'Make in India' Single engined fighter

[Rakesh]

Do that and what is left of Strategic Partnership?

Was the strategic partnership affected when Boeing supplied a rusting wind tunnel or when Indian diplomat was cavity searched in Washington?

I know this is going to sound clichéd, but there is a line from an old Bollywood movie (my Hindi is more rusty than the rusty wind tunnel from Boeing, so I will say it in English onlee) ---> -"First he took away my job, then he destroyed my home....but now he has hit my stomach. And that I cannot bear."

If the Americans sabotage the SEF deal, there will be no more partnership to speak off. But I do not believe the consequences will reach that stage. If they go down that path, the loss will be greater for America. My honest opinion, if they lose, they will whine & complain. But that is it. Look at the end game.

- America is $20.5+ Trillion in debt and China owns a good chunk of that debt. True?
- America cannot take on China unilaterally (economic disaster/meltdown for the US) and thus they need India, Japan and other countries in the region to tackle the dragon. And China is not Iraq or Afghanistan.
- America will win either way, with F-Solah or Gripen E. They are both American planes. Anything of value on the Gripen E is American origin.

All this talk about exporting F-16s, global supply chain, revitalizing India's aviation industry, etc is all fluff. Nothing really changes for India - we will be beholden to the US with either platform. With Gripen E, General Electric (and a few other American defence firms will earn money and LOTS of it). With the F-16, every American defence firm - involved with the F-16 - will make even more money. But that is not the issue. Let them make money. That's capitalism for you.

But buying F-16 (and other American wares i.e. F-18, EMALS, etc) makes interoperability easy for America. But from a platform perspective, nothing really changes for India. For all the capabilities that the F-16 brings to a fight (and it is a serious capability), there is an ecosystem to support the success of the plane. From satellites to tankers to AWACS to JSTARS to whatever else…when the USAF comes to a fight, the USAF prevails EVERY TIME. However remove the support system and the capabilities on the F-16 cannot be fully exploited. The IAF does not yet have anything CLOSE to what the USAF has. Very easy to talk about how much the F-16 can carry a heavier payload, the F-16 is a more mature platform, the F-16 has a greater array of proven weaponry available to it, but at the end of the day - to the IAF - the F-16 is just a platform (minus the support system) like the Su-30MKI, the Rafale or whatever else.

But from an American perspective, having India buy into the ecosystem with US weapons and US platforms makes for ease - for the Americans, not for India - in future military conflicts against China. The platforms all speak the same language, the platforms all operate the same weaponry, etc. That is the true definition of interoperability, from America's stand point. Thus the US diplomatic pressure on India to adopt US weaponry. You must take the F-16, otherwise we will find it hard to partner with you. You must take the F-18, otherwise we will have to rethink our relationship. See below...

‘Full transfer of tech in defence aviation is non-negotiable’
http://www.thehindubusinessline.com/new ... 968794.ece

Q. How concerned is the US with the single-engine fighter jet deal not taking off yet? There are even reports now that India may not place the order at all.
A. The US government has invested an incredible amount of time partnering with Lockheed Martin for F-16 and Boeing for F-18s. If one or both do not happen that will be a very big splash of cold water on our industries because of the amount of seriousness we gave into this matter and because of government time invested across multiple agencies. And this has happened across both the Obama and Trump administrations. There had been no review of decisions, no conflict between ‘Make in India’ and ‘Make in America’. We have reconciled all of that.

So America has reconciled and thus India must just blindly follow?

Speaking about the Queen Elizabeth Class aircraft carriers, Admiral Sir Alan West, former CNS of the Royal Navy, says:

I have talked with the CNO (Chief of Naval Operations) in America. He is very keen for us to get these because he sees us slotting in with his carrier groups. For example, in Afghanistan last year they had to call on the French to bail them out with their carrier. He really wants us to have these, but he wants us to have same sort of clout as one of their carriers, which is this figure at 36. He would find that very useful, and really we would mix and match with that.

The ability to slot carrier groups - with American wares on board - makes it easier for America to wield the sword against an adversary. Signing CISMOA (now COMCASA I believe) makes it even easier for American forces to take on the dragon with the partnership of nations like India and Japan. The pushback that America is facing from India - unlike poodle nations like the UK and Japan - is that there is a justifiable caution among Indian policy makers with regards to the acquisition of American weaponry. India cannot rush into something like this, without thinking of all the possible ramifications.

