Made in India is costlier; joint development is mere purchase

[CONNAN]

The report also indicts HAL for taking 2-3 times more man-hours than those taken by Russians.

What was supposed to be cheaper when made in India is much costlier. What was supposed to be a joint development programme has been reduced to a purchase from abroad. That is among the key findings of internal government audits of major aerospace projects in recent years.


All the aerospace reports accessed by The Hindu are scathing in their indictment of agencies such as the Defence Research and Development Organisation (DRDO) and Hindustan Aeronautics Ltd. over the way they have handled joint development programmes involving foreign partners, or produced aircraft in India under transfer of technology.


Sukhoi-30 MKI fighters

HAL was originally tasked by the Cabinet Committee on Security (CCS) with undertaking licence production of 140 Sukhoi-30 fighters under transfer of technology from Russia, with conditions including: indigenous manufacture of the aircraft at a cost lower than that of the imported aircraft.


The IAF entered into four different contracts with HAL for supply of the 140 aircraft, and later two contracts for 40 and 42 additional fighters. Thus a total of 222 S-30 MKI were to be assembled by HAL. When HAL began to assemble, however, the story was different. “Contrary to projection in the CCS note, where it was estimated that the indigenous aircraft production cost would be lower than that of the imported aircraft cost… the actual cost of phase IV aircraft has always been higher than that of the imported aircraft,” the report says.


In the production year 2014-15 in phase I, when aircraft was directly imported from Russia, the average cost per fighter was Rs. 270.28 crore. In phase IV, when aircraft is manufactured by HAL from raw material, the cost is Rs. 417.85 crore.


The report also indicts HAL for taking 2-3 times more man-hours than those taken by Russians.


Advanced Light Helicopter


An audit of the Advanced Light Helicopter (ALH) project of HAL from 2001 to 2009 carried out by the Controller-General of Defence Accounts (CGDA) pointed out: “As against the envisaged indigenisation level of 50 per cent, about 90 per cent of the value of material used in each helicopter is procured from foreign suppliers.”


The audit said that during the production of the helicopter, despite gaining experience of making 90 of them, the labour hours remained almost double of what was prescribed by the consultant.


The Air Marshal Matheswaran report on the aeronautical sector points out that the Shakti engine used in the helicopter “only has an indigenous name with hardly any self-reliance or technology control.”


Missile development


The Matheswaran report points out that in 2003, a decision was taken to allow the services to meet their operational requirements of surface-to-air missiles (SAMs), till 2010, by acquiring through the “buy global” route because the development of the indigenous Akash and Trishul missile systems was delayed.


The DRDO stepped in and proposed joint development with Israel. So the DRDO and Israel Aerospace Industries (IAI) started development of a long-range SAM (LRSAM) for the Navy in 2005. In 2007, they started work on developing a medium-range SAM (MRSAM) for the IAF under a separate contract. “Incidentally, LRSAM & MRSAM is the same missile,” the report says.


In a scathing indictment of the entire project, the report says IAI remains the design authority for the complete system. “IAI is doing the role of supplier and the DRDO is the buyer, which is contrary to the DRDO role of design agency.”


“No transfer of technology (ToT) has been taken as part of the contract. We will remain dependent on IAI for its share,” the report points out, adding that the intellectual property rights (IPRs) remains with the design authority.


Conflict of interests


The report also tears into the Department of Defence Production.


“The DDP, which on behalf of the Services and the MoD would have been the instrument of indigenisation, became primarily a custodian of a large collection of ordnance factories and de-facto owner of shipyards, aircraft factories etc.”


This resulted in a conflict of interest, the report says.
Made in India is costlier; joint development is mere purchase - The Hindu

 

[MilSpec]

that is because Journalist from JNU and DU can't see the difference between a nut from a bolt.
Labor hr's of HAL is given more than that of Russian counterpart, even now the production line is dependent of some key components from russia for the MKI, parts outage will cause a line a stop. HAL was also designed to employ a large workforce by the GoI to be a employment center for nation, like BHEL, BEL, BEML, OFB, all PSU's by design are overstaffed, that will reflect on labor hours even if the cycle time is the same. Next the "Hindu" is also off on cost's first 2014 costs of the MKI was 358Cr and not 417, and offcourse the price of direct import for P1 and P4 would be different. There was a massive initial investment cost (for tooling, hangars, final assembly fixture, Engine manufacturing, avionics dept, ToT costs, CNC Complex, Jigs Fixture that would have to be accounted for, in addition P1 aircrafts that came to India were not MKI but the SU30K's, which infact were returned and what is the value of 270Cr of 2000 after 15 years adjusting the devaluation of rupee?. The moron who compiled the report at hindu, wouldn't know the difference though.

