R.K. Tyagi, Chairman, Hindustan Aeronautics Ltd.

New Delhi: India’s aerospace giant and major defence public sector undertaking, Hidustan Aeronautics Ltd, has drawn ambitious plans to revamp its capacity to enhance productivity. On the one hand HAL is building better capability by outsourcing up to 30% of its manufacturing tasks, on the other hand, the company has drawn a roadmap to grab the immense offset opportunities by collaborating with various vendors and foreign suppliers.

In an exclusive interview with Bharat Defence Kavach, the Chairman of Hindustan Aeronautics Ltd., R.K. Tyagi unfolded his vision for the growth of the company.

BDK: Your roadmap for revamping HAL’s functioning?

RKT: The Company has drawn a long term Perspective Plan to realize its vision covering the period from 2010-2022 (i.e. up to the end of the 13th Plan).  This document outlines the roadmap for HAL’s march towards the vision through analysis of current position, defining strategies to be adopted to overcome challenges and to sustain growth. Detailed Plans for technology Induction, modernisation, manpower, collaborations etc., are being prepared in line with the overall strategy brought out in the Perspective Plan.

The current production processes are being critically reviewed to weed out bottlenecks and enhance productivity levels. HAL is exploring the possibility of enhancing the production rate by addition of suitable machinery / equipment at virtually all its divisions.

Dedicated Project Teams are already in place for each major project. These groups would be further strengthened with the required numbers, empowered with more authority and would be made accountable. Conformance to the time lines and cost lines would be the key performance indicators and would be the basis for rewards and appreciation.

With regard to the offset opportunities, HAL is pursuing closely with all the major vendors to enter into collaboration for offset liquidation, showcasing its capabilities & infrastructure set up, to provide services like Design Packages, work packages, Forgings & Castings etc. Outsourcing is being planned in a big way and HAL has drawn up plans to outsource upto 30% of the manufacturing task. This strategy would enable HAL to add & use the capacity more optimally on high value addition jobs or new business opportunities.

HAL is encouraging partnerships with the private industries in the areas of production and design & development. Many private industries are moving up the value chain, from being suppliers of components to suppliers of packaged assemblies and systems to HAL. In order to explore the opportunity for long term relationships and strengthen the supply chain, HAL recently organized a Global Business Partners meet of its vendors in Bangalore. We received direct feedback from the vendors and this should improve the business relationship. HAL would also explore to enter into allied fields to widen its product/service profile.
 
HAL is pursuing strategic business alliances through partnership and joint ventures with OEMs to gain access to technology and access to the global market. The Company aims to leverage the Indian market to gain access to the global market.

Plans are being drawn up to create new Divisions / facilities as Strategic Business Units (SBUs) for implementation of new programs such as Medium Multirole Combat Aircraft (MMRCA), Fifth Generation Fighter Aircraft (FGFA) and Light Utility Helicopter/ Medium Lift Helicopters at appropriate time. Core teams have been formed to plan these activities for each project to ensure that the required infrastructure along with manpower with the right skill set will be in place to complete the projects as planned.

The above plans if executed effectively would not only result in revamping the functioning of HAL but would also position HAL in the league of Maharatna Companies and ensure a place for itself in the top twenty aerospace companies in the world.

BDK: Your priority areas in HAL?

RKT: With major projects like Medium Multi Role Combat Aircraft (MMRCA), Basic Trainer Aircraft, Light Combat Helicopter (LCH), Light Utility Helicopter (LUH), FGFA, MTA running concurrently, the priority would be to put the right mix of resources in place to ensure the smooth progress of new / current projects, and meet the time and cost lines.

Another priority area, as brought out earlier is the “Offset opportunity”. The projected Offset opportunity market in the Aerospace and Defence sector in India is estimated at US$ 30 billion over the next 10 years. The Company would strive to garner a major share of the offset market opportunities. If required, the Company would set up a separate unit as a SBU to cater to the offset market.

Market analysis reports indicate that the Indian Civil aviation sector is likely to witness a high growth rate and would grow into the 3rd largest market, five years from now. The market dynamics and opportunities are being examined very closely to enter the civil aviation sector in design, development, manufacturing and Maintenance Repair & Overhaul (MRO) segments.

BDK: It is alleged that some vendors do influence the decision making at HAL. Have you come across any such complaint? If yes, what steps have you taken to address this issue?

RKT:  No, we have not come across any complaints. HAL has a very transparent purchase procedure and sub-contract procedure. Both are hosted on HAL website (www.hal-india.com). To improve effectiveness and efficiency of the procurement process, reduce cycle time and achieve transparency, e-procurement system was implemented in September 2011. All procurements above Rs.5 lakhs are channeled through the e-procurement system.

BDK: HAL has been in news for wrong reasons especially, for prolonged delay in implementing various programmes and orders. The Air Force who is the prime customer of HAL is unhappy over the delays. Raksha Rajya Mantri M.M. Pallamraju has also expressed concern over the functioning of HAL. The RM A.K. Antony is also said to be not very happy. So how are you going to make HAL a professional world class organization where there is no scope for delays and bickering?

RKT: Design changes, maximizing indigenous content, technology absorption, export regulations, country specific documentations, product obsolescence and supply chain management are some of the factors that HAL encounters during design & development and license production of aircraft & systems.

