Disruption of production likely in the short term due to Covid-19: HAL

State-run aerospace behemoth Hindustan Aeronautics Ltd (HAL) on Thursday said there could be likely disruption of production in the short term, with established supply chains getting affected, because of Covid-19 pandemic.

Though HAL also expressed fears that downsizing of the defence budget and risk of economic recession can lead to difficulty in working capital availability, it hoped that strong push from the government through the 'Atmanirbhar Bharat Abhiyan' is expected to favourably impact operations of the company.

"The company's business is mainly concentrated in Defence services, major negative impact on the demand side of the business due to the pandemic in the long term is not anticipated currently, as the defence contracts reflect long term requirements of national interest," HAL CMD R Madhavan said.

He, however, said the company is highly technology-intensive with the product spectrum including both Transfer of Technology (ToT) as well as indigenous platforms that contain systems/ subsystems/ raw materials of foreign origin.

"Since the pandemic has caused world-wide lockdown, suppliers, in general, are financially stressed due to cash flow and liquidity problems, possible production holds up in suppliers' facilities and restriction on movement of goods through international freights can lead to disruption of established supply chains and hence there could be likely disruption of production in the short term at HAL," he said.

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However, through all-out efforts the company is confident of tiding over such aberrations with resilience, Madhavan further said, in the company's annual report.

Noting that the past one decade has seen consistent growth of the military and commercial sectors of the A&D industry, both in the international as well as the domestic market, the HAL CMD said, during the past decade HAL has reported an impressive growth with an increase in sales of the order of 62 percent and efforts are in place to maintain the growth momentum.

However, the last quarter of the financial year saw the Covid-19 pandemic engulfing countries world over, disrupting normal operations of industries due to the lockdown.

While the pandemic has impacted all major industry sectors, in the A&D sector it has put severe supply and demand challenges for the commercial aviation sector, world over, he added.

Stating that defence projects, policies and funding of the Central government play a crucial role in the growth of A&D industry in India and in-turn HAL, because of the major dependence on the Defence sector, Madhavan said, hence, downsizing of the defence budget and risk of economic recession can lead to difficulty in the working capital availability.

However, on a positive note, there is a strong push from the government through the 'Atmanirbhar Bharat Abhiyan', the policy formulations and reforms post-Covid-19 which places significant impetus to self-reliance and local production, and this is expected to favourably impact the operations of the company, he said.

"The Defence services are looking for more indigenous options as compared to import and your company is expected to greatly benefit from this as there are a slew of indigenous products like LCA Tejas and its variants, LCH, LUH, HTT-40, etc.

During the year 2019-20, HAL has produced 31 new aircraft and helicopters, covering Su-30 MKI, LCA Tejas, Dornier Do228, ALH Dhruv, Cheetal Helicopter and Chetak helicopter.

Additionally, it produced 117 new engines and accessories.

Madhavan said the futuristic programmes on the anvil such as Advanced Medium Combat Aircraft (AMCA), LCA Mk II, the advance version of LCA Tejas, Twin Engine Deck Based Fighter, the twin-engine naval version of LCA, 12-tonne class Indian Multirole Helicopter (IMRH), aero-engine development, etc will ensure the technological lead of HAL in the years to come.

Collaborative initiatives such as the tripartite MoU between HAL, Israel Aerospace Industries (IAI) and Dynamatic Technologies Ltd (DTL) for UAV segment, lease agreement with airline operators for Do-228 civil operations etc are expected to add new business streams to the company portfolio, he added.