India’s staggered procurement, two-points of ‘fear’ for Industry

IDD Analysis

After India’s newly appointed Chief of Defence Staff, General Bipin Rawat announced that the military will do only ‘staggered  procurements’ of weapons,  equipment, systems and platforms, it  has thrown up two issues necessitating immediate answers from the Government to address ‘fears’ of the industry.

Firstly, such a move could jeopardize big-ticket acquisitions – 114 fighter jets, 111 naval copters and submarines, all multi-billion deals  —  planned under the strategic partnership (SP) model. This envisages the foreign original equipment manufacturer (OEM) setting up a manufacturing unit in India with a local partner. If the order will be staggered, the foreign OEM would have no interest in setting up  a unit in India, in turn impacting the ‘Make in India’ project.

Second, the ‘staggered procurement’ indicates nothing has changed on ground for any Indian or foreign company bidding for acquisition programmes, things will be as usual in India.

An assessment by the India Defence Dialogue (IDD) holds the view: If the suggestion made by General Rawat is carried out, It could have an impact on the minds of future investors who could seek multiple clarifications as the SP Model does not talk of staggered procurement, it wants military equipment manufacturing sector to grow.

Conversely, if the policy of staggered procurements is carried out then  nothing changes for Indian or foreign suppliers or the Indian Industry. “India always procured in staggered tranches (read examples listed later) and will continue to do so. In a way indicating matters will remain as they are”, says the IDD assessment.

What did General Rawat Say.

Indian News agency Press Trust of India quoted the General as having said on February 17: “ I think we should go for staggered approach of placing orders for big-ticket purchases. If we are buying 100 aircraft, then it should be in four packages of 25 aircraft each”.

“That is why we ordered only 36 Rafale aircraft,” Gen Rawat said when he was asked if the programme of the Indian Air Force to procure 114 jets from global suppliers was on target..

General Rawat took over as CDS on January 1, 2020

India’s military readiness hinges upon SP Model

Producing world-class military equipment hinges on the ‘SP model’. Production of four crucial military items–fighter jets (both for the Navy and IAF), submarines, helicopters (for all three services) and Armoured Fighting Vehicles (AFV)/Main Battle Tanks (MBT), are to be done under the SP Model. 

The ‘SP model’ allows the MoD to select an Indian private company to collaborate with foreign OEM to set up production facilities in the country.

Industry expects a business of $ US 150 billion over the next 15 years in defence manufacturing sector and large chunk of it shall be from SP Model

India has invited bids from foreign military aviation companies to make fighter jets in India. The MoD invited global plane makers to send in their initial proposals.  In the race are seven major global companies:  Lockheed Martin’s F-21, US Boeing’s F/A-18IN, Eurofighter Typhoon, French Dassault’s Rafale, Swedish Saab’s Gripen and Russian MiG-35 and the Russian Sukhoi-35. The programme looks to alter the manufacturing sector in India.

The MoD has asked for an expression of Interest (EOI) to make 111 Naval utility helicopters (NUH) and has okayed the indigenous construction of Six Project 75(I) submarines. Two Indian companies have been shortlisted for the same.

The other side of the story is; Nothing changes

The statement of General Rawat notwithstanding, the existing system  and pace of procurement will continue as it has  been for the past decade or so.  The monetary allocation made in the annual budget through the Parliament will only continue to grow.

As of now New Delhi has graduated to spend  anything upto  $ 11 billion annually on what it terms ‘capital acquisitions’ – defined as new purchases that cost beyond a certain amount of money and are met through what is termed the ‘capital head’  of the budget. 

Any dramatic increase or a sharp decrease in this monetary outlay is not expected. It cannot be increased dramatically as India has other expenses too. Historically, India always procured slowly, in tranches and on existing priorities. The budget cannot be decreased as India — hemmed in by Pakistan to the west and China to its north – sees a collusive threat from the two who are ‘partners’.

Besides the threat of a conventional war, India faces the threat of tactical nukes and Nukes besides terrorism from across the border from Pakistan

General Bipin Rawat (left) with Defence Minister ,Rajnath Singh, in New Delhi on January 1, 2020.

India has always done procurement in batches.

After spending years relying on the former Soviet Union and then Russia, India opened up to the US in 2008 when it ordered the first six C-130 J Super Hercules from Lockheed Martin. Internationally, it looked odd for a country , the size of India, to  order just six planes.  In 2013 India ordered six more and then in August 2014, it ordered one  more to replace a  C-130J which crashed in its fleet in March 2014.

A C-130 J in flight

In 2018 India ordered a small $ 97 Million support and logistics equipment from the company.

In 2011, India ordered 10 of the C-17 Globemaster III planes for $ 4.1 billion. It then mulled for several years to get more. The IAF finally got a proposal cleared in 20018 for three  more. But, by then, the Boeing , which closed down production  of the plane, was left with just one which India ultimately picked up. Now India is largest operator  of the C-17 outside the US

The story is the same for Boeing P8I maritime surveillance plane. India ordered eight in the year 2009. It followed up with four more in 2016 and is now processing another demand for six more which were okayed in November 2019 by the Defence acquisition council 

Story repeated  itself for Soviet/Russian equipment

In case of its Russian parentage equipment India has has been following the same model. It ordered the Sukhoi 30 MKI in multiple tranches since 1996, the T-90 tanks are coming in tranches, so did the Mi17V5  copter come is tranches. India got 61 of the MiG 29 in the 1980s and now is again looking to have 21 for MiG 29. In the interim the Naval  version of the MiG 29 was purchased in 2013.

A Sukhoi 30 MKI . File Pic

India, in November  1996, signed a US$1.462 billion deal with Sukhoi for 50 Russian-produced Su-30MKIs in five batches, each batch had improvements including avionics and engine.

In October 2000, a memorandum of understanding (MoU) was signed for Indian licence-production of 140 SU- 30. An order of 40 more was made in 2007 and another 42  were ordered  in 2010.

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