2022. With some 450 airstrips in India, HAL-NAL expects to build 400 RTA. Eleven vendors have responded to a request for information, and HAL announced at the Farnborough Air Show last week that it would soon tender for an engine for the RTA.
Simultaneously, HAL is partnering Russia’s United Aircraft Corporation in a $600 million (Rs 3,600 crore) project to co-develop a Multirole Transport Aircraft (MTA). The Indo-Russian agreement visualises the building of 205 MTA, of which Russia will take 100, India will buy 45, and 60 are slated for the export market. The MTA may eventually replace the IAF’s ageing Antonov AN-32, which have been flying since the 1980s.
Instead of introducing a third project into the mix (albeit involving manufacture, not development), the MoD must integrate these three efforts, avoiding the duplication of effort and expense. The instrument already exists --- the National Aeronautics Coordination Group (NACG) that was set up last year to coordinate national aerospace development. Chaired by the secretary (defence production), this high power body includes the secretaries of civil aviation; and science and technology; the chief of the Defence R&D Organisation; chiefs of HAL and NAL; military representatives and the National Manufacturing Competitiveness Council.

If the aim of the Avro-replacement project is to develop an alternative to HAL, the MoD must midwife the process, not burden private sector entrants with huge infrastructure expenses. The tried and tested “government owned, company operated” (GOCO) model must be activated, with private-sector companies encouraged to establish integration facilities at IAF base repair depots, which already have airfields, such as those at Coimbatore and Kanpur. They could be granted access to airfield facilities on a long-term lease, or on a pay-per-use basis.

Last year, Vijay Kelkar chaired a CSIR committee at the instance of former prime minister Manmohan Singh, evolving excellent suggestions for creating an aerospace ecosystem in the context of the RTA. The report, which predictably remains classified, examines the issues holistically, as the defence ministry should do. It offers solutions for synergising the function of the Directorate General of Civil Aviation, creating an agency for aerospace certification and for sharing development risk, which is a major concern for private companies in aerospace design and production. The defence ministry must succeed in creating competition in aerospace design and manufacture. For that, the new defence minister must go deeper into issues rather than merely splashing around the cash. 

10 comments:

Anonymous said...

There is many a slip between DAC approval and realisation on ground. Fingers crossed.

Parthasarathi said...

Sir. Please do not support HAL. They are the worst PSU. and they will never deliver. Semi-privatization (selling 49 % of stock to some biggies like Dassult etc.) of HAL. can be an answer.
They (HAL.) can also form a private subsidiary (like HDFC.bank is formed by parent HDFC.) with some interested vendor (many names are already mentioned in your article) with an equity participation of 51 (HAL) and 49 (Foreign) % and bid for the tender. They have some infrastructure in place like aerodrome etc. So their cost should be the minimum. If there is a will there is a way. But HAL management lacks the vision and dynamism.

Bhanja said...

Super article that correctly identifies the weakness of a piecemeal approach to aircraft development.

Anonymous said...

Rightly said & totally agreed. Multiple design transport designs r totally unnecessary & will further complex maintenance. Thats the problem when private lobby is involved in defence acquistions which end up in misuse of funds. Whats the purpose of much touted HAL-UAC MTA. Instead the money could have been spent for naval sonars,torpedoes & mine counter measure vessels for navy or airbus MRTT for IAF which r long pending.

Anonymous said...

Beautiful!

joydeep ghosh said...

@Ajai sir

I agree with you that no pvt. co. will setup a greenfield project to make just 40 and maintain 56 planes. Its imp. to boost the no. of planes to make economic sense.

Which planes it could be i think the C130-J SH is best suited as India has already signed up for 11 of them.

I suggest the number of C130-J SH as replacement for Avro 748 should be 112 (56 IAF, 28 IA, 14 IN, 7 ICG, 7 NSG/ARC) that way it will be easy for a pvt co. to make these many planes as a sound business venture.

Also servicing over 120 C130-J SH will make this venture the largest service hub for such planes in eastern hemisphere allowing other C130-J SH operators to get them serviced here. this will allow the venture to run for longer time and make more money.

anyways these are my opinion

thanks

Joydeep Ghosh

Anonymous said...

NACG... HAL turf... sentinels...

Anonymous said...

Honestly, I haven't seen a more short sighted article from you. The factors which are mentioned in the article are non factors.

1. This contract is meant to start the privatization of the aerospace industry (to be read as building a competitor to HAL).

2. NAL, Russian collaboration don't seem to have produced anything for the long period of time they have been working.

3. Not sure the manufacturer will do a kit or go the whole hog, but looking at how the TATA's have done it, the idea for the indian "manufacturer" is to become part of the supply chain.

Anonymous said...

What about the similar requirements for the BSF, Coast Guard, and Navy? If all those are combined, total production run should run more than 40. Also it could be exported!

Anonymous said...

Modi government is all about noise and no substance. They cannot be blamed for it. UPA has emptied the coffers before they left. Not able to replace the batteries of submarines. And no money to pay for the MRCA. With crashes happening every other week by IAF situation is precarious.