Why A $20-Billion Defence Deal May Be Scrapped

[INDIAPOSITIVE]

A $20-billion (Rs 1,20,000 crore) defence deal with French aerospace major Dassault may be unravelling, thanks to a change in thinking by Defence Minister Manohar Parrikar.

Parikkar recently hinted that the deal for Rafale medium multi-role combat aircraft (MMRCA), under negotiation with Dassault since 2012, might be scrapped. He further said that additional Sukhoi-30 MKI fighters, built by Hindustan Aeronautics (HAL) at its Nashik plant, could substitute for them.

The Sukhoi-30 MKI is currently India’s most advanced air fighter and forms the backbone of its air power. It’s also half the current cost of a Rafale. However, delays from HAL have slowed its entry into the Indian Air Force (IAF).

Air Vice Marshal (Rtd) Manmohan Bahadur, Distinguished Fellow at Centre for Air Power Studies, New Delhi, told IndiaSpend the statement of the minister could be taken as a statement of intent.

“A lot of operational issues will have to be taken into account before such a decision is taken,” said Bahadur, “the two aircraft are of a different class, requiring different types of infrastructure and aircrew—two for the Sukhoi instead of one for the Rafale, so training requirements double.”


IAF first signed a deal with the Russian government to purchase eight air defence Su-30K and 32 multi-role Su-30 MK aircraft in 1996. IAF bought an additional 10 Su-30 MKs in December 1998.

The original contract signed in 1996 also envisaged the development of new Su-30 MKI aircraft by integrating the Russian Su-30MK with the latest western, Russian and indigenous avionics. These were to be indigenously manufactured by HAL under a licence from Russian defence export agency Rosoboronexport.

India and Russia agreed to the licensed production of 140 Su-30 MKI aircraft, 920 engines and 140 sets of airborne equipment. These aircraft were to be delivered by HAL in four phases by 2017-18. However, in March 2006, the Ministry of Defence advanced the delivery of these aircraft to 2014-15 to counter a sharp fall in combat aircraft available, due to crashes and obsolescence.

The IAF then placed an additional order for 82 aircraft with HAL, taking the total number of indigenously produced aircraft to 222, to be delivered between 2002-03 and 2016-17. No more than 150 aircraft have been delivered.

The central government’s auditor, the Comptroller and Auditor General (CAG) was less than impressed, noting delays in technology transfers from Russia.

The delivery schedule of 222 aircraft has been pushed back by two-and-half years to 2019.

Crisis on the frontline

The IAF now has 25 active fighter squadrons (16-18 aircraft each) instead of 42, according to a recent report tabled by the Parliamentary Standing Committee on Defence.

Of these 25 squadrons, 14 use MiG-21 and MiG-27 aircraft, set to retire between 2015 and 2024. The report further states that the IAF requires “at least 45 squadrons to counter a two-front (Pakistan and China) collusive threat”. This is why the MMRCA from Dassault and the home-built Tejas light combat aircraft were important.

The MMRCA was first envisaged by IAF in 2000 as a stop-gap arrangement to replace the vintage Mig-21 aircraft, due to delays with the Tejas. In 2007, a Request for Proposal (RFP) was issued for 126 MMRCA at an estimated cost of Rs 42,000 crore ($12 billion).

Since 2012, the defence ministry and Dassault have not been able to close the MMRCA deal. A key reason is that Dassault is unwilling to guarantee the quality of 108 fighters to be manufactured in India.

The second reason is the escalation in costs by 100%. A recent report said that the technology transfer agreement and the Indian assembly line had led to the costs sky-rocketing to around Rs 1,20,000 crore ($20 billion).

As Parrikar said, the cost of a Rafale has now ballooned to twice that of the IAF’s primary workhorse, the Sukhoi 30 MKI.

Can Parrikar’s Plan B work?

Air Vice Marshal Bahadur feels HAL’s track record does not inspire confidence. “HAL will have to raise new infrastructure to take on the numbers required,” he said.

