At Aero India 2015 in Bangalore, Defence Minister Manohar Parrikar announced that a decision on India’s $20 billion medium multi-role combat aircraft (MMRCA) deal would be made soon, after the contract negotiation committee’s final report, due by end-February or early March. Reports indicate that the defence ministry has realised that the French Rafale, chosen as the lowest bidder, will cost much more over its life cycle than initial projections. While there might be other issues with French manufacturer Dassault, such as its unwillingness to be held liable for the quality as well as the timely and on-cost delivery of 108 aircraft to be produced under licence at Hindustan Aeronautics Limited, the tardiness in decision-making does not reflect well on the defence ministry.
India might be well served by the fighter it eventually chooses, but the lessons from the MMRCA deal are salutary. The defence ministry’s inexperience in undertaking complex negotiations has led to this situation. It erred in calculating the total costs of buying, maintaining and flying the fighters over the 40-year life cycle. The MMRCA deal has been in the works for nearly 10 years now, which should have been sufficient time to avoid such a mistake. As this deal was the cynosure of all global defence manufacturers, its likely abandonment will portray India in poor light. Under the UPA government, the ministry had already earned a bad name for its knee-jerk reactions to charges of corruption in defence deals.
The MMRCA is not the only military hardware that has suffered delays. Last week, US defence manufacturer Boeing warned India of a price hike in the $2.5 billion deal for 22 Apache attack and 15 Chinook helicopters if the contract was not signed quickly. The case of 145 M-777 howitzer guns for the army’s new Mountain Strike Corps is worse. In a direct deal between the defence ministry and the Pentagon, India was to place the order with BAE Systems in 2010. Delays in placing the order led BAE to shut down its M-777 production line in the UK in 2013. The proposal is now being resurrected under the Make in India scheme. While this confers some advantages, India is bound to pay far more for the same guns now. Political decision-making in defence deals has been under the spotlight for years. If India is to move away from costly delays and aborted deals, a similar scrutiny of the defence ministry’s procurement systems and processes is necessary.
India might be well served by the fighter it eventually chooses, but the lessons from the MMRCA deal are salutary. The defence ministry’s inexperience in undertaking complex negotiations has led to this situation. It erred in calculating the total costs of buying, maintaining and flying the fighters over the 40-year life cycle. The MMRCA deal has been in the works for nearly 10 years now, which should have been sufficient time to avoid such a mistake. As this deal was the cynosure of all global defence manufacturers, its likely abandonment will portray India in poor light. Under the UPA government, the ministry had already earned a bad name for its knee-jerk reactions to charges of corruption in defence deals.
The MMRCA is not the only military hardware that has suffered delays. Last week, US defence manufacturer Boeing warned India of a price hike in the $2.5 billion deal for 22 Apache attack and 15 Chinook helicopters if the contract was not signed quickly. The case of 145 M-777 howitzer guns for the army’s new Mountain Strike Corps is worse. In a direct deal between the defence ministry and the Pentagon, India was to place the order with BAE Systems in 2010. Delays in placing the order led BAE to shut down its M-777 production line in the UK in 2013. The proposal is now being resurrected under the Make in India scheme. While this confers some advantages, India is bound to pay far more for the same guns now. Political decision-making in defence deals has been under the spotlight for years. If India is to move away from costly delays and aborted deals, a similar scrutiny of the defence ministry’s procurement systems and processes is necessary.
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