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NO SMOOTH RIDE FOR INDIA’S LARGEST DEFENCE PURCHASE

NO SMOOTH RIDE FOR INDIA’S LARGEST DEFENCE PURCHASE WORTH $11BN
By Bulbul Singh

28 Jun 07. Even as India formally cleared June 29 proposal to hunt for 126 Multi-role Medium Range Combat Aircraft (MMRCA) worth $11bn, the procurement of such a big deal will not be easy to handle and it is likely that more than one vender will be finally selected.

Sources in the Indian Defence Ministry said, it is unlikely that the MMRCA deal will be completed in the next five years, as it is becoming politically charged with Russia, United States and France vying with each other to strike the deal, and are using diplomatic pressure as well.

The MMRCA deal could be a deciding factor whether India goes the Russian or the U.S. route in the coming decades, said the sources. Those in the race include Boeing with its, F/A-18, Lockheed Martin with F-16, MIG Corporation of Russia which is bidding MIG-35, European Consortium which is pitching the Eurofighter, SAAB of Sweden with Gripen, and Dassault Aviation of France which is pitching the Rafale aircraft.

While Indian Air Force officials preferred the Rafael, the final decision would purely be a political decision, admitted Indian defence ministry officials and it would not be easy for the ruling government to come to a decision quickly and simply.

India is currently going through a phase when it is facing a plateuing of defence ties with traditional friend Russia and is looking ahead to a better relationship with United States in the wake of the Indo-U.S. nuclear deal being finally cleared by Washington.

In the last few months Moscow has even sought to re-negotiate the defence deals already struck and those in negotiation seeking price increases. Russia, for over 30 years, has been the largest supplier of weapons and equipment to India is fast loosing the Indian military market to other players like Israel and western sources. Israel has already emerged as the second largest supplier of weaponry to India after Russia and Tel Aviv has now tied up with India’s defence laboratories to co-produce critical technologies like the air defence systems. Majority of Indian weaponry is of Russian origin and India remains completely dependent on Moscow for supply of spares and other material to keep the military machine in combat.

All the defence players in the race have offered to give Technology Transfer in the MMRCA, a basic requirement of New Delhi. However, what Indian Air Force really needs a quality combat aircraft which will give tangible superiority over the Pakistan Air Force and help in neutralizing a possible Chinese threat said an Indian Air Force official. “We want the best, technically speaking” added the official.

India wants the majority of the MMRCA aircraft to be produced in India and has said that eighteen of the planes will be bought in ‘fly away’ condition from the tender winner. The remaining 108 will be manufactured in India with transfer of technology and Hindustan Aeronautics Ltd will be the system integrator in India.

However, sources in the Indian defence ministry said, there is a likelihood that more then one vendor could merge as a winner in the race in case the decision becomes difficult on grounds of political arithmetic’s and other strategic factors.

The process of procurement will have to go through a number of bottlenecks in the Indian defence ministry and a change in government in New Delhi as the existing ruling United Progressive Alliance government comes to an end in mid 2009.

Indian defence ministry officials admitted that the current MMRCA procurement would be difficult to execute as it involves 50 per cent compulsory offsets, totaling over $5bn. The Indian defence market is currently nascent to handle such a big offset and the foreign vendors are not happy with offsets, admitted the defence ministry officials. The officials admitted that the MMRCA would be delayed by more then 20 months only

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