If most of the global aerospace majors are in private hands, why is it not so in India? But despite the indigenisation mantra the MoD has been chanting for some time now, the systemic reforms to facilitate entry of the private sector into defence production continue to remain a distant dream.

The Ministry of Defence (MoD) has issued a tender worth over Rs. 12,000 crore to replace the ageing fleet of 56 HS-748 Avro aircraft in service with the Indian Air Force (IAF). The tender has been issued to eight foreign vendors including some of the global aerospace majors such as Lockheed Martin, Saab, Rosoboronexport, Airbus Military, Alenia and Embraer. The selected foreign vendor will provide 16 aircraft in a fly-away condition and assemble 40 in collaboration with a private company in India. Indian companies such as Tatas, Mahindra Defence Systems, Reliance Industries and Larsen & Toubro are expected to partner with the foreign vendor for the programme.

The fleet of Avro twin-turboprop transport aircraft was procured from the UK for the IAF in the 1960s and was also built under licence by the Hindustan Aeronautics Limited (HAL) for the IAF and the then domestic carrier Indian Airlines. Although not originally designed as a military transport aircraft, the IAF adapted the platform for transportation as well as aerial delivery of cargo and personnel through modification of side doors. The aircraft was also used extensively for VIP travel.

The Avro fleet that has rendered yeomen service in the IAF for over five decades has been overtaken by obsolescence and ought to have been replaced at least a decade ago. But the delay in its replacement is understandable as the IAF has been somewhat preoccupied with other priorities such as revamping its strategic and tactical airlift capability as also its capability for Special Operations. The IAF has also expended considerable energy trying to induct combat aircraft and light utility helicopters, both badly needed by the service. Unfortunately, efforts in this regard are yet to fructify.

Normally, HAL would be assigned the task to produce aircraft required by the IAF. However, in this case, Air Chief Marshal N.A.K. Browne, Chief of the Air Staff, has been of the firm view that the project be given to the Indian aerospace industry in the private sector. He rightly believes that it is about time that efforts are made to provide the private sector the opportunity to enter defence production in collaboration with foreign partners to enable it to grow and compete with the public sector. If most of the global aerospace majors are in private hands, why is it not so in India?

The other reason why the IAF is in favour of the private sector is to mitigate the crippling dependency on HAL. The Indian aerospace major is already burdened with projects related to a variety of platforms that are in different stages of design, development and production such as the Su-30MKI, the advanced jet trainer (AJT) Hawk, light combat aircraft (LCA) Tejas, intermediate jet trainer (IJT), basic trainer HTT 40, advanced light helicopter (ALH) Dhruv, its weaponised version Rudra, LCA, LUH, fifth-generation fighter aircraft (FGFA) and multi-role transport aircraft. HAL is clearly overloaded with programmes some of which have been suffering cost and time overruns apart from quality issues. It may not, therefore, be appropriate to assign it another project especially when alternatives are available.

As per the tender, the foreign vendors participating will have to respond with their “techno-commercial proposals” within five months. Criteria for the selection of an Indian partner by the foreign vendor winning the contract has been spelt out in the request for proposal (RFP). Of the total of 56 aircraft required, the first 16 would be procured off-the-shelf. Of the remaining 40 to be produced in India at the facilities created by the Indian partner, the indigenous content of the first 16 aircraft will be 30 per cent, increasing to 60 per cent in the remaining 24 planes.

But the project may have imponderables to contend with. Creation of an aircraft assembling facility is a complex affair and requires colossal investments. For such a venture to be viable as a business model, there must be an assured market for around 200 platforms at the very least. A demand for just 40 aircraft is much too small to generate any level of inspiration in the private sector. Private entrepreneurs aim for low investment, quick returns and sustained demand. Besides, despite the indigenisation mantra the MoD has been chanting for some time now, the systemic reforms to facilitate entry of the private sector into defence production continue to remain a distant dream.

Unless these issues are addressed quickly and effectively by the government, it may be difficult for a foreign vendor to find a willing partner in the private sector in India to take on the project for the replacement of the Avro fleet.