The defence PSU, that once produced war-winning aircraft, is today mired in allegations of inefficiency, bankruptcy and corruption. Mirror does a deep-dive

by Hemanth CS

Hindustan Aeronautics Limited (HAL) is currently in the middle of a PR nightmare. After a Mirage 2000 trainer aircraft, upgraded by HAL, crashed on Friday killing both pilots, the defence PSU has come under tremendous fire from all sides for alleged inefficiency corruption. Even Chief of Air Staff, Air Chief Marshal B S Dhanoa, speaking on the matter of HAL’s apparent delays in delivering the Light Combat Aircraft (LCA) to the Indian Air Force, also slammed the public sector undertaking. “I, as the service chief can make concessions to Hindustan Aeronautics Limited (HAL). Will the enemy make concessions to me when I go and meet the enemy?” he said.

HAL was also recently dragged into the Rafale row when Congress president Rahul Gandhi accused the NDA government of snatching the aircraft deal from HAL and giving it to Anil Ambani’s Reliance Defence – a company that has no experience in making military aircraft or even defence equipment. To add to this, for the first time in the company’s history, it has recently borrowed money to pay employees. HAL chairman R Madhavan recently admitted that the PSU has been forced to take a loan of `1,000 crore to pay the salaries of some 30,000 staff. How did a company, that was once set up to make India self-sufficient in defence craft is concerned reach this point?

A walk through the HAL’s Hall of Fame Heritage Centre and Aerospace Museum in Bangalore, provides more than a glimpse of how India’s largest defence Public Sector Undertaking has evolved over the years. The photographs adorning the walls chronicle HAL’s growth through the decades: From its birth in 1940, when industrialist Walchand Hirachand and the erstwhile Maharaja of Mysore started the institution with a capital of `4 crore, to its almost eight decades of existence. There are photographs of foreign heads of state and an assortment of royals from around the world visiting HAL facilities in the 1940s and 50s. There are photographs of US Army aircraft, deployed during World War II, being overhauled at HAL airport. And then there are more recent images showing politicians and bureaucrats posing in the cockpit of HAL-assembled aircraft or choppers. But none of these images, of a glorious past, provide any indication of the current troubles HAL is in – of losing out on contracts; of having to downsize staff or not being able to rustle up the funds to pay salaries, and of being deeply mired in controversy. 

It (HAL) is a 75-year-old company which has been manufacturing aircraft since the 1950s. It has a lot of inherent strength and will bounce back strongly
–Ashok K Baweja, former HAL chairman and managing director

Laxman Kumar Behera, research fellow with the New Delhi based Institute for Defence Studies and Analysis (IDSA), says: “HAL is a PSU under the Ministry of Defence and has survived for this long largely because contracts were given to it on a platter by the ministry. But now, the scenario is changing, The number of contracts it used to bag – like the order for over 200 aircraft at a time – is no longer happening. There are no mega orders coming, and that’s one of the reasons for HAL’s current [poor] health. HAL is like any other PSU in India; the inefficiency that we see, is because of limited autonomy and the fact that they cannot take independent decisions and have to seek government approval to go ahead with any project.” A company must run on its own and be able to take its own decisions and have its own R&D, adds Behera. “But in case of HAL, everything is decided by the government and that is why one cannot fault the company. The current scenario is not entirely of HAL’s own making,” he adds. 

Indeed, HAL’s dip in revenues has been attributed to unpaid bills of about `14,000 crore from the Indian Air Force (IAF), its primary customer. And also because the government dropped the Medium Multi Role Combat Aircraft (MMRCA) deal to procure 126 fighter jets (18 were to be manufactured by the French company Dassault Aviation, and the remaining 108 were to be manufactured by HAL in its Bangalore and other facilities) and instead signed an intergovernmental agreement with France to procure 36 aircraft directly from Dassault. 

Aviation experts blame HAL for its current mess, saying the company was more than satisfied doing repair and overhaul work on foreign aircraft instead of manufacturing its own. They say that there has been very little focus on R&D over the last few decades, especially when it comes to fighter jets. HAL has done slightly better with helicopters, manufacturing the Advanced Light Helicopter (ALH) Dhruv and supplying it to all three wings of the armed forces as well as to the Coast Guard, besides exporting it to countries like Nepal and Ecuador. “HAL started as a private company, as did Embraer in Brazil,” says Air Marshal (Retd) BK Pandey, former Air Officer Commanding-in-Chief, Training Command. “Both were established around the same time, and then taken over by their respective governments to become PSUs. But while Embraer has produced over 2,800 airliners so far, including business jets (that have been supplied to the world over, even China) piston engine trainers and military trainers, how many aircraft has HAL made till now?” 