Buy American weaponry or platforms, if it makes sense to do so. A few examples;

- The C-17 is hands down the best strategic transport out there. Barring the marketing spin that Philip mentions about the IL-476, nothing comes close to the C-17. Same is true for the Chinook, the C-130 and arguably even the Longbow Apache.
- I am a strong proponent of the Boeing KC-46 tanker and would love to see that bird in the IAF. Brings way more capability vs the A330 MRTT, the IAF's earlier choice.

As a sovereign country, India has the right to pick and choose whatever it feels is required for her armed forces. If that means F-16 Block 70, then by all means go for it. If it means another platform, then go for that. The last time I checked, these aircraft were for India's Air Force, no? That country that juts out in the Indian Ocean and has a population of over a billion people.

But from purely a numbers perspective, the SEF is now a moot point. 126 fighters were needed. 76 out of the 126 is already confirmed (36 Rafales + 40 Su-30MKIs). Only 50 are left. With the exception of Philip, everyone on BRF is aware that a follow on order of 36 Rafales will be infinitely cheaper and quicker than a SEF acquisition. The IAF will be short of just 14 birds then, from the original 126 order. This is an easily solvable issue, not the headache that the media puts it out to be.

Please get the fantasy out of your head (not you Kashi), that buying F-16 and F-18 will result in America coming to India's aid in a conflict against China. With or without those platforms, India is on her own against the Dragon. She better be prepared.

[ShauryaT]

^@Rakesh: Good post. Now how would you respond if a cynic like me says, the average spend as a factor of GDP on defense is unlikely to exceed 1.5% for the next 10 years. The govt has NO intention to wage a war of aggression against Pakistan and has NO hope of such in the TAR. At max, it seeks to defend its borders and has some level of sea denial capabilities in the IOR. Anything else, we are better off in an "alliance" regardless of the official names, only to the extent that it serves as a caution to China, where the US can at least be a supplier of leading arms. The added benefit is our FP can be de facto managed via Washington, on the issue of Hafiz Sayeed or shelling on the LOC. The IN can continue to "roam" the indo-pacific in show exercises and forge an alliance of the democratic, even if interests do not converge on the ground. India's native MIC would be dependent on collaboration with the west, where the IP remains in western control.

IOW: India gets to be a free rider (minimal sweat and blood on national defense - like Japan and by definition, not a nation that can wield its sovereignty in any meaningful way, banish all thoughts of being a great independent power. India will focus on economic power primarily - but even that only in collaboration with the west and strategic power will be forsaken, say for at least 50 years. Not condoning or condemning but asking, would such a formulation be acceptable to you?

[Vips]

^^ Did we order another 40 MKI's?

[Rakesh]

Yes we did. Announced by ACM Dhanoa on 08 Oct 2017. Will post the link.

[Rakesh]

Vips: Here you go....date of the article is 17 Nov 2017. Even better.

Rafale Deal: Air Chief Dashes Rahul Gandhi’s Hope Of Stirring Controversy, Says No Overpricing
https://swarajyamag.com/insta/rafale-de ... verpricing

He said the government had ordered two squadrons of Su-30MKI. "The drop-down will be made up by two Rafale, two Su-30, two LCA squadrons and 80 more aircraft which will give four more squadrons," he said.

The two LCA squadrons are the two Mk1 squadrons.

The 80 more aircraft are the Mk1A squadrons.

[Rakesh]

@ShauryaT: If the GDP on defense sits at 1.5% for the next 10 years, then good luck getting anything. Increase that spending to 2.5% - 3% and then we can address your scenario.

Free Rider = UK, Japan. Poodle Nations. Does India want to be that?

[UlanBatori]

OT, but I happen to believe that rural India, 660,000 villages where 70% of India lives, can be jump-started to race to energy independence and hence business enterprise, within say 10 years. (already started the process, believe it or not..) APJAK's slogan of India 2020- Superpower, is closer than most of ever imagined possible, its within touching distance.
IOW, economic size relative to cheenistan can become ~ 1:1 instead of today's 1:5 or 1:8, within a very short time. Meanwhile cheenistan is beginning to totter and teeter. We are always trying to imagine worst-case scenarios etc, but there may be a different problem if you find yourself rich and haven't planned to defend yourself properly. You don' t have to believe this - but you might want to dream of what India should be doing when that happens. Wealth without a really tough defense/ global force projection, would be repeating the error of over 1000 years so.

