Defence Ministry audit finds HAL-made jets costlier than foreign ones

New Delhi, Oct., 19, 2018: Fighter jets manufactured by homegrown aircraft maker Hindustan Aeronautics Limited (HAL) are costlier than similar ones made by foreign companies, a defence ministry audit has found.

The interesting finding has crept its way out into the press at a time when the ruckus over Rafale fighter jet deal shook the government and divided public opinion over the wisdom of handing costly defence deals to private firms.

The review document has found that the HAL-made Su-30 MKI of the Indian Air Force is about Rs 150 crore costlier than its Russian counterparts produced by the JSC Sukhoi Company. The Russian versions cost Rs 269.77 crore, whereas the same jets produced under Russian license in India, come at a price range of Rs 417.69 crore.

“The aircraft produced at HAL comes at a significantly higher cost when compared to direct purchase from the OEM,” the document added.

The HT said it has seen a document, which was prepared by the ministry of defence. The department of defence production is studying the report, sources told HT.

The crucial report has made the startling revelation that the reason behind the cost spike in HAL is primarily “lesser efficiency and exorbitant man hour rates,” in the home-grown company.

HAL disagrees with the interpretation of the report. Responding to queries, a spokesperson said “Cost escalation from 2005 (for the Hawk jet) is normal. We also need to take into account the life-cycle cost of each product against off the shelf purchase from overseas. The indigenous benefits, the ecosystem HAL creates for the larger benefit of the country should be factored in also.

Importantly, staggered or small orders deny economies of scale to HAL.” HAL also pointed to supply chain issues adding to cost.

“Given that multiple agencies get involved in our manufacturing process, kit cost from OEMs and other delays like raw material and spare part supply issues, which are also endemic to the aerospace industry in India, the increase in cost must be evaluated in the right spirit,” the spokesperson added.

The development comes amid the Modi government and Opposition slugfest on the state-owned company being excluded from the Rs 7.87-billion euro deal under which Dassault Aviation along with Anil Ambani’s Reliance Group will produce 36 of the fourth-generation, twin-engine, multi-role fighter jet.