HAL HAWK TRAINER: The Hawk is a tandem-seat aircraft for ground attack, flying training and weapon training, powered by an Adour Mk 871 turbofan engine

by Ashish Shukla

The Hindustan Aeronautical Limited (HAL) is facing a severe cash crunch to such an extent that the company had to take Rs.1000 crore loan for its 30,000 strong work forces. The option of bailing out manpower of this scale is not a viable option as these are employees of the central government. The recent attempts to raise the capital for the country's sole military plane maker has failed multiple times.

The Modi led government had decided to divest 10 per cent of its holding in HAL in March last year hence reserving 6,68,772 shares for employees of the Bangalore-headquartered company. But even the company's own employees did not subscribe to its share (only one-fifth of the share on offer was subscribed by the employees).

Moreover, the government's bid to raise Rs 4,200 crore via share sale did not attract retail investors either. Eventually, the Life Insurance Corporation of India (LIC) rescued the defence PSU, buying 70% of the shares on offer for about Rs 2,800 crore.

The problem did not end here as the central government took Rs 11,000 crore through buybacks and dividends from it in the last four years. The situation reached such a level that HAL had to take Rs. 1000 crore to pay its employees. Apart from the financial mismanagement, the lack of orders and the cancellation of current orders has hurt HAL most.

The Modi-led government had planned to encourage the local manufacturing under its ambitious 'Make in India' campaign. But doing just opposite, it suspended two crucial projects of HAL -- the co-development of the fifth generation fighter (FGFA) with Russia and the licensed production of medium multi-role combat aircraft which in this case was a contract to make 108 Rafale jets.

Even after a decade, the FGFA failed to take off and with costs escalating, the government pulled out of the project. Furthermore, HAL was chosen as the offset partner for the Rafale jet deal but it lost a whopping Rs. 30,000 crore once the Anil Ambani-owned Reliance Defence and Aerospace was chosen to lead the execution of offsets.

The only hope remains with Tejas, the homemade light combat aircraft but the project cost, which is yet to be finalised with the Indian Air Force, is expected to take at least a year. The experts are of the opinion that the HAL has never actually taken off when it comes to developing business outside the traditional deal involving the government. The future looks bleak for one of the county's leading PSU.