One of the important policy reforms announcements done by the government in defence manufacturing in India last week was allowing foreign original equipment manufacturers (OEMs) to invest up to 74 per cent Foreign Direct Investment (FDI) in defence ventures in India. In the medium to long run, this could be a welcome measure but in the meantime, the proposals pending with the Defence Acquisition Council (DAC) will have to be quickly cleared since there are critical gaps that Indian armed forces are faced with.
One ready example is the long drawn out saga of procuring utility helicopters for the Indian Navy. First proposed in 2008, the case for replacement of the Chetak helicopters was projected under ‘Buy global’ category of procurement. For six years, nothing happened. In 2014, the DAC directed the Indian Navy to withdraw the case and initiate a new proposal under ‘Buy and Make (Indian). The next year, in 2015, the DAC again directed Navy to combine the requirement with the overall ‘Consolidated Helicopter Acquisition Strategy.’ Later, the DAC decided to progress the case under the strategic partnership (SP) model. The acceptance of necessity (AON)— the first step in the long road towards procuring a platform–was accorded in August 2018, three years after it was decided to go the Strategic Partnership (SP) model way!
So what is the SP model?
In July 2015, the Dhirendra Singh Committee on Make in India mooted the idea of SP Model for creating capacity in the Private Sector as an alternate to DPSUs/ PSUs in strategic sectors of defence manufacturing. Later, Dr Atre Task Force recommended the Model to be followed which did away with the bidding system. However, this was retained and Chapter 7 on SP Model was included in the DPP.
The then Minister of State for Defence, Dr Subhash Bhamre in a reply to Rajya Sabha stated, “SP Model would provide a Transparent, Objective and Functional mechanism to encourage broader participation of Private Sector in addition to DPSUs/OFB’. ‘It will provide greater self-reliance in meeting national security objectives’. This is also included in the Preamble of Chapter 7. It reads, in parts:
- Definition of SP Model vide Para 3 – “Such a partnership between the MoD and the Indian private Entity will be known as Strategic Partnership”.
- “Overall aim will be to build indigenous capability in the Private Sector to design, develop and manufacture complex weapon systems”.
- “….private companies have pointed to the lack of a level playing field as compared to DPSUs/OFs”.
- “As with liberalization of economy in 1990s, involvement of Private Sector in defence manufacturing will have a transformational impact”.
While Para 9 of Chapter 7 states that “MoD may consider the role of DPSUs/OFBs at the appropriate stage(s) keeping in view the order book position, capacity and price competitiveness,” Para 18 of amplifying instructions issued to Chapter 7 at a later date clarify “At the accord of AoN, DAC shall consider the participation of DPSUs/PSUs in the specific proposal keeping in view the order book position, capacity and price competitiveness”.
So in keeping with the above, the DAC before giving approval to AON for the Naval Utility Helicopters had indeed discussed the participation of Hindustan Aeronautics Ltd (HAL), a DPSU.
That time, according to all available figures, the HAL’s order book was overflowing even when it did not have the commensurate capacity.
Order Book Position vs Capacity of HAL in 2018
Total orders = 353 helicopters and 83 LCAs
- Ka 226T : 200
- LUH :15 (10 IAF+ 05 IA)
- ALH : 77 (16 IN+16 CG+45 IA)
- ALH(WSI): 18 (IA)
- Chetak/ Cheetah – 43 (25 IA+08 IN+10 IAF)
The Navy had pointed out over the years that despite knowing its requirements, HAL had not been able to provide it with a shipborne helicopter since 2003 when the first Advanced Light Helicopter (ALH) was delivered to the Navy. And yet, HAL, using various means has managed to insert itself as a competitor for the NUH which has now become a critical necessity for the Navy, further delaying the project, defence sources point out. Apart from a poor track record in meeting deadlines, HAL does not meet cost competitiveness in the NUH proposal either. According to one calculation, the cost of an advanced fully equipped helicopters in ALH class is between13 to 18 Million US dollars whereas the cost of the ALH is estimated to be around 16 million US dollars. Moreover, the ALH is not yet a fully proven seaworthy platform.
