Amid a political furore over the order books of state-run aerospace major HAL, a parliamentary panel Monday highlighted the “alarmingly low level” of orders to defence PSUs and raised doubts over the sustainability of these firms beyond 2020-21.
The panel said the current orders “do not sustain” the public sector undertakings (PSUs) such as HAL, Mazgoan Docks Ltd. and Goa Shipping Ltd. beyond 2020-21, adding that they are not being able to use full production capacity due to lack of orders.
“The committee referring to the alarmingly low level of order books of defence PSUs such as Hindustan Aeronautics Ltd. (HAL), Bharat Dynamics Ltd. (BDL), Mazagon Docks Ltd. (MDL), Garden Reach Ship Building and Engineers (GRSE), Goa Shipyard Ltd. (GSL), whose current order books do not sustain them beyond 2020-21, and are not able to use full production capacity due to lack of orders, had sought to know the factors that led to such an alarming situation which resulted in idling capacity of these PSUs,” the panel headed by senior BJP lawmaker Kalraj Mishra said.
In an Action Taken Report submitted to the panel, the Ministry of Defence said with regards to Hindustan Aeronautics Limited, the major existing orders for supply of aircraft and helicopters are expected to be liquidated by 2020-21.
This does not include the 41 Advanced Light Helicopter for the Army, 32 for the Navy and Coast Guard and eight Chetak for the Navy for which contracts have been signed during last year.
On completion of the Su-30MKI programme, it said the original plan was to utilise HAL’s Nashik facilities for manufacture of Fifth Generation Fighter Aircraft (FGFA).
“However, the programme is awaiting R&D contract finalisation to proceed further. Similarly, the MMRCA programme, with HAL as the Lead Production Agency, the MTA ( Multi-role Transport Aircraft programme) and IJT (Intermediate Jet Trainer) development didn’t materialise as planned,” the ministry said.
It added, “This has led to lack of fresh orders at Aircraft Division Bangalore and Transport Aircraft Division Kanpur.”
“The HAL has submitted quotation for supply of 83 LCA Mk 1A aircraft and 15 LCH LSP helicopters and orders are awaited. Additional orders for on-going programs like ALH, LCA, HAWK, Do-228 and SU-30 MKI as well as fresh production orders for new platforms like Do-228 Civil variant, LCH, HTT 40, LUH, Hawk-i and UAVs would help in sustaining growth of the organisation in the coming years,” the ministry also said.
The Standing Committee on Defence said the reply by the ministry shows that many defence PSUs have alarming levels of order books resulting in idling of their production capacities.
It observed that about 25 per cent of facilities for large ships and about 60 per cent of facilities for small ships will be idle from March 2019 onwards in case of Garden Reach Ship Building and Engineers (GRSE). The value of production of GRSE has gone down to Rs 928 crore in 2016-17 from Rs 1,661 crore in 2015-16 due to lack of orders, it noted.
The position of Goa Shipyard Limited (GSL) is no way different from GRSE and the current order book of GSL at less than Rs 1,700 crore, is spread over three years (till 2021), the committee said.
In view of the “low orders books and consequent lower utilisation of production capacities” of defence PSUs effecting adversely their profitability, the panel has recommended that armed forces should be encouraged to give orders with budgetary support from the ministry and a fool proof strategy be carved out so that none of these firms remain idle.
The report comes amid the opposition and the government sparring over the order books of HAL.
After attacks from Congress president Rahul Gandhi, Defence Minister Nirmala Sitharaman Monday rejected “doubts” raised on her statement on HAL as “incorrect and misleading” and said contracts worth Rs 26,570 crore have been signed by the defence PSU between 2014-18 and orders amounting to Rs 73,000 crore are in pipeline, which total about Rs 1 lakh crore.