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India is setting its sights on a new medium range combat aircraft from Europe. The competition to sell new aircraft to India is part of an increased engagement by European defence manufacturers in Asia, set against the backdrop of an economic downturn and shifting regional geopolitics.
By Avnish Patel for RUSI.org
16/01/2012* - The procurement of a new medium range multi-role combat aircraft fighter (MMRCA) by India is one of the single largest defence contracts the Indian Ministry of Defence will sign to date, with the competition illuminating in more ways than one. When the Request for Proposals (RFP) was issued in 2007, the value of the contract was estimated to be Rs 42,000 Crore (or $10bn). It highlights the Indian Air Force's (IAF) operational requirements as it seeks to augment its strike capability with the acquirement of 126 twin-fighter jets to replace a depreciating fleet of MiG-21s. This is integral to the on-going modernisation of the Indian Armed Forces and set within the wider context of the reorientation of India's strategic outlook and posture of 'looking east'.
Institutionalising a Better Procurement Process
The competition process has been conducted according to the framework of the Defence Procurement Procedure (DPP), the latest version of which calls for an efficient procurement process aiding the development of an indigenous defence industry and that will be conducted with 'the highest degree of probity and public accountability, transparency in operations, free competition and impartiality'.
The need to institutionalise a better procurement process is an admirable task considering that India still possesses a defence establishment still sensitive to the revelation of corruption and kickbacks that rocked the Indian polity with the Bofors scandal in 1986. Anna Hazare's much publicised hunger strike in August 2011 to demand an independent ombudsman to investigate corruption and the recent release of Transparency International's 2011 Corruption Perceptions Index (India was placed 95th out of 182 countries) is indicative of both the concerns and attitudinal change still required, regarding corruption in Indian public life.
Aside from corruption, foreign bidders can also be deterred by the numerous bureaucratic impediments that is still very much part of the Indian corporate landscape. In spite of this, US and European companies are attuned that India has been proactive in the defence market in the present economic climate and have duly formed a wagon trail heading eastwards. The competition is being conducted under a 'two-step' framework, with the IAF firstly making initial selections based on specific criteria revolving around flight trials and staff evaluation reports; secondly, those that have passed IAF muster will be comprehensively assessed by the Indian Ministry of Defence on the basis of costs, Transfer of Technology (ToT) and offset issues prior to the Cabinet Committee of Security making a final decision.
The Eurofighter consortium's Typhoon and France's Dassault Rafale are the remaining contenders for filling India's MMRCA. They have overcome stiff competition, overcoming the rival bids of: F-16 Super Viper IN (US, Lockheed Martin); F/A-18 E/F Super Hornet (US, Boeing); Gripen NG (Sweden, Saab) and the MiG-35 (Russia, Mikoyan). The opening of the final bids (reportedly within the range of $80-110m per aircraft) took place in early November 2011, with a final decision expected in early 2012. Out of the 126 jets that will be 'purchased', the first eighteen will be bought in a flyaway condition, while the remaining 108 will be manufactured in India, under licence by Hindustan Aeronautics Ltd (HAL). With the competition outcome presently scheduled for early 2012, delivery of the first jets is expected by early 2015, with HAL manufactured models coming off the Indian production line from 2017 onwards. The winning vendor is required to plough back fifty per cent offset obligations into the Indian aerospace industrial sector. This represents an increase from the usual thirty per cent, which is the normal prerequisite for foreign purchases over $70m. Whilst India is perceived as a willing spender, it is has dictated the terms and exploited the difficulties faced by the defence industry in the economic malaise by utilising, and extending the margins of the offset clause. These new dynamics have also made US and European companies adapt, moving away from direct sales and promoting 'off the shelf' products to building partnerships with Indian companies.
The Strategic Horizon and Future Planning
The new jets will essentially play an intermediary role, slotting in between the Su-30MKIs and the lower tier Tejas Lightweight Fighters in the IAF inventory. In terms of capabilities, the requirement is for a multi-role fighter jet with optimum manoeuvrability and superior close-in air combat capabilities; providing an effective utility role in patrolling and defending Indian airspace, conduct airstrikes inside enemy territory and provide aerial cover to ground and maritime forces. India has to maintain significant quantitative and qualitative superiority vis-a-vis Pakistan as well as developing a dissuasive edge against the developing capabilities of China. The Indian machinery of government is finally initiating future planning, and the evolution of numerically superior Chinese air capabilities including the development of the J-20 stealth fighter is indicative of their concerns.
India, too, has been proactive regarding a fifth-generation fighter aircraft (FGFA) and recently signed an agreement with Russia worth $35bn, to develop a stealth fighter programme, with 300 to be built over a ten year span. This joint programme for the T50/Pak-FA is inclusive of the all important sharing of technology and the opportunity to export. It is deemed to be less expensive than the US F-22 Raptor or the F-35 II Lightning (left); with the US indicating recently that it would offer the latter to India should it indicate interest. Despite arguments backing this offer and scrapping the MMRCA process, the competition is far too advanced at this stage and is seeking to fill a capability gap regarding fourth generation fighters that are operationally ready. The F-35 is still in the System Development and Demonstration (SDD) stage and India would accrue little regarding offsets considering that the US has denied core technologies to its partnering nations in this collaboration.
