Make-in-India for Strategic Self Reliance & Building a Globally Competitive Industrial Base

~ By Dr. Pratyush Kumar

India’s 70thanniversary finds the world’s largest democracy living in challenging times, in a complex and dangerous geopolitical neighborhood. Regional powers and rivals are pressing ahead with aggressive plans to challenge India’s longstanding airpower superiority, which has been the cornerstone of India’s national defence since 1971.  This has required India to continue modernizing its defence capabilities.

Over the past 70 years, India has relied largely on import and technology transfer from the Russian Federation (erstwhile USSR), France, and the UK for most critical tactical airpower needs.  The model for Transfer-of-Technology (ToT) has essentially been transfer of build-to-print drawings to Defense Public Sector Undertakings (DPSU) such as Hindustan Aeronautics Limited (HAL).  While this model has served a useful purpose, it has also left critical gaps forcing India to carry the dubious moniker as the largest arms importer in the world.

ToT Model with DPSUs have Outlived their Utility

Relying on ToT with DPSUs has generally led to vertical integration of manufacturing of full aircraft platforms without significant development of India’s domestic vendor/supplier base of components.  This has led to bottlenecks in production capacity leading to significant gap between demand and supply.  It has also forced huge over reliance on knocked-down kits imported from the source countries.  By some accounts aerospace DPSUs import over 60% of their output.

This has also led to under-development of design and development capability in India, so that every new need forces a new and self-reinforcing cycle of fresh ToT and continued reliance on imports.

At the same time, Indian defence services have found platforms coming out of such production lacking in maintainability, reliability and availability, resulting often in less than 50% mission readiness of most critical platforms.

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As India looks ahead, historical ToT with DPSU is unsustainable; a different model must be explored to keep defence capabilities contemporary, to build an indigenous industrial capacity, and to reduce over dependence on import.

A Proven Production Model

Modern Aerospace & Defense (A&D) platforms require billions of dollars in development.  They need a complex production system – global in scope with multilayered deep capability.  Several countries, notably the United States, the UK and France, have developed a tiered production model where A&D majors such as Boeing, Lockheed Martin, Dassault Aviation, and BAE provide overall systems integration supported by a cadre of Tier 1 suppliers for components such as engines (GE, Pratt & Whitney, Rolls Royce, and Safran), avionics (Honeywell, Rockwell, UTAS, Thales), aerostructure (Triumph, GKN, Leonardo), and radar (Raytheon, Telephonics, Thales).

Each of these Tier 1 suppliers is a highly specialized A&D giant who in turn deploys a large network of Tier 2 suppliers spread across the globe.  Tier 2 suppliers, in turn, rely on a bevy of other sub-tier suppliers, many of whom are Small and Medium Enterprises (SME).

System integrators do the overall design and development of the platform.  They do the final assembly of the aircraft, testing and certification constituting about 30% of the value.  A tiered vendor base contributes the remaining 70% value of the platform.

2Such as system has proven to be quite successful and sustainable and has enabled stakeholders to:

  • Distribute investment across many suppliers so no one company is left holding a big check.
  • Diversify development risk by distributing work packages in manageable chunks across the vendor base.
  • Broaden industry involvement and expertise enabling the full power of private sector enterprise to contribute.
  • Allow specialization on specific domains such as engine, radar, and avionics which are highly complex and need continuous improvement.

As India plans for the future, it must take a fresh look at developing its own version of this kind of tiered structure that will allow private enterprise to participate and enable the public sector to build new capabilities.  Of course managing such a tiered and deep vendor base requires new capabilities of supplier management, supplier quality, and program management.  The systems integrator is ultimately responsible for the platform and thusthe quality of each and every one of its direct (Tier 1) and indirect (Sub-Tier) suppliers.  This is not an easy skill set to acquire; it needs a systematic, thoughtful, and long-term plan, leveraging new programs and opportunities and breaking the historical cycle of ToT through DPSUs. India must look at model where the public sector and private industrial base co-exist, each contributing to India’s capabilities and continuously upgrading and modernizing their processes and operations.

Any new aircraft procurement India undertakes must be structured to “jumpstart” India’s domestic aerospace manufacturing capabilities and the development of this tiered system as much as possible. The goal is not to replace or leave behind the existing DPSUs in aerospace, but to develop a deep and robust private sector supply chain to complement and strengthen DPSU operations and that includes a substantial DPSU manufacturing role going forward.

India’s Challenge and Opportunity

By many accounts, India will face tactical airpower shortfall approaching 300 aircraft in the next two decades.  This is a watershed moment both for India’s national security and its economic development.

