India has decided to pull out of talks to procure the ‘Spike’ anti-tank guided missiles (ATGM) from Israel’s state-owned Rafael Advanced Systems after protracted negotiations to buy 1,600 units for the Indian Army.

The $500 million deal, which was almost finalised by a high-powered panel of the Defence Ministry last year to meet the long-pending demand of the Army’s infantry battalions, had gathered momentum when Prime Minister Narendra Modi visited Israel.

“The deal was never signed. So there is no question of cancelling a contract here. It was always at discussion stage. This was supposed to be a single-window clearance. But it has been decided not to go ahead with the talks,” a top Defence Ministry official told BusinessLine on condition of anonymity.

The official said the decision to cancel the talks was formally communicated to Rafael Advanced Systems by the Ministry of Defence earlier this week, although the decision to cancel the deal was finalised in November last year.

The decision comes ahead of the much-touted visit of Israeli Prime Minister Benjamin Netanyahu, which is scheduled to take place from January 14-16.

“Rafael regrets the decision but is committed to continuing to pursue this important goal, as it has been doing with great success for over two decades, with a range of innovative, advanced systems and with commitment to the Indian Ministry of Defence. The company will continue to cooperate, including in the framework of the prime minister’s delegation to India later this month,” the Israeli defence firm said in an official statement on Wednesday.

Yoav Har-Even, the Chief Executive Officer (CEO) of Rafael Advanced Systems, is also visiting India as part of the Prime Minister Netanyahu’s delegation. During the visit, he is expected to make a last-ditched attempt to push the deal through, sources said.

The Israeli ATGMs were supposed to be co-produced at manufacturing unit in Hyderabad, in collaboration with Bharat Forge’s Kalyani Strategic Systems.

The manufacturing facility was inaugurated in August. There were plans to also produce an air-to-surface version of the Spike missile for the Indian Air Force at a later stage.

Local procurement plans

According to sources, the reason why the Ministry of Defence decided to cancel the deal during the discussion stage was because it found the Israeli ATGMs “too expensive” to be produced in India.

The government has now decided to go for the local version of the man-portable ATGMs – Nag – being developed by the Defence Research and Development Organisation (DRDO), under the government’s Make in India programme. The Nag missile was successfully flight-tested last September in Rajasthan, marking successful completion of development trials. It has been developed at a cost of around $50 million.

The Indian Army is in dire need of third-generation ATGMs having infra-red seeker with integrated avionics. The requirement is for 40,000 missiles for Army’s 382 infantry battalions and 44 mechanised regiments.