Presentation to Hi Tech Defence Innovation Forum

1. Presentation to Hi Tech Defence Innovation Forum

2. Agenda • HAL - Indian Defence Preparedness • Challenges for India Inc • HAL & National Initiatives • India and Civil Aerospace • Avenues for Development • IDSA– Pondering Points

3. Hindustan Aeronautics Limited • India’s Flagship National Aerospace Company • Largest Defence Public Sector Company • Record sales of Rs 14316 Crs • 19 Production and 10 R&D Centers • Work Force – 33000 + • Exports to over 20 countries * * Kanpur Lucknow * Korwa * Barrackpore Nasik * Koraput * Hyderabad * Bangalore * * Kasargod

4. HAL – Learning Organisation • Creativity & Innovation are keys to our business continuity • Filed 174 patents in last one year • R&D Expenditure of Rs 1750 Crs (12.2%) • In house Design & Development of 15 platforms Current In House Design & Development Current Co Development

5. HAL – Enabling India Indian Navy Indian Army IAF • All satellite structures launched by ISRO till date • Designed & Developed first airworthy Turbo Jet Engine in India (PTAE-7) • Has supplied structures for nation’s Mars Orbiter Mission

6. HAL & Aerospace Ecosystem Development Northern Zone 173 12 2 41 41 2 77 1 73 2 22 7 Overall Vendor Base 2412 Eastern Zone 94 Western Zone 526 18 493 2 Value of indigenous sourcing ~ 1195 Crs 334 1119 15 Kerala 151 Southern Zone 1619

7. HAL is the biggest investor in R&D efforts amongst DPSUs as well as major Private Indian Industries entering defence sectors Domestic A&D – R&D Efforts Source : Company information & Annual reports 2010-11 available on web-sites, US average pertains to for US A&D majors

8. “Challenges for India Inc”

9. Challenges for India Inc Three Major Challenges • Economic • External Security • Internal Security

10. INDIA: “Striking a Fine Balance?” • Economic Paradox • India is the second most populous Country in the world, but Ranks a distant 134th on Human Development Index • India has the second largest workforce in the world, yet in terms of Exports (percentage of GDP) secures 100th place • India ranks 6th in the world in terms of Patent Applications, but comes a distant 55th in terms of high technology Exports • India has the 9th place in the world for its 17 Nuclear Power Reactor Units, yet 35% of its population has no access to electricity 29.8 % of • its population lives below poverty line

11. External Security Challenges • 25 of the 60 states, at highest risk of failure are located in Asia • Indian borders – 7,000 km of coast and 15,000 km of land border • Indian Republic is in an increasingly insecure security environment with threats from all around. • Source: http://www.fundforpeace.org/global/library/cfsir1210-failedstatesindex2012-06p.pdf

12. “HAL and National A&D Initiatives”

13. BK Chaturvedi Report Govt constituted BK Chaturvedi committee for strengthening HAL’s contribution to the country • HAL to gradually shift its role as system integrator • HAL to strive for outsourcing 50% of total workload in terms of SMH • HAL to focus on R&D / Development of Composites materials • Investments in aviation metallurgy – Working with MIDHANI • Design and Development of 25 kN Thrust class Engine • HAL to pursue the business of UAVs

14. BK Chaturvedi Report • Acquisition of companies abroad for technologies through Empowered Committee of Secretaries • Setting up of National Aeronautics Commission • Modernisation / Capacity Augmentation • HAL to establish aeronautics university or collaborate with some universities for expansion of aviation sector capabilities

15. Light Combat Aircraft - Tejas • Completed more than 2290 flights • 15 (7 LSP, 6 PT, 2 TD) • ADA commitment for IOC – Nov ‘13 • HAL geared up for production post certification

16. LCA – A National Effort

17. MMRCA Super Plastic Forming Canopy Fragilisation Circuit Thermo Plastic Composite Robotic Riveting • Microwave & digital jamming controller • FADEC • AESA Radar • Co-Cured Composite Stiffened Parts • EW Suite • Titanium Alloy Super plastic Forming • NC Loom manufacturing • Radio Crystallography

18. MMRCA Supply Chain Challenges ToT & Supplies ToT & Supplies ToT & Supplies ToT & Supplies Supplies Supplies Accessories ToT & Supplies ToT & Supplies 70+ French OEMs 20+ Indian Production Agencies • Good Example of Public Private Cooperation • IPR s stay within country

