The Vile Hoax of "Make in India" A Tale of Grossly Different and Discriminatory Treatments to Dassault and HAL
*Sukla Sen* Only ten days back a January 11 report offered this heartwarming news: An independent survey of aircraft manufacturing companies has rated Hindustan Aeronautical Limited higher than Dassault Aviation, under various factors. Among the world’s top 100 defence companies, HAL has been ranked at 38 and Dassault at 44. ... ... In 2017, HAL earns $2.83 billion, of which the revenue from the defence sector $2.72 billion. The 2017 earning was up eight per cent from $2.52 billion in 2016. Dassault earned $2.12 billion in 2017. (Ref.: 'Survey rates HAL higher than Dassault Aviation' at < https://www.deccanchronicle.com/nation/current-affairs/110119/survey-rates-hal-higher-than-dassault-aviation.html >.) But instead of really warming our Indian hearts, it actually aggravates our heartburning. The reasons are not too far to seek. I. The HAL, a premier - Navaratna, PSU, with decades of experience in aircraft building, for the defence sector, had been only recently brusquely set aside in favour of a newborn private enterprise with *zero*, just *zero*, experience in the field, as the (principal) Indian partner of the Dassault for the supply of Rafale fighter jets for the IAF. That impelled the just retired Chairman of the HAL go public, to give vent to his deep anguish at the perceived gross injustice, which he could have had not done while occupying the chair constrained by the service rules. “When HAL can build a 25-tonne Sukhoi-30, a fourth-generation fighter jet that forms the mainstay of the air force, from raw material stage, then what are we talking about? We could have definitely done it (licence produced the Rafale jets),” said (T Suvarna) Raju, who retired on September 1 (as the CMD). (Ref.: 'HAL could have built Rafale jets in India, says former boss', dtd. Sept 20 2018, at < https://m.hindustantimes.com/india-news/hal-could-have-built-rafale-jets-in-india-says-former-boss/story-Cr0dMhZXToq1GBIdXY97YI_amp.html >.) II. This is now followed up with the following: AA. Fast forward to 2019, the Bengaluru-based Navratna PSU is back in the news – albeit for wrong reasons. On the one hand, the company’s finances are in shambles, while, on the another hand, Defence Minister Nirmala Sitharaman, in defense of controversial Rafale Deal, is questioning the credibility of the prestigious PSU, that supplied over 6,000 aircraft to Indian armed forces. ... “The company has made aircraft when probably India couldn’t even make sewing machines,” said a former chairman of the defence PSU, stating example of HAL Dhruv and how it was far above the expectations of the armed forces. ... Many IAF pilots, who have flown combat aircraft, vouch for the capabilities of HAL. A former IAF Test Pilot is aghast at Nirmala’s defense on Rafale deal. “This government is basing their facts on mathematical manipulation. HAL is quite capable of doing a project like Rafale. If they can deliver us 250 Su-30 MKis, what is the problem in delivering other aircraft,” he told DH. Su-30 MKi and Dassault Rafale are both fourth generation combat aircraft. Fourth-generation designs are heavily influenced by lessons learned from the previous generation of combat aircraft. Long-range air-to-air missiles, originally thought to make dogfighting obsolete, proved less influential than expected, precipitating a renewed emphasis on manoeuvrability. ... The company’s trade receivables are 13.57 times that of the company’s cash reserves, at the end of September 30, 2018. While the cash reserves of the company have depleted to Rs 725.3 crore at the end of the first half of the current financial year, its trade receivables have bulged to Rs 9,845.07 crore at the same time. ... Just one-and-a-half years ago, since the day officials within the company say that armed forces stopped payments, the company’s trade receivables were just 0.38 times its cash balance. In the past one-and-a-half years, the company has bled 93.5% of its cash reserves to sustain itself, while its receivables have jumped by 133.8%. According to company sources, the Indian armed forces, which constitute 90% of the HAL’s revenues, owe it a whopping Rs 15,700 crore! (Ref.: 'Government’s apathy is pushing HAL to the brink', dtd. Jan. 13 2019, at < https://www.deccanherald.com/business/government-s-apathy-pushing-712869.html?fbclid=IwAR0sXa9b1R4j5I73zVfXL9pjSDBtxRj7VbOW3F7GYVANM9cf8k2IVyoUeOQ >.) BB. A news report published on Saturday highlighted how the defence PSU Hindustan Aeronautics Limited (HAL) has had to borrow money for the first time in last 20 years to pay for salaries and meet some urgent expenses. The report quoted HAL CMD R Madhavan saying, “Our cash in hand is in the negative, we’ve had to borrow close to Rs 1,000 crore as an overdraft (OD). By March 31, we’ll have minus of Rs 6,000 crore, which becomes unsustainable. We can borrow for day-to-day work, but not for project purchases.” Confirming the same, sources in the HAL told News18 that “the situation has been deteriorating for the last one-and-a-half years.” A source also added that the amount of Rs 1,000 crore borrowed is unlikely to last them more than a month or two, after which it might have to borrow money yet again. This would be unprecedented in HAL’s history. A highly placed source told News18 that HAL had brought, more than once, the issue of rapidly depleting financial resources of HAL “before the highest authorities” but nothing had been done to help the PSU whose account books are turning red. “HAL’s financial reports are in the public domain, so we understand that everyone was taking note