If you have been to Bangalore recently, you must have seen hoardings put up by Hindustan Aeronautics Limited (HAL) proclaiming its proud status as a Navratna company. The premier aerospace manufacturer in the country has been around for many decades now. It does have some notable successes like the ALH and potential successes like the LCA, despite the delays and cost overruns, but its overall track record is one of underachievement.

The fact is that, without its bread and butter business of assembling military aircraft of foreign origin, HAL will struggle to survive. Its biggest commercial contracts are for supplying aircraft doors and other minor equipment to Airbus and Boeing. If not for the offset clause in aircraft purchase contracts by Air India, which requires the aircraft manufacturer to buy goods worth a fixed percentage of the contract value from India, HAL would never have landed these orders in the first place.

Contrast HAL with Embraer, the Brazilian plane manufacturer. It is the third largest aircraft manufacturer in the world, behind Boeing and Airbus. Anyone who has traveled on Paramount Airways should be impressed with the Embraer planes. The VIP jets which transport our prime minister and other dignitaries are all Embraer. Unlike its giant competitors, Embraer doesn’t have a huge domestic market and large defense businesses supporting it commercially. Yet, Embraer has been doing quite well in the market for smaller commercial jets and corporate jets for over a decade now. It has announced a new range of small business jets, due in 2011, and hopes to sell more than 1,200 units within a decade.

Brazil hardly boasts about its scientific and technological prowess, they always appear more interested in the samba and the carnival. Unlike them, we never fail to pretend that we are some kind of a knowledge capital of the world. Then, why is it that a country like Brazil can outdo us in building commercial aircrafts – a capability which few countries can boast of?

The difference is, Embraer is a publicly owned commercial enterprise that was once government-owned. The company has thrived after it was privatized in 1994. It is now one of the largest exporters in Brazil, employing nearly 25,000 people directly and has an order backlog of nearly $19 billion. Embraer had revenues of over $5 billion last year, when HAL barely touched $2 billion with all the help from Indian Air Force, and a market value of over $8 billion.

Can HAL ever become an Embraer? Sure it can. Separate the sensitive defense equipment businesses, if they are sensitive enough, into another government-owned company. Sell majority stake in HAL to the public and domestic financial institutions. Let companies like HAL shed the imagined pride of a Navratna status and discover their true potential!