As Sukhoi-30MKI production nears end, HAL worries about future orders - Broadsword by Ajai Shukla - Strategy. Economics. Defence.

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Sunday 20 August 2017

As Sukhoi-30MKI production nears end, HAL worries about future orders

The Sukhoi-30MKI line at Nashik, which will complete delivery of its last 35 fighters by early 2020

By Ajai Shukla
HAL Bengaluru
Business Standard, 21st Aug 17

Hindustan Aeronautics Ltd’s (HAL’s) most lucrative cash cow, the Sukhoi-30MKI, is running dry. With only 35 Su-30MKI fighters left to deliver to the Indian Air Force (IAF) out of the 222 that HAL has been contracted to build, its Nashik production line, which builds 12 Su-30MKIs per year, would fall idle by March 31, 2020.

In better days, HAL has enjoyed order book backlogs of Rs 150,000 – 200,000 crore ($23.4 – 31.2 billion), with assured orders for Jaguar fighters, Hawk advanced jet trainers, Dhruv advanced light helicopters (ALHs), Tejas light combat aircraft and, most profitably, the Su-30MKI. Today, the company stares at a bleaker order book.

“I have just Rs 61,000 crore ($9.5 billion) of orders, including 35 Su-30MKIs and 73 Dhruv ALHs. That is just three years work, at our current turnover of Rs 20,000 crore ($3.1 billion per year). What lies ahead for HAL’s 20 manufacturing divisions built on 12,000 acres of land, and 30,000 skilled employees? Over the years, the government has invested Rs 50,000 crore ($7.8 billion) in HAL”, says T Suvarna Raju, the company’s chairman and managing director.

This uncertainty is an operational concern for a company that needs to plan its production years in advance, including placing orders for “long lead items” on ancillary suppliers.

While there are prospects in the defence ministry pipeline, few concrete orders are at hand. HAL once expected that the Nashik manufacturing division could, after delivering the last Su-30MKI, be used for building the Indo-Russian Fifth Generation Fighter Aircraft (FGFA). But New Delhi is dragging its feet in concluding a contract with Moscow, even after an okay from a defence ministry expert committee. The FGFA’s future and timelines are uncertain.

To keep the Nashik facility occupied, HAL hopes to overhaul the entire Su-30MKI fleet there. The fighter must be overhauled after completing 1,500 flying hours or 14 years in service, whichever comes first. The IAF calculates that its fleet of 272 Su-30MKIs would, at its peak, require 30 fighters to be overhauled each year.

It was planned that HAL Nashik would overhaul 20 fighters per year, while the IAF’s 11 Base Repair Depot, also located at Nashik, would overhaul the other ten.

“Now we are thinking differently. Rather than have HAL Nashik lying idle – with its 7,000 employees and 4,000 acres of real estate -- we should enhance our capacity and overhaul all 30 Sukhois ourselves”, says Raju.

Overhauling a fighter involves stripping it to its bare bones, checking each system and sub-system, replacing worn-out components, and then reassembling the rejuvenated fighter.

Over each fighter’s total service life of 6,000 flying hours or 30-40 years, it would be overhauled thrice – adding up to 816 overhauls for the 272-strong Su-30MKI fleet. Doing this in India is significantly cheaper than flying each fighter to Russia.

Meanwhile, in Bengaluru, HAL is ramping up the production line for building the Tejas Mark-1 fighter, but has orders in hand for only 20 aircraft. The defence ministry has cleared the purchase of another 83 Tejas Mark 1A, but an actual contract would most likely be years away.

Consequently, HAL is staking a claim to manufacture a “single-engine fighter”, for which the IAF has sent out “requests for information” (RFIs) to global vendors. It is proposed that the selected fighter be built in India by a private Indian firm that the defence ministry nominates as a “strategic partner” for fighter aircraft. Lockheed Martin’s F-16 Block 70 and Saab’s Gripen E are considered frontrunners in this contest.