19. Aerospace Structural Incoherence • India started off early in Aerospace(1940) • Indian Space and atomic programme started 2 decades later • Need for Opinion synergy and cohesion • Pointed out by many committees – Recent is BK Chaturvedicommiittee • Quote “To consolidate capabilities in design & development (D&D), a Design, Development and Technology Management Governing Council chaired by RakshaMantri may be set up. This may provide major policy directions. The Governing Council may be supported by a Design & Development Management Board and the entire pool of D&D personnel should be placed at the disposal of the Board. The Board may be chaired by Director, D&D, HAL and include representatives from CSIR and DRDO.”Unquote • Quote “Pooling of R&D Resources: Conceptual frame work of existing aviation R&D organisation in India needs to be revisited. The Design organizations involved in the field of aeronautics should be brought under one roof while retaining their administrative autonomy.” Unquote • Quote “If India wishes to be a global player in this field, there is a need to set up an Aeronautics Commission. …….All the institutions in the Military and Civil Aviation sectors could be brought under the umbrella of this Commission.” Unquote

20. “India & Civil Aerospace”

21. Civil Aerospace in India Some Facts …… • CAGR of 14% - Last 10 years • Air Traffic to Double by 5 to 7 Years Period • Passenger Volume - 2020 ~ 35 Crore • 1032 new aircraft ~ Rs 75900 Crores by 2028 would be inducted by Indian Aviation Industry * By 2020 India will be the 3rd largest aviation market in the world National Priority : Having flagship Civil Product Economies survive on Civil Business – Brazil, USA, Europe * Study By CAPA, 2012

22. NCAD & HAL • Planning Commission mandate – HAL to be the nodal agency • NMCC identified as the program coordinator • Envisaged over Rs 7500 Cr project • Design – Rs 4325 Crs • Production – Rs 3200 Crs Quote from BKC Committee Report Quote “National champions in Europe have become part of European Aeronautics Defence and Space (EADS.) Both the global leaders, Boeing and EADS are in both the civilian and military spheres as there are synergies. India’s capabilities in the field of Aeronautics have been created in HAL. These can easily be used for diversification in the civilian segment. It is suggested that as the proven Indian entity with the necessary wherewithal, HAL should spearhead the Aviation Business instead of creating several players in an industry which is technologically complex and is highly capital intensive. HAL has the resources to attempt this.” Unquote

23. Civil MRO Landscape in India • India will be the fastest growing country for air travel in next 10 years • Current Share of India in world MRO Market is 1 % of 41.8 BUSD • Total commercial fleet size is in excess of 430, expected to double in next 5-7 years • MRO is the third largest component(~15%) of the operating cost of an airline • Indian MRO Market is projected to balloon up to 2.6 BUSD by 2020 growing 10% per annum

24. Civil MRO Landscape in India “Advantage India” • Low Labor Cost (35$ per man hour in India vs. $ 60 in South East Asia & even more in Middle East and Europe) • Availability of technical talent to be trained and employed, More than 55 Aircraft Maintenance Training Schools • Geographical Advantage (Between Europe and Asia Pacific) • Untapped Demand , total Outgoing MRO Business is 0.7 BUSD per year • 100 % FDI in MRO Business

25. HAL and Aircraft MRO • Huge Infrastructure for Military MRO • Established Quality Systems and Logistical framework • Dedicated Overhaul and Accessories Divisions • Experienced work force with necessary skill set • Two operational Airports (Proprietary) at Nasik and Bangalore while its Accessories Division at Lucknow is close to Amausi Airport • To Sum it up... • India as well as HAL at a unique vantage point for Civil Aircraft MRO.

26. “Avenues for Capabiliy Development”

27. India – Offset Scenario • 19 contracts signed since 2007 worth 14.93 BUSD* • Leads to $ 4.479 billion as offsets(~ 20,000 crore) • 100 BUSD contracting in next 5 to 7 years • Approximately 1,00,000 Crore • Our focus as a country to offset should be on • Relevant Technology • Capability development • Performance Driven Lessons from other countries • Turkey • South Korea • Saudi Arabia • Brazil *Figure indicates the likely value of offsets and not the liquidated value of offset

28. Indian Aero Engine Scenario • India as a country needs to develop capability in field of Aero Engines • Requirement of Engines - Formidable cash outflow & long term dependency • HAL , AERDC - First flying jet engine in country & initiated development for 20 kN engine

29. Indian Aero Engine Scenario • Overall Outflow of approximately Rs 2,38,000+Crores (More than Indian defence budget allocation for 2012-13) • HAL - First flight worthy jet engine in country & initiated development for 20 kN engine with internal funding • Requires a serious national effort & National Funding for Development • BKC Committee Recommendation • Quote “An important need would be to develop aero engines, design & development and production to be managed by one organization,..........”Unquote

30. IDSA – Pondering Points • National Consensus • National Aerospace Accountability Center • Civil Aircraft Development should be a national priority

31. Introspection Points • Collaboration vs Competition ? • Synergy vs Redundancy ? • Short Term Gains vs Capability Building ? • Profit maximization vs Self Reliance ? Neither Public Sector alone nor private sector will achieve the goal of Indian Self Reliance Together WE CAN and WE WILL ACHIEVE IT

32. Jai Hind