A Downturn in India-US Relations?
Sceptics have highlighted a perceived downturn in the US-India relationship, with much being made of the IAF's rejection of the two US bids. It is worth noting that there is a persuasive argument that the US bids were knocked out of the skies due to the stringent technical criteria as mentioned already, but the obtuse nature of the procurement process and the way the decision was conveyed to the US did create friction between New Delhi and Washington. Many saw the initial outcome favouring a US winner, to be seen as a victory for burgeoning US-India relations moulded by assiduous US lobbying and a presumptive quid pro quo following the civil nuclear agreement signed in 2008. The coincidental resignation of Timothy Roemer as US Ambassador to India further stoked the conspiratorial fires.
The rejection of the US bids is indicative of the ebbs and flows of this still evolving relationship. The recent $4.1bn deal with Boeing for ten C-17 Globemaster strategic airlift aircraft for the IAF is consistent with the recent purchases by the Indian military from US vendors. There is a definite political hand at play in spite of the technical obligations consistently cited as the key drivers in the decision. The MMRCA competition conveys the message that India is unwilling to give the impression of being slavish to US industry and that it would be more prudent to align itself to a number of strategic partners. This wariness of over-reliance also stems from potential restrictions placed on exported US technology and the issue of End-Use Monitoring Agreements (EUMA) and scenarios where spares, weapons systems and support associated with the aircraft could be withheld in the event of a conflict at odds with US policy. Yet we could be a witnessing an evolution of this policy with the Obama Administration's recent Defense Strategic Guidance has underlining the importance in investing in a long-term strategic partnership with India as the US pivots towards the Asia-Pacific region.
Europeans in the Final Straight
The Eurofighter Typhoon consortium (UK - BAE systems; Italy - Alenia Aeronautica; Germany/Spain - EADS) and France's Dassault Rafale are the remaining contenders, reaching the highest number of fulfilled requirements set by the IAF (out of 660 technical benchmarks). Both fit the IAF's vision of acquiring a cutting edge aircraft that would be able to remain competitive for over thirty years. From a European perspective, this is an ideal match as both Eurofighter and Dassault are seeking to widen their export horizons in light of the economic downturn and the slashing of European defence budgets. The key factors are whether the European competitors can offer a higher quality of technology transfer as well as the nature of the character of offsets.
The Typhoon is presently being put to operational use by the consortium countries as well as Austria and Saudi Arabia. Japan also scrutinised the jet, but opted for the F-35. There are close similarities with the Japanese consideration of the Typhoon for its 'F-X' Programme, where not only performance, price, the development and participation of an indigenous industrial base played an integral role but also where the process and outcome acted as a barometer for relations with the US and various European partners.
Adding momentum to the Eurofighter consortium bid has been the performance of the RAF and Italian Typhoon forces in Operation Ellamy, in support of UN Security Council Resolution 1975 in Libya. Making its operational debut, the consortium was keen to highlight the full maturity and adaptability of the jet in conducting air superiority missions in Libyan airspace before switching to strike operations and destroying ground targets. The Eurofighter bid has been made further attractive by its keenness to engage India as a new industrial partner for production and further development of the Typhoon, plugging India into the global Eurofighter supply chain as well as enabling India to manufacture the Typhoon indigenously and to become an integral partner in its further development. Backing up the investment made in the Cassidian Engineering Centre in Bangalore, the Eurofighter consortium also claims that 20,000 high skilled jobs will be created in India if the MMRCA bid is won. The ToT would include a wide array of technologies, including the carbon airframe, mission system capabilities and advanced avionics. Compared to deals with the US and issues over End-Use Monitoring Agreements (EUMA), the European partner governments have strongly indicated that they will not seek such conditions, site inspections or similar caveats that would undermine Indian sovereignty or freedom of manoeuvre.
India has also been offered the option of being a partner nation regarding a proposed carrier-borne version of the Typhoon; a canny pitch and another option for the Indian Navy to consider when assessing its long-term plans for indigenous aircraft carriers. Most tellingly, endorsing the Eurofighter bid would enhance Indian relations with the UK, Germany, Spain and Italy, acting as a catalyst to even more meaningful defence dialogues, joint exercises and military exchanges as well as military sales. Certainly, from a UK perspective, a deal for the Typhoon would reaffirm the convergence in trade and security that has recently been integral to Anglo-Indian relations with senior UK officials pulling the diplomatic and political levers prior to the final shortlist being announced. A greater understanding has also been fostered with Indian pilots being given the opportunity to fly RAF Typhoon jets during the Indradhanush joint RAF-IAF exercise in November 2010. The UK Government has also been keen to point out that a winning Eurofighter bid would also save jobs at the BAE Systems plant in Warton, Lancashire.