This report is utter garbage.

@PARIKRAMA @Abingdonboy @anant_s @sathya @Dillinger

 

[rubyjackass]

The report also indicts HAL for taking 2-3 times more man-hours than those taken by Russians.

What was supposed to be cheaper when made in India is much costlier. What was supposed to be a joint development programme has been reduced to a purchase from abroad. That is among the key findings of internal government audits of major aerospace projects in recent years.


All the aerospace reports accessed by The Hindu are scathing in their indictment of agencies such as the Defence Research and Development Organisation (DRDO) and Hindustan Aeronautics Ltd. over the way they have handled joint development programmes involving foreign partners, or produced aircraft in India under transfer of technology.


Sukhoi-30 MKI fighters

HAL was originally tasked by the Cabinet Committee on Security (CCS) with undertaking licence production of 140 Sukhoi-30 fighters under transfer of technology from Russia, with conditions including: indigenous manufacture of the aircraft at a cost lower than that of the imported aircraft.


The IAF entered into four different contracts with HAL for supply of the 140 aircraft, and later two contracts for 40 and 42 additional fighters. Thus a total of 222 S-30 MKI were to be assembled by HAL. When HAL began to assemble, however, the story was different. “Contrary to projection in the CCS note, where it was estimated that the indigenous aircraft production cost would be lower than that of the imported aircraft cost… the actual cost of phase IV aircraft has always been higher than that of the imported aircraft,” the report says.


In the production year 2014-15 in phase I, when aircraft was directly imported from Russia, the average cost per fighter was Rs. 270.28 crore. In phase IV, when aircraft is manufactured by HAL from raw material, the cost is Rs. 417.85 crore.


The report also indicts HAL for taking 2-3 times more man-hours than those taken by Russians.


Advanced Light Helicopter


An audit of the Advanced Light Helicopter (ALH) project of HAL from 2001 to 2009 carried out by the Controller-General of Defence Accounts (CGDA) pointed out: “As against the envisaged indigenisation level of 50 per cent, about 90 per cent of the value of material used in each helicopter is procured from foreign suppliers.”


The audit said that during the production of the helicopter, despite gaining experience of making 90 of them, the labour hours remained almost double of what was prescribed by the consultant.


The Air Marshal Matheswaran report on the aeronautical sector points out that the Shakti engine used in the helicopter “only has an indigenous name with hardly any self-reliance or technology control.”


Missile development


The Matheswaran report points out that in 2003, a decision was taken to allow the services to meet their operational requirements of surface-to-air missiles (SAMs), till 2010, by acquiring through the “buy global” route because the development of the indigenous Akash and Trishul missile systems was delayed.


The DRDO stepped in and proposed joint development with Israel. So the DRDO and Israel Aerospace Industries (IAI) started development of a long-range SAM (LRSAM) for the Navy in 2005. In 2007, they started work on developing a medium-range SAM (MRSAM) for the IAF under a separate contract. “Incidentally, LRSAM & MRSAM is the same missile,” the report says.


In a scathing indictment of the entire project, the report says IAI remains the design authority for the complete system. “IAI is doing the role of supplier and the DRDO is the buyer, which is contrary to the DRDO role of design agency.”


“No transfer of technology (ToT) has been taken as part of the contract. We will remain dependent on IAI for its share,” the report points out, adding that the intellectual property rights (IPRs) remains with the design authority.


Conflict of interests


The report also tears into the Department of Defence Production.


“The DDP, which on behalf of the Services and the MoD would have been the instrument of indigenisation, became primarily a custodian of a large collection of ordnance factories and de-facto owner of shipyards, aircraft factories etc.”


This resulted in a conflict of interest, the report says.
Made in India is costlier; joint development is mere purchase - The Hindu

Nothing new here. The offset clauses in defence procurements are only helping scams to thrive.

 

[Raftaar]

Nonsense!
Don't understand that these journalists expect some miracle or some genie would come n start making equipment !
Its ok if time taken is more , atleast Indian worker is carrying home some money ....
2ndly, make in india is continuously evolving process n will take time to show results !