[shiv]

cross posting ny own post
Basically the "SEF" is to be funded by foreign investment along with private Indian investment. No (or little) gormint investment. It has to be a business deal between two private business partners where the product will be made in India (assembled to start with).

The idea as I see it is to

• Set up a parallel aerospace manufacturing eco system in the private sector
• Create jobs for the "youth bulge"
• Make aircraft in India using cheaper Indian labour and therefore a less expensive end product
• The Air Force is "also ran" and gets more aircraft
• Export of components/aircraft would have to be part of the business plan between foreign and Indian business houses

[shiv]

As I see it the "SEF" deal is not a sure fire one.

It will have to be a business deal with both parties taking a calculated risk. The risk they take will depend on how much investment they can afford versus profits they can make for that investment.

IMO the possibility exists that we will see no SEF deal if there is no sign of profit in the deal. The advantage, as I see it, of private players is that it is not taxpayers money that the government can freely spend to employ drivers and gardeners for life

[Anoop]

IMO the possibility exists that we will see no SEF deal if there is no sign of profit in the deal. The advantage, as I see it, of private players is that it is not taxpayers money that the government can freely spend to employ drivers and gardeners for life

The primary customer of the product is still the IAF with funds from the GoI, with an assured order book. So how is it not the tax payer's money?

[shiv]

Taxpayers money may come in after the investments are made and the production lines set up. The taxpayer should not be paying for those.

This is a crunch point

1. The business houses will have to examine the magnitude of investment and whether the IAF will buy at all
2. If MoD says IAF is in the market for x numbers at y price then the business deal will have to see if this alone is enough for the investment to be recouped
3. Both business houses will have to see if profits can be continued by exports to other entities AFTER any deal is done with MoD
4. Both business houses will have to examine whether there will be any return on investment if GoI refuses to buy the end product

If everything looks like it is worth a risk that will tie up money for at least a decade, then the deal may come through. Or else there will be no SEF deal.

Naturally - killing the Tejas would be attractive to force the GoI to promise investment for IAF in SEF

[JayS]

Taxpayers money may come in after the investments are made and the production lines set up. The taxpayer should not be paying for those.

Does it matter that much if you pay today or tomorrow if you anyway have to pay..? Customer always end up paying for the investment directly or indirectly in any private venture. Else how would the investor recover his investment and net profit thereafter..?

There is always advanced payment when Def contract is signed AFAIK - 15% is the norm. In defense, (arguably in my limited knowledge) I am yet to see a situation where a pvt company has invested money on production line without assured orders. They do invest in RnD, TDs etc. That money also is already partially or fully paid by government and rest of it would be recovered through customer orders eventually.

Even HAL gets paid advances form IAF. Remember how MP took idle money lying with HAL, which was paid as advance..?

Actually I don't see anything wrong if tax payers are paying for setting up plant for SEF. As such there is not going to be even single brick laid for production facility by anyone unless SEF contract is signed. Until then we will only see paperware MoUs and intentions of setting plants at various potential locations. In fact there is not going to be any fixed y price for x numbers. The contenders will submit their own bids for x numbers considering all the costs and profit margins added upfront to make it viable even without exports. Whoever comes lowest will be chosen. GOI benchmark price is only used as guideline.

[Philip]

"Killing the Tejas" will be a very courageous political decision.There will be a huge backlash.Tejas has turned the corner, crested the hill and the main angst is about its poor prod. speed, not the bird itself. The issue is maintaining capability and current sqd. numbers and the most cost-effective effective solutions.BMos-A launch brings back the case for more Desi made MKIs as alternatives to extra imported Rafales.HAL/ADA must seize the opportunity and publicly state how they're going to increase prod. significantly through extra lines perhaps even in the pvt. sector. Otherwise the lack of confidence will see the SEF look more attractive but the entrance of twin-E birds complicates everything.