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Today’s decisions will determine whether and how India can close that gap. Most vitally, it is critical to replace retiring fighter jets to maintain the current 33 squadron strength with new fighters that have a qualitative advantage. And that advantage must be built into a forward looking “development spiral” that keeps India’s air force ahead of the curve as rivals upgrade and enhance their fleets in coming years.

As Prime Minister Modi’s ‘Make in India’ initiative has demonstrated, the most reliable way to ensure India’s long term economic, political, and national security is to develop its domestic capabilities – which in the aerospace context means pushing high quality, high value work down into a tiered private sector supply chain.  And the best way to do this is to carefully structure the next procurement of tactical fighters to maximize long-term technology transfer and aerospace supply chain benefits, working with an Original Equipment Manufacturer (OEM) that knows how to operate in India and is fully committed to making a cutting edge technology transfer process work.

In the foreseeable future, India’s biggest challenge will be countering potential threats on two fronts. Just matching the upgraded capabilities of F-16s that operate in the region will be insufficient.  This means selecting a partner that can provide an aircraft that can outfly even the most advanced jets like the stealthy J-20, is affordable enough to ensure a large enough buy to provide tactical defense across the long and volatile western front, and can serve as the foundation for development of a “bottom up” industrial aerospace economy that will propel economic development forward – a contemporary aircraft platform that will remain cutting edge and preserve India’s airpower superiority for the next 40-years.

Aircraft Capabilities and Overall Force Structure

Indian air superiority is vital to the nation’s security and to preserve the regional strategic balance. Any new multirole fighter must sustain and extendI ndia’s historic airpower advantage.

Many experts have observed that when maintenance and operational availability are taken into account, the true size of the IAF drops to below its current 33 squadrons.  And that figure includes large numbers of obsolete or limited capability aircraft that would contribute little if a conflict should erupt.  Without a new procurement, and even factoring in the introduction of the Light Combat Aircraft and the limited fleet of Rafales currently under contract, the shortfall is predicted to grow to 200-300 aircraft by 2038.

Regional rivals, by contrast, are quickly modernizing, focusing procurement on highly advanced fighters and working to develop a quantitative and quality edge that could put Indian air superiority at risk.[1] In many cases, even the legacy aircraft fielded by India’s rivals are superior to the IAF’s older planes. As a result, the next Indian multirole fighter must be able to outcompete/overcome the capabilities represented in advanced aircraft like the J-20 and J-31, as well those in upgraded Block 52 F-16s.

That means a survivable, multi-role, maintainable, high availability aircraft that can perform a wider variety of missions, outfly or at a minimum match the most advanced rival aircraft head to head. It also needs to be cost effective and available enough to ensure a high degree of readiness – ensuring India gets the very most out of its new fleet.

A detailed review of the full suite of design features, performance metrics, avionics, sensors, weaponry, and other features that contribute to an aircraft’s overall performance is beyond the scope of this paper.  However, a few key items merit particular attention.

Combat Extension Capabilities.

For some time to come, the IAF is likely to field fewer aircraft than the combined forces of its regional rivals.  This makes it vital to select a multirole fighter with enhanced survivability and flexibility options that can allow the fleet to outlast larger rivals in a protracted conflict.

One key feature that allows a smaller force to take on larger rivals is twin-engine design, offering added survivability and increasing the odds an aircraft can remain airworthy and return to base even after a direct engine hit. When facing a larger force, the impact of every aircraft lost is magnified and the value of this added margin of safety cannot be overstated.

Other features bring similar “combat extension” value – such as “buddy” refueling capabilities that allow IAF frontline fighters to stay on station for longer periods of time.  While a larger air force with a more robust fleet of dedicated refueling tankers may be able to forego this kind of fighter-to-fighter refueling capability. But for the IAF, looking to stretch limited funds across as many needs as possible, this is a vital force multiplier.

Finally, a substantial degree of stealth to maximize survivability and increase mission flexibility is valuable.  While the general public tends to view “stealth” as a yes or no proposition, the truth is all advanced aircraft have greater or lesser degrees of stealth.  And while stealth may not be a primary consideration compared to the others identified, all things being equal, an aircraft with a higher degree of stealth will be more survivable and better able to conduct a broader range of missions.  That generates more options for commanders and keeps losses at a minimum in any engagement where the IAF faces a larger foe.

Newer Technology, Extendable Capability

The IAF should strive to procure the aircraft that entered service most recently in order to stay at the front edge of the aircraft’s development curve and technology upgrade spiral, and to obtain the longest window of likely service life between procurement and obsolescence.  Procuring an aircraft with an older Initial Operation Service date risks locking India into fading or unsupported designs. India shouldn’t get locked into producing end-of-life aircraft with no future technology upgrade path.

