SOURCE: AFI
India’s push to involve the private sector in fighter jet production, as part of its ‘Make in India’ and ‘Aatmanirbhar Bharat’ initiatives, promises to bolster indigenous defense capabilities and reduce reliance on imports. However, for private companies to establish viable production lines for aircraft like the Tejas Mk1A, Mk2, or the Advanced Medium Combat Aircraft (AMCA), the venture must extend beyond meeting Indian Air Force (IAF) demands. Experts argue that profitability and investment recovery hinge on creating exportable jets, which in turn necessitates a fully localized supply chain—including engines—to ensure competitiveness in the global market and control production costs.
Unlike state-owned enterprises like Hindustan Aeronautics Limited (HAL), private sector firms operate under stricter financial imperatives. Setting up a fighter jet production line involves massive capital expenditure—estimated at $1-2 billion for infrastructure, tooling, and R&D—alongside ongoing costs for skilled labor, testing, and certification. With the IAF’s orders typically limited to 100-300 units per program (e.g., 83 Tejas Mk1A, 120-150 Mk2, 150-200 AMCA), the per-unit cost remains high due to low economies of scale. For instance, the Tejas Mk1A’s price hovers around $45-50 million, partly because production is confined to domestic needs.
To offset these costs and generate profits, private companies must tap into export markets, where demand for cost-effective, capable fighters exists among nations in Asia, Africa, and Latin America. However, exportability depends on two critical factors: competitive pricing and freedom from foreign supply chain dependencies—both of which require a totally local ecosystem.
Fighter jets built by private firms must be priced attractively—ideally below $50 million per unit—to compete with offerings like Russia’s MiG-35 ($40-45 million), China’s JF-17 ($25-30 million), or even second-hand Western jets like the F-16. Limited IAF orders alone cannot amortize the investment, as fixed costs are spread over fewer units, driving up prices. For example, producing 200 Tejas Mk2 jets for the IAF might cost $50 million each, but scaling production to 400 units (with 200 for export) could lower the cost to $35-40 million, making it viable for buyers like Vietnam, Malaysia, or Egypt.
Export success also enhances the venture’s profitability, providing additional revenue streams to recover R&D and setup costs. The global light fighter market, projected to grow to $50 billion by 2035, offers a lucrative opportunity, but India’s jets must be unencumbered by foreign export restrictions, a challenge when key components like engines (e.g., GE F404, F414) come from the U.S., subject to stringent end-use controls.
A major hurdle to exportability and cost control is India’s reliance on imported components, notably engines, which account for 30-40% of a fighter jet’s cost (e.g., $8 million for F404, $12 million for F414). The Gas Turbine Research Establishment (GTRE) estimates a need for 1,100 engines over 20 years across the LCA, TEDBF, and AMCA programs, yet no indigenous engine is operational. This dependency not only inflates costs—due to import duties, logistics, and currency fluctuations—but also limits export flexibility, as U.S. approval is required for third-country sales.
A fully localized supply chain, encompassing engines, avionics, radars, and airframe components, is thus essential. Private firms like Tata Advanced Systems, Mahindra Aerospace, or Larsen & Toubro could produce airframes and subsystems, while companies like Godrej or Kalyani Group could contribute to engine manufacturing under GTRE’s guidance. A domestic 90-110kN engine, as proposed for the AMCA, could reduce costs by 20-30% compared to imports, stabilize pricing, and eliminate export bottlenecks.
Without exports, private production lines risk becoming unviable. For instance, if a firm invests $1.5 billion to produce 200 Tejas Mk2 jets for the IAF, the fixed cost per jet is $7.5 million before variable costs (materials, labor), pushing the total above $50 million—uncompetitive even domestically. In contrast, doubling output to 400 units cuts the fixed cost to $3.75 million per jet, enabling a price point of $35-40 million, attractive for both the IAF and exports.
Limited orders also deter private investment, as the break-even point stretches beyond a decade. HAL’s state-backed model can absorb such inefficiencies, but private firms require quicker returns, achievable only through export-driven scale. Without a local supply chain, reliance on foreign vendors drives up costs further—e.g., a 10% rupee depreciation could add $1-2 million per jet—making exports unfeasible and domestic production unsustainable.
Creating a 100% indigenous jet demands a concerted effort:
- Engines: GTRE’s 110kN engine project, scalable to 145kN, must be fast-tracked with private collaboration (e.g., Kalyani Group’s metallurgy expertise) to replace GE engines by the 2030s.
- Avionics and Radars: Firms like Bharat Electronics Limited (BEL) and Data Patterns can supply AESA radars (e.g., Uttam) and electronic warfare suites.
- Airframes and Composites: Tata and L&T can expand their aero-structure capabilities, already proven in partnerships with Airbus and Boeing.
This ecosystem would lower costs (e.g., a domestic engine at $6-8 million vs. $12 million for F414), ensure export autonomy, and position India as a defense supplier akin to South Korea with its KF-21 Boramae.
An exportable jet with a local supply chain offers dual advantages: strategically, it strengthens India’s geopolitical influence by arming allies; economically, it generates $10-15 billion in export revenue over 20 years (e.g., 200 jets at $40 million each). Domestically, it creates high-skill jobs, boosts ancillary industries, and saves $9-13 billion in import costs for 1,100 engines.
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