[Will]

If you think its not possible to kill the tejas then you are naïve. All they have to do is ask for umpteen enhancements. Drag it through trial after trial for the next decade and a half and the tejas is fried . Just like the Arjun. You underestimate the capability of the import lobby. They are there everywhere, in industry, the government, the opposition, the armed forces-everywhere.

[shiv]

Taxpayers money may come in after the investments are made and the production lines set up. The taxpayer should not be paying for those.

Does it matter that much if you pay today or tomorrow if you anyway have to pay..? Customer always end up paying for the investment directly or indirectly in any private venture. Else how would the investor recover his investment and net profit thereafter..?
.

It's not so difficult to understand. The investment money up front must come from the private players. It is not going to come from you and me via GoI. That investment money will come only if there is a promise of profit in the long term. That promise of profit depends entirely on how attractive the deal is for Indians. How many Indians will be employed, how many Indian companies will get subcontracting work and the price of the final product. If the deal works the investment will still be ONLY from private parties who will be paying Indians salaries and property tax in India and paying construction companies for infra. After that whatever monies the GoI pays will benefit Indians as well as the parent companies, foreign and Indian. That is the model of "foreign investment in Indian industry"

Government paying taxpayers money directly is for direct import or to HAL to employ gardeners and drivers for life. SEF will work only if an Indian pvt company with a foreign company can offer a good deal where value is generated by the creation of goods, and profits flow into Indian hands and that of the companies who invested initially.

[Rakesh]

Hakeem: Who will pay for the minimum of 100 SE fighters that is expected to join the IAF?

The GoI, the OEM (LM or Saab) or Tata / Adani?

[shiv]

Hakeem: Who will pay for the minimum of 100 SE fighters that is expected to join the IAF?

The GoI, the OEM (LM or Saab) or Tata / Adani?

You too are jumping the gun.

100 fighters will not join the IAF unless a production line is set up

Production line will not be set up unless the investment comes form 2 or more private players

That investment cannot come unless there is a reasonable assurance of orders "from somewhere"

Those orders could be from Timbuktu or Pakistan, but getting them from India would be a big bonus

Getting an order from India will depend entirely on how much Indian subcontractors are going to benefit, how much money is ploughed (by private players) into Indian concerns to employ Indians and at the end of all that the price still has to be right and the plane worth it.

This is not going to be an easy deal for anyone. Nothing is going to happen fast. In fact both F-16 and Gripen may be outdated and some other "new" single engine fighter could come up if enough years are wasted in reaching a deal. It will be a huge deal, if it can happen, but it ain't gonna be quick.

Air force is not going to have any quick inductions other than Tejas, Su 30 and Rafale

In my personal opinion if ALL Indian private players get a share of some pie and employ Indians and make parallel competing infra I would be a happy man. I will also be an old old man by then.

[srai]

Which private company (anywhere in the world) has invested 100% for defense R&D and infrastructure? Government always pays a substantial portion of it.

[shiv]

Which private company (anywhere in the world) has invested 100% for defense R&D and infrastructure? Government always pays a substantial portion of it.

This is a rhetorical question that has no connection with the single engine fighter deal. If there is any basis to the statement that you and others have made that GoI is going to invest in SEF then please point me to some proof or else it is simply a concoction that is being pushed on BRF like "IAF said this or that" in the media.

At worst (or best?) the deal won't happen.

[JayS]

Does it matter that much if you pay today or tomorrow if you anyway have to pay..? Customer always end up paying for the investment directly or indirectly in any private venture. Else how would the investor recover his investment and net profit thereafter..?
.

It's not so difficult to understand. The investment money up front must come from the private players. It is not going to come from you and me via GoI. That investment money will come only if there is a promise of profit in the long term. That promise of profit depends entirely on how attractive the deal is for Indians. How many Indians will be employed, how many Indian companies will get subcontracting work and the price of the final product. If the deal works the investment will still be ONLY from private parties who will be paying Indians salaries and property tax in India and paying construction companies for infra. After that whatever monies the GoI pays will benefit Indians as well as the parent companies, foreign and Indian. That is the model of "foreign investment in Indian industry"

Government paying taxpayers money directly is for direct import or to HAL to employ gardeners and drivers for life. SEF will work only if an Indian pvt company with a foreign company can offer a good deal where value is generated by the creation of goods, and profits flow into Indian hands and that of the companies who invested initially.