of the situation, but the matter was still brought before the highest authorities in a recent meeting,” said a source. One of the biggest reasons for HAL’s rapid decline is that its biggest customer — the Indian Air Force — hasn’t paid up outstanding dues of Rs 14,500 crore. The total pending dues to HAL are likely to go up to Rs 20,000 crore by March 31. Apart from the Air Force, Coast Guard, Navy and Army are other clients of the HAL. “These are for the orders we have already delivered. This is not an advance or anything, just to be clear,” the source told News18. (Ref.: 'Broke for 1.5 Years Now, Say Insiders as Cash-Strapped HAL Borrows Rs 1,000 Crore to Pay Salaries', dtd. Jan. 5 2019, at < https://www.news18.com/news/india/broke-for-1-5-years-now-say-insiders-as-cash-strapped-hal-borrows-rs-1000-crore-to-pay-salaries-1992597.html >.) CC. Normally payments used to come from the IAF, its largest and main customer, within one to three months. Now, as it lives in the hope of getting back the money spent on delivering aircraft and maintenance services to the IAF over a period, the ₹18,600-crore navaratna company says it will soon run out of money to buy spares and materials for servicing military planes and helicopters. At the end of March this year, after delivering some more fighter including five Light Combat Aircraft Tejas, the bill will mount to Rs19,000-20,000 crore. ... Apparently the overdue money has built up over a period. In the financial year 2017-18, it was Rs7,000 crore. An interim Rs2,000 crore was paid. Now the dues have ballooned to around 14,000 crore. Two other factors also led to the cash crisis: HAL paid a total of Rs11,500 crore to the government over two occasions in the past five years -- as dividends and to buy back its shares. (Ref.: 'HAL faces severe cash crunch as IAF delays payment'', dtd. Jan. 9 2019, at < https://www.thehindu.com/news/national/hal-faces-severe-cash-crunch-as-iaf-delays-payment/article25943780.ece >.) III. In contrast, which could hardly have been any more glaring: India has already paid more than half of the Rs 59,000 crore owed to France under the contract inked in 2016 for the 36 Rafale fighter jets, which will be delivered between November 2019 and April 2022. The 13 India-specific enhancements or upgrades on the 36 jets will, however, become fully operational only by September-October 2022 as they will require another six months to undergo "software certification" after all of them have touched down in India. Defence ministry sources say "around Rs 34,000 crore" has been paid in "milestone-linked instalments". "Another instalment of Rs 13,000 crore is to be made later this year," said a source. The first 15% instalment was paid soon after the agreement was inked in September, 2016. Then, even as IAF positioned project management and advance training teams in France, other instalments linked to milestones, like completion of critical design review and documentation, were paid. (Ref.: 'Over 50% of Rs 59,000 crore Rafale price already paid amid political slugfest', dtd. Jan. 20 2019, at < https://economictimes.indiatimes.com/news/defence/over-50-of-rs-59000-crore-rafale-price-already-paid-amid-political-slugfest/articleshow/67608660.cms?utm_source%3Dfacebook_wap%26utm_medium%3Dsocial%26utm_campaign%3Dsocialsharebuttons&from=mdr>.) *Sum Up* So, in sum, the premier PSU is being systematically starved of funds by denying its legitimate dues against the orders already supplied to the IAF and other defence wings of the state - which'd be around Rs 19,000-20,000 crore, by this March, and also, on top of that, siphoning off funds amounting to Rs11,500 crore, in the form of dividends and buy back of its own shares. Thereby it has been pushed to a financial crisis forcing it to borrow money from outside - of course, at a cost, and seriously impeding its operating capabilities. On the other, the Dassault has already been paid a huge sum of Rs34,000 crore - just a tad below 60% of the total contract amount, even before a single - even bare bones, aircraft has been delivered. There is another ten months to go for the scheduled arrival of the first one, which'd take further six months for the "upgradations", i.e. by May next year. The delivery is to be completed only by September-October 2022. Quite, interestingly, the Indian "offset" component is 50% of the contract value. The aircrafts would start arriving in India coming November onwards. Yet, around 60% is already paid. One only wonders what's the value addition to be done by the Reliance Defence, for which it's (going to be) paid the lion's share of the 50% - around Rs30,000 crore! How the original requirement of 126 fighter jets, worked out following a due and arduous process, was drastically slashed by Modi to mere 36 without any user input or even the involvement of the Defence Minister himself, plausibly only to benefit Anil Ambani at the cost of the HAL, has been dealt with in some details here: 'Rafale Controversy: Supreme Court Judgement Amongst Worst Ever?' at < https://groups.google.com/forum/#!searchin/greenyouth/Rafale$20Controversy$3A$20Supreme$20Court$20Judgement$20Amongst$20Worst$20Ever$3F%7Csort:date/greenyouth/5-fzbo1AY5o/Q3ok19vqBQAJ >. That the figure of 36 would get regularised post facto, as a sort of fait accompli, can hardly obfuscate the motivation behind the move. -- Peace Is Doable -- Peace Is Doable -- You received this message because you are subscribed to the Google Groups "Green Youth Movement" group. To unsubscribe from this group and stop receiving emails from it, send an email to greenyouth+unsubscr...@googlegroups.com. 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