$9 billion lotto for Defense Manufacturers in the Indian skies!

$9 billion are at stake in the Indian Air. The Indian Airforce is going in for a massive overhaul of its aging MiG aircrafts. And that means that everybody and his brother who manufacters defence aircrafts from US to Germany to France to Russia are in the loop! And guys its kickback time again!!

New Delhi’s plan to buy 126 multi-role combat aircraft for the Indian Air Force (IAF), replacing the ageing Russian MiG fleet, has leading global defence vendors from Moscow to Seattle, Paris to San Diego readying their best offers to bag a share in the estimated $9-billion order, the biggest in over a decade for the small world of fighter jet makers.

Leading the fray are MiG (short for Mikoyan Gurevich), with its MiG 35, and Boeing’s F-18 Super Hornet fighter, closely followed by Lockheed Martin marketing its F-16F Desert Falcon, Germany’s Typhoon of Eurofighter and the French Rafale. This is the first time US fighter jet vendors are participating in an Indian order. Feeding the rush is IAF’s clear intention to wrap up this giant order – key to the force because the new fighters will form the backbone of the service for two to three decades – through a fast-track procurement policy before the end of March 2007.

According to chief of air staff Air Marshal S P Tyagi, the IAF will float a request for proposals (RFP) for the fighter jets “very soon” and suppliers be given six months time to close the deal. Once the choice is finalised, the first lot of about 20 jets would be acquired within 42 to 54 months, and the rest would be made in India.

Under the new guidelines, 30% of the total cost of any deal worth over $70 million will be used as ‘offsets’, which means that the foreign vendor will have to buy defence or procure other specified equipment locally from Indian suppliers.

With this offset clause, manufacturers, including Boeing, EADS and Lockheed Martin, moved in to develop their activities in India only last fortnight. Boeing, which is offering its F/A-18E/F Super Hornet, plans to set up a $100 million maintenance, repair and overhaul facility in Maharashtra, while EADS has promised a training and engineering operations in a yet-to-be-decided Indian location.

Boeing has, for the first time, entered into a “dialogue” with the IAF on the innumerable options it has to offer, Chris Chadwick, vice-president of its F/A-18 programme, told FE. Chadwick adds that the Hornet Industrial Team (GE, Raytheon and Northrop) are exploring investment opportunities in military, biotech, IT and aerospace sectors in India.

Lockheed Martin plans to partner Indian companies this year to meet its offset requirements, say its officials. “We are anxious to get on and compete,” says Royce Caplinger, managing director of Lockheed Martin. “The

IAF has the Mirage and MiG-29 in its inventory and likes them, but the F-16 represents the latest and greatest the US has to offer. The platform may be old but the technology, weapon systems and cockpit are the latest.”