On Dassault, HAL and Reliance
India is not a manufacturing country. We skipped that phase and embraced the "service" industry instead. Now the problem is back to bite us hard.by Ajai Shukla
Business Standard, 5th Feb 13
Will Aero India 2013, the aeronautical jamboree that kicks off in Bangalore on Wednesday, be relatively subdued? Since 2005, zing has been imparted to successive versions of this biennial air show by the Indian Air Force’s riveting, multi-billion dollar quest for a medium multi-role combat aircraft ( MMRCA) to help meet our two-front security challenges. Every alternate year, the world’s foremost military aircraft vendors – including Boeing, Lockheed Martin, Dassault, Eurofighter,Gripen International and MiG – would converge on Bangalore along with myriad sub-vendors, pitching for their products and vetting prospective Indian partners for the offset obligations that would accrue from the world’s biggest international fighter deal. And each time one of the contending fighters would scream into the skies for an aerobatics display, the pilot would push it to the limits knowing that key decision makers were watching the performance.
But now, with Dassault’s Rafale fighter having won that six-way contest, has the fizz gone out of Aero India? With none of the Rafale’s erstwhile rivals coming to Bangalore, what will the spectators and aerobatics buffs crane their necks upwards at? Other than the Rafale, the only foreign fighters performing aerobatics will be The Russian Knights, a Moscow-based team that flies the Sukhoi-27. Is this a metaphor for a larger strategic truth: that after everyone has come and gone, there still remain the Russians?
Actually, any reports of the demise of Aero India would be exaggerated, given India’s dubious status as the world’s biggest buyer of weaponry. Besides, New Delhi is also the world’s most unpredictable arms buyer; and some fighter manufacturers believe that the last word has not yet been said on the MMRCA purchase. Even as New Delhi and Dassault continue to negotiate, the runner-up in the MMRCA contest, Eurofighter GmbH, maintains a major presence in New Delhi. It will be there in Bangalore even if the Eurofighter itself will not fly displays.
Few know better than EADS, one of Eurofighter GmbH’s parent companies, how quickly apparently done deals collapse in the Indian procurement environment. In 2007, New Delhi reversed its decision to buy 197 light helicopters from Eurocopter after allegations of corruption emerged. In 2010, New Delhi cancelled its tender for Multi-Role Tanker Transport (MRTT) aerial refuelling aircraft, which Airbus seemed poised to win, and reissued the tender (last month, Airbus finally won the contract).
“It’s not over till the fat lady sings,” says an EADS official. With general elections due in the first half of 2014, there is speculation that negotiations with Dassault could run into a new government in New Delhi. Another aspect that EADS and Eurofighter regard as a potential deal-breaker is Dassault’s (perceived) inability to deliver the Rafale to the IAF at the price that Dassault quoted in its commercial bid. According to this argument, Dassault had counted on winning the Brazilian order for 36 Rafale fighters, and a UAE order for up to 60 Rafales, bringing down production costs. But with only the Indian tender for 126 fighters having been won, Dassault’s cost of production could be significantly higher than quoted. If so, political uncertainty would be compounded by financial unviability.
So how far is the ministry of defence (MoD) from actually signing a deal with Dassault? In my understanding there is a better-than-even chance that this could happen in June/July. People who should know insist that there is no looming deal-breaker in terms of cost; and that ongoing negotiations are not about cost but about the modalities of production in India.
Dassault’s major concern is that New Delhi’s Request for Proposals (as the tender document is called) mandates that the Rafale be assembled in Hindustan Aeronautics Ltd (HAL), with Dassault responsible for timely delivery. The French vendor argues that it can take responsibility for the first 18 Rafale fighters, which will be built in France and delivered to the IAF in flyaway condition. But the next 118 aircraft, which must be assembled in HAL, would be clouded by uncertainty, given HAL’s poor production ethos and track record. Recent delays in HAL’s production of the BAE Systems trainer, the Hawk, support Dassault’s contention.
Dassault is arguing for doing much of the production and integration at a facility that it will set up in partnership with Reliance, which it partnered a year ago. Negotiations continue, with Dassault contending that it cannot be responsible for delivery if the aircraft were to be manufactured on a HAL line; while the MoD insists that the Dassault-Reliance venture can build components, sub-systems and systems, but the integration must be done at HAL.
Meanwhile, the Rafale will entertain the crowds at Aero India, unencumbered by the presence of a crop of rivals. And, as long as India retains its dubious status as the world’s biggest buyer of weaponry (Stockholm International Peace Research Institute estimates that India imported $3.58 billion, or Rs 19,000 crore, worth of conventional arms in 2011), Aero India 2013 will be bigger than ever.
Tailpiece: also flying aerobatics displays will be the Tejas Light Combat Aircraft (LCA), an Indian-designed and -built fighter that is a major aeronautical triumph but has never got the funding or attention that it deserves. The Tejas, at an advanced stage of flight testing, will perform vertical loops, barrel rolls and display its low-speed handling capabilities. Keep an eye out for it.
A US congressional report(in 2009?) evaluated the HAL production line to be more than 30 years behind in time. I will doubt HALs manpower also.
These are the facts, jingoism aside.
