Pressured by a possible price hike from Boeing in its planned purchase of 22 AH-64E Apache and 15 CH-47F Chinook helicopters for the Air Force, the Indian Ministry of Defence is considering inking the final contract before March 31 when the price set by Boeing will expire, said an MoD source.
A Boeing executive said the company cannot guarantee it will be able to keep the price quote beyond March 31 because it cannot afford to "wait endlessly," he said.
India delayed signing the contract because of a lack of funds. Even in the current financial year, which ends March 31, there are no funds for new purchases because money has been diverted from the Capital Head, which is reserved for buying new weapons, to the Revenue Head account, which is used to pay for salaries and day-to-day expenses of the 1.5-million-person military.
Under these circumstances, MoD is now considering signing the $2.5 billion contract before March 31 but begin making payments in the next financial year, which runs from April 1 to March 31, 2016, the source said.
The Boeing executive said they will respond to this method of payment after such a proposal is received.
However, before the deal is inked it will need clearance from the Cabinet Committee on Security which is headed by the prime minister and clears big ticket weapon purchases. "MoD is now working overtime to get the clearance in the forthcoming meeting of CCS," the source added.
The Indian Air Force selected Boeing's AH-64E Apache and CH-47F Chinook helicopters over the Russian Mi-28H Night Hunter and Mi-26 heavy lift helicopter in 2012.
Analysts were expecting the Boeing helicopter deal to be inked during President Barack Obama's visit to New Delhi Jan. 25 to 27 to send a positive political message.
An MoD official, however, said the helicopter deal is just one part of Indo-US defense ties as the two countries are now looking to jointly produce weapon systems under the Defense Trade and Technology Initiative.
"The deal would in any case had been signed," the official said.
The heavy lift helicopters will replace the two dozen Russian Mi-26 helicopters acquired in 1980, several of which are now grounded because of lack of spares. The Apaches will replace Russian-made Mi-25 and Mi-35 attack helicopters being operated by the Air Force.