Kamov: The Make In India Defence Deal

By S.N. Misra

HAL’s Joint Venture with Rostec of Russia to manufacture Kamov choppers in India is a real shot in arm for the Make-in-India initiative by PM Modi in the defence sector. Anil Ambani had pitched for it as the prime agency for integration for these Light Utility Helicopters (LUH) in tandem with the Tatas and M&M for manufacturing parts.

However, HAL clinched the deal, largely because of its long years of association with Russia with the technology transfer for Mig-21 since 1963. SU-30 has been India’s signing lamppost for a fourth generation plus fighter aircraft.

Many major private sector players feel understandably peeved by the historical injustice done to them in the past as they were not being provided a level playing field in technology transfer and platform integration while Defence PSUs and Ordnance factories were favoured as monopoly suppliers in terms of the Industrial Policy Resolution of 1956. This had serious implications in terms of timely delivery, high cost and poor repair and overhaul support to the weapons and platforms supplied to the services.

The year 2001 was a watershed for the private sector, as it allowed 100 per cent private sector participation in the defence sector. 26 per cent FDI was also allowed to the OEMs. Last year witnessed an increase in FDI cap to 49 per cent and the offset procedure has ensured that the private sector players have equal opportunity to team-up with OEMs and design houses to harness the benefit of outsourcing and technology tie-up.

However, the present arrangement with the HAL for a joint venture would have to seen in the context of (a) HAL’s track record in terms of designing and producing helicopters (b) the changing contours of our defence ties with Russia (c) the emerging challenges.

HAL’s Track Record with Helicopters

HAL has a chequered history in terms of manufacturing rotor-wing aircraft. The Advanced Light Helicopters and its weaponised version for the services has been one of the high watermarks of HAL’s success story. The aerospace behemoth has built sizeable capability in integration, manufacturing and updating of the ALH engines. This led the government to create a separate division for design, development and production of helicopters in Bangalore in 2009.

Accordingly, when the proposal for replacement of ageing and depleting fleet of Cheetah/ Chetaks was taken up by the Defence Acquisition Council (2009), and the services clamoured to import the LUHs, HAL made a strong pitch for indigenous manufacture through the Make route.

After a detailed and acrimonious debate, the DAC approved (2009) 197 LUHs for design/development/production by 2015 for HAL and the same number were allowed to be imported by the IAF and the Army by the same year, as replacement of the decrepit Chetaks.

In retrospect, when one looks back at the irony of the outcomes, it could not have been more Kafkaesque! HAL’s promise, that operational clearance would be achieved by December 2014, has come a cropper. So has the RFP for imports; it has landed with the CBI to do a check on the alleged compromise by the services in terms of operational parameters and trials. The previous cancellation of the Eurocopter deal in 2008 was due to allegations of compromising with the specification.

The bitter bilateral relations that it spawned with France has now been somewhat salvaged by Modi’s grandiose offer to directly import 36 Rafale aircraft for France instead of getting nettled by the company’s recalcitrance to pass on critical technology and unfair price increase. President’s Holland’s visit to India as the Chief Guest for Republic Day this year is testimony to the renewed Indo-French military cooperation.

It is PM Modi’s foresight that HAL’s dubious promise to indigenously produce LUHs in time and the services over eagerness to import have been put to a course correction by the present move to have ‘Make India initiative’ by getting LUHs manufactured in India with full technology transfer from Russia.

Kamov-226 is a tested and tried helicopter with the Russian armory since 2003 and will have an advanced French engine. This clearly demonstrates how ideological divides of the past between countries have given way to technological tie-ups.

In this new global reality, China teams up with Taiwan to optimise manufacture and export of laptops and smart phones, Russia and China ink a $400 billion gas pipeline deal to ensure durable energy security. Modi’s realpolitik in international relationship is indeed a fine balancing act between Indo-US and the Indo-Russia relationship.

