India’s combat jet negotiations still on track

On 9 April, in a rather unusual and swift move, the Indian Air Force (IAF) strongly refuted the previous day’s report in an Indian publication that it was initiating ‘Plan B’ in case negotiations for buying 126 combat jets, currently in progress, fail.

“The CNC (Contract negotiations committee)  process for acquisition of 126 MMRCA (Medium, multi-role combat aircraft) is underway and there is no thought process for any procurement  as a ‘back up’ as reported,” the IAF said.

The statement was unusual for two reasons. One it was not the Ministry of Defence (MoD), which refuted the report but the Air headquarter. Normally, MoD responds or clarifies contentious reports if they concern matters of acquisition or procurement. 

And two, this is the first time in six years that either IAF or the MoD has officially issued a press note about a planned procurement, considered one of the biggest acquisitions in recent times, pegged as it is at anywhere between 12 to 15 billion dollars. In fact, even when Dassault Aviation beat EADS in the MMRCA contract, there was no formal announcement by the MoD. It was left to the company to declare itself as the winner!

So why this unusual step? Sources say Air HQ and MoD officials wanted to scotch rumours initiated by ‘vested’ interests before they acquired a momentum of their own and acted as impediment to the eventual conclusion of the contract.

Dassault, the makers of Rafael fighter jets certainly have had reservations over Hindustan Aeronautics Limited ( HAL’s) capacity to absorb complex technology and therefore wanted to rope in other private sector units for manufacture of the jets in India. Under the agreement, Dassault is supposed to supply the first 18 planes manufactured in its facility in France and the rest of 108 aircraft are to be manufactured in India. The Ministry of Defence has however learnt to have told Dassault that HAL will remain the lead player. And yet, according to the MoD’s own estimate, at least 50 per cent of the work in India-based manufacturing will eventually be done by the private sector.

Sources involved in the negotiations point out that the process has been on for a year mainly because it involves many complex agreements that need to be hammered out between Dassault and HAL. The negotiations involve commercial factors, logistics arrangements, assessment of technological absorption capability of various divisions of HAL, supporting ancillary units and a host other small but vital aspects before a final contract is inked.

Dassault officials are in fact simultaneously and together negotiating with all divisions of HAL located in various cities. So for example, officials of  HAL’s Aeronautical Research and Development Complex, Engine division, accessories unit spread over locations like Lucknow, Nashik, Bangalore and Hyderabad  are constantly talking to Dassault officials to arrive at a mutually satisfactory result.

There are many small and big hurdles to overcome too. One example quoted by officials engaged in the negotiations is illustrative of the complexities involved. The Radar on the Rafael jet is to be manufactured by Bharat-Electronics Ltd (BEL) at its facility in Banagalore. The Radome (the protruding snub nose on the aircraft), is however manufactured by HAL at its Hyderabad facility. Dassault therefore wants both the units (of BEL and HAL) co-located at one place. Until BEL and HAL come to an agreement between themselves, Dassault cannot proceed any further on that aspect!

There are many such intricacies involved. However sources are hopeful that in another six months most of the wrinkles will be ironed out. Interestingly, French and Indian government officials are simultaneously working on an Inter-Government Agreement that will provide a sovereign guarantee that Dassault will continue to supply, service and maintain Rafael over the next 40 years. This provision, included in the Request for Proposal (RFP) is an important element in the Indian Defence Procurement Procedure (DPP), designed to ensure manufacturers don’t renege on their commitment no matter what the circumstances. 

The MMRCA contract, considered one of the biggest in terms of value in recent times, is seen as a test case that will determine how India proceeds to handle its mammoth procurement plans in the next decade. With India set to spend over 100 billion dollars in buying different weapons and platforms, it is absolutely essential, military and civil officials feel, to set a benchmark that will serve as a future guide for all such cases.
  1. April 12, 2013 -

    Nice read. However, how I wish that the process could be made faster! One must however realise the complexities of a deal such as this, and this article is a move in that direction. However, I wonder why is it that the government is insisting on HAL being the lead contractor. If we want to make the defence manufacturing sector competitive, the only way is to allow private players to join the fray. And if indigenisation is our final goal, I don't think that HAL will get us there going by their past and present track record!

  2. April 12, 2013 -

    Thanks. The Government's hands are tied as far as HAL is concerned since the RFP clearly mentions HAL as the lead integrator!. You are right about private sector. Think it is starting to happen