The Hindu Business Line : Outsourcing bonanza in aviation — HAL alone sets Rs 600-crore business for private sector

A BONANZA of aviation business opportunities awaits the domestic private sector with Hindustan Aeronautics Ltd, for one, setting a Rs 600-crore outsourcing target for the current year.

This is only the tip of the huge `air-berg' of business opportunities set to emerge in the coming years for private manufacturers, thanks to the recent policies and purchases related to defence and aviation procurement, according to the HAL Chairman, Mr Ashok K. Baweja.

HAL's package alone means a foothold for the private sector in prestigious projects such as the Sukhoi 30-MkI fighters, the `Dhruv' advanced light helicopters that are under production in hundreds and tens now.

As per its new outsourcing policy, 35 per cent of all its manufacturing capacity, covering all divisions, will be outsourced to qualifying vendors.

This includes components, spares and even systems for aircraft, engines, ground handling equipment and accessories.

Nearly half a dozen of its own major aircraft projects and an order book brimming over at Rs 25,000 crore have spurred the country's single largest aircraft company to tap the domestic manufacturing competence, according to the head of the Rs 4,425-crore defence PSU.

He was speaking at a two-day summit on public-private partnership jointly arranged with the CII.

The Rs 1,00,000-crore worth of aircraft acquisitions in the country; the 30 per cent of the business offsets of domestic carriers' purchase of Airbus and Boeing aircraft that will accrue in the form of spares and services; and the multi-crore MRO (maintenance, repair and overhaul) business in the region could translate to a huge number, according to Mr A.K. Saxena, Managing Director of HAL's Bangalore Complex.

HAL's current and pipeline projects include the Jaguar, light combat aircraft, the intermediate jet trainer, the Lakshya pilotless surveillance aircraft, Dorniers and Chetak helicopter.

Apart from a Rs 2,000-crore IAF aircraft upgrade programme, HAL is also exporting civil aircraft work packages to Boeing and Airbus, Israeli Aircraft Industry, Eurocopter and MHI Japan.

For all these programmes, Mr Saxena said HAL was looking for long-term partners. HAL plans to go beyond components and outsource entire systems such as wings, helicopter rotors and fuselage sections to capable domestic vendors.

Though their returns would not be immediate, considering the extraordinary growth in the aerospace industry, these players could expect business to last over 30-40 years.

In the two years since outsourcing was initiated at all its divisions, the value has grown from Rs 90 crore to Rs 200 crore last year and it could even grow to Rs 1,000 crore later, Mr Baweja said.

HAL will initially handhold with supply of design, technology and materials but withdraw from them all gradually.

This was the win-win model followed by global majors Airbus, Boeing and Embraer.

The new mindset, he said, "is a great step forward for a company used to making everything from components to systems and aircraft... but it is a long and difficult process." Quality, cost and timely delivery were most important.

Outsourcing has also become necessary, as its human resource has come down from 44,000 a few years ago to 29,000. Even 10 per cent outsourced will mean a big saving on cost and foreign exchange.

Mr M. Fakruddin, Director (Corporate Planning and Marketing), said 1,200 vendors have been identified or roped in for various categories.

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