Quite recently, on June 27, Air Chief Marshal VR Chaudhary, Chief of the Air Staff, Indian Air Force (IAF) said that the original equipment manufacturer (OEM) selected for the 114 multi-role fighter aircraft (MRFA) acquisition programme will have to ensure transfer of technology (ToT) to the Indian manufacturer as the aircraft was going to be acquired under the ‘Make-in-India’ framework.
He was referring to the IAF’s longstanding plan to build a 42-squadron strong force -a far cry from the current strength that is hovering perilously around 30 squadrons. The unexpected inter-governmental deal of 2016 to acquire 36 Medium Multirole Combat Aircraft (MMRCA) in a fly-away condition from Dassault Aviation of France, was just a flash in the pan.
Nothing much has happened since then except for the order placed on the state-owned Hindustan Aeronautics Limited (HAL) in February 2021 for acquisition of 83 indigenously designed and built Light Combat Aircraft (LCA) at a cost of Rs 48,000 crore. These aircraft cannot, however, supplant the need for multirole aircraft that IAF continues to aspire for.
The Air Chief’s statement sounded more like a prescient warning than a foretaste of what the OEMs should expect when the tender is issued for acquisition of the MRFA. It wasn’t necessary. Considering the unstinting fuss over ‘Make-in- India’, indigenisation, and self-reliance in defence production in the recent years, no one is in doubt about what the government wants: transfer of state-of-the-art technologies to the Indian companies.
The question is whether what IAF wants is out there for the asking. This question assumes significance in the shifting sands of the contemporary geopolitics following the Russian invasion of Ukraine which is now in the fifth month of savage militarism. Though India continues to be a potentially important destination for the global defence companies, in the current scenario the European defence market too has emerged as a lucrative alternative for them.
At the annual leadership summit of the North Atlantic Treaty Organisation (NATO), President Joe Biden announced on June 29 that ‘the United States will enhance (its) force posture in Europe and respond to the changing security environment as well as strengthening our collective security’. He also announced permanent basing of a US military garrison in Poland, dispatch of two additional F-35 fighter jet squadrons to the UK, and provision of more air defence and other capabilities to Germany and Italy.
Meanwhile, three days after Russia invaded Ukraine on February 24, Germany committed 100 billion euros ($107bn) to a special fund for its military and decided to raise its defence budget above 2 percent of the gross domestic product (GDP), something that it had avoided for long. Other countries are likely to follow suit. With so much happening in Europe, the demand for military hardware and services by the NATO member countries themselves will increase, with concomitant increase in their budget outlays which had been shrinking over the years.
The combination of improved business prospects, higher defence spending, and comparatively painless procurement procedures across Europe, could take some sheen off India as a lucrative market for the military hardware. Meeting the demand of the European countries to beef up their security is also going to take priority with the OEMs vis-Ã -vis the potential supplies to India.
This could affect the timeline for acquisition of 114 MRFAs for which the Request for Information (RfI) was issued more than three years ago in April 2019. The main contenders for this approximately US$ 18 billion programme are Lockheed Martin’s F-21, Boeing’s Super Hornet F/A-18 E/F, Dassault Aviation’s Rafale, Saab’s Grippen JAS39 E/F, Russia’s MiG 35 and Su-35, and the European Consortium’s Eurofighter Typhoon. All of them would be happy, if not happier, doing business in Europe.
The absence of any perceptible progress since the RfI for 114 MRFA was issued in 2019, preoccupation of the US and European OEMs with augmenting collective defence capabilities across Europe, and the difficulties involved in doing new business with Russia, are a cause for concern for the project, but more daunting challenges lie ahead.
The foremost challenge is the formulation of the Qualitative Requirements (QRs), primarily the technical specifications which the equipment offered by the OEMs must comply with. Though not common in the IAF programmes, setting the right specifications has been problematic in defence acquisition programmes across the services.
A recent manifestation of this problem was the French industrial conglomerate Naval Group pulling out of India’s Project 75 (India) which entails construction of six conventional diesel-electric submarines at an Indian shipyard with technology transfer from the OEM. Other contenders from Germany and Spain, too have reportedly withdrawn from the programme, leaving only South Korea in contention.
One of the main reasons for these companies to back out was the requirement that the OEM should be able to offer sea-proven Air Independent Propulsion (AIP) System for the submarines. Apparently, none of these companies can do that.
The Indian Navy (IN) would have surely known this when it issued the Request for Proposal (RfP) to two Indian shipyards asking them to tie up with the shortlisted foreign manufacturers and submit their bids. Inexplicably, however, this knowledge did not prevent IN from stipulating the requirement of AIP system in the RfP.
Though Project 75 (India) project is being processed under the Strategic Partnership (SP) category and the MRFA programme under Buy (Global – Manufacture in India) category, QRs form an essential part of both these categories. Unrealistic QRs, especially regarding ToT, across all acquisition categories, come in the way of first closing the deal and later ensuring compliance by the OEM.
Some other terms and conditions too can be problematic. It may be recalled that the aborted programme for acquisition of 126 medium multirole combat aircraft faced a prolonged stalemate on account of, among other things, issues concerning the respective workshare and responsibilities of the OEM and HAL. It is unfair to expect the OEM to take responsibility for certification and quality assurance of the aircraft manufactured locally by the Indian company on which it does not have a decisive, if not full, management control. Such conditions in the RfP can prolong, if not entirely derail, the acquisition programmes.
Assuming that there will be no budgetary constraint, success of the MRFA acquisition programme will depend to a considerable extent on how realistically the QRs and other terms are formulated, and the freedom given to the OEM to decide how the aircraft are to be built in India.
The Defence Acquisition Procedure (DAP) 2020 permits the OEMs to manufacture the equipment/platforms through a joint venture, an already existing company, or even their subsidiaries in India. The MoD should not shy away from permitting, or discourage, the OEM selected for the MRFA programme to manufacture the aircraft through a wholly owned subsidiary, if that is what the OEM prefers. The need to build up IAF’s capability should override all other considerations.
– The writer is Ex-Financial Advisor (Acquisition), Ministry of Defence. The views expressed are of the author and do not necessarily reflect the views of Raksha Anirveda