How exactly this is different than investment in LCA's line through HAL..? Agreed a small part of it goes to paying gardeners in HAL. But that's a tiny bit and negligible for all practical purposes compared to contract cost. Money still stays in India. A significant portion is passed on to private subcontractor companies. Salaries are paid to Indians after all. Some desi and some foren companies earn profits. GOI pays 15% advance on day 1 to HAL for contract. Same way GOI would pay 15% to LM or SAAB. HAL can also invest its own money just as any private company can invest. I don't see any difference moneywise.

The LCA 2nd line, HAL investing its own money for the 50% share. That's not coming from GOI. Just as a private company might invest.

[srai]

Doc saab, I can tell you right now what you wish for from private entities setting up production lines on their own won't happen for mere 100 odd planes. Quantities are far too low.

[Rakesh]

Hakeem: You have said yourself that Tejas and SEF are both needed. The GoI, MoD and the IAF are also invested in the idea of inducting both aircraft. So we do need to jump the gun and clarify this issue. So I ask again -->

- Who will pay for the minimum of 100 SE fighters that is expected to join the IAF? The GoI, the OEM (LM or Saab) or Tata / Adani?

[JayS]

Which private company (anywhere in the world) has invested 100% for defense R&D and infrastructure? Government always pays a substantial portion of it.

This is a rhetorical question that has no connection with the single engine fighter deal. If there is any basis to the statement that you and others have made that GoI is going to invest in SEF then please point me to some proof or else it is simply a concoction that is being pushed on BRF like "IAF said this or that" in the media.

At worst (or best?) the deal won't happen.

Its not a rhetorical question. I would ask the same question. Please show one example where a private company invested money in setting up production line without assured money coming from customer. A significant portion is paid upfront and rest is assured. I can't think of any OEM setting up production facility for defense product if the cost is not getting already recovered through assured orders upfront. When orders drop, unit costs are hiked to recover all the investment plus profit. IN civil domain, OEMs do take such calculated risks and sometimes get screwed. Airbus with A380 is good example. But I have not seen so far any example in Def. Yes, there are example of investing money in RnD/TD which they might lose or recover eventually. But at least I do not know of production facility being set up.

GOI is investing in SEF set-up in the sense that the entire setup cost will already be amortized over initial order and considered in unit price. If say 2000Cr is needed for the setup alone and order is for 100 units, per unit 20Cr will already be factored in in the tender/contract, over and above the actual manufacturing cost. So GOI is very much going to funding the setup cost. Its not gonna be like LM/Tata will only amortize 1000Cr of it over this order and then hope for some more orders in future to amortize rest of the money.

This is not same as Reliance Jio investing money in telecom venture where there was Zero assurance of order.

[Rakesh]

Thank You JayS for pointing this out. Greatly appreciated.

[UlanBatori]

But at least I do not know of production facility being set up.

Tesla.
All really innovative products go into production on a hope and prayer (and a lot of intense Customer Discovery). Defense products should be like that. The Indian defense procurement system history looks more like a PG Wodehouse novel with Florence Cray breaking off engagements every few months.

[Rakesh]

Post Deleted

[Zynda]

But at least I do not know of production facility being set up.

Tesla.
All really innovative products go into production on a hope and prayer (and a lot of intense Customer Discovery). Defense products should be like that. The Indian defense procurement system history looks more like a PG Wodehouse novel with Florence Cray breaking off engagements every few months.

AFAIK, *most* OEM in Commercial aerospace, defense & space systems Private/quasi-Private enerprises (Airbus, Embraer etc) all over the world have set up full-blown production facilities without any confirmed orders. Heck, most of the times even FSED won't proceed if orders are not confirmed.

Brarji can illuminate on this further, but AFAIK in recent times, onlee Scorpion from Textron was built based on no assurances from the End customer (USAF). Perhaps the company felt confident about going ahead because USAF really wanted a light, cheap aircraft specifically for COIN type Ops in None to low AD environment and a tender for the same was imminent. I think Scorpion was included among the competing products onlee in last moment (perhaps a lot of pressure was applied on USAF...).

