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January 4, 2012

Combat jet order: India to announce winner early in 2012

 
New Delhi. The Government is all set to announce the winner for the Indian Air Force’s competition for 126-plus Medium Multi Role Combat Aircraft (MMRCA) early 2012.
 
Authoritative sources told India Strategic that the process was nearing completion but there were volumes of paperwork and the complicated costs involving Transfer of Technology (ToT), Offsets, Lifecycle Upgrades and Maintenance Support. Every detail was being looked into as this was India’s, and the world’s, single biggest defence tender yet in the 21st century.
The Ministry of Defence (MoD) has not set any deadline to the process, but it could be a New Year gift to the Indian Air Force as the announcement could come by mid-January or so.
Notably, the financial bids of the two finalists in the fray, European consortium’s Eurofighter and French Rafale, are valid only till 31 Dec 2011, the end of the year. Both of them should be asked to extend the validity of their offers for another few months.
However, even if the choice is made within this month, the winner would be asked for extension to facilitate negotiations and finalization.
It may be recalled that Chief of the Air Staff, Air Chief Marshal NAK Browne, had said Dec 18 in Bangalore that “by mid-December we should have a very good sense of who has been selected,"
Understandably, by now, IAF and the MoD should know who should be winning – or who is the lowest – but till all the voluminous paperwork has been examined to the last comma and full stop, the files are Top Secret and literally “For Your Eyes Only” for those dealing with the subject.
The Air Chief, who was speaking on the margins of the 51st Indian Society of Aerospace Medicine conference at the Institute of Aerospace Medicine, had also said: "I can't tell anything till the time we finish that work, as there are a lot of complicated calculations and figures that need to be checked."
Initially, when the tender was floated in August 2007, the estimated cost for 126 aircraft with two years’ support and weapons was US$ 10 billion (Rs 42,000 crores then). Both the European finalists are known to be more expensive than the four others who lost out in the fray, and the estimate was revised by MoD some time back in Dollar/ Euro figures.
It is our guess that the revision should be 30 to 40 per cent of that pre-bid estimate, or say around to $ 13 to 14 billion. But this is only a guess as the winner has to help set up the manufacturing units in India and costing for that is not available in public domain, particularly as neither of the two aircraft have been sold along with manufacturing capability.
 
There is also an option clause for 63 more aircraft. Their cost would of course be additional.
Meanwhile, the Indian Rupee has been depreciating. The expenditure in terms of Rupees would increase but fluctuations are factored in all defence acquisitions and do not hinder the process. No fresh Cabinet approval is required in such cases.
Nonetheless, although procedurally the lowest bidder, designated L-1 in the MoD jargon, should be the winner, the choice has to be approved by the Government, specifically the Cabinet Committee on Security (CCS) headed by the Prime Minister (Dr Manmohan Singh). It includes the ministers for Finance (Mr Pranab Mukherjee), Defence (Mr A K Antony), Home (Mr P Chidambaram) and External Affairs (Mr S M Krishna).
Mr Antony has stated that the selection would be on technical and financial merit, that is, on the basis of qualification by the Indian Air Force and the price offered. The bid is submitted in two parts: Technical and Financial.
IAF disqualified technically four others in the fray, Swedish Saab Gripen, Russian Mig 35, and US Boeing F 18 Super Hornet and Lockheed Martin F 16 Super Viper on the basis of points scored in its selection process.
As per the established procedure, IAF is not supposed to give any grading like Number 1 or Number 2 to the finalists and both are equal as far as the MoD is concerned.
Nonetheless, the Government is not bound to select the L-1 as the winner, even if it is much lower, as there is an over-riding clause in the tender. If in the national strategic calculus, the L-2 can be of strategic significance for India, then the CCS can go in for that aircraft.
In the diplomatic circles, the deal is described as France (Rafale) vs Eurofighter’s Europe (Germany, UK, Spain and Italy). Eurofighter’s supporters say that India could gain significant weight in the global arena through this deal.
The French say that they have supplied the best of their systems to India without any restrictions so far, and that it would be much easier to deal with a single country than the bureaucracies of four others over the life time of the aircraft – 6000 flying hours or 40 years as stipulated in the tender.
So who is the winner?
Procedurally, L-1.
Strategically, only the CCS, the Cabinet Secretary, National Security Adviser, Foreign Secretary and Defence Secretary can decide if otherwise
  
  India Strategic

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