The Dassault Rafale is a product of France's decision to opt out of the Eurofighter consortium. Whilst the Rafale has been deployed by the French Air Force in Afghanistan and Libya it has so far struggled to find external buyers. Most recently, and much to Rafale's disappointment, Switzerland opted for the Swedish Saab Gripen ahead of the Rafale. Dassault, however, hope momentum for the MMRCA bid can be gained via the recent agreement to upgrade the IAF's fifty-one Vajra (Thunderbolt) Mirage 2000Hs, keeping it operationally effective for the next two decades. There are certainly linkages to both the Mirage upgrade agreement and the MMRCA bid, with the Indians seemingly capitalising on Dassault's position in the MMRCA bid by currying favour on the Mirage upgrade and negotiating a lower fee ($47million per plane) than the French were demanding in 2010. The Mirage is highly rated within the IAF despite its age, (it was highly commended during the 1999 Kargil War) and the introduction of the Rafale would provide an element of continuity and familiarity in some aspects.
The Indian MMRCA competition is an absorbing contest with the objective to provide the IAF with a technically superb fourth generation fighter as well as significantly bolstering the indigenous industrial aviation base via the offset clause. It is an illuminating process, shining light on the Indian procurement process with the long-term intention of eradicating the culture of ad-hocism in defence planning and expenditure.
The competition also gives analysts an indication of current and future strategic trends for India in the region and beyond. The rise of China, both economically and militarily, is a significant influence on future defence procurement. Equally, the relative weakness of Europe has provided an opportunity for India to gain generous terms to proposed contracts, complimenting European efforts to gain a foothold in the Asian market. Overall, the winning jet will offer India not just state-of-the-art operational capabilities, but also a rich seam of political and industrial benefits that can be reaped in the long term, the latter of which will help the ultimate goal of Indian self-reliance.
*Postscript: ...and the Winner is
31/1/2012: Dassault Aviation has emerged as the lowest bidder to supply 126 fighter jets to India, with its Rafale fighter jet reportedly $5m per aircraft cheaper than the Eurofighter Typhoon. Dassault Aviation will now enter into detailed negotiations lasting up to five months with the Indian Ministry of Defence, with the intention of refining pricing details and clarifying the level of Transfer of Technology (ToT) before any contract is signed. Dassault Aviation's emergence in the six year long competition has a number of industrial, military, political and economic repercussions. Seeing only service in the French Air Force since 2006 and hindered by a lack of exports (most recently rebuffed by Switzerland), the Rafale fighter jet now enters other procurement competitions with significant momentum. The French aerospace industry will benefit economically, with five hundred SMEs contributing towards the production and supply chain of the Rafale jet. Militarily, the deal strengthens the Franco-Indian bilateral relationship, already given succour by Dassault Aviation equipping India since the 1950s and reaffirmed again by India signing a $3bn deal to upgrade its fleet of Kargil-proven Mirage 2000 aircraft in 2011 and the recent $1.2bn contract secured by MBDA to supply 500 MICA air-to-air missiles. President Sarkozy will be emboldened by his diplomatic efforts on behalf of the Rafale ahead of the 2012 French Presidential elections, boosting his domestic credentials whilst also scoring a victory against his fellow international leaders in the Eurofighter consortium. There will be implications in the UK, with highly skilled jobs at the BAE Systems' plant in Warton to be affected if export orders for the Typhoon are not won in the present economic climate.
31/1/2012: Dassault Aviation has emerged as the lowest bidder to supply 126 fighter jets to India, with its Rafale fighter jet reportedly $5m per aircraft cheaper than the Eurofighter Typhoon. Dassault Aviation will now enter into detailed negotiations lasting up to five months with the Indian Ministry of Defence, with the intention of refining pricing details and clarifying the level of Transfer of Technology (ToT) before any contract is signed. Dassault Aviation's emergence in the six year long competition has a number of industrial, military, political and economic repercussions. Seeing only service in the French Air Force since 2006 and hindered by a lack of exports (most recently rebuffed by Switzerland), the Rafale fighter jet now enters other procurement competitions with significant momentum. The French aerospace industry will benefit economically, with five hundred SMEs contributing towards the production and supply chain of the Rafale jet. Militarily, the deal strengthens the Franco-Indian bilateral relationship, already given succour by Dassault Aviation equipping India since the 1950s and reaffirmed again by India signing a $3bn deal to upgrade its fleet of Kargil-proven Mirage 2000 aircraft in 2011 and the recent $1.2bn contract secured by MBDA to supply 500 MICA air-to-air missiles.
President Sarkozy will be emboldened by his diplomatic efforts on behalf of the Rafale ahead of the 2012 French Presidential elections, boosting his domestic credentials whilst also scoring a victory against his fellow international leaders in the Eurofighter consortium. There will be implications in the UK, with highly skilled jobs at the BAE Systems' plant in Warton to be affected if export orders for the Typhoon are not won in the present economic climate.
The views expressed here are the author's own and do not neccesarily represent those of RUSI.
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