Although automotive & other industries involve huge amount of CAPEX to get going, the amount of risk is a lot lower when compared to A&D industry. Somebody I know said to me once "a sure way of becoming a Millionaire from Billionaire is to open up an Aircraft company".

Edit: I think Eclipse Aviation in US was (is ?) a General Aviation company started in early 2000s. Not sure if they had any orders but they did decide to build a Very Light Jet. In 2008/09, Eclipse went in to bankruptcy and is currently under Chap 7 (or 11). Apparently, the owner was personally known to an ex-colleague of mine and the owner lost a lot of his own money. Proves the above statement

Gotta finish up some work and hit the bed. Will try to look up more on Eclipse tomorrow.

[UlanBatori]

OT, but look up (1) Adam Aircraft. (2) Groen Brothers Inc. The legend in the aerospace industry is that when a new VP was hired, the first thing s(he) was required to was to take out a second mortgage on his/her house and invest that 100% in stock of the company. Brought a level of dedication and intensity and focus that modern VPs rarely bring.

[JayS]

But at least I do not know of production facility being set up.

Tesla.
All really innovative products go into production on a hope and prayer (and a lot of intense Customer Discovery). Defense products should be like that. The Indian defense procurement system history looks more like a PG Wodehouse novel with Florence Cray breaking off engagements every few months.

I meant by Def production facility specifically.

[brar_w]

There is no problem for most defense companies to move to a privately funded model. Problem will come with investors who will want no restrictions on margin growth just as they don't exist on commercial businesses which they also fund. No one will take a disproportionate amount of risk with their investment if the profit margin is directly or artificially capped by their largest, and at times only customer. That will have to change and the control of management and requirements would have to shift to the OEMs as opposed to the operator community. If you want Apple level R&D, you have to up your margin to make investment more attractive for private investors and financial institutions that will bank roll this. Plus you will have to fund long term certainty in terms of demand as you can't start or stop as you please. At the moment, while program specific margins are not tightly regulated there is a broad (at least in the US) DOD wide look at the profit margin and of course if push comes to shove the government can enforce a unilateral contracting mechanism where the OEM has no choice but to accept the terms with only a small chance of taking it to court. Same with demand and certainty. No one will invest $20 Billion on developing a high tech. weapon only for the program to be truncated from a demand of 500 aircraft to say 200. If the customer (DOD) wants that level of flexibility (to not having to commit to a multi year/decade procurement plan upfront) then it must assume the risk associated with a loss.

Brarji can illuminate on this further, but AFAIK in recent times, onlee Scorpion from Textron was built based on no assurances from the End customer (USAF). Perhaps the company felt confident about going ahead because USAF really wanted a light, cheap aircraft specifically for COIN type Ops in None to low AD environment and a tender for the same was imminent. I think Scorpion was included among the competing products onlee in last moment (perhaps a lot of pressure was applied on USAF...).

All companies have an IRAD portfolio and invest 3-5% of business back into IR&D. For some this manifests as technologies developed, matured, or procured that are applicable to a broad set of solutions, and for others this results in a product. If you do a 20K foot analysis, what Textron invested on the Scorpion, or what they invest annually on internal research may not be very different than what other similar sized defense contractors do. While we can see Textron's investment on a physical aircraft more easily, it is harder, for example, to look at the tens/100s of millions an OEM like Raytheon put into its GaN foundries to develop a 3-5 year competitive advantage for the DOD applications and offer mature Next Gen. AESA products across the DOD applications. One also need not look at final or even a complete product/project. One can access company filings and read transcripts from financial reporting in the past to see how much charge companies booked on internal investment on both successful and failed bids. But at least in the US, the vast majority of the technologies are developed and managed by the pentagon with the OEM one of the many stakeholders (be it the most important one).

[ShauryaT]

Shiv ji: The easiest and most effective way to achieve a private eco-system is for the government to capitalize on its decades-long investments and disinvest. Let the government "fund" the five-year defense acquisition plans and programs of the LTIPP, creating a 15 year funded plan on what is to be the budget for major capital acquisitions. Let the government place the long-term orders to these newly privatized companies and let them propose the technologies that they need along with any foreign partnerships. Let parts of the DRDO become a governance agency for this new private MIC to regulate exports, technology imports and as technical advisors to the forces, maybe retaining only some research parts. All of it can be privatized - DPSU, most DRDO and OFB.

