In the world of multi-billion dollar defence contracts, India stands out.
The world’s biggest arms importer, with an annual defence budget of $43 billion -- has been dangling a potential $15 billion fighter jet deal for more than a decade with Lockheed and Boeing, the world’s two largest contractors.
Although drawn-out negotiations are not uncommon in the arms world, India took 32 years to seal a deal with the United States (US) to buy 145 howitzers from BAE Systems Plc, with arcane procurement rules and shifting specifications contributing to the lengthy delays.
“It is frustrating for both sides. No company or industry wants to wait so long. It also creates problems for the armed forces, because they are not getting the equipment on time,” said Laxman Kumar Behera, a research fellow who specializes in arms procurement at New Delhi’s Institute for Defence Studies and Analyses.
Extra Cautious
A wary India, which is hosting its flagship air show this week, has also derailed plans by Lockheed and Boeing to breathe new life into their ageing F-16 and F/A-18 programmes. India is still seeking to replace its Soviet-era MiG aircraft, while countries such as Japan and South Korea have acquired modern stealth fighters such as Lockheed’s F-35.
The Indian Air Force (IAF) is facing a critical shortage of combat assets and other equipment, said Caron Natasha Tauro, an analyst at Janes by IHS Markit. With a two-front threat in its north from Pakistan and China, this shortage is perceived to be an immediate threat to national security.
Immediate Need
About a third of India’s 650-strong fleet is more than 40-years-old and set to be phased out over the next decade. The IAF has estimated it needs at least 45 squadrons to repel a joint attack from Pakistan and China, compared with a current active strength of about 25. The need is immediate.
At the biennial air show in the southern city of Bangalore starting Wednesday, Saab AB, Dassault Aviation SA, Lockheed and Boeing will showcase their products as they seek to push for an early deal. Bethesda, Maryland-based Lockheed has sweetened its bid by offering to fit its F-16 Fighting Falcons with an advance radar available on its F-35s, while also promising to manufacture wings for the jet locally. Sweden’s Saab makes the Gripen fighter jet and Boeing makes the F/A-18 Super Hornet.
India is in the process of gathering information from fighter jet makers for the next round of orders, Defence Minister Nirmala Sitharaman said on Tuesday.
Rafale Scrutiny
Apart from bureaucratic delays, changes in governments and opposition parties out to embarrass the ruling party over perceived wrongdoings have also added to the mess.
All big businesses are cognizant that especially in democracies, we have political dispensations, but business goes on, Ajay Kumar, secretary for defence production, said earlier this month.
One recent example of the muddle: After initially choosing Dassault’s Rafale aircraft, the Indian government scrapped the deal to buy 126 planes in 2015. Instead, Modi opted to buy 36 of the French jets, leaving an order for 110 more still open to contractors. His decision has come under intense scrutiny for alleged rule violations and criticism by his political detractors months before national elections.
Clearing Modi’s handling of the Rafale purchase, India’s Comptroller and Auditor General (CAG) said in a report this month that the IAF needs to revisit the entire process of acquisition, because the system was overly-complicated and inefficient.
Make in India
Modi’s record electoral mandate and promises of sweeping changes to boost domestic defence production, however, have not had much impact.
He undermined his own Make in India push to boost domestic defence production by cancelling the original Rafale purchase -- which would have seen some jets made in India.
The fog surrounding a conclusive deal is not likely to lift any time soon as voters are set to elect a new government by May.
“What happened with Rafale underscores what is so rotten in the procurement process. If Modi, with his political mandate, is unable to deliver 30-odd combat jets to India, you can see the problem,” said Harsh Pant, an international relations professor at Kings College London.