India opens bids for US$11 billion fighter jet deal


The Indian government on Friday opened bids for an US$11 billion contract to buy fighter jets for India’s air force, a defence ministry source said, moving closer to awarding one of the world’s biggest arms contracts to one of two European groups.

Two European contenders are left in the race to sell India 126 fighter jets and help revamp the country’s creaking defence equipment in line with its rising global clout. American, Russian and Swedish bids were rejected in April, removing the Boeing F/A-18 Super Hornet, Lockheed Martin F-16 Fighting Falcon, MiG-35 and Saab Gripen from the race.
“The commercial bids were opened today to kickstart the process for selecting the lowest bidder, in the presence of the defence ministry’s cost negotiation committee members and representatives of the vendors,” defence ministry spokesperson Sitanshu Kar said on Friday.

Indian officials will examine the fly-away cost, life cycle cost, technology transfer cost and the offset offers before the winner of the contract will be known in six to eight weeks. The offset clause in the tender, included under the Defence Procurement Procedure of 2006, requires the winner of the tender to reinvest 50 percent of the deal amount in the Indian defence industry.

Still in the fray are Eurofighter, which makes the Typhoon fighter jet and is a four-nation consortium of EADS , representing Germany and Spain, Britain’s BAE Systems and Italy’s Finmeccanica .

Their competitor is France’s Dassault, which makes the Rafale.

The air force would prefer to award the deal only to one company, rather than splitting the order between the remaining two firms, a source told Reuters.
“With a potential contract price of US$9 billion to US$14 billion, this is the single biggest competition in the global defence aviation industry at the moment and offers both bidders a much-needed opportunity in a major market,” James Hardy, Asia Pacific Editor at IHS Jane’s Defence Weekly, wrote in an email statement.

Both remaining jets are riding successful performances as part of the NATO air campaign in Libya. Failure here would be a major blow after both made substantial investment in promoting their platforms in India.

For the Rafale, it would leave it without an export order and pegging its hopes on competition in the United Arab Emirates and Brazil, while the Typhoon would have to rely on securing contracts in Japan and other Asian markets, he said.

India is the world’s largest arms importer, accounting for 9% of the global arms trade between 2006 and 2010, according to data from Swedish think-tank Stockholm International Peace Research Institute.

It plans to spend US$50 billion over the next five years to upgrade its military, which largely consists of Soviet-era gear, to counter the rising might of China and threats from Pakistan.

The U.S. expressed interest on Wednesday to sell its most sophisticated fighter to India, six months after New Delhi rejected two older U.S. warplanes for the fighter jet deal.

The elimination of the U.S. competitors – a potential bump in forging closer ties – came despite lobbying from President Barack Obama and coincided with the unexpected resignation of the U.S. ambassador to India.