For India's aircraft needs we need ONE company for both in the military and civilian domains, where GoI and India airliners are the lynchpin customers and the littoral states of the Indo-Pacific as its key export customers. After the cold war, the wave of consolidations is a marker on the unsustainability of multiple companies in this business, as the need to provide scale, continuous research and integration cannot be sustained in a competitive environment, if India is to place its own independent flag as a credible aircraft designer and producer.

We have a simple and straightforward solution in front of us that is most likely to get the best results and with scale. The ONLY thing missing is political will. Time to put the rhetoric of the government to provide transformative governance to the test. Ask for disinvestment. The government has no business in the business of defense. Let the business people do the business, let the government focus on providing security and growing its power.

Added: A new airline company is formed and it needs to do some internal R&D or production expertise, where do we think these resources will come from. Maybe by going this route, it is a long-term death of the DPSU and the pain is at the public's expense, instead of a crash course of some diet with some poison pills to kill the fat.It is 2017, are we not tired of the excuses in this day and age to sustain a public enterprise like HAL that shows almost as much profit in its books as all other DPSU's combined. At a practical level, I think due to the growth of private industry in India these organizations are not attractive anymore to most personnel and have become somewhat less obese and fit for an auction.

[Karan M]

We have a simple and straightforward solution in front of us that is most likely to get the best results and with scale. The ONLY thing missing is political will. Time to put the rhetoric of the government to provide transformative governance to the test. Ask for disinvestment. The government has no business in the business of defense. Let the business people do the business, let the government focus on providing security and growing its power.

This is plain and simple rubbish, to put it mildly. The Govt should be in defense especially for strategic programs which have no business being in the hands of publicly owned corporations which have all sorts of disclosure agreements, multiple stakeholders to whom they have to conduct dog and pony shows and ringfencing them with Govt control makes them quasi-Govt anyhow. The BMD program, multiple missile and technology development programs, all run with no profit motive and have the involvement of GOI funded IP which is unique to India and should never be disclosed to foreign partners. This stuff of "business people can do business" and all iz well, is not anywhere near the reality for India, given the economic and socio-cultural milieu currently where pulling a fast one for profit motive is all too common and is considered de-jure.

[shiv]

Its not a rhetorical question. I would ask the same question. Please show one example where a private company invested money in setting up production line without assured money coming from customer

"The customer"

Who will the customer/s be? Are you and others thinking that this private production line is going to be dependent on Indian gormint alone and that too for just one run of one product? After that the line will close down? No business will touch that idea with a barge pole. The line cannot depend on GoI and then close. They WILL have to plan for exports and future production long after GoI loses interest, and new products to interest the GoI.

Without that there will be no SEF. Mark my words. I predict we will all be alive for the next ten years for people to tell me I was wrong.

[shiv]

For India's aircraft needs we need ONE company for both in the military and civilian domains, where GoI and India airliners are the lynchpin customers and the littoral states of the Indo-Pacific as its key export customers

Shaurya I will not comment on the "one company" idea

Civil airliners and military aircraft are two different categories. One is health insurance and the other is labour saving device.

Military aircraft per-force will have to be made and developed in house.

Civil aircraft will end up being too expensive unless they are subsidized. The other alternative is the China model to simply depend on an old airframe and churn them out in numbers for military transport and try and play catch up in the civil arena. For civil we need a niche product like Saras. For a decade or so there was hope of a "medium transport aircraft". IMO that has now been killed by the incomparable C-130 and the C-295 that is coming.

[JayS]

Its not a rhetorical question. I would ask the same question. Please show one example where a private company invested money in setting up production line without assured money coming from customer

"The customer"

Who will the customer/s be? Are you and others thinking that this private production line is going to be dependent on Indian gormint alone and that too for just one run of one product? After that the line will close down? No business will touch that idea with a barge pole. The line cannot depend on GoI and then close. They WILL have to plan for exports and future production long after GoI loses interest, and new products to interest the GoI.

Without that there will be no SEF. Mark my words. I predict we will all be alive for the next ten years for people to tell me I was wrong.

