Monday, 21 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. 

Sunday, 20 August 2017

Border Roads granted boosted financial powers to improve border connectivity

Concern at tardy road building on northern border, while China races on

By Ajai Shukla
Business Standard, 21st Aug 17

With the Border Roads Organisation (BRO) far behind schedule in constructing 73 approved “Indo-China Border Roads” along the northern borders, the defence ministry on Sunday empowered BRO officials with enhanced financial powers.

The Chief Engineers, key officials who head BRO projects spread across the border states – with project names like Himank (Ladakh), Vartak (Arunachal Pradesh) and Beacon (Kashmir) – will now enjoy enhanced financial powers that are 5-10 times more than their earlier financial limits.

The defence ministry states this will “avoid delays on account of references between the Chief Engineer and HQ DGBR (Headquarters, Director General Border Roads) and also between HQ DGBR and the Ministry.”

BRO’s road building has lagged, while China has constructed a wide-spread network of roads that allow their troops to reach the border quickly on vehicles. In contrast, Indian foot patrols must march long distances to reach the same areas.

With only 27 roads completed of the 73 “strategic roads” approved for the Sino-Indian border, the defence minister assured Parliament on July 28 that the balance roads would be completed by December 2022.

The earlier financial powers permitted a Chief Engineer to approval “departmental works” up to Rs 10 crore, and the ADGBR (Assistant Director General Border Roads) up to Rs 20 crore. All “contractual works” had to be referred to the DGBR, who could sanction expenditure only up to Rs 50 crore.

Enhancing financial powers at all levels, the defence ministry “has now approved that for both departmental and contractual mode of execution, a Chief Engineer of BRO can accord administrative approval up to Rs 50 crore, ADGBR upto Rs 75 crore and DGBR up to Rs 100 crore.

For regular contracting, a Chief Engineer’s powers have been enhanced tenfold from Rs 10 crore to Rs 100 crore; the ADGBR’s powers fifteen-fold from Rs 20 crore to Rs 300 crore; and the DGBR’s powers for contracts above Rs 300 crore.

Decentralised financial powers for Border Roads

(all figures in Rupees)

Chief Engineer
ADG Border Roads
DG Border Roads


Administrative approval of works
10 crore*
50 crore^
20 crore*
75 crore^
50 crore^
100 crore^

Execution of contracts
10 crore
100 crore
20 crore
300 crore
Above 20 crore
Above 300 crore

Outsourcing of consultancy
10 lakhs
2 crore
50 lakhs
5 crore
2 crore
Above 5 crore

Procurement of indigenous    construction equipment
7.5 crore
100 crore

Procurement of imported construction equipment
3 crore
100 crore

*          Only for Departmental Works
^          For Departmental and Contractual Works

“With this delegation, the entire tendering process including acceptance of bids would be completed at the level of Chief Engineer/ADGBR for a majority of the contracts”, stated the defence ministry.

In a useful departure from the earlier policy, the DGBR has been granted full powers to determine the usage norms and life span of construction equipment, which was hitherto done by the defence ministry. For example, if the DGBR assesses that a bulldozer operating at 16,000 feet altitude in the Daulat Beg Oldi sector would have a reduced life span compared to one operating at 11,000 feet near Leh, he is now empowered to introduce the new norm.

In 2015, the BRO was transferred from the Ministry of Road Transport and Highways to the defence ministry to improve functioning. On May 6, 2013, the defence minister told parliament that the Cabinet had approved raising the BRO’s manpower strength to 42,646 personnel.

Despite attempts at reform, the BRO remains a divided organisation, with friction between BRO cadre officers, and army officers posted on deputation. The BRO cadre resents a large number of top executive and command positions going to the army.

Friday, 18 August 2017

First violent clash between Indian and Chinese troops in Ladakh, where China has the advantage

By Ajai Shukla
Business Standard, 18th Aug 17

The two-month-long confrontation between Chinese and Indian troops in Doklam, on the Sikkim-Bhutan border, is raising tempers elsewhere on the Sino-Indian border, most notably Ladakh, where China enjoys an operational and logistic advantage over India, unlike large sections of Sikkim and Arunachal Pradesh.

For decades, Indian and Chinese patrols have confronted each other with relative restraint. At worst, words would be exchanged and some pushing and jostling carried out before both sides disengaged and returned to their camps. Even during longer intrusions, like at Depsang in 2012 and Chumar in 2013, both sides scrupulously avoided physical violence.

This absence of bloodshed has been instrumental in ensuring a peaceful Line of Actual Control (LAC), as visualised by the Sino-Indian “Peace and Tranquillity Agreement” of 1993.

