On 16 Feb 2018, in a significant move indicative of the Indian government’s rising commitment to ‘Make in India’, state-run aerospace major Hindustan Aeronautics Limited (HAL) issued a notice expressing their intention ‘to develop a reliable Indian Partner (IP) for the purpose of manufacture and supply of Dhruv (ALH) Civil Helicopter through Transfer of Technology (ToT) under License’. The EoI proposals are due by 6th Apr 2018.
This is the first time that HAL has offered private manufacture of its helicopter under licence. Plans to offload the government’s stake in HAL have been afoot for some years now. In 2012, the Union Government had approved sale of 10% stake in HAL. The process of initiating an IPO has been set into motion by filing of the Draft Red Herring Prospectus by HAL with market regulator SEBI on 29th Sep 2017. In early Dec 2017, the Minister of State for Defence Subhash Bhamre while speaking at a Public Private Partnership Summit on ‘Make in India’ in Nashik, India had called for a greater participation by private sector in the aerospace and defence sector. HAL’s latest move seems to be a logical follow-through and may be testing the waters.
The Advanced Light Helicopter (ALH) Dhruv is a 5.5-ton class multi-role, multi-mission helicopter designed, developed, manufactured and certified for civil and military use by HAL. A total of 228 helicopters have been manufactured by HAL till Mar 2018 of which 216 have been supplied to the Indian Armed Forces. The military variants have more or less stabilised in service and operate from sea level to super high altitudes of over 15000 feet. Operators’ response has been lukewarm given the challenging conditions of exploitation. Operators like the Indian Army who stuck with the project and invested in large numbers are now reaping the benefits of an indigenous product that has matured over the years.
However, HAL’s primary focus on satisfying military customers has come at the cost of benign neglect for the civil variant. Civilian customers of the Dhruv are limited to Jharkhand government, ONGC and a couple of other government agencies totalling just 3-4 helicopters. HAL’s forays with Dhruv into the international market has not met with much success either with Ecuador cancelling their contract in 2015 after a spate of crashes. The government has also pushed the helicopter into Mauritius and Maldives where a military variant continues to be operated by Indian crew. However, this is more symbolic than a testament to the helicopter’s competitive edge over other products in this class.
The latest notice requires the selected Indian Partner to carry out manufacture, assembly, testing & supply of the civil variant under ToT in three phases that include final assembly and flight test. HAL will get its pound of flesh through fees for licence, royalty, technical assistance, modification, upgrade and configuration control. Only Indian registered companies with a net worth over INR 2000 Crores (US$ 300M) and annual turnover in excess of INR 2500 Crores (US$376M) with minimum 5 years’ experience in engineering / aerospace manufacturing and assembly are eligible to apply.
The larger question that merits attention is the viability of Dhruv, with an already unenviable track record, in the civil market. What competitive advantage will the 5.5-ton Dhruv provide Indian or international customers over well-established foreign products like the Bell 412EP, AS365 DauphinN3, AW139, AW169 and Airbus’s latest offering – H160? The sentiments around ‘Make in India’ and indigenous helicopters are unlikely to be shared by private operators who are already beset with wafer-thin margins and regulatory overloads. HAL has largely been catering to a captive audience comprising Indian military operators and state / government agencies who hardly count the rupees while dealing with downtimes, logistical footprint, dependency on HAL, or quality control issues. Even repeated sorties flown for track and balance adjustments (which the military operators view with indifference) can bleed the pockets of a civil operator. One hopes that HAL and its selected Indian Partner would raise the bar with respect to reliability and maintainability while getting into a marriage of convenience orchestrated by a government itching to push its own agenda.
When it comes to striking out on the civil turf, HAL would do well to shake off some of the lethargy and complacency gathered over years of dealing with military customers. For a nation having less than half the civil helicopters (under 200 in the NSOP segment at last count) than just one single operator Air Methods of USA, the market is immense. But only the best will survive and there won’t be any waivers or second chances here.
It is a welcome move, trifle late in coming, but with the promise of greater possibilities for the private sector. I am waiting for April!
(The original article was written by me for Shephard Media, UK and published on 19 Feb 18. You can find it here. This extract has been republished with permission of Shephard Press Ltd, London, UK.)
© KP Sanjeev Kumar, 2018. All rights reserved. Cover photo courtesy: www.hal-india.com
Views expressed are personal. I can be reached at firstname.lastname@example.org.