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Confirmed: India’s ‘Mother of All Defense Deals’ Is Dead

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Asia Defense

Confirmed: India’s ‘Mother of All Defense Deals’ Is Dead

New Delhi will, however, issue a new Request for Proposal (RFP) for the purchase of 90 fighter jets very soon.

It is official now: The Indian government has cancelled its $12 billion program to purchase 126 medium multi-role combat aircraft (MMRCA), according to Defense News.

“The RFP issued earlier for procurement of 126 Medium Multi Role Combat Aircraft (MMRCA) has been withdrawn. In this multi-vendor procurement case, the Rafale aircraft met all the performance characteristics stipulated in the Request for Proposal (RFP) during the evaluation conducted by Indian Air Force,” a July 30 press release circulated by the Indian Ministry of Defense stated.

The statement provided no additional reasons for the program’s cancellation, although the announcement comes as no surprise to observers. Pricing differences as well as the inability to come to a mutually satisfactory arrangement over the question of technological transfers, as well doubts over India’s ability to build the plane locally, were the likely main causes for the withdrawal of the RFP.

As I reported back in June (See: “India to Buy Only 36 Rafale Jets”), the price tag for $20 billion MMRCA project went up 2.7 times from the original cost proposal, according to Indian press reports.

Originally, the MMRCA project had India’s Hindustan Aeronautics Limited (HAL) building 108 out of a 126 total Rafale jets locally, with the first batch of 18 fighter jets directly delivered from France in flyaway condition.

However, New Delhi announced in April of this year that it would only purchase 36 off-the-shelf Rafale fighters in a government-to-government deal instead of the original 126. Back in June, Indian Defense Minister Manohar Parrikar told local press that 126 Rafale aircraft are “way too expensive” and “economically unviable and not required.” Purchasing the fighters would have been “a very steep slope to climb financially (…) we are not buying the rest. We are only buying the … 36,” he said.

The current contract under negotiation for the 36 off-the-shelf Rafale – expected to be concluded by the end of 2015 – includes an offset clause which stipulated that France will have to invest 50 percent of the contract value as offsets in India, which could cause further delays. The costs for the 36 Rafale fighters – excluding the maintenance contract and the weapons suite – are estimated at around $4.5 billion.

According to the Times of India, India will very soon invite global defense contractors to once more compete under the “Make in India” campaign to build 90 fighter jets for the Indian Air Force at an estimated cost of $30 billion.

“An RFP is expected to be drafted soon for making 90 MMRCAs in India. A global tender will be floated. The private sector will also have an active participation,” a source within the defense ministry told the Times of India.

Out of the 90 aircraft, 54 allegedly will be single-seaters and the remaining 36 tandem-seaters. There is also the possibility for the additional purchase of 45 fighters in a follow-up order, the source added.

The aircraft types that will be reconsidered include all jets from the original bidders such as Russia’s MIG-35 (RAC MiG), Swedish Gripen, French Dassault Rafale, American Lockheed Martin F-16IN and Boeing’s F/A-18IN Super Hornet and the Eurofighter Typhoon build by the Eurofighter consortium.

The Eurofighter consortium in particular could potentially benefit from the new RFP as I already stated in an article in May:

Germany had consistently lobbied against the purchase of the Rafale aircraft and — among other things — pointed out to New Delhi that the Rafale would only be the cheaper solution to the Eurofighter Typhoon multirole fighter if one excludes maintenance and future upgrade costs from the financial calculations. These lobbying efforts might perhaps be paying off now as India is reconsidering the Eurofighter option.