On Independence Day, however, mounting Chinese frustration boiled over at the scenic Pangong Lake. At about 7 a.m., a couple of hours before the two sides exchanged traditional gifts of sweets at nearby Chushul, a Chinese patrol consisting of “border defence” troops from their post at Khurnak Fort began pelting stones at an Indian patrol that had come to the same location – the hotly disputed “Finger 5” area.

The Indian patrol consisted of a mix of personnel from the Indo-Tibet Border Police (ITBP) and army soldiers from the local infantry battalion. They apparently retaliated before their commanders reined them in and defused the situation.

Participants in that clash say the Chinese were carrying iron rods, in addition to their personal weapons. This was apparently because an Indian patrol to the same area, the previous day, had carried wooden sticks (lathis).

No injuries were caused by firearms or the sticks, but there were minor bruises and cuts caused by the stone-pelting.

“We were restrained all through, but the Chinese border guards were very aggressive. There were a lot of abuses shouted at one another, but that was a waste in the absence of interpreters”, says an Indian officer, tongue-in-cheek.

“The code of conduct that has held since 1993 is now under stress. We are aware that Doklam is a factor on the Chinese side. But we are trying to ensure that the situation is not complicated by an incident where soldiers from either side are hurt. That would complicate Doklam even further”, he said. 

Thursday, 17 August 2017

Army gets its first attack helicopters, 6 Apaches cleared for Rs 4,168 crore

By Ajai Shukla
Business Standard, 18th Aug 17

For decades, the Indian Air Force (IAF) has resisted giving the army control of combat aviation assets, especially attack helicopters, which the air marshals have insisted on keeping firmly under their control.

Even as the army began operating light utility helicopters and established its own Army Aviation Corps, the IAF retained control of medium and heavy helicopters (Russian Mi-17 and Mi-26) and attack helicopters (Mi-35).

The IAF’s predominance in helicopters was underscored in September 2015, when $3 billion worth of helicopters – 22 Boeing AH-64E Apache attack helicopters and 15 CH-47F Chinook heavy lift choppers – were handed over to the IAF, overruling the army’s arguments that attack helicopters, which are an integral part of the ground battle, should be flown by army aviation pilots.

On Thursday, in a landmark decision, the defence ministry’s apex procurement body, the Defence Acquisition Council (DAC), chaired by Defence Minister Arun Jaitley, cleared the Army Aviation’s first attack helicopters –a Rs 4,168 crore purchase of six Apaches, including associated equipment, spares, training, weapons and ammunition.

While the IAF will use its 22 Apaches for “air defence operations”, to take out enemy radars and command and control centres; the army’s Apaches would destroy enemy tanks and armoured vehicles on the mechanized battlefield.

It is understood the IAF has let go of the new batch of six Apaches with some reluctance, calculating that the air force budget – already strained because of the Euro 7.8 billion purchase of 36 Rafale fighters – could not sustain the added financial burden of more attack helicopters.

The army’s Apaches will only be delivered from 2020 after Boeing delivers the IAF its 22 choppers. Probably before that, Army Aviation would have inducted the first of its Light Combat Helicopters (LCH), which is at an advanced stage of development in Hindustan Aeronautics Ltd (HAL).

Like the Apache, the LCH will be flown by both the IAF and the army. The LCH is a 5-tonne-class helicopter, significantly smaller than the heavily armoured and armed Apache. It is untested in combat, while the Apache has flown a million mission hours in combat from the first Gulf War in 1991 to the ongoing operations in Iraq and Afghanistan. However, the LCH is optimized for extreme altitudes, and for providing fire support to soldiers at heights up to 6,000 metres.

Both attack helicopters are armed with anti-tank missiles, air-to-air missiles, air-to-ground rockets and devastating chain guns that fire hundreds of shells per minute to rip apart lightly armoured vehicles.

Besides the Apaches, the DAC cleared the Rs 490 crore purchase of gas turbine engines from Ukraine for two Grigorovich-class frigates that Russia is building for the Indian Navy.

The two frigates, which form part of a $4 billion order for four such frigates, are almost fully built in Russia’s Yantar Shipyard at Kaliningrad, on the Baltic Sea. With relations between Russia and Ukraine at rock bottom after Moscow’s annexation of the Crimea, it has fallen to New Delhi to buy the Ukrainian gas turbines that the Grigorovich class frigates were designed to be powered by.

Negotiations are under way for building two of the four frigates in Goa Shipyard Ltd, under the Make in India programme. The purchase of gas turbines for those vessels will be cleared subsequently.

