About Me

My photo
MILITARY TECHNOLOGY (MILTECH) is the world's leading international tri-service defence monthly magazine in the English language. MILITARY TECHNOLOGY is "Required Reading for Defence Professionals". Follow us on Twitter: MILTECH1

23 March 2015

High-Stakes in Indian MMRCA, Eurofighter Makes Strategic Push

In one of the slowest defence deals in history - Medium Multi-Role Combat Air-craft (MMRCA) -, MT recently learnt that the Narendra Modi government is studying a German proposal (offering a new cheaper proposal for its Eurofighter TYPHOON), even as Hindustan Aeronautics Ltd (HAL) has been negotiating with Dassault, the maker of the RAFALE, to finalise agreements to produce the aircraft in India. The RAFALE deal for 126 jets is estimated to cost €20 billion (Rs.1.6 lakh crore) over the next decade and is considered the biggest global defence tender.

Representatives of the German government met leaders of the Indian MoD and culminated in a new commercial proposal that seeks to undercut the French bid. The new German offer could bring down the total value of the contract by Rs.20,000 crore over its 10-year duration. The scale of the "discount"-formally offered in early July to Defence Minister Arun Jait-ley-was substantial enough to create ripples at the very top of the Government, with Prime Minister Modi also being apprised about the development, sources said.

In terms of the net present value- the hypothetical cost of buying the entire fleet in one go at current prices-the new offer is at a little more than €10.5 billion, while the French price is estimated to be a billion euros more. Calculated on the basis of the firm fixed price-or the amount India has to pay over 10 years-the German price comes to €17.5 billion.

Other news sources state that German Foreign Minister Frank-Walter Steinmeier offered 126 Eurofighter TYPHOON for approx. U$9.8 billion, about $2 billion less than the original French $12 billion.

The German offer, which has come through Eurofighter TYPHOON manufacturer Airbus Defence & Space (DS), has raised doubts over the future of the RAFALE deal even though there is no scope for a revised price offer in the defence ministry's procurement rules. Experts believe that while there is no room for renegotiating the contract under the rules, the size of the German discount would force the Indian government to take a fresh look at the price offered by France. The counter-offer is supposed to be the outcome of hectic diplomatic manoeuvring by major European powers that have a high stake in the contract due to its sheer value and the job creation potential that can boost the economy of consortium member nations.

India would also have to deal with pressure from Paris, given that France has invested a lot of political capital in the deal. France is India's third-largest supplier of defence equipment and major deals include the SCORPENE submarine line and the upgrade of the MIRAGE 2000 fleet. But the counter-offer and its financial implications can create uncertainty for the MMRCA project. And that cannot be good news for the Indian Air Force as the project is already two years behind schedule and other replacement projects such as the Fifth Generation Fighter Aircraft (FGFA) with Russia and the indigenous Light Combat Aircraft (LCA) have also been crawling.

No comments:

Post a Comment