Whatever its current troubles, there is no denying that HAL’s glittering history. Among its fleet of offerings, two aircraft stand out: The Gnat, which played a significant role during the Indo-Pak wars of 1965 and 1971, and the HF-24 Marut, which was India’s first fighter jet. The Gnat, which was licenced and produced by HAL, was originally designed by UK-based Folland Aviation. Some 200 of them were manufactured for the Indian Air Force, and proved so formidable and stealthy during the Pakistan wars, that they were nicknamed ‘Sabre Slayer’ (after they shot down many a Pakistani Air Force Saber aircraft in dog fights). Rumour has it that Pakistani pilots were asked to refrain from engaging with the Gnat, if they could. Later HAL developed the Gnat into the Ajeet, which was also supplied to the IAF in large numbers until they were phased out in 1991.

Another hero of the Pakistan wars was the Marut, which was designed by German aeronautical engineer Kurt Tank, and had its maiden flight in 1961 after which it was handed over the IAF. Between HAL 1964 and 1977, HAL built 129 single-seaters and 18 trainers of the Marut, squadrons of which won several Vir Chakras during the two Pakistan wars. However, the aircraft was immersed in controversy when it was found that it had a major problem with its engines, and was finally decommissioned in the 1980s. “Historically, HAL has had a strong foundation in aircraft manufacturing and supplying these to the IAF,” says military historian Jagan Pillarisetti: “The HAL HJT-16 Kiran trainer is still being used to train Indian pilots, and has been in service for more than 40 years. A completely indigenous design, generations of IAF pilots have learnt fast jet flying with this aircraft. The Kiran, in my opinion, is an unsung success for HAL. The PSU has built a strong foundation with the licensed manufacturing of Gnats, Ajeets, MiG-21s, MiG-27s, Jaguars and Sukhoi-30s along with creating [effective] overhaul programmes for various aircraft. The transition from assembling aircraft from Completely Knocked Down (CKD) kits to building them a hundred per cent from raw material, is an achievement that HAL should be proud of. The contribution of HAL’s helicopter division, which gave us Chetaks, Cheetahs and Advanced Light Helicopters (ALHs), cannot be ignored. Though there were designs that failed to make a mark.” 

Reports about its poor financial health has left many HAL employees anxious. While some are worried about the future of the PSU, others are confident that orders would come from the government to keep it going. “When you are told by the management that the company has taken a loan to pay our salaries, it definitely affects our morale. We never thought a day would come when the future of HAL would be in question,” says an engineer in the aircraft division. “There is a perception that nothing happens in government-owned companies, but that is not true. Look at HAL’s record; we did not become a Navratna company overnight. Our predecessors have worked hard for it, and we will ensure that we keep up that legacy.” Another official from the helicopter division said that there is no dearth of work in his department. “As far as the helicopter division is concerned, there is a lot of work going on now and it will be the same in the future as well. There are several ongoing projects, and future ones like the Light Combat Helicopter (LCH) and the Light Utility Helicopter (LUH). There is a new manufacturing facility coming up at Tumkur. Many jobs would be generated there,” he adds.

Pavan Srinath, Fellow and Faculty member at the Takshashila Institution, a Bangalore based independent think-tank on public policy, says: “The image of HAL that we have had for a long time, is that of a PSU which has a domestic monopoly over defence products, like the assembling of the SU-30 aircraft, and it has done this successfully. But now HAL is facing competition which is a good thing. In the best interest of the nation there should be competition. For Instance, in the US they don’t have a PSU like HAL but two competing defence players like Boeing and Lockheed Martin. HAL still has a role to play in the 21 century, but there should be competition in the defence manufacturing sector.”

Former HAL chairman and managing director Ashok K Baweja too believes that HAL will recover from its current difficulties. “During my tenure, there were no working capital management issues and one never had to take a loan. I hope [the financial problems are] a passing phase that HAL will be able to get over. It is a 75-year-old company which has been manufacturing aircraft since the 1950s. It has a lot of inherent strength and will bounce back strongly.” The key to keep HAL afloat, is to maintain cordial ties with its primary customers, like the Indian armed forces, Baweja adds. “[HAL officials] should work closely and coordinate with their customer of over 70 years. HAL should produce [aircraft] in large numbers and ensure that the products are delivered on time. If they have to double the production of the LCA Tejas from eight to 16 aircraft they should do it.”