Dynamatic sets sights on becoming “private sector HAL”

Dynamatic Technologies seeks to develop “system integrator” skills by building UAVs

By Ajai Shukla
Devanhalli, Bengaluru
Business Standard, 17th Aug 17

In an environment where large corporations with no experience in building defence equipment – such as the Adani and Anil Ambani Groups – are hoping to be chosen by the defence ministry as “strategic partners” for defence manufacture, Dynamatic Technologies Ltd (DTL) is a rarity: a company that has incrementally developed the capability to design and manufacture military equipment; in pursuit of a clear aim to graduate into the manufacture of military aircraft.

Last month, on the sidelines of Prime Minister Narendra Modi’s visit to Israel, DTL signed a partnership with Israel Aerospace Industries (IAI), a global leader in unmanned aerial vehicles (UAVs). DTL plans to leverage this partnership to become an Indian “systems integrator” – the entity at the apex of a manufacturing chain, which integrates assemblies and sub-assemblies built by Tier-1 and Tier-2 suppliers into a final product.

Manufacturing state-of-the-art UAVs, like the “medium altitude long endurance” system that India’s military is buying, is only a waypoint for DTL. Eventually, the company – which already builds one-sixth of the fuselage of the Sukhoi-30MKI, and one-fifth of the Tejas fighter’s fuselage for Hindustan Aeronautics Ltd (HAL) -- aims to become a full-scale systems integrator of sophisticated combat aircraft.

Towards this end, DTL has proceeded systematically. From manufacturing precision-engineered hydraulic pumps in the 1980s, to aerospace grade components in the 1990s, to aerospace assemblies later that decade, to major aerospace assemblies today, DTL believes the next logical step towards building sophisticated aerospace systems is to be a systems integrator for UAVs – flying platforms, but less complex than manned combat aircraft.

“We believe this is the logical moment to transition up the value chain to become a systems integrator. En route to building complete fighter jets or bigger aerospace systems, we believe that UAV development and integration is realistic and achievable for Dynamatic”, says the company’s chief executive, Udayant Malhoutra.

“In my mind, we are working to become the private-sector HAL of tomorrow”, he emphasizes.

To assess DTL’s ambitions and capabilities, Business Standard visited its brand new manufacturing location – a 27.5-acre facility at Devanhalli, adjoining Bengaluru’s new international airport, where the UAV line will come up. Capable of housing half a million square feet of hangar space, Devanhalli is accessible by large cargo trucks and provides ready access to the airport.

At nearby Doddabalapur, DTL owns a large research farm that could be converted to manufacture later, if required.

With DTL’s long-standing facility at Peenya, outside Bengaluru, running short of space, the manufacture of flap-track beams for Airbus’ A330 wide-body airliners has already been shifted to Devanhalli, along with the assembly of Bell-407 cabins for Bell Helicopters.

Meanwhile, DTL’s Peenya plant continues manufacturing flap-track beams for every one of the 54 single-aisle airliners (A318, A319, A320 and A321) that Airbus assembles each month; and also components for Boeing’s P-8I maritime aircraft and CH-47E Chinook helicopters.

In contrast to the relatively stable income from global aerospace manufacturers, DTL would be in uncertain territory in UAV manufacture. The company visualises a market opportunity in India of about 5,000 UAVs for military and civilian uses but, so far, there are only three “requests for information” (RFIs) issued by the military, for which the DTL-IAI combine will have to compete with global UAV manufacturers.

This includes an RFI issued last year for 150 MALE UAVs for the three services; a 2015 enquiry for 50 Naval Shipborne Unmanned Aerial Systems (NSUAS) for use from large ships for surveillance of coastal waters and India’s exclusive economic zone; and a 2015 RFI for 600 mini-UAVs for the army’s infantry battalions.

DTL has experience in UAVs, having participated in the DRDO’s programme to build the Lakshya pilotless vehicle. In 2015, DTL signed a “teaming agreement” with US company, AeroVironment, to co-develop the Cheel UAV – which is one of six pilot projects designated during US President Barack Obama’s visit to India. However, no orders have resulted from that initiative.

Even so, Malhoutra remains bullish about the opportunities for UAVs, particularly in civilian applications. He cites the potential for low-cost UAVs for crop spraying or as airborne sensors to gauge soil conditions. Pointing to DTL’s long experience in agriculture (70 per cent of all Indian tractors incorporate DTL’s hydraulics), he forecasts: “UAVs will initially come in for military applications, but will find sustainable value mainly from the civilian market.”

Dynamatic: Operating figures

(in Rs crore)


Net Profit
Interest burden