HAL attempts to gatecrash India's first Strategic Partner programme to acquire naval choppers

India's first military procurement programme under the Strategic Partner route is set to get off the ground but already faces its first hurdle. It is whether to allow the public sector monopoly Hindustan Aeronautics Limited (HAL) and its subsidiary Indo-Russian Helicopters Limited (IRHL) to participate in the $ 5Billion procurement process for 111 Naval Utility Helicopters (NUH).

Eight Indian entities have responded to the Indian Navy's open Request for Expression of Interest (EoI) published online in February this year. These include Tata Advanced Systems Limited (TASL), Mahindra, Adani, Reliance, Bharat Forge and Laxmi Machine Works, besides HAL and IRHL.

A separate Request for Expression of Interest was issued to four foreign OEMs: Airbus Helicopters, Sikorsky, Russian Helicopters and Bell. The last date for submitting proposals is May 30.

The Strategic Partner concept involves selecting a pool of private Indian companies fulfilling basic minimum criteria for financial and industrial capability. This pool of Indian companies will respectively have to pair up with a qualified foreign OEM to make a bid. The RFP will be issued to the shortlisted Indian companies, and the foreign OEMs will be the technology providers in the respective bids.

Eight Indian entities have responded to the Indian Navy's open Request for Expression of Interest (EoI) published online in February this year. These include Tata Advanced Systems Limited (TASL), Mahindra, Adani, Reliance, Bharat Forge and Laxmi Machine Works, besides HAL and IRHL.

An Indian Navy team is scheduled to visit the facilities of the Indian companies which have bid for selection as Strategic Partner from May 28 to June 10 to assess their fitness. While the Expression of Interest draft clearly mentions that the bidding entity needs to be a Private Sector company, the bids by HAL and IRHL force a decision on the Government on whether or not to expand the Strategic Partner ambit to the Public Sector. The raison d'etre for the Strategic Partner concept was to create Defence manufacturing capability in the Private Sector.

HAL is India's largest Defence PSU. And according to information filed with the Registrar of Companies, the ownership of HAL in IRHL is 50.5 per cent. IRHL is a joint venture between HAL and Russian Helicopters to produce 140 Ka-226T helicopters in India. Any entity in which Public Sector companies have more than a 50 per cent stake is itself considered part of the Public Sector.

Foreign OEMs are seeking clarity from the Government. "We have to reconsider our strategy if HAL is allowed," a senior executive of one of the contenders told this reporter. Any bid involving HAL will become the favourite and disrupt the level playing field, besides defeating the very purpose of the Strategic Partner Concept, Industry insiders argue. That is because HAL, as an aerospace industrial monopoly, is the only entity which has existing capability and infrastructure to manufacture aircraft. Of the 111 NUH to be procured, 96 are to be made in India.

An Indian Navy team is scheduled to visit the facilities of the Indian companies which have bid for selection as Strategic Partner from May 28 to June 10 to assess their fitness. While the Expression of Interest draft clearly mentions that the bidding entity needs to be a Private Sector company, the bids by HAL and IRHL force a decision on the Government on whether or not to expand the Strategic Partner ambit to the Public Sector.

HAL has a declared tie-up with Russian Helicopters, and allowance to either HAL or its subsidiary IRHL will skew the selection process in favour of the Kamov-226T. Sikorsky of the US is fielding the S-76D while Europe's Airbus Helicopters is likely to offer the AS565 MBe Panther. There's uncertainty over the participation of the other American contender, Bell. The Bell 429 helicopter falls in this category being prospected for the Indian Navy procurement.

Mahindra has a tie-up with Airbus Helicopters while Tata has one with Sikorsky. While these tie-ups are not binding, and are subject to the bid by the respective foreign OEMs qualifying for Stage 2 of the competition, an Indian company can submit only one bid.

The other uncertainty is over the unavailability of military-naval versions in three of the contenting helicopters. The only option which has a demonstrated capability for naval application - including weapon hard points, corresponding radars and submarine-detection capabilities - is the Airbus AS565 MBe Panther. Over a decade ago, a tender Light Utility Helicopters for the Indian Army was cancelled after it was pointed out that the technically compliant helicopter fielded by Eurocopter - the predecessor company of Airbus Helicopters - for extensive trials was not a military variant.

"This is a great opportunity to build Defence manufacturing capability and enhance the Make in India narrative. But the process must ensure transparency and fair competition," an Industry source reasoned.