Dubai Airshow

HAL Struggling with Labor Costs and Disputes

 - November 17, 2019, 8:03 PM
Hindustan Aeronautics is ramping up production of the Tejas light combat aircraft.

The strike in October of around 19,000 workers of Bengaluru-based Hindustan Aeronautics Ltd (HAL) to increase wages has highlighted concerns and issues faced by the government-owned defense manufacturer. And while the high court of the state passed an interim order restraining the Hindustan Aeronautics Employees Association “from continuing their ongoing strike including go-slow, work to rule, or any form of agitation or disrupting day-to-day activities of HAL and its offices in Bengaluru," it seems to have added fuel to the government’s intent to disinvest the organization.

According to a union leader, HAL lost $8 million a day during the strike period, but this could not be confirmed.

The government is struggling to ease its financial situation, having adopted a program to disinvest many public-sector organizations. Already a decision is close to sell stakes of the mammoth Bharat Earth Movers (BEML) and Bharat Heavy Electricals (BHEL). BEML's defense segment accounted for around 17 percent of the company's overall revenue last year. It also supplies mortar and casing components to the Indian Army and has plans to enter the aerospace sector. Heavy engineering giant BHEL is now looking for larger defense projects including the building of submarines in partnership with other organizations.

HAL needs to be watchful about labor costs, CB Ananthakrishnan, director of finance, cautioned at a press conference following the strike. He added that while orders under negotiation would be sufficient for the company's growth for the next three years, “We need to get more orders to ensure that the workers are not kept idle. Unless we remain competitive…we will not get further orders in the future," he said.

This has direct relevance to the government’s move to encourage private industry to step into the manufacture of defense products, an effort that will need HAL to become more cost-effective and efficient. But for this to happen, payments must come on time, said an official. HAL's major client, the Indian Air Force (IAF), still owes it a large part of $3 billion for past orders that include delivery of aircraft and maintenance.

The IAF had ordered 40 Tejas light combat aircraft (LCA), of which 16 have been delivered. The Tejas LCA Mk1 FOC fighter version is already under production, and HAL has said it plans to deliver the rest of the FOC fighters progressively, giving March 2021 as a tentative timeline. Some of the improvements include beyond visual range missile capabilities, air-to-air refueling, FOC-earmarked advanced weapons and delivery systems, and flight envelope expansion.

Indian Air Force chief RKS Bhadauria confirmed in October, "We have started building the LCA fleet. We already have a squadron operational and five more will be inducted in the near future."

HAL's Light Combat Helicopter platform has achieved operational clearance for both IAF and the Army variants, and these have successfully completed all development milestones including weapons trials. HAL submitted a bid in March 2018 for a request for proposal for the supply of 15 limited series production helicopters and is awaiting orders for production deliveries/operational induction. Delivery of helicopters, according to HAL, can start within 12 months from the date of signing of the contract by the MoD. There is a projected requirement of more than 160 helicopters and follow-on orders are expected from both the Army and IAF upon completion of the initial lot of 15 production helicopters.

The single-engine, three-ton Light Utility Helicopter (LUH) platform is in the advanced stages of certification, having completed hot-weather trials at Nagpur in 2018, cold-weather trials at Leh in 2019, and sea trials at Chennai in 2018 and at Puducherry in 2019. The LUH is capable of flying at 220 kph, has a service ceiling of 6.5 km and a range of 350 km with a 500 kg payload. LUH demonstrated high-altitude capability in hot and high weather conditions in the Himalayas in trials from August 24 to September 2. Operational clearance is expected in the near future since all major developmental trials have been completed. There is a projected requirement of more than 180 helicopters.

HAL's new helicopter facility in Tumkur is being built on 615 acres. Part of the facility will include manufacture of 200 Kamov 226-T by the Rosoboronexport-Russian Helicopters and HAL joint venture Indo Russian Helicopter. The Ka-226T helicopters are to replace the four-decades-old Chetaks and Cheetahs of the Indian Army and IAF.

A long-term requirement for rotary unmanned aerial vehicles (RUAV) is being addressed by HAL, and a prototype was displayed at Aero India in Bengaluru in February. The 200 kg RUAV is being designed for ISR for the army and Indian navy, which requires 20 units.  The RUAV has a service ceiling of 6,000 meters, hover ceiling of 5,000 meters, and a max payload of 40 kg. The two-blade RUAV can fly in fully autonomous mode, including auto takeoff and landing with a return-to-home recovery option.

Moving forward there has been confusion whether HAL will be permitted to join the Strategic Partnership (SP) program, which envisages establishment of long-term strategic partnerships with Indian entities through a transparent and competitive process, where Indian manufacturers can tie up with global original equipment manufacturers for technology transfers to set up domestic manufacturing infrastructure and supply chains. HAL says it will definitely participate if given the opportunity.