The bottom line: the IAF will remain a weakened force unless the jet mess can be sorted out

Why A $20-Billion Defence Deal May Be Scrapped | IndiaSpend

 

[Tshering22]

I am sure the Russians would only be happier for the Super-MKI contract. Another 126 enhanced MKIs, means they get a big deal out, we get a bang for buck, and it gives IAF the cushion to rapidly induct and master the Tejas.

Honestly speaking, I think Parrikar should give this one final shot now, and then if they still don't listen, cancel the deal.

Putin would be laughing his head off at the French.

 

[VelocuR]

India clearly can't afford to purchase expensive Rafales, stop asking for low-prices.

 

[SrNair]

India clearly can't afford to purchase expensive Rafales, stop asking for low-prices.

This is not about price since we can afford that.This is about RFP where French twists from original terms.
FYI .Pakistan latest IMF bailout program of around 550million$ is already on anvil.So you should be the last one to talk us about low price

 

[VelocuR]

This is not about price since we can afford that.This is about RFP where French twists from original terms.
FYI .Pakistan latest IMF bailout program of around 550million$ is already on anvil.So you should be the last one to talk us about low price

Military experts say the deal could cost India $20 billion, double the original estimate, because of the benchmarking of aircraft prices and a roughly 5 percent annual cost increase.

The Rafale fighter beat the Swedish Gripen, the Russian MiG-35, and the U.S.-built F-18 and F-16 and finally the Eurofighter in a decade-long selection process for a new Indian multi-role combat aircraft, as Dassault was the lowest bidder on up-front and lifecycle costs over 40 years.

But three years on, the sides are far from signing the contract and an Indian defence source said price negotiations were on hold until the issue of licensed production was resolved in line with the original request for proposals (RFP) floated by the Indian defence ministry.

"We are saying that the RFP has to be honoured totally, there can't be deviations," said the source.

French officials to visit India to rescue stalled Rafale jet deal| Reuters


No need to argue, let's talk about Rafale prices of 5% increase.

 

[NKVD]

Military experts say the deal could cost India $20 billion, double the original estimate, because of the benchmarking of aircraft prices and a roughly 5 percent annual cost increase.

The Rafale fighter beat the Swedish Gripen, the Russian MiG-35, and the U.S.-built F-18 and F-16 and finally the Eurofighter in a decade-long selection process for a new Indian multi-role combat aircraft, as Dassault was the lowest bidder on up-front and lifecycle costs over 40 years.

But three years on, the sides are far from signing the contract and an Indian defence source said price negotiations were on hold until the issue of licensed production was resolved in line with the original request for proposals (RFP) floated by the Indian defence ministry.

"We are saying that the RFP has to be honoured totally, there can't be deviations," said the source.

French officials to visit India to rescue stalled Rafale jet deal| Reuters


No need to argue, let's talk about Rafale prices of 5% increase.

Yeah you're right we can't afford 110 million fighter Rafale but we can afford 150 million FGFA Thats How poor we are

 

[Nilesh Singh]

I am sure the Russians would only be happier for the Super-MKI contract. Another 126 enhanced MKIs, means they get a big deal out, we get a bang for buck, and it gives IAF the cushion to rapidly induct and master the Tejas.

Honestly speaking, I think Parrikar should give this one final shot now, and then if they still don't listen, cancel the deal.

Putin would be laughing his head off at the French.

Its high time to make the final decision, as this limbo is creating lot of confusion either the french get on the horse and clear the deadlock or our DM should scrap it and go for extra MKI, and in the meanwhile get the FGFA problem sorted out so that we start getting this fighter from 2020 onwards and AMCA from 2023.

India clearly can't afford to purchase expensive Rafales, stop asking for low-prices.

Is this comment necessary, you are perfectly aware that problem is not about the money but other thing. Before posting these one liner, please Google to find the real reason for this impasse.

 

[GURU DUTT]

I am sure the Russians would only be happier for the Super-MKI contract. Another 126 enhanced MKIs, means they get a big deal out, we get a bang for buck, and it gives IAF the cushion to rapidly induct and master the Tejas.

Honestly speaking, I think Parrikar should give this one final shot now, and then if they still don't listen, cancel the deal.

