Shuklas New Article
Hefty Rs 42,000 crore bill for combat aircraft may rise
For years, India’s proposed purchase of 126 medium multi-role combat aircraft (MMRCA) --- the world’s largest overseas fighter buy for which the Typhoon, built by Eurofighter GmbH; and the Rafale, developed by French vendor Dassault, remain in contention --- has been valued at Rs 42,000 crore, almost US $10 billion. Now that valuation is set to rise dramatically as the Ministry of Defence carries out a process called benchmarking.
Benchmarking is the crucial process of estimating the fair price for any purchase, and is completed before the MoD opens the price bids for any tender. This is done by an MoD committee which scrutinises similar tenders worldwide, especially recent sales, to arrive at a comparable --- or as the name suggests, a benchmark --- price. If all the vendors’ bids emerge significantly higher than the benchmark, the tender is cancelled and the process begun afresh.
For example, if the MoD committee that is currently benchmarking the MMRCA concludes that Rs 42,000 crore is a decade-old estimation that should be increased due to inflation by 50%, the benchmark for that contract will be pegged at Rs 63,000 crore. When the Eurofighter’s and Dassault’s bids are opened, if both turn out to be notably higher, the MoD will scrap the MMRCA tender. On the other hand, if the lower bid is less than or approximates the benchmark, that bid will be accepted.A keen watcher of these developments is Lockheed Martin, whose F-16IN Super Viper was rejected by the IAF. A visiting Lockheed Martin executive told Business Standard that the fifth-generation F-35 Lightening II would become a real option for India if the MMRCA procurement was scrapped.
“We did not offer the F-35 for the MMRCA contract because it exceeded the Indian specifications; the fighter was not yet ready for the kind of flight testing specified in the tender; and because the US government had not yet approved it for release to India to include transfer of technology as specified in the RfP,” said Orville Prins, Lockheed Martin’s Vice President for Business Development.
Six years down the line, these conditions have changed. Prins now points out that, with Lockheed Martin set to build 20 fighters per month, i.e. 240 per year, “we could be in a position to supply India with its first F-35s by 2016, contingent upon many additional factors including US governmental approval that would affect this timing.”
Asked for the cost of the F-35, Lockheed Martin estimates it “in the mid-60s”, i.e. somewhere between $60-70 million for the conventional version of the fighter. This would be the cost of a full-up, operational configuration with all the high-tech sensors that are integrated internally in a 5th generation, stealthy aircraft. Added to this cost would be the added expenses of training, technology transfer (ToT), manufacturing infrastructure, etc, which would significantly raise the overall cost of buying 126 F-35s.