Airplanes can give wings to self-reliance

Ajay Shankar | Updated on July 08, 2020

Ready for take-off The domestic aircraft market is expected to become the second-largest in the world   -  iStock photo

A National Mission for design and development of passenger aircraft can help India create a globally competitive industry

The vision of self-reliance in a globalised economy has to be crafted for present-day realities. A major pillar should be developing Indian products in the frontier areas of technology. One new approach that needs to be tried is the use of public private partnerships (PPP) in product design, development and manufacturing in some key frontier areas.

An ambitious project that India could take up would be the development of a civilian medium-range aircraft. The domestic market for this itself is expected to become the second-largest in the world. This, however, is advanced technology and there are dominant players in the international market. Can we succeed? Well, why not try and get an assembly plant from a major global firm?

But doing this would be akin to accepting that we should not try to enter the big league in any area. By that logic, neither Korea nor China should have tried to create a car industry of their own. But they did, and now the two countries have globally competitive car industries. And, by the same logic, India wouldn’t have developed a successful space programme.

Even then, developing a civilian plane would certainly be ambitious and challenging; a plan worthy of a National Mission.

Focussed mission

This would need a new creative approach. The state would have to provide patient capital. But more than funds, the state can mobilise domestic capacities in a National Mission. India has successfully designed the Tejas fighter jet and is now producing these. Hindustan Aeronautics Limited (HAL) has also designed a trainer jet. So, we do have some proven aircraft design capabilities. This should give confidence.

In addition, India has a cost-competitive design and development ecosystem. After all, every major global player has a development centre in India that contributes to its international competitiveness. It is time this was used for a national project. Airbus is a successful example of governments creating a competitor to Boeing.

The best way to go forward would be for the government to promote a dedicated special purpose vehicle (SPV). The SPV would have only one mission — develop, manufacture and sell the medium-range aircraft. It should strive to succeed as it would have a single goal. Being faced with a big challenge tends to bring out the best in us.

At the outset, the government would need to empower the SPV sufficiently. It should be empowered to adopt the search-cum-selection process for choosing partners, procuring equipment and appointing personnel. It should also be exempted from public sector guidelines.

The SPV should be able to offer market-based compensation, particularly to get specialised expertise from overseas.

Development process

Choosing the right engine from the ones provided by global aircraft engine manufacturers should be the starting point. The parameter for selection should be the lowest per passenger km life-cycle cost, derived from capital and maintenance costs and fuel consumption per km. The partnership with the engine manufacturer should be for both development and subsequent production and supply.

Once a cost-competitive engine is selected, the SPV should be able to design a plane around it and manufacture it competitively. A clear cost advantage for the user should be the objective. This alone would be the basis for commercial success. The SPV should choose Indian partners at the outset for the major sub-assemblies for design, development and production. The chosen Indian partners should be encouraged to take some equity in the SPV. The major sub-assembly partners would, in turn, choose and develop their Tier-II and -III suppliers ,and create the full supply chain.

There should also be no hesitation in sourcing from across the world. Once commercial production starts and volumes rise, many overseas suppliers may find a cost advantage in manufacturing in India. This can be incentivised then.

The development costs would need to be borne fully by the government, either directly or through its undertakings. These could be of the order of ₹10,000-20,000 crore spread over 7-10 years. The development time and costs have been declining due to breakthroughs in simulation software and 3D design. So actual time and cost could become much lower as work proceeds.

Public sector energy companies in petroleum, power and coal have reserves and these can also be used to provide equity. The successful EESL (Energy Efficiency Services Limited), which has brought about the breakthrough in the uses of LEDs, is a good example. The important and difficult decisions would involve funding the chosen private sector partners for design and development, where costs would evolve; the process would have its own difficulties. It may also take more time than initially envisaged.

A new level of empowerment and confidence would have to be given to decision-makers so that they take timely decisions. A Mission leader — like V Krishnamurthy, who set up Maruti — who enjoys full confidence of the government would be a prerequisite.

Market introduction

Internationally acceptable testing and certification for a civilian aircraft would naturally be needed. Once we have a tested, certified and cost-competitive aircraft, it would still be a challenge to find customers. The advantage in per passenger km cost should enable the SPV to lease its aircraft, while assuming maintenance responsibility, to domestic airlines on a trial basis with provision to keep extending the lease.

With leasing, the SPV should be able to start earning profits, move on to listing and start giving its shareholders returns. But for this to happen, the government would still need to guarantee loans to the SPV for production, maintenance and leasing till such time that the aircraft proves itself in the market. This decision should be taken right at the outset.

Once the aircraft succeeds in the open free domestic market, it can start selling planes and also enter the global market. The Embraer of Brazil is a good example. With a successful medium-range aircraft, India would have created a globally competitive aircraft industry. It would have achieved self-reliance in a high technology field.

The writer is former secretary, DIPP and distinguished fellow, TERI. Views are personal

Published on July 08, 2020

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