The Prime Minister’s Make in India initiative subsumes both ‘Buy and Make’ and ‘Make’ options of our Defence Procurement Procedure (2013). His September 2014 address, flagging his new initiative hopes to make India a destination for global foreign direct investment and put the footprints of a global manufacturing hub; much like China and South Korea. This will create job opportunities for millions and enhance skills in 25 identified sectors.

The Manufacturing Zone Policy (2011) mooted by V Krishna Murthi envisioned creation of ten million jobs per year and increasing our share of manufacturing in GDP from 16 per cent to 25 per cent in a decade’s time. This sensible proposal has remained moribund and a pipe-dream.

The present initiative has ignited the possibility to a modicum of reality. Defence Manufacturing, which has often taken a solitary and cloistered route, will now be part of the Grand National strategy to bolster manufacturing, create credible job opportunity and reap the demographic dividends through global tie-ups.

Changing Contours of Indo-Russian Ties

While Nehru had plumped for non-alignment as our foreign policy, Mrs Gandhi clearly tilted towards the Soviet Union by forging a long-term Indo-Soviet Treaty in 1971. Strategic ties in defence manufacturing for tanks, ICVs, submarines, missiles and aircraft subsumed this template; very often denying the technologically superior options from the western counterparts.

The Indo-US Civil Nuclear deal (2009) marked a significant change to this uni-dimensional approach. In major defence weapons and platforms, India has increasingly plumped for competition instead of going in for strategic purchase from Russia.

The MMRCA contract with Dassault of France for the Rafale and opting for the C-17 heavy lift aircraft from USA over the earlier procured IL-76 from Russia are indicative of this paradigm shift. This had indeed dented Indo-Russian relations and a certain amount of uneasiness had also crept in.

The real landmark for the Russian industry was the SU-30 deal in 1998 and the subsequent repeat orders. The FGFA deal for co-design and co-production of a stealth aircraft still remains in the preliminary design phase.

The JV for the Multi-Role Transport Aircraft is, unfortunately, in a state of limbo. The present deal with Russia, therefore, where the company has promised to transfer complete technology will be in a sense, a resumption of old ties by trusted allies in a definitive way.

Its export potential remains suspect as it did not have much an export success so far. However, this deal has to be seen in the context of our acute need to replace the ageing Cheetahs/Chetaks and reduce the vulnerability of our troops on the Siachen glacier.

Emerging Challenges

India’s quest for bolstering indigenous manufacturing capability and revamping its military complex is a daunting challenge. Foisted on it is the need to improve our Self Reliance Index, which the Kalam Committee in (1995) had suggested to increase from 30 per cent to 70 per cent by 2005.

A decade later, we still are 80 to 85 percent dependent on foreign suppliers for critical weapons, sensors and engines. In the ‘Buy & Make’ option, what is critical is the range and depth of technology that is going to be transferred by the OEMs.

In the ‘Make in India’ option, association of the private sector as partners will be paramount. The governmental policy must be to provide a level playing field to both the private sector and the DPSUs in matters of technology transfer.

The days ahead will be testing for HAL, given its dodgy record in designing and partnering with major national companies. And Kamov is a test for realising our manufacturing potential and providing credible employment opportunity to the millions who are in search of jobs.

The services look at HAL with understandable consternation and cynicism. Its track record in terms of timely and quality delivery, spare part support, repair and overhaul in time like that of the DRDO in terms of design/development and timeline compliance, remains unsatisfactory. One of the Air Chiefs had advised the PM that the helicopters segment should be outsourced to the private sector.

The Nagalia Committee (2008) had also underscored the need for HAL to bolster its design capability, improving partnership with companies such as Tatas, L&T & SMEs, while recognising its domain expertise in “Systems Integration”.

HAL must not rest on its laurels and must take up this challenge in the right spirit. The government’s decision to go with an old agency like HAL is driven by its headstart in integration and technology absorption. Its indigenisation record in the SU-30 remains wobbly.

For the Kamov deal to succeed as a template of our renewed defence ties with Russia, HAL’s willingness to forge partnerships with the private sector, OEMs and design houses in a synergistic manner under the hawkish eye of the RM to oversee the progress would be critical.

This article was first published in Indian Defence Review.