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Why HAL was not able to close the offset contract deal with Dassault Aviation for the Rafale fighter, and what is the future of the defence PSU in the face of a dwindling order book?
Shareholders are expected to ask these searching questions of the HAL management at the September 28 annual general meeting, the first post its initial public offering (IPO).
Sources in the public sector company say that some of the new clauses introduced in the RFP (request for proposal) for the offset contract may not have found favour with Dassault Aviation. A HAL spokesperson did not respond to queries about the deal, involving the manufacture of 36 medium multi-role combat fighter aircraft.
Some of the new clauses introduced in the RFP are: the inclusion of the cost of aircraft assembled at HAL; the life-cycle cost; separate contracts between the OEM (original equipment manufacturer), the MoD (Ministry of Defence) and HAL; and warranty and delivery of all the aircraft produced by Dassault and assembled by HAL.
Sources say that with a monthly salary bill of around ₹400 crore, HAL may have to cast its net wider to bag fresh orders. HAL will also have to foot the bill for a higher wage bill as the previous wage agreement with the workers got over in December 2016. Currently, negotiations are on with the trade union to set new wages. A former chairman T Suvarna Raju recently said that HAL could have assembled the Rafale fighters had the government closed the original agreement successfully.Last Early last year, Raju had said that the organisation has planned a capital expenditure of ₹17,500 crore over five-six years for aircraft upgrade, to develop new planes, and to modernise its manufacturing units.
Had HAL bagged the deal, it could have provided a new lifeline for the 27,000-employee aeronautics major, which at present has contracts worth ₹61,000 crore. Dassault Aviation has been one of the major clients of HAL as it has been involved with the maintenance and upgradation of over 60 Mirage-2000 fighters.
HAL has orders from Sukhoi to deliver 222 Sukhoi Su-30MKI, which will get over by 2019-20. It also has orders from the Indian Air Force to produce and deliver 40 Tejas Mark-I fighters. All the existing orders are expected to be delivered over the next three to four years.
One of the reasons for the underwhelming response to HAL’s IPO earlier this year is said to be the depleting order book.
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