The country’s Rs 15,000-crore tender for 56 new transport planes for the Indian Air Force has hit rough weather, just two months into the acquisition process.
The tender (Request for Proposal or RfP in defence parlance) was issued in the first week of May for the transport aircraft that will replace the now near-obsolete fleet of Avro planes.
Not one of the eight foreign Original Equipment Manufacturers (OEMs) to whom the Ministry of Defence (MoD) gave the tender papers have responded to the request so far, primarily because of a clause in the RfP aimed at creating indigenous capability for building the planes in the country.
Though the MoD’s intention is laudable, the tender clause that the winning OEM should tie up with an Indian private industry for domestic manufacturing of 40 of the 56 planes seems mindless or it clearly indicates lack of application of mind, according to some foreign companies keen on the tender.
The RfP envisages that the OEM will deliver the first 16 planes in a fly away condition and then transfer aircraft technology and its production to an Indian private industry that it is free to tie up with, for locally manufacturing the rest 40 planes.
But the RfP drafters at the MoD and IAF failed to ask a key question. Which Indian industries will be willing to invest anywhere between Rs 15,000 crore to Rs 25,000 crore to set up a new production facility and hire the needed talents, all for only producing 40 planes?
“And that is where we have a problem,” a foreign OEM official said, requesting anonymity.
“Even if we get an Indian partner, setting up a production facility of the size of an airfield will take years. There are issues of land acquisition, construction of facilities and manpower hiring. I hope India has that much time and patience to wait for the Avro replacement to join its fleet,” the official noted.
Among the foreign OEMs that have got the invite are Ilyushin of Russia, Antonov of Ukraine, European consortium EADS Casa, Brazilian Embraer, Italian major Finmeccanica’s Alenia Aermacchi, American firms Boeing and Lockheed Martin and Swedish Saab. The Indian private industries, who have the resources to invest in such a large venture, are doubtful of the return on investments.
“Such projects involve huge money. They will bring in technology, generate employment and all that. But shouldn’t there be returns on the investment or not?” a representative of one such Indian major noted.
One of the unstated intention behind the government keeping the tender an ‘Indian private sector only’ venture is to establish an Indian competitor to the public sector Hindustan Aeronautics Limited, the only aviation manufacturing facility in the country.
When asked which product the OEMs may offer for the Indian tender, it has come to light that only Casa and Alenia have a clear-cut idea. While Casa has its C-295 plane to offer as Avro’s replacement, Alenia will propose C-27J. “We are still studying the RfP. We are yet to finalise our offer,” an official from one of the rest six OEMs said.
“I can confirm that not one of the eight OEMs have as yet responded to the RfP. We still have time. So let us hope some of them come up with their proposals,” a senior IAF officer said.