Boeing Forecasts $15 Billion Indian Defense Bidding
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By Anand Krishnamoorthy
Dec. 1 (Bloomberg) -- Boeing Co., the second-largest U.S. defense contractor, said it may bid for $15 billion of Indian military orders in the next decade, benefiting from growing ties between India and the U.S.
The aerospace group and its suppliers have contacted some 40 Indian state-owned and private companies about forming defense- related ventures, Boeing President James Albaugh said in New Delhi today. He declined to name the partners.
``India has the potential to emerge as a very big market,'' Albaugh said. ``Given India's military requirements and given the growing relationship between India and the U.S., we see exciting opportunities here.''
Boeing, Lockheed Martin Corp., the world's biggest defense contractor, and Raytheon Co. can compete with Russian and west European suppliers for the first time in half a century after U.S. President George W. Bush and Prime Minister Manmohan Singh agreed on a deal to lift a three-decade ban on supplying nuclear equipment to India.
``The Soviet era is long over and India is looking at different sources for military purchases,'' said Suba Chandran, assistant director at New Delhi-based Institute of Peace and Conflict Studies. ``That is good news not just for Boeing, it's good for Raytheon and Lockheed. If you open the nuclear establishment, then there is no issue for defense.''
Lifting Restrictions
The U.S. Senate last month approved the civilian nuclear plan that lifts restrictions imposed on India after it tested an atomic bomb in 1974. India may pay suppliers including General Electric Co. 1.8 trillion rupees ($40 billion) to build nuclear reactors in the next 14 years to meet rising energy demand.
As part of the growing relationship between India and the U.S., the army, navy and air forces of the two countries are conducting joint military exercises.
``If you try to do a deal with Uncle Sam, and people like Lockheed are desperate to keep a production line going, they'll offer their F-16s at almost giveaway prices,'' said Andrew Brooks, aerospace analyst at the London-based International Institute for Strategic Studies. ``You'll have George W. ringing up India and saying, `You want nuclear? Then it would help us if at the same time you could take some of these airplanes,''' Brooks said.
India in February increased its defense spending for the year ending March 31 to $11.6 billion, or about 15 percent of the country's budget. The defense budget includes payment of salary to soldiers and purchase of equipment.
F-18, MiG
Chicago-based Boeing and Lockheed Martin, based in Bethesda, Maryland, in 2005 were allowed for the first time to compete for an Indian order for 126 multi-role combat aircraft, a deal that may be worth $9 billion.
Boeing's F-18 jet will compete with fighters from Lockheed, Russia's MiG Corp. and France's Dassault Aviation SA. The government may call for final proposals from each of the contractors as soon as this month.
India, where the state-owned Hindustan Aeronautics Ltd. is separately developing fighter planes on its own, is buying new planes to replace its older combat aircraft. As many as 157 pilots have died in MiG crashes since 1971, the defense ministry said in 2004.
The Indian air force, the world's fourth-largest, has 1,700 planes and 120,000 personnel, according to its Web site. Most of the planes are Russian-made MiG fighters. It also has Russian Sukhoi and French Mirage jets.
Harpoon Missile
Mahesh Upasani, a spokesman for Indian Air Force, wasn't immediately available for comment.
Boeing has also bid for a missile order with the Harpoon cruise missile. The company and its suppliers may work with Indian partners to help cut development and production costs, Albaugh said.
Boeing will work with ``large-sized engineering companies and small niche companies'' in India as it tries to procure components. The company has in the past worked with Tata Consultancy Services Ltd., Infosys Technologies Ltd. and Wipro Ltd., India's top three software developers.
According to the Indian government's defense purchase program, the company that is selected for the aircraft order must transfer technology for local production and also do business with local private companies or state producers in the defense sector.
``There is skill, technology and labor in India that will help Boeing and its partners meet that objective,'' he added. The company's two largest Asian customers are Japan and South Korea, he said.
Boeing, which has no revenue from India's defense market, will have the south Asian nation as among its top three markets in Asia.
Shares of Boeing fell 0.4 percent to $88.53 in New York yesterday.
``Definitely, the U.S. has a very good chance,'' of selling in India, said Brooks. ``They've been supplying Pakistan with jets, and now, because of the rapprochement with India, I very much expect to see both Boeing and Lockheed Martin get in there.''
To contact the reporter on this story: Anand Krishnamoorthy in New Delhi at
anandk@bloomberg.net .