Hall of defame: MoD needs to restructure HAL urgently

Ever since present Chairman Ashok Nayak took over as CMD, there is an uneasy tension prevailing in the ranks and files of India’s aerospace giant Hindustan Aeronautics Limited (HAL). While there is a brain drain due to lack of motivation and some even term present situation as ‘depressing’, the Ministry of Defence (MoD) which controls HAL is silent over the internal matters of HAL that is threatening to undercut India’s effort to create a strong Military Industrial Complex (MIC). The present Chairman of HAL who is supposed to deliver the products on time and meet project deadlines is reportedly busy in lobbying for an extension of his tenure. Indeed, Nayak fully understands once he retires at the end of this month he will be reduced as a man on the street or at best a private consultant like his predecessors. It is hard to forgo as power has its own charm.

An ongoing tussle between India’s Ministry of Defence (MoD) and Hindustan Aeronautics Limited (HAL) as who should be the next Chairman of India’s multi billion dollar Defence Public Sector Undertaking (DPSU) is slowly taking an ugly turn.

In the latest round, a senior HAL official, suspected to be acting at the behest of HAL Chairman, has gone to the court to secure a stay order as three years ago he was denied promotion to the same post by previous HAL Chairman A K Baweja.

No doubt Baweja’s tenure was a breeding ground for nepotism and favoritism. Now, the officer wants to challenge MoD’s move to appoint a new chairman as the ministry wants to restructure the company.

Extension plans

But the question is why the HAL officer has gone to court now. The story is simple. In Latin proverb it is always emphasized that “cui bono?” means “who benefits”, or more literally “For whose benefit is it?”

If the court case gets adjourned for a next date which is scheduled for the third week of September, then the HAL will be either without a head or an adhoc CMD can function since Nayak is retiring end of this month.

In that situation, it is expected, the MoD will be forced to ask Nayak to continue till an amicable solution is found or the court disposes off the petition.

Further, if the court case is further challenged in higher judiciary then Nayak will get an extension beyond one year. This works to the advantage of Nayak who is reportedly lobbying hard to get an extension for his present position.

However, the MoD has already rejected the plea for any extension to Nayak as it wants to make HAL an aerospace giant in true sense to meet Indian armed forces needs. So far, Nayak has failed in his job miserably.

If the court battle goes on, then the officer who is supposed to retire in another four to five months time will not be selected as Chairman in any manner as he has no tenure left with.

In the process, for sure, it is Nayak who will only benefit from all this as it is up to the court to decide whether the officer will be selected as next chairman or not. Secondly, it is the prerogative of the MoD to select a suitable candidate for the post. So, the officer’s chance is doubtful or 50:50 but Nayak’s extension could be guaranteed.          

Yet, the tussle has many dimensions to comprehend and far too difficult to correct at this stage. Only option the Government left with is to fully privatize the HAL and disposing off over all responsibilities to private hands to bring efficiency and enhancing productivity.

But the MoD is reluctant to do so as HAL has returned the gesture back to the ministry in many occasions. Therefore, it may be an uncomfortable situation but mutual coexistence is the mantra of UPA Government.  

For example, Defence Minister A K Antony, riding over a strong clean image like his Prime Minister, had secured a favor from HAL in August 2008 to set up a unit of HAL’s strategic electronics branch factory at Kinfra Industrial Park at Seethangoli in Kasargod district in his home state, against project feasibility. In fact, this was dubbed as an Onam gift from the minister.

Corruption allegations

Now, these spiraling incidents have cascading effects. For last few years, HAL is fighting its own internal menace of allegations of rampant corruption and wide spread nepotism. The corruption charges against senior HAL officials, according to MoD sources, have increased many folds in comparison to last five years.         

Although the Government of India is finding it difficult to correct the over all functioning of HAL, premier investigating agencies have started probing allegations against present HAL CMD Ashok Nayak who is reportedly having unusual ties with some private companies.

According to MoD sources, investigating officials have reportedly found a less known Delhi based local company Lotus Aviation is having special ties with HAL and the whole link is being trailed to HAL Chairman Ashok Nayak.

Indeed, HAL Chairman did not respond to a written query made by STRATEGIC AFFAIRS  to ascertain the above facts.

Nayak is running HAL in a quite autocratic manner and the MoD is having problems with Nayak for quite some time. In several occasions, the MoD which attempted to bring course correction in HAL functioning it has been opposed by Nayak.

Apart from Lotus Aviation, previously the agencies were reportedly suspecting similar ties with Mumbai based least heard Millennium Aerodynamics which is into MRO business.

It is not new for senior HAL officials to have intimate ties with some specific companies and render special favors from time to time but MoD officials are quite uncomfortable with the over all functioning of the HAL.

For HAL, project delays have become an order, not a mere exception. All major global aircraft companies finish the jobs at least near to the deadline or before time, but HAL has been grappling with a series of problems.

For example, D Shivamurthy, former HAL Director (finance), was forced to quit HAL March this year in most unceremonious manner from the company as his room was locked by the authorities. His fault was to speak his mind about the miserable condition of the HAL functioning.    

Sources pointed out that there had been several internal problems and since Shivamurthy did not share a healthy relationship with former Chairman Ashok Baweja he is now being haunted down and forced to quit despite having a good record.

Back in 2004, former Director (Finance) of HAL, A K Zutshi, and his accomplice Manikantam were arrested in Chennai for offering a bribe of Rs 50,000, a cell-phone and a laptop to a CBI official at a hotel for weakening an assets case against him.

The Bangalore-based Anti-Corruption Branch of the CBI had booked the case against Zutshi in March 2003 for investing crores of rupees in shares.

It was reported that Zutshi had sent Manikantam, a software engineer with Patni Computers, to check with the CBI official if his case could be diluted. Zutshi had promised a bribe to the CBI official. Both Zutshi and Manikantam were caught in a CBI trap.  

The HAL was established in October 1964 by merging Hindustan Aircraft Limited and Aeronautics India Limited. It is engaged in the design, development, manufacture, repair and overhaul of aircraft, helicopters, engines and their accessories.

Interestingly, despite a dismal record of performance, last year Nayak was awarded by Prime Minister Dr Manmohan Singh for Excellence in Performance (2008-09) under Industrial Category.

MoD insiders said that although HAL has achieved sales turnover of Rs11,457 crore during the Financial Year 2009-10, the company has only invested Rs 300 crore into infrastructure development. This investment is miniscule going by the order book of the company.

As a result, most projects are suffering but HAL is randomly signing MoUs one after another without giving a proper thought whether the company can meet project deadlines or not.