European defence firm Airbus Military has once again tossed its hat in the ring for the Indian Air Force's $1 billon (Rs 4,500 crore) contract for mid-air refueling aircraft, a year after the tender was scrapped due to objections raised by the finance ministry. Aerial refuellers expand the operating radius of fighter jets by tanking them up during flight.
The Spain-based firm, part of European conglomerate EADS, was on the verge of clinching the two-cornered contest, but finance ministry's reservations over the steep price of the Airbus A330 multi-role tanker transport (MRTT) led to the cancellation of the contract. The A330 MRTT was locked in stiff competition with the Russian IL-78 refuellers.
After operating IL-78 tankers for six years, the air force had made it clear to the defence ministry that the Russian platform did not meet its requirements and it wanted to go in for the A330 MRTT. But the finance ministry's doubts over "reasonableness of price and competitiveness of bids" stacked the odds against Airbus. The A330 MRTT is a military derivative of the A330-200 commercial aircraft of the Airbus family.
Airbus Military's head of market development Didier Vernet said the firm had responded to the defence ministry's fresh request for proposal (global tender) for midair refuellers in early January. "We are very much in the competition and probably have a better chance as the A330 MRTT has obtained military certification," he said.
Vernet refused to comment on the cost advantage that the Russians would bring to the table with the IL-78. "The A330 MRTT is a new generation refueller, it cannot be compared with the IL-78," he said.
Russian equipment comes at a cheap upfront price, but questions have been raised about inflated life-cycle costs. Former IAF chief Air Chief Marshal Fali Major said, "There's no doubt that the Airbus platform is far more expensive even if you factor in low lifecycle costs, spare support and reliability. But the A330 MRTT scores on technology and that makes it worthwhile in the long run."
The defence ministry had floated a tender for six midair refuellers to achieve rapid global mobility for the air force four years ago. There are currently six IL-78 tankers in the air force's inventory.
Some of the irritants in India-Russia defence ties include mid-way price escalation of projects with long gestation period, problems with steady supply of spares and transfer of technology from Russia. Poor vendor support after the disintegration of the Soviet Union has also complicated matters, a senior IAF official said.
Moscow had committed to deliver aircraft carrier Gorshkov (now INS Vikramaditya) with 16 embarked MiG-29K fighters by 2008. But the carrier will arrive only by 2012-2013. India had contracted the Gorshkov for $1.5-billion (Rs 6,750 crore) in January 2004, but Russians revised the price to $2.33 billion (Rs 10,485 crore).
While the navy inducted four MiG-29Ks in February 2010, it will be operating the maritime fighters from ashore for the next two years.
The A330 MRTT has won several tanker competitions with contracts signed by the governments of United Kingdom, Australia, Saudi Arabia and the United Arab Emirates.
The Indian Air Force is, however, nowhere close to inducting new tankers. The tanker deal could take at least two more years to finalise. The first refueller will be delivered to the air force three years after the signing of the contract.
Vernet said that Airbus Military would submit its `offset proposal' for the tanker contract to the defence ministry in April. The defence ministry's offset policy makes it compulsory for foreign vendors to invest in India 30% of the value of contracts worth more than Rs 300 through purchases, investments and transfer of technology.
A significant amendment in the country's defence procurement rules, announced by defence minister AK Antony in early January, allows foreign vendors to plough billions of dollars into non-defence sectors that were out of bounds for them.
India has thrown open its civil aerospace and internal security sectors to foreign defence suppliers, giving them more elbow room to discharge contractual obligations that come with big-ticket military deals.