$15-billion Indian Air Force Tender: Foreign firms look to partner HAL

With the Indian Air Force (IAF) issuing the requests for information (RFI) for purchase of 110 fighter aircraft at an estimated total cost of $15 billion, the race has intensified among three major aerospace companies — US-based Boeing, European firm Eurofighter and Russia’s Mikoyan — to tie up with an Indian partner.

State-run Hindustan Aeronautics (HAL) could be favoured by these global giants for a tie-up, sources indicated.

According to the RFI, of the planes, 15% have to be in flyaway condition while the remaining 85% will have to be made in India with a strategic partner.

Other foreign majors in the fray for the multi-billion contract already have Indian partners. While the US aerospace giant Lockheed Martin has recently announced its partnership with Tatas, Swedish company SAAB has had an alliance with the Adani Group since 2017.

The French Dassault Aviation, which will be delivering is Rafale jets to the IAF through a government-to-government route, has a joint venture with the Reliance Group.

In 2016, Dassault Aviation entered into a partnership with Reliance to execute offsets for the deal for 36 Rafale fighter aircraft. The joint venture is called Dassault Reliance Aerospace.

Last week, defence ministry officials in an interaction with the media ahead of the DefExpo had said that the government was considering bringing in state-run defence public sector undertakings for forging joint ventures with foreign companies under its ambitious strategic partnership (SP) model.

The government had unveiled the SP model in 2017 under which select private firms were to be roped in to build key military platforms like submarines and fighter jets in India in partnership with global defence majors.

Sources said the government is seriously considering involving the defence PSUs under the framework of the strategic partnership model. There was criticism of the strategic partnership model as it did not envisage any clear role for major defence PSUs like HAL, Mazagon Dock Shipbuilders and Bharat Earth Movers which are leading producers of key military platforms.

Responding to a question related to the issue, additional secretary of defence production Subhash Chandra said the government was committed to create a level playing field for all stakeholders.

“There are issues relating to our policy on defence manufacturing. We are considering how to involve the defence PSUs. We are working on certain issues,” he told reporters at a briefing on the upcoming DefExpo in Chennai.

Citing examples, industry sources said this is not going to be easy. In the past there have been multiple cases of failure where the OEMs have not been able to reach an agreement with the Indian PSUs on terms and conditions of the contract for projects worth several billion dollars.

Examples include Dassault Aviation’s failed to tie up with HAL for the medium multi-role combat aircraft when it had emerged as L1 in 2012.

South Korea’s Kangnam Corporation, which had emerged as a sole bidder to respond to a global expression of interest floated by India’s state-owned Goa Shipyard in 2016 to jointly build 12 mine countermeasure vessels too had failed to achieve the tie-up.

Both Hyundai Heavy Industries of South Korea and the Hindustan Shipyard failed to have a joint venture for construction of a fleet of support ships for the navy in both the countries.

What makes it even more complex is the depth and scope of the transfer of technology (ToT) asked for in the fighter aircraft RFI. If an OEM is not willing to meet these requirements, it will face disqualification and will not be considered at the RFP stage, point out industry sources. ToT requirements also mandate that indigenous unilateral upgrade capabilities are made available to the Indian SP.

As reported by FE, the RFI document states that “the MoD intends to procure Fighter Aircraft for the IAF which is to be Made in India. The proposal is to procure approximately 110 fighter aircraft (about 75% single-seat and rest twin-seat aircraft). The procurement should have a maximum of 15% aircraft in flyaway state and the remaining 85% aircraft will have to be made in India by a Strategic Partner/ Indian Production Agency (SP/ IPA).”

According to the document, the OEM should convey with adequate clarity their ToT offer for indigenous manufacture of the aircraft in India towards the “Make in India” initiative.

 

 

 

 

 

Source:- Financial Express

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