Newer planes are more likely to have built in high-performance features and depend less on major retrofits.  Built in stealth, for example, is generally superior to airframe treatments or modifications bolted on decades after initial entry into service.

More fundamentally, a new aircraft model is likely to be relatively early in its development “spiral” – the process by which aircraft manufacturers and advanced militaries strengthen and upgrade their aircraft to keep them at the cutting edge over their entire service life.  An aircraft at the beginning of this process will have a far longer “top of the line” lifetime than one that has been in service for many decades and will inevitably face an earlier platform retirement.

Ensuring Qualitative Separation from Key Rivals

The most reliable way to ensure the IAF’s qualitative edge is to invest in a newer, more robust basic platform that potential adversaries are not able to field.  While some argue that flying the same aircraft as rivals is a safe way to ensure that they do not surpass India’s capabilities, this is tantamount to a defensive crouch that essentially places the nation’s security at risk. And the problem becomes acute when potential adversaries have a significant experience lead on a platform – in a combat situation they can eke out more based on their experience.

By the same token, aircraft proposals that promise to engineer a qualitative advantage for India over potential adversaries flying the same basic platform by limiting those competitors’ access to upgrades and enhancements should be viewed skeptically.  It’s an easy promise to make at time of sale but a very difficult one to enforce over the long haul.  Better to start out with a more advanced, newer platform and build forward from there.

Lifecycle Cost.

Given the larger size of rival fleets and the IAF’s lopsided dependence on older aircraft, this procurement must bring as many advanced fighters on line as possible to close the potential 200-300 aircraft shortfall.

All else being equal, an aircraft that is more affordable over the long term is always better.  That means carefully evaluating both up front purchase costs (once all discounts, offsets, and other factors are considered) and life cycle costs (including cost per flight hour and maintenance, upkeep, and depot requirements over time).  A newer aircraft is likely to have lower maintenance costs and, over the long haul, easier and more affordable access to supplies and spares.  Of currently available aircraft, Super Hornet has the lowest cost per flight hour in the U.S. inventory, including the F-16.

Another factor that can generate substantial long term cost savings is the availability of off-the-shelf variants that use the same basic airframe to meet airpower needs beyond the basic fighter bomb mission.  For example, an aircraft with electronic warfare ready variants would bring greater economies of scale if India should in the future seek to acquire those capabilities.

Similarly, and more immediately, while no one expects the IAF to base its tactical airpower decisions on the needs of the Indian Navy, it is clear that over time the Navy will need to upgrade and expand its carrier air wings.  Selecting an IAF fighter now that offers a carrier ready variant would permit substantial cost savings and force integration benefits when that occurs.

“Make in India” and the Development of an Advanced Domestic Aerospace Capability

This procurement represents a once-in-a-generation opportunity to jumpstart India’s domestic aerospace industrial base and accelerate the development ofits advanced military grade manufacturing capability.

The importance of this objective cannot be overstated.  Development of a modern aerospace capability and supporting tiered supply chain is vital for India’s long-term national security – as the only way to reduce and eventually end the nation’s reliance on foreign suppliers of advanced defense systems.  And it is a doorway India must pass through in order to develop advanced industrial capabilities that will allow it to compete in high tech markets around the world.

Prime Minister Modi’s ‘Make in India’ initiative is providing an enormous boost to the development of India’s modern industrial economy.  But all prior ‘Make in India’ initiatives pale in comparison to the prospect of standing up a new cutting edge aerospace manufacturing facility to build one of the world’s most advanced fighter jets.

The IAF knows from hard experience how challenging it can be for manufacturers to live up to their ‘Make in India’ commitments in the context of advanced aerospace projects.  For this reason, it is vital to select both an aircraft and a manufacturing partner that gives ‘Make in India’ the greatest chance to succeed and yield the most substantial domestic industrial gains.

Five elements must come together to create a globally competitive A&D industrial base in India that not only serves India’s needs but is fully integrated into the global supply chains of major OEMs for the long term:

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111.Product & Technology: A Long-Term Competitive Aircraft

For similar reasons, the aircraft itself must be a competitive new model fighter that can be expected to compete in and win international procurements for years to come.  Leveraging global demand and international sales to drive up export volume in this way supercharges ‘Make in India’ by vastly extending the useful life of the manufacturing facility and the number of Indian aerospace workers who will be able to gain experience there.

By contrast, an older model aircraft trying to eke out a few last sales before platform retirement is unlikely to be competitive with international buyers over the long haul, saddling India with a “white elephant” manufacturing plant that has little long term economic or “know how” value.

