Indian defence minister admits complications in Rafale talks
( Janes Defence Industry, Author: Rahul Bedi 01/02/2015 Subscription)
India's long-delayed procurement of 126 Dassault Rafale fighter aircraft has once again run into "complications", defence minister Manohar Parrikar admitted on 30 December.
Parrikar did not specify these difficulties at a press conference in New Delhi, but tellingly stated that additional licence-built Sukhoi Su-30MKI multirole fighters would be "adequate" for the Indian Air Force (IAF) in the event of the Rafale deal being scrapped.
"The Su-30MKI is an adequate aircraft for meeting the air force's needs," Parrikar said, adding that at INR3.58 billion (USD59.66 million) each, the unit cost of the Su-30MKIs being licence-built by Hindustan Aeronautics Limited (HAL) was less than half that of a Rafale.
The IAF aims to have 272 Su-30MKIs in service by 2020, but this number could increase "significantly" to compensate for the IAF's rapidly declining fighter squadrons, senior officers said.
Parrikar revealed that the French government was sending an "empowered" official to Delhi to expedite negotiations for the Rafale in the New Year, but did not provide details.
The impending visit would follow that in November 2014 by French defence minister Jean-Yves Le Drian, who had looked to resolve the three-year impasse on the Rafale purchase.
Senior defence officials told IHS Jane's that Parrikar's statement on the Rafale contract could well be a "tactical move" to pressure Dassault into resolving contentious issues bedeviling the deal.
These include an increase in its overall cost - estimated to have almost doubled to about USD20 billion - and Dassault's hesitancy in assuming final responsibility for HAL's licence-built Rafales.
According to the 2007 tender for 126 medium multirole combat aircraft (MMRCA), 18 aircraft would be acquired in fly-away condition and the remaining 108 would be built by HAL.
India's Ministry of Defence (MoD) insists Dassault assumes liability for HAL's Rafale delivery schedules, quality assurance and liquidated damages, conditions that the French aircraft manufacturer is resisting.
Dassault is reportedly of the view that, without any executive or supervisory authority over HAL, it would be unable to vindicate these stipulations.
Although both sides had recently reached a 'compromise' on this issue, with Dassault agreeing to closely oversee the Rafale's licensed production, the MoD is believed to be demanding a more formalised involvement, sources said.
The escalating cost of the tender from the original USD9-10 billion also poses a "serious" hurdle in maintaining talks over the contract, officials said.
Meanwhile, Parrikar declared that a revised Defence Procurement Procedure (DPP) would be announced by February to provide clearer guidelines on blacklisting overseas defence companies for wrongdoing.
Proscribing foreign defence vendors, a measure that was followed by the previous Congress Party-led federal coalition, merely hampered India's military modernisation, he said.
Parrikar reiterated the government's intent of permitting overseas materiel vendors to appoint "representatives or technical consultants" in India.
Once implemented, this would reverse the ban imposed on defence agents or advisors following the corruption scandal involving the purchase of 410 Bofors FH-77B 155mm/39-calibre howitzers in the late 1980s.
Parrikar also announced that the quasi-military Border Roads Organisation (BRO), responsible for building strategic roads, mostly in remote Himalayan regions bordering Tibet, would henceforth be under the MoD's financial and executive control.
Presently, the federal Surface Transport Ministry provides the BRO's budget, but its tasks are determined exclusively by the MoD.
This anomaly had led to extended delays in building 73 military roads totalling 3,500 km, which had been scheduled for completion by 2012. Of this, only 500 km of road has been laid so far and the deadline for its completion has now been extended to 2016.
On the cost argument: Cost is a function of the life cycle usage anyhow. An F-16 is considerably cheaper than an F-15E, but the price to purchase speaks very little of the overall cost. Even if the F-15E was half the price of the F-16 to procure, the F-16 would still be a cheaper bet due to its operating cost which in dollar amounts is nearly half at around 15-16K per flying hour (modern F-16, with EFT's, pods, and high weapon carriage). Thats a difference of 210 million over 8000 hours of usage (Between a heavy F-15E and the single engined F-16) Remember that when you have the Su-30MKI and Dassault Rafale being made in India, your cost to operate_Component outside of the fuel bill would be in INR which means a considerably lower cost to operate for both systems given your salaries, spares, depot runs are all procured and paid for in INR (tech salaries etc). Another point to keep in mind is that the Rafale is good for 33% more compared to a 6000 hr MKI so you would need around 170 MKI's from a fleet point of view.
@ 120 million (based on the Janes report above) the cost of the jets is roughly 14 or so Billion with at least 6 billion going to TOT (if the 20 billion price tag is to be believed)