 

[PARIKRAMA]

Source old - IAF frets over Russian fighter aircraft deal - The Economic Times

i quote
At present, a Sukhoi 30 MKI that would cost Rs 227 crores to manufacture in Russia, rolls out of HAL's Nashik plant for over Rs 440 crores. This considerable mark-up is due to the extra man hours that are required by HAL to manufacture an aircraft, the official explained.
unquote

True we are dependent on Russia for critical components and we also add French and Israeli avionics on it. IF DM MP said Rs 358 crs then the 440-358 Crs might explain the add ons procured outside the Russian contract
But 358-227 = 131 Crs is made up of few things like critical components from Russia, excess Manhours in HAL, even the quality of manapower which is very good at "assembling" but due to a fat workforce (typical PSU led employment scheme) this figures stands out more

Two more instances where a similar view was pointed..............

Rafale made in HAL needing 2.7 x manhours as per DM MP himself in an interview
HAL needing more manpower for LCA MK2. (Of course this was a pressure tactic for Mk1 variant order)

Perhaps both these points to a bulge in manpower and human capital led cost escalation versus productivity which has remained same.

using the data from this link :http://www. hal-india. com/Common/ Uploads/Finance/Annual-Report-2013-14- English.pdf
which is basically the annual report for 2013-14

and

You see the trend shows, Sales per employee to avg employee cost showed a positive trend till 2006-07 post which it fell down and is hovering at a rate which is somewhat similar to 2004-05 time era.

This proves that avg employee cost in spite of higher sales resulting into higher sales per employee is clearly offset by increase in manpower costs which is also observed in the excel.

The other way to interpret is that manpower cost to sales growth ratio

this shows the human capital costs as part of sales is down from original 99-00 timeline and is now around 18%.

The decreasing trend of this and asymmetric trend in sales per employee to average manpower cost suggests that employees could be used for better productivity than whats they are at present doing. That may result in better productivity and higher sales.

This is the reason that even a MKI or any HAL product which is made in India inspite of critical components being imported like in case of MKI , the price increase is too sharp owing to productivity timeline as compared to a production line abroad in OEMs place.

 

[Echo_419]

Source old - IAF frets over Russian fighter aircraft deal - The Economic Times

i quote
At present, a Sukhoi 30 MKI that would cost Rs 227 crores to manufacture in Russia, rolls out of HAL's Nashik plant for over Rs 440 crores. This considerable mark-up is due to the extra man hours that are required by HAL to manufacture an aircraft, the official explained.
unquote

True we are dependent on Russia for critical components and we also add French and Israeli avionics on it. IF DM MP said Rs 358 crs then the 440-358 Crs might explain the add ons procured outside the Russian contract
But 358-227 = 131 Crs is made up of few things like critical components from Russia, excess Manhours in HAL, even the quality of manapower which is very good at "assembling" but due to a fat workforce (typical PSU led employment scheme) this figures stands out more

Two more instances where a similar view was pointed..............

Rafale made in HAL needing 2.7 x manhours as per DM MP himself in an interview
HAL needing more manpower for LCA MK2. (Of course this was a pressure tactic for Mk1 variant order)

Perhaps both these points to a bulge in manpower and human capital led cost escalation versus productivity which has remained same.

using the data from this link :http://www. hal-india. com/Common/ Uploads/Finance/Annual-Report-2013-14- English.pdf
which is basically the annual report for 2013-14


View attachment 292071

and
View attachment 292072

You see the trend shows, Sales per employee to avg employee cost showed a positive trend till 2006-07 post which it fell down and is hovering at a rate which is somewhat similar to 2004-05 time era.

This proves that avg employee cost in spite of higher sales resulting into higher sales per employee is clearly offset by increase in manpower costs which is also observed in the excel.

The other way to interpret is that manpower cost to sales growth ratio

View attachment 292074

this shows the human capital costs as part of sales is down from original 99-00 timeline and is now around 18%.

The decreasing trend of this and asymmetric trend in sales per employee to average manpower cost suggests that employees could be used for better productivity than whats they are at present doing. That may result in better productivity and higher sales.

This is the reason that even a MKI or any HAL product which is made in India inspite of critical components being imported like in case of MKI , the price increase is too sharp owing to productivity timeline as compared to a production line abroad in OEMs place.

