NEW DELHI ― India has formally approved the acquisition of 111 naval utility helicopters for $3.39 billion to be domestically manufactured under the Strategic Partners policy, but the local private defense industry feels the program is infeasible.
The Defense Acquisition Council, the government’s defense procurement body, last week granted an acceptance of necessity for the program under which 16 helicopters will be procured from foreign companies and the remaining 95 will be produced by local private companies, possibly though a joint venture and technology transfer from the foreign company.
In July, the Ministry of Defence floated a request for information to both domestic and foreign original equipment manufactures for the naval utility helicopter program.
Foreign OEMs ― including Airbus Helicopters of France, Russian Helicopters of Russia, and the United States’ Lockheed Martin and Bell Helicopter ― responded with information on capabilities, technology transfer, scope of building domestic technology and constructing an ecosystem to build naval utility helicopters in India.
Likewise, domestic private firms ― including Adani Group, Bharat Forge Limited, Reliance Defence, Larsen & Toubro, Mahindra Aerospace and Tata Advanced Systems ― are also submitting offers to build helicopters in the country. None of these local companies have ever produced helicopters.
A senior MoD official said that within the next six months, selection of foreign OEMs and domestic companies will be complete, and that “thereafter a formal request of proposal will only be issued to selected Indian companies as strategic partners who can team up with selected foreign OEMs to participate in the program and jointly offer commercial and technical bids.” The selection will be made based on price and the technical offer.
The CEO of a leading private company, speaking on condition of anonymity, was critical of the policy approach for the program.
“The Strategic Partners policy is not workable for naval utility helicopters, and MoD must aggregate all requirements of the services and strike one contract for manufacturing all types of helicopters for one place.” He added that each naval utility helicopter produced in India will cost about $55 million, and that he’s confident the program will face cost overruns and delays.
According to a country manager of a foreign defense firm, “the order for manufacturing 95 helicopters in India is too small for any foreign OEM to establish joint venture with private defense company and then even transfer the technology.”
However, a second MoD official was undeterred. ”It will be useful and feasible for private companies to set up joint ventures with foreign primes and carry out initial feasibility study of the helicopter platform and subsystems. Since none of the private sector companies manufacture helicopters at this stage, this will be a greenfield program. So initial investments in terms of capital expenditure and building up requisite skills will be very huge. “
A senior executive of the Federation of Indian Chambers of Commerce and Industry, a lobbying organization, said that ”95 as a standalone number for an OEM is very attractive. However, for somebody to invest in India for such a facility, there should be adequate opportunities for other helicopter programs, long-term maintenance and support, and some supply chain sourcing by helicopter OEMs.“
The Indian Navy currently operates Hindustan Aeronautics Limited-built Cheetah and Chetak light utility helicopters, which have been in service for 40 years and outlived their operational life.