The second and final bidding stage-commercial negotiations-of the $10.4 billion, 126 medium multi-role combat aircraft (MMRCA) tender floated by the Indian Ministry of Defence (MoD) for the Indian Air Force in 2007 has selected two European products (Eurofighter Typhoon and Rafale). This entails the exit of two American (F-16 and FA-18), one European (JAS-39 Gripen) and one Russian (MiG-35) system from the race.
The selected vendors have been forwarded bid extension letters. The commercial bidding process will be carried out with simultaneous negotiations on offset obligations and Transfer of Technology (ToT) conditions. Others have been given explanations through official communications for their rejection. Procedural provisions will now go through a rigorous commercial negotiations process under the Contract Negotiation Committee (CNC), and with the approval of Competent Financial Authority (CFA), the contract would be finally announced. Contract administration and post-contract management would follow thereafter.
While many recent Indian acquisition programmes-the $3.8 billion Scorpene submarines, $2.6 Hawk advanced jet trainers with a follow-on order of 57 aircraft, $9 billion American products (C-130J, P-8I, C-17) with follow-on orders, additional 80-plus order of Su-30s, to name a few-have undergone acquisition procedures or thorough inter-governmental agreements, none have received so much attention that the MMRCA deal has received for the past few years. It is interesting to note that even a $30 billion worth joint project on a fifth-generation fighter and many multi-billion dollar current and future joint projects with Russia (next line of Brahmos, Military Transport Aircraft, to name a few) have not received similar attention. Price, volume, timing, media and involvement of big players have made the MMRCA look like a political deal while it should have been otherwise treated as just another military procurement.
Reactions to the MoD decision, especially by the Americans, are interesting on many counts. Consider these: the announcement of resignation of the US Ambassador to India, Timothy Roemer, made within 24 hours of the MoD verdict; one of the American vendors hinting at an 'appropriate response' to the MoD's communication, now supported by the US government trying to seek explanations from India on the same; strong statements coming from analysts like Ashley Tellis and others; and apprehensions concerning the future trajectory of India-US relations by both American and Indian commentators. In brief, the bulk of the opinion in the US and India has been vocal against the MoD verdict.
The American braggadocio on their superior products not being selected and oozed out frustrations after the MoD selection process typify not only a bad marketing strategy but, more importantly, display utter arrogance. Imagine the verdict going the American way and the response of others. No doubt, both visible and possible reactions would be in both extremes. This shows the extent of politicisation of a major arms deal.
The MMRCA verdict must be examined in its totality to see whether India has made a strategic blunder or a prudent decision. First, the problems started with volume and price tag. 126 fighters (with a possible follow on order of an equivalent or more numbers) with a price tag of $10.4 billion would obviously attract major vendors around the world, even though top aerospace companies like Boeing, Lockheed and EADS have formidable order books. But what was important for India was to select a reasonably good product with a future horizon in which Indian technology and industry could benefit as well as contribute. Systems selected by the MoD conform to this aspect. Second, the timing of the MMRCA process interestingly coincided with a bilateral strategic partnership construction period between India and the US. The linkage was unavoidable yet unfortunate as this provided a fertile ground for politicisation, primarily through the use of media. The verdict has proved that the MoD was concentrating more on techno-procedural aspects rather than being subject to influence of any kind.
Third, the deal provided large grounds for negotiations on important aspects like offsets and ToT. Both offsets and ToT have undergone torturous processes and are likely to continue further. What might have gone in favour of the selected vendors could be the gamut of offers made by them vis-à-vis their competitors. Equal ownership and partnership, quantifiable technology transfer and formidable industrial linkages were other decisive factors apart from conforming to most of the 643 technical parameters and better performance in the field trials. Fourth, even if there have been time delays, the MoD has done an excellent job by taking the process forward through appropriate routes at a time when there have even been rumours of a split verdict or an eventual scrapping of the deal.
Fifth, much has been argued on the politico-strategic aspects of arms procurement, which is a fact of life for any major deal. Both the US and Russia have bagged major projects from India in recent times and a possible European winner in MMRCA would reflect the mindset of the Indian political leadership, which hints at enlargement of the basket of choices for Indian military procurement beyond prime suppliers. This way, India has made a prudent decision.
By awarding the contract, India could receive strategic dividends from the Europeans, who have been supportive of Indian postures on critical international issues.
If the selection thus far has shown emphases on technicalities, the final selection should primarily be based on more concrete benefits that either company offers. The final MMRCA award would also reflect the abilities of the MoD in processing such complex contracts in the future.
(Deba Mohanty is a Senior Fellow in security studies at the Observer Research Foundation. These are his personal views)
Courtesy: The Financial Express
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