Govt to announce winner for 126-plus combat jets in 2012

The government is all set to announce the winner of the Indian Air Force (IAF) competition for 126-plus combat jets early in 2012.

Authoritative sources told India Strategic defence magazine (www.indiastrategic.in) that the process was nearing completion but there were volumes of paperwork and the complicated costs involving Transfer of Technology (ToT), Offsets, Lifecycle Upgrades and Maintenance Support. Every detail was being looked into as this was India’s -- and the world’s -- single biggest defence tender yet in the 21st century.

The defence ministry has not set any deadline to the process, but it could be a New Year gift to the Indian Air Force as the announcement could come around mid-January.

Notably, the financial bids of the two finalists in the fray, European consortium EADS' Eurofighter and French Rafale, are valid only till Dec 31. Both of them could be asked to extend the validity of their offers for another few months.

However, even if the choice is made within this month, the winner would be asked for an extension to facilitate negotiations and finalisation.

It may be recalled that the IAF chief, Air Chief Marshal Norman Anil Kumar Browne, had said Dec 18 in Bangalore that “by mid-December we should have a very good sense of who has been selected".

Understandably, by now, the IAF and the defence ministry should know who is winning -- or who is the lowest -- but till all the voluminous paperwork has been examined to the last full stop, the files are Top Secret and literally “For Your Eyes Only” for those dealing with the subject.

The Air chief, who was speaking on the margins of a conference at the Institute of Aerospace Medicine, had also said: "I can't tell anything till the time we finish that work, as there are a lot of complicated calculations and figures that need to be checked."

Initially, when the tender was floated in August 2007, the estimated cost for 126 aircraft with two years’ support and weapons was $10 billion (Rs42,000 crores). Both the European finalists are known to be more expensive than the four others who lost out in the fray, and the defence ministry revised the estimate some time back in terms of the dollar and the euro.

The revision could be 30 to 40% of the pre-bid estimate, or say around to $13-14 billion. But this is only a guess as the winner has to help set up the manufacturing units in India and costing for this is not available. Neither of the two aircraft has been sold anywhere the way India wants.

There is also an option clause for another 63 aircraft. Their cost would be additional.

Meanwhile, the Indian rupee has been depreciating, but fluctuations are factored in all defence acquisitions and do not hinder the process. No fresh cabinet approval is required in such cases.

Although procedurally the lowest bidder, designated L-1 in the defence ministry jargon, should be the winner, the choice has to be approved by the government, specifically the Cabinet Committee on Security (CCS) headed by Prime Minister Manmohan Singh. It includes the ministers for finance (Pranab Mukherjee), Defence (AK Antony), home (P Chidambaram) and external affairs (SM Krishna).

Antony has stated that the selection would be on technical and financial merit, that is, on the basis of IAF's requirements and the price offered. The bid is submitted in two parts: technical and financial.

The IAF disqualified four others in the fray -- Sweden's Saab Gripen, Russia's MiG-35 and the US Boeing F-18 Super Hornet and Lockheed Martin F-16 Super Viper on the basis of points in its selection process.

As per the procedure, IAF is not supposed to give any grading like Number 1 or Number 2 to the finalists and both are equal for the defence ministry.

Nonetheless, the government is not bound to select the L-1 as the winner, even if it is much lower, as there is an over-riding clause in the tender. If in the national strategic calculus, the L-2 can be of strategic significance for India, then the CCS can go in for that aircraft.

In diplomatic circles, the deal is being described as France (Rafale) vs Europe (Germany, Britain, Spain and Italy make up the consortium that makes the Eurofighter).

Eurofighter’s supporters say that India could gain significant weight in the global arena through this deal.

The French say that they have supplied the best of their systems to India without any restrictions so far, and that it would be much easier to deal with a single country than the bureaucracies of four others over the life time of the aircraft -- 6,000 flying hours or 40 years as stipulated in the tender.

So who is the winner?
Procedurally, L-1.

Strategically, only the CCS, the cabinet secretary, the National Security Adviser, the foreign secretary and the defence secretary can decide.