The chosen aircraft and manufacturing strategy must also lay a clear and direct pathway to the domestic design and production of a new Advanced Medium Combat Aircraft (AMCA).

In large part, that simply means ensuring that procurement focuses on obtaining the most advanced technology available and putting in place an effective ‘Make in India’ manufacturing plan that accelerates development of an advanced manufacturing supply chain and boosts domestic aerospace capabilities.  But in certain areas it is worth considering up front whether the selected aircraft and ‘Make in India’ arrangement will fill key gaps needed on the pathway to the AMCA.

Fluency with advanced composite materials has become a core manufacturing competency needed to produce cutting edge highly capable combat aircraft.  This is a highly specialized field with a small number of military capable suppliers and an area where India must become self-sufficient if it is to domestically produce the AMCA.  Care should be taken to ensure that this procurement results in meaningful skills and technology transfer in the area of composites.

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NAVR, public release SPR-2016-904
Distribution Statement A – approved for public release, distribution is unlimited

It is also vital to prioritize a two engine (2E)Make-in-India fighter to counter the growing threat on the eastern border while giving HAL chance to develop the Light Combat Aircraft. India has dual needs – finding a replacement for retiring one engine (1E) MIG-21s and maintaining a Force Balance for operational needs which calls for more 2E fighter/attack aircraft.

From a Force Balance point of view, IAF has already determined that it requires 126 2E aircraft during the MMRCA AoN process. So with only 36 Rafale on order, there is a clear and present gap of 90 aircraft which will become even more acute in coming years.

Given the regional geopolitical situation, India needs an effective counter to J-20 aircraft, not just upgraded Block 52 F-16.  Therefore, India needs to move quickly on the 2E aircraft decision, which will also give a timely boost AMCA development and send an important geopolitical message.

  1. Business Case and Scale

  Scale is a must to close the business case for developing indigenous capability. For example, developing a domestic engines capability is vital if the AMCA program is to yield a truly indigenous aircraft.  Based on current specs and development plans, the GE F414 engine would be viable in the LCA, the Super Hornet, and the future AMCA.  Taking advantage of a common engine would do much to advance a logical technology transfer agenda in one of the most complex and high-performance areas of aircraft manufacture.

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  1. Skilled Workforce – A Must for Aerospace & Defense manufacturing in India

Aerospace manufacturing requires uniquely tight tolerances and production has to be essentially defect-free.  Therefore, it necessitates highly skilled factory workers and services capability.

To realize growth in aerospace manufacturing and achieve government’s vision, Aerospace & Aviation Sector Skills Council (AASSC) estimates additional 90,000 trained workforce will be needed over the next decade.  Aerospace sector not only needs engineers from multiple disciplines — ranging from computer science to mechanical engineering to materials sciences, but also requires skilled frontline manufacturing workers.

The government of India is addressing this problem through initiatives such as setting up the National Skill Development Corporation (NSDC) and AASSC operating under the auspices of NSDC. India’s vocational education and training institutions are in the process of addressing the requirements of the industry.

For similar reasons, India’s new fighter must be built in India at an advanced top of the line manufacturing plant that uses the most current and forward-leaning technologies and processes.  India must refuse to accept “last generation” technology or dated “hand me down” production facilities that will lock its domestic aerospace economy into a cycle of obsolescence for an industrial generation.

Indian aerospace workers who gain experience and skills working at this facility must learn the most advanced manufacturing methods and work with the newest processes and equipment available to lay the foundation for a domestic aerospace supply chain and long-term capability that will ultimately perform most of the work on this new ‘Make in India’ fighter.  There should also be a role to use this process to strengthen and modernize India’s aerospace PSUs, who ideally would have some role to play in the end stage work bringing these new aircraft online.

As workers rotate out of this facility to start their own businesses and staff existing aerospace suppliers, they should be equipped with skills equal to those at any of the world’s most advanced economies.  This is vital with experts predicting India will need 90,000 trained aerospace workers to meet coming demand and currently producing only 4,000 qualified graduates a year.

  1. Know How: The Right Partner Committed to Sharing Capabilities and ToT

The most important factor by far is selecting an OEM partner that has experience in complex local sourcing arrangements such as evidenced in the ‘Make in India’ program. Ideally it should be one that has a record of success in this regard.

The partner company must have extensive experience working through technology transfer issues, to ensure it can navigate its own domestic legal and national security review processes and understand and comply with Indian requirements, as well.  Given the unique opportunity at hand, and the devastating opportunity costs for India if the local production and technology transfer components of the program do not succeed, choosing a reliable partner with a strong track record making ‘Make in India’ work is crucial.