HAL’s Raju says: “It is hard to understand the logic of giving the ‘single engine fighter’ contract to a private sector ‘strategic partner’, when so much of HAL’s capacity will soon be lying idle.”

Raju points out that the new policy on Strategic Partners (SP) requires the defence ministry to satisfy itself that the capacities of defence public sector undertakings are being adequately utilised before allocating production to a private sector strategic partner.

Both Lockheed Martin and Saab have tied up with private Indian firms to build their fighters in India, if it is chosen by the IAF. In June, Lockheed Martin and Tata Advanced Systems Ltd (TASL) announced a partnership to build the F-16 in India; while Saab has an unannounced agreement with the Adani Group to build the Gripen E. Yet, sources confirm that both foreign vendors would much rather work with HAL, which has decades of experience in building combat aircraft.

In contrast the Adani Group has no experience in building even an aerospace grade component. TASL has recent experience in building aerospace assemblies under licence, but has never assembled an aircraft or designed a significant component or assembly. 

25 comments:

  1. No Doubt anyone would prefer HAL. They know if HAL is chosen, India will remain a beggar forever and they will have more and more business going forward, while the HAL people learn how to fix nut bolts and screws.

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    Replies
    1. WTF ur talking Mr. Anonymous. Who r u comment on HAL and it's overhaul and Manufacturing Capabilities. Bloody come and sit in my place and get a our base order negotiated with bloody cumbersome rules in place. I bet u would be even to move a stone in PSU becoz of these. Stupid. Ppl like u first try to get a Govt job and then end up finally in a stupid private company when u can't clear written tests. And finally u comment on the same company that it's not doing its job.

      Delete
    2. Good brother.
      HAL should be privatized, then those workers and management inside will learn how to work in time.
      Time matters more.
      Time matters more.
      Time matters more.

      Delete
  2. Following is the aviation production profile of HAL even after 2020 - continuing or expected soon:

    1. Tejas MK-1
    2. ALH Dhruv
    3. WSI Rudra
    4. Mirage Upgrade
    5. Jaguar upgrade
    6. Sukhoi Upgrade
    7. HTT-40 (coming soon)
    8. Light Utility Helicopter (LUH)
    9. Kamov 226 (expected)
    10. Light Combat Helicopter (expected or LSP)

    And still Mr Raju says that his facilities will remain without work ??? Unbelievable !!! Till recently, he was saying that he doesn't have enough staff or facilities to increase production of helos or fighters but now, his tune has changed???

    There is a better way if Mr Raju has courage to follow!

    HAL can lease out its facilities to the single engine fighter maker in the private sector. That way, skilled personnel and facilities can be usefully employed and HAL can earn handsome profit.

    Meanwhile, HAL can handover the LCA-Tejas project to Prashant Bhadoria after he is done with HTT-40 and let him take it to MK-2 or MK-3 or more. It won't hurt if a portion of HAL is VRSed and the dead-weight is reduced.

    By leasing to private sector and handing over to Bhadoria, a stable production rate of Tejas will be on the way while a new private sector would rise as a competitive production center.

    More the merrier for Govt of India.

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  3. Indian govts systematically kill PSUs, so that they can deal with private companies. Private companies mean more bribes. See how BHEL was killed.

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    Replies
    1. After indipendence, private banksector are nationalised. Now it is the era of privetisation.
      HAL is 75 year old company supporting IAF to fly Migs, jaguar, Miraj which are out of production decades ago.
      It will be a great loss to nation and IAF if the loose support from HAL.

      Delete
  4. “It is hard to understand the logic of giving the ‘single engine fighter’ contract to a private sector ‘strategic partner’, when so much of HAL’s capacity will soon be lying idle.”
    The logic of course is unfathomable to Mr Raju as to why anyone would want to kill a dinosaur like HAL.
    sources confirm that both foreign vendors would much rather work with HAL, which has decades of experience in building combat aircraft.
    yea...like Dassault loved HAL so much.