Dedicated Project Teams are already in place for each major project of HAL. These groups would be further strengthened with the required numbers, empowered with more authority and would be made accountable. Conformance to the Time Lines and Cost Lines would be the key performance indicators and would be the basis for awards & appreciation.

The Delegation of Powers (DOP) within the organization is being reviewed to further empower the senior and middle level management with more authority and accountability in an attempt to hasten the decision making processes. HAL has initiated e-procurement for all procurements above Rs.5 lakhs from September 2012 to reduce cycle time, achieve transparency and improve effectiveness & efficiency.

The current production processes are being reviewed to weed out bottlenecks and enhance productivity. HAL is exploring the possibility of enhancing the production rate by additions of suitable machinery / equipment at virtually all its divisions.

Organisational structuring in the form of new Divisions / facilities are planned to be created as Strategic Business Units (SBUs) for implementation of new programs such as Medium Multirole Combat Aircraft (MMRCA), Fifth Generation Fighter Aircraft (FGFA) and Light Utility Helicopter/ Medium Lift Helicopters at appropriate time. Core teams have been formed to plan these activities for each project to ensure that the required infrastructure along with manpower with the right skill set will be in place to complete the projects as planned.

All these initiatives being explored and implemented are aimed at making HAL a world class organization in the field of Aeronautics.

BDK: Which are the new MoUs of agreement HAL has signed recently with foreign companies and how are they going to help HAL in indigenizing defence products?

RKT: HAL has initiated discussions with various OEMs to explore possibilities of collaboration for co-development & co- production of equipments / platforms with an aim to:
o    Access to technology
o    Access to global markets
o    Secure supply chains at predictable time & cost lines

HAL is exploring possibilities of entering into strategic alliances for setting up facilities within the country in niche/critical technology areas like the AESA Radar, Software Defined Radios, Avionics, Ultra Light/Heavy Helicopters, small Gas Turbine Engines etc. This would ensure that the technology is available within the country and HAL would have a direct control over the technology & supplies from the collaboration/alliance.

BDK: How can HAL take advantage of the global slowdown for acquiring western core technology?

RKT: The US and major European countries, which constitute nearly 70% of the global defence expenditure, are witnessing reduction in military spending. This change, is forcing the major OEMs of the industry to change their business strategy towards, expanding and strengthening their positions in the emerging markets like India, Brazil, South Korea, Saudi Arabia, UAE etc.

It is assessed that due to this shift in focus on the emerging markets, the market would witness more aggressive competition and further streamlining of cost structure is likely to take place. In this scenario, HAL is looking out for opportunities of entering into strategic alliances with major foreign OEMs in niche/critical technology areas by leveraging HAL’s strength in Indian market. HAL is also exploring to partner with the OEMs to be part of their supply chain offering gains of cost economics.

BDK:  Is HAL getting into any new Joint Venture?

RKT: HAL is exploring business options including Joint Ventures, with different OEMs in niche/critical technology areas like the AESA Radar, Software Defined Radios, Avionics, Ultra Light/Heavy Helicopters, small Gas Turbine Engines etc.
BDK: What is the impact of the new Government guidelines on defence PSUs and private sectors on HAL?

RKT: During the last decade the government has introduced a series of policy changes in the defence sector to create a strong industrial base combining both public and private sector, to promote indigenization, to foster investments and promote the growth of the Indian defence industry.

The thrust given by the government has yielded results and many major industrial houses in the country, have diversified into the A&D sector. We hear news of collaborations and tie-ups between the Foreign OEMs who are the technology providers and the Indian companies regularly.
Some of the above Companies could vie with DPSUs in the competitive sector of offset opportunities. They could expand their activities in future and become potential competitors at the systems level and later at the platform level as they go up the value chain.

However, to gain advantage of the competitive industry scenario with increased capabilities of the private industry in manufacturing of defence equipments, HAL has planned to outsource non-core manufacturing / design jobs through the tiered level of supplier base. This strategic change in HAL policy is driven by the necessity for HAL to become an assembler / integrator of the flying platform to achieve economic advantage and focus on core activities.

BDK: With new defence deals signed with foreign suppliers, there will be unprecedented scope for offset benefit for HAL. How prepared is HAL to grab this opportunity keeping in view the modernization program of HAL is way behind the schedule?

RKT: HAL is reviewing the current production processes thoroughly to weed out bottlenecks and enhance productivity. Possibility of enhancing the production rate by addition of suitable machinery / equipment is being worked out at virtually all the divisions of HAL.

A modernization Plan is being evolved outlining the equipment / machines, and infrastructure that need to be upgraded or added to cater to the capacity requirement of all the current and the new projects that have been considered in the Perspective Plan. In general, whenever upgrades/augmentation is planned the likely offset opportunities are also factored in. HAL has drawn up plans to outsource up to 30% of the manufacturing task which will further increase over the subsequent years. This strategy would enable HAL to use the capacity more optimally,

The message is that the overall strategies are in place; detailed plans are being prepared and will be implemented in line with the overall strategy to gradually increase the capacities to cater to the requirement of the order book and also to tap the offset opportunities.

(First published on: 11.08.2012)