Putin would be laughing his head off at the French.

i second the bold part + we save at least 5-8 billion on training & maintinence infrastructure and another 5 billon on new wepons (specialli the pods & LGBs & PGMs & other air to surface missiles )

 

[WishLivePak]

You guys are so mean to my fellow Pakistanis

I think India would've paid the $20 billion, but they want to make them to drive the Indian economy and do the stuff china did with Russia (making copies/reverse engineering). If India can't do that, then $20 billion IS expensive for this amount of jets. Hell, even Pakistan would've bought these jets if they could get equal deal to what India wanted, except we'd pay I guess $10 billion since our overall GDP is 33 in a year alone and Indian defense budget is some 40 billion. The point I'm making, $20 + technology sharing/making is a BIG bonus.

 

[IND151]

The deal will not be canclled.

It seems Indian authorities are playing patience game. The deal will not be cancelled. The main motive behind MMRCA is not only induct new medium fighter jets but also avoid over dependnce on Russia.

So if some one thinks that MMRCA will be cancelled and order for 126 Super MKIs is given, he is wrong.

 

[acid rain]

I am sure the Russians would only be happier for the Super-MKI contract. Another 126 enhanced MKIs, means they get a big deal out, we get a bang for buck, and it gives IAF the cushion to rapidly induct and master the Tejas.

Honestly speaking, I think Parrikar should give this one final shot now, and then if they still don't listen, cancel the deal.

Putin would be laughing his head off at the French.

Putin will call it sweet revenge for the mistral goof up.

I wonder if it wasnt pre planned by russia and India.

You guys are so mean to my fellow Pakistanis

I think India would've paid the $20 billion, but they want to make them to drive the Indian economy and do the stuff china did with Russia (making copies/reverse engineering). If India can't do that, then $20 billion IS expensive for this amount of jets. Hell, even Pakistan would've bought these jets if they could get equal deal to what India wanted, except we'd pay I guess $10 billion since our overall GDP is 33 in a year alone and Indian defense budget is some 40 billion. The point I'm making, $20 + technology sharing/making is a BIG bonus.

Dude, the price for each piece works out to 158 million..40 million more than a 5th gen F35.

As for 20 billion..The payment is spread out over 10 years, so it practically works out 2 billion a year.

 

[PARIKRAMA]

Every fortnight a "new story" which basically is a recap of the story so far. Damn those reporters who makes us break our heads over the same news again and again.

Note to all folks: Sip a cup of tea and ignore rafale story/news till April 2015 when modi visits france. We will know by then the "real story". This many recaps is actually doing nothing. The Media needs to grow up rather than play same story again and again and show it as Breaking news or an update.

 

[SrNair]

Military experts say the deal could cost India $20 billion, double the original estimate, because of the benchmarking of aircraft prices and a roughly 5 percent annual cost increase.

The Rafale fighter beat the Swedish Gripen, the Russian MiG-35, and the U.S.-built F-18 and F-16 and finally the Eurofighter in a decade-long selection process for a new Indian multi-role combat aircraft, as Dassault was the lowest bidder on up-front and lifecycle costs over 40 years.

But three years on, the sides are far from signing the contract and an Indian defence source said price negotiations were on hold until the issue of licensed production was resolved in line with the original request for proposals (RFP) floated by the Indian defence ministry.

"We are saying that the RFP has to be honoured totally, there can't be deviations," said the source.

French officials to visit India to rescue stalled Rafale jet deal| Reuters


No need to argue, let's talk about Rafale prices of 5% increase.

Yes it is expensive and we can afford it.
But we should get something worth in return as ToT .

 

[Koovie]

Another rubbish article based on guesses from "defence experts"....

 

[Радж Синха]

India clearly can't afford to purchase expensive Rafales, stop asking for low-prices.

At least we can buy dude We have 47 $ defence Budget , and look who is saying it , who's country has only 7 billion budget haha

I

At least we can buy dude We have 47 $ defence Budget , and look who is saying it , who's country has only 7 billion budget haha

mean 47 billion $ lol