A US$10bn scramble for India's
fighter jets By Siddharth
Srivastava
NEW DELHI - With the Indian
government finally clearing the way for the
acquisition of 126 multi-role combat aircraft, the
countdown has begun for winning the world's
biggest single fighter-jet contract.
The
inclusive deal will be valued at close to US$10
billion. Despite frequent delays by the Defense
Ministry in clearing the way for proposals, it is
expected that the mega-deal will be finalized
soon, as New Delhi has been signing new defense
deals at a fast pace
in
the recent past, given the military's acute
modernization requirements.
The main
contenders include:
The US Boeing F-18 Super Hornet.
The US Lockheed Martin F-16 Fighting Falcon.
The Russian RSK MiG Corp MiG-35.
The Swedish Gripen International (SAAB Group)
Jas-39.
The multinational British, German, Italian and
Spanish Typhoon Eurofighter.
The French Dassault Rafale.
The
competition is stiff after Indian Air Chief F H
Major's recent comment that the 126 aircraft will
be acquired from a single manufacturer, not from
two or three sellers.
"The world's single
biggest fighter-jet order will go to one supplier.
It doesn't make any sense to go to two or three
sellers just to keep different countries happy,"
said Major. The first squadron of 18 new jets are
planned by 2012.
Major said the purchase
would be "objective, transparent and time-bound",
adding that the chosen manufacturer would have to
provide lifetime support and a performance-based
warranty for the planes, which are likely to be in
service for 40 years.
According to a
recent report, India will need to spend at least
$35 billion over the next few years to make up for
the lull in defense acquisitions after the Rajiv
Gandhi government lost power in 1989 amid
allegations of corruption in a Swedish Bofors gun
deal. Ironically, the controversial guns performed
very well during the 1999 Kargil war against
Pakistan.
The multi-role fighter is a
crucial cog in Indian combat aircraft planned in
three main systems: the Indian-developed Tejas as
a light combat aircraft, the new multi-role
fighter in the medium combat aircraft category,
and Su-30-MKIs as heavy combat aircraft.
However, Indian defense deals have not
been purged of middlemen, agents and kickbacks.
Recently, an Austrian firm told India's Supreme
Court that Russian manufacturer Kazan Helicopters
paid Rs290 million ($7.2 million) to swing a Rs1.8
billion deal to supply India with 16 Mi-17
helicopters. It took a bitter legal battle between
the agents involved in the deal, the
Singapore-based Austrian firm Rite Approach Group
Ltd and Russian Rosoboron Exports, for the truth
to come out.
According to former chief
vigilance commissioner N Vittal: "Instead of
having a ban on middlemen, it is better to clearly
have principles or rules to recognize such
agents." Indeed, given the gray areas surrounding
Indian defense deals, the competition for the
fighter contract will be intense.
The
selection process begins with the air force making
a technical study after the bid submissions. It
then submits its report to the Defense Ministry,
which looks at both the financial and technical
aspects. Then it goes to the cabinet committee on
security, which comprises top ministers, including
the prime minister, to make a final call. It is at
the cabinet stage that the political and strategic
aspects come into play.
Middlemen can be
involved at any stage of the deal. In the past,
sting operations, such as those by the noted
investigative website Tehelka.com, have shown that
defense officers, political party representatives
as well as friends and minions can be involved in
the deals.
The contenders have been
looking to advance their India investments after
new regulations requiring that 30% of all defense
purchases above $66 million should be offset by
investments in India's defense sector.
As
such, the US F-16 and F/A-18 Super Hornets are the
front-runners. US aerospace major Boeing hopes to
leverage "bankable offsets" to enhance its
standing. Boeing has a tremendous track record of
offsets, investing close to $30 billion in 35
countries. Recently, Boeing, which bagged orders
for 68 aircraft from Air India worth more than $11
billion, announced that it would invest $1.7
billion to buy goods and services from Indian
companies. Boeing is reportedly looking at
creating an immediate defense offset bank of $100
million.
The prospects of bigger contracts
due to the offset norms has also led to Lockheed
Martin approaching state-owned and private
companies such Hindustan Aeronautics, Bharat
Electronics, Bharat Heavy Engineering, and Tatas
for joint defense projects. Pushing the contest
further, Swedish company Gripen International has
offered a full transfer of technology along with a
state-of-the-art weapons systems for its Jas-39.
Recently, Swedish Foreign Minister Carl Bildt
visited India and met with Prime Minister Manmohan
Singh and Defense Minister A K Antony among others
to press his country's case for the fighter deal.
However, some experts in India favor the
Eurofighter Typhoon, Rafale, MiG-35 and F/A-18F
Super Hornet over the Gripen, which has been
compared to the domestic Tejas light combat
aircraft.
Russia, already with numerous
defense commitments to India, has been unhappy
about the recent overtures by New Delhi to Israel,
Europe and the US for new defense deals. Moscow
has asked to renegotiate recent Sukhoi fighter jet
and Gorskov air carrier deals. The message is
clear: Moscow does not want to lose out in any
way.
In the past few years, Israel has
overtaken France and the United Kingdom to become
India's second-largest defense supplier, behind
Russia. The US is the latest to join the
competition and since signing a 2005 defense pact
that includes joint arms production and military
exercises has sold India its first US warship, as
well as sealing a $1.1 billion deal for Hercules
C-130-J transport planes, India's largest military
purchase from the US to date.
Siddharth Srivastava is a New
Delhi-based journalist.
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2007 Asia Times Online Ltd. All rights reserved.
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