Sources point out that the Indian Navy has lost five Chetak helicopters in the last 7 years. The number of Chetak helicopters available with the navy will reduce considerably by 2023 to 2025 and the navy will be faced with a major capability gap. Inclusion of HAL will result in setting back the procedure by at least another two years. The capability gap, therefore, will be a critical vulnerability of ships at sea. For this reason alone, HAL should be kept out of the competition in this particular proposal, those who have been watching the never-ending saga of NUH procurement point out.
Naval aviators have also listed out several other reasons why the ALH—proposed by HAL for the NUH competition—is not suitable. For one, the ALH does not meet the Qualitative Requirements of the Indian Navy. The helicopters being operated by the Navy presently and the 16 new ALH Mk III on order are to be operated only from the shore as they are not capable of being operated from ships.
Secondly, HAL has been indicating that it is working on the blade folding capability on ALH (a must for parking and storage on ships). However, the segmented blade folding as a concept has been rarely utilized across the world’s navy’s since it is not found to be practical. The Indian Navy is therefore in a fix. It fears that the inclusion of ALH MK III as a platform for NUH with HAL as a strategic partner will result in either or all of the following (a) Force the Indian Navy to accept a platform with reduced capabilities compromising its operational requirements.; (b) Necessitate modifications to NSQRs of NUH delaying the entire Project further and (c) Time overruns resulting in further delay in inducting this capability into the Navy.
None of the three scenarios is very palatable for a navy that is a premier security provider in the Indian Ocean and is facing increasing competition from the resurgent Chinese Navy.
Hopefully, Defence Minister Rajnath Singh and other members of the DAC will be sagacious enough not to force HAL’s entry into a critical project.
By: Nitin Gokhale
May 20, 2020 -
I don’t know why everyone is taking a grim view of the “make in India” concept. If naval ships and fighter planes can be manufactured, then why not the helicopter ? I am sorry, but this appears to me, as if the article has been dictated by a foreign manufacturer, who does not want to encourage indian manufacturing of industrial products.
May 20, 2020 -
Agree with the above comment
May 20, 2020 -
Right
May 21, 2020 -
This is propoganda article…..just see their ad banners showcasimg F21……..
May 21, 2020 -
Sir, being intimately involved in design and development of these aircraft, I would submit that the views expressed above (though a little aggressive against HAL due to the choice of words) , are factually correct .
The reason lies in the very remarkable differences in Naval helicopters vs the ones for army and IAF . space saving design, blade folding Require specific R and D and a navy specific design to be worked . This is simply not cost efficient for HAL due to the numbers navy needs typically . 16 ALH is the current demand .
HAL offers a modified ALH with Naval additions as an afterthought . This is neither efficient nor cost effective for the Navy . Therefore , the navy feels that its helicopters can better come from an existing naval helicopter manufacturer at a lower price as no R and D would be required . SP with indian private players is also an option . But giving monopoly to HAL is not the answer . Let HAL have some competition
Technically Its possible to design a helicopter in India . The question is costs and the time required for Navy specific R and D vis a vis the number required . Of course making in India is a very necessary end state . But this is the ground reality right now .
May 21, 2020 -
Very true
May 20, 2020 -
I absolutely agree with Prakash the article has a stench of external agencies.
May 20, 2020 -
Foreign defense agent
May 20, 2020 -
It is unfortunate that our bureaucrats have still not understood their duty. If the country suffers due to inadequate equipment blame will fall only on the politician.
No reform will work as long as we keep the bureaucrat in service.
May 20, 2020 -
Our bureaucracy must be impressed upon to understand their responsibility in matters of defence.
May 20, 2020 -
As a matter of fact.. When delayed delivery issue of HAL is concerned, HAL has changed , improvised and modified its concept of manufacturing and in turn working on 2nd line of manufacturing. When compared to 2018 to till date HAL is being appreciated by concerned authority for quality and on time delivery. Also in gaganshakthi live wire.
Hope HAL is well aware of competitiveness n well prepared in facing challenges with vast experience n young working force.
