Even as low bidder, Russia’s Rosoboronexport may still loose air defense program in India

Even though Rosoboronexport has emerged as lowest bidder in the Indian army’s $1.5 billion very short range air defense or VSHORAD program, the Russian company may loose the contract following serious complaints from the other competitors in the fray.

The Indian Ministry of Defence last week opened the commercial bids of the long pending VSHORAD program, in which Rosoboronexport was declared lowest bidder against Saab of Sweden and MBDA of France, a senior MoD official said.

“But the Russian defense company is not going to get [VSHORAD] contract any time soon and the program may face cancellation following complaints from one of the competitor,” he noted.

The Indian Army floated a restricted global tender for purchase of more than 5,000 VSHORAD portable systems to Saab of Sweden, Rafael of Israel, MBDA and Thales of France, Raytheon of United States, Rosoboronexport of Russia and LIG Nex 1 of South Korea. Rafael, Thales and LIG Nex 1 did not qualify after the technical evaluation and Raytheon did not participate in the bid. Only Igla-S by Rosoboronexport, RBS 70 NG by Saab and Mistral by MBDA were qualified for trials after completion of technical evaluation in 2012.

The Indian army conducted two rounds of separate trials before opening the commercial bids last week. A senior service official said the “Indian army discovered Igla-S system fielded by Rosoboronexport to be non-compliant and not-recommended for induction into the service because it failed missile locking and direct hit repeatedly during both separate trials.”

However, the Russian system was permitted and eventually approved by some officials within the service and MoD, despite the strict defense procurement guidelines that non-compliant systems should be rejected outright.

MoD is not expected to award this contact anytime soon, given the current funds crunch in India. Any award to a Russian company could also lead to U.S. sanctions under the Countering America’s Adversaries through Sanctions Act or CAATSA, another MoD official noted. He also pointed to plans for a thorough review before any decision is made to move forward or cancel this program.

Of the 5,175 missiles and associated equipment sought in the VSHORAD program, 2,315 missiles are to be bought in fully formed condition, 260 semi- knocked down condition and 1,000 missiles in completely knocked down condition and 600 missiles will be produced in India. In addition, Indian army is seeking other equipments including launchers, sensors, thermal imaging sights and command & control units.

An executive with the industry group, Federation of Indian Chambers of Commerce and Industry or FICCI, who requested anonymity alleged that the Russian company never followed the technology transfer norms in the VSHORAD program. Since the tender involved domestic transfer of technology, Saab teamed up with state-owned Bharat Electronics Ltd and MBDA tied-up with private sector Larsen & Toubro Ltd, but Rosoboronexport chose to go alone.

“Indian defense forces including army and the air force have large requirements of short range air defense systems,” said Mahindra Singh, a retired army major general. “It makes sense to produce these systems in the country with full transfer of technology from suitable overseas original equipment manufacturers.”

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