Indian Government Considers Restructuring HAL to Manage Rising Defence Orders

The Indian government is working on a plan to reorganise Hindustan Aeronautics Limited (HAL), India’s largest aerospace and defence manufacturer, as the company struggles with an unprecedented order book. HAL has long been central to the country’s military aviation industry, but its current structure is showing strain under the weight of fresh contracts, including the recent order for 97 Tejas Mk-1A fighter aircraft.

The company’s commitments have now crossed ₹2.7 lakh crore, more than eight times its annual revenue of about ₹32,000 crore. This backlog covers a wide range of equipment, from fighter jets and helicopters to engines and maintenance work. The government has brought in an international consulting firm to suggest a restructuring plan that could break HAL into smaller, more specialised companies. One would focus on fixed-wing aircraft, another on helicopters, and a third on maintenance, repair, and overhaul (MRO) services. The aim is to ease production bottlenecks and improve efficiency by allowing each unit to work on narrower areas of responsibility.

This idea is not new. HAL’s integrated structure, which dates back to the early years of licence production, once ensured standardisation and control. But what worked in the past has now become a source of delays. Long processes and an overstretched workforce have slowed the delivery of key projects at a time when the armed forces urgently need new equipment. The Indian Air Force (IAF), for example, is operating with only 29 fighter squadrons against the approved strength of 42. With more squadrons set to retire, the shortfall is expected to grow unless new fighters are delivered on schedule.

The Tejas programme is a telling example. First expected to enter service by 2015, its induction was repeatedly delayed. Even today, HAL is able to produce only around 16 to 18 aircraft per year. To deliver the new order for 97 Tejas Mk-1A jets within the planned timeframe, this output will need to increase sharply. Global supply chain dependencies, such as reliance on General Electric (GE) engines, add further pressure.

There is also concern over HAL’s ability to manage future projects like the Advanced Medium Combat Aircraft (AMCA), India’s proposed fifth-generation stealth fighter. The Defence Ministry has already indicated that private companies such as Larsen & Toubro (L&T) and the Tata Group may play larger roles. These firms have built expertise in areas like composite materials and avionics, and their involvement is seen as essential to meeting the government’s requirement that at least 70 percent of future platforms be indigenously sourced.

From a strategic perspective, the restructuring of HAL reflects more than an internal reform. It highlights the growing gap between India’s ability to design advanced platforms and its capacity to produce them at scale. Unless production improves, even the most capable aircraft risk entering service too late to meet operational needs. Other countries with strong aerospace industries rely on ecosystems where government enterprises and private firms share responsibilities. India’s reliance on a single, centralised organisation has limited flexibility and slowed progress.

The implications for the Air Force are direct. Delays in production weaken operational readiness and risk forcing India into short-term imports, which dilute the larger goal of self-reliance. At the same time, the sheer scale of HAL’s commitments has created the risk of overstretch, with projects ranging from fighters and helicopters to UAVs and engines competing for resources. A restructured model with focused units could not only help deliver aircraft on time but also open the way for better cooperation with private industry and universities.

In this sense, the reorganisation of HAL is less about internal management and more about aligning India’s defence industry with its security requirements. The choices made now will influence the future of the Tejas and AMCA programmes, the pace of squadron inductions, and India’s ability to maintain self-reliance in defence manufacturing.