May 20, 2020 -
Nitin gokhale (ndtv) you are bound to make such noise if hal can make lca whats the big deal making copters if ever the have any technical issues they can always have technology partners or consultant…think they should use IITs for that
May 20, 2020 -
The idea of SP model has metamorphised over time as another essentially a Traditional Buy and Make schemè providing a backdoor entry to foreign OEMs where domestic capability amply exist
May 20, 2020 -
This article looks totally biased.When India has the capability to manufacture helicopters then why import and make other nations grow. HAL has ALH, LCH and LUH fully operational over years.. making small changes for naval varient is not a major task compared to manufacturing a new helicopter from scratch. It’s time to think about our nation as a whole.. Remember, the grass on the other side always looks greener!
May 20, 2020 -
What you are saying is true and much more. Those who haven’t been at the receiving end of the HAL stick have no idea of the guile and last-minute entry tactics of the PSUs who scuttle well-laid out plans and provide us with sub-standard or obsolete stuff.
Have you noticed Ashok Leyland trucks with the logo Jabalpur Ordinance Factory? What is the big idea of taking SKD kits from and Indian Company that manufatures trucks for direct sale in India and then selling them as OFB products. Similarly, the Tatra trucks are still “manufactured” from knocked down kits. WIll you believe that the “indigenised” truck still has a left hand drive? Isn’t it ridiculous?
The story of the sub-standard MiGs built by HAL has been immortalised into a Colourful movie of the Spring.
Our PSUs have gotten used to growing at the cost of the exchequer. Most of the items are imported, re-labelled, reassembled and sold off as “Indian”. Take the stickers off any radio or other component, and the original manufacurer can be seen.
Another of the very large DRDO establishments had started work on the INSAS rifle, supposed to be the best in the world. Many moons went by until the final product saw the light of day. Only to be rejected due to too many failures. Only the Army was saddled with this piece of ……. Do you notice that the armed guards at all major airports never carry an INSAS rifle?
There is an establishment called the GTRE, supposed to have produced a world class turbine engine called Kaveri to match the LCA. No prizes for guessing whether the LCA is flying with the Kaveri. Now they want funding to design the Kaveri II….. just like HAL is trying to design a segmented blade folding that has never been tried before.
The HAL and all the DPSUs are adept at making the hand fit the glove. They wanted the Navy to cut a hole in the hangar of the ship, because that was the only way the blade would fit into the hangar. The list is very long, and will need hours of work, but I do hope that better sense prevails and we do not get stuck with this product that does not work for the intended task. It’s not that India does not have the capabilities to produce stuff. Tata produces the entire cabin structure for the Sikorsky S92, HAL and other PSUs as well as private players are producing parts for the highly successful PSLV, so there is not lack of talent and capability. What is happening is that they that taking a short-cut into the contracts battlefield to gain an imagined victory that will ultimately lead to loss of valuable lives and possible loss of the battle in the field of war.
And the contents of this article cannot have been sponsored by anyone from other nations, because sadly, it is true.
May 20, 2020 -
When no decision made from 2008 to date. How we can expect producing in couple of years. Absence ofwholehearted support and results are in front of us. At least take decision and follow it. Prove it right.
May 21, 2020 -
All the ones who say this is a biased report, just tell me how many think that the govt services are better compared to private ones. How many have travelled in AIR India and liked it compared to indigo or jet airways.
You should know why HAL, a govt industrial organisation with industrial workers who don’t work at all is not competent enough to do a job. They started manufacturing the choppers in 2003 bidding the contract and still their production is yet to clear the flight trials and by now the advanced countries have moved ahead with next gen vehicles.
Some one pointed that we are capable of building ships and subs. True. But do they know their performance against foreign ships/subs? We have more foreign made ships than Indian made because of their efficiency. We should be happy that INDIAN NAVY is pushing for indigenization despite the govt sectors weak quality and untimely deliveries. The air craft carrier being manufactured in Kochi is being manufactured for decades. You can’t take chance with helicopters because it’s matter of life and death. In case of ships, if the hull is strong enough,you can still have a ride at least. It’s not the case with choppers. Before commenting about foul play, you should know entire process happening.