First of all, there is no real order potential or part supply potential for either Gripen or F16 besides the IAF order. Both the aircrafts are going to have equivalent MFG ecosystem in multiple countries. The chances of other countries giving orders to Indian companies for spares or MRO leaving their own companies at a risk of closure are slim. (lets face it chances that any of those countries will have a next fighter program (apart from participation in F35) are also slim so the risk is real, Even Swedes know for quite a while that Gripen is perhaps their last fighter). We cannot hope to gain market only based on price benefit since prices hardly dictate such contracts. Any company coming in for this work surely can see this obvious thing. And they are not there due to this one product/order. They are hoping to get a start from this and then go on to get AMCA and other products later in their portfolio.

But, the cost of set-up of SEF *will* be recovered from IAF's order entirely. If GOI promises 200 orders then it will be amortized over those many or it will be amortized over initial 114 units and any subsequent orders will be significantly cheaper. (I expect SEF order to go beyond 114, at least to 200). Which is fine BTW. I would never expect any private company to take risk on their investment (its not just money, but time, efforts, brand value etc also matter) in defense unless there is 100% assurance upfront that all the investment will be recovered with reasonable profit margin. And I am fine by that. I have infact even proposed multiple times that GOI bankroll complete initial setup cost if some one is willing to take up LCA manufacturing. If its gonna kickstart MIC in private sector, its worth spending a couple of thousand crores on it. GOI has to and should bankroll initialization of MIC in private sector and continue to fund RnD. Someone here on BRF aptly put this in words, SEF is basically a socialistic scheme for private industries or something like that. And its fine, until its well thought of. I don't think it is so I oppose it, I am not against GOI giving out money to private companies, if they can establish a good MIC in return, which would empower our nation. I have always maintained that Defense is always a socialistic sector. All governments pour large sums just to keep the industries afloat, throw their weight behind them to get them business, give them a lot of leeway. I don't see why GOI should not do it.

The reason why we do not see any private company wanting to touch idea of def manufacturing with a barge pole, is precisely because, they are going to be largely dependent on GOI's orders and GOI is highly unreliable customer. Now companies are willing, because this government is ready to commit upfront. They offered $12B 200+ LCA MK2 manufacturing opportunity to private companies. They see that emphasize on MII and Strategic partner model (that too one per sector) means a good long term prospect of business without any real competition, once you get a foot in the door.

Let me also say this, this is my opinion based on my knowledge and experience, and I cannot prove it with documentary proof. So it doesn't really carry any value as such. I do not claim that its even right. Only that I think its right, as of now.

[JayS]

AFAIK, *most* OEM in Commercial aerospace, defense & space systems Private/quasi-Private enerprises (Airbus, Embraer etc) all over the world have set up full-blown production facilities without any confirmed orders. Heck, most of the times even FSED won't proceed if orders are not confirmed.

The two sentences are conflicting. Is that exactly what you wanted to say..?

BTW, has Textron, set up a production facility..?

[Zynda]

^^Oops...there is definitely a typo there. I meant usually no investments will be made except for Eclipse Aviation which I quoted earlier.

[JayS]

We have a simple and straightforward solution in front of us that is most likely to get the best results and with scale. The ONLY thing missing is political will. Time to put the rhetoric of the government to provide transformative governance to the test. Ask for disinvestment. The government has no business in the business of defense. Let the business people do the business, let the government focus on providing security and growing its power.

This is plain and simple rubbish, to put it mildly. The Govt should be in defense especially for strategic programs which have no business being in the hands of publicly owned corporations which have all sorts of disclosure agreements, multiple stakeholders to whom they have to conduct dog and pony shows and ringfencing them with Govt control makes them quasi-Govt anyhow. The BMD program, multiple missile and technology development programs, all run with no profit motive and have the involvement of GOI funded IP which is unique to India and should never be disclosed to foreign partners. This stuff of "business people can do business" and all iz well, is not anywhere near the reality for India, given the economic and socio-cultural milieu currently where pulling a fast one for profit motive is all too common and is considered de-jure.

I completely agree.

[Prasad]

Rakesh saar,
please dont provide hits to that flea-bitten rag of a portal.

[Rakesh]

Prasad, my most sincere apologies. I had no clue. I saw the article and posted it. Deleting now.