Do you work in the Aerospace sector ?
Always a joy to read your posts

 

[Echo_419]

Source old - IAF frets over Russian fighter aircraft deal - The Economic Times

i quote
At present, a Sukhoi 30 MKI that would cost Rs 227 crores to manufacture in Russia, rolls out of HAL's Nashik plant for over Rs 440 crores. This considerable mark-up is due to the extra man hours that are required by HAL to manufacture an aircraft, the official explained.
unquote

True we are dependent on Russia for critical components and we also add French and Israeli avionics on it. IF DM MP said Rs 358 crs then the 440-358 Crs might explain the add ons procured outside the Russian contract
But 358-227 = 131 Crs is made up of few things like critical components from Russia, excess Manhours in HAL, even the quality of manapower which is very good at "assembling" but due to a fat workforce (typical PSU led employment scheme) this figures stands out more

Two more instances where a similar view was pointed..............

Rafale made in HAL needing 2.7 x manhours as per DM MP himself in an interview
HAL needing more manpower for LCA MK2. (Of course this was a pressure tactic for Mk1 variant order)

Perhaps both these points to a bulge in manpower and human capital led cost escalation versus productivity which has remained same.

using the data from this link :http://www. hal-india. com/Common/ Uploads/Finance/Annual-Report-2013-14- English.pdf
which is basically the annual report for 2013-14


View attachment 292071

and
View attachment 292072

You see the trend shows, Sales per employee to avg employee cost showed a positive trend till 2006-07 post which it fell down and is hovering at a rate which is somewhat similar to 2004-05 time era.

This proves that avg employee cost in spite of higher sales resulting into higher sales per employee is clearly offset by increase in manpower costs which is also observed in the excel.

The other way to interpret is that manpower cost to sales growth ratio

View attachment 292074

this shows the human capital costs as part of sales is down from original 99-00 timeline and is now around 18%.

The decreasing trend of this and asymmetric trend in sales per employee to average manpower cost suggests that employees could be used for better productivity than whats they are at present doing. That may result in better productivity and higher sales.

This is the reason that even a MKI or any HAL product which is made in India inspite of critical components being imported like in case of MKI , the price increase is too sharp owing to productivity timeline as compared to a production line abroad in OEMs place.

Do you work in the Aerospace sector ?
Always a joy to read your posts

Source old - IAF frets over Russian fighter aircraft deal - The Economic Times

i quote
At present, a Sukhoi 30 MKI that would cost Rs 227 crores to manufacture in Russia, rolls out of HAL's Nashik plant for over Rs 440 crores. This considerable mark-up is due to the extra man hours that are required by HAL to manufacture an aircraft, the official explained.
unquote

True we are dependent on Russia for critical components and we also add French and Israeli avionics on it. IF DM MP said Rs 358 crs then the 440-358 Crs might explain the add ons procured outside the Russian contract
But 358-227 = 131 Crs is made up of few things like critical components from Russia, excess Manhours in HAL, even the quality of manapower which is very good at "assembling" but due to a fat workforce (typical PSU led employment scheme) this figures stands out more

Two more instances where a similar view was pointed..............

Rafale made in HAL needing 2.7 x manhours as per DM MP himself in an interview
HAL needing more manpower for LCA MK2. (Of course this was a pressure tactic for Mk1 variant order)

Perhaps both these points to a bulge in manpower and human capital led cost escalation versus productivity which has remained same.

using the data from this link :http://www. hal-india. com/Common/ Uploads/Finance/Annual-Report-2013-14- English.pdf
which is basically the annual report for 2013-14


View attachment 292071

and
View attachment 292072

You see the trend shows, Sales per employee to avg employee cost showed a positive trend till 2006-07 post which it fell down and is hovering at a rate which is somewhat similar to 2004-05 time era.

This proves that avg employee cost in spite of higher sales resulting into higher sales per employee is clearly offset by increase in manpower costs which is also observed in the excel.

The other way to interpret is that manpower cost to sales growth ratio

View attachment 292074

this shows the human capital costs as part of sales is down from original 99-00 timeline and is now around 18%.

The decreasing trend of this and asymmetric trend in sales per employee to average manpower cost suggests that employees could be used for better productivity than whats they are at present doing. That may result in better productivity and higher sales.

This is the reason that even a MKI or any HAL product which is made in India inspite of critical components being imported like in case of MKI , the price increase is too sharp owing to productivity timeline as compared to a production line abroad in OEMs place.

Do you work in the Aerospace sector ?
Always a joy to read your posts

 

[PARIKRAMA]

Do you work in the Aerospace sector ?
Always a joy to read your posts



Do you work in the Aerospace sector ?
Always a joy to read your posts

No sir.. I am basically into Risk domain..
Thanks for your words.. I am still trying to improve...