May 21, 2020 -
Wow, propaganda at its best…
May 21, 2020 -
We are obsessed with foreign item.If we will not try,we can never do any defence thing.
June 1, 2020 -
Commented upon by Gopal Sutar, Chief of Media Communications, Hindustan Aeronautics Limited (HAL)
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Article by Nitin Gokhale in Bharat Shakti dated 19 May 2020 titled “HAL entering Naval Utility Helicopters competition will erode Navy’s operational capability”
Certain factual inaccuracies, incorrect assumptions and unfounded allegations in the subject article are highlighted below and commented upon.
1. In para 1, it is stated that while the policy reform of up to 74% FDI in Defence manufacturing is a welcome step in the medium to long term, the proposals pending with the DAC (such as the NUH) have to be quickly cleared to fill the critical gaps. In fact, cases which are already initiated will proceed as per current policy framework including DPP-2016. So, the new policy of 74% FDI has no impact on cases like the NUH. Secondly, urgency with reference to any acquisition case is a matter which is inherently understood by the MoD and the Service HQs and decisions are taken accordingly after considering all aspects and consulting all stakeholders. It is not clear on behalf of which stakeholder the author is urging DAC to quickly clear the NUH proposal.
2. By comparing Order Book position and capacity of HAL as of 2018, a section of the article seems to be implying that it was wrong for the MoD to have discussed participation of HAL in the NUH case. However, the argument has some flaws.
a. The author does not deny the fact that considering HAL in the NUH case was in accordance with the DPP-2016 (Para 9 of Chapter 7). So, if the MoD decision is to be proved wrong in view of the DPP, the author has to show that (i) HAL did not have the capacity vis a vis its Order Book position in 2018 and/or (ii) that HAL’s offering would not have been competitive in terms of price. However, the facts presented in the article do not prove either of these.
b. To substantiate the enormity of the HAL Order Book in 2018, the author has cited the following products. The facts are indicated alongside each product.
i. 200 Ka 226T helicopters: This Indo-Russian project is still under discussions, let alone being approved by the government. Therefore, it could not have been counted as an Order with HAL in 2018.
ii. 15 LUH: A case for acquisition of the LUH has not even been initiated by the Service HQ. Yet, it has been counted in 2018. Even if what was meant was LCH, there is no Order even today.
iii. 77 ALH: The actual number is 73 (16 IN, 16 CG & 41 IA)
iv. 43 Chetak/Cheetah: The actual number is 38 (20 IA, 8 IN & 10 IAF)
v. 83 LCAs: The Order for 83 LCA Mk-1A is yet to be approved. Being fixed wing, this is not clashing with Helicopter load.
· Summing up, as against the 353 helicopters counted by the author, the actual numbers is 111 helicopters. As against 83 LCAs, the actual is nil. To give the benefit of doubt to the author regarding the exact variant of
LCA being counted, in 2018, approximately 28 from the old Orders for LCAs were outstanding.
· It can be seen that the author has based his argument that HAL had “overflowing” Order Book in 2018 on highly inflated numbers. Even if it is assumed that the Order Book was full, in the absence of accurate information with him about HAL’s production infrastructure spread across 19 Divisions, the author could not have proved that HAL did not have the capacity to fulfil the Orders. In any case, no attempt has been made in the article towards proving the same.
c. Regarding price competitiveness of the HAL’s NUH offering, the author states that, “According to one calculation, the cost of an advanced fully equipped helicopters in ALH class is between 13 to 18 Million US dollars whereas the cost of the ALH is estimated to be around 16 million US dollars”. This statement itself shows that the price of the ALH is well within the expected range for this class of helicopters.
3. The author states that “The Navy has pointed out over the years that despite knowing its requirements, HAL has not been able to provide it with a shipborne helicopter since 2003 when the first ALH was delivered to Navy”. It may be noted that “knowing requirements” is different from the IN formally issuing a NSQR clearly defining what it wants from the ALH in the NUH role. No such NSQR has been issued to HAL. Against the NSQR issued for NUH through the SP route, HAL can today confirm that its offering of ALH in the NUH role will be fully compliant with the NSQR.