For similar reasons, it is also important to select a partner that already has concrete, hands on experience building its own aerospace components in India and working with existing vendors, suppliers, and partners.  A manufacturer that has seen the value of building in India and that has an existing network of relationships with India’s current supplier networks is more likely to hit the ground running.  By contrast, a company with no real pre-existing footprint in the country or one that has only participated in India’s domestic aerospace economy when compelled to do so by ‘Make in India’ will be less likely to succeed.

There is also tremendous value in working with a partner that has both commercial and military aerospace experience and operations.  The purpose of ‘Make in India’ is to develop domestic industrial capabilities – and the benefits will be far more substantial with a partner that can help boost both India’s military and commercial opportunities and expertise.  A partner with a broad diverse aerospace business will be better positioned to integrate nascent Indian suppliers and vendors into their global supply chain, particularly those who have done ‘Make in India’ work relevant to the fighter aircraft they propose to supply for this procurement.

5.Supply Chain.  Co-opt Private Enterprise without Sacrificing Public Enterprise

At this time, HAL needs a fair opportunity to build LCA Mark 1 & 1a.  Depending on HAL’s performance, production decisions on a new 1E fighter can be made in a couple of years.  In the meantime, to meet critical operational need of 2E aircraft in near-to-medium term, the immediate ‘Make in India’ fighter jet decision should be focused on 2E aircraft.

India wants to develop an alternative to HAL for military aircraft manufacturing and therefore wants to partner with private industry on the new ‘Make in India’ fighters.  A key complication is how to develop objective criteria to select the partner, which won’t be challenged by parties not selected.  Any such controversy, or fear thereof, will drag out decision on strategic partner selection.

Also, there is risk that any such pre-selected partner may act as a monopolistic player complicating negotiations. Therefore, it’s best to go through the established Buy & Make category as defined in DPP 2016 and leave the choice of India partners to the selected OEM.

At this stage, while HAL’s capacity is a concern as “they have more on their plate than they can deliver,” it would be prudent not to rule out a possible structure where HAL or DRDO participates in a Special Purpose Vehicle (SPV) with the selected OEM.  To avoid distracting HAL, this SPV wouldn’t be controlled by HAL and would require only minimal management oversight from them.  In line with the earlier rationale, 70% of the value will be added by the private players feeding into to the SPV which will do final assembly, testing, and certification totaling to 30% of value.

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Such a structure would enable future collaboration of next generation aircraft such as AMCA with HAL and DRDO.  SPE with a global OEM can become conduit for delivering much needed manufacturing best practices for existing HAL factories.

G2G Approach is Preferable for Speed, Transparency, and Cost

There is a school of thought to ask for fresh Expressions of Interest (EOI) for ‘Make in India’ fighters.  Based on the response to this EOI on level & depth of technology transfer and indigenization, IAF/MoD will then decide on a government-to-government (G2G) procurement via Inter Governmental Agreement (IGA) or decide to float a tender.  Having been through a lengthy (10 year) and ultimately inconclusive tender process for MMRCA at the end of which India had to rely on a G2G transaction, it will be prudent to stay on the G2G path.

The G2G route also allows India to buy into huge procurement scale of big buyers like the United States.  That brings unrivaled cost advantages; FMS deals tend to be more economical than competitive procurements given the scale advantages and cost plus nature of such deals.  Besides, G2G procurement is transparent and avoiding delays and potential controversies.

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India’s ability to maintain its edge versus potential regional adversaries depends on expanding and upgrading its tactical aircraft fleet.  A G2G approach prioritizing a two engine tactical aircraft for the ‘’ in India’ project is the best way to counter emerging threats and build India’s industrial base and supply chain capabilities for long term development and growth.  This will allow the IAF to get the best out of opt private enterprise while enhancing and strengthening the capabilities of its DPSUs.

[1]While it is common to refer to “Fourth Generation,” “Fourth Generation Plus,” and “Fifth Generation” aircraft in discussions of advanced airpower, these terms do little to clarify the issues.  The available multirole fighters exist on a continuum of version “blocks”, capabilities, attributes, and treatments that represent a much more fluid set of choices than the broad, rigid, “Fourth” or “Fifth” Generation categories suggest.  For this reason, the analysis here focuses on specific capabilities and related considerations such as in-service dates and expected development spirals in comparing aircraft options.

(This is the summary of the address made by Dr. Pratyush Kumar, President, Boeing India at the India Ideas Conclave at Goa on 4thNovember, 2016)

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