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  5. HAL should have got involved in production of LCA much earlier. ADA has no experience in production. They messed up by playing coy. They could not succeed in IJT. The HTT-40 is flying 10 years late.
    LUH is 5 years late. LCH is also late.
    The HAL management wants IAF and GoI to,take all decisions & risks while pocketing the profit.
    Let them complete all the above projects by sinking own money . Then reap the rewards.
    Meanwhile they can start giving performance based gaurantees to their prime customer IAF to get steady revenue.

    ReplyDelete
    Replies
    1. Please read history of development of eurofighter and other foreign aircrafts, before commenting on anything . Eurofighter conceptualised in early 70, completed in early 2000. With a budget of approx 15.8 billion euros and 3 nations behind it's development. HAL is one of the most efficient PSU under govt control. Please remove govt control and then talk...

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  6. With delay in finalizing the deal for FGFA PAK FA, the IAF must induct additional Su-30MKI's in super Sukhoi configuration. IAF must quickly finalize the configuration of super sukhoi & sign a deal with Russia for buying additional jets with complete transfer of technology. The IAF must induct at least 400 Super Sukhoi's by 2025. 200 Super Sukhoi's must be imported from Russia for quick induction. The balance 200 must be assembled by HAL. 600 Su-30's must be deployed on the mainland & 60 jets on A&N islands. IAF must buy additional jets for SFC & training command as required. HAL must increase the assembly capacity to at least 40 Sukhoi's per year. By inducting 400 Super Sukhoi's, the falling squadron levels in the IAF will be plugged. Once FGFA PAK FA is developed, the Nasik plant must start assembling the 5 gen fighter. HAL must also ramp-up the existing Su-30's to Super Sukhoi configuration by 2025. Further, HAL & Sukhoi must aim to start assembling the 5th gen fighter from 2026. Similarly, DRDO must develop the AMCA by 2025 & HAL must start assembling AMCA from 2026. If required, India must tie-up with France & Germany to develop the AMCA. IAF must also go for additional Rafale's with complete transfer of technology in the interim to counter China's J20 & J31. India must induct at least 20 squadrons of Rafale. HAL must increase the assembly capacity of Tejas from the current 16 to 240 by 2025. HAL & an Indian private sector company must be asked to build 4 additional assembly lines of 48 Tejas per year. The existing assembly line must also be increased to 48. Once Tejas mk2 is developed, it must be inducted in large numbers. The IAF must aim to have 600, 1200 & 2400 fighters in heavy, medium & light category respectively by 2040. Such overwhelming force is necessary to counter growing threat from China & Pakistan. Fighters in such large numbers can be inducted if IAF's budget is increased to 1% of GDP.

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    Replies
    1. I am sri lankan and recently i sow in youtube hal doing great job hal thejes should interduce to sri lankan air force too proud of you guys

      Delete
  7. off topic

    Large section Indian media has put the dismal performance of IA's T-90s at Tank Biathlon 2017 in a cold box, as well as has ignored CAG report which has brought to light discrimination Arjun has faced during T-90 vs Arjun trials-- something you have been very vocal about.

    Being a reader and a follower I am hoping you to put a fight like you did for HTT-40 or at least post comprehensive article(s) presenting the picture of the sitution with respect to two new developments.

    Thank You.

    ReplyDelete
  8. HAL should be closed and entire defence aerospace sector should be given to private firms.

    ReplyDelete
  9. Will HAL.aggressivly bid for Indian Navy NUH with a helicopter based on Dhruv ? This should give them additional business .