4. Another assertion made is that “Inclusion of HAL will result in setting back the procedure by at least another two years”. Even if the NUH proposal is cleared by the DAC now, several stages will remain to be gone through before the first Indian-made NUH can be received by the IN.
a. RFP to be issued to the shortlisted Strategic Partners. (»3 months)
b. SPs to submit Bids in association with their OEM partners. (»3 months)
c. Technical Evaluation including FET (»3 months)
d. Commercial Evaluation (»3 months)
e. Contract Negotiations (»3 months)
f. Approval by the CCS & placement of Order/Signing of Contract (»3 months)
g. Technology transfer by the OEM to SP (»12 months)
h. Setting up of production infrastructure by the SP (»24 months with 12 months overlap with ToT)
i. Cycle time from metal cutting to delivery of first helicopter (»18 months)
· All of the above optimistic time frames add up to a total of 60 months.
· On the other hand, in case the Order is to be placed on HAL, 4.(g) and 4.(h) adding up to 24 months can be saved as the HAL production line is ready and waiting. In addition, the SP without any prior experience will take more time to get production tasks right whereas HAL has already travelled way down the Learning Curve by producing more than 287 ALH. Therefore, the author’s contention that inclusion of HAL will delay the project by two years is incorrect.
5. The author states, “Naval aviators have also listed out several other reasons why the ALH…is not suitable” and goes on to list two of these reasons. Both are addressed below.
a. ALH does not meet the Qualitative Requirements of the Navy: As stated earlier, IN has not issued any NSQR to HAL for NUH class of helicopters. The requirements specified by the IN for acquisition of the 16 ALH Mk-III variants include all requirements for various Naval Missions including shipborne operations. However, stowage requirements in that Order are different from what is now asked for NUH. Even then, HAL has demonstrated on several occasions to IN how the Rotor Blades of ALH can be folded to meet stowage requirements of a majority of IN ships. Just because the ALH after such folding cannot fit into a limited number of ship hangars, it shouldn’t be concluded that ALH is incapable of shipborne operations.
b. Segmented Blade folding: The author’s claim that segmented Blade folding is rarely used because it is not practical is a misconception. The LUH has segmented Blades and it has been demonstrated to the IN reps how the LUH Blades can be folded in a matter of 7.5 minutes with a crew of four.
June 7, 2020 -
· One of the main features of SP Model is to induct critical technologies in the strategic manufacturing sector. Consequently, a Committee comprising HAL, DRDO, CEMILAC and MoD representatives was constituted to identify technologies required in the helicopter manufacturing sector that could be included as part of the SP Model for Naval Utility Helicopter. A total of 65 required technologies were identified for transfer into the country by the Committee as part of helicopter manufacturing which indicates the state of technologies with HAL on ALH. Even after 17 years of manufacturing ALH, almost 65 percent by cost of ALH is imported. The Govt of India will have the ownership of the technologies once inducted.
· Comparison of ALH with other three helicopters indicates that the range, endurance, speed and serviceability of ALH is much inferior. Moreover, ALH has been designed as a land based helicopter and then offered to the Indian Navy. World over the design of ship borne helicopters is based on an ‘Articulated Rotor’ whereas the ALH has a ‘Rigid Rotor’. This is primarily to include a high degree of ‘Gust Tolerance Characteristics’ required by helicopters taking off and landing onboard ships which is the most critical phase of flight. All helicopters likely to be shortlisted for NUH have either a fully articulated rotor or a semi rigid rotor designed for operations from ships. Helicopters are to be designed to be operated with average pilots through the entire flight envelope. Presently, ALH has considerable limitations imposed on its All Up Weight, wind envelope for operation from ships and roll/ pitch. Infact, the operational envelope of the Chetak which is 1960s design is better that that of ALH from onboard ships. Can the Indian Navy be forced to induct a helicopter into service with such basic flying qualities lacking especially when the helicopter would be the mainstay of Indian Naval helicopter operations from ships.
