The Game Changer

The Avro replacement procurement plan can boost India’s indigenous industries

AVM Manmohan BahadurAVM Manmohan Bahadur (retd)

The HS-748, Avro, is akin to the MiG-21 of the Indian Air Force (IAF). It came in to the inventory way back in the Sixties and is still going strong — and like the MiG-21, it will continue to fly for almost another decade. It has seen its real good times when the high and mighty, both Indian VVIPs and foreigners, flew in it and were all praise for its low noise level, good comfort due to no vibrations at all and above all the very high reliability that the fleet offered. It was, and still continues to be, the load carrier of the IAF, though with its side loading it has some restrictions.

Many an army paratrooper has got his brevet jumping from its side door and almost all the mid and senior level transport pilots of the air force owe their ‘wings’ to this ‘good for all seasons’ aircraft. Time has started taking its toll, and problems with its power plant and its famed reliability have moved the IAF to seek a replacement, even though its total technical life (at which time an aircraft has to be retired out of service) is still far away.

Enter the clamour for indigenisation of the Indian defence industry and we have the term ‘Avro model RFP’ entering the lexicon of the procurement directorates of the three services and Ministry of Defence (MoD). Repeating that India’s 70 per cent defence import bill must be reversed to 70 per cent indigenous content would be adding one more voice to a statement that has been used and printed with sickening regularity, but with no result to show on ground. Having been part of the tri-Service procurement process, this writer can say with authority that everyone, with ‘no’ exception, wants indigenisation to take place. But, somehow the proverb, ‘where there is a will there is a way’ does not appear to be true in this context. Can the Avro replacement procurement plan breathe life into the moribund state of affairs? In my view, it can.

The Avro replacement Request for Proposal (RFP), worth Rs 28,000 crore, is novel in its concept. It makes a break from the traditional process in that the DDP, finally, has lived up to its name of Department of Defence Production and not Department of DPSU Production. All parties have agreed that the proposal to acquire 56 aircraft should ‘not’ go to HAL, the sole aircraft manufacturing agency in the country. The reasons are many, foremost among them being Hindustan Aeronautics Limited’s (HAL’s) track record of gross overshoots in programme implementation both, in terms of time and budget and the fact that its order books are overflowing, to put it mildly. The first of the aircraft have to be delivered within two years of contract conclusion, with 16 being imported and 40 to be manufactured in India.

Why is the Avro replacement RFP a novel and pathbreaking document? The answer would become evident if we review China’s aviation industry which is on the verge of going innovative with truly homegrown products. They started out with reverse engineering the MiG-21s and other aircraft and then moved on to cheap imitations. The imitations gave them insights into design and manufacturing problems leading to the next step of incremental innovation, wherein some locally-made parts were introduced. As they gained experience and confidence in their abilities, basic architectural changes in the equipment were introduced; now they are at what Tae Ming Cheung, an authority on the Chinese aviation industry calls, disruptive innovation when de novo products will start appearing from their stable.

One is already seeing this in the move from J-15, which is a clone of the Sukhoi 27 but with a large number of changes to make it operate from Liaoning, their aircraft carrier, to the J-20 stealth fighter whose prototype took to the air in early 2011. True, that certain important aggregates like the engine are still imported, but the fact is that the basic stealth design, avionics and a major part of the systems are all homegrown. Some reports suggest that the Chinese are just a few years away from a truly operational fighter jet engine due to increased research and development (R&D) funding (Reuters October 2012 report puts it at between 100-300 bn yuan). When that happens, they would be a challenge to other established arms manufacturers who have been predominantly from the Western countries. So, how does the Avro replacement programme hold promise and how does the Chinese example fit in to the discussion?

As per the Defence Procurement Procedure (DPP), if equipment is categorised as ‘Buy and Make,’ the Indian Production Agency (IPA) has to be specified in the RFP. This is done so that when vendors submit their technical and pricing proposals, they know about the technical capability and prowess of the Indian agency that will fulfil the ‘Indian’ part of the contract and accordingly price their commercial quotes. In practice, the IPA has always been a Defence Public Sector Undertaking (DPSU), as the department of defence production, whose task it is to nominate the IPA, has not been taking a judicious call on it.

The argument for doing so goes like this: A commercial quote in a Buy and Make categorisation carries an enhanced price due to the Transfer of Technology (ToT) that has to be given to an Indian firm. So, how can public money be given to a private IPA as the auditors will question the decision? This has caused DPSUs and Ordnance Factories having orders pending for long periods extending up to a decade.

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