    ReplyDelete
  10. So much for HAL crying and you sympathising and not grilling them!!
    HAL does not deserve any new projects - it is like a child failing in all subjects and asking for another subject!!!
    every single project is a disaster in terms of delays
    - the 20th IOC LCA will come out in 2019-20 - 7 years to make 20 planes!! LM is offering 36 a year!
    - ALH is being built for 15 years and yet they make at most 24 a year
    - Su-30 is being made for around 15+ years and they make 12 a year!
    - LCH is not yet in IOC even though flights started in 2010
    - IJT - no comments
    - Mirage upgrade - god only knows
    - Mig-29 upgrade - same as above
    - Darin III - delays of course
    and whom can you blame? the excellent proj management capability of HAL?
    it is because of the stingy mindset that I will not invest and you give me orders.
    how much have they invested in manufacturing? Would love to know how much they spent in scaling up in the last 15 years or so.
    clearly they will not get single engine proj, no way with Modi in charge
    by the logic of new player, do you mean that no one should ever build planes except HAL?
    till the time they are satisfied with the order books, no one should come near them?
    they also plan to make UAV's and space products, what is the need?
    you should have asked all these but alas you fell in their trap.

    ReplyDelete
    Replies
    1. Effect of reservations in government sector.

      Delete
  11. dear friend nice to read u, it,s not easy to run when your legs are tied, being public sector HAL is bound to follow industrial and govt rules formed in 1950's . There being no freedom to work independently u are supposing public sectors to run with MNC' s.Even to buy a pencil u have to follow a file process governed by Babu's sitting in ministery, Being in shop floor we work 12 _ 14 hrs*7 days, During deal these so called babu,s r available everywhere but during implementation stage u will not find any of them around, There is different set of people who go foreign TD and those who die n get blame, I m not telling that HAL should not be blamed but better to scrutinize and audit the things and go for 360 degree change than to waste entire set up worth billion of dollars and castle build by great visinories,

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    Replies
    1. Agreed, HAL should be free and should be without reservations in jobs.

      Delete
  12. When HAL itself is struggling to outsource its manufacturing activities and focus on its core competency it's foolishness to underutilize the capacity of HAL which will hamper the development of an already existing vendor base and aerospace manufacturing ecosystem .As rightly told Babu's who don't know about manufacturing take decisions and the public questions the skilled workforce who work 24/7 in the shop floor when no one questions what work they are doing in their own government offices and the great Indian parliament.

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  13. When HAL itself is struggling to outsource its manufacturing activities and focus on its core competency idling its capacity Wil hamper the already existing vendor base and aerospace manufacturing ecosystem in the country.As rightly said idiots and Babu's who doesn't know about manufacturing take decisions and the public questions the skilled workforce in hal when no one asks a single question what work these Babu's are doing in their government offices and the great Indian parliament.

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  14. HAL even of being in circumstances of fewer contracts is trying out with outsourcing. Then what are they doing with the permanent employees? The rafale deal was to be given to HAL as per the previous government, now why the modi government is giving rafale contract to a private owned conpany which never had an experience with the aviation and aeronautical research and manufacturing even keeping overhauling as a farr off thing. Projects should have been with HAL even as per Dasault. They had already mentioned that the main authority for rafale's production in India should be HAL. Still politics is great to handover the rafale contract to reliance at a much higher price that HAL was about to be assigned with. Great Modi Sarkar!

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  15. There is vested interest in denigrating HAL. You know how much time Dassault take to develop Rafale fighter. 40 years at a cost of over Euro 45 Billion. USA's Lockheed Martin took 28 years to produce Raptor 22 at an exorbitant cost after numerous design failures. HAL is far better than Chinese aircraft manufacturers. Modi wants to ruin HAL and boost private sectors for crony capitalism.




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  16. Besides , I feel the HAL has to remain solvent. Govt of india must release the balance budgetary support of Rs 6000 crores which they are supposed to release to HAL during this financial year. IAF owes currently Rs 15700 crores for the services rendered which IAF must release so that HAL is not compelled to borrow from the market to survive. it is surprising that IAF has already paid nearly Rs34000 crores to Dassault Aviation though the delivery of Rafale Fighter jet would start later this year.

    ReplyDelete

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