· The cost of helicopters likely to be shortlisted for NUH varies from 10 to 16 MUSD whereas the cost of the ALH is around 16 MUSD. With the advantages of sole manufacturing line in the world and transfer of MRO facility to India as provided in the SP Model, the business studies by Indian Private Companies in the fray have indicated that the NUH would be cheaper than the ALH. In addition, intangible benefits like ToT, skilling of MSMEs, R & D hub, certification and testing facility as well as job creation which will accrue from the SP Model with a Private Industry partnership make the NUH far more cost effective. With two of the three OEMs already maintaining 700 to 800 helicopters the world over and the requirement of the sole MRO facility to be shifted to India, upgradation and life time maintenance would also be much cheaper. Provisions have been made in the REoIs issued to ensure these and would also translate into the RFP when issued by the MoD.
· There is a need to demystify and understand the objective of the SP Model which is being misrepresented by the DPSU lobby in the media. Whether it be HAL officials or some correspondents, the impression that is being created is that only through DPSUs and selection of ALH as NUH would the mantra of ‘Make in India’ be realised and that ‘foreigners will bleed us’ if we buy any helicopter through SP Model. SP Model was conceptualised as a master stroke of the present Government wherein alternate manufacturing capability in the strategic defence manufacturing sector would be inducted utilising the Private Industry over and above the capability of DPSUs. After 17 years of manufacturing ALH, almost 65% by cost of ALH is imported thereby losing valuable foreign exchange. This means that for each ALH that costs around 120 crores, approximately 75 crores is in Foreign Exchange to US, UK, Switzerland, Singapore and EU with only 55 crores remaining in India. With the stipulation of upto 45 percent Indigenous Content (by cost) through the entire Project and 60 percent on the last batch of helicopters under the SP Model for NUH, the FE component works out to approximately 52 % which is much lesser than that as compared to ALH manufactured by HAL.
· With sole license to manufacture and export helicopters with the SP, there would be considerable inflow of foreign exchange into the country thereby offsetting the initial outflow which would not be possible with ALH as it is does not have international certification. The only export to Ecuador were also returned back to HAL. The SP Model therefore is in true sense a catalyst for the economy at no cost to the Government. Even the CDS in an article had quoted the Maruti example which heralded a revolution in the car manufacturing industry in India. There is a need to take this bold step and provide an avenue to the Private industry to enter the strategic manufacturing realm of helicopters as competition to the DPSU. Atmanirbharta would therefore never happen if we depend only on DPSUs/ PSUs/ OFBs. If HAL is to be included in any form in the SP Model, the contract for the 111 helicopters might as well be awarded to HAL on nomination basis setting the nation back in its progressive economic policies by three decades.
· Navy has been processing the NUH procurement case since 2008 wherein a Global RFP was issued followed by Buy and Make in 2014. On both these occasions, HAL could have bid but as ALH did not meet naval requirements, there was no bid received from HAL. HAL has been stating that the Navy did not issue an RFI to HAL so it could not respond. It is learnt from sources that the Navy had tasked HAL to provide blade folding capability on ALH for which HAL demanded funds. HAL is a profit making company and could have used its funds to undertake R & D followed by modifications knowing very well that this was a critical requirement of the Navy. However, blade folding was never undertaken on the ALH but commenced on the LUH which is on order from the IA and the IAF. The 16 ALH that were contracted in 2017 are also limited for operations from ashore only and will meet Navy’s requirements of coastal reconnaissance.
· Navy has been the front runner in indigenisation amongst all three services. Since 2014, 66 percent of naval contracts have been signed with Indian entities of which only 3 percent are with Private Companies and the remaining with DPSUs/ PSUs. Navy is rightfully demanding a helicopter which not only meets its current requirements but will continue to meet the requirements of the future till 2050. Considering that ALH does not even meet the current requirements and neither does it accrue economic advantage, it would only make sense to give the SP Model a fair chance.
July 7, 2020 -
agree with u !